May 112015
 May 11, 2015  Posted by at 10:58 am Finance Tagged with: , , , , , , , , , , ,  2 Responses »

Unknown Wharf, Federal artillery, and schooners, City Point, Virginia 1865

ECB’s Nowotny: Greece Much More Political Than Economic Question (Reuters)
Greece’s ‘War Cabinet’ Prepares To Battle EU Creditors As Anger Mounts (AEP)
IMF and ECB Loom Large Over Greece’s Debt Talks (NY Times)
How The ECB Became The Real Villain Of Greece’s Debt Drama (Telegraph)
No Solution In Sight For Greek Crisis – Tsipras’ Impossible Dilemma (Guardian)
EU’s Unraveling Plans For Greek Debt Risks Split Among Creditors (Bloomberg)
IMF Works With Greece’s Neighbors to Contain Default Risks (WSJ)
It’s Not Just Greece, China’s Retreat Threatens European Bonds (Bloomberg)
Farewell To The United Kingdom- Let It Bleed (Tariq Ali)
Cameron Must Accept SNP’s Anti-Austerity Mandate, Or The UK Is Finished (IBT)
Sturgeon Says SNP Is Real Opposition in Commons Amid Labour Woes (Bloomberg)
Anti-Austerity Group Plans Major Protest Outside Bank Of England (Guardian)
The Economist’s Racist Headline Must be Retracted Immediately (Bill Black)
Goldilocks Unemployment: A Disgusting Bowl Of Porridge (Mark St.Cyr)
Italy Must Become A Civilised Country With A Citizen’s Income (Grillo)
The Killing of Osama bin Laden (Seymour Hersh)
Inequality: How Rich Countries Can Make A Difference (Ken Rogoff)
EU Plans Refugee Quotas Forcing States To ‘Share’ Burden (Guardian)

It was always just politics.

ECB’s Nowotny: Greece More Political Than Economic Question (Reuters)

Any solution to Greece’s financial woes is much more of a political than an economic question, European Central Bank policymaker Ewald Nowotny said on Monday, as eurozone finance ministers meet to continue Greek debt talks. Top officials have voiced little optimism about a breakthrough at the meeting. Nowotny declined to suggest a way out of the impasse, reiterating that the ECB’s role was to ensure price and financial stability. Referring to Monday’s Eurogroup meeting he said: “It would be premature to give any details.”

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“We have agreed on a tougher strategy to stop making compromises. We were unified and we have a spring our step once again..”

Greece’s ‘War Cabinet’ Prepares To Battle EU Creditors As Anger Mounts (AEP)

Greece’s “war cabinet” has resolved to defy the European creditor powers after a nine-hour meeting on Sunday, ensuring a crescendo of brinkmanship as the increasingly bitter fight comes to a head this month. Premier Alexis Tsipras and the leading figures of his Syriza movement agreed to defend their “red lines” on pensions and collective bargaining and prepare for battle whatever the consequences, deeming the olive-branch policy of recent weeks to have reached a dead end. “We have agreed on a tougher strategy to stop making compromises. We were unified and we have a spring our step once again,” said one participant. The Syriza government knows that this an extremely high-risk strategy. The Greek treasury is already empty and emergency funds seized from local authorities and state entities will soon run out.

Greece’s mayors warned over the weekend that they would not release any more funds to the central government. The Greek finance ministry must pay the International Monetary Fund €750m (£544m) on Tuesday, the first of an escalating set of deadlines running into August. “We have enough money to pay the IMF this week but not enough to get through to the end of the month. We all know that,” said one minister, speaking to The Telegraph immediately after the emotional conclave. The war council came a day before Greece’s three-headed team – deputy premier Giannis Dragasakis, finance minister Yanis Varoufakis and deputy foreign minister Euclid Tsakalotos – are due to go to Brussels for a crucial meeting with Eurogroup ministers Time is running out for a deal opening the way for the disbursement of €7.2bn under an interim agreement, due to expire in June.

It is even harder to see how the two sides can narrow their enormous differences on a new bail-out programme, which must be intricately negotiated and then approved by the parliaments of the creditor states. German finance minister Wolfgang Schauble said over the weekend that Greece risked spinning into default unless there was a breakthrough soon. “Such processes also have irrational elements. Experiences elsewhere in the world have shown that a country can suddenly slide into insolvency,” he told the Frankfurter Allgemeine.
Greek officials retort that this is a conceptual misunderstanding by the German and North European authorities. Syriza officials say they may trigger the biggest sovereign default deliberately if pushed too far, concluding that it is a better outcome than national humiliation and the betrayal of their electoral vows to the Greek people.

“If it comes to the crunch, Greece must default and go its way,” said Costas Lapavitzas, a Syriza MP and member of the party’s standing committee. “There is no point raiding pension funds to buy time. We just exhaust ourselves for no purpose.” “We went up and down Greece in the elections urging the voters to throw out the old government. The question now is whether we mean what we say, and whether we have the courage of our convictions.”

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“At some point, you have to give up this orthodoxy of saying, ‘This is the right way of doing things.’ This is an unusual case.”

IMF and ECB Loom Large Over Greece’s Debt Talks (NY Times)

Greek leaders have fought fiercely in recent months with politicians from other European countries over relief on Greece’s vast debt load. Yet the power to decide the fate of Greece lies not just in the hands of these national governments, but also with unelected officials at two powerful institutions: the ECB and the IMF. Each is a creditor to Greece, and each is expecting the country to repay it billions of dollars of debt in the coming weeks. The influence of the ECB and the IMF will be felt behind the scenes on Monday, when finance ministers from Greece and other European nations meet in their latest effort to break an impasse that is paralyzing the Greek economy and frightening global markets. Greece is expected to repay €750 million to the monetary fund on Tuesday as scheduled.

For the rest of the year, however, its debt repayments to the fund and the central bank total nearly €12 billion. The politicians at the meeting are racing against the clock to forge a deal that would give Greece enough money to repay both this summer. In theory, both institutions could greatly ease the situation by agreeing to delay repayment, or even forgiving some of their Greek debt. But they see themselves as a special class of creditors — so-called lenders of last resort — that should not write off the money they lend. Still, some sovereign debt specialists say that there is a case for the monetary fund to take a hit on its Greek loans. The institution, they assert, backed the policies that deflated Greece’s economy, making it harder for Greece to service its debt.

