“I believe, no,” is how Italian Prime Minister Mario Monti answered the question if Italy would seek a bailout—lacking the bravado and vehemence with which Spanish Prime Minister Mariano Rajoy had claimed for the longest time that Spain wouldn’t need one. Until it needed one. The question was hot. It followed the kerfuffle that ensued when Austrian Finance Minister had let it slip that Italy might also need “support.” But Italy is too big to get bailed out.
In Greece’s chaotic wake bobs the listing Republic of Cyprus, soon to be the fifth Eurozone country, out of seventeen, to get a bailout. By June 30. Only last year’s €2.5 billion loan from Russia has kept it afloat. It’s economy is shrinking, unemployment is at a record, and real estate is collapsing after a phenomenal bubble and a nationwide title-deed scandal that has taken down the banks. But Cyprus has something—and it’s huge—that no other troubled Eurozone country has.
On June 17, when Greeks try again to choose a government, they’ll decide their country’s fate—or not. One thing is for sure, whichever parties are able to form a coalition government, they will push for more bailout billions, but this time, forget the conditions, the structural reforms, the austerity. Just give us the money. And however much we want. They’d watched Spanish Prime Minister Mariano Rajoy proclaim victory.
While France is preoccupied with the legislative elections next weekend, Germany and Austria plunge into public soul searching about the euro, its meaning, its relevancy, the sheer and endlessly growing expense of maintaining it. To which are now added the $125 billion for bailing out Spain, the first in a series. Then there’s Italy. Like so many things that appear useful and sensible, the euro has become dangerous.
Josef Ackermann, Deutsche Bank’s CEO until a couple of weeks ago, who knows a thing or two about skeletons hidden in the bank’s vast closets, says that he is “grateful the US is pushing Europe to act faster.” Just like his US counterparts on Wall Street in 2008, he wants massive bailouts of the banks. He has “no doubt” that the German people would rescue the Eurozone, he says. But the German people aren’t so sure about that.
On July 1, Cyprus, a tiny country on a divided island, will rotate into the Presidency of the Council of the mighty EU—one of those bitter European ironies because Cyprus will have to be bailed out, according to its Central Bank governor. Reality is now even staining the Teflon economy of Germany with a daily litany of suddenly awful data points. But a central banker pointed at an uplifting story of austerity and growth at the edge of Eurozone mayhem.
Tourism, Greece’s second largest industry after the shipping industry, and already in a downdraft, is taking another hit as tour-bus drivers will go on strike; wage negotiations have deadlocked. Owners demand that drivers take a 50% cut in pay and benefits on top of the 20% cut they’ve already suffered! And Greece is the model for Spain and Italy.
Not a day goes by when Germany isn’t under heavy fire from outside interests, including Barak Obama who is facing a tough reelection campaign; and the last thing he wants is any crap flying across the Atlantic and messing up his speeches. They all want Germany to agree to whatever it takes to bail out the Eurozone, beyond the hundreds of billions of euros it has already agreed to pick up. And now it has to decide, but timing couldn’t be worse.
As developments in the Eurozone veered from bad to awful, with Greece on the brink and Spain getting closer, Switzerland, a speck with 7.9 million people surrounded by turmoil, is bracing itself, according to the President of the Swiss National Bank and long-time euro-skeptic Thomas Jordan, for the collapse of the euro. In the process, it’s creating a housing bubble with potentially horrendous consequences.
Jens Weidmann, President of the German Bundesbank, ventured into a veritable lion’s den with an interview in Le Monde, largest liberal daily in France, supporter of President François Hollande and his “growth” policies. And there, he lashed out at Hollande, the ECB, Greece, at everything that smelled of a transfer union, at Paul Krugman even.