Luxembourg’s Finance Minister said it out loud: “If the Greek people or the Greek political elite do not apply all of these conditions, they exclude themselves from the Eurozone.” All of these conditions. And there are a lot of them. Then he added crucial words: “The impact on other countries now will be less important than a year ago.”
“The European Union is suffering under Germany,” said Georgios Karatzaferis, president of the right-wing LAOS party. He accused German Chancellor Angela Merkel of trying to “impose her will on Southern Europeans.” He called the Netherlands, Austria, Finland, and Luxembourg “satellite states” of Germany. And then, with a few words, he pushed Greece a step closer to bankruptcy.
After the German-French council of ministers in Paris, Chancellor Angela Merkel and President Nicolas Sarkozy gave a joint TV interview at the Elysée Palace, the official residence of the French president. Merkel berated François Hollande, Sarkozy’s top challenger in the upcoming presidential election. Then Sarkozy lashed out against him. Never before had a German chancellor campaigned so hard for a French president.
Greeks yanked €65 billion out of their bank accounts since 2009, the Finance Minister told parliament. “Of that, €16 billion was legally taken abroad,” he said. The rest? Stashed under mattresses or hauled to Switzerland via the land route. A whopping 20% of GDP! Capital flight of massive proportions. They see a forced conversion of their euros to drachmas. And politicians are planning for the “afterwards.”
Unemployment is a staggering problem in Eurozone countries that are at the core of the debt crisis. Spain’s jobless rate jumped to 22.8%. Among 16-24 year-olds, it’s an unimaginable 51.4%. In Greece, youth unemployment reached 46.6%. In Portugal, it’s 30.7%, in Italy 30.1%. But highly educated young people are leaving in massive numbers—with harsh long-term consequences for their heavily indebted countries.
Hope is pervading the media that an agreement might be reached between Greece and private sector investors on a debt swap, maybe even this weekend, though everyone is hobnobbing at the World Economic Forum in Davos where all sorts of things have already been said and leaked between drinks. But now a horrible sign has appeared: German individual investors are gobbling up Greek sovereign bonds.
In her speech at the World Economic Forum, Chancellor Angela Merkel warned that Germany might be overwhelmed by its efforts to bail out the Eurozone. Germany must not make promises that it can’t keep, she said. It doesn’t make sense to demand a doubling or tripling of Germany’s contribution. “How long will that remain credible?” she asked. That reluctance has made Germany a favorite punching bag. And yet the numbers are staggering.
We finally have statistical proof that CEOs are … a confusing bunch. PWC’s survey shows that CEOs in 60 countries are exhibiting signs of gloom about the economy but not their own companies. German CEOs, facing the Eurozone debt crisis on a daily basis, aren’t feeling the pain, according to Ifo’s indices. The Empire State Manufacturing Survey points at spiking optimism. And all three show patterns of false hope.
“The case of Greece is hopeless,” Otmar Issing said today. He should know. He was a member of the Executive Board of the Bundesbank and of the Governing Council of the ECB. Another substantive voice in an increasingly loud chorus. But it’s legally impossible to kick Greece out of the Eurozone. So he suggested a procedure—a procedure that has been happening all along.
Treasury Secretary “Hank” Paulson was the trailblazer with his proposal for TARP in September 2008. He went to the Congress with a list of demands—unlimited powers to hand unlimited amounts of taxpayer money to whomever—and threatened that the whole world would collapse if his demands weren’t met. It worked. So Greek prime ministers imitated him. And now Christine Lagarde, managing director at the IMF, tried it too.