Russia-Ukraine week 17A: The EU's 15% non-solution

A number of people who still are following the Russia-Ukraine war and its global spill-out may have noticed last week that the European Union voted to (try to) cut natural gas usage by 15 percent. 

UnHerd spells out why it won't work, and worse, with Germany embracing austerity again, as it did in the Great Recession, why the Eurozone economy is set for a major crumble unless Vladimir Putin somehow benevolently turns the taps on. Of course, if the war is still ongoing, he won't, and no, the US doesn't have that much LNG, and definitely won't in the winter. Could the somewhat parallel NATO wind up shattering over this?

Nobody should be shocked over any of this. 

Looking first at NATO, not the EU, it's part of why most of its member states have long resisted spending close to US amounts on defense. (Not that we don't spend way too much.) Spending more, especially if coupled with American minor reductions, would mean that Europeans would have to make decisions rather than following behind the US lead.

And, now that the EU has jumped in line with the US on sanctions, even while doing much more business with Russia than the US, it faces the same issue. Besides German austerity being likely to clusterfuck the whole EU economy, it now faces the problems of being the "leader" at least in part. It also faces the problems of being the leader after failure to do so. Remember post-Fukushima? Then-German Chancellor Angela Merkel ordered a hard — and fast — pivot away from nuclear. And, to dirty lignite coal. (It also appeased the former East Germany, which still mined some of that.)

But, she didn't address other diversification. (Personally, as long as the long-term waste disposal issue is solved, AND we build more efficient reactors — including breeder-type ones, as long as security is STRONG — I'm OK with nuclear.) Wind energy is more than in America, but, with no nukes, is still a kind of a patch. Yes, solar can provide SOME energy, but not as much as here. It's a matter of latitude, not just more cloudy weather.

Beyond that, when I hear about air conditioning in Hamburg, I shake my head. Germans are getting about as spoiled as Americans.

Independent Media Institute has more on the showdown, noting Spain and Portugal rejected the 15 percent call. Spain, to get to a 7 percent cut, has forbidden by decree public space AC thermostats from going below 27C, or 80.6F, which created a huge outcry. I could see them bargaining down to 25C/77F, but no lower. And, you know what? That's actually comfortable, and with box or ceiling fans, 27C is certainly "tolerable." I live in Tex-ass and it's where I keep our office AC set at. And, 19C in winter is 66.2F. Tolerable or even semi-comfortable. That said, unless all Spanish office buildings have "smart" thermostats, I don't see how you enforce this.

Biggest loser: Greece, Euro, France, Germany?

Now that Greece and its Eurozone creditors have apparently come to some sort of deal, albeit one that is perhaps even harsher than what was on tap just a month or two ago, the finger-pointing has started.

So, here's my 2 cents worth of fingers.

First, Greece is somewhat a loser. It's a loser not just because of the bad new deal, but because, as just-resigned Finance Minister Yanis Varoufakis claims, Greek Premier Alexis Tsipras was and is exactly what Eurozone leaders have long claimed about him: vacillating and spineless.

So, it's a loser because, unless Syriza replaces him, the Greeks don't have a real option to stand up to the EU. And, Syriza as a party winds up looking like a toothless tiger.

The euro as a currency is somewhat dented, but it's  not too bad a loser.

France? Somewhat a loser. It was the biggest pusher for the creation of the euro as a joint currency after the collapse of the Soviet Union, precisely to restrain German financial hegemony. Françoise Hollande got the EU to paper over France-Germany differences, but it's clear that the big stick of German Iron Chancellor 2.0 Angela Merkel forced France to accept giving Greece as harsh of a deal as it got.

Germany? A lot of people are claiming it overplayed its hand. However, the fact that it publicly displayed a card hand of wanting to give Greece a five-year boot shows that Merkel, along with her financial minister, Wolfgang Schäuble, knew exactly how close to the vest to play. And, the fact that other eurozone diplomats wanted to "teach Greece a lesson" only underscore this.

Finally, the whole world is a loser if part of the results of this German-pushed deal force Greece to sell off historic world heritage assets.

A couple of #Grexit and #Eurozone jokes — and #grexit_songs

First, have you heard about the hot new mixed drink sweeping Central Europe?

The Berlin Boomerang is the hot new drink replacing the Moscow Mule.

It’s composed of two parts schapps, a dash of sauerKraut juice and a double pinch of bitters.

It's a favorite of Angela Merkel, the Iron Chancellor 2.0.

