Salon.com > Europe

Euro crisis’ vultures

Thu, 17 May 2012 15:25:00 +0000

BOSTON — It's an axiom of modern capitalism, almost as certain as death and taxes: No matter how bad an economic crisis gets, someone is bound to get rich from it.

Very rich.

During the 2008-2009 financial meltdown, Goldman Sachs and hedge fund tycoon John Paulson hauled in billions betting against mortgage-backed securities. Likewise, the financial nerds profiled in Michael Lewis' "The Big Short" cashed in, big time.

And this is nothing new.

Before the UK's 1994 Black Monday crash, financier-philanthropist George Soros, sensing central bankers with their heads in the sand, made billions shorting the pound sterling — essentially borrowing the currency, selling it, and later paying back his creditors when he could buy it cheaper. He successfully repeated this trick as Southeast Asia went into crisis in 1997.

Euro doomsday looms

Tue, 15 May 2012 12:29:00 +0000

BRUSSELS – It was the scenario never to be named, a prospect so terrible that the mere mention of it would conjure up doom and destruction for the eurozone.

In the last few days, however, the risk that Greece could be forced out of the currency bloc has become too real to be ignored. The once-taboo subject has become an unavoidable topic of conversation among Europe’s financial leadership.

“The price would be very high if they decided to leave the euro,” warned German Finance Minister Wolfgang Schauble, before talks Monday with his eurozone partners.

Governors of three central banks have openly raised the option of a Greek exit.

“Technically it could be managed,” said Patrick Honohan, the Irish governor. “It is not necessarily fatal, but it is not attractive.”

Even Jose Manuel Barroso, the usually cautious president of the European Commission, had a stark warning for the Greeks: “If a member of a club does not respect the rules of the club, it’s better not to remain in the club,” he told Italy’s Tg24 TV last week.

In the corridors of the European Union’s headquarters the fear now is not only that Greece could be forced out, but that the resultant chaos would spread quickly to Portugal, Ireland, Spain and beyond, causing a collapse of the euro currency and a generalized economic meltdown.

Europe’s dirty secrets

Mon, 14 May 2012 19:14:00 +0000

Angela Merkel, Europe’s master schoolmarm, scolds her neighbors that they have “no alternative to austerity.” François Hollande, the new French president, preaches the need for growth, challenging Merkel’s leadership with a social democratic alternative. The two meet in Berlin tomorrow, for the first time since Hollande ousted Merkel’s pal, Nicolas Sarkozy. And the tension will be on display later this week, as they head to the United States for the G-8 and NATO Summit. No matter how diplomatically conducted, their conflict will determine the direction of Hollande’s presidency and the very future of Europe.

The debate can be confusing, especially for Americans. Even as Merkel insists on cost cutting, her economic team rushes to explain that Germany has always been pro-growth. Well, maybe, but Merkel’s “growth” more likely means wasting Greece, Ireland, Portugal, Spain and France. Hollande, a one-time professor of political economy, understands this as he preps for the grip of Madame Merkel’s open arms. He knows that she will try to smother him with her much-loved Treaty on Stability, Coordination and Governance, which would press thorny sanctions on any country that fails to hold its deficits below 3 percent of gross domestic product. This fiscal compact, drawn up by Merkel and Hollande’s defeated predecessor Nicolas Sarkozy, mandates harsh spending cuts that would further deflate the continent’s already weak economies, boost unemployment, agitate unrest, reduce GDP and thereby increase everyone’s debts and deficits — including very likely her own.

Why did we move to Paris?

Sat, 12 May 2012 16:00:00 +0000

Paris’s neighborhoods, the arrondissements, are organized like a twist. They spiral from the river like toilet water flushing in reverse and erupting out of the bowl — a corkscrew or what have you, a flattened pig’s tail, a whorling braid notched one to 20. But if you walk from one neighborhood to the next, there is little to suggest the numbers changing. So it was confusing. Anyway, if you began in the middle of the Seine and snaked around, we lived on the Right Bank in the top of the third arrondissement, called the haut Marais, the upper Marais, on Rue Béranger, a quiet little street curling down from Place de la République.

We’d chosen the apartment so we could be within walking distance of nearly everything. I’d overlooked its darkness and short ceilings for location’s sake: 15 minutes to Notre Dame; 25 to the Louvre.

Earlier generations of Americans wanted to live on the other side of the Seine, in the Latin Quarter, where artists and students rambled, but the Left Bank had long ago priced out the artists and students. Now it was home to the rich of Paris, the wealthy of the retired-expat class, and Russian moguls, while the youthful and creative tended to live on the Right Bank, especially in the higher, cheaper numbers, the 19th or the 20th — if not the Right Bank of Berlin, or Toronto.

