The Euro And Greece: The Empty Trojan Horse

It is remarkably curious that Greece, a country of relative insignificance, whose economy is smaller than Volkswagen's, has dominated the UK media agenda with much frenzied anticipation of a eurozone meltdown. Leading economists began predicting 'Grexit' including the economist who is credited with coining the phrase, as did other 'experts';

"Grexit is inevitable, it’s an absolute certainty"

And not just economists, this what Daniel Hannan had to say on July 6th:

It's interesting that with a Greek deal looking increasingly likely when we went to find the above tweet last night we found Hannan has now deleted it. Thanks to the internet though it can be found elsewhere. I guess the deletion speaks for itself.

Among other predictions, such as the 'European project is dying' there has been ill-disguised Anglo-saxon gloating and praise for "little democratic Greece standing up to the bullying EU". Greece though did not vote to leave the Euro or indeed the EU itself. They had instead voted to keep spending Germany's money without the inconvenience of paying it back. It's worth noting that the UK is owed around £10billion by Greece.

Whatever the referendum was, an exercise in democracy it was not. Called at the last minute, the referendum was rushed through with no time to debate the complexities of the bailout package, there was an absence of a proper "yes" or "no" campaign, the government put the "no" option (which it favours) above the "yes" on the ballot paper, the Greek media have been accused of bias and breaking the law leading up to the poll and it now appears that the result has been ignored anyway.

In that sense the referendum cannot be fair, or be considered a reflection of a true democratic decision. Instead it was merely an exercise in trying to bluff the EU using the Greek people as pawns. We can only be grateful in this country that we have an Electoral Commission to help negate government referendum stitch-ups like this.

So rather blow apart the eurozone, instead Greece is capitulating. It has proposed and is accepting a deal far worse than the one which was put to its people in a referendum. It will crawl away with a whimper.

The reason of course, as we noted last month, is that the current crisis, and the Euro in general, has less to do with economics and more to do with politics. The current crisis has not come about because Greece ran out of money - there was a deal on the table - but due to Tsipras deciding to do politics, and he has not come out of this well. It would seem he has been rather naive when dealing with the EU and we venture as far as to say "out of his depth".

He had a much weaker hand than he seemed to think - Greece economically and politically is insignificant - and he played it badly. By calling a referendum he thought he would frighten the EU into a better deal by the threat of political contagion to the likes of Spain et al.

Instead the markets largely shrugged off the referendum result and the only consequence has been that he has annoyed just about every leader in the eurozone. Annoyed to the extent that the ever increasingly robust language coming out of the EU indicates how fed-up they are with Greece. Fed-up to the extent that Greece was given an ultimatum on to agree a bailout package or leave. Tsipras backed himself and Greece into a corner. He's had no choice but to climbdown.

And the reasons are two-fold. For all the gloating by the UK media, they have largely overlooked two key points. They can deal with the economic part of EU membership but uttlery fail to acknowledge the more important political aspect. For Greece to leave would be contrary to "ever closer union". The EU cannot politically afford Greece to leave.They will paper over the cracks until the "English Question" is resolved and then we will have a new treaty.

Secondly, despite "preaching" by British" commentators that Greece would be better of out, their own experience suggests the opposite:

When it comes to money, the Greeks learned a lot of lessons the hard way over many generations. The drachma has always been seen by them as a way for the series of corrupt governments to steal from the people through devaluations and inflation.

This is what monetary theft looks like from the Greek point of view, and why they don’t trust their politicians and central bankers in managing a currency. They’ve learned the hard way and won’t forget the drachma’s 82% devaluation against the euro in two decades.

Greece simply does not want to leave. So ultimately Greece's gestures were empty, they capitulated as we expected they would. If nothing else this saga demonstrates once again how badly served we are by our media which doesn't bode well for our own forthcoming referendum.
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Greece And The Euro: A Matter Of Politics Not Economics

"The process of monetary union goes hand in hand, must go hand in hand, with political integration and ultimately political union. EMU [economic and monetary union] is, and always was meant to be, a stepping stone on the way to a united Europe"
(Wim Duisenberg, first president of the EU Central Bank) 

"The single currency is the greatest abandonment of sovereignty since the foundation of the European Community: the decision is of an essentially political nature"

(Felipe Gonzalez, a Spanish former PM, 1998)

"Europe will be forged in crises, and will be the sum of the solutions adopted for those crises."  

