In the midst of the Euros I noticed another bailout was agreed yesterday. It’s Spain this time, so I thought I’d dig out these old comments from the past couple of years:
• “ Spain is not Greece” – Elena Salgado, Spanish Finance Minister, February 2010.
• “ Portugal is not Greece” – The Economist, 22nd April 2010.
• “ Greece is not Ireland” – George Papaconstantinou, Greek Finance Minister, 8th November 2010.
• “ Ireland is not in ‘ Greek Territory’” – Irish Finance Minister Brian Lenihan.
• “ Spain is neither Ireland nor Portugal” – Elena Salgado again, 16th November 2010.
• “Neither Spain nor Portugal is Ireland” – Angel Gurria, Secretary-General, OECD, 18th November 2010.
And guess what?
Yes, all the above countries qualified for Euro 2012!
Amazing isn’t it? I thought for a moment I’d stumbled across a betting theory that there was some magic link between national indebtedness and the quality of football that country plays…..
But then I remembered that none of them are actually doing very well in the competition so far, plus England owe an absolute shed load and they’re rubbish too. The fact Germany is doing most of the bailing out goes would also tend to disprove the theory. (By the way, I know they have to make these bail out announcements over the weekend so as not to spook the markets, but I did think it was a nice touch that they announced a Spanish bailout at the same time Spain was kicking off against Italy, most people’s idea of the next country in line for a handout.)
What is mildly irritating about all the above comments is that if you take them literally, they are in fact true. Spain is definitely NOT Greece and you can’t argue with that. So if you thought the BBC commentators on the Euros talk some vacuous shite, well they are in good company.
I was a bit annoyed after a savage Saturday’s punting. A badly advised rugby bet on Wales went astray in Australia first thing. Then a last second, (literally last second) English try ruined my handicap bet against South Africa before the inept Holland shafted me. But things really reached rock bottom in the early hours of Sunday. I’d backed the Boston Celtics with an 8pt start to beat the Miami Heat in the final game of their best of 7 play off and the last thing I remember they were leading by 11 points. I nodded off in comfort: surely they couldn’t blow an effective 19 point lead?
They surely could! When I woke they had managed to lose 101-88, which is quite impressive when you think about it.
But no-one bails me out, do they!
I would argue with an absolutely straight face that I was less stupid with MY investments than the dim witted Spanish bankers who loaned out the entire ranch were with their’s (and therefore in greater need of a bailout of course). But my complaints will always fall on deaf ears.
But there is a serious point to all this.
The EU is becoming unstitched at the seams. When the EU was set up there was quite vocal dissent put forward by the Euro sceptics: one size does not fit all. Well 15 years later we find ourselves in the following situation: Ireland has to pay 8% interest on its 10 year debt, Portugal 11%, Greece 30%, the UK 1.6% Germany 1.4% France 3.8%, Italy 6% and Spain 6.5%. So what do we learn from this?
We learn that the sceptics were right*.
Monetary union will not square the circle. Monetary union is failing the EU. Normal tax paying Europeans will continue to pay with these bailouts.
But don’t get angry at “lazy Spaniards” or “tax-dodging Greeks”. They won’t see a penny of that bail out. These bailouts aren’t a transfer from the rich to the poor, they are hand outs from the little people of the EU to the rich bankers who were stupid enough to lend it out to greedy property developers.
The markets will continue to punish the stupidity of the EU elite who are determined not to let this doomed union fail. And let’s face it, why should the market lend to the likes of Italy and Spain at favourable rates?
If a retailer goes bust because he sells too few goods that’s just market forces at work. If I go broke because the Boston Celtics can’t defend a 19 point cushion, well that’s tough titty too. There is risk and reward for good and bad decision making and occasionally there are a few casualties. We should not cry for them. We knew the risks. This bailing out of the banks is the sort economics that would make a Communist blush
John Maynard Keynes said that “markets can be irrational longer than you can be solvent”. This is true, as I’ve found out personally. But, you had better believe it, the market will get it right in the end. Boy, it will get messy.
(*And that anyone who lends to George Osborne for 10 years at 1.6% is an idiot)