Simon Heffer's regular Wednesday piece covers many of the points on the above I have been writing about for the last few months. The financial markets cannot take many more dramatic falls like yesterday without real action by governments not meaningless twaddle and flannel from van Rumpy, Barroso etc. The Euro now is kept going on a German drip of money into Club Med. We will no doubt be asked to subscribe as well and I hope Dave gives a similar answer to Laws on child trust funds i.e. there is no point in us borrowing money and lending it on when we will never get it back.
Merkel faces electoral wipe out if she continues subsidising the Greeks for the sake of the unattainable great EU super state project. Obama will face re-election in 2012 so increasingly US self interest will dominate his actions. The undemocratic self perpetuating Brussels bureaucracy is becoming increasingly exposed as what it is, a reincarnation of the failed Soviet system.
Greece can be kept going for a short time on temporary term injections of liquidity just like a business kept going by an overdraft from an indulgent bank manager. The truth is Greece is insolvent. It cannot hope to repay its debts. Speculators will be blamed but of course the real culprits are the self seeking politicians, our own included, who have not stood up for their own people as common sense demands and have conspired to subvert our democracy as in the Lisbon Treaty to the great Monet dream.
In the financial markets there is a huge flight to quality with German bond yields at record lows and Club Med bond yields steadily increasing. Euro dollar swaps are also becoming increasingly expensive. The main holders and buyers of last resort for these unwanted bonds are the principally Eurozone banks but UK, US and other non - eurozone banks also have large holdings of such dodgy paper as do the Chinese. The powder keg is there for another and bigger bank crisis. It just waits a spark.
As for more regulation, the EU and leftist's panacea for all things we can now see exposed the claims from people like Diane Abbott that Spanish tighter bank regulation kept Spanish banks out of trouble as complete baloney. Spanish banks are mired in what are euphemistically called non-performing property loans. Mark to market has been abandoned in Italy as this would show the huge amount of bad loans on their banks books and the giant hole in their balance sheet would be clear for all to see.
The public payroll has to be cut all over Europe including the UK. The LibCon's £6bn cuts will mainly hit private employers because it is easy to cancel or not award contracts but difficult and painful to reduce staff and cut benefits, ask Willie Walsh at BA! Only the Irish have done it but we and the whole of Europe have to follow their example. I would suggest one politically expedient remedy. Start at the top and restrict the highest earning person in any public funded body, quango or quasi governmental organisation, eg the BBC, to a salary no more than the Prime Ministers and just watch how quickly that cascades down through the ranks of assistant chief constables etc. You can impose also a Swedish style cap that the best paid can earn no more than ten times the least paid.
Chief executives of publicly funded bodies are paid far more for doing far less than in the US. Why is Mervyn King, governor of the Bank of England paid around twice the amount of Ben Bernanke, chairman of the US Federal Reserve and in charge of monetary policy of an economy ten times the size of the UK? Why is the head honcho of the BBC, Mark Thomson, paid £800k? If that is the market rate let him go out and get a job in the market and let us the licence/tax payer recruit someone else. I don't think there will be a shortage of applicants at £160k per year. Its the same for the BBC's high paid presenters. There are plenty of younger, and dare I say it better people, waiting for a chance to do these jobs at a fraction of these Paxoesque salaries. These great stars can then be paid their true worth in the private sector!