(EU founding father Jean Monnet)

As the eurozone goes through one of its periodic 'difficulties' there's much fuss being made about a possible Greek exit, or Grexit. Today "Greece faces a critical 24 hours as European leaders hold an emergency summit in Brussels that could break the deadlock around the country's debt crisis".

We have of course been here many times before and naturally such speculation results in a media plethora of economic analysis, graphs and statistics and goodness what else.

There's often incredulous analysis on why Greece hasn't yet left Euro and go it alone and why it should; the economic case is one which is largely obvious.

Yet to make such an economic case is to miss the point entirely. What is so often overlooked is that the euro, and indeed the EU, is a political project not an economic one. And as the quotes above make clear the EU, and its member states, make no secret of this. But despite proclaiming its political intentions so publicly it is a damming indictment that we can no longer rely on the UK media to even acknowledge this simple fact, which perhaps reflects the prevailing UK view in general.

But it's in this political context we must see the Greek crisis. The euro has always been a political project to achieve its "ever closer union" as per the opening sentences in the Treaty of Rome 1957. "Ever closer union" is the utter founding principles of the EU; they meant it then, they mean it now.

To achieve full political union requires salami tactics or the Monnet method. Normally with a currency union we should start off with political union first and then economics. However due to the difficulties of achieving the political union part first the EU quite deliberately put the cart before the horse. By doing so they ensured the euro was a flawed project from the outset.

By making it flawed meant it was inevitable that it would encounter a series of crisis. Each crisis needs a solution and that solution, if we may call it that, invariably would be a call for 'more europe'. More Europe, more power, more integration. Thus step by step a series of euro problems allows the march towards further integration to continue unabated.

What could not be achieved explicitly by the front door would be achieved less obviously via the back door on the back of an economic Trojan horse - of ultimately economic misery. The euro is the extension of engrenage or 'the Monnet method' writ large:

The Schuman Declaration was presented by Schuman on 9 May 1950 (9 May was later to become Europe Day). Monnet and Schuman believed that it was through economic integration that political integration would eventually be achieved, via a process called spillover. Monnet and Schuman were thus the first functionalist theorists of Europe. Indeed, this process of integration is often termed the 'Monnet method'.

Yet much of this obvious point seems so beyond our own media who seem to be willing the Greece to exit to reinforce their misplaced, wrong and self-important analysis that the EU is all about economics rather than deal with the real issues as they are.

Thus despite all the brinkmanship and threats of Grexit, ultimately someone will put up some money, more than likely Germany, to paper over the cracks and the eurozone crisis will be left on hold until a new treaty comes along. Bailouts are de facto fiscal transfers - essential for an economic union to succeed. All that is needed is to make them official via a new treaty.

It's with some irony that the UK is aggravating the Greek crisis by having a referendum in 2017. By doing so it is holding up the new treaty to try to resolve the euro crisis; the Fundamental Law of the European Union which now has to wait until the "English question" is settled.

Despite the dreadful economic statistics Greece will stay in, politics and EU integration ambitions ensures that it must.

And So It Rumbles On...

I haven't done a Eurozone post for a while largely because it consists of soporific repetition, however rumble on it still does:

And:

And:

It all reminds me of this post by the FT in 2010 regarding the sterling devaluation crisis in the 1960's:

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.

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.

Can we put it out of its misery yet...?

"Greece Won't Leave The Euro?"

From the same chap who thought VAT was a Thatcher invention, we now have this

(hi Mum!) I'm going to stake what little credibility I have here: I don't think Greece will leave the euro. Not now and probably not ever.

I'm saying nufink...*

*Can I have a job writing for the Telegraph being paid to talk bollocks...?

Will It? Or Won't It?

It would seem that the Euro is going through another of its periodic epileptic fits again, where much chatter resides on alleged major developments:

The European Union is working on an emergency Greek exit plan as the break-up of the euro looms, a senior Brussels official has revealed. 

That the euro cannot continue in its current form is pretty obvious - I just wish they would get on with it. So while we tire of the seemingly never-ending circus of crisis, it is inevitable that at some point a breakup or exit must come to pass - the tricky bit is gauging when.

