Euro 50 billion more for Greece

The IMF has apparently come to two conclusions on Greece which the rest of the Euro area does not wish to admit. First, Greece will not be able to pay back all that she owes. Second, she needs another Euro 50 billion. Why then did the IMF lend Greece so much before with the pretence that it would work?
If Greece is to stay in the Eurozone she will need Euro 50 billion or more, to have enough cash for her banks to distribute and enough money for her government to pay its bills. In a normal currency zone this money would be sent to the poorer part of the zone and much of it would be grant, not loan. A city or county in the UK with low incomes and high unemployment does not have to borrow from the rest of the UK, but receives central cash to pay welfare benefits, pensions and local authority costs by way of grant.
If Germany wants to carry on with her currency zone then she has to accept that German taxpayers – and the taxpayers of other rich countries – have to fork out to pay for Greece. Greece, for its part, has to accept that the Eurozone can then settle its budgets and interfere in its government decisions.
It is deeply damaging to the Greek economy and people to go on pretending that Greece can pay her way locked into the Euro, and to pretend the European institutions can get all their money back with the agreed interest. After seven years of agreed programmes for reform and all that borrowing Greece is no nearer today to being able to repay than when it all started. So the rest of the zone must either pay up or tell Greece to leave. Outside the Euro Greece will become more competitive immediately and better able to pay her way. Her borrowing will then be limited by the market to levels she can afford.
the zone is cruel and unrealistic. It needs to tell Greece to leave, or it needs to pay up and take social responsibility for the unemployment and severe cuts it has helped create.

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What a scorcher?

On Wednesday we were told by various media outlets that the 36 degrees recorded in some parts of the UK was a new record.

That’s strange. The Met Office’s own website shows a high of 38.5 degrees in 2003. It’s still nothing like the summer of 1976 when the temperature from 23 June to 7th July was always over 32 degrees somewhere in the UK – now that was a hot summer.

This week is not the first time rails have buckled from heat, nor the first time we have hit 36 degrees. I seem to remember it used to be thought very hot if we hit 100 degrees Fahrenheit, which is more than 36 Celsius.

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Countering terrorism

Yesterday in the Commons we debated defence matters. The Secretary of State explained the actions UK aircraft are taking in Iraq, at the request of the Iraqi government. He raised the issue of whether the new Parliament would reconsider the position in Syria, and allow air strikes by UK aircraft there as well. Several of us advised against.

I share his revulsion at the actions of extreme groups in various parts of the Middle East. We all feel we want to take action to make an attack like that in Tunisia last week less likely. However, a mature well armed state needs to think carefully before committing to military action. It should always ask Is this a war we can win? If we win this war will there be a satisfactory peace that is better than the current situation? Can we win the war without doing unacceptable levels of damage to the place concerned, and without excessive loss of life, especially for non combatants?

The UK has had to counter domestic terrorist threats. The UK always sought to respond to terrorism at home under the rule of law. The authorities tried to locate terrorists, assemble evidence and prosecute them as criminals. This remains our approach to terrorists in the UK linked to Middle Eastern fanatical groups. In the Irish troubles the terrorists sought special political status. There were endless arguments about the use of force for self defence by the UK authorities and about the legal processes and the detention of prisoners.

To end the terrorist troubles in Northern Ireland successive UK governments, both Conservative and Labour, came to the conclusion that they needed to undertake a political process, engaging terrorist organisations in talks and finding a democratic answer to the conflicts within a troubled community. No political party in the UK ever advocated pursuing a war on terrorist organisations,authorising shooting or bombing by the state.

I raised the question of how the UK can contribute to a negotiated settlement in Iraq or Syria, and drew attention to the contrast between treating terrorism as a serious policing matter, and treating it as a war to be fought despite the terrorists being embedded in civilian communities of people who are not themselves killing others. The Minister reminded me that in the case of Iraq we have the request of the civilian authority and operate under that legal cover. In Syria we do not wish to be friends of the Assad regime, so there is no similar legal base for intervening in Syrian territory. The Minister implied that any intervention would be as a result of extending the remit from Iraq, chasing terrorists over the border who have been operating in Iraq itself.

