08:58 – Greek Prime Minister George Papandreou is being universally reviled for doing the right thing: calling for a referendum to allow the Greek people to decide their future. Merkozy are spitting nails right now, because Papandreou has just thrown a gigantic monkey wrench into the save-the-euro plan they came up with at their failed summit last week.
The real problem, of course, is that the EU wrote off Greece long ago as unsalvageable. Their plan has nothing whatsoever to do with helping Greece; it’s all about helping Greece’s creditors, many of whom are German and French banks. Whether or not the plan goes forward, Greece is toast. In either case, Greece faces literally decades of economic disaster and human suffering.
Calling for a referendum really is a stroke of genius. At this point, Papandreou has basically called the EU’s bluff and, at the same time, shifted responsibility for the decision from his own government to the Greek people. It almost doesn’t matter if the referendum is actually held or, if it is, what the outcome is. It is, if not win-win for Papandreou, at least a less-lose either way. The ideal outcome from Papandreou’s point of view would be for the EU to write off Greece’s debts without requiring the austerity measures that they have so far demanded. I have no doubt that that’s one of the options that Merkozy will be discussing during their emergency phone conference today. Alas for Greece, I don’t think that’s what’s going to happen.
I think what’s more likely to happen is Merkozy deciding to drop Greece like a hot potato, even if that does make a chaotic Greek default almost certain. Make no mistake. Right now, Angie and Nick are seriously pissed. From their point of view, they held out an olive branch to Papandreou and he just shit on them. There are so many players involved, not least the IMF, that it’s difficult to predict short-term outcomes, but I think it’s even possible that the EU/IMF/ECB will decide to withdraw the sixth aid tranche that was to be paid to Greece in the next couple weeks.
That would, of course, immediately topple Greece into chaotic default, but ultimately it won’t matter. Merkozy certainly understand by now that that outcome is inevitable, so from their point of view the only real question is whether it’s worth buying a few more weeks before they have to deal with the fallout. Ultimately, the aid payments are just paper shuffling anyway. Each of the bailout payments is simply an accounting transfer from the bailout fund to Greek creditors. Why not take Greece out of the loop entirely and simply make those transfers directly to the creditors? Or, more specifically, why not simply have the German government make bailout payments to the German banks who have Greek payments due, the French government make payments to French banks, and so on? The EU governments, the IMF, and the ECB also hold Greek debt, but you can be sure they’re first in line to be paid, and Greece cannot afford to default on those debts if it ever wants to be able to borrow again before the 22nd century. Of course, that leaves non-EU creditors without anyone to pay them. Too bad. So sad.
09:43 – Rule, Britannia! Believe it or not, the Home Fleet is now down to zero vessels. The once-proud Royal Navy, which within living memory deployed huge battleships, battle cruisers, and aircraft carriers by the dozen, is unable to come up with even a tiny destroyer or frigate to protect home waters.