Words ought to be a little wild, for they are the assault of thoughts on the unthinking
- J.M. Keynes

Tuesday, 26 February 2013

Euro Drama Returns



Scene: Two European bureaucrats (Eurocrats) travelling in the first class carriage on the gravy train from Brussels to Strasbourg.

Eurocrat-1 (E1): C’est une catastrophe. This is a catastrophe. Dies ist eine Katastrophe…
Eurocrat-2 (E2): Stop it. There is no need to state the obvious in all the official languages.
E1: Sorry, drafting communiqués for all these emergency summits and meetings has made it a habit. But you know what I mean, those Italians have jeopardised all that we’ve worked so hard to achieve over the last three years.
E2: Yes. What a bitter pill to swallow. Undone by a comedian.
E1: You mean Berlusconi or Grillo?
E2 (continuing): This is the problem with Europe. Too much democracy. Too much power in the hands of the unwashed masses who do not possess our stupendous intellect. It was a simple enough task – go to the polling booths and elect the unelected technocrat. We, the mighty European machine would have taken care of the rest and set Italy on the path to recovery. But no, the average man is too concerned about his daily bread to look at the bigger picture. He is ignorant of the fact that the glory of Europe demands sacrifice.
E1: I couldn’t agree more. We have dedicated our lives to this ideal which has cost us so dearly. All the travel, all those summits, all those late nights. It is time the man on the street followed our example of personal sacrifice. By the way I’m about to order some champagne and canapés, would you like some too?
E2: Yes please. It’ll help figuring out how to deal with this wrong election result.

Eurocrat-1 orders a bottle of Grand Cru champagne and some canapés over the intercom.

E1: So what are our choices? First is to get the parties to form a grand coalition. Failing which, the other option is to have another set of elections and hope that the right parties somehow cobble together a majority.
E2: The right?
E1: No I didn’t mean the Right, but right parties which are not Right but Left. As you know for us in Italy, Left is right but Right is wrong unlike in Greece where Left is wrong and Right is right. Of course I mean mainly Centre with a small tilt left or right when I refer to either Left or Right being right. We don't support extreme parties who don't believe in democracy.
E2: Ah I see. You had me confused there.

Champagne and canapés are served by a liveried waiter.

E1: So can we manage to create a grand coalition?
E2: It is possible. In Italy more so than other places, the laws of political arithmetic have evolved into physics. Given enough, ahem, energy, you can place the electrons where you desire.
E1: Yes but the last grand coalition with an unelected technocrat was wrecked because of the repulsion between the electrons. How do we manage another which will last? And this time we won’t even have our man as the head of government. Instead we’ll have an elected head of some party interfering in our efforts to reform the country.
E2: True. He may be tempted to ignore our advice and do what will make him popular in the next election. That only means higher spending and not firing workers which is completely the wrong way to go about dealing with this recession.
E1: If only the people would realise that austerity is good for them. They can see that austerity is working in all the other countries. Even Greece is emerging from its slump without defaulting on its debt.
E2: Isn’t unemployment going up in Greece and the economy still contracting?
E1: Yes but the rate of change is slowing which shows we’re on the right track. Austerity is the path to prosperity. Oh…the champagne is over. Order another bottle. We might as well drink the Grand Cru while it is available. The budget cuts might lead to their serving only Premier Crus in the future.
E2 (shocked): Are you serious?

Both shudder. Eurocrat-2 orders another bottle.

E1: So if the grand coalition isn’t going to work then Italy has to have another election. But how do we guarantee that we get the government we think the Italians should have? Given how close the contest was this time there could be a bigger mistake in the next one.
E2: Yes and we can’t make the same threat of total instantaneous financial destruction which we made to ensure enough Greeks voted for our guys in their second election.

Both quietly contemplate while another bottle of champagne arrives and is served.

E2: I suppose ballot stuffing, booth-capturing, etc are out of the question.
E1: My dear fellow, that is outrageous! It’ll never escape the media and we can’t have a political scandal. No one has the time to deal with it since everyone is still quite busy dealing with the financial crisis and all the new regulation it has spawned.
E2: Yes, sorry. They really should have increased our budget to take into account all the new work. Well, coming back to the topic, we can still play the instantaneous financial destruction card for want of anything better.
E1: How so?
E2: Call up Draghi and ask him to start selling the Italian bonds ECB bought under SMP. It’ll raise the yield quite spectacularly on Italian debt and cause the anti-austerity brigade to come crawling back to us.
E1: Isn’t that a little dangerous? It might spiral out of control.
E2: Nonsense. Have we not been in control over the last three years and proved our critics wrong? Despite all their carping no one has defaulted and bond yields are coming back to the lows.
E1: True. I'll have a chat once we get off. (Raises his glass) Let’s drink to that.

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