Many held their collective breath last weekend to see what the Sunday vote in Greece would produce. Never mind the names, not household words – it was the
Radical Leftists (Syriza), opposed to the ongoing BailOut programs which are keeping Greece from economic disaster, pitted against the Conservatives (“New Democracy”), who would keep Greece on the Euro, come hell or high water.
New Democracy garnered 29.7% of the vote; SYRIZA -26.9%. With a Majority Bonus of some 50 seats going to the winner, and a third party PASOK, taking 12.3 % of the vote, Greece formed a new government and may have dodged a bullet, for a while anyway. Europe, and the rest of the developed world hunkered down.
Germany demands austerity and spending cuts, promising more aid if those happen. With no centralized government overseeing the Euro’s common currency, Germany, the richest of the 17 countries, along with the International Monetary Fund, calls the tune.
Without this aid, Greece goes bankrupt, and goes off the Euro, possibly converting remaining Greek bank deposits into Drachma’s and breaking up the European Union’s (“EU”) common currency. This threatened unraveling cannot be a good thing.
Greece’s leading politicians want to buy more time – Germany says it all must be in place by 2014; Greece wants until 2016 – a possible compromise after this past weekend’s Greek elections may be 2015. However, that depends on German Chancellor Angela Merkel’s insistence that Greece speedily meet these severely trimmed back financial goals, and the concurrence of the rest of the EU’s member countries – a tough crowd, who seemingly cannot agree on lunch.
The American economy treads water, still some 5 ½ months from our cataclysmic 2012 elections and facing austerity measures of our very own which, unless Congress has a change of heart, will automatically take effect at this year’s end.
Even the mighty engine of the Chinese economy has cooled and halted it’s growth, for now. We await the next meeting of EU leaders on June 28-29 in Brussels, to continue discussing plans for averting financial Armageddon.
Everywhere across the developed world, it seems that Confidence has gone home early and won’t be attending the party.
And all the King’s horses and all the King’s men, regardless of how much austerity is shoved down Greece’s throat, or, by year-end, how many spending cuts are shoved down America’s throat, cannot inspire economic confidence where it is most needed. Businesses sorely need confidence in the economy, going forward right now, in order to bring them off the sidelines and to spend and invest piles of cash which they have accumulated while awaiting an end to this economic storm, an end which is now officially overdue. Businesses simply won’t create more jobs without confidence in the economy. “The global economy is slowing and is slowing at a time when you have got such policy indecision that it’s making investment very difficult,” observed Sean Darby, a Hong Kong-based chief global equity strategist for Jefferies, an investment bank.
Without confidence in the economy, businesses will continue to operate as they are, not creating new jobs, and thus fewer dollars from fewer paychecks will flow as they must, throughout our economy, to float all of our boats a little higher. There has been precious little of late to inspire that confidence. The Greek elections, a real squeaker of a victory, will not restore that confidence – not in Greece, not in the EU, and not across the Atlantic, here in the US.
Monday, the Euro reached a one-month high against the U.S. dollar, roughly $1.2747 in early Australasian Monday trading, up from roughly $1.2655 late in New York on Friday. With the EU committed to austerity, the US heading into its own Winter of Austerity, and China’s growth now slowed down considerably, is it truly any great mystery then, why there is no significant economic growth, not now and not even predicted? Sean Darby, quoted above, answered thusly: “I cannot find an economy at the moment where there’s a natural pro-growth policy. There isn’t one.”
And, all the while now, as the lazy days of Summer are upon us, we continue to fritter away the days of the lowest interest rates in generations, which could finance the rebuilding of our crumbling infrastructure, put people back to work, and, yes, begin to inspire that confidence which is so sorely lacking everywhere you look today.