It’s often an apertif drink with the new Athenian dessert, Brokelava.

Brokelava? It’s just like baklava, but with a few differences.

You follow a baklava recipe, but cut out 30 percent of the butter and don’t add the almonds or pistachios.

After it’s baked, you relayer it, add the nuts, but then take 90 percent back out.

Germans love its austere taste; Greek tax collectors love it after they chase it with three shots of ouzo.

Meanwhile, the European Union has recognized that a weak financial union looks like the United States’ old Articles of Confederation. Some folks are pushing for fuller unification.

To start it off, they have proposed a new “national” anthem for the Eurozone.

Euro, Euro über alles,
Über alles in der Welt,
Wenn es stets zu Schutz und Trutze
Brüderlich zusammenhält.
Von der Maas bis an die Memel,
Von Ebro bis Ägäisch,
Deutschland, Deutschland über alles,
Über alles in der Welt!

Deutschland, Deutschland über alles,
Über alles in der Welt!

(Translated, first the original, then mine:

Germany, Germany above all things,
Above everything in the world,
when, for protection and defense,
it always stands brotherly together .
From the Meuse to the Memel,
From the Adige to the Belt,
Germany, Germany above all things,
Above everything in the world!

Germany, Germany above all things,
Above everything in the world!

Euro, Euro above all things,
Above everything in the world,
when, for protection and defense,
it always stands brotherly together.
From the Meuse to the Memel,
From Ebro to Aegean
Germany, Germany above all things,
Above everything in the world!

Germany, Germany above all things,
Above everything in the world!)

Voila! European Union! Best pictured when sung by the Iron Chancellor 2.0.

(All images via Wikipedia.)

#England vs. #Scotland — a 9-point overview and more

Tomorrow, the vast majority of eligible voters in Scotland head to the polls to vote on whether to become independent from the rest of the United Kingdom or not.

So, what's all at stake? Besides North Sea oil and gas reserves?

Pride. Resentments. Related psychological issues The Tories, the Conservative Party. Actual, and perceived, economic issues with London.

And, North Sea oil and gas reserves.

Those are the biggies. Any lesser issues connect with one or another of the big ones.

First, the funny version, from John Oliver, who is great with this.



That said, the serious version.

First, the economics.

I don't know how much Scotland feels "stiffed" by England. The per capita GDP? Scotland at $44,378 vs England at $50,566. Actually, if income differentials are a cause for secession, Wales, at $30,546, has more right to want to leave the UK. (That said, per the Beeb, how North Sea oil and gas revenue is divided could affect the Scotland/England difference.)

At the same time, while England may not be as liberal as, say, Sweden, it's more liberal than the US. I presume that that includes being more liberal overall in progressive taxation. That income differential may hurt.

Ditto on language. Welsh is spoken by about 20 percent of Wales, and 15 percent read and write it with proficiency. In Scotland? Only 1 percent speak Scottish Gaelic; yes, 20 percent speak Scots, but, it's been affected enough by standard British English that one could halfway argue Scots is an English dialect and not a separate language.

That addresses non-economic pride and resentment issues to some degree. Scotland may not be so united if resentment against London (primarily against Conservatives, but somewhat against Labour) is discounted.

Natural resources distribution, per what I said above? A chart on Oliver's video tells the truth. By 2040, North Sea oil production will be about one-quarter of what it is today. Indeed, in less than a decade, production is likely to be less than a quarter of the 1999 peak.

More economics. Per this good 9-point overview from the Washington Post, I don't see how an independent Scotland can continue to keep the pound as its currency; certainly not as its official currency:

An independent Scotland would keep the British pound as its currency, the SNP says. No, they would not, the British government replies. 

It's a clear divide between the "yes" and "no" camps. For what it's worth, Salmond has argued that it doesn't really matter what London thinks. "No one can stop us from using" it, he told Sky News this week. 

He's not wrong, but there may be complications. The independence movement has suggested that it would seek a currency union with the United Kingdom, but the powers in London would have to agree to that. Should they refuse, Scotland could unofficially use the pound anyway, in the manner that Ecuador uses the U.S. dollar. 

Both options present risks. A recent article in the Economist explained how a "sterling zone" created by a currency union might end up looking like the euro zone, "with Scotland in the part of Greece." The New York Times' Paul Krugman wrote last week: "If Scottish voters really believe that it’s safe to become a country without a currency, they have been badly misled." 

