Last updated: May 19, 2012 12:26 am

The Diary: Howard Davies

A discussion on the eurozone on a yacht in Greece and watching a play in Manhattan with investment bankers
Flags from Greece and the European Union©James Ferguson

Two weekends ago the Corfiots were too preoccupied with the Greek election to pay much attention to a scruffy old 30ft cruising yacht meandering from bay to bay on their island. They were making a big mistake; on board was a priceless cargo. While my young crew hauled and trimmed, I sat in the cockpit buried under a paper mountain: 85 essays from my course on the Political Economy of Central Banking at Sciences Po in Paris.

The Masters students, from 32 countries, mostly European, could choose to write about what the Bank of England’s governor Mervyn King meant when he said central banking should be boring, or about whether and why the US Federal Reserve failed to head off the financial crisis. But most elected to grapple with the euro meltdown. I asked them whether they thought economic and monetary union could survive without radical treatment or surgery.

Not a single one believed that the current mix of policies would do the trick. They were not all in what we might call, in tribute to the FT commentator, “the Wolfgang Münchau Götterdämmerung faction”. Most retained a sense of enthusiasm for the project and believed it could be rescued, given a change of political sentiment in Germany. But they thought that if the Greeks pushed their luck and unilaterally demanded a new bail-out package, the response would simply be, “Auf Wiedersehen.”

Leftwing Syriza voters in Greece took a different view, although I can’t help thinking that had their leader Alexis Tsipras shared my marking load, he might have reconsidered his position.

So is euroyouth turning eurosceptic? Do they look enviously at the Brits who cry, “Doomed, you are all doomed”? Bluntly, no. My students do not mention Brown or Cameron. British views are seen as largely irrelevant. They have more time for France’s new leader, François Hollande. They think he is on the right track.

Several writers thought it incumbent on the French and German leaders to dream up a solution, and schnell. After all, they reminded me, the euro was born of an unholy deal between Germany’s former chancellor Helmut Kohl and François Mitterrand. France’s then president agreed to German reunification, which made him very anxious, on condition that – if the Germans had the whole of Germany – France must have half the D-Mark. Berlin has had by far the best of that deal, with a lower exchange rate and booming exports. Now it is time to pay.

As we pottered into Paxos (as with the eurozone economy, there was little wind in our sails) I pondered on the realism of these pleas for German flexibility. We aimed our modest craft at a tempting gap between two Bavaria 42s, moored a boat-width apart on the tiny quay. OK, it was a cosy fit but the Greek islands are like that. “Nein, nein, nicht möglich” (“No, no, it’s not possible”) was the angry cry from both sides as we were pushed away. The watching Greeks sat by, fiddling with their worry beads, as we meekly made our Grexit to another mooring.

. . .

I don’t recommend commuting from Corfu to Krakow. EasyJet can get you there but via Gatwick – and it was on a day when the UK Border Agency was on strike. The Polish economy is the only one in Europe to have avoided a recession in the past five years. How they manage without plumbers, builders and waitresses I have no idea but maybe these trades are not as crucial for growth as we assume.

I was there for the Polish-British Round Table. The number one topic, you will be astonished to learn, was the future of the eurozone. The Brits were careful not to sound too smug about being outside but that is what we felt, of course. Aren’t we clever boys and girls?

The Poles seemed a little less impressed by our cleverness than we thought they should be. Indeed, they still want to get into the eurozone as fast as may be, albeit not on the original timetable. We questioned them about it. Aren’t you anxious about its stability, and the risk of taking on a share of other people’s debts? Don’t you worry about the aggressive politics of austerity you will be obliged to pursue? Over the slivovitz, we pursued these themes.

Our questions were seen by our hosts as beside the point. “What’s wrong,” one inquired politely, “with living within your means?” “We haven’t waited a thousand years to be at the centre of European governance to be put off by a bit of fiscal turbulence,” another observed, taking a refreshingly long view. “We want to board the ship, even if it is sinking,” said a third (an economist, of course).

The event was delightful. Krakow is a gem, full of castles, churches and art nouveau stained glass. We ate, drank, and were merry, but no minds met. British pleas for redefining the purpose of the EU were politely ignored. One wit (well, me) suggested a Polish-Scottish Round Table might find more common ground. They are looking for dates in 2015.

. . .

There are no Krakow/New York flights, and my corporate jet was in for its MOT, so I had to pass through London, which allowed me to turn out for the Barnes Common CC in the first game of my 36th season. We played Lord Gnome’s XI, without Ian Hislop, as it turned out.

I am only selected these days by virtue of a kind of droit de seigneur as a founder member. But the last ball of my first over (after a couple of sixes, I should admit) went straight up in the air and back down the throat of our club secretary at silly mid-on, a decidedly catchable catch, as PG Wodehouse would have said.

Unfortunately, he decided to try to catch it with his throat, rather than with his generally reliable two hands. It is possible that, with the passage of time, I may speak to him again, but one can never be sure of these things. At my age, wickets are as scarce as British supporters of the euro.

. . .

I hopped to Manhattan for a couple of days with the Masters of the Universe. Even besieged financiers must relax sometimes, so I took some hard-bitten ruthless investment bankers to see the National Theatre’s production of One Man, Two Guvnors, which opened on Broadway last month. (Full disclosure, as they say in the trade: I chair the NT’s finance committee, so have a non-pecuniary interest in its success.) I did not need to worry. The play’s star, James Corden, had the audience eating out of his hand. For two hours, dynamic hedging strategies and derivative class action suits were left on one side, as they roared. Our very British attempt to serve the two guvnors of Europe and the US may be doomed to failure. But playing the fool is a noble role. He is often wise, though he is rarely thanked for his foolish wisdom.

Howard Davies is a professor of practice at Sciences Po in Paris and former deputy governor of the Bank of England

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