Rise of the Euro Robots stabilises the patient, for now
Democracy is from the Greek “Demos Kratos”. People power. So what of Technocracy? Technos Kratos. Robot power? Well they weren’t invented then. But Technos means method, art or skill. And so, today we bear witness to the rise of the technocrats.
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You might call it the Rise of the Euro- Robots. Economists not army men as crisis leaders. Lucas Papademos was announced as new prime minister of Greece today. Mario Monti is likely to replace Silvio Berlusconi in Italy very soon. The former – Frankfurt’s man, a former European Central banker. The latter – a Brussels man, a former European Commissioner. The perfect diumvirate to mediate between the Pigs and their Paymasters.
Both of them are Technocrats, but not quite Democrats. Papademos was appointed effectively leader of the parliamentary majority, without being elected. Monti was appointed a life senator by the Italian President last night. Incredible stuff, but the establishment on both countries has decoded that needs must.
Lucas Papademos emerged from the President’s mansion to pronounce that Greece’s stability was best pursued within the Euro. He was the European Central Bank’s Vice President from 2002, appointed on merit as a top economist. He even approved the design of the ECB’s new super headquarters.
He has penned recent papers quibbling with the idea of making Greece’s bond holders lose more than the 21% agreed in July. That was France and the ECB’s position too. So that means on the same day as his predecessor George Papandreou, Merkozy and the bank lobby the IIF agreed the 50% bond writeoff at the European Council, he wrote this lengthy article explaining why it was a bad idea.
But its Italy’s crisis, that has raised questions about the entire viability of the Euro. Its President warning that Europe was urgently waiting for “full responsibility” from this EU founder state.
Italy had to pay 6 per cent interest for a one year loan today, which is a pay day type loan for a G7 country – totally unsustainable. However, in the markets Italian effective interest rates did come down to below 7% after the expectations that Monti would replace Berlusconi.
But is it too late? Today we discovered that this political and financial crisis was now infecting the real economy. The European Commission slashed its forecasts for growth for next year. The Eurozone was forecast a few months ago to grow by 1.8 per cent in 2012 – now its just 0.5%, near recession. And we too are affected: Britain slashed even more: from 2.1% and now down to 0.6%
In fact: Britain’s economy will the worst of all EU nations apart from troubled Italy, Greece, and Portugal over this year and next. David Cameron again pointed the finger towards Germany and the ECB.
For its part the ECB, is still resisting launching a multi-trillion euro bazooka bailout. Angela Merkel did though firmly deny suggestions that France and Germany were looking towards a smaller core-eurozone, saying that Germany’s only goal was “the stabilisation of the Eurozone in its current form”.
I’m still of the opinion, unpopular I know, that Germany will ultimately write the big cheque. But if the likes of Berlusconi believe that, they will never reform and get their house in order. There are noises Germany is considering a two speed zone is part of the brinkmanship to create the “shock therapy” Germany thinks is required in the likes of Greece and Italy.
As if to prove things, as Monti was positioned into power in Rome, the ECB bought Italian bonds in huge quantities, and Merkel reaffirmed Germany’s commitment to the current Eurozone. In fact the only change she was considering in Berlin today… was an expansion to take in Romania, whose President was visiting.
What we learnt today, though, is for the next year or two that means lower growth and less people power.
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