This has been a grim weekend for news. No one can have failed to be moved by what has happened in Tunisia and France. Elsewhere in the world conflict brings more victims, but it is Greece that concerns me here although at this moment the immediate human cost seems less apparent.
I don't think that will last for long. Greece has imposed capital controls in the last hour before wrote this. The sign has been given that Greece is now a country that sought the proffered support of allies, who then abandoned it. That sign says that the democratic choice of people's and nations does not matter: it was a banker who delivered the blow. And just as in 2008, when Lehman fell, no one really knows what will happen now that the European Central Bank has declared Greek banks, en bloc, to be insolvent.
On the ground, in Greece, there will be desperation. Money is not, of course, everything in life. But try to do without it as the mechanism that makes the modern economy possible and then see what happens. That is the experiment that the ECB has unleashed tonight. No one can be sure what the outcome will be. We can sure there is no upside.
And elsewhere there will be contagion. It is impossible that it can be avoided. There will be counter-parties to Greek banks in other countries who will lose as a result of what is happening. No one yet knows who they are. Across Europe there will be many who could be about to lose as a result of what has been decided who have no idea of what is going to happen: that's the nature of bank collapses.
All of which is unnecessary. Greece made mistakes in its economy, for sure. As a result it has paid an incredible price in the destruction of physical, human and monetary capital over the past five years. It cannot be expected to bear more. The Greek government has been right to say that the time to say enough has arrived. It was time for the EU, IMF and ECB to say debt write down had to be on the agenda. But austerity and more misery for the people of Greece has been instead. It is as if the lessons of 1919 had never been learned, most especially by the Germans.
Recriminations, referenda, and offers can come now but the point where the damage might have become irreparable may have already been reached. Can anyone trust their supposed partners again when they make clear that in an hour of need the answer to the question will be no? Because that is what has been said today.
In that context the argument about ever closer union is meaningless.
And the argument about monetary union is just nonsense.
There is just power. Ugly, brutal, financial power apparently exercise by homo economicus without compassion, as the breed demands.
And when faced with that no one can be sure how homo sapiens will respond.
That's what worries me: this is a tragedy in the making.
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A powerful piece, Richard, which should be read in conjunction with Zoe Williams’ article.
http://www.theguardian.com/commentisfree/2015/jun/28/greece-europe-imf-democracy Together they illustrate what this is really about. Financial fascism v democracy and the will of the people.
Thanks
Zoe is very good
IF no rot exactly lighthearted tonight
we bailed out the banks but people’s life chances are expendable. sad or sick. Maybe both.
Bankers uber alles. Let third parties control your currency and that’s the attitude you end up having to deal with. Money is far too important to be privately owned. It has to be a public facility.
Richard, if the banks are closed and capital controls have been put in place, this would seem to indicate that the Greek government has decided to go for the exit would it not? Which means when they re-open, it will be drachma for business, not Euro.
I don’t think that’s decision for Grexit
It may be acceptance if it
But that is different
So the ECB has withdrawn support for Greek banks.
A point worth repeating, as it is not widely understood: Greece does not have a Central Bank as we understand the term. Their banking regulator and emergency liquidity provider is – or was – the ECB.
This is an externally-imposed collapse.
It is also vindictive, irresponsible, and unnecessary. Greek banks were not the source of Greece’s problems, there is no reason why they should not continue to function, and the management of their current liquidity crisis is exactly the reason why modern central banks exist.
Greece has been ejected from the Euro, and thrown off an economic cliff.
Anyone who tells you otherwise because there are still Euro notes in circulation is either deluded – and this is all too common in economic commentators – or promoting an agenda that is, at best, indifferent to truth in public discourse.
And that, too, is all too common.
I fear for the future in Greece: this will precipitate the collapse of many, many viable farms and businesses that people rely on for a living; and it is a deliberate rebuke to democracy.
We should fear, too, the consequences closer to home. I recall that when Lehmans was thrown under the bus as an example to others – and they deserved to go down – the systems that we thought we had in place to mitigate the risk worked. Mostly. The crisis hit in places where we weren’t looking and were largely unaware that we had left a risk uncovered.
The Greek people might do well to study the example of Cuba, and go for a barter economy — including reuse, repair, recycling and growing food, like the poor people in the caravan about whom you recently wrote so movingly.
If the ECB has quantitive easing in place wouldn’t buying all the Greeek debt owed to other countrys’ governmnents be a legitimate use of the process? If it would have been why on earth was it not used?
That was entirely possible
The option has been refused for political reasons
Greece is excluded from the ECB QE programme
Germany is achieving , by financial warfare, that which it failed to do with tanks and armies. We should be concerned for Greece.