EC PRESIDENT CALLS URGENT MEETING FOR TOMORROW #2

Spectre of Greek eurozone exit looms as tour firm plans for drachma comeback

German tour operator TUI writes to hoteliers demanding that they agree to renegotiate contracts in drachma

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• Helena Smith
  
• guardian.co.uk, Sunday 6 November 2011 20.04 GMT
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German tour firm TUI has demanded that hoteliers agree to renegotiate contracts in drachma if Greece leaves the euro. Photograph: Prisma Bildagentur/Alamy

If Greeks were under any illusion that their country's exit from the eurozone is being entertained, it has been dispelled by the German tour operator TUI. Barely hours after EU powerhouses Germany and France tore up the bloc's own rulebook with the taboo-breaking announcement that a Greek departure from the EU was no longer inconceivable, the travel giant demanded that hoteliers in Greece agree to renegotiate contracts in drachmas.
Amid all the political and economic uncertainty surrounding the debt-stricken country, the spectre of Athens returning to its old currency had suddenly been raised. "It's very sad and we think they have jumped the gun," said the Greek travel executive Christina Tetradis, who vowed to raise the issue at the industry's biggest trade fair, the World Travel Market, which opens in London on Monday.
"I have heard that TUI has sent letters with a clause mentioning drachmas to hoteliers in Crete, which is their largest market. People there are very upset."
Tetradis, who presides over the association of hotel owners in the Ionian isles, said Greek hoteliers gathered in London for the fair would tackle the tour operator over the move.
"We don't understand and we want them to take it back," she told the Guardian.
"We are going to raise it with them. We need to find out more because nobody at this point has seriously talked about a new currency."
Opinion polls have shown that Greeks have no desire to re-embrace the drachma, first used in Athens in at least the 5th century BC but (or so it was thought) consigned to history when the nation adopted the euro in 2001.
A Public Issue survey conducted for Sunday's Kathimerini newspaper showed that 67% of Greeks believed life would be worse if the country abandoned the euro. Currency experts predict that the new drachma would probably lose around 60% of its value if it were to be reintroduced and living standards would plummet dramatically.
TUI acknowledged at the weekend that it had asked hotel partners in Greece to renegotiate contracts to protect against loss. "We have to protect ourselves against these kinds of currency risks," said Robin Zimmermann, the German tour operator's spokesman. "Let's be realistic, right now there is more than just a theoretical possibility that Greece will leave the eurozone."
With tourism accounting for nearly 20% of GDP and one in five Greeks working in the sector, industry figures in Athens worry that TUI's move will encourage others to follow suit. Last week, the tourism minister, Giorgos Nikitiades, contacted the company to express his displeasure. "We can't possibly accept this," he said.
"A lot of hoteliers have received letters but none are going to agree," insisted Andreas Andreadis, the chairman of the Association of Greek Tourism Enterprises. "TUI cannot pressure anyone into signing something like this."
Germans top the league table of foreigners visiting Greece. The EU, ECB and IMF, which are propping up the moribund Greek economy with rescue funds, have pinpointed tourism as a potential engine of development and growth that could also help the country exit its worst crisis in modern times.

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  Greek leaders agree to unity government as future hangs in balance
  Markets braced for more turmoil as key details of new deal still missing
  
• Eurozone ministers begin frantic search to fill shortfall in bailout fund
  
• Italy hails businessman a hero after he launches appeal to save the economy
  
• Global recession looms larger after G20 summit fails
  
• Greece prepares for departure of Papandreou
  
• Comment and analysis
  
• 
  Costas Douzinas: European elites should be wary of the Greek spring
  Costas Douzinas: The fear of 'contagion' shouldn't be just about the euro – this Greek resistance could spread across Europe
  
• Cannes showed how power has shifted to Beijing
  
• Nikos Konstantaras: Angry and ashamed, we Greeks need to see a just solution to our ills
  
• William Keegan: We mustn't overlook the role of politics in the eurozone crisis
  
• Andrew Rawnsley: Only power leaders have is to frustrate each other
  
• Markets pass judgment on G20 fiasco
  

See also

• 21 Jun 2011
  Greece: the risks of leaving the euro
  
• 22 Jul 2011
  Eurozone bails out Greece - video
  
• 18 Aug 2011
  European Central Bank is fighting fires on all fronts
  
• 22 Oct 2011
  
  
  

France is also having problems, it"s E45 billion has up to now been financed by Oil rich Countries but there is a shortfall of 8 billion which means more
austerity measures.

