The Shitzel Is About To Hit The Fan.

‘Greece could be utterly destroyed by infighting in the Eurozone,’ warns Foreign Office minister

Lord Howell, father-in-law to the Chancellor George Osborne, told peers that Britain was pressing for a ‘realistic and sustainable’ solution to Greece’s debt crisis, which he warned was having a ‘chilling effect’ on the British economy.

He said ‘uncertainty in Greece must be brought to an end… without utterly destroying that noble country’.

A woman sweeps in front of a graffiti-covered wall in Athens, Greec,e after the riots over cuts demanded in return for a bailoutA woman sweeps in front of a graffiti-covered wall in Athens, Greece after the riots over cuts demanded in return for a bailout

His comments came amid mounting fury in Athens at the draconian austerity measures demanded by Germany in return for a second £110 billion bailout by the 17-strong Eurozone.

In an alarming development there were also fresh signs of economic ‘contagion’ in Europe, with unemployment in Spain topping five million as its economy went into reverse. Official figures showed Spain’s economy shrank by 0.3 per cent in the final quarter of last year, with unemployment jumping by 400,000 to 5.3 million.

Leading ratings agency Moody’s added to the bleak outlook by threatening to downgrade more than 120 banks, including several major British institutions, because of concerns about the Eurozone.

A mannequin of a child stands behind the damaged window of a fashion store in the centre of the capitalA mannequin of a child stands behind the damaged window of a fashion store in the centre of the capital as resentment grows over euro zone treatment of Greece

In a gloomy assessment the former Tory Chancellor Lord Lamont described Greece as the ‘canary in the mine’ warning of the dangers ahead for the Eurozone.

Lord Lamont said Greece was being forced to choose between the ‘utterly impossible and utterly incredible’.

He warned it now seemed a ‘certainty’ that Greece would be forced to leave the single currency, leaving the Eurozone facing a ‘bleak future’.

During angry exchanges in the Lords a UK Independence Party peer suggested that German economic policy recalled slogans used by the Nazis.

Lord Willoughby said the German ‘remedy’ in Greece was ‘austerity macht frei’ – echoing the German phrase arbeit macht frei, meaning ‘work sets you free’. The slogan was placed over the entrances to several Nazi concentration camps, including Auschwitz.

Liberal Democrat Lord Teverson intervened on the UKIP peer to label the remark ‘offensive’.

The former Tory European commissioner Lord Tugendhat said Germany’s overwhelming economic dominance following the crash was ‘dangerous’ for the EU. He said anti-German feeling was now ‘rife in many European countries’ – a development he described as ‘very worrying and disturbing’.

Anti-German feeling is running particularly high in Greece after Berlin’s finance minister Wolfgang Schaeuble suggested the country was becoming a ‘bottomless pit’. Some other northern European countries are also now thought to favor Greece leaving the euro.

Greece’s 82-year-old president Karolos Papoulias, a veteran of Greece’s resistance struggle against the Nazi occupation, hit back angrily on Wednesday night, saying: ‘Who is Mr Schaeuble to insult Greece? Who are the Dutch? Who are the Finnish?’

Despite the row there were tentative signs last night that the Eurozone was moving closer to agreeing a bailout deal for Greece.

Employees of the Labour Housing Organisation shout slogans during a protest outside the Labour Ministry in Athens today

Employees of the Labour Housing Organisation shout slogans during a protest outside the Labour Ministry in Athens today

Some senior officials suggested a deal could be struck as early as Monday. But it remained unclear whether the deal will amount to more than a temporary fix, with a final package delayed until after the Greek elections expected in April.

European Commission president Jose Manuel Barroso yesterday sought to soothe tensions with Greece by praising the country’s attempt to deal with an economy in freefall.

Mr Barroso said: ‘I would like to salute the courage of the Greek government and the Greek people in these very demanding, challenging times.

‘And I would hope that the member states, the members of the European Union will accept the commitments given by Greece.’ But several European capitals retain severe doubts about whether Greece is willing or able to impose the level of cuts needed to tackle its debts and remain within the euro.

In one small symbol of the scale of the challenge facing Greece it was reported yesterday that virtually every traffic light in central Athens was smashed during anti-austerity riots at the weekend. But the transport department is so strapped for cash that it cannot afford to replace them, leaving to disastrous congestion in the Greek capital.

