The FINANCIAL — The Euro, Its origins, Development and Prospects written by Chris Mulhearn and Howard R. Vane, published by a relatively small publishing company in the United Kingdom in 2008 needs to be read by anyone who wishes to understand the political and financial dimensions of the Euro, the Euro zone , the evolution of the political history of Europe as a unified entity and the difficulties of managing the transatlantic alliance in currency power-sharing between the dollar and the Euro.
Chris Mulhearn is a pure-bred academic from the Liverpool John Moores University, a soft-spoken, austere, unassuming professor with commendable insights into the realities of global economics. As my guide and supervisor of my doctorate program, we have developed an open and rewarding relationship to the extent we both explore the frontiers of economic and financial phenomena, normally uncommon to the supervisor-student relationship.
A month ago, in Liverpool, he invited me to an old traditional Italian restaurant. Over lunch, we contemplated the future of Euro as a currency. We talked about the gathering storms of sovereign debts, propelled mostly by the frivolous borrowing and spending by governments in and out of the European community, fuelled by the investment bankers who prided themselves in buying Euro bonds from sovereign governments and pumping unrealistic amounts of money into sovereign coffers in the belief that Euro was probably taking over the United States dollar, the mighty greenback, as the global currency of the future. We talked about the triangle of conflict, opposing agendas and strategies of three major currencies for global dominance: the United states dollar, the Euro and the Chinese Reminbi ( Yuan).
The European Financial Stability Fund born on the midnight of October 26th in Brussels to bail out European banks through re-capitalisation and save Greece from defaulting seems to be off the rails as a forceful and adequate strategy. The Greek Prime Minister George Papandreu introduced a new wave of surprise when he declared a referendum in Greece to ask the people whether they wish to stay in the Euro zone or go back to their Drachma.
The G20 group of nations meeting in Cannes, France are now locked in debates over what exactly should be done to resolve the crisis of Euro being sidelined as a not-so-important currency on the one hand and averting a European and global growth slowdown on the other. French President Sarkozy and Angela Merkel of Germany who, despite their differences, announced the EFSF just a week ago were shocked and betrayed by the Greek Prime Minister for calling a referendum on the Euro and have been, as I write this column, talking to him to back off from the referendum in Greece. And Greece is divided on the issue and it may indeed be likely that, if the referendum is held, Greeks may just wish to go back to the Drachma, forget the Euro zone as a bad dream, and slip back into their old traditions of living very differently from the fast-track European way of life.
In Cannes, as the G20 leaders assembled to discuss the euro crisis, President Nikolas Sarkozy gave a press conference and defended the Euro as the only way to save the political unity of Europe. He said that the break-up of the Euro zone would mean the break-UP of Europe as one unified political entity with disastrous consequences. US President Barack Obama joined the chorus and insisted that the Euro zone and European crisis must be resolved expeditiously in order to save Europe and avoid a global financial and economic crisis, while British Prime Minister David Cameron warned that UK will not back International Monetary Fund’s unlimited increase in bail-out funds.
Greek Prime Minister’s decision to go to the people to ask for their opinion in the referendum on the Euro zone begs a number of questions: first is whether the Greeks do want the bail-out plan of massive austerity measures imposed on them by the European community , even though fifty per cent of their debt is to be forgiven and to be absorbed by European banks, who in turn will be bailed out by the European Financial Stability Fund. The second question is whether Greeks really think that they are part of the greater Europe, culturally, emotionally and indeed in their way of life.
Greece is now blamed as the pariah of the European community and its woes, and Sarkozy pointed out that Ireland, Spain, Portugal and even Italy are more respectful of the austerity measures imposed on them for the bail-out funds they received. And so, why do the Greeks continue the months- long protests, the strikes that paralyze every artery of the Greek economy and drive people to the frenzy of despair.
I went on a brief holiday to Herlakion in Greece last year and stayed in a beach side resort for a week. I was somewhat surprised that most workers, from the gardener to the cook, from the maid to the maintenance men were all from a collection of different countries, from Georgia to Latvia and beyond. I asked my friend who was my host. She said that “Greeks would not do these jobs”. I was astonished that despite the massive unemployment in Greece, people would not work in hotels, sweep the streets or work in farms. The young generation has suddenly become very different.
Greece does not have any major manufacturing base and depended for a long time from its shipping prowess, the olive oil most of which is sold crude and refined overseas, some minor industrial production and the largest segment of the labour force in government service, pushing papers and building a complex bureaucracy of gigantic proportion where very little was ever done by an army of white collar workers. I found the work ethics in Greece to be somewhat lethargic and pretentious and thought to myself that perhaps, this was the way the world was to be, relaxed, happy and undaunted by the speed of growth taking place in countries like Turkey. Greeks, admirably, defiantly and loveably were different from the rest of Europeans. If France and Germany tell them how to live poor, the message is a recipe for revolt in a nation which was the cradle of philosophy and civilisation.
Europe and Euro are in a watershed of history. The current, fast-changing events will have a long and decided impact on the future of not only Europe, but also on global trade and cross border alliances. In the hot politics of Europe and its crisis, the US economy, the protestors at Wall Street, the middle East crisis with the new Libya in disarray, Syria’s struggle for containing the contagion of the Arab spring, the elections in Tunisia, the unresolved issues on the future of Egypt, the triple disasters in Japan, the floods in Thailand, earthquake in Turkey and all the myriad of events which will mark 2010 as one of the most difficult years, have all become a mere side-show for the media.
What is really disturbing to watchers of global events is that 2012 and the next years may be equally uncertain, and our celebration of the seven billionth baby in Philippines may indeed augur the greatest challenges for national development strategists in emerging nations like Georgia.
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