“…a quarrel in a faraway country, of whose people we know nothing” This was Neville Chamberlain’s famous defence of his agreement achieved in his meetings with ‘Herr Hitler’, which sealed the fate of Czechoslovakia – the said faraway country. The world has supposedly gotten much smaller in the intervening seventy-plus years, and most Englishmen have visited European countries, some as far — or further — than that one with the unpronounceable name. But the sentiment of the average bloke in Ilford, Ilfracombe or Isley towards Europe has barely changed. Thus, even if there is a crisis in Greece, it is of no direct concern, unless he happens to have booked his summer hols there.
The degree of detachment of the average American, the proverbial Joe Six-Pack, toward a crisis in some small country in ‘Yurrup’ – and a financial crisis at that, not even a war – is far greater than that of his British counterpart. As for the average Chinese citizen, whether toiling in the rice paddies or in a new factory or office building, it is reasonable to assume that he not only knows nothing of the development surrounding Greece, Portugal and Spain this week, he couldn’t find out even if he wanted to. Nevertheless, all of them, and us, are caught up in the rapidly-snowballing global sovereign debt crisis, of which Greece still serves as the focal point.
Make no mistake, however: the crisis is still only in its early stages and Greece has almost exhausted its limited potential to be the lightning-rod. Already, other southern European countries are jostling to seize the limelight, whether they want that dubious distinction or not. Thus this week has seen a slew of developments across southern Europe, with not only Greece, but Portugal and then Spain, suffering the ignominy and severe financial pain that comes from being downgraded by one of the main international ratings agencies.
But the shame and the slumping prices of the prices of shares and bonds are only the first courses in a country’s feast of disaster on the road to bankruptcy. They are followed by massive cuts in public spending, hefty tax rises, the cancellation of all kinds of benefits previously provided by the public sector at local or national level. All of these are already happening on a small scale in the Iberian countries and, on a steadily larger scale in Greece.
But if citizens of northern European nations or of America, Japan and other developed, rich but debt-laden countries, think that all this is a tale of woe relating to people in a faraway country, they are sadly mistaken. In most cases they do think that, because they indulge in the most extreme form of wishful thinking – and because neither their politicians nor their media, the supposed bloodhounds of the democratic system, have bothered to tell them the truth. The result is that the British are headed into a general election next week which is certain to turn the country’s political system inside out – but they do not know what any of the competing parties will do on the key issue facing the country, namely its huge budget crisis.
They do not know, because the official data are unavailable, obfuscated or obscured. Mocking the Greeks for their regimen of lies, half-truths and warped-statistics is par for the course in London, as it is in Paris and Berlin. But the bitter joke is on the British themselves, because they will soon be prescribed some of the nasty medicine the Greeks have been swallowing in steadily-increasing doses for the last six months. If – an unprecedentedly big if for Britain – there is a functioning government in Westminster this summer, it will have to first tell the truth about the size of the budget deficit and then detail how it intends to reduce it sharply. Failure to convince the markets on either count will trigger the kind of trial-by-torture via the bond markets that has pulerised Greece and is now in play in Portugal and Spain.
The French should find nothing risible in the woes of their southern neighbours – because the budget and debt data of la belle France are not that much better than benighted Portugal, For some reason, France has been basking in the undeserved reputation that its finances are as solid and its firms as efficient as its German partner. That, however, is far from the truth and, sooner or later, the market will shine its spotlight on the French data and be displeased with what it sees.
The Germans are in the best shape, but they are not laughing. The prospect of an endless stream of bailouts of their profligate, inefficient and largely corrupt fellow-travellers in the European Union and the euro, seems to be filling them with rage rahter than mirth. But the alternative, of bailing out their banking system which lent heavily to the Greeeces and Portugals, is also very costly and politically unattractive. De-nial, as they say, is not just a river in Africa – and it seems that the Thames, the Seine and the Rhine are its tributaries.