I understand the frustration of many that we have not so far been able to stop some of the advances of terrorists in Iraq and Syria, though nor have we in Nigeria and other Middle Eastern countries where there is no UK wish to take military action.There are many other well armed powers in the region that can and do take action and know the local religion, culture and languages better than us.

The questions the government needs to ask are the ones in this piece. I do not see a way for the UK military to improve the situation in Syria by bombing. The UK should be neither on the side of the Sunni nor the Shia forces in this religious war. We should remember just how difficult it has proved to create a stable peace in Libya after taking military action. We should also remember our soldiers and air crews. Their tasks should be both feasible and legal.

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English votes – you read it here first

Today begins a government journey to give some justice to England. The minimum required is a guarantee that England will not have to pay a higher rate of Income Tax than Scotland based on Scottish votes at Westminster, that England’s MPs have a veto over laws the Union Parliament wishes to impose just on England, and that England has more power to decide how to spend the money we raise in taxes which is the equivalent of the Scottish bloc grant.

This was something I highlighted last summer during the Scottish referendum campaign:

August 10 2014 post
“On Tuesday I am giving the McWhirter Memorial lecture at 7.30pm on HMS President, moored on the Victoria Embankment in London.

I will use the opportunity to make the case for England. If we assume Scotland votes to stay in the Union, the three main Westminster parties have promised more powers including powers over parts of taxation will be passed to the Scottish Parliament. This will be the time to recognise that England too wants and deserves devolved government, enjoying the same powers of self determination of laws, spending and taxes as our Scottish neighbours and friends.

I will ask Who currently speaks for England? Why do the EU and many senior politicians in the UK want to break England up into regions that we do not seek or recognise? Why can’t English MPs at Westminster make the decisions for England, and speak for England, in the way the Scottish Parliament in Edinburgh does for Scotland?

If we are revisiting Scotland’s settlement, we need to consider England’s at the same time. Many English people will not accept Scottish members of the Westminster Parliament voting through taxes on England that they do not have the power to impose on Scotland.”

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Mr Javid gives good advice to the CBI

I was delighted to read the Business Secretary’s speech to the CBI this week. In it he told them in no uncertain terms that if they continue to say the UK must stay in the EU come what may, they undermine the Prime Minister’s negotiations. He reminded them that in a negotiation you need to set out what you want, and to indicate that you will walk away if you do get a good offer. Business is for ever telling us they want to stay in a reformed EU, not the current EU. They should now tell us what reforms they want. They should also tell Brussels what reforms they want, and tell Brussels that people in the UK will vote against staying in if we are not offered solutions to the problems with our current membership.

At the base of the UK’s unsatisfactory relationship with the modern EU is the way in which the EU uses the so called single market as an excuse to regulate, legislate and interfere in a range of other important matters in ways which UK voters do not approve. The modern challenge for business is the way in which the demands of the Euro for more taxes, more financial controls and more business regulation are also spilling over into the wider EU. Big business does not like the banker bonus controls, the Financial Transactions Tax and the new banking capital rules from Brussels, though these may be popular with some voters. Nor does business like the results of the EU’s energy policy, with dear gas and electricity driving energy using businesses out of the UK.

The truth business needs to understand is that membership of the current EU is not a comfortable status quo that they can live with, but a ticket for a wild ride to political union which may do all sorts of things they do not want. The recent programme set out by the 5 Presidents of Euroland and the EU show just how central to the EU the Euro project has become. They want legally binding targets and controls on economies, a Euro Treasury, a financial union, and a political union. The UK has wisely decided not to join the Euro. Few business leaders want us to join the Euro. They therefore need to understand that any UK government now has to negotiate a new relationship with the emerging Euro state. We want to trade with them, be friends with them, have a range of sensible agreements with them but we do not wish to be governed by them.

