Not Peppa this time, I'm talking about Portugal, Ireland, Spain and, most relevantly today, Greece. The countries in the Eurozone with the largest debt overhangs. The countries which - let's be frank - have the capacity to destroy the Euro. Or rather to reduce the Euro to the currency of the old 'core' countries of the original Common Market- quite possibly excluding Italy if things get really out of hand. There is a definite limit to how far the German, French and Dutch electorates will allow their governments to bail out these poorer countries. & if that point is reached, the Euro gets totally redefined as basically a Franco-German-Benelux currency alone.
We're not there yet. There's undoubtedly going to be a lot of yabba-yabba today on the technical complexities of what's going on in Greece and the bond markets from well informed economic commentators. For what it is worth, my inexpert guess is that the Germans and the IMF will, in all probability, stabilise the Greek situation and quieten the bond markets for a while. But they'll face further attacks on one or other of the PIGS and have to re-consider their response all over again. & , in all likelihood, again and again.
So what does this mean for us?
Certainly, in the very short term, siren voices from the right will hardly resist the temptation to coin some quip alone the lines of New Labour 'having made a PIGS ear of our economy', and push for a definite Tory victory to reassure the bond markets that vicious cuts really will come very quickly after the election. But everything I've been reading suggests the City is actually quite sanguine about the idea of a coalition, and may even welcome it, so I'm not sure that this line will gather much long term traction. Though it might make it more difficult for Gordo to play what I'm sure he reckons is his trump card of having stabilised the economy in a crisis in tomorrow's economic debate.
In a deeper sense, however, a crisis for the Euro would inevitably mean a crisis for the wider European 'project' and it is the LibDems who are most closely associated with that particular political meme. At minimum it would give a very definite warning that there are limits to how far one can pursue economic integration without a corresponding political union. So this would damage the image of the LibDems, but also the long term strategic aims of large swathes of Big Capital. So if the LibDems do have some participation in or influence over the next government their honeymoon in the polls might come to a very rapid end very shortly afterwards.
Massive cuts are coming. Even if a coalition government is spatchcocked together to apparently represent a majority of votes the legitimacy and popularity of that government is going to vanish like early morning mist under the heat of the sun.