The debate over bail outs

 

            The Uk government has been right to argue against a further Greek bail out, and right to keep the UK out of any direct Greek bail out. I have argued here that another bail out for a country which cannot afford its current debts will not solve the problem. it just means more money will be lost by the creditors in the end, when the underlying reality is faced.

            On Tuesday the government has to explain to Parliament why it goes along with an IMF bail out of Greece, when it correctly refuses to countenance joining in a direct bail out alongside the IMF.  I expect we will be told three things.  Firstly, the planned increase in IMF capital goes back to the time of Gordon Brown, when he was trying to save the world by nationalising risks and printing money. Secondly, the UK needs to remain as part of the IMF and  therefore has to play its part in increasing its capital. Thirdly, we will be told that the IMF issues stringent terms and has priority over repayments, so maybe it will get its money back.

              All this is true. It leaves  open some other questions which Ministers would be wise to ponder.

             The first is, why should the UK have to put in a larger percentage increase in her contribution than Germany, Belgium, Saudi Arabia and many others?  Why can’t we limit our increased contribution to the bottom end of the scale of increases, in view of the UK’s currently heavily indebted position?

            The second is, why can’t the UK find like minds in the IMF and have more influence over how the IMF spends the money?  The reason for the current large increases is partly the present and likely future commitments to Euro zone bail outs. Shouldn’t the UK be persuading the IMF that the UK’s position over Greece is correct -no more bail outs?  Should the UK be arguing that the Portuguese, and possible other future Euro bail outs may be unwise? If we won those arguments the IMF would not need so much extra cash.

            The third is, shouldn’t we say that the IMF should only lend to sovereign countries in trouble? Euroland members are no longer sovereign in any meaningful sense. The bodies which should go to their aid are the European Central Bank, the EU Euroland members acting as a whole, and individual richer Euroland states. The IMF would not consider making a loan to a County Council or major quango in the UK. It would say the UK authorities have the means and the responsibility to decide whether to lend or not to such a body. So why should the IMF lend to Euroland members, when the Euroland centre and its Central Bank are thought to be strong, supporting a fairly strong currency with low interest rates?

             Using IMF money to prop up a currency which is based on insecure foundations is a very bad idea. The IMF should send Euroland an essay on how single currencies can work and on the responsibilities of the government and Central Bank which back them. It should not lend a penny more to Euroland economies. It should not need the large UK capital contribution currently planned.

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65 Comments

  1. lifelogic
    Posted July 4, 2011 at 6:30 am | Permalink

    Nothing to add all perfectly sensible but why will Cast Iron ignore all this as he clearly will. He is not stupid so what are his true motivations – for acting clearly against the voters, the Tory parties’ and tax payer’s interests (and indeed the long term interests of Europe and the World economy).

    Can you JR or anyone else understand what his real motivations are?

    • lifelogic
      Posted July 4, 2011 at 6:48 am | Permalink

      Anyone who has listened to the BBC much, in particular woman’s hour, knows that the BBC generally think that any man accused by a woman of rape is clearly guilty and should go to jail for ever. The woman’s word should be sufficient evidence alone (even if she was too drunk to remember anything at the time or has a history of lying). She should be given anonymity and he should be paraded as guilty in the papers and TV on day one. The woman’s background and past honestly is not relevant and should not be allowed to be brought out. Woman who do make false accusations do not exist and even if they do they should not be prosecuted for doing it and remain anonymous. Clearly reasonable doubt and a fair trial should not apply to this area.

      In view of the Strauss-Kahn developments and many other cases – should they perhaps not revisit their position on this (as indeed on almost everything else).

    • APL
      Posted July 4, 2011 at 8:40 am | Permalink

      Lifelogic: “Can you JR or anyone else understand what his real motivations are?”

      Like Louis sixteenth in France, it is inconcievable to Cameron or come to that, anyone else in the Westminster bubble, that things won’t just keep on ticking over, just the way they have been for the last century.

      He has no motivations other than being at the top of the pile.

  2. Gary Jones
    Posted July 4, 2011 at 6:34 am | Permalink

    I think Greece, by most definitions is still a sovereign country.You can blame Gordon Brown for the increase in contributions to the IMF, but the Government does not have to pay it. But I agree it is one big mess,I will do my bit by going to Corfu on holidays

    • APL
      Posted July 4, 2011 at 8:44 am | Permalink

      Gary Jones: “I will do my bit by going to Corfu on holidays”

      And it bears remembering that it was largely British people holidaying in Spain that turned the Mediterranean coast of Spain from an economic basket case to a vibrant economy.

      We don’t need government to ‘stimulate’ other countries with aid. Where it suits the British we will do it ourselves, thank you very much.

      • Simon
        Posted July 5, 2011 at 9:08 am | Permalink

        Exactly .

        Just look at the effect that the price hikes brought about by the Euro have had on their tourist industries .

    • forthurst
      Posted July 4, 2011 at 1:50 pm | Permalink

      Is Greece sovereign in the context of its currency? Surely it has surrendered that sovereignty to the ECB and the other Eurozone countries? Can it alter its interest rates? Can it print its way out of its obligations?

