Greece is still there.

Yesterday's election results in Greece seem to be a mixture of fear and defiance. For weeks various people have been trying to terrify the Greeks by making these elections a referendum on whether to stay in the Euro or to go back to the Drachma. British Prime Minister, David Cameron said at the NATO summit in Chicago in May," We are coming to a decision point where Greece is going to vote. It has to be absolutely clear there is a choice: they can stay in the Eurozone and meet their commitments, or they can vote to give up up on their commitments and effectively give up on the Eurozone." Blinded by arrogance it did not occur to Cameron that he was interfering in another country's democratic process. Also, the UK not being part of the Euro it is none of his business what Greece does. He was effectively trying to bully the Greeks into decades of miserable poverty to prevent the UK economy from sinking further into recession which is because of his own incompetence. The unelected World Bank President, Robert Zoellick said, " There could be a Lehman moment if things are not properly handled." The Greeks have spoken. The New Democracy Party has 129 seats in the 300 member parliament, Syriza has 71, PASOK has 33, extreme far right Golden Dawn has 18 and Democratic left 17 seats. This means another unstable coalition which will try to stick to the severe austerity that Greece signed up to. But will this suffice? Spain has been loaned $126 billion to recapitalise its banks. Spanish Prime Minister, Mariano Rajoy has claimed that this is not a bailout for Spain, like that received by Ireland and Portugal, but only for its banks but experts point out that Spanish banks do not have the ability to repay the loans so they will devolve on to the government, raising its deficit. Already Spain's budget deficit is 8.9% of GDP which the government finds impossible to reduce. Last week Spain's 10 year bond yield briefly rose above 7% before settling down at 6.87%. People are predicting that Spain will need a bailout soon. However, does the pain of austerity really work? The 10 year bond yield for Greece is 27.13%, Portugal 10.52% and for Ireland, which voted for austerity in a referendum a week ago, 8.21%. No reward for all the pain the people are suffering. The key is the German Chancellor, Angela Merkel who has the money to stimulate growth in these countries which will increase tax collections and reduce the need for savage cuts in public spending. But she wants a fiscal union where a central institution will control revenue, spending and budget deficits of member countries and a banking union which will tightly supervise banks. This means Eurozone countries will have to give up some of their sovereignty and guess who will do the supervising? The Germans of course. It is ironic that David Cameron of the Tory party, which still celebrates victory over the Germans in WW II, is begging Merkel to take over Europe. Germany may have lost the war but they look like winning the peace.