8 Jun 2012

Euro crisis 2012 vs Euro 2012

It is rather striking that the last four major international football tournaments have been won by Spain (2010, 2008), Italy (2006), and Greece (2004).

All five troubled eurozone nations have qualified. For economics, it all goes to show that there is no long run connection between winning a major tournament and long term growth, in fact the reverse appears to be true.

There has, in the past, been research showing growth is boosted in host nations, temporarily, particularly if that nation does well. It’s remotely possible that the euro won’t even survive Euro 2012 intact, depending on how other nations react to a new Greek government.

Anyway, as I’m on holiday, and yesterday I wrote a very sober blog invoking the Optimal Currency Area theory, here are some spurious connections between the Euro crisis of 2012, and Euro 2012, which starts today.

1. Spain vs Italy

The debt derby. And on the economic front there has been tension too after unelected technocratic Italian PM Mario Monti twice criticised Spain in recent months  for failing to get a grip of the crisis. Monti critiqued Spain’s public finances in March before apologising. But then in April saying told aides that Italy was “paying on the rebound for the Spanish crisis”. The Spanish PM Rajoy diplomatically told Monti to shut up. So much for “porcine solidarity” 

Actual game: Sunday 10 June, 5pm UK time. Prediction: 1-2

2. Germany vs Portugal

Germany versus one of the three countries needing a bailout. A classic paymaster versus PIIG affair, you might think. However you would be wrong. Portugal’s centre right PM and finance minister have been vocally championing austerity, praised by the IMF/EU for “sticking to the course”, and have even warned against the President Hollande’s push to water down the EU austerity drive.

The government remains popular despite surging unemployment, anti-austerity demos have attracted limited support and the Portuguese Treasury has even managed to sell short term debt to the markets, and attract foreign investment. And unlike Greece, there has been no surge in support for extremist political parties. All this could be upended by the Greek crisis flaring up again, but this game looks like being more of a friendly, at least economically speaking.

Actual Game: Saturday 9 June, 745pm. Prediction: an austere: 0 – 0

3. Greece vs Czech Republic

This could be a tense affair. The Czechs are among a band of right wing austere governments who are biting their tongues whilst Greece goes to the polls.

Along with Finns, Austrians, Dutch and many Germans, we will only really know if their patience with Greece has been exhausted after the election result a week on Sunday. How will the EU austerian belt respond to a new Greek government wanting to rip up the existing bailout agreement?

The Czech Republic, is, of course, not in the euro, but  its central bank governor and President Vaclav Klaus were one of the first to anticipate Greece leaving the euro. It has contributed to Greece’s bailout. “If Greece decides to devote more hours to ouzo or cypresses, it is absolutely all right. Nevertheless, it cannot enter a currency union with Germany,” Klaus said in the interview last year

Greeks wanting to know what it is like to abandon a common currency might also want to consider the experience of the break up of Czechoslovakia in early 1993. It was mainly an orderly affair. But korunas drained out of the Slovak banking system, the weaker economy as the break up was negotiated. People had to queue up to get their currency stamped by 13,000 government officials. And the border had to be closed to stop Slovaks trying to dodge the Slovak devaluation. The irony? That Slovakia grew faster after its devaluation, and ended up joining the euro.

Actual Game: Tuesday 12 June, 5pm. Prediction: A tense affair, 1 – 2

4. England vs France

For reasons I explained yesterday, eurozone suspicion at the City of London will eventually force a fundamental decision upon Britain about its place in Europe. The French president, who was visibly snubbed by David Cameron’s support for Sarkozy, might choose to press ahead with attacks and oversight on the London financial services “casino” to make the “banking union” concept work. The fundamental question: can a tighter, more politically united eurozone really tolerate the City’s primacy in its financial markets? Will Britain opt for an offshore Swiss model?

Actual Game: Monday 10 June, 5pm. Prediction: 2 – 0 all out Gallic genius thwarted by stalwart defence and lucky breakaway goals.

5. Germany vs Greece (prediction)

If Germany tops the group of death, and Greece come in 2nd, (as predicted by Salford University Stats expert Ian Mchale) then we have the mother of all euro battles: Germany vs Greece in Gdansk on Friday 22 June. This would be five days after the Greek election rerun, and plausibly as a new radical left prime minister Tsipras takes his oath of office. First act: rip up the Troika “memorandum” and renegotiate the bailout deal. Tsipras believes that Germany ultimately cannot afford to let Greece go and will relent on austerity.

Prediction: a shock win for Greece, after extra time, on penalties, after three red cards.

There are some other choice encounters in the Group of Debt, Group C. Spain vs Ireland on Thursday 14, is the bank debt derby.

