A ‘Grexit’ could finally sink the euro – so beware of Greeks bearing threats

THIS is an election year like no other, few can dodge its impact and, whoever wins, most voters will probably feel they’ve lost out.

Because, like a nasty rash, polling fever is erupting almost everywhere and what’s at stake isn’t so much who governs where next, but whether the world plunges into the financial abyss again.

In Britain the only certainty about what will happen in the general election on May 7 is uncertainty, though I have a sneaking suspicion Squire Cameron won’t be handing over the keys to 10 Downing Street.

Why? Because there’ll be what veteran American pollsters wryly recall as the ‘Richard Nixon Gambit’, an event from the annals of politicking gimmickry and the 1960 White House race, squeakily shaded by John F. Kennedy.

Too close to call, the Democrats stooped to a now legendary low in black propaganda by releasing an image of Nixon looking sweaty and shifty behind his grizzled five o’clock shadow, alongside the headline: ‘Would you buy a used car from this man?’

NIXON NIXED: The ad showing a shady Richard Nixon that tipped the 1960 US election JFK's way

NIXON NIXED: The ad showing a shady-looking Richard Nixon that tipped the 1960 US election JFK’s way

The stunt resonated sufficiently for JFK to win literally by a whisker – 49.7% to 49.6% – after voters carried the scary vision of the then Republican Vice President into the polling booths.

Nine years later, and remembering to shave at least twice a day, Tricky Dicky won the presidency – perhaps proving you can’t keep a good crook down – only to resign in 1974 in the murk of the Watergate Scandal.

So, it would surprise me not one iota to see a montage of Ed Miliband snaps, showing the Labour leader at his geekiest worst, cropping up like Comparethemeerket telly ads.

The tacit caption would be: ‘Would you believe this nerd could lead the nation?’

Though Britain’s hustings might be enthralling to dedicated followers of UK politics, they are a parish-pump sideshow to elections globally – and I don’t mean in Burkina Faso, where President Blaise Compaoré is hotly tipped to get the heave-ho in November.

Nor am I referring to Israel’s March vote, which will predictably end in a cobbled-together Left or Right-wing coalition government, neither of which will bow to Palestinian blackmail and have imposed on them a factionalised, corruption-riddled Arab statelet that adamantly refuses to recognise its neighbour’s right to exist.

And forget the polls in Saudi Arabia, Turkey and Egypt, which sully the name of democracy. Ditto Estonia, Finland and Poland, where properly constituted elections should hardly cause a ripple on the Richter scale of political earthquakes.

No, the fun – if that’s not too sardonic a description – is in the European Union’s Club Med nations, beginning next Sunday in Greece, the so-called ‘sick man of Europe’ (well, considerably more bilious compared to the ailing rest).

CAN’T PAY, WON’T PAY: Alex Tsipras (left), head of Greece’s Syriza bloc, demands debt relief to relieve his nation’s plight…or else

Because if a bunch of rebel populists called Syriza, who make the Chinese Communist politbureau look like Young Conservatives, the flaking euro is in for a further buffeting, one which – this time – could actually prelude the first exit of a member state from the Eurozone.

A bloc of far-Left hardliners led by neo-Marxist Che Guevara fan, Alexis Tsipras, the thrust of Syriza’s manifesto is simple: ‘Stop austerity – or we’ll stop paying our debts’, beginning with the instalment of €6.7-billion due to the European Central Bank (ECB) in July.

Unless you’re an International Monetary Fund (IMF) bean-counter, it’s a difficult to gauge just how much Greece owes creditors and what interest it’s cranking up. But terms like ‘colossal’ and ‘humungous’ are understatements and, as one economist noted, ‘At the current rate of pay-down, it’ll 130 years before they return to where they were in 2008.’

How a nation that produced arithmetical geniuses such as Pythagoras, Archimedes and Euclid got itself into such a mega-mess – or managed to flannel its way into the Eurozone in the first place – is no longer the issue.

