Just before the roof fell in on Kweku Adoboli, the UBS trader whose “miscalculations” cost his bank $2.3 billion, he posted a message on Facebook: “I need a miracle.” Keep an eye out for something similar from George Papandreou, Greece’s prime minister, who has been telling us: “Let everyone be certain, Greece will not default, we will not let it default.” Nothing short of a supernatural event is now required for that promise to be met – the Greek bubble is about to pop.There are similarities between Mr Adoboli’s flame-out and Greece’s imminent bankruptcy: failure of regulation, credulity of investors and a desperation to throw good money after bad. The difference, however, is scale. UBS’s losses are shocking but manageable. By contrast, when Greece repudiates all, or even part, of its 370 billion euros of debt, the foundations of the single currency will crack and many bystanders will be hurt.
Financial pain will be accompanied by the political humiliation of European Union leaders and their apologists in the commentariat who boasted that such an outcome was impossible because there was the “necessary will” to prevent it occurring.
The fallacy at the heart of this crisis is that every financial problem has a political solution. If only. Yet the Brussels elite and its co-conspirators at the IMF continue to promise that by “doing all it takes” they will, somehow, defy indefinitely economic gravity. This illusion of political primacy is perpetuated because a confession of impotence would not only undermine the worth of those in power but also expose the euro’s fatal flaw: monetary union without fiscal union is a marriage that weds the prudent to the profligate with no control over the latter’s spending. more
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