“There is no question in my mind that the I.M.F. needs to be part of the debt forgiveness,” said Ashoka Mody, a visiting professor at Princeton and formerly a senior official at the fund. “At some point, you have to give up this orthodoxy of saying, ‘This is the right way of doing things.’ This is an unusual case.” Debt forgiveness from the central bank has even broader support from outside investors and economists because the bank avoided taking a loss on €27 billion worth of Greek bonds in its portfolio while private sector investors lost more than half of their money in the 2012 Greek debt restructuring. Still, there has been no sign that either institution is considering yielding on its payment schedule.

If there are no concrete signs of progress in the talks Monday, a majority of the central bank’s governing council would be in favor of placing additional restrictions on lending to Greek banks as early as this week, people briefed on the council’s discussions said. “Their interest is to get their money back,” said Zsolt Darvas, a senior fellow at Bruegel, a research organization in Brussels. Greek officials, meanwhile, have contemplated steps that would test the institutions’ hard-line stance. Discussions in the Greek government have included assessing the pros and cons of not paying the central bank and the monetary fund. In such a case, which was described as a last-ditch option and not a plan for action, Greece would keep paying debts owed to private sector bondholders and other European governments.

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“In their attempt to respect their duties, the ECB’s policymakers have made themselves political..”

How The ECB Became The Real Villain Of Greece’s Debt Drama (Telegraph)

When a rogue protester scaled the platform occupied by European Central Bank president Mario Draghi at his monthly press conference in April, the usually unruffled Italian could be forgiven for being paralysed by fear. Confronted with female activist shouting “end the ECB dictatorship”, Mr Draghi was showered with pamphlets bearing a list of inchoate threats, accusing the central bank of “autocratic hegemony” and Mr Draghi of being an evil “master of the universe”. As she was swiftly whisked away by ECB henchman, the Twittersphere was soon abuzz with rumours of the identity and possible motivation behind Mr Draghi’s “confetti-bomber.” As it turned out, 21-year old German Josephine Witt, was not a disgruntled Greek citizen demanding answers from the ECB chief.

But the feminist agitator was a stark reminder that technocratic central bankers are not immune from public anger over eurozone economic policy. In the last three months, the Frankfurt-based ECB has become the target of vociferous criticism for its handling of the Greek crisis. Weeks before the confetti attack, Mr Draghi was heckled by a Greek journalist at a press conference in Nicosia. Before that, he was the subject of a tirade from a Greek MEP during an address at the European Parliament. On both occasions, the Italian was shouted down as he was forced to defend his institution’s role in Greece’s debt drama. “In their attempt to respect their duties, the ECB’s policymakers have made themselves political,” Greece’s finance minister Yanis Varoufakis told an audience of academics and economists in Paris last month.

The refrain strikes at the heart of his government’s complaints against the notionally independent ECB. As one of Greece’s three main creditors – alongside the IMF and the European Commission – the central bank is unique in wielding the power that can ultimately force the country out of the single currency. Despite not officially being party to the political negotiations over extending Greece’s bail-out, the ECB has made a number of discretionary moves since the Syriza government was elected just over 100 days ago. When he first swept into power, Prime Minister Alexis Tsipras appealed to Mr Draghi to provide some form of bridging finance to keep the country afloat as he sought to re-write the terms of Greece’s rescue programme. It soon became clear the Italian would not be playing ball. Not only has the ECB rebuffed requests for temporary financial relief, but its disciplinarian stance has led to accusations that it is acting ‘ultra vires’ – taking politically motivated action outside of its legal remit to ensure financial stability in the eurozone.

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“It’s not in anyone’s interests to have a crisis now..”

No Solution In Sight For Greek Crisis – Tsipras’ Impossible Dilemma (Guardian)

“Nothing will change this week,” said Aris Karnachoritis confidently as the waitress handed out bottles of beer and frosted glasses to him and his friends. Constantinos Neocleous, sitting beside him at a table on the beach at Vouliagmeni near Athens, nodded in agreement. “It’s not in anyone’s interests to have a crisis now,” he said. Beyond the beach lay shallow waters of radiant turquoise. Children paddled. Teenagers romped. And from nearby, where a group of young men were playing beach tennis, came the comforting “plock-plock” sound of bat on ball. The talks between Alexis Tsipras’s government and its creditors have dragged on for so long that it has become hard to believe there will ever be a decisive make-or-break juncture.

And never has that been harder to believe than now, with the arrival of summer and the entrancing distractions it brings to a country like Greece. There is a striking disconnection in Athens between the blithe lack of concern that the government evinces, and which it has successfully communicated to much of the public, and the objective seriousness of Greece’s plight. This week Greece and the eurozone face a week of fresh nail-biting uncertainty as the single currency area’s finance ministers prepare to report on progress towards an agreement with Tsipras’s government. On Tuesday Greece is due to repay €770m (£560m) to the IMF. A deal with its creditors on moves to liberalise the economy would give it access to the remaining €7.2bn from a €240bn bailout.

But it has refused to budge on two “red-line” demands – for pension cuts and looser rules on hiring and firing – and hopes of reaching an agreement in time for a meeting of the finance ministers on Monday have gradually seeped away. On Thursday Greece’s finance minister, Yanis Varoufakis, promised that the IMF would nevertheless get its money. Armageddon – a Greek default on its borrowings followed in all likelihood by exit from the eurozone – may once again have been postponed. But for how long?

Beyond the IMF deadline loom far bigger repayments the government has to make to the ECB in the summer. Yet it is already so desperately short of funds that it has ordered local authorities and public bodies to turn over their cash reserves to the central bank. “We have only the money to pay for this month,” conceded Karnachoritis, a young civil engineer, as he sipped his beer. “But that has been the situation for the past two months.” Like his companions, he thought it would take several more months to reach an agreement. “I don’t believe anything will happen before September,” he said.

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“The uneasy relationship with the Eurogroup, which wanted IMF rigor in bailout reviews but not its debt sustainability and financing criteria, is looking increasingly unsustainable..” “Just like the Greek debt.”

