Former ECB man Lucas Papademos

The bankers are replacing the politicians, the German-US agenda is in the ascendancy, and power is drifting away from those not in the eurozone. Britain must get out of the EU now.

NOON UPDATE: BERLUSCONI SAID TO BE MULLING IMMINENT RESIGNATION

After an amazing 36 hours of to and fro, The Slog’s Greek sources turned out to be right after all: Papandreou is out as Prime Minister. This morning, the Athens media are announcing with a degree of confidence that former ECB Vice-President (and close chum of Jean-Claude Trichet) Lucas Papademos will take the reins of the new Coalition of National Unity Until We All Start Squabbling Again.

This time, as we can see, the eurocrats and bankers aren’t taking any risks. The new chap’s suffix might be ‘demos’, but there’s nothing democratic about this choice of leader. Like our old friend Christine Lagarde at the IMF, Mr Papademos is very Amerophile: he attended the Massachusetts Institute of Technology, gaining a degree in physics in 1970, a masters degree in electrical engineering in 1972, and a doctorate in economics, in 1978. He followed an academic career at Columbia University where he taught economics from 1975 until 1984. During this last period, he also served as Senior Economist at the Federal Reserve Bank of Boston.

The new head of the ECB Mario Draghi, as we saw last week, is also very well-connected in the US, and a former Goldman Sachs staffer. Goldman Sachs folks tend to wind up at the Federal Reserve in one form or another. So it’s all going to be one big happy family….if it comes off. Papademos is also a hawk when it comes to EU integration: his line on this, plus his passion for physics, also tick all Merkel’s boxes. It’s not hard to discern who’s taking control here – and it is entirely predictable. The word has come down the line: no more accidents.

More immediately, Lucas Papademos has (I assume) been chosen for the role partly because he is very unlikely to ask the Greek people what they think about any of this, but chiefly on the grounds of his outlook and acceptability when it comes to the bondholders. In a keynote speech during 2009, he had this to say:

“……the increasing financial integration in Europe and globally has important implications for the cross-border distribution and propagation of systemic risk and the appropriate institutional setting for the prevention and management of a crisis. More specifically, the regulatory framework and the supervisory arrangements in Europe must be broadly compatible with those in other large economic areas, notably the United States and vice versa. And within the EU, the growing presence and significance of cross-border financial institutions (the largest 43 cross-border banking groups in the EU accounted for 76 % of total EU bank assets at the end of 2007) requires the strengthening of the pan-European character of supervision….”

In short, fiscal union as a way to supervise the fact that the banks were all idiotic enough to align themselves as dominoes.

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Germany made a mistake twelve years ago in giving in to the light-supervision approach to fiscal discipline put forward by the French. Angela Merkel’s goal all along during the debt saga has been to ensure that this mistake is corrected in perpetuity. My own view is that, while Berlin discipline is preferable to what we’ve had so far, it’s too late to apply it now. Nothing, for example, can now divert the disaster waiting to happen in Italy. Merkel’s strategy is mistaken, and this appointment (if it is confirmed) will store up problems further down the road….in amongst all the mountain of can litter already there.

Basically, Papademos will do the EU and America’s bidding – viz, anything to avoid a default that would sink France, rock Germany, and pass the virus on to America. But that doesn’t change the structure of the chess game: Greece still cannot survive without (around) 80% haircuts, the Greek people are running on empty, and if Germany tries to run the whole of southern Europe from Berlin, it will come the most almighty, and expensive, cropper.

On a broader canvas still, I see this as another instance of power being transferred away from politicians and towards global money. But in a more local context, it also means that Britain is (as I predicted last  July) heading for isolation. We are already getting vibes back from Brussels that from here on, the eurozone will be calling the shots: Sarkozy didn’t want the other nations at the last summit, and Merkel is convinced that those using the eurozone should have the right to, alone, decide on their destiny. I find this an enormous cheek, given that on the other side of her face she is also demanding we cough up 40bn euros to help clear up the mess that this Mickey Mouse currency has left. But a Europe  run by France and Germany was never going to be fair to the UK….as its brazen attempts to shaft the City have demonstrated even to Vince Cable at Business. (Osborne, I understand, is incandescent with rage about it).

We do not have a role in this New Europe – which will remain unstable for some considerable time. I will keep banging on about this until more people catch on to it: if we don’t take major, bold steps now to diversify our exports away from Europe – and become less dependent on food imports – then pauperisation on a massive scale will be our fate. Come what may, the West is going to see its standard of living slashed for some time. If we stay in the EU, we will get the worst of all worlds. The Cabinet Minister who told me a year ago that Britain’s future “is inextricably linked to the EU” was talking tripe. In the contemporary context, the case for that link is now running close to zero.

The time is rapidly approaching for more action to coordinate the UK’s opposition to EU membership. Maybe we should hide our feelings about some of those leading this faction, and start persuading others to join in with them.

Earlier in this saga:

America bets the farm on Germany