THE GREAT EURO RAID :
A TALE ABOUT FARMERS AND HORSES.
VENICE, May 10, 2010 - Europe’s frantic efforts to save its runaway currency had an uncanny similarity to the proverbial farmer locking his stable door after the horses bolted.
       In this case the ‘horses’ – who ran off with their feed – were the global speculators, whose scams, manipulations and raids have gone uncurbed with neither the U.S. nor the European Union willing to change financial rules and ensure a more stable global economy.
       In the raid against the Euro Anders Borg, Sweden’s finance minister, accused these speculators, most of them U.S. financial institutions, of having acted “like a wolf-pack” to ravage the weakest of the European nations, Greece. Then, he said, these financial raiders threatened to tear apart the rest of the struggling members of the European Union, Spain, Portugal and possibly Italy.
       The farmers in this case - the heads of State of the 16 of the 27 European member nations who use the Euro - were still debating what kind of locks to use on their currency while the Euro was losing value by the hour against the rest of the world’s major currencies.
       The subsequent financial panic - caused by a combination of ruthless speculative raids and a selfish delay how to combat them - wiped out billions in bonds and shares and threatened another global recession, even the dissolution of the European Union.
        Faced with this prospect EU leaders suddenly rallied and agreed on a massive 500 billion Euro special fund to bolster their besieged currency and bail out the weakest Union members, should they require a Greek-style rescue mission.
        To no one’s surprise neither the rescuers nor the rescued were happy with the bail-out formula.
         Greeks who can now service their debts thanks to a 110 billion Euro credit line (22.4 billion from Germany alone) went on a rampage of demonstrations during which three bank employees were burned to death. The protests were an expected reaction to an IMF-EU austerity program, a prerequisite for the loans, that intends to slice as much as 30 per cent off the wages of workers and pensioners and most likely will keep Greece on a zero economic growth rate for years to come.
       Without doubt Greek protesters realized they are to pay not only for the corruption and mismanagement of senior officials but the deliberate manipulations of U.S. credit rating agencies that gave Greece the coveted AAA rating when its was already clear the country’s finances were in deep trouble. The inexplicable high rating encouraged investments that quickly turned toxic. 
          On the other hand the rescuers had their own domestic problems.           
          German Chancellor Angela Merkel was facing key provincial elections and knew the electorate had no stomach for contributing the lion’s share of the Greek bail-out - even though gullible German banks held most of the ‘toxic’ Greek loans.
           Merkel stalled on the rescue package, hoping to complete it only after the elections at the weekend. But the run on the Euro, the market crash and a lengthy phone call from President Obama forced her hand. As the EU’s major player she helped rush the bail-out through at the weekend causing an immediate positive response on world markets Monday.
         But Merkel paid the price at domestic polls. An enraged electorate, not prepared to help out the Greeks by tightening their own belts, voted against her coalition. By losing a stunning ten percent at the ballot box Merkel forfeited her coalition’s important majority in Germany’s Bundesrat, the Upper House or Senate. Her electoral loss and the bail-out means neither Germans nor other EU members will be offered eagerly awaited tax cuts to stimulate growth. Nor will there be promised health reforms.
           On the positive side the western world appears to have avoided once again a disastrous financial meltdown. This time it was Europe (last time the United States) that has mobilized financial resources (at least on paper) to bail out banks and governments who either speculated badly or became victims of a free market system that has run amok.
           On the negative side there is no guarantee of a repetition of the crisis, even worse in its effects, without new rules and regulations to curb unscrupulous financial predators who work hand in glove with rating agencies and the financial media. These agencies are often the very clients of the institutions that benefit from their assessments.
           (Similar to the Asian meltdown at the end of the 1990s the trick is to over-estimate the assets of a country or banking institution to facilitate loans when in reality the country or institution is already financially sick.)
           This conflict of interest, known for years, has been the target of constant criticism by independent analysts but neither the U.S. nor the EU has been able - or willing - to stamp out practices that clearly show corporate and government interests coincide today in a western world where politicians are corporate stooges and corporate bosses become politicians.
           While this unsavory symbiosis is legal periodic financial crashes will repeat themselves until the day when the entire global house of cards finally collapses.
            Judging by the ever shorter frequency of the crisis this should not take too long.
ends