Greek debt: down-at-heel Achilles adds to EU vulnerability

“I fear the Greeks bearing two-year bonds with 10-percent yields” – as Virgil never quite got round to writing. Yes, it’s that time of year again, when the sage leaders of Europe take time off from plotting to stuff Britain in the Brexit negotiations and wondering why half the population of Africa is mysteriously surfacing in Brussels and Amsterdam to wring their hands – an exercise at which they excel – over the seasonal topicality of the Greek debt crisis.

This financial crisis, which resembles nothing so much as a nuclear reactor meltdown in slow motion, has been going on for so long that half of the story is in the province of historians rather than economists. To recap very briefly: after Greece, the inventor of democracy, emerged from military rule (being intrinsically democratic it was ruled by humble colonels rather than elitist generals) parliamentary government was restored. In practical terms, that meant everybody in the Athens phone book named Papandreou got a turn at being prime minister.

Eventually it occurred to the sons of Socrates that if the European Union was a dripping roast, its elite inner circle, the eurozone, must surely be a potential source of even more gravy. At this time the Experts in Brussels were engaged in an exciting experiment, similar to the initiatives involving gunpowder beloved of schoolboys, that sought to discover what would happen if economies spearheaded by IT whizzkids were combined with smaller economies supported by goatherds and confined within one currency, with no possibility of devaluation by individual member states. It was the fiscal equivalent of the Manhattan Project, but less disciplined.

So, Greece ambitiously entered the eurozone. Unfortunately it soon ran into problems with the Maastricht Treaty’s Stability and Growth Pact (SGP) which required eurozone member states to maintain a debt/GDP ratio of under 60 per cent and a deficit/GDP ratio of less than 3 per cent. This presented certain difficulties for the Greek government. Enter the Cheeryble brothers, aka Goldman Sachs, a New York-based philanthropic institution that just loved to give money away. By arranging “cross-currency swaps” the Cheerybles enabled the Greeks to maintain a dignified profile within the eurozone.

Unfortunately, as Achilles became increasingly down-at-heel, the loan habit proved addictive, followed by bailout therapy, to the present point where, over the past five years, more than 170bn euros of EU taxpayers’ money has been flushed down the Hellenic loo. Now it is time for more good money to be thrown after bad, for the purpose of avoiding overt crisis in advance of the Dutch, French and German elections. Voters lately have been exhibiting a lack of discipline worrying to their leaders – the political and fiscal Experts who created the Greek debacle – and descriptions of that snowballing catastrophe as “explosive”, along with forecasts that it could unravel the EU, are distinctly unhelpful.

The Greek debt imbroglio is a microcosm of the European Union: the triumph of political wishful thinking over fiscal reality. It is a human response to feel sympathy for the Greeks, suffering under ruthless German austerity demands, until one recognizes the elephant in the room. It is not the Greeks’ refusal to implement a serious economic reform programme, though that hardly inspires sympathy: it is the fact that the solution to this seemingly intractable problem has long been known, but stubbornly rejected by all parties involved. The patient is at death’s door, but nobody will administer the readily available medicine

Greece could end this spiral of madness virtually overnight by exiting the euro, returning to the drachma and executing an immediate devaluation. But nobody will countenance that. The Greek electorate has been brainwashed into believing that leaving the eurozone would tip them off the edge of the world (“Here be dragons…”). The IMF is disillusioned by the lack of serious reform in Athens and divided internally on how to proceed.

Brussels will not tolerate Greece exiting the euro, especially after the Brexit referendum. Close upon one member state departing from the whole integrationist mechanism, another country abandoning the cherished single currency would signal accelerating disintegration of the European project. Not one more inch of ground is to be conceded, insist the federalist fanatics.

Germany, under the leadership of Angela Give-Me-Your-Huddled-Jihadists Merkel, prohibits debt forgiveness out of fear of its electorate, already dangerously goaded by immigration chaos. It is a sign of Merkel’s precarious situation that in a recent opinion poll she fell one point behind her electoral rival former EU parliament speaker Martin Schulz.

Recently, eminent trainspotter Michael Portillo suggested the EU could unravel under the Greek debt crisis. He may well be right. Increasingly, what is problematic is not the collapse of the EU – which is inevitable – but which crisis of its own making will bring it down: its toxic currency or its demented immigration policy. All of this will have potent and negative effects on the world economy. Unless the final crisis materializes within the next 12 months, you can bet the Elgin Marbles that this time next year the political eunuchs in Brussels will still ineffectually be debating Greek indebtedness, spiralling out of control and heading remorselessly towards final meltdown.