Will Greece Deliver Europe the EMF or a Trojan Horse ?
Daniel Gros of the Centre for European Policy Studies and Thomas Mayer of Deutsche Bank have put forward a case for the creation of a European Monetary Fund to help the highly leveraged European economies recover.
How quickly politicians in Brussels would be able to implement it remains to be seen. The problem of Greece is the tip of the iceberg for Europe and the EMF could help reform several European economies which are increasingly resorting to “off the balance sheet debts” and creative financial innovations.
The economy of Greece, one of the smallest in Europe, was fundamentally based on tourism with its fabulous beaches and historically important monuments. It lost its cachet as a cheap tourist destination in the global market as soon as the competitive drachma was converted into the strong Euro. Greece and weaker EU nations need the EMF to rebuild and transform their economies. Unlike Argentina, Greece may attract suitors from the emerging economies if kept out in the cold too long.
Similarly, Spain and Portugal—Europe's leaders in renewable energy along with Germany—could do with EMF development funds to reduce Europe’s carbon footprint and replace the creative carbon trading economy which is forming yet another EU asset bubble.
Since carbon is neither a good nor a service, it is not an asset but essentially an "off balance sheet entry" into the income statement. Besides since it's a subsidy to the energy industry, it's open to challenge at the WTO. Europe's Steel plants which have profited billions from the carbon trade last year may face carbon equalising tariffs or anti-dumping duties across Asia and the U.S.
The UK also has a closet full of "declared" dirty laundry , the ”PFI” which is "out of balance sheet funds" infused since the last twenty years through a myriad of private companies to reduce the big debt component of the ballooning public sector expenditures.
Italy, well-known for their financial profligacy, has been indulging in creative accounting that could make the Greek $1 billion Goldman deal look like a flea on a elephant. In short, Europe’s
Pandora’s box is now open and each day’s delay in finalising the Greece’s bailout package will be suicidal as news of Euro-mess unfolds.
Learning from Abu Dhabi’s quick move to protect the Emirates from the Dubai crisis, the EU must quickly bail out Greece first, and then create the EMF if it wants to avoid a Trojan horse.