November 9, 2011
[The following is probably far tootaxing for RRZ - for him the next instalment of Noddy in Toyland follows in a later post.]
One shudders to imagine what noxious vapors swirled through the skull of French President Nicholas Sarkozy as he told Barack Obama that Binyamin Netanyahu was a “liar.” No-one has told the truth more clearly than Netanyahu: as long as the Palestinians cannot bring themselves to pronounce the words “Jewish State,” there won’t be a peace agreement. Where, pray tell, is the lie? Were he less diplomatic, Netanyahu might have added that with Egypt plunging into chaos, and likely to repudiate its peace treaty with Israel, and Syria in civil war, and Iran and Turkey vying to support the overtly (as opposed to de facto) terrorist wing of the Palestinians, the problem of a peace agreement with the beleaguered and unpopular Palestine Authority is moot.
In fairness to Sarkozy, he used the word “liar” advisedly. What does it mean to be a “liar?” Tell the Emperor he has no clothes, and he will scream, “Liar!” Tell the Heaven’s Gate cult that space aliens are not coming to meet them up on the comet, and they will shout, “Liar!” Tell a schizophrenic that the CIA did not implant a radio transmitter in his brain, and he will shout, “Liar!” Tell a trusting wife that her husband is cheating on her, and she will shout, “Liar!” (Tell Hillary Clinton that Bill is not cheating on her, and she also will shout “Liar!”). And tell a European politician that the world has changed such that the European political class no longer has a reason to exist, and he will scream “Liar! Liar!” until his lungs collapse.
Egypt is about to turn into Somalia-on-the-Nile, with unlimited leakage of weapons to Hamas in Gaza. That makes an agreement between Israel and the Palestinians about as probable as the return of the Pharaohs. The simple inattention of the world community to Egypt’s impending catastrophe astonishes. Last week we learned that Egypt’s liquid foreign exchange reserves were down to about $13 billion, about two months’ import coverage in a country that imports half its caloric consumption. A huge current account deficit due to the collapse of the tourist industry and workers’ remittances is partly to blame, but billions are leaving the country each month in capital flight.
On May 27, Sarkozy hosted the leaders of the Group of 8 industrial nations in France. The G8 promised $20 billion in aid to Egypt and Tunisia, and Sarkozy said that the amount might double. Since then, the subject has dropped out the news. If aid to Egypt was on the agenda of the Group of 20 meeting in Cannes Nov. 3, where Sarkozy called Netanyahu a ´ ¨liar,” it went unreported by the whole media. Last May’s emergency package evidently has been forgotten, because the Europeans are too busy figuring out how to bail out Italy and their own banking system, and Obama doesn’t want to defend a massive new foreign aid package in the 2012 elections.
As for Syria, a former French colony, the latest round of government violence has killed a French-backed Arab League initiative, Foreign Minister Alain Juppe allowed this morning. Humanitarian organizations now estimate the death toll at 3,500. It seems certain to rise sharply, as the opposition has a reported 22,000 men under arms.
With Europe at risk of bankruptcy, it is understandable that the French would be too distracted to remember the urgent warnings and grandiose promises they made only a few months ago in regard to the “Arab Spring.” French banks gorged on Italian government bonds and now are at risk of bankruptcy if Italy goes the way of Greece. The Wall Street Journal reported today,
Some French banks also are paying more than they usually do: They have to pay an additional 0.45 percentage point to 0.70 percentage point a day for funding, Mr. Gollapudi said. By comparison, high-quality U.S. banks typically are funding at about 0.15 percentage point more than what they would pay for overnight debt. The highest-rated financial firms were able to borrow money for seven days using commercial paper at an average rate of 0.08 percentage point last week, according to data from the Federal Reserve.
0.7% might not seem like a lot, but the three major French banks–Credit Agricole, Societe Generale, and BNP–earn respectively 0.13%, 0.34%, and 0.45% on their assets. The increase in their funding costs, in short, exceeds their profit margin. That means the whole French banking system already is running at a loss.
The Europeans, in short, are going bankrupt (“Liar!”). The bailout mechanism that they have proposed for their weakest members is a transparent scam in which markets have no confidence (“Liar!”). Bailing out Italy, for that matter, is a fool’s errand, for by mid-century, three-fifths of Italians will be at retirement age, and the state will go bankrupt in any case. Better to put the country through bankruptcy now (“Liar! Liar!”). What passes for European diplomacy in the Middle East is a mishmash of hypocritical platitudes at the precipice of disaster (“Liar! Liar! Liar!”).
Europe’s political class are an infestation of fleas on a dead dog. Any mention of reality appears to them as an existential challenge, and will elicit the response: “Liar!”