Enforcement – the new chapter in the crisis

From now on, whether the issue is economic, financial or political, it is no longer a matter of agreements but of enforcement.

The Greek government has agreed to accept the dictates of the IMF and Germany/EU. But can they enforce this agreement on their people for five weeks, five months or the five YEARS it will take? Can they? What do you think? What do you think the bond market thinks? Because if they doubt the agreement can be enforced for all that time then the debt they buy, they will not be able to sell on. And if they can’t sell it they won’t want it at all. Would you want to buy into that deal?

The Conservative government have won the largest number of seats in Parliament but not a majority. Cameron and Clegg (Conservative and Lib Dem) have agreed to talk about coalition. But can either of them enforce any kind of agreement on their party? Cameron already faces the wrath of his backbenchers and 1922 committee. They WILL NOT compromise on Proportional representation nor on their abhorrence for all things European and immigrant. Clegg for his part would tear his party in two if he agreed to a coalition at the cost of abandoning proportional representation and being Pro-Europe. If either man compromises more than a fraction half of his party will rise up. The Lib Dems particularly would be destroyed as voting reform is the primary reason many vote for them AT ALL.

So they can agree all they want. But could either enforce any agreement on their party?

If once the two men bring details of the painful compromises back to their party will it become clear they cannot enforce a coalition. In which case it will devolve back to Laboutr who are already talking to both the Northern Irish MP’s and the Plaid Cymru (Welsh) and Scottish Nationalist MP’s. But could Labour enforce a third term, no matter who was their leader on a country which dismissed their majority at the polls so decisively? The bond market will think not.

Merkel has agreed to play its part in bailing out Greece. But can she enforce it in polls going forward? She will find out today in the North Rhine-Westphalia election. If she loses, she loses her majority in Germany’s upper house. That house HAS to approve all legislation. What then of the Greek bail out? Enforceable?

The American administration is rumoured to be preparing to open Treasury swap lines with European countries to lend ‘liquidity’ in any crisis. If it becomes clear that the American tax payer is again, will that be enforceable at the mid term elections?

If the answers to these questions are NO. The the bond market has little reason to feel sanguine about lending money it may not get back.

It is all now about enforcement. This is where Democracy and finance run into each other like bulls in a field. One insist contracts MUST be enforced. The other reserves the absolute right to change it mind. We saw this in action in Iceland. The government agreed one thing. The people pissed on that agreement and the British banks who felt they were owed money, were told to go suck an egg.

Enforcement in simple terms means what we are seeing in Greece and what we saw in Iceland. It means police forces versus people.

It will come here too.