Scotland could, of course, create its own currency, though the independence campaign hasn't suggested that yet. There's also another complication: If Scotland is required to join the European Union as a new state, it may be compelled to join the euro zone. Scotland doesn't want that, for obvious reasons.

I've seen people favoring independence bash Krugman. Well, any idiot knows he's right about the eurozone. Sorry, folks.

And, the yes folks are showing naivete or hubris on other issues related to this First Minister Alex Salmond et al claim that Scotland could join the European Union via renegotiation of treaties. The EU, per a CNN overview, has already said no. 

In that case, it appears Scottish adoption of the euro would be part of the price of membership. 

The Wall Street Journal further discusses pros and cons of five different monetary options.

That said, if there's a yes vote, for oil and gas reasons alone (even if they are already in decline), this would be a blow indeed to the remnant UK.

So, why? I think the Telegraph has it right. Starting with the Thatcherite mistreatment, while the economy is an issue, it's ultimately psychological.  That said, the Telegraph's also right that, setting aside Thatcherite-related resentment, the West continues to generally move, for now, toward a post-industrial world. What can Scotland offer to that world besides oil?

As for the outside world?

If North Sea oil and gas weren't involved, the international business world probably wouldn't pay half as much attention.

Per John Oliver, if not for Mel Gibson in "Braveheart," and a love-hate relationship with haggis and bagpipes, the average American probably wouldn't pay one-quarter as much attention. Just wait and see the yawns and ignorance that greet any Catalan independence movement.

So, if you do like bagpipes, crank up "Scotland the Brave."



And, if you're really interested, it may take 3-5 years after a yes vote to find out if, or if not, "Scotland the Brave" was also "Scotland the Dumb."

To Americanize this, it would be like if Austin wanted to secede from the rest of Texas.

Germany to US: Don't lecture us on bailout; and #Krugman may not be all right

Actually, it's a German academic/think-tanker, but Hans-Werner Sinn has some interesting, and at least partially valid, points on why Germany won't bail out Spanish banks.

First, the obvious one, that the eurozone, or even the larger EU isn't a single country. HEck, it's not a single economic polity, even. If it were, perhaps Germany would take the lead in a 1990s Sweden-style nationalization of some of the banks, which would trump both current EU action and US action four years ago. But, without at least a true single economic polity, Germany can't nationalize Spanish banks, and it won't float the money for Spain to nationalize its own, I'm sure.

Sinn then raises the "moral hazard" issue with a name from American history guaranteed to strike at U.S. Republican-Democrat issues:

When Secretary of the Treasury Alexander Hamilton socialized the states’ war debt after the Revolutionary War, he raised the expectation of further debt socialization in the future, which induced the states to over-borrow. This resulted in political tensions in the early 19th century that severely threatened the stability of the young nation.

Sinn notes that several U.S. states went bankrupt in the 1830s and 1840s because of this. (As did the independent Republic of Texas, or nearly so. Part of its "price" for annexation (the threat to become allied with Britain was bogus) was U.S. assumption of its debts. So, any time you hear a Texas Republican talk about fiscal discipline, he's probably full of shit.

Third, Sinn says it would be unconstitutional for Germany to do a true bailout of Spain. (That's no never mind to U.S. leaders who don't respect our own constitution.)

Finally, though the initial comparison is apples and oranges anyway, Sinn says Greece has gotten 105 Marshall Plans from Germany already.

I don't totally agree with all Sinn's arguments, and don't know that, if the eurozone were at least one economic "country," if he and most Germans would support a Swedish move.

That said, Germany could leave the eurozone instead of trying to boot out Greece. Would probably change its relations with Russia and Eastern Europe at least as much as with Western Europe.

And, while "austerity" isn't the answer ... maybe Germans are right to worry about overcommitment. If the likes of a Krugman favors massive Keynesianism across borders, within the eurozone "project," does he think Germany is, in turn, entitled to some "guarantees"?

Some "collateral" from Spain, to use a banking term?

I kind of do. And, I'd like to see Krugman address this issue. I think it's a flaw in his thinking.

Ditch the euro — it's easy!

Simon Johnson, in talking about the ongoing eurozone crisis, says that, while it's not quite as easy as pie, it would be relatively easy for some countries, say the PIIGS, to ditch the euro. Why? He looks back to Depression-era Europe and notes how easily many countries went off the gold standard.


That said, one country going off the gold standard inspired or compelled others to do the same. So a mad rush for the euro exits would probably inspire more.

