Despite his best intentions and better judgment on taking charge of the ECB, it appears that Mario Draghi, considered a capable, intelligent and efficient banker, has now succumbed to the German Juggernaut.
The German directorate?s Nein to everything and anything that could lead to an active part by the Central Bank in alleviating the European debt crisis, has now extended to forbidding the bank from buying up Italian and Spanish bonds to shore up the spiraling rise of interest costs, our so called ?spreads?.
As a result, spreads have not only gone up for the bonds of the countries in greater trouble but for all bonds of the Eurozone countries. Not to mention the pressure piling up on France, the second largest economy of the Eurozone, being threatened with the loss of its triple A status.
Meanwhile back to the original sneeze of this galloping pneumonia, tiny little Greece, a furore has arisen which is incredibly childish and potentially equally dangerous.
After days of uncertainty and turmoil, Papandreou relinquished the premiership, giving way to a so called Unity government under a respected technocrat. This new government consists of the old government?s ministers plus a number of new ones for the other two parties supporting this government, the conservative New Democracy party and the LAOS right wing party.
Greece was due to receive the sixth tranche of its bail out loan somewhere back in September. It remains pending, having been put off for all sorts of serious and not so serious reasons. Now it has been stalled again because the German Minister of Finance has declared roundly that Greece will not get one cent unless the Leader of the New Democracy party signs a firm commitment to follow the dictates of the new bail out plan. (A demand already complied with by the other factors of this government).
Now, the leader of ND refuses to do so, maintaining that he is already committed through his support of the government and a letter he sent to the European leadership of his party and so on, and that insistence on yet one more written commitment is demeaning. At the moment it appears that both are refusing to budge. Playground mentality again.
Now, we have been informed that if Greece fails to receive this tranche, by mid December there will be no more money in the kitty at all, and therefore, Greece will have to declare a default on all loans and payments outstanding, in other words the country will go roundly bust.
Will this eventuality leave the rest of the Eurozone unscathed? If not, then will the Juggernaut have blown the whole fleet of Europe roundly out of the water? And might this not affect the whole of the global economy?
If so, has everybody gone mad, including the playground bully, aka The German Juggernaut?