It is an urgent task to get more business people to grasp that now we have an opportunity to free ourselves to be more prosperous, and to free the Euro area to get on with what it wants to do. The UK and our businesses do not wish to be drawn into a massive transfer union where we have to pay more tax to send to countries in the Eurozone that need more aid and support. That is why now is the time for business to tell us what reforms they need as we seek this change of approach.

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Mr Juncker wants our pity as well as our money

Mr Juncker’s 29th June press conference is already infamous for his parting jibe that the Greeks should not commit suicide because they are afraid of death. There is a serious problem of suicide levels in Greece thanks to the economic misery the Euro and its policies have created. This made the remark crass. Talking of mortality as a simile for the Euro and its policies also showed a curious lack of judgement.

As remarkable was the way Mr Junker decided to talk about the crisis as being about him. He explained how personally saddened and aggrieved he felt by the events of last Saturday. He felt betrayed by the failure of the Greeks to respond to all his personal efforts to bring about a deal. (Je suis profondement afflige, attriste, par le spectacle qu’a donne L’Europe samedi dernier…..apres tous les efforts que j’ai deployes…je me sens un peu trahi parce qu’on prend insuffisament en compte mes efforts personnels…). Highly paid officials do not usually vent their feelings in public about complex negotiations they have to conduct on behalf of their organsations. Mr Junker is paid around £300,000 a year in salary, expenses and benefits to be a professional. Most people could put up with a few difficult meetings for such a large public reward from taxpayers.

In the wider scheme of things Mr Junker’s feelings are of little significance. They do, however, reveal the growing gap between the lives and views of the EU ruling class and many of the voters and taxpayers who have to pay their salaries and live under their unsuccessful policies. The suicide comment is Mr Junker’s “let them eat cake” moment. It could prove to be almost as memorable as its predecessor should Greece dig in and be forced out of the Euro by its lack of cash, the intransigence of the rest of Euroland and its own high spending and borrowing inclinations. Mr Juncker’s personal quest for recognition and for our sympathy for his hard and so far fruitless work to find a compromise or agreement is more a sign of incompetence than proof of a worthy and trusted official who has been treated badly.

Perhaps Mr Juncker should now apologise to the Greek people for his remarks. His closing words in his press conference were a direct appeal to the Greek voters in their forthcoming referendum. He tells them to vote Yes whatever the question. As far as he is concerned he says the real question that the referendum decides is whether Greece stays in the Eurozone. The Greek government say the question is the one they put on the ballot paper, which is about whether to accept the last offer from the rest of the Euro area or not. His speech implies he thinks the question is whether the Greek people come to recognise the talent and hard work of their EU President of the Commission, and whether they give him carte blanche to override their government and sentence them to a few more years of Euro austerity.

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Railway improvement?

What should be on the agenda for the new Chairman of Network Rail?
I would like him to start with an analysis of who the users of the railway are, and where the growth in passenger and freight demand might come?

The opportunity seems to lie mainly in two big areas. The first is travel into and out of the larger cities, especially but not only at peak times. The second is more rail freight, taking heavy loads off trucks for longer distance haul. The first is genuine demand, even at current high ticket prices in the case of peak travel . The second is desirable new business which will be price and convenience sensitive.

I would want him to see the problem from the traveller’s point of view. The traveller wishes to go from A to B, where neither A nor B is a railway station. The traveller is interested in speed and convenience as well as price, and will look at total journey time rather than time of the train. This means the successful railway manager does have to ensure good car parks, set down points, bus and mass transit links to mainline stations. The problem with the commuter railway is the problem of peak usage. The railway has to allow for much greater demand at busy times, and have surplus capacity for the rest of the time. More flexibility in running shorter or longer trains would help adjust. Taking too many trains out of the off peak timetable makes the total service less desirable.

