My Mortgage Blog

“This month, Greece’s Parliament needs to approve an additional 11.5 billion euros in spending cuts for 2013-14. If it does, it will most likely prompt big protests in the streets. If it doesn’t, the so-called troika (the European Commission, the I.M.F. and the European Central Bank) won’t lend Greece the money to keep its economy afloat. If all sides get through September intact, they’ll still be at loggerheads during the next phase of budget negotiations.”

Looking for an exciting soap opera? One that can keep you on the edge of your seat, with a plot that seems always to be moving in some way (not necessarily forward) but always avoiding meaningful resolution?

If you are, the euro crisis is for you.

As NPR’s Adam Davidson describes it above (in the New Your Times), the euro crisis is lurching forward toward yet another moment when the western economy could fall into a potentially desperate collapse of the euro and destruction of any remaining shreds of hope for a lasting solution to, as just one example, Greece’s current need to borrow yet another infusion of money with which to make debt payments.

Okay. I can sense the yawns. We’ve been watching this show for a good number of television seasons already. The plot really hasn’t changed. We’re still, according to the scriptwriters, on our way to hell in a hand basket. Yet the big moment when everything explodes never occurs. The ongoing drama has lost all its suspense, no?

Well, no, actually. It hasn’t. Davidson also has this to say: “Despite its many noble goals, the euro has been, in many ways, disastrous. It has taught many economists that there is no way to have a single currency without a single government or, at the very least, a unified financial policy. Europe has two choices: deeper integration or fracture. We may be inching toward the day when bureaucrats from Brussels will show up in Athens, Rome and Madrid and tell elected officials how to do their jobs. If you thought Greek and Italian governments were unstable when the countries were fully independent, just wait.”

In other words—at least, as I read these words—the Eurozone is likely to fall apart unless its countries can find a way to bend their knees a bit more and grant more sovereignty to other nations. Greece has already played with how much it can accede to the demands of the European Central Bank, the Germans, and others. All the while, the Greeks have been understandably unhappy to have jobs sliced and diced, rioting occasionally. The economy has been moving underground because there isn’t enough money in the marketplace.

At the same time, Germans are visibly steamed about having their tax dollars shipped to Greece, to help the Greeks support their indebtedness and evade a complete crash of their banking and currency system, such as it is. Not our problem, a great many Germans argue.

If you were betting on this, would you put much money behind the possibility that the European sovereign nations will be able to put together agreements to continue with very unpopular belt-tightening policies and logistics? This is stuff that should have been handled, much less foreseen, back in the days of the Maastricht accord that created the euro and the Eurozone in the first place. But wasn’t.

We hear, beneath the apparent calm, that the world economy is actually on the brink of disaster. Maybe it is, at least temporarily. A European accord is very difficult to create on the fly. If confidence in the possibility of doing so fails, though, we’ve got a major currency and a huge trading partner in even deeper trouble, and that would also hit the world economy—and American trade and American interest rates—very hard.

So maybe it’s more enjoyable not thinking about any of this. I’m afraid, though, that we’re stuck with it, and if we want to know how we’re going to pay for our lunch a year from now (and, perhaps more to the point, how we’re going to keep our businesses alive), we will do well to pay fairly close attention to the soap opera and keep as accurate an idea as possible of where it is heading.

Sorry, but that’s our world in 2012 and 2013, if not beyond. It’s impossible to avoid.