So it's tempting, as it's a Friday - which is a good time to announce bad economic news or fundamental economic changes ahead of the weekend to prepare for Monday morning - to take this report seriously:

(Reuters) - De La Rue (DLAR.L) has drawn up contingency plans to print drachma banknotes should Greece exit the euro and approach the British money printer, an industry source told Reuters on Friday.

 However, according to Business Insider:

Is Greece Already Stepping Back From The Ledge?

A couple of new polls have the conservative New Democracy party leading, and a report in Ekathimerini suggests that New Democracy is shoring up its coalition.

The Greeks want change, but they don't want to leave the Euro, and if it looks like SYRIZA's leader Alexis Tsipras is overplaying his hand, and risking a GREXIT, then he may get punished.

In short no-one knows. Yes the Euro's flawed, and yes it will breakup but when is another question. My guess is Greece will still be in the Euro this time next week.

Inevitable

Economic problems + Mass Immigration + Removal of people's democracy = A move to extremist parties:

A neo-Nazi party who advocate forcing immigrants into work camps and planting landmines along the border are today savouring unprecedented political success in Greece.

Golden Dawn party will enter parliament with 7 per cent of the vote after the electorate shunned the main parties who they blame for plunging the nation into austerity.

The obscure extreme-right group are one of the biggest winners in a poll which has plunged Greece into a fresh political crisis.

As UKK41 says it's depressing. It's also inevitable:

Asked if he worries about that prospect, Thomas Nikolaou, an unemployed mathematics professor, who until now backed Pasok, said: 

“This trick didn’t work now and it won’t work in the future. I voted for (the extreme right) Golden Dawn (party). I lost my job, I can’t feed my family and I have nothing else to lose. The only power I have is my vote and I will give it again to those who say no to this madness. 

“All I can think of is revenge against the politicians who destroyed my life and millions of others.”

So it's with deep irony that by trying to eliminate the nation state and democracy the EU will encourage precisely the very situtation it wanted to prevent.

Forcing Greece Out

As previously mentioned on this blog, and by Richard North, and by Mary Ellen Synon, it looks like Greece is on its way out of the Euro - forced by the Germans. It's nice to see the BBC catching up eventually, and the fact they're starting to report it, reluctant as they always are to mention EU matters, indicates how close this scenario is coming to pass.

The MSM Fiddles As Greece Burns

The Talking Clock makes an excellent point about the priorities of our nation's 24 hour news coverage. Last evening's coverage, on both the BBC and Sky, was dominated initially by the sad death of Whitney Houston (which albeit warrants a mention) and then for hours by pre BAFTA footage of self- congratulatory celebrities walking down the red carpet. Apparently, and this was important, they were adopting a 'green' theme - actor Colin Firth was wearing an 'Eco-friendly sustainable suit', whatever that means? All of this coverage despite that the event had a two hour time slot on BBC One anyway.

Meanwhile on the European continent - on our doorstep - Greece was experiencing severe social, economic and political turmoil. People were rioting, buildings were burning and Greek politicians were voting on approving a new austerity package the failure of which to pass the Parliament could have resulted in Greece exiting the Euro and possibly the breakup of the currency itself.

Not that any of us would have known this following the 'standard' media outlets. We had to instead rely on social networking sites and foreign news channels, such as Russia Today, to follow the unfolding events.

The MSM is retreating rapidly into an ever decreasing circle of relevance.

By Default

It's another Euro crisis, so it's another deadline. It's reported that this weekend bankrupt Greece faces the ultimate decision of whether to stay in the Euro or not.

Now we have been at 'deadline hour' many times before, which has so far always proved false, so a little cynicism is in order. But the indications are that the momentum does appear to be heading towards a conclusion - I do agree with Richard North when he writes "There is definitely a sense that we are moving to the end game".

The pressure on Greece is intense and there seems to be a non-too subtle attempt, on behalf of the EU and Germany, to force Greece to default, and possibly exit the Euro. The likely reasons for the EU's bullying are manifold.