And, regarding austerity issues, leaving the euro could cut both ways. Germany might decide to leave the euro because it looks too weak, or, if a new French government tries to dump on Germany.

And, per Johnson's analogy, leaving the gold standard didn't immediately end the Depression.

Given that different of the PIIGS face what they do for different reasons, leaving the euro might or might not help. Spain and Portugal face the implosion of a housing bubble. Maybe they need to nationalize local banks, then implement a Tobin tax on non-nationalized banks to ding the Germans. Ireland might be in a similar boat.

OTOH, would Germany, or the UK, invest in them in the future then?

Greece? Its problems, of corruption and tax evasion, are self-inflicted. It shouldn't have been admitted to the eurozone, in the first place.

Italy? It's halfway in the Grecian urn, though not totally.

Leaving the euro, of itself, probably wouldn't help Italy and definitely wouldn't help Greece. Until Greeks own up to that, nothing will help them, anyway.

So, Johnson is half right. Ditching the euro is easy. Helpful? Maybe not so much.

The UK must choose

It's clear that a 30-year period of reckoning for Great Britain vis-a-vis the EU has finally come due. Britain must choose whether to be part of a more financially integrated EU, even if it stays out of the Eurozone, or decide what it wants to do outside of that.

And, of course, this is all complicated by politics within the UK.

Assuming that financial services is that much a part of the British economy, I think Tories have to ask whether it will shrink more as part of the new EU or outside of it.

Frankly, a tighter monetary EU will, eventually, boost the Continent's role in finances, especially if any directives from Brussels are ultimately influenced by glances at Berlin. So, if Prime Minister David Cameron wants to walk around in EU purgatory, or even, as Tory backbenchers clearly want, leave the Union entirely, I think he's an idiot.

Sign on. Britain's financial sector will take some sort of hit, true. But, not immediately, and not in a way that Cameron, if he has any brains (questionable) can't actually fulfill his talk about leading a new type of Conservative Party.

The option of playing at the EU edges? Assuming Merkel and Sarkozy can pull something off, that's not a long-term option.

Cameron's stiff upper lip talk otherwise, larger EU-27 institutions will lose relative power if the narrower eurozone gets new financial strength, new financial regulations strength and, above all, is less unwieldy and more open to easier reform of governance. Eventually, the other "outsiders," even those already given tentative eurozone approval, will have to sign off on the bottom line, too. So, unless Britain can convince a minority of "outsider 10" to follow it, a two-tiered EU just doesn't sound that plausible.

So, ditching the EU entirely? Unhelpful. Despite new openness on banking, Switzerland's tight world would make it equal to an independent UK as an EU counterweight. The rest of the Commonwealth? Canada's tied to the US. Australia is largely independent. Other countries matter less.

Labour would, albeit reluctantly, surely take the plunge, also liking more of Brussels' regulatory powers and ideas.

Per Indiana Jones and the Holy Grail, choose wisely, Mr. Cameron. You may not get a second chance.

And, per U.S. conservatives, don't root for Cameron to choose to opt out. The "special relationship" will only be diminished if Britain itself is.

At least not at the head of a government.

That said, if this leads to a referendum, Labour won't be able to do any "straddling" itself.

And, whoever leads the country, if Britain winds up in financial outer darkness, does it wind up as more a "lapdog of the US"? Thoughts for all British political leaders.

It's not the choice of the EU vs. a more independent UK. That ultimate 30-year reckoning on alignment may be coming due.

Roger Cohen agrees about that and about Cameron's short-sighted stupidity.

In the land of the twice credit-downrated ...

The once-downrated is king?

That's why the threat by credit rating agencie S&P to downgrade most countries of the Eurozone, even Germany, should be taken with a grain of salt. The U.S. downgrade by one of the three ratings agencies has shown little fallout so far. (That said, a day later, the S&P has now said its credit downgrade threat includes the Eurozone bailout fund, not just member nation economies.)

I agree that the Eurozone needs reframing. Whether Sarkozy and Merkel are doing a lot more than window dressing is another question. But, if there's a threat of a two-notch downgrade, they will do more than window dressing.

And, given Germany's notorious inflation fears, just what would a downgrade mean there, internally?

Anyway, for now, at least, the court of general public opinion will surely recognize that Germany, and even France, aren't Italy.

David Brooks' rose-colored fiscal morality

Brooks, in comparing the U.S. and Germany (wo bist du, Herr Bobo?) says this nuttery:
Why are nations like Germany and the U.S. rich?...

