Thursday, 16 February 2012

Even I Understand that the Euro Crisis is Cause for Concern

I’ve never had much of a grasp of economics. At school I passed my A-level but with a mediocre grade in spite of having been tutored by an excellent (and very patient) Economics teacher. The shambles that has always been my own financial affairs is ample testimony to my general confusion on the subject.

But having seen and studied the various news bulletins I do have a bit of a handle on the Eurozone crisis, and on the dilemmas that appear to be unfolding before us. If Greece were an individual with a personal account at Barclays or HSBC it would probably be refused a loan. It is, after all, a pretty routine consideration when deciding whether or not to lend somebody money that they should have some prospect of one day being able to pay it back. Lenders have sought assurances not only from the Greek government but also from every political party with a chance of being involved in running the country after April’s elections that they will squeeze the Greek people until the pips squeak for as long as it takes them to repay the debts which, like the British people, they played no part in incurring.

If the lenders appear to have the whip hand though, consider this. The refusal of a loan would probably result in Greece either leaving or being thrown out of the Eurozone. Devaluation of the national currency would result in hardship for millions, with those who are able to either leaving the country (as a member of the EU they have free movement after all) or at least ensuring that their savings do.

Here in Portugal, which is probably the EU member closest to Boot Hill after Greece itself, there would be a feeling amongst anybody with anything that they are next. Probably many would not wait for the eleventh hour to arrive. There would be a crisis of confidence following which collapse would probably become a self-fulfilling prophesy. Then Spain, then Italy, then Ireland…

I don’t know many people in Greece, but I do know a great many in Portugal. They are pleasant, hard-working, poorly paid but still cheerful people. They don’t deserve the misery that the bankers are in the process of visiting upon them.

I don’t know how this is all going to end but an awful lot of anger is being felt by usually level-headed, liberal and moderate people all over Europe towards the politicians and bankers who are asking them to suffer the consequences of their own failure whilst they generally exempt themselves from the misery they tell us we must all share in.

Bankers have historically taken risks whenever they have felt they might get away with it, because they are fundamentally greedy. Lending to Greece would probably be a bigger risk than most, but not lending to Greece would be infinitely more risky still.

Even I understand that.

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