Two nations that abided by the fiscal rules, only to be swamped by a massive dumping of financial risk from poorly regulated banks. Italy vs Ireland too on Monday 18. In fact the Salford stats computer predicts that Ireland will qualify and face England in the quarter finals on 24 June. Judging by the welcome afforded in Krakow to the England team bus from some visiting Irish fans: perhaps George Osborne should up the interest rate on the £7bn loan facility.

And then the bookies say it’s all set up for a Spain vs Germany final on the 1 July. The first day of the Eurozone bailout mechanism, the ESM, hours after the vital EU summit that could see Greece on the euro exit path, and as Germany and Spain jostle over Spain’s banks.

On the basis of the last four major tournaments, perhaps optimistic fans of Portugal and Ireland can have some hope of continuing the pattern.

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12 reader comments

  1. Saltaire Sam says:

    The euro crisis could be solved at euro2012 – just take the combined salaries of all the players taking part for one year (they wouldn’t miss it) and redistribute it to ordinary families.

    Instead of being spent on the odd luxury car, huge house, bottles of champagne etc in a few cities, the cash would be spread about on a wide variety of products, boosting manufacturing and local economies.

    And let’s face it, no one is worth £250k a week for kicking a football, no matter how well it is kicked.

    Apart perhaps from Lionel Messi.

  2. Mark Antony says:

    I wonder how British journalists and economic analysts will react to the news, presented yesterday by a French news channel, that the property market bubble in China is in the process of bursting. Will they also blame this on the eurozone, or will they find other explanations? It all reminds me of Ptolemy’s cosmology of the eath-centred universe. He had to keep on inventing more and more epicylcles – or orbits within orbits – to explain all the anomolies, until, in the 15th century, Copernicus found that the entire basis of his theory was incorrect, but was too afraid of the Catholic Church to say so. Where is the modern day Copernicus of Economics who will challenge the entire system so that we can replace it with something that works for all of us?

  3. Andrew Dundas says:

    There may be some other connections between Greece, Italy, Portugal and Spain besides soccer.
    Each State WAS the beneficiary of Euro Regional and Social structural subsidies because of substantial regions and their eligibility as Objective One largesse. In Ireland’s case because there was a quasi-civil war going on ‘next door’. [Moreover, each remains a net beneficiary of CAP funding and price supports].
    Could it be that those Euro-support funds have had the side-effect of distorting the economic culture of those areas?
    When the ESF and ERDF criteria were re-assessed and those subsidies withdrawn, might that loss of big subsidies have contributed to the policy failures within each erstwhile recipient?

  4. Doubting Thomas says:

    The success of these football teams from troubled European countries may indicate that international banks haven’t sold these clubs bad loans or toxic products, so they’ve been able to provide proper coaching, facilities, food, remuneration etc for their players. Our modern pre-occupation with football clubs and players is often associated with ‘dumbing down’ in society, but this may be based upon a misunderstanding. According to “The Oxford Dictionary of Economics”, by J Black, N Hashimzade and G Myles(2009) ”deintellectualization’ is the process of dumbing down in education and society in general. It is typified by the current popularity of qualitative degree subjects relative to quantitave degree subjects, and by the replacement of departments of economics by schools of business. Deintellectualization has also led to the growth of ‘management speak’ as a substitute for reasoned argument.’
    On this basis, History and Literature are degree subjects that have hastened the process of dumbing down as has Philosophy, even though Adam Smith was a philosopher. Economics is the epitome of intellectual rigour and truth, and as for soccer – that’s a nobrainer.

  5. Moonbeach says:

    Imagine the nightmare of a United States of Europe!

    The finance minister would have to be German.

    But what about the rest. France would want Foreign Affairs but what about Agriculture and the CAP?

    Italy for Defence!!!! and so on …..

    What about a common language. Esperanto?

    This failed experiment is a load of (our shadow Chancellor) and you should say so.

    The Spanish non-bail out is straight from the Milo Minderbinder school of economics (Catch 22 for those with a non-satirical education!) Italy borrows money at, say, 5% to lend to Spain at 3% whilst Germany borrows at 2% and shows a profit on the loan!

    Yep. Brilliant! That should do it!

    Incidentally, noone seems to have spotted the paradox that more groups are trying to wrestle control from big countries (Scots, Welsh, Cornish, Basques, Catalonians, Flemish etc ) whilst our ‘in-touch’ politicians are dragging us to more un-democratic centralisation!

  6. Robert Taggart says:

    Surely the success on ‘the field of play’ in what can at best be described as a sideshow (footy) – in life – just goes to show how ‘lightweight’ these countries are ? Sporting prowess be all well and good, but, it does not ‘put food on the plate’.
    The things that really matter in life – good governance, rule of law, sound economics – are just too much for these dimwits. Not just these dimwits, but, Argentina and Brazil (until recently anyway) also.
    As for African nations – where to start ?!

    1. Robert Taggart says:

      Just look at the semi-finalists in the Euro’s – only one really ‘sound’ country still left !…
      “Up the Bosch” ?!

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