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The Greek elections saved the world for about 48 minutes

Fundamental failings remain.

By Alex Hern Published 18 June 2012 12:13

A trader is sad about something. Photograph: Getty Images

The half-life of a European success is getting shorter and shorter. Last week's bailout of Spain (euphamistically referred to by Prime Minister Mariano Rajoy as "what happened on Saturday") saved the world for 48 hours, with everyone thinking all was good at Saturday lunchtime and realising that it was still messed-up by Monday. The results of the Greek elections look to have saved the world for 48 minutes.

The headlines (mostly written before the election was even declared, to be fair) declare Europe to have survived "a close call" and been granted "a stay of execution" as "Greece gives Europe a chance", and this morning economics correspondents are still filing pieces claiming Greek result buys Europe time.

For a while it looked like they may have been right. Spanish 10 year yields opened at 6.84, before falling in the first few minutes of the day to 6.817. Italian yields also dropped slightly, and the country's main stock index, the FTSE MIB was up over 1 per cent over Friday's close.

But by 8:49, the MIB was down to where it had been on Friday, and is now 1 per cent down. And by 9:14, the Spanish 10 year yields had rocketed up, not just to where they were, but to a new high of 7.12 (chart via FT alphaville):

The problem is, as we wrote this morning, that the election of New Democracy does nothing to solve the underlying crisis in Greece – nor does it take Spain off the hook. Both countries are in the throes of a full-blown (though strangely slo-mo) banking crisis, and Greece is additionally suffering under an austerity program which is unlikely to be sustainable, either politically or economically, while its relationship with the European Union remains unchanged.

Except for the replacement of PASOK with SYRIZA in the Greek two-party system, the victory for ND represented a return to the status quo. And, regardless of your opinion of the possible replacement for it, the status quo was kind of crap.

Tags: Greece Eurocrisis

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View the discussion thread.

7 comments

Tue, 2012-07-17 13:06 — Cara Bellizzi

Less money in debt? First, all the citixens should start taking care of their money, this blog will help taking care of your finances.

Sat, 2012-06-30 02:44 — Jack Roberts (not verified)

What is sad is that Greece used to have an FTZ zone that HP, Dell and other utilized, after they cancelled the FTZ zone their economy went to crude. I love Greece, Crete, Xania, Mykanos(sp?), Santa Renie(Sp?) and all the islands. Absolutely terrible what happened to the country such wonderful people.

Jack Roberts
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Biodegradable Plastic Additive for cleaning the environment.

Tue, 2012-06-19 14:58 — Roberto Birkett (not verified)

ABH123
Countries spend money with no regard and it is not right.
-----------
What about people spending with no regard; taking on borrowing with no regard; banks lending with no regard?

What got us into this mess? Big government? How, exactly - and start in 2007, not 2009, if you have the wit.

When the crisis started five years' ago, I remember no talk of big government. It was about unpayable debts in the financial markets, the closing of the wholesale debt markets, banks having no trust in each other and refusing to lend to each other, and the collapse of neoliberal orthodoxy: markets regulate themselves. I remember banks going bust, and that mortgage debt had climbed inexorably for years, with house prices rising 250% on the back of all that debt.

I then remember governments bailing out the banks after Lehmans unleashed hell on the markets.

Are you conveniently forgetting all that? Or are are you just dim?

Today, those mortgage debts are unpayable for millions, even with emergency interest rates maintained via £325 billion of money printing from the BoE going directly to those who caused the crisis (the lenders, ie banks). And the banks subsequently used the money to bail out the other villains (the mortgage and equity borrowers of the previous 5-10 years).

Who are the victims? Those who did not lie to get a mortgage, those who paid their taxes, paid their rent, and are facing penury in order to bail out the Feckless as you call not them, but some other group.

Get your facts in order!

Tue, 2012-06-19 14:29 — John Lynch (not verified)

the reason that all the 'rescues' and 'bailouts' and 'stays of execution' don't work is that they are simply fiddling with the existing debt money system.

In a world economy where the overwhelming majority of the money is created when banks extend credit (loans) - it is hardly suprising that:

(a) We are drowning in debt

(b) Our economies are geared towards the short term profiteering of banks

So no more homilies about feckless greeks etc etc or witless macro economic projections.

Its about the money stupid!

we need more MONEY WITHOUT DEBT.

http://www.moneywithoutdebt.org.uk/

Tue, 2012-06-19 10:00 — Kleanu (not verified)

The Greeks don't like being the butt of economic jokes. LOL?

joc nou

Tue, 2012-06-19 05:53 — mbrecker (not verified)

It's too bad that no one (including NS) is willing to ask the valid question in this story. As one possible solution, if you accept that the total debt (for Greece and the rest of the world can never be paid off), then why not write it off and start over? While I'm not a professional economist, I am a longtime investor who tries to be as informed about global markets as possible.

If you can work on getting agreements to forgive Third World debt, why not the total global debt?

Is it because in this 24/7 celeb megahype culture nobody cares unless you have names attached to it?
Is t because the Powers that Be (many who own much of the MSM) won't tolerate that?
Is it because the Home Office will threaten you in some way?
Is it because most major economists only care about Kensyan economics? If they say something else they'll get cut off? How then do you explain Steve Keen appearing on "Hardtalk" talking about this?

Instead, what do we get? Endless pointless "analysis" that's rehashing the obvious:

The Greeks don't like being the butt of economic jokes
The Spanish and everyone else don't want the same austerity measures that Greece has.
The Germans are saying, what are you, special? No re-negotiation.
Many bankers are saying since the Greek "govt." is basically centrist, the markets will magically be okay. Because they EU would NEVER allow a member to go bankrupt.

What about the IMF? What about their vested interest (controlled by the States) to keep countries dependent? Keep in mind Obama's recent quote about these market practices. Much of this is questionable, morally objectionable, and possibly in extremely bad taste (standard lawyerspeak). However, it's not illegal. Which means it's ok. If you have a problem with this, don't blame me. Its not my job to fix this.

Everyone who should go bankrupt should. Some countries have already done this, and now have some of the strongest economies in the world. Which means it CAN be done.

Tue, 2012-06-19 00:54 — abhi23 (not verified)

This seems too much like a situation closer to home. Greeks do not like to pay their taxes, students do not like to pay their way. Corruption in both governments.
These people want to keep the status quo and think others to pay their way. These countries will fall soon. Italy, Greece, Spain all toast.. America will be soon, probably after the election but soon. Countries spend money with no regard and it is not right.Direct loan consolidation