It’s because many people in these countries, as Arthur Brooks of the American Enterprise Institute has noted, believe in a simple moral formula: effort should lead to reward as often as possible.

People who work hard and play by the rules should have a fair shot at prosperity. Money should go to people on the basis of merit and enterprise. Self-control should be rewarded while laziness and self-indulgence should not. Community institutions should nurture responsibility and fairness. 

Well, lemme see, the 1 percenters believe exactly nothing of that, David! And, to be honest, a certain amount of non-1 percenters probably have the same unbelief.

Beyond that, long before the meltdown, America's economy, more than Germany's, was built NOT on "self-control" but self-indulgence.

That said, while Brooks is right about Greece, and somewhat right about Italy, Krugman has a more nuanced picture of the whole Eurozone. And, labor retrenching of the last decade aside, Germany in general still rewards regular old labor better than the U.S. in many ways.

And, neither one of them has totally tackled this issue: Many Germans' lingering fears of 90-year-ago hyperinflation means that Germany is not liable to go too far in working with even non-Greek parts of the eurozone. Booting Greece from the zone might work. But, the rest of the eurozone would be hugely weakened without Germany.

And, all the fractions of blame that lay out there, it's clear both on this side of the pond and inside Europe that the whole eurozone is in trouble. Most economic pundits are saying if Italy caves, that's it; that's too much burden for the eurozone.

That said, I'm not a professional economist, and I don't play one on TV. But, I don't think a eurozone collapse is as bad as the 2008 global financial turmoil. Now, coming on top of a slow recovery from that, it could extend a "lost decade" in fair parts of both Europe and the U.S.

On the other side, China has said it wants to invest sovereign wealth fund money in both areas, in infrastructure improvements. One hundred and fifty years ago, their labor built our railroads; now, their money might rebuild them.

DON'T throw a #TARP over the #Eurozone

Stop me if you've heard this before:

If (it) fails, bank lending would freeze, stock markets would likely crash, and ... economies would crater. Nations ... could see their economic output fall temporarily by as much as X percent, according to ... forecasters. The financial and economic pain would spread west and east as (Europe) and Asia get ensnared in the credit freeze and their exports ... collapse.

Oh, yeah, October 2008. Wall Street's collapse was going to destroy America.

Only now, the Eurozone's collapse is going to destroy Europe.

Of course, Wall Street wasn't allowed to collapse.

BUT, while I don't agree with tea partiers about not having acted in 2008, as well as disagreeing with the idea of running a nation without some sort of central banking system, it's clear that the no-strings TARP "cure" for Wall Street wasn't a cure for the American economy in general, either in 2008 or 2001.

So, let's hope that Western Europe's version of paper-pushing technocrats attaches some strings to Eurozone reform. If Greece needs the boot, then boot it. If the European Central Bank, or the degree of "federalism" emanating from Brussels, needs to be strengthened, then strengthen it. And, if member nations can't agree to that, then wind down the Eurozone.

We probably could have "wound down" Wall Street, too, if its kleptocrats refused to accept tight strings as part of TARP. Unfortunately, the corruption of mainstream bipartisan American politicians, including in having deliberately reduced shareholders' power to sue corporate boards, meant that the wind-down option here in America wasn't that viable. A Darwinian Goldman Sachs and JPMorganChase likely would have survived. A vulture-like low-feeding George Soros would have repeated his 1998 international exploits on an even grander scale.

That said, because Europe's crisis is in part a monetarist crisis, or so it seems, failure to achieve a good resolution one way or the other probably will enable the Soroses of the world even more than the Goldman Sachses.

At the same time, because the Eurozone "project" isn't the same as the U.S., the whispered-about possible cataclysm isn't likely, should Eurozone ministers "fail."

I actually see the current crisis as worse, from the financial world POV, and from member nations' POV, than the U.S. debt supercommission, but not as serious as TARP. Germany IS too big to fail. The U.K., which has problems enough of its own, is outside the Eurozone. The Netherlands is fine. If push comes to shove, for France, Nicolas Sarkozy will perform financial cunnilingus on Angela Merkel, if necessary, to bind Gaul that tightly to the Deutschland. Both Euro and non-Euro parts of Scandanavia are doing well, too, as is Switzerland.