EU’s Unraveling Plans For Greek Debt Risks Split Among Creditors (Bloomberg)

Greece’s ballooning debt load is casting doubt over the IMF’s role in future bailouts. The IMF typically needs debt to be sustainable to provide more funds and, with the economy faltering, Greece is heading in the wrong direction. Creditors preparing for talks on Greece this week have just one positive scenario and three negative ones, the most extreme of which is that the government starts paying employees in IOUs, German newspaper Die Welt reported. The European Commission forecast last week that the country’s debt will be 174% of gross domestic product next year, 15 percentage points above the level projected in February. And even that assumes Prime Minister Alexis Tsipras reaches a deal to get previously agreed aid flowing.

The projection means that if there’s an agreement, the Greek leader is still going to hit bureaucratic and political resistance to longer-term support. While the euro area has denied debt relief to Greece and insisted Tsipras observe the terms of the existing bailout, the IMF has signaled its concern over the deterioration in the country’s finances. “The uneasy relationship with the Eurogroup, which wanted IMF rigor in bailout reviews but not its debt sustainability and financing criteria, is looking increasingly unsustainable,” said Michael Michaelides a rates strategist at Royal Bank of Scotland Plc. “Just like the Greek debt.” Asked about the implications of the Commission’s forecasts for Greece, IMF spokeswoman Angela Gaviria referred to a November 2012 statement in which Managing Director Christine Lagarde said Greece’s debt was expected to decrease to 124% of GDP by 2020.

As Greece’s chances of hitting the target recede, it makes it more difficult for the IMF to justify extending additional funds because the Washington-based lender is prohibited by its own rules from lending to countries with unsustainable debts. If the euro area concedes that the debt burden is not sustainable, that would add weight to Greece’s appeal for more debt relief, an offer that its creditors have dangled since 2012 as an incentive to make good on the terms of its bailout. Greece could win a cut in its interest payment and an extension of its repayment period if it sticks to the deal and delivers a primary budget surplus.

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How the IMF grabs more control.

IMF Works With Greece’s Neighbors to Contain Default Risks (WSJ)

The IMF is working with national authorities in southeastern Europe on contingency plans for a Greek default, a senior fund official said—a rare public admission that regulators are preparing for the potential failure to agree on continued aid for Athens. Greek banks are big players in some of its neighbors’ financial systems. In Bulgaria, subsidiaries of National Bank of Greece, Alpha Bank, Piraeus Bank and Eurobank Ergasias own around 22% of banking assets, roughly the same as Greek banks own in Macedonia. Greek banks are also active in Romania, Albania and Serbia. “We are in a dialogue with all of these countries,” said Jörg Decressin, deputy director of the IMF’s Europe department. “We are talking with them about the contingency plans they have, what measures they can take.”

As part of the discussions, the IMF has asked national supervisors to ensure that subsidiaries of Greek banks have enough assets that they can exchange for emergency financing at their own central banks—in case financing from their parent institutions is suddenly cut off—and that deposit-insurance funds are at sufficient levels, he said. Negotiations between Greece and its international creditors—the other eurozone countries and the IMF—have been advancing slowly, despite warnings from Greek officials that the government is close to running out of money. “It would be foolish for anyone in the policy world not to be worried at this stage,” Mr. Decressin said.

European officials expect no breakthroughs at a meeting of the currency union’s finance ministers on Monday. That means Greek lenders will remain under pressure, dependent on relatively expensive liquidity from the Greek central bank and at risk of bank runs in case doubts emerge over their ability to pay out deposits. Overall, the IMF believes that subsidiaries of Greek banks in southeastern Europe should be able to withstand the failure of their parent companies. “Our assessment of the Greek banks in that region is that they are fairly liquid; we have not seen major deposit outflow,” Mr. Decressin said. Because they are subsidiaries, rather than branches, the lenders have to hold their own capital buffers and can refinance themselves at national central banks. That would make it easier to split them off from their parent banks if necessary.

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Elephant, meet room.

It’s Not Just Greece, China’s Retreat Threatens European Bonds (Bloomberg)

European policy makers will be focused on Greek aid talks in Brussels on Monday. Investors may need to look further afield to fully explain the sell-off in the continent’s sovereign debt market. China’s foreign currency reserves had their biggest quarterly drop on record in the first three months of the year and the yuan is trading at the closest to fair value since 2010, according to Goldman Sachs. That means less demand for assets in dollars and euros from the world’s biggest creditor. The Chinese central bank has amassed $3.73 trillion in currency reserves over the past decade in a bid to hold down the value of the yuan and underpin the competitiveness of its exporters.

As the government in Beijing changes gear, cultivating domestic demand to sustain economic growth, it may affect European bond markets just as much as the Greek efforts to win better terms from creditors. “It’s quite clear that China’s foreign exchange reserves can’t grow like before,” said Li Jie, head of the foreign-exchange reserve research center at the Central University of Finance and Economics in Beijing. “There will be fewer and fewer funds available from China for European treasury bonds.” The People’s Bank of China said Sunday it will reduce the one-year lending rate by a quarter of a%age point to 5.1%, in a further sign of the shift in focus.

Germany’s 10-year borrowing costs almost quadrupled over the past three weeks as investors turned against negative yields and those on Italian and Spanish securities breached 2% for the first time this year on May 7. Bonds fell even as the European Central Bank pressed ahead with its €1.1 trillion program of government debt purchases. Euro-area finance ministers are meeting in Brussels on Monday to assess Greece’s plans to meet the terms of its bailout and obtain the aid it needs to stave off a default.

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View from the left.

Farewell To The United Kingdom- Let It Bleed (Tariq Ali)

In England the third party in terms of number of votes cast is UKIP. It gained votes from both Labour and Conservatives, but its 4 million votes (12.6%) obtained just a single seat in Parliament. The Greens with over a million also have a single MP. The absurdity of an electoral system that gives the Conservatives an overall majority (331 seats) with 36.9% of the votes cast, Labour (232 seats) with 30.4% reducing the other English parties to nothingness is clearly long past its sell by date. A serious campaign for a proportional system is needed. The first-past-the-post, winner-takes all system is a malignant cancer that needs to be extracted from the body politic.

