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Wednesday, 26 November 2014

On Greece, France and the trouble with liberal democracy

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Another teemingly wet Monday morning in London, another drive through the spray, another big rally in Asia and another lease of life for the eurozone. Greece has voted and the New Democratic party has crept over the line. Antonis Samaras, leader of the ND and probable prime minister, tells us that the Hellenes have chosen the path of austerity and adherence to the memorandum of understanding and that the eurozone is saved. But…

Anthony Peters, SwissInvest Strategist

I’m not quite sure where he learnt his maths – maybe in the National Statistical Office – but the pro-bailout parties did not poll 50% of the votes; in fact it might be that the NP, PASOK and whoever else joins the coalition might be closer to 40% than 50% and without the extra bonus of 50 seats to the largest party, the supporters of the memorandum would not be strutting.

Greece is as bust today as it was yesterday and as it will be tomorrow. However, the next tranche of eurozone/IMF bailout money will be on its way and the public services will live to fight another day. However, in effect the memorandum which has been at the centre of the political debate is already as dead as a dodo, for the underlying assumptions with respect to growth and fiscal revenues might as well be a chapter out of a Harry Potter novel.

Liberal democracy is proving itself to be quite incapable of taking away benefits it can’t afford or for which nobody is prepared to lend it the money to fund with the same alacrity with which it was happy to hand them out

The economy is still in free-fall and the rate of decline is accelerating rather than decelerating, so any promise which Samaras might offer up to his eurozone peers is not worth any more than any previous promises. It is true that the authorities are looking to buy time while looking for any way out of the financial crisis which does not include cutting one’s suit to match one’s cloth but we all have to ask ourselves how much this time is costing us and whether it’s a justifiable and sensible use of our unborn grandchildren’s future savings.

This is one question which the French electorate evidently didn’t bother to ask itself as it seems to have bought into the Hollande tax and spend “race for growth” policies (read “promises”?) hook, line and sinker. The broadcast media which do tend to have a more left of centre bias are grandly pronouncing that the electorate has rejected the austerity route for one of growth. Methinks, the same electorate would probably also vote for the three day working week and a policy of not going to work at all when the weather is either too good or too bad either.

Liberal democracy is proving itself to be quite incapable of taking away benefits it can’t afford or for which nobody is prepared to lend it the money to fund with the same alacrity with which it was happy to hand them out.

Democracy at work

Personally, I can’t see financial markets being prepared to strongly buy into yesterday’s Greek elections as being the first step in the revival of the eurozone’s fiscal fortunes. Prime Minister Samaras will roll up in Brussels with a new set of economic forecasts which he doesn’t believe in and where he will sit down with his peers who don’t believe in them either and there they will thrash out new and slightly more accommodative terms for the memorandum which all those present will know will not be met either but where the failure will occur in the future and not now. Simples.

Then Ireland and Portugal cry “Foul!” and they get to renegotiate. All the while, Frau Merkel will be declaring that nothing has been offered unconditionally and it is only the conditions themselves which have been tweaked. Everyone’s a winner with exception of those who have to actually have to pay for it who outnumber those who agree it by a factor of millions.

Democracy at work, guys.

Meanwhile, the G20 plus friends will be assembling in Mexico for a bit of assiduous back-slapping with the back-slapper in chief, President O’Bama, leading the clearing. O’Bama is already there; Cameron is on his way but Merkel and Hollande will be late arriving as they look forward to a flash meeting with Antonis Samara who, all things being equal, will be able to announce his right/left/down the middle coalition before lunch is taken. He should be on a plane to see the lenders – why don’t we just give up and call the “donors”? – before tea time. We trundle on in our world of postponements.

Meanwhile, Greece meets Germany in Euro 2012 on Friday and I have on good authority that UEFA has vigorously refuted the rumour that the official ball would, for that game,  be replaced by a can.

Ménage à deux

Finally, my heart goes out to Ségolène Royal, former presidental candidate and ex-squeeze of President Hollande who lost her bid for a seat in the Assemblée Nationale to a fellow left-wing candidate. It appears that Hollande’s current bed-fellow, Valérie Trierweiler, tweeted support for Olivier Falorni, the spurned incumbent, who went on to defeat Royal for the La Rochelle seat for which she had been parachuted in. Her dream of becoming the President of the  Assemblée Nationale is blown to bits.

You must agree that the French do sex and politics so much better than anyone else.

What goes ’round…

My thanks to Alex Banbury of Hamilton Capital for the following:

“I thought you would be amused to see the following, which Fairfax sent round in one of their daily reports last week:

“Spain is not Greece.” Elena Salgado, Spanish Finance minister, February, 2010.

“Portugal is not Greece.” The Economist, April 2010.

“Greece is not Ireland.” George Papaconstantinou, Greek Finance minister, November, 2010.

“Spain is neither Ireland nor Portugal.” Elena Salgado, Spanish Finance minister, November 2010.

“Ireland is not in ‘Greek Territory.’”Irish Finance Minister Brian Lenihan. November 2010.

“Neither Spain nor Portugal is Ireland.” Angel Gurria, Secretary-general OECD, November, 2010.

“Italy is not Spain” – Ed Parker, Fitch MD, 12 June 2012

“Spain is not Uganda” Spanish PM Rajoy. June, 2012

“Uganda does not want to be Spain” (Ugandan foreign minister) June 13th 2012

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