Berlesconi is under pressure to resign, two of his allies have defected to the opposition and contagion has hit borrowing costs. There is not enough to
guarantee Italy"s E1.9 TRILLION deficit and this is the Country which is not allowed to fail.

Papandreou will step aside and it is rumoured that the vice president of the ECB will head the Unity Government until a General Election is called.

An Investment analyst says that while the EU is trying to patch up all these bailouts, if stability is not acheived soon, the Markets will be merciless.

Germany has revised its growth estimate from 3% to .3% for the coming year.

Italian 10 yr Bond up to 6.42% ...7% regarded as critical, Greek Bond down from 104% to 24% as market approves new Government.

Stock Markets care more for the Politics than markets.

Louisa Cooper of BCG Partners finds the sight of IMF Chief La Garda Sarkozy and Merkel laughing at the antics of Berlesconi quite terrifying and wonders
how they think the Italian debt of E1.9 trilliion is to be financed. The G 20 countries showed little appetite for helping to bail out the EU Countries when
they have problems of their own.

Italian 10 year bond yield now 6.5 %.

I heard on Sky News a moment ago from a analyst on the Eurozone that Merkel and Sarkozy were "smirking" when asked at a Press Conference as to whether Berlesconi would last and whether Italy would be able to sort out their situation.

This attitude of Merkel and Sarkozy highlights what's really going on in the EU - I think France and Germany have got some sort of agenda gong on. I saw this smirking before from Merkel whilst the Sarkozy was lambasting Papandreou last week.

This analyst also said that you can be sure that they are fully in charge with what will happen regarding the proposed Unity Government and anything which is proposed will have to be agreed by the Eurozone.

There was some talk that the Greeks would not put up with this so maybe that is what is making the tour operators ask for drachma quotes.

Angelique wrote:I heard on Sky News a moment ago from a analyst on the Eurozone that Merkel and Sarkozy were "smirking" when asked at a Press Conference as to whether Berlesconi would last and whether Italy would be able to sort out their situation.

This attitude of Merkel and Sarkozy highlights what's really going on in the EU - I think France and Germany have got some sort of agenda gong on. I saw this smirking before from Merkel whilst the Sarkozy was lambasting Papandreou last week.

This analyst also said that you can be sure that they are fully in charge with what will happen regarding the proposed Unity Government and anything which is proposed will have to be agreed by the Eurozone.

There was some talk that the Greeks would not put up with this so maybe that is what is making the tour operators ask for drachma quotes.

If Merkel and Sarkozy want an Elite EU where everyone toes the line they are living in cloud cuckoo land. Had monitoring of EU Members fiscal policies been
adhered to, this crisis would never have happened and these two set themselves up as Leaders when neither has any Economic credentials.

