Back in November, I mused on the prospect of a nationalist strongman arising in Greece in response to the EU’s apparent willingness to override national sentiment and the democratic process in Greece. While no Nostradamus, I point you to the entrance into the Greek parliament of the crypto-Nazi “Golden Dawn” party as well as the communists as evidence that my foresight was about right. My suspicion is that while this is being treated as a kind of dramatic sideshow, it actually will form a template for events across Europe.
In France, the voting share of the National Front shocked the commentariat who even now have no idea how deep the roots of nationalist resentment at the European project have spread. That Hollande has been routinely called a socialist by the press overlooks the fact that his main appeal is actually to this latent French nationalism.
Suddenly, Angela Merkel is facing the end of her much-vaunted ‘fiskalunion’ and this in turn reveals the essentially undemocratic nature of the European project. Greece and France alike, she avers, must keep to the agreements they signed. But what when the national governments that signed those agreements are booted out? Either the electorate is allowed its say, and a government can renege on an agreement to which they weren’t signatories, or the EU can simply insist that its will overrides that of the people. No surprise which course ex-Communist Merkel seems to favour. I must have missed the bit where Merkel was enthusiastically endorsed by plebiscites in Greece and France.
Pulling back to the wider picture, slowly but surely (and, to give them their due, the powers-that-be have kept the plates spinning for far longer than I imagined possible) the multiple crises developing across not just Europe but the whole world are reaching a head.
Hollande’s program of decouplement from the fiskalunion is likely to be timed with a true Greek default. If no government prepared to agree to the terms of the fiskalunion can be formed in Athens by June, the country effectively runs out of money and Greece will be forced out the Euro. In turn, this will give the Greeks the opportunity to revert to the Drachma and default on their Euro liabilities. Lest we forget, the primary victim of a Greek default will be France (see here)
If this runs its course, France herself hits a perfect storm sometime in July of market flight (already, spreads on French bonds are rising as the markets take fright at Hollande’s rhetoric) and Greek default – leaving the French banking sector in shreds more or less overnight. How does that play out? Probably not very well.
Meanwhile, overt currency wars have broken out. The dollar has been the reserve currency of the world since pretty much the end of WWII – and thus has been the centrepiece of US foreign power (oil trading, for example, is exclusively in dollars). But since the Fed turned on the taps and started printing dollars by the trillion, that picture is changing. Quietly, various countries have started looking at alternatives. Since 2009, India pays for Iranian oil with gold, for example and China is reported to have started using the Yuan for transactions with Iran.
What does this mean? Well it tells us that the era of US dominance is more or less ended. By debasing their currency so thoroughly, the Fed has guaranteed that US dollars carry less weight than they once did. By corollary, Iran’s geopolitical importance thus grows ever greater as trade in Iranian oil becomes the poster child for those who want to see an end to the dollar’s cherished status and therefore an end to American power.
Obama may still be feted by the nearsighted, but he has if anything accelerated the stupidities begun under Bush II. Across the Western world, governments remain addicted to the crack pipe of deficit spending which, for all the talk of ‘austerity’, is actually the true picture.
As an aside, ponder this: Greece spends a greater percentage of its GDP on the military than either the UK, France and even Russia (remember: this is an economy in freefall, and entirely supported by ECB loans). So on the edge of Europe – bordered by the troubled Balkan states which have seen much warfare over the last 2 decades, we have an excessively militarised country which is increasingly turning to the political extremes