Nordic Front reawakens Eurogeddon Beast - Euro crisis returns


The rain is pouring, Summer's over and the Eurozone crisis is back from his hols. Timed nicely to coincide with the brutal Spanish riot police attack on the indignados protest outside the Madrid parliament, yesterday's statement by the remaining triple-AAA rated "Nordic Front" of Germany, Finland and the Netherlands, has put the cat back amongst the pigeons.

The Euro-summit of June 29th this year, backed up by Mario Draghi's not-quite-promise suggesting that the ECB would use its licence to print euros to support Spanish and Italian bond prices, had managed to lull the markets into a false sense of security long enough for finance directors and politicians to have a proper Summer holiday this year. The media platitudes of "light at the end of the Eurozone" tunnel were piled on to smother the flames and keep the ember's covered until school and parliamentary holidays were over. Now, with all the head crisis-makers back in the office and back on the game, the artifical frankenstein that is the Eurogeddon monster is cranked up again, just in time for the budget setting season.

The threat of Eurogeddon has never really gone away. Since the imposition of direct economic rule from Frankfurt over the three little PIGs (Portugal, Ireland & Greece), the main danger has been preventing an uncontrolled Greek default, or disorderly exit from the Eurozone (effectively the same thing) triggering the kind of run on Spanish bonds that would force "too big to bail" Spain, the Eurozone's fourth largest economy into a bailout. Through the domino effect, the fall of Spain would trigger the fall of Italy soon after, and that would place a massive question mark over it's biggest creditor - France. Yes the Eurogeddon domino trail leads right to the heart of the European core itself.

A few more "adventurous" or perhaps just foolhardy commentators have speculated that maybe the Euro could continue based around the remaining Nordic core of Germany, Netherlands, Finland and possibly one or two others. However the more sober opinion is that such a currency would soar in value relative to Germany's main export markets leading to the economic ruination of Germany itself, entirely dependent on exports as it currently is. Indeed, this has been the source of almost universal bafflement amongst observers trying to figure out exactly what the German capitalist classes' understanding of its current Eurozone game is, given the obvious results of a collapse in the Euro. Be that as it may, unlike the Provos, the Eurogeddon threat really hasn't gone away.

To go over the facts, yesterday the finance ministers of Germany, Finland and the Netherlands, in Helsinki, released a statement about what terms they would be willing to allow the newly constituted European Stability Mechanism (ESM). In amongst the largly turgid legalese that such statements are usually couched in, they casually dropped the bombshell that, in their opinion, the ESM direct re-capitalisation of banks could only be applied to new problems, not "legacy" ones. Throwing into doubt the entire deal done in June to stabilise Spain with its banks that everyone suspects of being effectively bust. The June agreement also included Ireland getting the same access as Spain, much to the crowing of Enda and the FG/Labour shower. Now it appears the "Nordic Front" have had second thoughts and want to block, or be seen to be threatening to block, the deal to gradually move towards a European banking guarantee and resolution framework.

Putting the facts into context, this means the Helsinki declaration is a calculated effort to resurrect the spectre of Eurogeddon in order to re-establish "discipline" over the rest of the zone, particularly its "wayward" peripherals. More to the point, it appears they are drawing another line in the basic struggle over the European debt crisis. Namely that the losses incurred by Eurozone banks in their unwise (not to say idiotic) investments in the peripheral bubbles inflated by monetary union, including a good many banks in Germany and the other "core" countries, should be born by the working classes of those countries alone, rather than being shared around the Zone as a whole. Whether they really expect this project to be sustainable in the medium term (and it appears at least some of them are stupid enough, or blinded by neoliberal dogma enough, to think so) is secondary to the obvious usefulness of putting a bit of fear back into the Eurozone budget negotiations. The beast must awake and carry out its useful role of terrifying the (revolting) peasants into submission.

So far, with the clashes outside of the Cortes in Madrid and the rioting in Syntagma Square going on as this is typed, the "peasants" don't seem to be sufficiently intimidating into having the good grace to starve quietly. No doubt we'll be seeing more of the Eurogeddon beast in the near future, in the pages of our newspapers, on the TV news headlines and no doubt chatting and sharing a sherry with Vincent Browne one of these evenings.

What the fervent believers in "discipline for others" of the Nordic Front appear to have forgotten, is that the tiger they are riding is far from a paper one. More than simply a mock-up to frighten the natives with, the Eurogeddon beast has remarkably sharp teeth still capable of doing some real damage yet. So for the benefit of the finance ministers of the Nordic Front, we leave them with this little limerick from Edward Lear:

There was a young lady of Niger
Who smiled as she rode on a tiger;
They returned from the ride
With the lady inside,
And the smile on the face of the tiger.