That all said, per my one poll on the left, it is indeed possible that the combined European Union economy, including Eurozone and non-Eurozone members, will fall behind the U.S. as a result. It is even vaguely possible that the EU, not just the Eurozone, could at least "reformulate," if not break up.

And, maybe it needs to.

Just don't throw a TARP over it.

If nothing else, maybe the U.S. can still teach Europe a thing or two -- about what not to do.

Will the EU fracture?

British Chancellor of the Exchequer George Osborne gives Eurozone members "only a few weeks" to save the quasi-nation supernational entity. He was speaking narrowly about the euro as a common currency, but, in things like this, you can't take one step backward without other fallout.

In hindsight, early national opposition to the Maastricht Treaty that lead to the euro currency seems more than reasonable. But, promises from Brussels aside, it's clear that nobody back then thought about national fiscal issues that would crop up.

Given that Eurozone members today say they passed "the Articles of Confederation," and know what they mean when they say that, why wasn't anybody saying that 19-20 years ago? Or in the run-up between the passage of the treaty and the implementation of the Euro?

Don't tell me Eurozone leaders got incredible enlightenment in the past six weeks, or even six months.

While the new "old Europe" is good in many ways, it's now straddling two sawhorses. And, the "fixes" proposed so far won't cut it.

Greece, for example, doesn't need more bailout; it needs the other countries to take it over, at least until a true union is approved in Europe. And, until the EU admits that, it loses relevance.

That said, can the EU survive without the euro? Sure, it did pre-1992. Or, the current EU can get serious about debt rules and boot some current members. Or, to the degree I understand finance, the EU could be made a notional reserve currency while EU members go back to national currencies.

EU agrees to let Greece 'default'

In exchange for more loans to Greece, the European Union has agreed to let it technically default.

Here's how this played out:

In a declaration crafted here after hours of haggling, and a whirlwind trip Wednesday to Berlin by the French president, the leaders put forward billions more in new loans to Greece. But they extracted a price: Greece's private-sector creditors will accept a bond exchange that gives them less than originally promised. ...

Greece was reeling under its huge burden, and its woes were threatening to engulf other countries.

To push back against that contagion, the euro zone also agreed Thursday to a wide expansion of its €440 billion bailout fund. ...

"We created a solid firewall and better fire-brigade equipment," said Herman Van Rompuy, the European Union president.

That creation had been a long time coming. In spring of 2010, when the euro zone was debating the first Greek bailout, the countries—at the firm insistence of Germany— insisted that rescue loans would come only when absolutely needed, and would be issued at punitive rates to discourage countries from slacking on reforms and falling back on cheap aid.

Germany has made a stark reversal. Chancellor Angela Merkel, once the euro zone's "Madame Non," led a push to assemble the new Greek bailout program. In the face of stiff domestic opposition to creating what the German press dubbed a "Transferunion," she opened the door to far greater fiscal aid than her country had once contemplated. In return, she won a commitment that banks and other creditors—and not just taxpayers—would have to bear some of the burden.

Here's the details, with euphemisms, of how this will allegedly work:

Private creditors who hold Greek debt that matures in the coming years will "voluntarily" turn in their bonds and accept new ones that mature far in the future. The Institute of International Finance, a banking trade group, said its members had committed to participate in the exchange.

The banks, Germany and France's largest institutions among them, offered to take new 30-year or 15-year Greek bonds. The offer includes a menu of four different flavors of bonds with varying coupons and types of insurance—some would be backed by triple-A-rated collateral. Some of the bonds on the menu include a 20% discount to principal.

The euro-zone leaders said the private sector's "contribution" would amount to €37 billion through 2014 and €106 billion through 2019, though it didn't detail the calculation. They also said a debt buyback program would yield an additional €12.6 billion by taking Greek debt off the markets at discount prices.

That said, is this going to work, or is it pounding more sand down a bottomless rathole?

I vote the latter.

Greece's problems are not just due to Europe's version of financial and housing bubbles. Tax evasion and general corruption have been rampant there for decades. Until there's reform in Athens, all we have here is a larger Band-Aid.

That said, kudos to German Chancellor for making private lenders talking a haircut on stupid loans to a country that was corrupt before it joined the eurozoneand never reformed itself.

But, whither Germany? And Merkel's coalition with Free Democrats? At least one Free Democrat in parliament has called for Greece to be booted from the eurozone. Can her coalition hold? Will a push develop within the EU to force a confidence vote?

And, can the EU hold? Can the eurozone hold? Will German bankers and businesses continue their push to invest further east in Europe rather than to expand their involvement in a morass?