      The Eurozone is maintaining policies which are good for France and Germany and bad for Greece; perhaps they could reverse their priorities?

      The EU is a French racket; does the same now apply to the IMF? The warning signs are there: the UK being asked to hand over billions to further the political and financial interests of France.

    • Stuart Fairney
      Posted July 4, 2011 at 4:59 pm | Permalink

      I would be a bit careful if I were you. When Greece does go bankrupt as it surely must (the latest nonsense is buying time, no more), all the Greek banks go bust and thus Greeks have nowhere to get money from. So, imagine what some criminal types might do to tourists with cash?

  3. Mike Stallard
    Posted July 4, 2011 at 7:30 am | Permalink

    Every time I turn on the radio or the TV we hear of someone who desperately needs our money and usually it is handed out to them on a plate. Today it is people who are getting over £500 a week for being on the dole. The Labour Party of all people is warmly supporting their begging! Michael Portillo has been given several millions for some arts project or other.
    £500 a week! £500 a week!
    Meanwhile the EU/Greece is just cutting a hole in our finances at billions and billions every day.
    And nobody seems to care.

    I thought this was the government of cuts. Instead it is an incontinence of hand-outs.
    Meanwhile our petrol is £1.35 a gallon, our VAT at 20% (think of that!) I dread to think, as a pensioner, what other taxes people on this blog are paying. I really do.

    It is so easy to spend other people’s money isn’t it.

    • alan jutson
      Posted July 4, 2011 at 8:52 am | Permalink

      Mike

      I wish our petrol was £1.35 a gallon (well it very nearly is I suppose) but with taxes it actually is 4.5 times that.

      Also reported in the national news papers, the benefits to all, of our international health service, where non residents come here for treatment on a visitors visa.
      Recent case reported, exposed a Nigerian lady who has now had multiple births.
      Arrived in the Uk when 5 months pregnant, still here more than some 6 months later, bill so far to the UK tax payer over£500,000 to look after her premature babies, she it would appear, is now seeking to renew her visa in order to stay here with her sisters a little longer, for emotional support.
      Her husband it seems, if press reports are true, is still in Nigeria !.

      It appears she has no money to pay towards any treatment ! Guess she has no travel insurance either , even if she had, it would probably be excluded as a pre condition.

      Just a thought given its a topic of conversation at the moment, £500,000 would pay for 20 elderly, sick UK citizens, to be looked after in the average nursing home for a year.

      John are there any figures for what is owed to the NHS by foreign visitors, or does each Primary Care Trust area have to keep their own record?

      See from reports the Lib Dems seem now to be going soft on Housing Benefit limits, seems £500 per week (£25,000 tax free a year) is not enough or them to give out.
      Guess half the working population earn less than £25,000 to pay for this, and their wages are certainly not Tax Free.

      Thought Mr Osbourns total Benefits limit for any one family was going to be £25,000 tax free
      Is this still the case ?
      If so where does it leave this situation ?
      Is Housing Benefits included in the total ?.

      • lifelogic
        Posted July 4, 2011 at 7:27 pm | Permalink

        The Nigerian mother and babies did look rather bonny in the pictures though. What would you do if you were in her position I wonder? I would rather they spent it on delivering these bonny babies than on much of the Cameron nonsense. Certainly preferable than on pointless bail outs and the green house Bling nonsense.

        • alan jutson
          Posted July 5, 2011 at 9:30 am | Permalink

          Lifelogic

          Would be cheaper for us to hire a private plane and send her and her and her little ones back to join their father (or is he now coming here as well) so that can see how bonny they are as well, rather than continuing to spend a fortune looking after them all here.
          Funny she seemed to find the money to take the right fertility medication in Nigeria to get pregnant in the first place (press reports), but now has nothing !

          • lifelogic
            Posted July 5, 2011 at 8:09 pm | Permalink

            Yes but what would you have the state/doctors do faced with a woman carrying 5 children. At lease the money is not bombing people.

        • lifelogic
          Posted July 5, 2011 at 2:43 pm | Permalink

          Not to mention the expenditure on the counter productive wars.

    • Mick Anderson
      Posted July 4, 2011 at 11:07 am | Permalink

      I wish petrol was only £1.35 a gallon…. I’m paying that much for one of those tiny European litre units!

      • lifelogic
        Posted July 4, 2011 at 9:24 pm | Permalink

        It is nearly before taxes and profits.

    • GnosticBrian
      Posted July 4, 2011 at 5:16 pm | Permalink

      Mike, where can I buy petrol at £1.35 per GALLON? Around here (Kent) it costs that much and more per LITRE.

    • uanime5
      Posted July 5, 2011 at 7:51 pm | Permalink

      Most of the people who get this much money are working in high cost areas on minimum wage. It seems that benefits have gone from being paid to those out of work to supplementing the income of those in work so companies can keep their wages low. If you want welfare to fall you have to make companies pay a living wage.

