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  1. Wealth
January 10, 2010

Greece-ing the EU's palms

By Spear's

It’s a familiar story: a corrupt socialist government has lost control of public expenditure. If, Dear Reader, you think I am talking about the UK…

The fact that the €uro was spread too fast and too thin has given it the hue of margarine around the edges while the butter collects and curdles in the centre, and in the mixed metaphor of the €urozone, the whole experiment is beginning to look like a fried egg, with a burnt bit of white on its right.

“Burnt bit”? – that’s the €uro currency pegs of the eastern bloc, which is best cut away so that the dish at least looks more palatable. But the real problem is that the whole thing is swimming in grease, like a dish served up on an old A1 transport caff which has escaped the attentions of dear old ’Elf and Safety.

The problem is how to deal with the excess of Greece in the €uro-dish. It’s a familiar story: a corrupt socialist government has lost control of public expenditure and is now heavily in debt, owing £362.0 billion, which represents an unsustainable 168% of GDP.

The government is in denial, didn’t mention the word ‘austerity’ in its recent election manifesto, so its credit rating has been cut to BB-, which means its interest cost has gone to 225 basis points above the Germen 10-year Bund rate, and now debt-deflation is setting in.

If, Dear Reader, you think I am talking about the UK, you are automatically pardoned, and the sale of indulgences will commence shortly, disguised as so-called gilt-edged securities.

Jurgen Stark, the ECB’s Chief Economist, says Germany is not about to bail-out the Greeks, but he sounds like the old Bundesbank talking with their ‘receive no gifts’ policy, when the politicians obeyed what Mr. Money-Man said.

The trouble is, however, ever since the dreadful Maastricht Treaty, it’s the politicians who call the shots now, and Messers Merkel & Sarko don’t want to see the €uro-constructivist 35-year dream unravel before their eyes. If Greece leaves the €urozone amidst more riots and then prospers with a devalued Drachma, like the UK did in 1992, it’s going to send a clear message to all the other €uro-laggards, like Spain, Ireland and East Europe, while a post-Brown UK with its battered Pound slowly begins to struggle out of the gutter of excess HP brown sauce as well.

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When a Franco-German rescue of Club-Med inevitably causes €urozone interest rates to rise along with inflation, then the riots will move from Athens to Berlin and Paris. Like I said, it’s best to stick with that Greasy Spoon on the A1. At least you know what you’re going to get there for your 2/6d-worth.

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