The cost of trying to save political face by keeping all the countries in the Euro has been superseded by the embarrassment of the Greek crisis to the Euro project, which has no prospect of ending anytime soon. Greece is an economic basket case - so the EU needs to get rid of, in part to try to improve the currency's 'respectability'. That Greece will default has always been a matter of when not if - a reality the EU has long known about. After over 2 years, weariness is creeping in. Greek promises are never kept and more importantly for some European politicians elections are due this year. Taxpayer's money to keep bailing out Greece is not popular to say the least.

The constant bailouts, or rhetoric, has also conveniently given time for the Eurozone to prepare for the inevitable Greek default - in short economic sandbagging. As Louise Armitstead argues in the Telegraph:

The bankruptcy of Greece is no longer the threat to the eurozone that it once was. For all the frustration caused by the constant delays - Greece missed four deadlines last week alone - the time has not been wasted. Banks have busily untangling themselves from the thicket of Greek debt; repricing and restructuring debt and taking large write-downs. In total foreign banks have slashed their exposure to Greece by 60pc.

In a note last week, Willem Buiter, Citigroup’s chief economist, said: “In early September 2011, we argued that the cost of Greek exit to the rest of the world would be very high. We now consider these costs to be much lower because the 'exit-fear-contagion’ could be contained.”

In essence preparations are being made to hang Greece out to dry, a view echoed by Jeremy Warner:

There is only one way of interpreting the set of fresh demands tabled by eurozone finance ministers last night in return for agreeing a new €130bn bailout for Greece – that they are now quite deliberately trying to push Greece out of the euro. All pretence at European solidarity has been abandoned, to be replaced by the vengeance of Shylock.

There is now no chance whatsoever of Greece making it in the eurozone. Economically and politically, the country is in meltdown. Richer Greeks...are all getting their money out as fast as they can, as those of us who have been gazumped in the London property market by Greeks bearing piles of wonga know only too well.

It's a disgrace what's going on, little short of the rape of Greece by its own countrymen, but it is an entirely rational and logical response to the grossly overvalued currency they find themselves with.

Greece has very little option now but to impose capital controls and leave the euro. The longer it leaves things, the more desperate will its plight become.

Despite enduring economic, social and political hardship strangely most Greeks still want to be members of the EU and the Euro. Sadly they are about to find out the hard way that membership of the EU, and more specifically the Euro, only works one way - it means doing what the EU orders when a member, and being jettisoned overboard without concern when an inconvenience. The other Euro members are saving their own skin but not without causing economic and social meltdown, without a care, in another country first.

But no doubt if the inevitable Greek default doesn't lead immediately to a Euro breakup, much rejoicing will occur in Brussels, along the lines of 'we're dealing with the problem'. However next up will be Portugal, and then... well close your eyes and put a pin randomly into a map of Europe.

Going Going...?

Back to the Euro crisis, events appear to be moving to a conclusion. It's getting hard to work out what exactly the state of play is and what is going on; we're now reduced to guesswork essentially, as Xen rightly concluded in a previous comment on here, and the scary thing is it appears that those in charge don't seem to know either.

What is clear though is that the news chatter is intensifying greatly which indicates panic is setting in significantly. I suggested before that sandbagging maybe happening with gusto but one wonders if they know what they are supposed to be sandbagging against, especially with these rather unusually stark comments from Sir Mervyn King:

Banks should brace themselves to withstand the "extraordinarily serious and threatening" economic situation, the Bank of England governor has said.

Which prompted this analysis:

If anyone was in any doubt about the severity of the eurozone crisis and what it might mean for the UK, they shouldn't be any more.

The governor of the Bank of England delivered his starkest warning yet. It's quite something for a central banker to describe the financial climate as "extraordinarily serious and threatening".

Sir Mervyn King made no attempt to play down speculation about the possible break-up of the eurozone. He thinks banks can weather storms ahead if they set aside more capital. But he acknowledged that the problems were widespread and beyond the control of any UK authority.

To sum up the financial regulators' message - fasten your seatbelts for what could be a very bumpy ride.

It's getting obvious that no-one has the first idea what they're doing and are in denial about the urgent and fundamental problems of the Eurozone....that then leaves only one conclusion and one inevitable outcome. Gulp!