‘I am not sure even now whether all in the political parties in Greece are aware of their responsibility for the difficult situation of their country.’

‘Schaeuble Junta’, ran a headline in the conservative Eleftheros Typos newspaper, harking back to Greece’s painful spell under military rule during the 1960s and 1970s.

The front pages of three Greek newspapers, depicting German Finance Minister Wolfgang Schaeuble, from left to right, Dimokratia The front pages of three Greek newspapers, depicting German Finance Minister Wolfgang Schaeuble, from left to right, Dimokratia “In the gas chamber,” Eleftheros Typos ”Schaeuble’s Junta” and Ta Nea ”What the Germans want” in Athens

BREAK-UP WARNING TO BANKS

The banking sector faces being broken up unless it shows a ‘step change’ in competition, the head of the Office of Fair Trading warned today.

In a speech to bankers, John Fingleton said banks must provide the ‘right prompts’ to help customers decide whether or not they should switch account provider.

The issue of bank account switching was flagged last year by the Independent Commission on Banking, which made several recommendations designed to make switching accounts more easy for customers.

Mr Fingleton said: ‘It is not enough to make it easy to switch. Customers also need the right prompts to exercise their choice of provider.
‘In banking markets consumers frequently face difficulties in understanding the true cost of running their account and comparing deals from alternative providers.’

He said the sector was at a ‘turning point’ with the emergence of new banks such as Virgin Money, Metro Bank and Tesco but said if ‘real change’ is not seen, a ‘radical approach’ must be considered.

The OFT chief executive said he was prepared to hand the sector over to the Competition Commission and warned the industry could face the same outcome as airports operator BAA – a forced break-up.

As uncertainty lingers, investors are reassessing their assumption that Greece will get the money, prompting big market movements today. 

While the euro slipped by 0.5 per cent to below $1.30, stocks across Europe fell, with Italy’s main market underperforming its peers, trading down 1.9 per cent.

Meanwhile, the yield on Italy’s ten-year bond has risen by 0.18 percentage points to 5.81 per cent while Spain’s rate has risen another 0.07 percentage points to 5.46 per cent, a little down from earlier.

Italy is a particular worry because it is the eurozone’s third-largest economy and its debt mountain stands at around 1.9trillion euros, way more than anything Europe has committed to its bailout facilities. 

Though the rates of both countries are still down from the end of last year – when lack of confidence in Italy’s ability to pay its debt saw its yields bust the 7 per cent mark while Spain hovered around 6.67 per cent – the increases have triggered concerns that Europe’s debt crisis is a long way from being solved.

The pressure on the two countries had eased in recent weeks, primarily because the European Central Bank offered unlimited amounts of super-cheap long-term loans to banks.

The mood was further darkened after a leading ratings agency threatened more than 100 lenders with downgrades in a sign that the single currency crisis is infecting the banking system.

Barclays, Royal Bank of Scotland and HSBC were among 122 financial institutions to have their ratings placed under review by Moody’s. Shares in the banks fell more than one per cent.

A homeless man sleeps rough beneath a graffiti-covered wall in a train station in Athens todayA homeless man sleeps rough beneath a graffiti-covered wall in a train station in Athens today

 Louise Cooper, markets analyst at BGC Partners, said: ‘The language between those writing the cheques and those cashing them is becoming increasingly critical and untrusting. This bailout deal is by no means assured, there are just so many details missing and time and tempers are running short.’

Simon Denham, chief executive of Capital Spreads, said: ‘You’d be forgiven for thinking that parts of Europe were gearing up for a war after the comments that have been made flung around the continent in recent days…

‘The lack of trust from the likes of Germany, France and other countries that Greece will not actually implement the agreed austerity measures is fuelling a loathing amongst the Greeks, especially against the Germans.

‘The bail-out funds are still not guaranteed and this is rattling markets this morning.’

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About Steve King

iPeopleFINANCE™ Chief Operating Officer. Former CEO of Endymion Systems, Inc. a $36m Information Systems Services company. Co-founder of the Cambridge Systems Group, the creator of ACF2, the leading IBM Mainframe Data Center Security product; acquired by Computer Associates. IBM, seeCommerce, marchFIRST, Connectandsell alumni. UC Berkeley alumni. View all posts by Steve King

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