So now it’s Spain’s turn to get those virtual euro printing presses turning in order to rescue its banks. Another EUR 100 billion vanishes into somebody else’s black hole and Madrid’s rescue plan makes us all feel happier. Who’s next?
One of the reasons why the Eurozone’s continuing, oh-so-slow-motion carcrash fails to motivate us or to force us to take stock of the gravity of events, is that this story seems technical and remote from our daily lives.
There’s something faulty with the storytelling. It has no terror, no shock and awe. Krapp’s Last Tape has more going on in terms of plotline.
This Beckettian bureaucratic drama is played out (or mimed out) in summits, as news photographers’ flashes pop outside official buildings in Brussels, where EU flags hang limply behind the podiums where leaders give press conferences about the next in a cancer-like spread of national bailouts. Big things happen in weekends, when the markets are closed and we’re supposed to be worrying about somewhere or something else. It’s like watching TV with the sound off.
Yes, there is suffering involved. But unlike the 1929 Wall Street Crash you don’t see bank employees hurling themselves from rooftops – or even tearful young execs struggling out of the revolving doors of City offices with cardboard storage boxes as they did after the 2008 Lehman Brothers collapse.
Oliver Stone would never dream of making a movie like Wall Street out of the Eurozone crisis. You won’t find many Shia LaBeouf lookalikes in Frankfurt – or even London. Even the TV news anchors nightly go through the motions of trying to make it interesting. The whole point of the euro, when it was created, was that it would put the cap on a century of European strife and uncertainty with a thousand-year Reich of euro-dullness, euro-prosperity and euro-reliability. Now it’s just plain dull and mighty unreliable.
In other words, there doesn’t seem to be any compelling story attached to European banking. Yes, we all we want to hear about pride, hubris, megalomania, wilful destructiveness – but who is to impute this from a string of empty golfing resorts in Spain put up by faceless property developers, or a fleet of tower cranes standing idle on the Dublin skyline?
The bankers who built those empty reports in Murcia are just as dull as the rows of empty apartments beside the now-browning grass of the untended fairways. The Greeks and Irish speculators who burst their nations’ balloons are quietly buying up luxury rental properties in London, while the Portuguese who once drove around in rented Porsches, are trying to make a new start in Angola. Nobody is jumping off the rooftops.
Well actually, there is a story. A horror story, in fact. It’s a morality play that drives the behaviour of Central Bankers, twisting their arms to cave in to the special pleadings of men in limousines. This story is the ultimate “get out of jail free” card for Europe’s banking titans, distorting the game of moral hazard that financiers play with regulators.
Deep within the race memory of Europe’s administrative elite lies the fear of a repetition of the chaos triggered by the 1931 collapse of Austria’s Credit-Anstalt Bank. It’s arguable that just about all the ills that eventually coalesced into World War Two, can be traced back to this seminal event in economic history. Like the mythical “patient zero” responsible for starting the global AIDS epidemic in the early 1980s, Credit-Anstalt is the starting point for all the evils that the euro was finally supposed to make unrepeatable.
The collapse of a “too big to fail” financial institution in Vienna was at least in part the event that led to the extreme polarisation of Austrian politics and the installation of a far-left municipal administration in the capital in 1934. That in turn led to the rise of right wing agitation and, eventually, to the emergence of Hitler.
Credit-Anstalt was part of “old Europe.” It was a Rothschild-owned institution that had served the Austro-Hungarian empire before World War One, and lingered on into another age. The Credit-Anstalt default began in a small, peripheral country, just as today’s worst problems are concentrated so far in Greece, Ireland, and Portugal, which combined make up just 5 percent of the 27-nation European Union’s gross domestic product.
Worldwide, the Credit-Anstalt collapse cause Britain to abandon the gold standard and this created a 25 % devaluation of sterling. Likewise, the Austrian bank collapse had a catastrophic effect on the US dollar.
It’s been argued be economic historian Charles Kindleberger the event — more so even that the Wall Street Crash of 1929 – actually stimulated the Great Depression. Plenty of bloggers and grander commentators have been telling the “it’s 1931 all over again” story. But somehow it hasn’t made its way into our broader European consciousness.
All the same players are gathered, although some of the names have changed. For Austria, read Greece, or Ireland … or Spain. For the Bank for International Settlements that botched the Credit-Anstalt rescue, read the “troika” of IMF, EU and European Central Bank.
For America’s Great Depression, read the rising tide of criticism from President Barack Obama that Europe’s woes are dragging down the US economy. Wall Streeters are now blaming Greece for their skimpy bonus packages. And of course, for the gold standard that prevailed in 1931, read the single European currency.
OK, so the parallels are scary, and we should learn from history, and so on. But what are we to do with this awareness? Should Europe’s politicians be threatening us with a new apocalypse of the type: “You want fascism back again? Just keep ignoring this one.” It wouldn’t work.
Unfortunately, it mingles with a perception that’s back on the table again: Germany is somehow to blame for all this. Not this time for starting a war, but for showing too little largesse and for selling too many efficiently made BMWs to spendthrift southern Europeans. Just because Germany has been prudent, why should its taxpayers be forced to pay up?
“Start the Engines, Angela” shouted the Economist, in a headline matching an illustration of ship entitled “world economy” sinking below the waves, unless the German Chancellor fosters new growth. Let’s not forget that Germany wasn’t supposed to have stopped paying war reparations to the Allies until 1989, under the terms of the 1919 Treaty of Versailles. Something is hardwired into the European mind that the Germans must always pay up.
So yes, European banking is dull, the euro is dull, central bankers are dull. But behind all this lies the memory of terror that led to the deaths of 70 million people worldwide. Somebody should be able to make a decent scare story out of that.