Presseurop

• Briefings
  

Editorial

With TINA at the helm

4 November 2011

Ever since the debt crisis began to threaten the stability of the single currency, the “Merkozy” duo has taken over the bridge of the good ship Euro. Not by virtue of any agreement among the member states, but due to a simple conclusion: “There Is No Alternative” – T.I.N.A., to quote a certain Iron Lady.
Or perhaps there is. There’s the European Commission, guardian of the treaties and of the “economic government” of the EU, as its President, Jose Manuel Barroso, recently repeated. But when it comes to the eurozone, it’s the Eurogroup – the Ministers of Economy, i.e. national governments – that has taken over. Again, therefore, Paris and Berlin.
The recent appointment of European Council President Herman Van Rompuy as “Mr. Euro”, with the blessing of Angela Merkel and Nicolas Sarkozy, strengthens the role of member states in the economic governance of “Euroland”, with Germany and France in the lead.
The catch is that this set-up isn’t based on any agreement and that the decisions taken by “Merkozy” seem increasingly to be evading any debate, even within the eurozone itself. Indeed, no other country is able to influence the discussions or to act as counterweight to a steamroller increasingly unencumbered by courtesies when addressing one’s peers, as shown by the angry and hostile tone in which the proposed referendum in Greece was greeted by “Merkozy”.
Among the other “big” countries, Italy, the third-largest economy in the eurozone, finds itself in the hot seat because of the precariousness of its government and its public finances. Meanwhile Spain, in the middle of an election campaign, is not out of the rut yet.
Hammered by the debt crisis, they are, like Portugal and Ireland, well distant from the “triple A” of the rating agencies that seems to confer supernatural powers on countries that still have it. Which, incidentally, explains why the French president is obsessed with keeping his country in the most prized circle of the moment. In the eurozone, the other members of this triple-A club – Austria, Finland, Luxembourg and the Netherlands – either pack a light punch or are aligned with the Franco-German duo.
While Merkel and Sarkozy may be able to avoid the most threatening whirlpools, however, they seem to have no clear idea of where they want to steer the good ship Euro – and they have no mandate for it either. This lack of clarity and legitimacy weighs heavily over the uncharted course of the crisis and gives the impression that they’re navigating by sight. Steering through the storm, we’re not willing to hand the helm over unless those who take it can guide the ship and crew safely to harbour.
Translated from the French by Anton Baer
Categor

Denmark is feeling the pinch but apparently unable to borrow from their Banks who are in debt themselves.

Rumour stated that Berlesconi had resigned but this was later denied.. Danny Blanchflower, Economics Professor , says even if he did resign will it really
affect the Bonds purchases.This debt is the highest in Italy"s history.

On a lighter note, I just caught the tail-end of a skit by American Actors. Apollo is ranting to a few Greeks saying, "how dare they accuse us of laziness,
when we work three days a week for one hour a day. Then he asks one of the Soldiers, are you the Finance Minister? I don"t know where it came from but
I thought it was funny.

German Economy is slowing down considerably which would definitely mean that the Country would not offer to add to the EFSF Fund.

Berlesconi has always been a flamboyant character and even has his own Facebook account.Seems he is going to fight to the death and has been called
Houdini by some for the way he manages to escape .

Ireland is doing very well , probably the only Country which is at the moment. Although it has austerity measures the population is accepting these and
the workforce able to diversify. The low Corporation Tax is bringing new Business especially from the U.S.

In a discussion with an Executive of Deutchebank , Dominic Konstan and James Sweeney of Credit Suisse, it is of concern that there is so much internal Capital flight.

It was thought the ECB is the only Bank which can help in this crisis , but the President says for it to be a lending Bank , it can only purchase Bonds.

Italy was considered a prosperous Country until the spending spree caused the E1.6 deficit but even if the EFSF and IMF agree to bail Italy out, the Italians
may not agree to the stringent austerity measure and leave the EU.

Europe is going into a very deep recession so how can any bail out be repaid if Exports slump?

Ed Conway, sky news
’s lucky – or rather unlucky – number? It proved to be seven for Greece, Ireland and Portugal.That,
at least, was the level those three countries’ government bond rates
rose to just before they were rescued by their euro neighbours and the
International Monetary Fund. Which is why there is so much consternation
at the moment about the seemingly relentless increase in recent weeks
of interest rates on Italian government debt.

