Friday, 7 January 2011

Ils ne passeront pas says Madame Lagarde

On last night's Newsnight the delicious Christine Lagarde, French Finance minister, speaking English better than the BBC interviewer stated all current members of the Euro would remain members. She said there will be no more bail outs. She was sure no country within the zone would have difficulties financing itself in the year ahead.  It was a “Crisis, what crisis?” moment, a “Let them eat cake” or as Marshal Petain ,defender of Verdun, a later head of the Vichy Nazi government, said , "They shall not pass. "

      The BBC’s Economics correspondent afterwards told us the Euro political classes are in denial about the Eurozone's problems. He likened it to the run up to World War I. All we need is the spark of a Balkans assassination to bring the whole Eurozone edifice crashing down. The current situation cannot be sustained.

As John Redwood put it, "politicians have to keep spinning through whatever the odds. If they once suggested there could be another bond crisis, or another bank shake up, or further deterioration in one of the struggling economies, they would hasten just such an event.

The Euro, just like the Exchange Rate Mechanism before it, forces politicians either to fly in the face of reality or to keep quiet. Markets want to go in the opposite direction to the politicians. In such circumstances careless talk can cause great economic and financial damage."

Madame Lagarde had to say what she said but she is too clever to believe it. The Germans are not going on paying for the profligate PIGS without controlling the PIGS domestic economic policies just like Adolf did 70 years ago. Guaranteed to upset the PIGS.

Another group in denial is the Bank of England's monetary policy committee, chaired by Governor King. Inflation is picking up big time all over the world, China, India, Brazil and now Oz. Interest rates have to rise in the UK very quickly. Again the politicians will be upset but they are only out to save their skins and have no regard for the well being of our nation.

I will spend next week in the supremely well run and expensive country of Switzerland. From my Alp I will view the UK's political giants fight it out in Oldham. Not so much the War of the Roses but the battle of the stinkers.

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