From London't Financial Times via Tim Duy's blog :
Meanwhile, Germany and France are holding to the official line. From the FT:
?We want Greece to stay in the euro,? Ms Merkel said. ?We know that the majority of people in Greece see that.?
The Greek government had also agreed on a rescue programme with the IMF and the EU after lengthy negotiations, she said. ?I believe that memorandum must be respected.?
My translation to Real Speak:
We know that the majority of people in Greece see & understand that we only want them to stay in the euro but only if they make good on their debt payments per the austerity we require ... otherwise we really don't give a shit. Pay up or fuck-off.
What I find most interesting about this though --- Greece's creditors are by and large Europe's big banks, other EU nations central banks (via the ECB), and the IMF. The EU's big banks are owned by Europe's capital owners club Elite. The ECB (European Central Bank) is a voluntary alliance of the EU member state's central banks that have committed a limited amount of funds to the ECB). Germany's central bank is by a huge margin the largest, but won't commit more than it already has (and it's not a huge amount relative to it's holdings). The IMF's credited funds come from the IMF's global member nations gov'ts (Treasury departments).
To actually bail out Greece (and by extension also Italy, Spain, Portugal, & Ireland) requires far more credit than Europe's big banks, the ECB's current funds, & the IMF has available. Germany has thus far not committed to using it's huge available funds to add to the bailout packages (ECB's) and say they won't commit more funds to a bailout. So in real effect Germany is saying that without Greece's being committed to paying back what it owes already (by implementing the required austerity), they're not going to put more good money after bad. Germany's central bank can afford the losses of the credit it's already extended, which is not a major proportion of what it can afford, so rather than have to extend any more credit from it's reserves it would rather let the IMF's, existing ECB's and Europe's big bank owners take the losses.
But what happens to European trade when the largest banks in Europe have to absorb the losses ... considering that this will tighten credit, leading to reduced GDP growth --- i.e. larger and longer recession than they're already facing, which will reduce revenues of the other EU nations --- like Italy & Spain in particular, making it more difficult for these nations to make payments on the debt due without implementing even more austerity in their own nations... which further reduces European nations GDP growth, widening and deepening the recession even further, reducing GDP even more, which reduces revenues by more, leading to greater austerity or inability to make debt payments when due ---- etc., etc. in a never-ending cycle to the bottom.
Among the fallout will be Germany's growth & revenues, hence job losses, hence German gov't outlays to support greater unemployed (unemployment benefits much greater than those of the US), increasing their own deficit spending... ad-infinitum until the rest of Europe recovers --- which may be a ten year period of no/slow growth ... or even worse.
Italy and Spain won't be able to continue to satisfy their creditors by implementing even more austerity, just as with Greece, the inhabitants will eventually say "no more" and elect gov't that refuses to play ball with the creditors on the creditors terms. So either the creditors losses on debts owed will be absorbed and banks recapitalized (by european central banks printing more Euros.. .which means more Euro's in circulation, reducing the value of the Euro relative to other currencies, which makes European exports more attracting and thus increasing exports to lead Europe back to economic growth and increasing jobs.
Meanwhile however there's a huge deficit created for an extended period... not to mention lost revenues, jobs, & trade. That seems to be too high a price to pay relative to the alternative which can be easily and quickly implemented by Germany's central bank just by guaranteeing the debts of the EU's indebted nations... in other words in real terms acting as the bank of last resort (through commitment of funds to the ECB).
So what's most interesting to me is that Germany appears to be more than willing to let the EU slide further into recession and extend that recession for a greater length of time, putting the entire EU at extremely high risk of falling apart.
Thus the question must be what's in it for Germany's current conservative gov't? I think the answer to that is clear --- to me anyway ---- like conservative gov't everywhere, no different than that of the US --- they want a vastly reduced role of gov't in public support .. a greater reliance on laissez - faire capitalism ... which of course increases the wealth of the capital owners and reduces the relative wealth of the rest. If it takes letting the EU fold to move the conservatives toward that objective then so-be-it.
It's a long term fight, and it really is about class warfare. The sooner this is accepted as the fact of the matter, the sooner it can be dealt with for what it is.