Whisper it softly for fear of being mocked, but the worst may well be over for Greece, I wrote on 1 October .

[T]he eurozone may be in crisis but there are still signs of hope, argues Huw Pill, Goldman Sachs' chief European economist, in today's Telegraph. A combination of economic, financial and political factors therefore serves to reinforce our expectation that the euro area will continue to muddle through, rather than progress towards resolution, he adds.

I guess we weren't so very far out.

View full article here

The land of perpetual crisis ... the new norm.

There was always too much political capital at stake for a small country like Greece to threaten the EU federal project.
Demographics will bring it down. Europe is ageing and dying.
How will the German economy or even its society function as it ages and more immigrants are needed from Turkey and the Middle East to pay pensions? And how will these young Muslims feel about paying high taxes to keep German pensioners in relative luxury?

Back over to Spain then.

Quite. Anything from GS will be agenda-driven. They’re part of the very top of the power structure, so there might be something to be read in the runes. It’s all 2nd. order stuff, though. The euro is a political project, and will only fail if there is a fracture in the existing EU politics. And there’s none in sight. ( That was why I was cautious earlier in the year when there was speculation the Merkel would dump Greece come the autumn just gone.)

The worst is over in terms of grexit speculation, maybe. The worst is over for the Greek people. Doubt it.

Edited by user 10 December 2012 13:10:28(UTC)  | Reason: Not specified

I agree with the prognosis, but not with AE-P's solution (which, if I have understood correctly, is just a bit of "monetary easing" ) .

Edited by user 10 December 2012 15:19:41(UTC)  | Reason: Not specified

Yeeeh. I think the problem is that current policies are so removed from what is viable, where do you pitch your answers ? Like the Irishman giving directions – if I were you I wouldn’t start from here. Either you come up with something that is economically sensible but, within the current scheme of things, politically non-viable. Or vice versa.

So, in fairness to AE-P, loosening is not that far from what could be politically possible, if the Germans moved a bit. And in the short term it would be less painful for the Greek and for German exporters. Long term, it’s the first step on the (hyper)inflation road. And, because it’s not solving anything, once the politicians are on that road, it’s unlikely they will come off it.

And that’s my point, come objection, to AE-P’s position. Not so much that its wrong in itself, but that it doesn’t scratch the surface of anything that will make a real difference. Firstly, the financial errors that need correcting are much bigger than this. And secondly – the fundamental crisis is not financial, it’s structural/social/economic. If you wreck your country’s productive capacity, you’re going eventually going to end up poor, irrespective of monetary policies. The cheap credit that caused the financial crisis was a politically expedient way of temporarily masking the reduction of living standards of a “post-industrial” society. A 1% pa reduction of the UK’s deficit is not going to stop stagflation. Greece’s desperate need is for structural reform. Otherwise any monetary expansion will go down the same hole that the earlier money went down.

Edited by user 10 December 2012 17:09:30(UTC)  | Reason: Not specified

In certain circumstances - and especially in Italy - the local government is so corrupt that many people actually prefer rule by Brussels, in preference to their own. Sovereignty is hardly an issue, when you've never really had it in the first place.