Despite the heavy responsibility of today's meeting, no-one in Brussels has the first idea how to respond to this crisis effectively. The obvious solution - of an orderly break-up of the currency - is a non-starter for them. So what remains are fundamental and seemingly insurmountable differences between the Germans, French and the European Central Bank over the bailout terms of Greece. My guess is that what will result will be the classic EU fudge, a bewilderingly complex plan that pretends to fix the problem (and allows Greece to partially default but in such a way that it is not made specific) in order to buy more time. Already apparently there is a deal but no details yet are forthcoming.Whether the markets buy it is another matter; they are clearly losing patience with the whole charade and tomorrow could be Black Friday. But the proponents of the Euro won’t go down without a fight, all the time it will try to buy more time and buy more time. Last November the FT published this article which compared the Euro crisis with the 1960s Sterling devaluation crisis:
To some who went through the unsuccessful struggle from 1961 to 1967 to stave off sterling devaluation, the series of crises surrounding the euro will be drearily familiar. First there is a surprise loss of confidence. Then there is a series of rescue operations, usually taking the form of international guarantees of one kind or another. These are backed up by domestic restrictive measures leading to a domestic recession of sorts. In time the financial pressures ease and near-normality is seen to return. But then, when few are looking, there is another crisis, another set of international rescues and another set of domestic restrictions. And so on. Eventually the struggle is abandoned, and political and financial leaders work to pick up the pieces.While Euro-federalists will fight tooth and nail to prevent a disintegration of the eurozone, the simple fact is if something is unsustainable it can not be sustained for ever - however it can still be kept going for quite a long time.
During the period when sterling devaluation was known as “the great unmentionable” a tiny band of Treasury officials kept “a war book” on how to deal with the unmentionable if it nevertheless happened. Harold Wilson, the prime minister, ordered that the “war book” be physically burned, which it was of course not. It is difficult to believe that such a manual does not exist in Athens, Frankfurt and perhaps other European centres.
Everyone knows the Euro is seriously screwed but, I suspect after today, being screwed will have to wait just a little bit longer.