Obama's dumb oil move

Tapping the Strategic Petroleum Reserve?

First, the amount it contains? 727 million barrels, per Wikipedia, is enough that it can't be tapped too often, too hard.

Wiki also says the current consumption per day is 21 million barrels so Obama's 30 million barrels actually lasts less than a day and a half (just over 1 day, 10 hours to specific), per fried Leo Lincourt.

So, add up A and B, and contra Salon's Andrew Leonard, it's possible this will NOT stop oil speculation. (I'm also assuming Saudi Arabia's talk about raising production is a lot of talk and not much else, given its recent unmothballing of a field that that had been in drydock for years.) The market remains relatively tight. It might take the sharpest edges off speculation, but that's about it. And, due to the realities of what the strategic reserve contains, commodities speculators know that.

Beyond that, Obama's never showed any real inclination to reign in speculators. If he had, he would have tighten commodity, commodity futures, and commodity derivatives legislation.

But, since many of those folks are the ones who were major bankrollers of the mythical Citizen Obama's 2008 presidential campaign, and whom he hopes will be the same in 2012, he's not going to regulate them in the future.

This was just about trying to give the economy enough of a nudge, without having to make any actually liberal political decisions, to boost his election chances.

But, this is about more than Obama. The International Energy Agency signed off on this too.

This is also in part about post-Fukushima Japan, worried about summer energy needs with some of its nuclear plants offline. Or so I'm guessing. It's about the EU, hoping this will take the mind off of bailout trauma in Greece and bailout payment trauma in Germany. And, it's about China hoping it can continue to keep its housing and other bubbles from bursting.

Well, I don't know what the answer is for Japan. For Greece, austerity won't address a culture of tax evasion and corruption that makes the legal-on-paper antics of folks like the Koch Bros. look like kindergarten, and cheap oil won't camouflage austerity. For China, as Paul Krugman wrote the other day, only an upward re-evaluation of the renmimbi (yuan) has a serious chance of deflating those bubbles without too much pain or destruction.

On Europe, as I learn more ... it's supposed to replace the missing Libyan oil, most of which went to Europe. So, I wasn't totally wrong there.

China? At least one market analyst in that area, as well as some in the U.S., suspect "coordination" with Fed chief Ben Bernanke's speech about a slowing economy, and that this will be the gateway for more "quantitative easing," but by different name and means. In fact, Forbes calls it QE2.5

Meanwhile, the Commodity Futures Trading Commission is investigating "suspicious" trades in oil just before the decision was announced. Getting back to lack of regulation - such insider trading isn't illegal in the commodities markets.

And, back to the "timing" issue, too. The story notes the Saudis had already announced a production increase.

So, many this was a bank shot against the non-Saudi members of OPEC, played in conjunction with Riyadh?

Guess who could be leaving the eurozone ...

Shockingly, it's not Germany, threatening to remove itself from a bunch of blood-sucking southern European leeches.

Instead, it's one of the leeches, Greece, who wants to leave. Even more surprisingly, Germany's governing Christian Democrats are threatening to stop the move.

And, a new Greek drachma or whatever wouldn't be worth the paper on which it was printed:

"It would lead to a considerable devaluation of the new (Greek) domestic currency against the euro," (a German Finance Ministry) paper states. According to German Finance Ministry estimates, the currency could lose as much as 50 percent of its value, leading to a drastic increase in Greek national debt. Schäuble's staff have calculated that Greece's national deficit would rise to 200 percent of gross domestic product after such a devaluation. "A debt restructuring would be inevitable," his experts warn in the paper. In other words: Greece would go bankrupt.

It remains unclear whether it would even be legally possible for Greece to depart from the euro zone. Legal experts believe it would also be necessary for the country to split from the European Union entirely in order to abandon the common currency. ...

What is certain, according to the assessment of the German Finance Ministry, is that the measure would have a disastrous impact on the European economy.

"The currency conversion would lead to capital flight," they write. And Greece might see itself as forced to implement controls on the transfer of capital to stop the flight of funds out of the country. "This could not be reconciled with the fundamental freedoms instilled in the European internal market," the paper states.

It's a threat serious enough to get a special EU meeting called, though.

But, not everybody outside of Greece thinks it's either legally impossible or economically foolish for Greece to do this.

Unfortunately, I don't see a new Krugman blog up on this yet.