Europe’s austerity revolt

Mon, 07 May 2012 13:38:00 +0000

Who’s an economy for? Voters in France and Greece have made it clear it’s not for the bond traders.

Referring to his own electoral woes, Prime Minister David Cameron wrote Monday in an article in the conservative Daily Telegraph: “When people think about the economy they don’t see it through the dry numbers of the deficit figures, trade balances or inflation forecasts — but instead the things that make the difference between a life that’s worth living and a daily grind that drags them down.”

Cameron, whose own economic policies have worsened the daily grind dragging down most Brits, may be sobered by what happened over the weekend in France and Greece – as well as his own poll numbers. Britain’s conservatives have been taking a beating.

In truth, the choice isn’t simply between budget-cutting austerity, on the one hand, and growth and jobs on the other.

It’s really a question of timing. And it’s the same issue on this side of the pond. If government slices spending too early, when unemployment is high and growth is slowing, it makes the debt situation far worse.

Europe’s far right marches on

Sat, 28 Apr 2012 13:00:00 +0000

Marine Le Pen, who put a friendly smile on her father’s neo-fascist National Front, has become “the third man” in French politics and could now determine whether the center-right incumbent Nicolas Sarkozy or the center-left Socialist François Hollande becomes the country’s next president. Geert Wilders, the golden-haired leader of the Dutch Freedom Party, has just brought down the right-wing coalition government that he had supported. And in an Oslo courtroom, Anders Behring Breivik fights to prove he was sane last July when he systematically slaughtered 77 innocent people, mostly teenagers, at a summer camp. He was, he explains, simply trying to spark a crusade against multiculturalism, “cultural Marxism” and Muslims living in Europe.

Le Pen, the "right-wing liberal" Wilders and the unbelievably weird Breivik differ in crucial ways, but they reflect the range and varied thrust of Europe’s far right, which is showing its greatest strength since World War II. All three have given up yesterday’s Jew-baiting, at least in public, and proudly proclaim their support of Israel. They all target Muslims as a major source of Europe’s current woes, preaching a white European nationalism that is largely Christian and intolerant of immigrants and other outsiders. And they all feed on a popular backlash against the European Union and Eurozone and the failure of mainstream leaders to provide any sense of hope at a time of crippling economic crisis.

Eastern Europe’s Hitler nostalgia

Mon, 02 Apr 2012 16:40:00 +0000

WARSAW, Poland — In the Baltic States they celebrate their liberation from the Soviet Union in the middle of March.

Winter's worst lies grey on the streets, but that doesn't stop people in Vilnius, capital of Lithuania, and Riga, capital of Latvia, from marching solemnly to honor the heroes who fought vainly to keep the Soviet Union at bay.

Among those who march are groups who honor those who fell wearing the uniform of the Waffen SS, the military arm of the notorious Nazi paramilitary unit. These SS veteran marches are not fringe events. Thousands march and thousands more turn out to cheer them on.

The parades' permits are applied for by members of the governing party in parliament. Marchers are defended by the government.

Latvia's president Andris Berzins reportedly praised the SS veterans on Latvian television last week, "It’s crazy to think they’re war criminals." Berzins added, “Many people lost their lives for the future of Latvia. I don’t see any basis to deny this … it seems to me it’s not acceptable to dishonor these people, before whom we should bow our heads,” he said.

The crisis in the eurozone

Thu, 10 Nov 2011 12:59:00 +0000

The eurozone crisis is a bank crisis posing as a series of national debt crises and complicated by reactionary economic ideas, a defective financial architecture and a toxic political environment, especially in Germany, in France, in Italy and in Greece.

Like our own, the European banking crisis is the product of over-lending to weak borrowers, including for housing in Spain, commercial real estate in Ireland and the public sector (partly for infrastructure) in Greece. The European banks leveraged up to buy toxic American mortgages and when those collapsed they started dumping their weak sovereign bonds to buy strong ones, driving up yields and eventually forcing the whole European periphery into crisis. Greece was merely the first domino in the line.

In all such crises the banks' first defense is to plead surprise – “no one could have known!” – and to blame their clients for recklessness and cheating. This is true but it obscures the fact that the bankers pushed the loans very hard while the fees were fat. The defense works better in Europe than in the U.S. because national boundaries separate creditors from debtors, binding the political leaders in German and France to their bankers and fostering a narrative of national-racism (“lazy Greeks,” “feckless Italians”) whose equivalent in post-civil rights America has been largely suppressed.