This
chart tells the story: not all that long ago, Italy could borrow at 4%;
now investors are demanding rates of over 6.5% for the benchmark
government bond, which lasts 10 years.
But is there any real
science behind that 7% figure – anything built into economics that
suggests any government borrowing rate beyond this is unsustainable? The
answer is: not really. The Bank of Italy, which recently did some work on the subject, says that the country could survive, at least in the short term, with yields up to 8%.
Moreover,
higher interest rates of the sort you see in that graph are in the
secondary market – they only affect Italy’s own budget when it auctions
off another slice of debt. That happens quite frequently in Italy’s case
– there is an €8bn auction of debt next Monday – and so over time
Italy’s debt interest costs will rise. But it doesn’t happen overnight,
so it’s not as if it is suddenly insolvent.
And unlike Greece,
Spain, Portugal or indeed this country, Italy’s problems don’t derive
directly from the financial crisis. Yes, it has high debt – 120% of GDP –
but this has been at the same level for many years, and the country has
been able to finance itself and keep raising cash in the capital
markets.
However, traders like simple numbers – and they love
prime numbers. Seven is both of these, and, like it or not, the market
has convinced itself that Italy is in real trouble if it goes beyond
this level. And when markets convince themselves of something it usually
becomes a self-fulfilling prophecy.
So why should we be worried about Italy’s ever-increasing interest rates?
In
the long run, a country’s government debt rates should not be higher
than the country’s nominal growth rate: if they are, that suggests it
doesn’t have the capacity to generate enough domestic wealth to pay
them. And how do things look on that front? Not all that good. According
to IMF figures, the average nominal growth rate (and remember this is
real growth plus inflation) between 1990 and 2010 was 4.4%.
The
problem is that the country has barely grown in recent years, and the
IMF forecasts that its average growth in the next five years will
average just 3.3%. If the country’s interest rates are higher than this
for a lengthy period, that erodes its capacity to pay.
Moreover,
the European Central Bank clearly doesn’t like rates at this level – it
has been in the market buying Italian debt actively in recent weeks in
an effort to bring rates down to levels that it judges to be consistent
with its benchmark rates.
So what would improve matters? The
knee-jerk answer would be to say: a change of government, which is why
there is so much speculation over the apparently imminent departure of
Silvio Berlusconi. However, while the Italian PM has certainly presided
over many years of disappointing growth, it is not immediately obvious
that anyone else waiting in the wings would be able to improve things
all that dramatically, at least in the short and medium term.
And
then there’s the even more terrifying fact that the European Financial
Stability Facility doesn’t really have the firepower to fund Italy for
any extended period of time. The country has to raise around €300bn of
debt in the next year alone, which is more than the EFSF actually has –
in its current form at least. And plans to leverage up the Fund aren’t
going anywhere quickly. The IMF could probably afford to keep Italy
afloat for a while, but not for more than a couple of years – and that’s
before one considers the possibility of contagion, in other words Spain
falling victim to similar speculative attack.
So, in the short
term, there seems to be little sensible alternative to the European
Central Bank stepping in – not merely by silently buying loans in the
secondary market, but by doing quantitative easing in the way the Bank
of England has done. This won’t be particularly palatable to the
Germans, who resist the notion of printing money. But it is the only
conceivable way of saving the euro as we know it.

it

Your"e not gonna believe this!!!! there is a programme being shown now called Greek for a Week and Members of the Public are visited by a Greek
Financial Advisor and told what they would be earning if they lived in Greece.

A Hairdresser earning £12, 000 a year would get extra money for arduous work because the chemicals she used for Perms and Colouring are considered harmful so she would earn more money, retire at 54 with a Pension of 90% of her salary.

Pastryworkers, Germs on microphones and Trombonists are all considered "arduous."

A Widow of an Engineer can claim up to 12 Pensions.

A 36yr Old Bus Driver earning £430 per month . In Greece he would be paid extra for coming to work early and checking on the passengers tickets. He would also get £75 a year milk allowance and earn £35,000 a year extra.

100,000 Pensions are illegally being taken.

150 Doctors some of them specialists filled in Tax returns showing less than £30,000 annual income

Shipping Magnates do not pay any Tax because of the benefit they give to the community.

that"s all I saw , it was enough.

I AM WATCHING SOMETHING ELSE.
I HAVE DECEIDED TO LOOK AT THE PROGRAMME INSTEAD
DEAD CIVIL SERVANTS CAN PASS THEIR PENSION ETC ONTO THEIR RELATIVES.