What of English radicalism? It’s not a pure accident that a right-wing party like UKIP has become the third force. The effective collaboration between the major trades unions and the Labour leadership meant that building social movements to challenge privatizations and demanding public ownership for utilities, more public housing, local democracy, and the renationalization of the railways fell by the wayside. No other force was capable of organizing an extra-parliamentary base for a rejection and reversal of extreme centre policies. This is the challenge that now confronts all those who want a strategic break with the Thatcher-Blair consensus in England. Not an easy task. Possibilities, however, exist but they require forces on the ground to help create a new movement that speaks for the oppressed and exploited.

The Labour leadership contest is a no-hoper for the Left. The names being touted are worse than useless. What would help a great deal is if early in the new parliament, the handful of left MPs effectively broke from Labour and established a new, radical caucus to link up with forces outside. I doubt that they will and here the Bennite tradition is, to put it at its mildest, unhelpful. Its attachment to Labour at a time when the party broke with its own social-democratic past and opted for a full-blown capitalism was wrong-headed and led to an impasse.

We need an alliance of all radical forces to build an anti-capitalist movement in England. A movement that is both new but also prepared to search the past for help: the Grand Remonstrance of the 17th century, the Chartist rebellions of the 19th century, the more recent developments in South America, Greece and Spain also offer a way forward. As for the Labour Party, I think we should let it bleed. Here the Scottish route offers hope.

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More or less what I was saying yesterday.

Cameron Must Accept SNP’s Anti-Austerity Mandate, Or The UK Is Finished (IBT)

The electoral divergence between Scotland and England is, of course, even more extreme this time. The Tory government has just one seat in Scotland, compared to the 10 Thatcher was left with after the 1987 rout. The other seats are not dominated by a Labour party content to bide its time until it can build a UK-wide majority, but by a pro-independence party that will not accept the legitimacy of Tory rule unless the “vow” which secured the No vote in last year’s referendum is implemented in full. That perhaps wouldn’t pose such a problem for Cameron if the policies that he has received a clear English mandate to implement weren’t so utterly irreconcilable with the policies that the SNP have won an even clearer (in fact much, much clearer) Scottish mandate for.

In Scotland, the democratic will is for an end for austerity, in England it is for swingeing cuts. The ‘One Nation’ rule that Cameron rather oddly promises is almost a contradiction in terms when the nation in question has just spoken with two distinct voices. If London rule is to be maintained, the only way of respecting the Scottish people’s wishes is to exempt them from the austerity imposed on everyone else. That is surely inconceivable. Ironically, a compromise to cover the whole UK probably could have been reached if a Labour minority government had taken office with the support of the SNP.

Cameron chose to whip up irrational fear about that possibility in England, and now he must live with the consequences. In the light of Thursday’s result, the circle can only be squared by constitutional change. Any previous distinction between Nicola Sturgeon’s demands for an end to austerity and for more powers to be transferred to the Scottish Parliament has suddenly vanished, because under a Tory majority government the first is literally impossible without the second.

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But can she speak for all Britons?

Sturgeon Says SNP Is Real Opposition in Commons Amid Labour Woes (Bloomberg)

Scottish First Minister Nicola Sturgeon staked a claim for her nationalists to be seen as the effective opposition to David Cameron’s Tories in the U.K. Parliament as Labour seeks a new leader in the wake of its election defeat. “Given that Labour are entering a period of introspection, questioning their very purpose in life, the SNP is going to be the principal opposition to the Conservatives,” Sturgeon said on BBC Television’s “Andrew Marr Show” Sunday. “There are people in England, Wales and Northern Ireland who will be as disappointed as people in Scotland that we’re looking at a majority Conservative government. We can be a voice for them.”

Sturgeon’s Scottish National Party took 50% of the vote and 56 of the 59 House of Commons seats in Scotland in Thursday’s election, in which the Tories unexpectedly won a parliamentary majority. Labour leader Ed Miliband resigned after the party’s defeat, which saw it lose 40 seats in Scotland. SNP support surged after the failure to achieve a majority for independence from the U.K. in September’s referendum. Cameron “cannot act now as if it’s business as usual in Scotland” and will have to offer the semi-autonomous Scottish government and the Parliament in Edinburgh more additional powers than have already been promised in the wake of the referendum, Sturgeon said.

The prime minister said in a victory speech on Friday that he intends to implement his devolution plans for Scotland as quickly as possible, “to create the strongest devolved government anywhere in the world with important powers over taxation.” “Scotland voted overwhelmingly for change and I think that has to be heeded,” she said, repeating calls for “priority devolution of powers over business taxes, employment, the minimum wage, welfare.” Another independence referendum is not “on the immediate horizon,” Sturgeon said. “What we have to do now is make sure we get the best deal for Scotland within the Westminster system.”

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The Guardian conveniently focuses on ‘disorder’.

Anti-Austerity Group Plans Major Protest Outside Bank Of England (Guardian)

The anti-austerity group behind a protest that escalated into violent clashes with riot police outside Downing Street on Saturday is planning another demonstration outside the Bank of England next month. The People’s Assembly has told campaigners to assemble “right on the doorstep of the very people who created the crisis in the first place” in central London on 20 June, sparking what could become a summer of anti-austerity protests across the UK. Hundreds of people attended the group’s impromptu demonstration outside Downing Street on Saturday after David Cameron was returned to No 10 with a Conservative majority. The protest quickly turned ugly, with green smoke bombs and tomato ketchup thrown at riot police officers in clashes that led to 15 arrests for violent disorder or assaulting police.[..]

In a Facebook post announcing its 20 June march, the People’s Assembly said it was arranging travel for supporters from across the country to the Bank of England for a demonstration that would be “bigger and bolder than ever we have done before”. More than 32,000 people on Facebook have said they will attend the rally, which would draw significant resources from both City of London police and the Metropolitan police if it is on the same scale as a 50,000-strong protest organised by the group last summer. The group says in its invitation to supporters: “With the Tories going it alone in government we know exactly what to expect. More nasty, destructive cuts to the things ordinary people care about – the NHS, the welfare state, education and public services.

“We’ll be assembling the demonstration in the heart of the City of London right on the doorstep of the very people who created the crisis in the first place, the banks and their friends in Westminster. We demand that the bankers and elite should pay for the crisis and not the vast majority who had nothing to do with it. “Now is the time to get organizing, to mobilize our communities, to prepare transport and spread the word. We need to do all that we can to make this demonstration bigger and bolder than ever we have done before.”

