Well, to be quite fair, for all her formidable powers, The Frau hasn’t quite made the mess that is Europe single handedly. Nevertheless, if Nobel prizes for utter mess making were being handed out she would be the prime candidate.
All the best ideas currently in the processes of destroying Europe have derived directly from The Frau. Such as the binding law to outlaw Keynes, for instance. (Which may not even be passed by the German Parliament. We are in for lots of laughs at least.)
Now we have to wait and see how the infamous PSI for Greece will work out. The exchange of bonds by the private sector whereby they shall lose something over 50% of their holdings in Greek bonds. Otherwise known as a ‘haircut’. This again was an exclusive idea of The Frau’s which Mario Draghi, head of the ECB, hastened to describe as a ‘political’ decision. That is a nutty decision that has no relation to economics and finance. As are most of The Frau’s decisions. Such as spanking austerity over the whole continent at the cost of growth.
Now the whole point of this rigmarole of the PSI is not to lighten the burden of Greek Debt since this could be achieved by so many different and simpler ways than this convoluted doubtful process. And besides, for a saving of, we are told, something like 100 bill. Euro we shall then be lent another 130 billion at least, which does not sound like debt lightening to me. Nor is it a way of trying to get Greece back into the borrowing markets again. If anything, the only thing this will achieve is to keep Greece out of the borrowing markets for a very long time.
So why go to all this trouble and uncertainty rather than just declare a default on payments? Well, the CDS or Credit Default Swaps, instruments purchased and traded to ensure against a Greek default, must NOT be paid out! How could the banks afford these? The Banks! For god’s sake! At all cost save the Banks! Which is what this whole Greek ‘bailout’ charade has been all about from the very beginning. “Save the Banks, Screw the people!” as it has been memorably put by David Harvey.
Yes. OK. Save the Banks. But if this is done at the cost of the real economy, as is happening, and there is nothing left but barren destruction, then just what business will there be left for the banks? Just a silly thought.