All those Germans who take over Greek holiday resorts in the summer had better watch their step this year.
Greece now looks increasingly likely to default on its debts, and maybe Portugal too, after the two main powers in the Eurozone, Germany and France, have made a right mess of the country’s long-planned (and long-delayed) bailout.
French president Nicolas Sarkozy has been telling all and sundry that the cavalry is on the way but the trouble has been that the Germans are supposed to be paying for it.
And, with elections looming and the German economy still struggling to escape from recession, German politicians and indeed the German voters aren’t very keen to do so.
So a problem that could have been solved, at least in the short term, by a relatively modest loan of about €30bn a few weeks ago is now much more serious, with the dreaded speculators in investment banks and hedge funds cheerfully ‘shorting’ Greek bonds.
Yesterday the contagion spread to world stock markets with New York, London and, overnight, the Far East all tumbling. There will have been a lot of highly profitable bets on this happening too.
And, for the first time, many people (as opposed to the permanent anti-EU brigade) are questioning the survival of the Eurozone in its current expanded form. Even if that fate is avoided it hardly looks good for the world’s second-largest trading unit to need to turn to the International Monetary Fund to help one of its smaller components.
Greece, which got itself into this mess in the first place of course with help from the likes of Goldman Sachs who raised money for the country that it can’t afford to repay, accounts for about two per cent of EU GDP. In UK terms this is a bit like a spot of bother in Bristol.
UK chancellor Alistair Darling will think he’s well out of it (the UK sticking to good old GBPs) although his boss Gordon Brown may be wishing he’d been able to chip in and bang a few heads together, something he’s good at when it comes to economics.
European stock markets opened modestly lower this morning after being slaughtered yesterday (the FTSE down 150 points). But the biggest early loser in London was Royal Bank of Scotland, a star performer recently but now prey to fears that the big global banks will take a savage haircut on loans to Greece if the country defaults.
A new banking crisis is the last thing anyone needs including the Germans. So come on Angela Merkel, do something!