Reading Frau Merkel's lips

Wolfgang Munchau writes in the FT on 20the Feb that Mrs. Merkel is doing everything possible to force Greece's exit from the EU. Assisted suicide, he calls it:
http://www.ft.com/intl/cms/s/0/16f04ffa-5963-11e1-9153-00144feabdc0.html#axzz1moAdPAft.

And this is what I wrote on Feb 3rd, 17 days ago:

17 summits in the last 3 years. No, that’s not the track record of a mountaineer, but the number of meetings EU leaders have held in the effort to save the Euro.

Through the serial summits, German Chancellor, Angela Merkel, has made it clear that German purse-strings are going to be opened very cautiously; this is dictated by fiscal prudence, by the strictures of the German constitutional court, and above all by domestic German politics. In a situation where three-quarters of German voters do not want their government to aid Southern Europe, Chancellor Merkel would be irresponsible to go against the will of her people.

Economic commentators have been saying that the costs of saving the Euro go up with every week of delay, echoing Shakespeare’s Macbeth, “If it were done, ‘tis best it were done quickly”. I am sure Merkel has enough advisers for her to put pretty precise estimates on the cost of this delay. My sense, then, is that she has no intention to save the Euro by expanding her government’s guarantees for the debts of other nations.

The surest signal, to my mind, of her intention came from her recent demand that the Greek government hand over its budgetary process to German supervision. As a politician herself, Merkel would have known that no government can be seen to accept such a submission of its sovereignty, and certainly not one like Greece, where the political temperature is already high. I believe this was her way of telling Greece, “I want you to leave the Eurozone, but you won’t hear me saying it.” To ensure this, she made Greece a proposal that was politically unacceptable.

Under this scenario, Merkel is making a Greek debt default a virtual certainty; my sense is she is using this time to shore up German banks against the impact of such a collapse.  Of course, there will be many unpredictable outcomes of such a development, and she cannot guard against all of them. However, given the depth of the European debt crisis, there does not seem to be a good solution. Merkel has to choose what she thinks is the least bad solution.

If she does allow a Greek default, risk will switch off like a 1970s Delhi black-out. 

The cost of law and order

Huge swathes of our country are ungoverned. Or, to be accurate, let's say that the definition of governance standards is set so low that criminal activities are not seen as being remarkable. The fact that such norms do not disturb us should be a reason to be disturbed!

Business friends of mine recently established a factory in Mayawati's newly colonised Greater Noida. As the plant neared completion, the local village 'leaders' offered factory management their services for transport of finished goods from the plant. A couple of weeks later, they returned to remind the plant manager; he said he would talk to Head Office. The would-be transporter left behind his rate-card. Turned out that the transport charges on offer were 40% higher than prevailing rates.

Discussing this with me, the CEO felt that plant management should find a way to work with local people, and believed the transporters would come around to rates which were on par with the market. This was clearly not the intention - within a couple of days, they had parked some 70 trucks around the factory, and sent word that this was a gentle reminder of the services on offer.

Plant management inter-acted with other manufacturing facilities in the area, and were told that prices were not negotiable, and that the attempt was to create a monopoly on out-bound trucking; the only exit route that would work was to say that the plant had decided to deploy its own trucks.

This is what was done; my friends bought a fleet of trucks, and used them to ship finished goods to a sister plant in Ghaziabad, about 50 km. away. A reliable network of transporters trans-ship the goods onto onward vehicles. The cost of this exercise? Rs. 15 lakhs per month.

One medium-sized factory that won't show up as a blip on any industrial statistics for India. One bunch of local operators, whom many Indians wouldn't even classify as thugs. Jack the numbers up by several orders of magnitude to get a sense of the scale of moral depravity in our country. And then try to get a sense of the waste generated because our leaders are not concerned with law, order, and justice, but with power, lobbies and re-election.