It is not going to be a pretty sight today in Justus Lipsius building in Brussels. At the crisis summit, Europe’s leaders will do something they previously reassured their taxpayers was a legal impossibility – bail out failed states in the Eurozone.
Or at least, they will try to do this. Although they all agree Something Has To Be Done to save Greece, they can’t agree on what.
Should private bondholders be made to pay a share? Should Eurozone banks be taxed to support failed countries? This latest idea is potty – why pick on banks? If you want to make the culprits of this crisis pay, why not tax subprime mortgage lenders, regulators, Socialist Greek politicians – or indeed, just Greeks.
Getting Greeks to actually pay taxes would be a good place to start. Tempers are starting to fray as EU voters vent their fury at having to pay to reckless Greeks; and politicians are worried they will be caught throwing good money after bad.
THE REAL GREEK QUESTION
European leaders will in fact discuss everything except the most important issue. The big problem is not that Greece needs money to stop it going bust.
They are steadily turning the EU into a transfer union, where the disciplined countries routinely make payments of hundreds of billions of euros to undisciplined ones.
But this does nothing to address the underlying problem – which is the lack of competitiveness of the Greek economy.
Greek industry is unable to compete with German industry, and Greece is now denied its old trick of competitive devaluations of its currency.
The inevitable result is that Greece, currently led by Prime Minister George Papandreou (pictured right) is never going to be able to pay its way; instead the country is being turned into a bailout junkie.
WHY LONDON SHOULD WORRY
Nor should London be smug and complacent about the widespread troubles on the European mainland.
Clearly international investors might target their money at London as a safe haven in times of trouble, and we could see short term benefits.
But if the wheels come off the euro bandwagon, then we will suffer from the economic shockwaves.
Eurozone leaders are going to be looking for scapegoats to punish – and there will be none more delicious than those Anglo Saxon bankers.
The crisis is a Eurozone problem, but the consequences will be ours.
Anthony Browne is a board member at theCityUK