Update, May 9: Still no Krugman column on this, but Mark Weisbrot totally agrees. As an analogy, he cites Argentina a decade ago decoupling from the dollar.

At the same time, leaving the Euro would force Greece to sink or swim on its own on facing up to massive tax avoidance, etc.

'Old' Europe ain't so sclerotic:

Far, far, far from it.

To put it bluntly, European businesses are kicking America's ass, as well as Japan's and China's. And the rest of the BRIC nations besides China. And, the earlier core EU of Western Europe could actually pick up the pace more. Picture EU expansion as being, other than the Greek debt crisis, something like how NAFTA was really supposed to work here in the New World, but didn't, primarily due to American big business greed, callousness and more.

Take note of the poll in the right-hand rail. A couple of months ago, I would have been ready to believe the worst about the Greek debt problem and vote more conservatively. Not now.

And, since French President Sarkozy hosts the G8 and G20 later this year, has been making noise about more financial reform, and the EU in general has done more than just make noise about other regulatory tightening in the last couple of years, Obama had better sit up and take notice.

I wouldn't be surprised if, by 2015, the euro is not a default tertiary global currency, with the EU accepting that, but deliberately keeping the currency from being a full-fledged secondary currency.

If Wall Street is a casino, it's incestuous

It's a casino that's rigged, with algorithmic trading on computer the Securities and Exchange Commission still doesn't understand, with the incestuousness of paying ratings agencies for their ratings of sheiss. And, more and worse, as Salon's Andrew Leonard makes clear.

The incestuous part? EU member states know this, too, especially the incestuousness between ratings agencies and the investment banks like Goldman Sucks who sold drossy schlock as alleged 24-K gold.

(So, Lloyd Blankfein, was Moody's helping you do "God's work"?)

Oh, a few Democrats (from the party that outpaced the GOP 2-1 in 2008 election cycle campaign receipts from Wall Street, per Open Secrets) have blathered about reforming this incestuous relationship, but the financial reform bill from Chris Dodd (D-Conn. Man) never did address this.

Compare the EU, which is implementing a new regulatory system for ratings agencies, which goes into effect near the end of this year.

In fact, the concern has been so bad in the Eurozone, politicians are saying, why don't we have a European-based ratings agency?

There have been repeated calls from European policymakers in recent years for a home-grown agency to compete in the U.S. dominated sector but with little progress. Users of ratings, such as investment banks, said policymakers are aiming at the wrong target.

"They should be focusing on getting stability back to the market and a European ratings agency is not going to do that," said Mark Austen, acting chief executive of the Association for Financial Markets in Europe.

The new EU rules being phased in from September will include requiring them to undergo direct supervision if they want to issue ratings in the 27-nation bloc, and two have at least two "independent" members of their boards of directors.

EU readies lifeline for Greece

It's not officially been accepted yet, but a financial backstop of more than 30 million Euros is now available. At the same time, it's carefully structures as to not a "bailout." Too bad folks like Big Ben Bernanke and Little Timmy Geithner weren't that smart, eh?

Goldman Sachs wrecks foreign economies, too!

Not content to pass out derivatives of various sorts here in the U.S. like a Pez candy dispenser, when some more fiscally "loose" members of the European Union sought some creative budget help in order to meet the deficit standards for the E.U.'s monetary union in the Euro, Goldman Sachs was only too glad to peddle similar bullshit to Greece, Italy and elsewhere.

Tony the Pony NOT a lock as EU prez

Former British Prime Minister Tony Blair is finding his shot at the European Union presidency taking a sudden swan dive, primarily due to lack of support from French President Nicolas Sarkozy and German Chancellor Angela Merkel.

Why? Politics. The two want a leader from one of Europe’s center-right parties, like themselves.

Also hurting Blair’s candidacy — Britain being outside the Eurozone. What puzzles m e is why this hasn’t been held against him all along. Especially since he never did hold up his promise to push this.

Interestingly, parties of the center-left in Europe have kind of written off the presidency already, and are focusing on the EU foreign ministry. Read the full Guardian article for more such details.

Germany and France officially out of recession

In another sign that, contra economic sneerers on the equivalent of Don Rumsfeld, the “old Europe” of the Eurozone has plenty of vigor, Germany and France are both officially out of recession with second-quarter economic growth.

That said, overall Eurozone growth dropped 0.1 percent. However, that’s still smaller than the U.S. second-quarter drop. In the rest of the EU, the UK seemed to the biggest laggard, with its financial sector still struggling more.