SOME PROFESSION LIKE HAIRCUTTERS CAN RETIRE ON 90% OF THEIR SALARIES,LETS ALL HEAD OUT TO GREECE FOR A GOOD PENSION!

No wonder Greece is in the state it"s in. I wouldn"t be surprised if Greece is allowed to default in order to save Italy which is considered too big to fail .

THEY WERE SAYING ON CH4 NEWS THAT THE EFSF WAS ONLY JUST ABOUT ABLE TO RAISE 3 BILLION EUROS FOR IRELAND,HOW ARE THEY GOING TO RAISE THE MONEY FOR ITALY?

RAILWAY FARES ARE USUALLY NOT COLLECTED.

ITS APPEARS THAT MANY PENSIONERS ARE WORKING ON THE SIDE,CASH IN HAND.
SHADOW ECONOMY IN GREECE IS 20-25%

Badboy wrote:THEY WERE SAYING ON CH4 NEWS THAT THE EFSF WAS ONLY JUST ABOUT ABLE TO RAISE 3 BILLION EUROS FOR IRELAND,HOW ARE THEY GOING TO RAISE THE MONEY FOR ITALY?

Italy owes E1.6 TRILLION. !!!! The G20 failed to agree IMF Loans and one analyst said the ECB will HAVE to lend money, not buy Bonds. The ECB says
the Treaty doesn"t allow loans and could not finance such a huge debt anyway. Even the U.S. or China could not help , how long would it take for Italy
to get back into the Black when the World is heading toward recession.?

LET'S SEE,HOW CAN ITALY GET ITS WAY OUT
1)SET UP A TAX AVOIDANCE/BENEFIT FRAUD HOTLINE
2)ENCOURAGE THE SETTING UP OF ECOMMERCE WEBSITES

BERLUSCONI IS NOT GOING TO RESIGN.

Eurozone debt crisis: EU members line up to demand ECB intervention

Germany and Merkel under huge pressure to drop veto against European Central Bank rescue

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• David Gow in Brussels and Patrick Wintour
  
• The Guardian, Tuesday 8 November 2011
• Article history
Forcing the ECB to provide bailout funds will ring alarm bells in Germany, with memories of the hyper-inflation of the 1920s and 1930s Photograph: Dominique Faget/AFP/Getty Images