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English media exposed as bigots.

The Economist’s Racist Headline Must be Retracted Immediately (Bill Black)

It took exactly one day for the Tory election victory in the UK to produce the confidence among the Conservatives only remaining media organ with even a semblance of journalistic professionalism to reveal its true racism against the Scots. The Economist felt empowered to headline its article about the other electoral triumph, by the Scots, as “Ajockalypse now.” Wow, that is such a clever title. One can only imagine the back-slapping among the staff in the magazine’s halls at the ability to go full-racist given the election results. (The English have historically treated the Celts as separate “races.”) Here is a translation of the headline for a non-UK audience. “Jock” is defined in the Urban Dictionary (with a helpful example of usage after the definition):

A term used by English people to generally describe Scottish people in a derogatory fashion (was once a common male nickname within Scotland). It is now considered to verge on racism when used by a non-Scot. The Scottish equivalent for the Irish “Paddy” or “Bog-trotter”. “Those bloody Jocks are at it again with their whinging over the Barnett Formula and North Sea oil revenues.” Another major dictionary’s definition is similar. British Informal: a Scottish soldier or a soldier in a Scottish regiment. Usually Offensive. a term used to refer to or address a Scot”. The Oxford Dictionary agrees. “noun, informal , chiefly derogatory A Scotsman (often as a form of address).”

So the “cleverness” is that the once-respected magazine managed to use an ethnic slur and add an ending to it suggesting that the rise of the Scots as a political power in the House of Commons represents an “apocalypse” – a catastrophe of biblical proportions. Such fun! Let’s see what analogous fun we can have using slurs about other ethnic groups that the English have long despised. Jews, blacks, Catholics, Muslims, and Asians all have such endearing slurs that rhyme with so many words and allow “clever” word play in headlines. Oh, except if the Economist chose any of those groups it would result within the day in a retraction and apology. Celts, however, are fair game and the Scots are the Celtic target of choice today for the Tories. Indeed, Prime Minister Cameron’s paramount election strategy was demonizing the Scots as a “threat” to the English – a fact that the Economist chose to omit in favor of the myth that the Scots were on the “warpath” against the English.

The English papers were littered with other forms of “clever” ethnic slurs in the run-up to the election. “Sweaty sock” rhymes with “jock” and insults Scots as “sweaty” because they are more likely to be industrial laborers. The deliberately doubly offensive “Jockestan” – insulting the Scots and Muslims simultaneously – is a favorite of one of the UK’s prominent “journalists.” A Tory media troll whose claim to “fame” was not being chosen by the Donald as his “Apprentice” uses these slurs. She attacks the SNP leader as a “terrorist” and denounces her because she has red hair. Yes, red hair. Calling someone with red hair “ginger” is a common ad hominem insult in the UK. [..] I confess to a wicked wish that the Donald had picked her as his “Apprentice” – they richly deserve each other.

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“We now have the lowest participation rate since 1977 [..] I will tell you this: one of the words never bandied about during that period when it came to describe any jobs or employment report was “Goldilocks.”

Goldilocks Unemployment: A Disgusting Bowl Of Porridge (Mark St.Cyr)

It’s no wonder we find ourselves in this collective business environment of malaise and atrophy when people who are supposed to be informed, or anything else relating to business, use terms to describe the most recent jobs report as a “Goldilocks” print: i.e., “Not too bad – Not too good.” This term was the moniker de jure of Friday’s cadre of financial media economists, analysts, and next in rotation fund manager. Nothing more than cheerleaders to stagflation is what they’ve all proven themselves to be in my opinion than anything else. The actual print was that the economy created 223K new jobs vs expectations of 228K. Where the overall jobless rate now stands at 5.4 vs 5.5. The kicker? Not in the labor force: 93,194,000 up from 93,175,000. Let that last number sink in a moment.

We currently have over 93 Million able-bodied people without jobs – and growing. This is why it’s near incomprehensible, as well as outright disgusting to me that such a dismal showing in both the headline number as well as the onerous implications of such a downward revision to the month prior, coupled with the outright fallacy of suggesting the rate of unemployment has moved closer still to statistical “full employment” came with near giddiness and if not outright back slapping. i.e., “This is a Goldilocks print. Not too hot – not too cold. With a report like this – The Federal Reserve won’t dare raise rates and might actually have to contemplate instituting another round of QE if not outright QE4ever!” And yes; that was the reaction paraphrased across the financial media outlets. Again, personally – I found it all repulsive.

We now have the lowest participation rate since 1977 when Jimmy Carter was president. Although I was young during that period, I was around and working. (and when I wasn’t working, I was out looking daily) I will tell you this: one of the words never bandied about during that period when it came to describe any jobs or employment report was “Goldilocks.” As a matter of fact it was during that period of time the term “stagflation” came into prominence. The difference? It was used to describe an abysmal economy while hoping at some point the winds would change and we could regain our bearings to move out from under such stifling economic conditions. Today?

As these conditions have once again reared their ugly head the difference is today: these conditions are celebrated by the so-called “smart crowd” as reason to JBTFD! (just buy the dip) For this malaise sends the “right” signals to the Federal Reserve they should dare not raise interest rates off the zero bound anytime soon, and instead prolong this economic atrophy with the possible infusion of yet another round of QE. After all with economic malaise like this – NASDAQ™ 10K here we come!

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All EU countries except Italy, Greece and Hungary have one.

Italy Must Become A Civilised Country With A Citizen’s Income (Grillo)

“There are those that have said that it cannot be done, that the money’s not there, that it’s a gift to lazy people. And yet it’s enough to go round all the European capital cities to see that that’s not true. The Citizen’s Income exists in 25 of the 28 European countries (everywhere except in Italy, Greece and Hungary), even in countries with a GDP that’s just a tenth of what we have in Italy. In Spain the citizen’s income came into existence in 2008, right in the middle of the economic crisis, and it provides €532 a month to anyone with an income less than €5,000 a year. In the Netherlands people get €1,400 a month. In Ireland and Romania there’s no time limit and it keeps going until the person finds a job. In Estonia the law says that the national parliament must adjust the sum each year to allow for alterations in the cost of living.

