In response to an FT article by FT reporters on 18th June 2015, entitled 'Merkel sees Greece deal if Athens musters the will'
My view is that Greece is bust, default is inevitable, and this ongoing saga amounts to a marathon dance around a proverbial handbag.
Whatever happens over the course of the next few days, the key issue was highlighted by Mrs Merkel, and it will not go away:
“The decision to have a single currency in Europe stands symbolically for the idea of European unity like no other European decision,” Ms Merkel said.
The European project is about economics for some, but for the core, it is and always was, a political project. European unity is the thing at stake for Mrs Merkel. Whether she believes a Federal Europe is still a possibility I do not know. What seems absolutely clear to me, however, is that the creation of the Euro was originally taken as a step towards a Federal Europe by people who had that as their primary aim.
What also seems clear is that the architects of the Euro must have understood that a common currency would not work without consolidating the debt into a single bond market. Knowledge of how debt markets work or a study of the process undertaken by Alexander Hamilton in the fledgling USA, would, and I suspect did, lead to that conclusion. They must also have been aware that at that time national populations would not go for such a leap in one go. In a nutshell, there was insufficient unity to create 'unity'.
So what happened? I believe the decision to go ahead was originally taken as 'phase one'. The strategy was to get everyone comfortable with the currency, drip feed the idea of fiscal union, and do it by stages. The politicians will not talk about this publicly for obvious reasons - people don't like being told they've been the subjects in a 'drip drip' experiment. As Mr Juncker said recently, and I paraphrase 'Some things are so important you have to lie about them'.
So where does that leave us? It doesn't solve the Greek problem, and it won't solve the Greek problem. Monetary union without fiscal union does not and will not work - ever. Continuing to kick the can down the road will simply delay the inevitable - we are in the early stages of a sovereign debt crisis and Greece is the canary in the coal mine.
Ultimately this is not just a European problem - it is a symptom of a massive and unstable mountain of global debt, which is being added to daily by politicians and central bankers who are as bankrupt intellectually as their balance sheets are monetarily. This could have, and should have been been addressed in 2008. Personally I think it is now too late - Mr Market is now going to take care of business because we won’t.