Germany has come under heavy pressure from its EU partners to abandon its veto on a huge rescue operation by the European Central Bank to prevent the eurozone from falling apart and the world from sliding into renewed recession.
With the eurozone's main €440bn bailout fund in tatters, it has emerged that the ECB has been forced to intervene at an increased rate by buying up more and more distressed government bonds. Figures released on Monday showed it bought €9.5bn last week – or more than twice as much as a week earlier (€4bn).
The eurozone's 17 finance ministers began crisis talks in Brussels on Monday night "to stop the rot" with Italian bond yields – the country's cost of borrowing – hitting a new peak of 6.69%, threatening to crash the euro system, and political leaders from virtually all countries outside Germany lining up to demand full-scale ECB intervention. Bond yields of 7% would be seen by the markets as a trigger for the IMF to intervene as it did when Irish borrowing costs reached a similar level last year.
David Cameron, in the Commons, issued his starkest warning yet that the eurozone will collapse unless the ECB takes more powers to buy the bonds of countries such as Italy, where the crisis is deepening, not helped by the refusal of Silvio Berlusconi to step down as prime minister.
Telling the eurozone to sort itself out, Cameron said it was hard to understand "why some in Europe are so opposed to the ECB being more of a monetary activist".
The mood among non-Germans was summed up by one EU diplomat: "The Germans will have to be dragged kicking and screaming and it will probably come to a knife-edge before they agree to let the ECB play a bigger role." Markets have already lost faith that the euro rescue mechanism, the European Financial Stability Facility, due to see its firepower lifted to €1tn, can even remotely do the job. On Monday it was barely able to attract investors to a €3bn bond for Ireland, signalling that it will fail to raise funds in future.
Irish finance minister Michael Noonan publicly voiced doubts about the EFSF's future, saying the ECB must continue to play a parallel role "until the EFSF firewall has been put in place, whenever that may be" and even then "the ECB must carry out a parallel function until it is quite clear that the new firewall is doing its job".
So far the German chancellor, Angela Merkel, and her finance minister, Wolfgang Schäuble, have heeded warnings from the Bundesbank president, Jens Weidmann, that a prolonged bond-buying spree by the ECB would jeopardise its independence and stoke up inflation. Prompted by him, they killed off attempts led by the US at last week's G20 summit in Cannes to raid the Bundesbank and other central bank gold reserves to boost the IMF's firepower so it could effectively boost the EFSF.
The Bundesbank alone has reserves of €180bn, of which €130bn are in gold – prompting headlines such as "A grab for our gold". One abortive plan at Cannes was to convert some of these into extra "special drawing rights" at the IMF to boost German guarantees for the EFSF over the heads of the Bundestag.
But there is still hope in London and other European capitals that the Bundesbank and Berlin will relent under sheer market and political pressure, with the IMF clearly unable to persuade the oil- and gas-rich Russians to contribute more to the EFSF as Christine Lagarde, its managing director, discovered in Moscow on Monday. She now heads for China and Japan.
Cameron told MPs: "It is for the eurozone and the ECB to support the euro. Global action cannot be a substitute for concrete action by the eurozone.
"The G20 withheld specific IMF commitments at this stage precisely because we wanted to see more concrete action from eurozone countries to make their firewall credible and to stand behind their currency. In short, the world sent a clear message to the eurozone at this summit: Sort yourselves out and then we will help. Not the other way round.
"The rest of the world can play a supporting role but, in the end, this work has to be done by the eurozone countries themselves. No one else can do it for them."
He also urged Greece, which was on Monday night still waiting to see who would head its new national government, to make up its mind about the austerity programme or else the rest of the world cannot move on.
On Monday the 17 finance ministers failed to give any clear guidance on their plans for the EFSF, including its eventual firepower, as Klaus Regling, the fund's chief executive, said he and his team would have to go back to "market participants" to help decide. After issuing a paper about how to enhance the EFSF's firepower, Regling blamed the Greek political crisis for yesterday's difficulties in placing the €3bn bond and insisted that the problems had been exaggerated because German bonds are trading at their lowest yield for almost 50 years.
He also blamed lack of clarity about the fund's eventual firepower, disclosing merely that the new investment fund designed to attract overseas investors would now be known as a "co-investment fund" rather than a special purpose investment vehicle (SPIV).
Showing every sign of stress, Jean-Claude Juncker, eurogroup chairman, and Olli Rehn, EU economic and monetary affairs commissioner, made plain that the only decision taken was to demand a letter from the new national salvation government in Greece – and to scrap plans for another emergency session on 17 November.
The letter, Rehn indicated, would have to spell out that all members of the new government, particularly the two main parties, pledged to implement in full the stiffer austerity programme associated with the next €130bn bailout for the near-bankrupt country. Once that was received, he added, Greece would probably get the €8bn bailout instalment it needs to avoid bankruptcy next month.

Berlesconi is a very wealthy man, owns a T.V. Station huge block of Apartments among other assets. He is currently being accused of fraud and
corruption and having sex with an under age girl. It is expected that he will dig his heels in about resigning unless immunity is given for these charges.

Societe Generale misses earnings , profit falls by 31% and the Bank won"t be paying a dividend for 2011. Sarcozy is probably hoping the ratings agencies
do not take away its AAA rating.

The EFSF has come out with a new plan. It will partially guarantee Funds, operate a co-investment to buy Banks and aim to have teverything in place by
December.

Vodaphone taking half a billion loss in Greece.

European Banks cutting Sovereign Bond Holdings threaten to worsen crisis.

Japan bought 10% of Euro rescue Bonds to avoid crisis.

Greece moves closer to Unity Government as Papandreou meets with Samares, leader of the opposition party.

There is an Election in Spain on 20th November and some of the Candidates held a televised debate, no studio audience.