In Finland the amount is doubled for families. In Lithuania as well as the Citizen’s Income people get their heating costs paid back by the State. In France anyone getting the Citizen’s Income has to sign an agreement that they will cooperate with the social services. In Denmark the citizen’s income is also given to those people under the age of 30 who are living with their parents. In all these countries, anyone who is underhand or who is working without declaring it, is severely punished. In Europe, the laws differ in their content. The requirements and the duration vary from country to country, but the lowest common denominator is there and it’s called the Citizen’s Income. The economic crisis has created a sea of desperation. In Italy, with the bonds brought in by Tremonti and Monti, the world of politics saved the banks, and they gave the financiers shields to protect them against the weapons that they themselves had created. The citizens were abandoned and left to their own devices.

In Europe there’s no such thing as “exited” people because they would have the Citizen’s Income. In Europe, fathers separated from their wives are not sleeping in their cars because they would have the Citizen’s Income. In Europe there are no “bamboccioni” {adult men living off their parents} because, thanks to the Citizen’s Income, they can shop for themselves without waiting for pocket money from mother. In Europe, unemployed people are not committing suicide, because after unemployment benefit ends, they get the Citizen’s Income. Are graduates sending off thousands of CVs to get their first job? While waiting for a response, those in Europe have the Citizen’s Income.

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Great, as Hersh always is.

The Killing of Osama bin Laden (Seymour Hersh)

It’s been four years since a group of US Navy Seals assassinated Osama bin Laden in a night raid on a high-walled compound in Abbottabad, Pakistan. The killing was the high point of Obama’s first term, and a major factor in his re-election. The White House still maintains that the mission was an all-American affair, and that the senior generals of Pakistan’s army and Inter-Services Intelligence agency (ISI) were not told of the raid in advance. This is false, as are many other elements of the Obama administration’s account. The White House’s story might have been written by Lewis Carroll: would bin Laden, target of a massive international manhunt, really decide that a resort town forty miles from Islamabad would be the safest place to live and command al-Qaida’s operations? He was hiding in the open. So America said. [..]

This spring I contacted Durrani and told him in detail what I had learned about the bin Laden assault from American sources: that bin Laden had been a prisoner of the ISI at the Abbottabad compound since 2006; that Kayani and Pasha knew of the raid in advance and had made sure that the two helicopters delivering the Seals to Abbottabad could cross Pakistani airspace without triggering any alarms; that the CIA did not learn of bin Laden’s whereabouts by tracking his couriers, as the White House has claimed since May 2011, but from a former senior Pakistani intelligence officer who betrayed the secret in return for much of the $25 million reward offered by the US, and that, while Obama did order the raid and the Seal team did carry it out, many other aspects of the administration’s account were false.

‘When your version comes out – if you do it – people in Pakistan will be tremendously grateful,’ Durrani told me. ‘For a long time people have stopped trusting what comes out about bin Laden from the official mouths. There will be some negative political comment and some anger, but people like to be told the truth, and what you’ve told me is essentially what I have heard from former colleagues who have been on a fact-finding mission since this episode.’ As a former ISI head, he said, he had been told shortly after the raid by ‘people in the “strategic community” who would know’ that there had been an informant who had alerted the US to bin Laden’s presence in Abbottabad, and that after his killing the US’s betrayed promises left Kayani and Pasha exposed.

The major US source for the account that follows is a retired senior intelligence official who was knowledgeable about the initial intelligence about bin Laden’s presence in Abbottabad. He also was privy to many aspects of the Seals’ training for the raid, and to the various after-action reports. Two other US sources, who had access to corroborating information, have been longtime consultants to the Special Operations Command. I also received information from inside Pakistan about widespread dismay among the senior ISI and military leadership – echoed later by Durrani – over Obama’s decision to go public immediately with news of bin Laden’s death.

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Rogoff sounds confused here.

Inequality: How Rich Countries Can Make A Difference (Ken Rogoff)

Europe’s migration crisis exposes a fundamental flaw, if not towering hypocrisy, in the ongoing debate about economic inequality. Wouldn’t a true progressive support equal opportunity for all people on the planet, rather than just for those of us lucky enough to have been born and raised in rich countries? Many thought leaders in advanced economies advocate an entitlement mentality. But the entitlement stops at the border: though they regard greater redistribution within individual countries as an absolute imperative, people who live in emerging markets or developing countries are left out. If current concerns about inequality were cast entirely in political terms, this inward-looking focus would be understandable; after all, citizens of poor countries cannot vote in rich ones.

But the rhetoric of the inequality debate in rich countries betrays a moral certitude that conveniently ignores the billions of people elsewhere who are far worse off. One must not forget that even after a period of stagnation, the middle class in rich countries remains an upper class from a global perspective. Only about 15% of the world’s population lives in developed economies. Yet advanced countries still account for more than 40% of global consumption and resource depletion. Yes, higher taxes on the wealthy make sense as a way to alleviate inequality within a country. But that will not solve the problem of deep poverty in the developing world. Nor will it do to appeal to moral superiority to justify why someone born in the west enjoys so many advantages.

Yes, sound political and social institutions are the bedrock of sustained economic growth; indeed, they are the sine qua non of all cases of successful development. But Europe’s long history of exploitative colonialism makes it hard to guess how Asian and African institutions would have evolved in a parallel universe where Europeans came only to trade, not to conquer. Many broad policy issues are distorted when viewed through a lens that focuses only on domestic inequality and ignores global inequality. Thomas Piketty’s Marxian claim that capitalism is failing because domestic inequality is rising has it exactly backwards. When one weights all of the world’s citizens equally, things look very different. In particular, the same forces of globalization that have contributed to stagnant middle-class wages in rich countries have lifted hundreds of millions of people out of poverty elsewhere.

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The media still talk about migrants, whereas Brussels says: “The EU needs a permanent system for sharing the responsibility for large numbers of refugees and asylum seekers among member states.”

EU Plans Refugee Quotas Forcing States To ‘Share’ Burden (Guardian)

The EU’s executive body is to unveil radical new proposals on immigration, imposing migrant quotas on the 28 countries of the union under a distribution “key” system set by Brussels. The plan, which is supported by Germany and will be fiercely resisted by the new Conservative government, will be launched by the European commission on Wednesday in response to migrant boat crisis in the Mediterranean. The bold move by Brussels comes as the EU draws up plans for military attacks in Libya to try to curb the flow of people across the Mediterranean by targeting the trafficking networks. The EU’s top diplomat is to unveil an attempt on Monday to secure a UN mandate for armed action in Libya’s territorial waters.

