Belmont Club

'Fear Is Coursing through the Corridors of Brussels'

Le chat is out of the bag. Treasury Secretary Timothy Geithner, speaking at a conference, said German Chancellor Angela Merkel has repeatedly said “we are not going to have a Lehman Brothers.”  Which probably means there is every chance they may have a Lehman Brothers, only one immeasurably bigger.  European Parliament Member Daniel Hannan writes: “We are approaching end-game. Greece is supposed to pay off its next tranche of debts on 17 October, and the markets are now expecting what this blog has long predicted: a large-scale default.”


But since this could lead directly to the unraveling of the European project, no one will countenance even mentioning the apparently inevitable. French President Nicolas Sarkozy has “reaffirmed France’s determination to put everything in place to save Greece,” a wording which strongly suggests he’s going to try to get somebody else to pay for it.

That someone, according to John Ellis at the Business Insider, is likely to be the U.S. taxpayer. He predicts that before long Europe is going to ask Obama for a trillion dollars.

We’re at the end of “extend and pretend.” The crisis of the Eurozone is now acute. The headlines are specific. The best analysis suggests that only extraordinary action can keep it afloat. And even that would work only to delay the inevitable for a month or two more. …

In the days leading up to the collapse of Lehman Brothers, then French Finance Minister (now IMF Managing Director) Chistine Lagarde told then-Treasury Secretary Hank Paulson that he could not allow Lehman to fail. The ramifications would be catastrophic, she said. She was mostly right.

Three years later, it will be Angela Merkel talking to President Obama,Treasury Secretary Geithner and Federal Reserve Bank Chairman Ben Bernanke with exactly the same message. The United States government and the Federal Reserve must come to the rescue of the Eurozone or the ramifications will be catastrophic. And she will say that she needs roughly $1 trillion in financial guarantees and liquidity support. That’s the number that will calm the markets.


That would be crazy. But we live in crazy times. Whether Ellis’ predictions will be borne out by events remains to be seen. But even the BBC now admits that “fear is coursing through the corridors of Brussels.” It is a fear, the BBC says, which has been there for some time, like a nightmare lurking in the background, like the dim awareness that the bill from the credit card company is in the mail. And now the envelope has arrived, bearing the shiny bright logo of the finance company. And it’s all they can do to slit the envelope open and turn the page quiveringly to the page which says “amount due.” They describe the pathetic sight in Brussels of leaders sending sidelong glances, talking out loud largely to themselves, wishing things were better and generally looking vainly for an exit that does not exist.

In the absence of a plan, officials have turned to shock treatment. This was the moment to frighten.

First up, European Commission President Jose Manual Barroso, for whom this is now an existential crisis. “We are confronted with the most serious challenge of a generation,” he told the European Parliament in Strasbourg. “This is a fight for the jobs and prosperity of families in all our member states. This is a fight for the economic and political future of Europe. This is a fight for what Europe represents in the world. This is a fight for European integration itself.”

In his final words the warning was clear; the whole vision for a united Europe is at stake.

Next up, Polish Finance Minister Jacek Rostowski. He warned that crisis could destroy the European Union. “Europe is in danger,” he told the parliament. “If the eurozone breaks up, the EU will not be able to survive.”

For the German Chancellor, too, there is no Europe without the euro. These statements come without any explanation as to why the EU would fold without the single currency.


The word the BBC is looking for isn’t “frighten.” It is “scare”, as in hoping to scare up a trillion dollars from Obama. But the president is too full of himself to listen just yet — he’s still indulging in a teaching moment to lecture the European leaders on the importance of “leadership.” The Telegraph reports that Obama has criticized European heads of state for their lack of leadership. “The leaders in Europe must meet and take a decision on how to co-ordinate monetary integration with more effective, co-ordinated fiscal policy,” a comment that must surely rank as among the most banal and content-free of platitudes ever uttered on the world stage by one incompetent to another.

Analysts at JP Morgan said there was “a growing sense that the crisis is reaching a climax”, arguing that the “endgame on EMU [European Monetary Union] is approaching fast.”

Jim O’Neill, chairman of Goldman Sachs Asset Management, added that along with Greece, “something big needs to happen for European bank capital, the clarity and determination of ECB policy making and, most importantly, where Germany wants to lead EMU.”

The old system is visibly sinking and its captains are visibly confused, milling around on deck, now running here, now running there. The problem they face is that there is now no policy action consistent with the survival of their power.  They have to let go to live but are too greedy to relinquish the perquisites of sham power without more urgency.


The giant state hasn’t got the money to pay for its continuation, but it cannot bring itself to abandon is most cherished dreams of “progress.” The socialist catalog of “gains” has ultimately proved to be an itemized list of debts. “Pay before.” Merkel herself has said that when the end comes, it will be swift: “a domino effect” was how she put it. The question is not now “if,” but “when” the dominoes fall.

Perhaps the only advantage America has over Europe is not that Obama is a better leader than Merkel, but that U.S. political tradition has given rise to a popular movement determined to amend things, without resort to fascism or dictatorships. The Tea Party may not provide an end point, but it certainly serves as a starting line.

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