With unemployment rocketing, the prospect of triple-dip deflation and Greece’s economy screwed to the floor by the ‘Troika’ – that’s the IMF, ECB and European Union, otherwise known as Greater Deutschland – Tsipras is demanding a 50% write-off its debts, just as the international community let Germany get away with in 1953.

For the record, deflation is a mixed blessing. In the UK, where inflation has fallen to 0.5%, courtesy of falling oil, food and commodity prices, consumer spending power is boosted. In contrast, what it means for the Eurozone is rising joblessness, stagnant wages, weak consumption and an inexorable slide into deflation.

POKER FACE: Germany's Merkel fears that a 'Grexit' would be contagious and infect other Club Med states

POKER FACE: But Germany’s Merkel fears that a ‘Grexit’ would be contagious and infect other Club Med states

Meanwhile, despite lame messages from Chancellor Angela Merkel about wanting to keep Greece in the club – which chimes with what Syriza claims it wants – behind the scenes an ultra-high-stakes game of diplomatic poker is being played, with many German politicians refusing to blink first.

‘We are past the days when we still have to rescue Greece,’ insists Michael Fuchs, parliamentary leader of Merkel’s Christian Democrats. “The situation has completely changed from three years ago. Greece is no longer systemically relevant for the euro.’

In fact, it was recently revealed that in 2011 Germany offered Greece a ‘friendly’ return to the drachma, the so-called ‘Grexit’ option. However, Merkel had an attack of the jitters when it became clear Spain and Italy would be mired by contagion from it.

Notwithstanding great strides the Spanish and, to a lesser extent, the Italians have made in putting their houses into better financial shape, with both nations also facing elections in 2015, many voters are looking to see what happens in Athens before they decided which way to jump.

The storm clouds are certainly gathering in Spain, where the Left-wing upstarts of Podemos (‘We Can’), who are allies of Syriza, are currently leading the polls on an anti-corruption, anti-austerity ticket.

Which is why Merkel fears a domino effect across the Club Med if Greece defaults on its IOUs, starts afresh with a new drachma and its economy shows signs of revival.

Because, however tentatively it finds its newly-liberated feet, the Greeks will offer an example to others stretched on the German-imposed financial rack to do likewise.

And the lure of a born-again peseta or lira – plus the freedom of nations to structure their own destiny – might be too strong to resist.

So watch this space…2015 could be the year that reshapes the future of the Eurozone.

 

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Cyprus, the mouse that roared, is still no pipsqueak – even after the EU’s bank heist

Way back in the mists of cinema history – 1959 to be precise – there was a spoof movie whose plot might just have provided the answer to cash-strapped Cyprus. Plus, it could also have sent a reassuring message to other Club Med Eurozone members on their uppers, their populations incandescent with rage over force-fed austerity.

Based on a book by Irish-American writer, Leonard Wibberley, and starring Peter Sellers, The Mouse That Roared chronicled the tale of the miniscule European duchy of Grand Fenwick when it was hit by a financial tsunami.

With its tiny economy almost entirely reliant on Pinot Grand Fenwick wine – read that as a metaphor for today’s banking – the country suddenly faced ruin when a US winery made a knockoff version of the highly-quaffable plonk.

The medieval micro-state, its 20-man army equipped with longbows and arrows, had but one recourse…to declare war on America, pray for instant defeat and trouser the largesse Washington usually doles out to those it has vanquished (e.g. the Marshall Plan for Germany following World War II).

So far, so good. Except it all turns turtle when the pauper duchy accidently defeats the mighty superpower and stumbles on control of the ‘Q-bomb’, a doomsday weapon capable of destroying mankind.

Naturally, in the world of wacky movies, all’s well that ends well; Grand Fenwick loses the conflict…and wins the moolah.

CYPRUS TAKE NOTE: The 1959 movie that showed how to take on a super power, lose...and win

CYPRUS TAKE NOTE: The 1959 movie that showed how to take on a super power, lose the war…and win the moolah

Fast-forward 50-plus years and, with nowhere to run to find financial succour, Cyprus played an audacious, Mouse That Roared card and took on the clunking fist of the EU in a poker game over bail-out terms for its banks relatively huge toxic debt.