That Euro Crisis (Again)

The events in Greece are now a sideshow as the Euro crisis moves to Rome. The yield on Italian 10-year bonds rose to a euro-era high of 6.6% - this is dangerously near bailout territory. And given that Italy is the 3rd largest economy in the Eurozone, a crisis there is a whole different ball game to Greece.

Talks of a possible Euro breakup are now openingly being discussed as German tour operator TUI writes to hoteliers demanding that they agree to renegotiate contracts in Greece's old currency - the drachma.

There are conspiracy theories this morning that the pressure on Italian bonds is being used to force the removal of Berlusconi. The collapse of the Italian government would bring relief to the markets. That a government collapse could help market confidence is a strong indication of how bad this crisis is. I'm not so sure about the conspiracy theories, my feeling is that the crisis is starting to snowball, to escalate out of control towards its inevitable conclusion; that the markets no longer believe (rightly) that the EU has the capacity to solve the problem. We can only wait and see.

But don't worry the EU have everything in hand, their solution? To announce another Eurozone crisis meeting. On November 17th.

Confusion

I meant to write a blog about today's G20 summit and the continuing Eurozone crisis, but events are moving so fast that I can't keep up at the moment. For a number of hours now we have had reports that Greece's PM George Papandreou has resigned, then oh no he hasn't, then oh yes he has ...and so on. And it's not even pantomime season yet.

Also Italian bonds continue to rise to record levels, as Italian politics is in a bit of turmoil. France and Spanish bonds have also risen. Van Rompuy and Barroso can't decide whether to hold a press conference or not. The sleepwalking into chaos continues.

Meanwhile a rather revealing twitter exchange between myself and pro-EU Telegraph journalist Daniel Knowles. I was simply arguing for an orderly break-up of the euro - the only realistic option left to prevent a chaotic collapse. This response below from Daniel was rapidly deleted, but I have a screenprint:

"You people"? Hmm interesting. And then the follow up:

What is really dangerous is that the Euro is heading rather rapidly for a disorderly collapse because no-one will make any of the very difficult decisions required to stabilise the crisis. When the collapse happens Mr Knowles will then find out what the words idealistic and extreme really means.

Germans Say Nein To Greek Football

From Greek paper Ekathimerini:

The German soccer federation suddenly informed its Greek counterpart on November 2 that it cannot host Greece's friendly game with Romania at Reutlingen on November 15 «for security reasons."

Greece had arranged the friendly in Germany in order to satisfy the huge demand by Greek expatriates to see their national team play, but less than two weeks before the match, the DFB told EPO it could not stage it after all, according to an EPO statement on Wednesday.

How strange...or maybe not:

The German federation's decision came just 24 hours after the Champions League game between local Borussia and Olympiakos at Dortmund with some 4,000 Greek fans in the stands whose behavior could not be faulted.

Speculation in Athens suggested that the decision may be down to the political uncertainty in Greece that could turn the match into a demonstration, although that appears to be quite far-fetched.

It is also likely that the German federation was upset by the behavior of Olympiakos fans in Piraeus during the home game against Borussia on October 19, as they produced a banner (pictured above) that appeared to be offensive to Germany.

EU harmony continuing as normal...

Greece Will Vote Yes

The referendum question according to the FT has been decided, and as expected it will be couched in terms of EU membership not the bailout itself (my emphasis):

Greek voters would be asked not to approve or reject the terms for Greece’s next financial rescue, which European leaders set at a Brussels summit last week, but a broader question centred on support for Greece’s membership of the European Union and 17-nation eurozone.

Greek enthusiasm for EU membership runs at more than 72% - George Papandreou will win the vote. Like most referendums it's going to be rigged.

A Question

As the Greek referendum fallout continues, (Richard North has excellent analysis of Papandreou's strategy), a thought has occurred to me. Will the Greeks even know what bailout package they'll be voting on given that it doesn't actually exist yet?

The deal announced to great fanfare last Thursday was vague, and short on details. The details have yet to be hammered out on the banks agreeing to voluntary haircuts, on leveraging the European Financial Stability Facility (EFSF) effectively to a trillion euros, who pays, and whether the bank recapitalization program is even sufficient.

And EU finance ministers are not expected to agree on these nitty-gritty elements of how the EFSF will work until sometime in November, with the exact date not fixed. It is probable that agreement on it and other elements of the deal will drag on longer maybe into next year (if at all).

