Facing the markets alone
I recently had the opportunity to talk about developments in Europe with someone who is right at the heart of it all. It was an open and brutally honest conversation, and the main conclusion was that the hard core of the European establishment may not like Germany?s harsh and insistent stance but it will admit that, ultimately, the rest of Europe will either follow the German path or fail to compete with emerging economic powers like China, Brazil, India and even Turkey.
On a practical level, this means that Germany wants to see a memorandum with all eurozone countries that will impose deregulation of the labor market, structural reforms that will boost entrepreneurship and, of course, strict and centralized fiscal control.
In order to dispel any illusions, my acquaintance pointed out the following: a) that the French are in the same bloc as the Germans; b) that whoever decides to stay out of this hard core will be at the mercy of Wall Street and the markets; c) that whoever cannot or will not toe Berlin?s line will be left behind and, d) that the eurobond will only happen once a new, strict development model is drawn up. His honesty was raw, despite the fact that he was not entirely kind about German Chancellor Angela Merkel, especially over the fact that she has repeatedly responded to proposals regarding how to help the poor in Europe with the retort that each country should take care of its own.
I don?t know how the situation will evolve in Europe over the next few months or whether the German bulldozer will sweep us into a new direction that will cause us pain but will also ultimately give Greece a competitive edge. Of course, it may also crush us and this will depend on the reactions from society, on our political stamina and even on the luck factor. The biggest risk is obvious: that we go ahead and make the effort, but then either decide that we can?t put up with being constrained and controlled anymore or that Berlin and the other partners in the eurozone?s hard core decide that we do not belong to the club after all.
I remember by acquaintance?s final words: ?I understand what you?re going through, I understand how hard you?re trying, I really appreciate that things are changing so fast, but either you will follow or you will be left alone to face the markets.?
All I can say is, ?Have courage.?