Britain is drafting the UN security council resolution that would authorise the mission, senior officials in Brussels said. It would come under Italian command, have the participation of about 10 EU countries – including Britain, France, Spain and Italy – and could also drag in Nato, although there are no plans for the initial involvement of the alliance. While there is broad support within the EU for the military plans, the proposals for sharing the immigration burden are highly controversial and divisive. On Sunday night the Home Office said the plans were unacceptable to the UK, putting Cameron on a collision course with German chancellor Angela Merkel and other EU leaders as he begins attempts to renegotiate Britain’s relationship with Brussels ahead of a promised in/out referendum in 2017.

“The UK has a proud history of offering asylum to those who need it most, but we do not believe that a mandatory system of resettlement is the answer. We will oppose any EU commission proposals to introduce a non-voluntary quota,” a spokesman said. The policy document, obtained by the Guardian, demands new and binding rules establishing a quota system of sharing refugees among the member states. The migration agenda declares: “The EU needs a permanent system for sharing the responsibility for large numbers of refugees and asylum seekers among member states.” By the end of the year, Brussels is to table new legislation “for a mandatory and automatically triggered relocation system to distribute those in clear need of international protection within the EU when a mass influx emerges”.

The proposals will lay bare deep divisions between national governments over immigration, with the German chancellor, Angela Merkel, backing the scheme and Britain leading the resistance. Germany and Sweden between them take almost half the asylum seekers in the EU, and Berlin is predicting that the numbers this year could almost double to about 400,000 in Germany, two-thirds of the total number in the EU last year.

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May 102015
 May 10, 2015  Posted by at 7:30 pm Finance Tagged with: , , , , , , ,  3 Responses »

Jack Delano Worker inspecting locomotive, Proviso Yard 1942

From where we’re sitting, the biggest victory in the May 7 British election will turn out to be not that of the Conservatives, but of the SNP, the Scottish nationalists. The party took 56 out of 59 Scottish seats in the United Kingdom’s Westminster parliament in London (with just half of the total votes..). Perhaps even more significant is the increased divide between Scotland and ‘the rest of the UK’.

While Cameron’s ‘unexpected’ victory marks a sharp turn to the right, the SNP’s landslide win sets the Scots on a course that’s close to a 180º opposite, even sharper turn to the left. Or in other words: while Britain voted for more of the same, Scotland voted for change. And never the twain shall ever see eye to eye again?! The left side of the spectrum was represented by the SNP, not by Labour, who Tony Blair now claims should run even more to the right – which he calls center.

Perhaps it’s nice to start off with a more philosophical angle about the future viability and/or inevitable fate of the United Kingdom. Just to set the overarching and underlying tone. Ian Jack had this for the Guardian yesterday:

Did The End Of The British Empire Make The Death Of The Union Inevitable?

.. what some of us were in Denmark to consider is the now almost-conventional wisdom about British identity: that it rose and fell with the empire, and with the empire’s going the United Kingdom will almost inevitably break up. Stuart Ward, professor of global and imperial history at Copenhagen University, reminded us of this theory’s several advocates, from Tom Nairn, writing presciently in 1977, to Linda Colley in her book Britons, published in 1992.

David Marquand took the idea to the extreme when he announced in 1995 that shorn of empire, Britain had “no meaning” and it was therefore impossible “for Britain as such to be post-imperial”. In a what-goes-up-must-come-down way, it looks a plausible argument. The logic is, as Ward said, that if you can demonstrate that the empire forged an idea of Britain, then Britain’s vanishing two centuries later “is merely a question of the laws of physics – remove the load-bearing pillar, and the structure falls”.

Is Britain destined to fall to pieces? Are all empires? How long can the center hold?

There are more interesting angles besides these, not least of which is the similarities between Greece vs Eurozone and Scotland vs United Kingdom. The keyword in this is ‘austerity’. The Greek people voted en masse to end it, and so did the Scots. Here’s what SNP leader Nicola Sturgeon had to say post-election:

Nicola Sturgeon Tells Westminster: ‘Scotland Will No Longer Be Sidelined Or Ignored”

“Scotland has given the SNP a mandate on a scale unprecedented for any political party, not just in Scotland but right across the UK. “We will use that mandate to speak up for and protect the interests of Scotland. “Let us be very clear, the people of Scotland on Thursday voted for an SNP manifesto which had ending austerity as its number one priority, and that is the priority that these men and women will now take to the very heart of the Westminster agenda.” Ms Sturgeon said: “After Thursday, and as I told the Prime Minister when I spoke to him yesterday, it simply cannot be and it will not be business as usual when it comes to Westminster’s dealing with Scotland.”

Sturgeon has hinted that she aims to end austerity across the UK, not just in Scotland. That may be a bit much to ask given that her mandate is limited, but at the same time it’s hard to see how ending austerity only in some parts of a union would work out in practice. The EU certainly doesn’t seem eager to grant Greece an austerity-free status, and how Cameron would tackle this mandate issue is unclear. Can he abandon austerity in Scotland and continue it in the rest of the UK? And if he can’t do it in Scotland, then how can he in Wales?

Cameron thinks he’s riding a major victory, and he will now be called upon to deliver on his election promises, which just so happen to include a deepening and acceleration of austerity measures. At a time when we can see even such sworn antagonists as Steve Keen and Paul Krugman agree on the failure of austerity as a financial/fiscal policy measure, David Cameron insists on inflicting more of it on Britain in the exact same way that the Troika insists on more of the same for Greece. And he’s not kidding.

Here are two British pieces on the topic; first the Mirror:

100 Days Of Tory Cuts Carnage As George Osborne Plans To Fast-Track £12 Billion In Savings

George Osborne is preparing to drastically speed up the pace of £12 billion in brutal spending cuts. Before the election, Tories feared proposals to slash cash from the welfare bill would have to be watered down under any coalition deal. But now the party has a majority, the Chancellor plans to race ahead with his austerity cuts to meet his pledge of eliminating the deficit by 2018. Senior Tories revealed how ministers would try to push through the majority of the welfare cuts within two years instead of the original three-year timescale.

