Eruptions across Europe
At the time of writing, the finance ministers of the eurozone have just announced officially a three-year aid plan for Greece of 110 billion euros. But what hesitation and procrastination it has taken to get there. Discussions were expected to be bitter and messy, but European politicians have shown themselves to be particularly arrogant in their defiance of the basic rules of economics and finance. From the beginning, the tone was set by the debate over banning credit derivatives on sovereign debt and blaming speculators. Meanwhile in Athens the government was belatedly admitting that its accounts had been manipulated. Events then took over, as the rating agencies came under exceptional pressure to lower the credit ratings of countries on the European periphery.Their governments quickly reached an impasse.Without the possibility of devaluation, they probably realise that the Greek debt restructuring is ultimately inevitable, but the priority for the moment is to allow sufficient time for European financial institutions to make the necessary provisions.Their bet is that within three years, the system will be in position to adjust the value of Hellenic assets, but not today, while banks are still convalescing.