Forex Market Commentaries - Potemkin Village

Cannes, the Modern Day Potemkin Village

Nov 3 • Market Commentaries • 4642 Views • 1 Comment on Cannes, the Modern Day Potemkin Village

Potemkin villages or Potyomkin villages (Russian: Потёмкинские деревни) is an idiom based on a historical myth. According to the myth, there were fake settlements purportedly erected at the direction of Russian minister Grigory Potemkin to fool Empress Catherine II during her visit to Crimea in 1787. According to this story, Potemkin, who led the Crimean military campaign, had hollow facades of villages constructed along the desolate banks of the Dnieper River in order to impress the monarch and her travel party with the value of her new conquests, thus enhancing his standing in the empress’s eyes.

Modern historians are divided on the degree of truth behind Potemkin villages. While tales of the fake villages are generally considered exaggerations, some historians dismiss them as malicious rumours spread by Potemkin’s opponents. These historians argue that Potemkin did mount efforts to develop the Crimea and probably directed peasants to spruce up the riverfront in advance of the Empress’s arrival. According to Simon Sebag-Montefiore, Potemkin’s most comprehensive English-language biographer, the tale of elaborate, fake settlements with glowing fires designed to comfort the monarch and her entourage as they surveyed the barren territory at night, is largely fictional.

Regardless, Potemkin had in fact directed the building of fortresses, ships of the line, and thriving settlements, and the tour (which saw real and significant accomplishments) solidified his power. So, while “Potemkin village” has come to mean, especially in a political context, any hollow or false construct, physical or figurative, meant to hide an undesirable or potentially damaging situation, the phrase may not apply to its original context

According to a legend, in 1787, when Catherine passed through Tula on her way back from the trip, the local governor, Mikhail Krechetnikov, indeed attempted a deception of that kind in order to hide the effects of a bad harvest. (Wikipedia)

The Potemkin facade, permanently in place at Cannes, provides the perfect juxtaposition to the hardship many Europeans are feeling due to the recession and not the austerity measures they’ll have to endure as they’re put in place, measures that each EU17 or G20 meeting appears to crank up. Whilst Italian cites such as Napoli, and French cities such as Marseilles are being torn apart by hardship, the great and the good dine out at Cannes. One aspect the mainstream media hasn’t broached is the cost of this gathering, you can be sure the travel arrangements are first class and the security bill alone (cumulatively racked up over the past dozen or so meetings) would probably have paid to clear Naples streets of the infested, uncleared rubbish that piles up daily…

Apparently stunned by Greece’s show of defiant independence the Merkozy alliance has blown apart any thoughts that the EU en masse is a democratic entity by throwing the ‘made up as you go along’ rule book at Greece. As to what rights the ‘Merkozys’ have to issue diktat and threats to another member state, without the full support of other members by way of unified permission, remains unclear. But threaten they have, not only using threats of with-holding cash bailout support, but attempting to put words into the mouths of Greek officials as to how they should frame the referendum questionnaire which is a matter for the Greeks not the EU.

If any more proof were needed that it would have been far better for the French and German leaders to have acted statesmanlike and said nothing then this impasse has provided it. We now have a situation were a cool, calm series of questions put to the Greek people is by far the least damaging option as opposed to G Papa’s government suddenly imploding and being replaced with an interim emergency govt. that may still insist on a people’s referendum. The deeply disappointing aspect of this whole affair is that it was avoidable, Greece should have been allowed to default in an ‘orderly’ fashion in 2010. The blame for not allowing it to do so lies at the feet of the Merkozys who are now vainly scrambling to control their own domestic political careers.

Greece’s Finance Minister Evangelos Venizelos defied Prime Minister George Papandreou’s call for a referendum on the country’s membership of the euro, opening up a split before a confidence vote in the government tomorrow.

Greece’s position within the euro area is a historic conquest of the country that cannot be put in doubt, it cannot depend on a referendum.

 

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European leaders during their meeting in Cannes last night cut off aid to Greece until the results of a the referendum are known, which is likely to be held on Dec. 4 or 5, raising the spectre of a disorderly default as soon as next month. Hours later, Greek Agriculture Minister Costas Skandalidis called for an emergency meeting of lawmakers from the ruling socialist Pasok party to discuss developments before tomorrow’s vote. Polls show most Greeks object to the austerity required for aid, yet more than seven in 10 favour remaining in the euro, according to a survey last week of 1,009 people published in To Vima newspaper.

Naturally the ‘markets’ have reacted to the turmoil, equities have fallen albeit modestly in all European bourses, the euro has weakened to near a three-week low versus the dollar and its major counter parts while Treasury 10-year notes rose for a fifth day. The MSCI World Index dropped 0.9 percent as of 8:01 a.m. in London and the Stoxx Europe 600 Index sank 1.4 percent. Standard & Poor’s 500 Index futures retreated 1.4 percent. The euro lost 0.5 percent to $1.3676, New Zealand’s dollar slid 1 percent after the nation’s jobless rate gained. Oil, copper and silver dipped at least 1.5 percent.

Market data and snapshot at 9:45 am GMT (London time)

Asia/Pacific markets fared badly in the overnight and early morning sessions, the Nikkei closed down 2.21%, the Hang Seng closed down 2.49% and the CSI closed slightly up at 0.07%. The ASX 200 closed down 0.31% and the NZX 50 closed up 0.08. The SET is down 1.31%.

European indices are down moderately considering the Greek and Italian questions stalking the markets adversely affecting sentiment. The STOXX is currently down 0.48%, the UK FTSE is flat, the CAC is down 0.06%, the DAX is down 0.20% and the ASE (Athens main index) is up 0.23%.

Economic calendar data releases that may affect the afternoon market sentiment

12:30 US – Non-Farm Productivity Q3
12:30 US – Unit Labour Costs 3Q
12:30 US – Initial and Continuing Jobless Claims
12:45 Eurozone – ECB Rate Announcement
14:00 US – ISM Non-Manufacturing Index October
14:00 US – Factory Orders September

Analysts surveyed by Bloomberg predict that the ECB will keep rates unchanged at 1.5%. A Bloomberg survey forecasts Initial Jobless Claims of 400K, compared with the previous figure released which was 402K. A similar survey predicts 3693K for continuing claims, compared with the previous figure of 3645K. Based on a survey of economists, the median estimate was -1.0% for unit labour costs from last months figure of 3.3%.

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