As the referendum might take place as early as December, the Greeks may end up effectively voting on a deal that no-one knows what it is.

Another Greek Surprise

The Guardian, links to a report from Athens Times that the top officials in the Greek military have been replaced today in a 'surprise' move:

In a surprise move, the defence minister proposed on Tuesday evening the complete replacement of the country’s top brass.

At an extraordinary meeting of the Government Council of Foreign Affairs and Defence (Kysea), which comprises the prime minister and other key cabinet members, Defence Minister Panos Beglitis proposed the following changes to the army, navy and air force and the general staff:

• General Ioannis Giagkos, chief of the Greek National Defence General Staff, to be replaced by Lieutenant General Michalis Kostarakos
• Lieutenant General Fragkos Fragkoulis, chief of the Greek Army General Staff, to be replaced by lieutenant general Konstantinos Zazias
• Lieutenant General Vasilios Klokozas, chief of the Greek Air Force, to be replaced by air marshal Antonis Tsantirakis
• Vice-Admiral Dimitrios Elefsiniotis, chief of the Greek Navy General Staff, to be replaced by Rear-Admiral Kosmas Christidis

It is understood that the personnel changes took many members of the government and of the armed forces by surprise.

As a consequence there's much speculation that it is being done to prevent a military coup. However there's no indication yet that a military coup is on the cards, though given the financial turmoil in Greece and that its Government is close to collapse this evening, nothing can be ruled out. Also EUobserver reported this morning:

There are other signs the government is losing control.

In recent weeks, members of the Greek police forces have also protested against the troika outside EU offices and French and German embassies, while retired army officers stormed the Greek defence ministry.

Defence minister Panagiotis Beglitis in October warned that the Greek military establishment is a "state within the state."

On Tuesday, he convened an unscheduled meeting of the Government Council for Foreign Affairs and Defence, the supreme decision-making body on national defense.

According to sources within the ministry quoted by Greek daily Eleftherotypia, Beglitis is planning to replace the leadership of the military with "his own people." Unnamed officials described his actions as "politically mad" and "militarily dangerous."

One interesting question, posed before on this blog, if Greece does become a military dictatorship (again) will the EU throw it out because it fails its democratic criteria? And what of its membership of the Euro?

Interesting times.

Have Your Say...

...on whether Greece should have their say. The Guardian wins the 'ironic piece of the day' award:


You can vote here on whether the Greeks should be allowed to...er vote.

That Bombshell

I wrote yesterday's post about the referendum proposal in Greece in a bit of a hurry. Partly because I was at work when the news came through on my phone and partly because it was such a bolt from the blue. It completely surprised everyone even George Papandreou's own parliamentarians. But whatever the reasons behind his decision, much amusement can be had from the obvious sheer terror he invoked across the EU. Daniel Hannan writes:

I wish I could convey the sheer writhing horror that George Papanderou's referendum proposal has provoked in Brussels. Eurocrats instinctively dislike referendums. They feel that their work is too important and complicated to be vulnerable to the prejudices of hoi polloi.

A referendum at any time would be regarded by European leaders as irresponsible. But a referendum when the euro is teetering on the brink is seen as the height of ingratitude, selfishness and recklessness.

Wondrous joy. As expected the markets this morning have taken on a plummet trajectory - over two months of uncertainty now lie ahead until the vote. That Greece will default is a given, the markets have priced that in; how and when are the key questions. Now with the referendum there's another possibility that's been thrown into the mix, that in the event of a no vote that Greece could not only exit the Euro but possibly the EU altogether.

And it's the last point that means a Greek no vote is not a certainty.

Firstly it will significantly depend on the referendum question asked. If the question is along the lines of the bailout package itself and more austerity then a no vote is a likely outcome. However if the question is couched in terms of a no vote meaning exit from the Euro and the EU, and I suspect strongly that this will be the case, then the outcome is far from certain. Not only do referendums tend to favour the status quo but much scaremongering will be deployed - Greece leaving 'will be a disaster' they will cry.

Secondly the EU will use every tactic in the book; blackmail, threats, coercion and bribes. They have form on this - Lisbon, Ireland anyone? Then there's the infamous EU's last resort of; 'wrong answer vote again'.

