Résumé en français : la situation préoccupante de la Grèce face aux marchés financiers va peut être obliger les politiques à tenter d'imposer de nouvelles règles.


European governments early this morning approved a €500bn deal to shore up troubled eurozone economies. But is it enough to prevent further crises?

Of all the European leaders it has been Angela Merkel, caught between furious German taxpayers and Greeks pleading for the rescue of their economy , who has been most outspoken. Last week she said, ”Politics have to reassert primacy over financial markets…Speculators are our opponents.”

She has been very outspoken in suggesting that politicians are now fighting notoriously unstable markets for control of the world economy. All this is unfolding as Portugal and Spain, the next countries liable to default, look to the terrible example of Greece and the euro plunges against the dollar.

President Sarkozy has issued a joint statement with the Germans saying that the large swings in the yields of sovereign bonds in countries such as Greece, Spain and Portugal were, "not aligned with the development of fundamentals.” Essentially a complaint as old as capitalism itself that panic, irrationality and speculation were driving market reactions and not a logical of the potential yields of assets. The markets are reacting to appearances and not fundamental facts.

Despite the €110 bn rescue package for Greece yields on short-term bonds have, once again, dramatically increased. What should happen next with Greece? What should happen if Portugal was to default? More loans? Should "healthy" European countries, through the European Central Bank, intervene and buy up government bonds ?

Several countries, including Australia and Japan, believe the current EU package to rescue Greece, of a three-year duration, is simply not enough. Kevin Rudd, Australian Prime Minister, is blunt. “Markets have judged these arrangements to be inadequate.” Rudd is worried, because any implosion cannot be contained. It will reach beyond Europe’s borders and contaminate every country with banks that contain sovereign debt. After the collapse of Lehman Brothers in 2008 banks went to work recapitalising their balance sheets, they did this with deposits of government bonds, If the ratings of the Greek, Portuguese and Spanish government debt continue to fall this will impact not only on the governments themselves, but on the banks that hold that debt in deposits.

Assessed by companies such as Standard and Poor, the AAA credit ratings that allow the major European economies to borrow relatively cheaply and easily, have become a major tool in striking fear in governments that cannot afford to lose their privileged status. In the context of this, Sarkozy/Merkel are currently reviewing the rating process for sovereign ( government ) debts. How should a country be rated? Who should do it? And how should the results be published? Seeing that even the slightest indication that a favourable rating might be taken away can now instigate a flurry of aggressive speculation against a country and make the internal situation in that country much much worse by undermining its credibility and stability.

So, what’s the solution? Should governments accept to run the economical, social and political risk of irrational, fluctuating and highly-sensitive markets or should governments accept the responsibility to restrain and shape markets according to sovereign, or national, needs?

It is may be time for politicians, acting through the State, to restore rationality in a situation which seems to be consistently giving way to panic and speculation? Measures they have lacked the courage or conviction to do for many years.