Trains need to be lighter, so they can brake more quickly. It would then be possible to increase throughput on lines, from around 30 an hour to 40 an hour in the peak, greatly improving services and adding 33% extra capacity when needed. The long lengths of empty track visible in the morning peak is testimony to an old technology and an unwillingness to innovate to help customers. None of this requires a change of traction from diesel to electric. Customers do not on the whole want electric as opposed to diesel trains, though they would like new trains with more capacity for busy periods.

The problem of freight is one of access and single wagon marshalling. Few businesses have a trainload of traffic for the railway each day. British Rail allowed freight to run down, losing much of the old single wagon business it enjoyed on pre war industrial parks with rail access. The railways came to rely on coal, steel, cars, cement – a few large businesses with large quantities to haul. These in turn have declined or found other cheaper ways of sending their goods.

The railway should ask how can they put freight branch lines back into larger industrial parks and urban industrial areas, so they can pick product up for large manufacturers who lack a trainload? How can they provide marshalling yard access for businesses which are prepared to drive a container to the railway to travel longer distances by train? How can they start to match or beat the price of road haulage? They should be able to cut costs of manpower, as a long train needs but one driver, and cut the costs of fuel. There has to be an allowance for the extra costs of getting to and from the railhead. Maybe the railway has to offer tractor units and delivery drivers to take freight from main freight depots to end destinations.

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The euro versus democracy- a Greek tragedy

The Greek government’s wish to put the latest Euro area/IMF offer to voters for decision is a game changer. It has left a wounded and surprised Euro area fulminating against the way Greece behaves.

The European Central Bank with the support of the Euro area has cut off all supply of Euro support to Greek commercial banks. As a result we now have our third Euro, the Greek Euro. Like the Cypriot Euro in their crisis, the Greek Euro is not freely convertible into the regular Euro as you cannot draw it out of a Greek bank when you want to. What kind of a currency is this European single currency, when the Central Bank does not stand properly behind all the banks in the system, and when in part of the zone they have to close the banks on a normal trading day?

I am on neither side in this damaging row. I think Greece should leave the Euro, devalue, write off debt preferably by agreement and have a fresh start.No-one with a powerful part in the crisis wants that answer.

My head is with the Euro area when they say Greece should honour her agreements, repay her debts, and seek to live within her means. The problem is their approach causes misery and mass unemployment,so my head also says they are wrong in the wider scheme of things.

My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them. My heart loses sympathy if their responses plunge themselves and the wider economic world into danger by their inability to get on with their creditors.

Many UK people are with the Greeks in opposing a mindless austerity policy at a time when Greeks have already lost a quarter of their national income,
have a quarter of their workforce unemployed, and lack demand and tax revenue to pay the bills. We are also with them when they say their democratic will and their elections should be able to change things for the better, and need to be recognised by the rest of the EU as important.

What a predictable tragedy the Euro has become. If you want a single currency to work you need a single government to back it, a single demos to decide who rules, and an economic policy which generates prosperity for the many. The Euro area still lacks all these features, so it is no wonder it limps from crisis to crisis.

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What price a new railway?

Some of the most difficult emails or letters I receive tell me we need to nationalise the railways. I write back pointing out that is exactly what Labour did when they took over Railtrack and put it into 100% taxpayer ownership, and strengthened the controls of the state over the contracts of the individual train operating companies that run trains on the nationalised railway. Today’s problems in the railways are the direct result of having a nationalised monopoly railway with access to huge sums of taxpayer cash.

In the year to March 2014 the Network Rail accounts show that the five executive directors were paid £990,000 (2 people successively in the same post),£922,000, £880,000, £890,000 and £567,000. It is difficult to understand why the state sector pays such huge salaries to people who presumably have some sense of public service and duty, and when the railway pre subsidy is heavily loss making, offering an indifferent service to its users. The only explanation for such large salaries must be the talent and ability of the people concerned and the results they are achieving. In which case, why aren’t the financial and operational results better?

