Don’t bet on any politician to solve euro debt crisis

WHO among the world’s leading politicians will have any credibility left after the sovereign debt crisis has played itself out? Over the past two years, we have had numerous summits by the world’s top economies, whose leaders then tried to reassure voters their savings and pensions were in safe hands.

South Africans are just as affected by the lack of confidence in the global economy, with Finance Minister Pravin Gordhan reminding us yesterday of our vulnerability to poor decisions.

To date, no summit or Group of Eight or 20 meeting has managed to halt the decline in confidence. At the height of the crisis last July, we were greeted with a barrage of news on some or other grand meeting every other weekend led by Germany and France. Being an addict of the numerous documentaries on the allied effort during the Second World War, I must say the meetings and conference calls had the same sense of urgency that writers and film-makers about those dark days in world history try to portray.

While the big men of Russia, the US and Britain had their D-Day to sum up the value of their efforts, there has been no such event to mark an end to this crisis. I once thought a Greek exit would be it, but now markets are focusing on Italy again, not to mention Spain.

What we are going through may not be as dramatic as the smokefilled meeting rooms of the war era, but the longer this uncertainty continues, the more we don’t know how it will all end — whose economy will be left standing and who will be cast into the abyss.

The battle to contain the crisis will no longer be won at summits; all faith has been lost that they can do anything to bring confidence back to Europe, and in turn to economies like ours that have the region as its biggest customer.

Germany stands rigid as ever, gripped by fear over inflation and not wanting its taxpayers to carry a bigger burden than they already do. It will not budge on Eurobonds, even though the bulk of its exports are to its immediate neighbours, who are struggling to emerge from their winter recession.

France, which has a new leader on a card of greater growth, fears the dissent that will come from citizens if he was to undertake even half the structural reforms needed to boost competitiveness.

The UK still stands alone on its island, pointing fingers at the mainland, while its economy continues to struggle. State figures said the economy barely grew in the quarter ending last month, after contracting in the previous three months.

The US is still inwardly focused, with the scrap between Democrats and Republicans in an election year proving much more important than actually getting the economy moving forward.

With trillions of dollars at its disposal, China was supposed to save the global economy at some point. That’s not likely, given that it too has had to cut rates to boost a stuttering economy. (The rates cut in turn has stirred fears of a housing market bubble.)

Most of the other

leading emerging-market economies have begun to report the damaging effects of European uncertainty on their prospects too.

With almost all the leading economies in a spot of bother, I don’t think anyone should be looking at politicians to find a breakthrough in this crisis of low to stagnant global growth.

A new game plan is desperately needed, and unless we have a world of second- and last-term presidencies, not too many are going to be willing to take the hard decisions.

DEMAND for safe-haven assets should be renewed this week and, depending on the outcome of the Greek elections this weekend, may run on over the next few months. And it is purely because no one out there can say what’s going to happen this weekend, or at the European summit at the end of the month. Gold so far has not featured strongly as a safehaven play, but there will be a time when it does.

As a friend of mine recently said, with central banks spewing out money, one has to ask how much it costs to make one R200 bank note, compared to an ounce of gold? I have not managed to get an answer yet, but I’m trying.

Anyway, with less than a week to go, conservative and left-wing parties in Greece remain neck and neck in the polls. It’s not easy to predict what course the country will take over the coming months and neither it is possible to predict the precise degree of contagion that politics in that country will spur.

We are also unsure if the figures quoted to save Spanish banks are enough.

Interesting times these are.

E-mail: derbyr@bdfm.co.za Twitter: @ronderby

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frustrating