But Prime Minister David Cameron hopes to kick it off with a 100-day policy blitz. One senior party source admitted: “When it comes to cuts, we want the pain to be out of the way long before the next general election. Without the restraint of the Lib Dems, it means we can go further and faster when it comes to controlling the welfare bill.” The new Conservative Government is due to present its programme of legislation to Parliament through the Queen’s Speech on May 27. But officials are already drawing up worrying plans to squeeze a host of benefits.

Ministers are looking at means testing unemployment benefits like Jobseeker’s Allowance, according to a document leaked earlier this year. Other proposals to slash the £125 billion welfare bill include limiting Child Benefit payments to the first two children and taxing Disability Living Allowance and Personal Independence Payments. The Tories also want to reduce the maximum any household can receive in benefits from the current £26,000 a year to £23,000. Other cuts include a £3.8 billion raid on tax credits, which are relied on by millions of families on low wages.

The number of people who get Carer’s Allowance could also fall by 40%. Such moves are likely to pile the pressure on food banks and charities as the cost of living crisis deepens. Senior Labour MP John Mann warned: “People don’t realise what’s going to hit them. The entire benefits system is going to crumble and almost everyone will lose out apart from private landlords who will remain untouched. It will be a return to the Victorian age.” “Everyone will have to stand on their own two feet, even people with no legs.”

And second, this is from Here Is The City:

Tories Weigh Up Options For £12 Billion Welfare Cuts

Either the poorest in society or the “hard-working people” courted by the Conservatives face being targeted under the party’s commitment to £12bn of welfare cuts, experts have said. One way of achieving the £12bn goal could be by reducing the £38bn cost of out-of-work payments to working-age families, for example by cutting entitlements to a third of the recipients, according to John Hills at the London School of Economics.

“But that would mean hitting lone parents and disabled people and create pressure on food banks and hardship on a scale that would be hard to imagine,” Hills said. “Alternatively you could take it from hard-working families who rely on housing benefit and tax credits. That’s a lot of pain from a large number of people who have just voted for you.”

[..] To justify the cuts, the Tories are likely to employ a narrative of skivers v strivers, suggesting a clear division between a large, permanently welfare-dependent group and the rest of the population who pay taxes to support it. The Tories know this is a fiction, but it is a politically useful one. Welfare is mainly about taking money from those of working age – when incomes are high on average – and giving cash and services to older people, and families with children.

A DWP paper setting out options was leaked to the BBC in March. [..] if the BBC’s document is any guide, George Osborne – reappointed as chancellor – could look to strip £1bn from carers’ allowances; means-test national insurance-backed unemployment benefits, saving another £1.3bn; and tax disability benefits to raise another £1.5bn. Then there’s limiting child benefit to two children – affecting a million families to save another £1bn.

The Institute For Fiscal Studies noted: “These may well not be the decisions that a future Conservative government would make. But it is likely they would have to make changes at least as radical as this to find £12bn a year.” Not all these changes would require a new bill, but if past form is anything to go by then the Tories would want to lay a trap for their opponents with new legislation so as to paint anyone who votes against it – such as the anti-austerity Scottish Nationalists – as pro-welfare parties prepared to spend lavishly on the idle poor.

How this will not end badly and ugly is hard to see. As we quoted in an earlier article, the number of foodbanks in Britain went from 66 to 421 in the first 5 years of Cameron rule. How many more need to be added before people start setting cities on fire? Or even just: how much more needs to happen before the Scots have had enough?

Very much like the Greeks, the Scots unambiguously voted down austerity. And in very much the same fashion, they face an entity that claims to be more powerful and insists on forcing more austerity down their throats anyway. It seems inevitable that at some point these larger entities will start to crack and break down into smaller pieces. As empires always do. Now, the EU was of course never an empire, there’s just tons of bureaucrats dreaming of that, and Britain is a long-decayed empire.

Larger entities like empires are more powerful only for a limited period of time, for as long as the center can make the periphery benefit; once the center starts feeding off the periphery, the endgame starts. This can take a while, but it will happen, it’s a law of nature. When periphery regions figure out they have nothing to lose by splitting off, they will elect to stand on their own two feet and be their own boss.

And it’s not as if either Scotland or Greece lack a history of fighting for their independence. Just a reminder.

What’s next for Greece is by now anybody’s guess. And a whole other story too. What’s next for Britain and Scotland is or seems -for now- somewhat less convoluted.

Nicola Sturgeon will have conversations with Cameron. Who will offer her more ‘autonomy’ for Scotland. But the budget, also for Scotland, is decided in London, not in Edinburgh. How Cameron’s austerity 2.0 can be made to fit with the SNP’s anti-austerity message, their number 1 priority in last week’s elections, is hard to fathom. Label us curious to see what happens.

It would seem that there are two referendums in Britain’s future. First, the EU in-or-out referendum Cameron promised his voters. It looks like the majority of British voters will opt to leave the EU, or at least partially; things may change if or when Cameron convinces Brussels to change the entire concept of the Union to ‘pacify’ the UK. But that majority will probably come from England only. Scotland, Wales and Northern Ireland will -almost certainly- choose to remain in the EU. And it just so happens that Sturgeon addressed the issue in the Guardian in no uncertain terms:

There are huge issues and challenges ahead – not least the looming question of the UK and Scotland’s place in Europe. A key requirement of the prime minister’s in-out referendum should be a “double-lock” requiring the assent of all four UK home nations before any withdrawal from the EU..

It doesn’t look like there will a general endorsement for the Tories’ vision for leaving the EU. So what’s your run of the mill Cameron to do? Ignore the Scottish demand for that ‘double-lock’? That wouldn’t be very democratic, and it would raise the chance of the UK falling to pieces. No easy choices, no easy pieces for David.

The other referendum, brought closer, as time passes, by Cameron’s multiple conundrums, is of course about Scottish independence. If London holds on to its position on austerity, it’s hard to see how there can not be another of these plebicites, soon.

Granted, it would depend on how much of a warrior Nicola Sturgeon is. Just like in Greece, the outcome of the Syriza vs Troika battle depends on how much chutzpah each side carries. And how much integrity. That last one should be an easy contest. London and Brussels have none, Athens and Edinburgh may yet find some.

All in all, yours truly is going for the center cannot hold.