Pass The Parcel: Euro Edition

Gillian Tett and Paul Mason have written the two best popular books so far about the banking crisis of 2008. Perhaps significantly, neither initially started life as an economist: Tett did her doctorate in social anthropology and Mason trained as a music teacher and musical academic. With all due respect to Steph, Pesto and the starry array of proper economists @ the FT, I think these two are the best economic journos in the business.

Anyway, here they are having one of those slightly artificial discussions the Guardian likes to publish on a Saturday. Inevitably, the subject matter is the crisis in the Eurozone. The future’s cloudy and they present somewhat different emphases on lots of stuff, not least the likelihood of a breakup of the Eurozone or otherwise. That’s understandable. But where they’re absolutely as one is in their very direct answers to a simple question: the debt isn’t ever, ever going to be paid back.  It’s just a question as to whether the currently rich get to see their wealth inflated away – perhaps by being forced to buy government bonds issued at below inflation rates of interest - or whether there is a ‘slate-wiping system on systemic debt’. What they don't say, but which is implicit in the whole situation, is no one  is ready to accept that it is their current wealth that gets vaporised.

So it’s still pass the parcel time: when the music stops someone is going to have huge losses on their hands. The only thing that’s different from 2008 is that the bankers have engineered a situation where they’re not alone in the party ring, nor even necessarily in the front rank.  The explosive debt is now also being gingerly handled by whole countries and various bewilderingly-lettered orgs (ECB, IMF, and so on) which are, in essence, no more than the public faces of various layers of multi-national Finance Capital.

Part of this pass the parcel game is inflicting the losses on the bottom end and middle of society. States are needed to do this, but not necessarily democratically led ones - hence the overthrow of Berlusconi and Papendreou, sad parodies of democratic leaders though they were.

Yet this too is a gamble. States that act too far outside a certain range of norms can quickly lose their legitimacy in the eyes of their populations, and this can happened that much quicker in the absence of a government led by anyone with a  popular political mandate.  Greece, in particular, looks like a political tinderbox to my untutored eye, but little of the Mediterranean periphery of the EU can  be counted as truly 'stable' or immune to the attractions of a ‘slate-wiping system on systemic debt’, which for a small and/or deeply indebted country is a process most easily kicked off by unilateral  default. Indeed there are conceivable circumstances where  this economic  'nuclear option' might be almost the only area of economic autonomy left to such countries as the crisis develops.


There are a few more rounds to play of pass the parcel in Europe, and especially in Italy I think. More schemes to try, further complex euphemisms to emerge from the alphabet soup of  High Financial shenanigans. I'm not promising it will all turn out OK in the end, but certainly a repressive stabilisation in favour of the currently wealthy is not beyond the realms of possibility  across Europe. Yet the more the powers-that-be press this explosive parcel of debt into the unwilling hands of those who are already losing, the more attractive a  very dangerous 'mutual ruin of the contending classes' option of unilateral default might come to seem across the Mediterranean basin.