A no answer is not guaranteed by any means.

What Papandreou has done though is start a risk of contagion of similar demands in other countries. Already, after last week's deal, Spain, Portugal and Ireland started making noises about getting more concessions from the EU as Zerohedge highlights:

...just as expected, the weakest PIIGS - Portugal and Ireland - wasted no time to start rumblings about a "suddenly slowing economy" in the aftermath of the Greek bail out which achieved nothing but to delay contagion by 48 hours and to unleash demands by everyone else to get the same concessions, in essence pushing Europe into an even deeper hole...

Confirming that the tsunami of demands has been unleashed is today's announcement from the Bank of Spain that not only was Q3 GDP flat (read: negative), but that the deficit target for the year would not be achieved.

How long before they start to make threats of referendums as well?

Another pressing problem is Italy, here the Eurozone has real immediate problems. I suspect that Greek Finance Minister Evangelos Venizelos's hospitalisation due to stress related health problems won't be the last amongst Eurozone politicians.

Greece Calls A Referendum

On top of soaring unsustainable Italian bond yields today, we also have the Prime Minister of Greece, George Papandreou, announcing a referendum on the new EU aid package:

"We trust citizens, we believe in their judgement, we believe in their decision," he told ruling socialist party lawmakers.

Nearly 60 percent of Greeks view Thursday's EU summit agreement on a new 130 billion euro bailout package as negative or probably negative, a survey showed on Saturday.

Ha ha cats and pigeons spring to mind. The markets will likely go mad tomorrow. Also adds extra pressure onto Cameron regarding a referendum - this EU issue is not going away is it 'call me Dave'?

Another Warning

In this weekend's papers the Euro crisis rumbles on despite Cameron's attempts to try to change the narrative. Cameron wants to leave the EU issue alone, but the EU is not going to leave him alone any time soon. Christopher Booker writes that "the project is slowly heading for very messy and prolonged disintegration" and it won't do that quietly. Far from it.

So while Cameron and his merry band of Europlastics prattle on about 'repatriation of powers'; a complete non-starter as the ever excellent Richard North points out, the Euro crisis continues to pull the EU down a gurgling plug hole. And the consequences of a chaotic, yet increasingly inevitable, breakup will not be good as this piece by Liam Halligan in the Telegraph argues. Liam is unconvinced by the latest 'extend and pretend' bailout package:

Far from making the situation clearer, allowing investors to make considered assessments, this latest announcement made Western Europe's grotesque debt crisis even more acute, sowing further infectious spores of confusion.

By late Thursday...and certainly on Friday, the warning signs were there. Global bond markets, by character more sober and smarter than the excitable equity guys, were voting against the deal. This is alarming. For it is only by selling more bonds that the eurozone's deeply indebted governments can roll-over their enormous liabilities and keep the show on the road.

And then comes the warning, that we are heading towards significant and serious civil unrest at the least:

Let's be clear – if global bond markets stop lending to a number of large Western economies, we are in the realms of unpaid state wages and pensions, transport chaos and closures of schools and hospitals – sparking the prospect of serious civil unrest. Forgive my intemperate tone, but these are the dangers we face. And I'm afraid the only rational response to Thursday's announcement is that the probability of such undesirable outcomes has just been increased.

Liam rightly argues that the only practical solution to the crisis is an orderly breakup of the Euro, but that ain't gonna happen (my emphasis):

The eurocrats, of course, lack the guts to trim back monetary union to a more manageable size. Too much face would be lost. So "euroquake" fears, once viewed as outlandish, are gaining pace. Despite Thursday's deal, and all the reassurances of a "durable solution", the Italian government on Friday paid 6.06pc for 10-year money, up from just 5.86pc a month ago and a euro-era high. Such borrowing costs are disastrous, given that Rome must roll-over €300bn of its €1,900bn debt in 2012 alone. A default by Italy...would make Lehman look like a picnic.

Gulp! In truth there's little in the piece that isn't anything that this, and many other blogs, haven't said for months if not years. But at least some sections of the MSM are starting to wake up, though almost certainly it's too little, too late.

Update: Just seen that Autonomous Mind has a piece on the make up of the next European War; between the politicians and the people. Warnings are coming in thick and fast.