This has not been a great week to be South African as a once-proud liberation movement rushed into law a Secrecy Bill that it had said would be held back pending more discussion and debate.
But what exactly does it mean to be European right now? Jason Manolopoulos, in Greece’s Odious Debt, says European Union banks and authorities colluded for a decade in the illusion that lending huge sums to peripheral eurozone countries was safe.
Manolopoulos quotes deceased tycoon Aristotle Onassis: “To be successful, keep looking tanned, live in an elegant building (even if you’re in the cellar), be seen in smart restaurants (even if you nurse one drink) and if you borrow, borrow big.”
There has been both big borrowing and big lending in Europe. But the day of reckoning, when the tab has to be settled, is drawing nearer.
These are strange times. A few weeks ago the entire global financial system was apparently imperilled because George Papandreou, then Greece’s prime minister, unilaterally decided to hold a referendum among Greeks on whether they should accept the EU bail-out. How could he be so irresponsible, indignant critics everywhere wanted to know?
In Greece and Italy, in quick succession, technocratic Cabinets were brought in to fix what the politicians had broken. The change was both quick and mysterious. In Italy’s case, Silvio Berlusconi was prime minister one day and gone the next. But maybe not. A television clip had him announcing his resignation but saying he was still the head of the majority party in Parliament.
There have been increasingly desperate attempts to create a big fix. British Prime Minister David Cameron flew in to implore German Chancellor Angela Merkel to support calls for the European Central Bank to buy debt as fast as the Europeans could make it. But Merkel was having none of it, telling Cameron that the individual eurozone members had to get their own houses in order.
Then Belgium became a pig, or more accurately, a member of the Pigs (Portugal, Ireland, Greece and Spain) as its borrowing costs rocketed. Although some of these countries have technocratic leaders, Belgium has had no leader for more than 500 days and the leader apparent has just said he does not want the job.
Its leaderless government has just found out that it got its sums wrong on the Dexia bail-out deal to which it agreed. It is on the hook for much, much more than previously thought.
Brussels in mid-week announced a new plan to save the eurozone. This, as leaked to the Financial Times a few days earlier, is for a new get-tough policy on recalcitrants that do not keep their budget deficits under control. It sounds good, but the EU could equally well go and look at the Maastricht Treaty, its founding document, which sets out the fiscally prudent deficits that have been roundly ignored.
Brussels announced a new solution — eurobonds, European Central Bank-backed bonds underwritten by the financially strong (read: Germany). The only problem, though, is that it should really have checked with Germany before putting eurobonds up as a solution. Merkel responded by describing eurobonds as no more than collectivised debt.
Germans, by the way, love what she is doing, giving her an approval rating of 57%. Merkel, at least at this stage, is not likely to be replaced by a technocrat.
But if Greece precipitated the crisis, it was Italy that brought the eurozone — and the global economy with it — to the brink. The Italians have borrowed too much and need the Germans to bail them out. Italy’s public debt tops 120% of gross domestic product at €1.9-trillion, the highest in the eurozone. Germany’s is a relatively modest 81% of GDP, but still above the EU limit of 60%.
But, perversely, Italians are richer than Germans. Credit-Suisse says in its Global Wealth Report that the average German household has wealth (assets less debts) on a per-capita basis of $133 000; the equivalent amount for Italians is $180 000. The Germans should get a suntan. And borrow big.