One Candidate complained that the austerity measures weres stifling growth which is affecting everything. He said Spain has become anaemic and you don"t cure anaemia by more austerity measures, you use vitamins.

One in two under 25yr olds is out of work in Spain with no job prospects.

One Italian Minister has said Italy"s debt is manageable and the Country shouldn"t be browbeaten to use stringent austerity measures but should be able
to manage their economy on their own.

The emergence of the Frankfurt Group has turned back the democratic clock

Electorates are being bypassed as increasing austerity pushes Europe's weaker countries into an economic death spiral

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Protesters in front the headquarters of the European Central Bank in Frankfurt. Photograph: Ralph Orlowski/Reuters

Financial markets rallied last week when the Greek prime minister, George Papandreou, announced he was dropping plans for a referendum on the terms of his country's bailout. Bond dealers liked the idea that the government in Athens could soon be headed by Lucas Papademos, a former vice-president of the European Central Bank. Angela Merkel and Nicolas Sarkozy think Papademos is the sort of hard-line technocrat with whom they can do business.
Silvio Berlusconi's long-predicted departure as Italy's prime minister will no doubt be greeted in the same way, particularly if he is replaced by a government of national unity headed by another technocrat, Mario Monti. A former Brussels commissioner, he is seen as someone who could be relied upon to push through the European Union's austerity programme during the next 12 months, watched over by Christine Lagarde's team of officials from the International Monetary Fund.
From the perspective of the financial markets, this makes perfect sense. Papandreou could no longer be relied upon, and his decision to hold a plebiscite threw Europe into turmoil last week, blighting the Cannes G20 summit. He had to go.
In Italy, Berlusconi is seen as entirely the wrong man to cope with his country's deepening crisis; bond yields are above 6.5%, a level that eventually resulted in bailouts for Greece, Ireland and Portugal. He, too, has to go in the interests not just of financial and political stability but to prevent the eurozone from imploding.
The European Union has always had problems with democracy, a messy process that can interfere with the grand designs of people at the top who know best. When Ireland voted no to the Nice Treaty, it was told to come up with the right result in a second ballot. The European Central Bank wields immense power, but nobody knows how the unelected members of its governing council vote because no minutes of meetings are published. That said, the latest phase of Europe's sovereign debt crisis has exposed the quite flagrant contempt for voters, the people who are going to bear the full weight of the austerity programmes being cooked up by the political elites.
Here's how things work. The real decisions in Europe are now taken by the Frankfurt Group, an unelected cabal made of up eight people: Lagarde; Merkel; Sarkozy; Mario Draghi, the new president of the ECB; José Manuel Barroso, the president of the European Commission; Jean-Claude Juncker, chairman of the Eurogroup; Herman van Rompuy, the president of the European Council; and Olli Rehn, Europe's economic and monetary affairs commissioner.
This group, which is accountable to no one, calls the shots in Europe. The cabal decides whether Greece should be allowed to hold a referendum and if and when Athens should get the next tranche of its bailout cash. What matters to this group is what the financial markets think not what voters might want. To the extent that governments had any power, it has been removed and placed in the hands of the European Commission, the European Central Bank and the IMF. It is as if the democratic clock has been turned back to the days when France was ruled by the Bourbons.
In the circumstances, it is hardly surprising that electorates have resorted to general strikes and street protests to have their say. Governments come and go but the policies remain the same, creating a glaring democratic deficit. This would be deeply troubling even if it could be shown that the Frankfurt Group's economic remedies were working, which they are not. Instead, the insistence on ever more austerity is pushing Europe's weaker countries into an economic death spiral while their voters are being bypassed. That is a dangerous mixture.



Posted by Larry Elliott Tuesday 8 November 2011 15.22 GMTguardian.co.ukArticle history

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• 4 Nov 2011
  G20 summit was a lesson in disunity – and the markets passed judgment
  
• 5 Nov 2011
  Global recession grows closer as G20 summit fails
  
• 6 Nov 2011
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• 12 Oct 2011
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