Greece and the Rise of Nationalism in Europe and East vs West
Here’s the clip from yesterday afternoon’s Capital Account with Lauren Lyster. I am on as a guest in the first part, talking about Europe. If you have been reading Credit Writedowns for the past few months, then nothing I said here was really news.
I am not particularly shocked or worried about the cancelled European finance ministers meeting. I still think this bailout gets done because Europe and the markets are not prepared for a disorderly default and politicians cannot risk the fallout one would create. Where my concern lies is the medium to longer-term. The austerity approach has created a depression in the periphery, with Greece being the hardest hit. Eventually this will lead to political extremism and nationalism.
In the UK, the Chancellor got the wrong message from the downgrade by Moody’s. He will re-double austerity efforts as a result and that will weaken the economy but be bullish for government bonds.
Video below
I do agree with you about the rise of nationalism as a solution for the periphery. The problem for the Core is that this does not always end the problems. Unemployment might fall but things could get out of control. There could be targeting of some group or other and that will lead to a refugee problem as in the thirties.
If Greece remains in the EZ then some form of fiscal transfer will be needed and possibly even greater write downs to minimise transfers, which could be politically unpalatable, especially in Germany and Finland.
But what does it matter if a deal gets done if greece will eventually be back on the drachma anyway. The longer it gets drawn out — the worse it is for everybody. If the markets are not prepared by now, it is because they never will be.