Wednesday 16th May

Will Greece really leave the Euro, as all the commentators are now predicting?  Not necessarily, it may be in both France and Germany’s interests to support Greece and to significantly soften the programme so that Greece can actually recover while still being a member (maybe with special allowances) of the Euro.  They may conclude that the price is worth paying rather than the unknown price of Greece leaving the Euro.   Sometimes in life, when everyone is saying something is a certainty, it isn’t.  A game of bluff relies on someone blinking first, maybe the blinking can be synchronised this time.

And there is a mood of change sweeping across the continent, against austerity.  Of course, in an ideal world countries should not have to borrow and all budgets should be balanced.  The trouble is that there are two sides to the coin, income and expenditure, and the problem with austerity is that while it should reduce expenditure if the price of that is diminishing revenue it may quite soon becomes self-defeating.  Also, it is miserable, with people being thrown on the scrap-heap, living standards eroded and a general lack of self-confidence that is debilitating and can become a self-fulfilling doom machine; as things get worse people expect the future to be bleaker still, and so by their actions it becomes so.

After both World Wars the solution was in effect to create money and debt, and build new infrastructure and in effect subsidise industry until the world economy recovered.  This was also the solution after the great depression of the early 1930’s.    We will see what happens this time, but the Greeks leaving the Euro it is not a foregone conclusion at all.