However, unlike Grand Fenwick, Cyprus (population: 700,000 and dwindling) didn’t stand a snowball in Hades chance of plucking victory from the jaws of defeat. Because German Chancellor Angela Merkel and her finance minister Wolfgang Schaeuble – a man who could start a fight in an empty room – were never going to dip into their tax-payers’ wallets, especially in an election year.

Despite Germany’s financial might only required to back-stop a European Central Bank-EU-IMF (a.k.a. the Troika) loan approaching €10bn to the blighted island, it was time to set a brutal example to all Club Med beggars and crack the whip, even if it confirmed (once again) the Eurozone isn’t fit for purpose.

So, if Cyprus railed over the hardball terms being dictated, the door marked Exit, Ausgang or Salida beckoned to bankruptcy, irrespective of the EU’s Alcatraz rules that once in, there’s no escape.

This was the Euro superpowers’ revenge for feckless bankers having the audacity to set up an off-shore tax-haven paradise on the tiddler island…a money laundrette for washloads of filthy lucre (€18bn by some accounts), dropped off by Russian oligarchs wanting more bangs for their buck – or rather rouble – and no questions asked.

Then, to compound their monumental folly and displaying quite staggering disregard for due diligence, the Cypriot whizkids showered an avalanche of euros on iffy on Athenian junk bonds, which sank when the vacuous nation’s gravy train hit the buffers (Moral: beware of Greeks seeking gifts).

So, like their busted flush neighbour before it, Cyprus took its begging bowl to Brussels, with the implied threat that if you don’t underwrite our debt, we’ll upset the EU applecart.

However, the response was predictably draconian or, to paraphrase a fox-hunting analogy, the ruthless in pursuit of the potless.

BANK ROBBER: Hard-up Cypriots blame Germany's Angela Merkel for their misery, as this satirical ATM image shows

BANK ROBBER: How hard-up Cypriots satirically portray Germany’s Angela Merkel on their ATMs

Spurred on by a Germany for whom the Eurozone is fast becoming a jigsaw of Teutonic provinces, the Brussels bullyboys (Motto: take a sledgehammer to crack a nut) exposed themselves – once again – as crass, anti-democratic, bean-counting thugs.

And, to stamp their authority with maximum savagery, they demanded not only an end to Cyprus’s dodgy tax laxity, but depositors become victims of blatant bank robbery to help stump up nearly €6bn.

This will be achieved via a 40% haircut (scalping more like it) for those with over €100K in one dubious bank and the total annihilation of another. Plus, there’ll be ‘temporary’ controls to stop capital flight – another pillar of monetary union conveniently disregarded – though most of the dirty money has already flown.

The net result is that no-one comes out of this smelling of attar of roses. The EU is exposed for what it is – a wannabe super-state without a grain of compassion for its hoi-polloi; and Cyprus, an omnishambles of Byzantine idiocy, is to be the template for any other uppity lot misguided enough to believe it’s still a sovereign nation (Club Med+Ireland take note).

My guess, though, whatever arm-twisting deal was cobbled together, we’ve not heard the last of the Eastern Mediterranean mouse and how it cheesed off the EU (sorry, couldn’t resist that pun).

So the fear of contagion lurks and not a day goes by without me hearing folk voicing similar distrust of the Troika’s heavy-handedness, despite Spain’s finance minister assuring investors it can’t possibly happen again.

Why not? Even with depositor guarantees of €100,000, if the ECB – supposedly the milch-cow of last resort – cocks a snook at Cyprus, for all its profligacy, which Eurozone politician can predict with any certainty no more cruelty will be meted out to purge ungodliness from the sainted euro paradigm?

However, Cyprus may have more room for manoeuvre than Brussels imagines.

Having propped up the island with a €5bn inter-government loan, Moscow is livid at being locked out of rescue talks in what it perceives as an EU snub. And now it is muttering darkly about pay-back.