I raised the issue of Network Rail’s poor financial performance and high cost base in the Commons during the productivity debate, before the latest problems were known. I also met with representatives of the industry at the Commons recently and asked them about the high costs of work being done. Why I asked, did the welcome improvements at Reading station cost somewhere between £850million and £900 million when the original estimate was reported at £400 million? Although this was the prime project Network Rail reported last year no-one at the session could tell me which was the right figure for the cost or why the original cost/plan had been so much lower. The representatives of the industry did not come across as regarding cost or taxpayer money as that important. I still await a written reply to my queries at the meeting.

I also pointed out to them that when I travel on the railway I see plenty of evidence of poor management. I see large areas of unused land close to stations and town centres, with no sign of anyone trying to use or develop it in ways which could improve the facilities and bring in private sector investment or cash. I see supplies of building materials, sleepers and engineered products lying around decaying. I see old coaches, engines and wagons left in sidings to rust. I see sidings and branch lines with weeds growing high between the tracks. It does not look like a well run business, with proper control of its stocks and assets. They need to clean the place up, see what they have lying around, use the stocks and assets or sell them off for scrap or recycling.

The present failure to proceed on time and budget with the electrification schemes the railway top management have always said they need to run a better service is shocking. I have myself been sceptical about the need to change traction to get a better railway, but it is this railway management’s mantra and if it brings better trains and more services then all well and good. Electric traction should be dearer than diesel, as it is a secondary fuel. There are substantial fossil fuel energy losses when generating the power in the first place and losses in taking the power to the tracks as well as the energy inefficiencies in the electric engines themselves.

I hope the Minister will use his unwelcome pause of modernisation schemes to review whether there are quicker and cheaper ways to give people a better service with more trains when needed. The new Chairman needs to review his top team and see if with better leadership they can do the job, or whether some of them need replacing as well. What is clear is so far the state is overpaying the management of the railway for what they do, and proving again that nationalisation does not work well.

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What the Queen really said in Germany

Some in the media tried to trivialise, distort and politicise the Queen’s speech in Germany this week. They wrongly thought she was saying the UK has to stay in the EU. This was a curious interpretation of one sentence in a speech which did not mention the European Union by name, and which certainly did not break the rule of the monarch staying out of current political controversies at home.

By doing this the media missed a much more significant feature of the Queen’s speech. Far from being a eulogy to the EU it was a short serious analysis of the state of Anglo-German relations based on an 800 year perspective. I thought it was remarkable for how honest, tough and balanced it was.

The speech began by reminding her audience that we are currently commemorating events in the Great War in 1915, and marking the 70 th anniversary of the end of the Second World War. To reinforce the point she was making she told them of Magna Carta and England’s early march to democracy, going on to say

“Tomorrow I shall visit St Paul’s Church where the first freely elected legislature in Germany met in 1848. The Frankfurt Parliament turned out to be a false dawn; it took another century and the loss of the most terrible wars in history to set Germany on the path to democracy”

Here was the Queen of Great Britain and Northern Ireland telling our German neighbours that we are glad we are now friends, that democracy is the ally of peace, and that Germany only got onto the path of democracy after 1945. The UK as the Queen reminded her audience has been involved in European affairs, and had to fight two dreadful wars which none of us wish to see repeated.

To underline the sombre message more she told of royal visits to the sites of Jewish concentration camps, and of her own immediate visit to Bergen Belsen.

I would say this was a profound and brave speech to make in the circumstances, backed by a visit whose very steps wished both to highlight the past and point to the peace we have now created on the back of a new relationship with a more democratic Germany. She spoke of reconciliation.

It would be good sometimes if the media tried to report what is interesting in what was said, instead of trying to impose their own bizarre agenda onto words that mean something else. If the Queen had been helping the stay in campaign she would have visited a series of sites built with EU money, praised the work of the EU in her text, and directly linked the EU to the peace in Europe which has been created by other forces and means. Now that would have been a story,because that would have been unwarranted interference in politics by a Queen who is usually an impeccable judge of where she should stay silent.

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  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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