This, then, could be the trigger for woebegone Cypriots to pull, because they have two prizes Vladimir Putin muchly desires: Russian exploration rights to a natural gas field Cyprus is developing with Israel and the potential to be a new base for its Mediterranean fleet if the Syrian port of Tartus is lost, come Bashar al-Assad’s downfall.

And writing off a €5bn loan – mere loose change – is no hardship for an economy swimming in petro-dollars.

Moreover, the geopolitical implications of Cyprus falling further under Moscow’s sway could be dramatic. The EU’s third smallest nation could not only afford to shun the euro and return to its old Cyprus £ – as one of its ministers threatened – it could deliver a strategic uppercut to the West’s sphere of Middle East influence and threaten the British army outpost at Akrotiri, one of NATO’s pivotal monitoring stations.

With Greece already deep in hock to the expansionist Chinese, who own the deeds to the port of Piraeus, and the Moscow-Beijing axis strengthening, Cyprus may provide the key to unlocking greater riches than its emptying bank vaults.

If that happens, the smart alecs who dictate EU tyranny may well rue the day they put the screws on the tiny Eastern Med mouse with the temerity to roar.

Is this the end of the road for the Euro bullies?

Slowly, but surely, the cat is emerging from the Eurozone bag – and it’s a ruthless, snarling beast with sharp claws, hardly the fluffy pussy the International Monetary Fund and Europrats of Brussels would have you believe.

Because a doomsday scenario is being shaped by the ominously-understated Euro Working Group (EWG) in the event – likelihood more like it – of a Greek exit (‘Grexit’ in money-market speak), after next Sunday’s second General Election in weeks for the vote-weary Greeks is predicted to deliver a resounding win for far-Left, anti-austerity parties.

The plot being hatched by the EWG is likely to act as a template for other errant nations that won’t take their German-prescribed medicine (note to Spain’s PM, Mariano Rajoy: ‘Swallow the bitter pill, amigo, or else’) and it amounts to this:-

  • Suspension of the Schengen Agreement, thus reintroducing border checks at all Eurozone frontiers (to halt a rush of money smuggling);
  • Capital controls to staunch a run on banks;
  • Limits on cash withdrawals from ATMs

Cristine Lagarde, the IMF boss, still refuses to predict whether Greece will leave the euro, claiming that ‘It’s going to be a question of political determination and drive’.

THE PESETA: Is a return beckoning?

Whatever this coded sentiment or loosely-construed threat actually amounts to is anyone’s guess, but last week billionaire investor George Soros, who knows a thing or two about currency trading, indicated the EU has three months to sort out its financial crisis or its curtains for the euro.

And, however Lagarde, German Chancellor Angela Merkel, Rajoy and the Brussels’ spouters dress it up, this week’s €100-billion ‘rescue’ package for Spain’s ailing banks was nothing but a straightforward sovereign loan to buy time and precious little else for Rajoy’s regime.

As a consequence, to all intents and purposes the European Central Bank now has first charge on Spanish assets. So any private investor buying Spain’s government debt bonds (are there are any still loco enough to do so?) will be relegated to the end of the queue if it ever comes to pay-back time.

That essentially freezes the country out of the capital markets, so its financial destiny is wholly hocked up to the IMF/EU forever and a day, unless Spain follows the Grexit with a Spexit and eventually quits the euro for a return to the peseta (Portugal and Ireland get ready to dust off the escudo and punt, respectively).

Naturally, the Europhile politicos and Europrats will cry into their Chablis that their dream of a single-currency, one-size-fits-all mish-mash has been shattered and their power is gone.

But the flip side is we might return to the original ethos of the Common Market – a tariff-free trading zone, with the unhindered passage of goods, people and cash, not some ill-conceived United States of Europe, where nations cede their national identities to an unelected, anti-democratic ruling clique of Euro bullies.

Naturally, it means an end to straight bananas and the survival of cheese-and-onion crisps – both proscribed by Brussels – but somehow I think we can live with that.