  4. Alison Granger
    Posted July 4, 2011 at 7:41 am | Permalink

    Face it, there’s no chance of this coalition standing up to the EU or IMF. They’ve rolled over and played dead at every possible opportunity so why should this time be different?

    • BobE
      Posted July 4, 2011 at 10:58 pm | Permalink

      This coalition realises they will loose the next election. So they play to there future paymasters in the EU. Tis survival my boy.

  5. Duyfken
    Posted July 4, 2011 at 7:51 am | Permalink

    As a corollary to your third point, if the IMF is hell-bent on lending monies to Greece, should it not insist on firm collateral from all other countries within the Eurozone?

    • Kenneth
      Posted July 4, 2011 at 7:48 pm | Permalink

      Absolutely.

      This is what we should be arguing for.

      Neither the ECB nor the eu quango can be guarantors as the ECB is holding too many toxic debts of its own and the eu doesn’t have sufficient funds of its own. Only individual Eurozone states can provide collateral and, as you say, this is what we should be pushing the IMF to insist upon.

  6. Gary
    Posted July 4, 2011 at 8:11 am | Permalink

    This is a back door banker bailout.

    “Using IMF money to prop up a
    currency which is based on insecure
    foundations is a very bad idea. ”

    They bailed out the UK in 1976.

    ALL, these fiat debt based fractional reserve currencies are deeply flawed. They are all unsustainable and will all collapse in time. That should be our debate.

    • BobE
      Posted July 4, 2011 at 11:01 pm | Permalink

      Gary, they only think over a 5 year period.

      • lifelogic
        Posted July 5, 2011 at 11:51 am | Permalink

        Only three and a bit years now.

  7. Barry Laughton
    Posted July 4, 2011 at 8:20 am | Permalink

    Be very careful, the argument is well made, but let’s not encourage the Brussels Despots (not sure if they benevolent) to consider they are rulers of a sovereign country until we are well out of it.

  8. GJ Wyatt
    Posted July 4, 2011 at 8:32 am | Permalink

    The reason for any IMF loan should be made clear. When the IMF gave a loan to the UK in 1976 it was to help deal with the current account deficit of the balance of payments, not to pay off any debt. A debt can be dealt with by selling assets. The IMF knows well enough that it is extremely difficult to fix the current account of the balance of payments solely by reducing expenditure within the country. Since devaluation is not possible for Greece within the Euro, then the rest of the Eurozone simply has to face up to ongoing transfers to Greece, not loans and just write off those transfers. Else Greece must reestablish its own currency and devalue its way out of its predicament. This is your County Council/Quango point.

    • Gary
      Posted July 4, 2011 at 4:10 pm | Permalink

      And so it follows that the solution to economic woe is neither found in monetary unions nor in the ability to devalue your currency, but in the implementation of sound money and living within your means. In fact, under sound money you HAVE to live within your means, since one of the tenets of sound money is the inability to extend credit without limit.

      In a sound money system excesses in one area produce shortages , and opportunities, in another. In this unsound money system, credit is sprayed everywhere, rates are distorted and neither shortage nor opportunity can be economically discerned, and so you get a splurge of bad investment, a false sense of wealth, govt overspending and asset bubbles. This all ends in a collapse, a bad debt clean-out (no matter what), and hard times.

      Sound money means that govt can no longer bribe voters with credit funded inducements, and bankers must drastically reduce their pyramiding growth expectations and reduce their share of the economy to make way for productive manufacturers. So, we will end up with nothing changing, except to jabber on endlessly about monetary unions being the source of all evil.

  9. APL
    Posted July 4, 2011 at 8:35 am | Permalink

    JR: “and right to keep the UK out of any direct Greek bail out. ”

    Qualification! We don’t want to be in any more bailouts, either through the IMF or any other NGO!

  10. Stuart Fairney
    Posted July 4, 2011 at 8:59 am | Permalink

    S & P tell us the current plan is de facto a default thus

    “French banks, major holders of Greek sovereign debt, proposed voluntarily renewing some of the bonds when they fall due, but on different terms.

    S&P cut Greece’s sovereign rating to “CCC” last month, from “B,” on a view that any restructuring of the country’s massive debt load would count as an effective default”

    Renewing on different terms, ie paying less, ie default!

    http://uk.finance.yahoo.com/news/S-P-warning-adds-default-reuters_molt-3509283131.html?x=0

    The game is up!

  11. alan jutson
    Posted July 4, 2011 at 8:59 am | Permalink

    If the IMF was a Commercial Bank, would not its profit from other loans given in the past, (assume they are all being repaid on the terms agreed) act as the seed corn for future loans, or is this new demand for funds, like a “rights issue” for extra capital for expansion ?

    If past loans are not being repaid, then it would seem that the IMF has a track record of calling it wrong. If that is the case, why lend it more money ?

  12. AndyC71
    Posted July 4, 2011 at 9:04 am | Permalink

    Well, the IMF is now run by someone whose stated aim is saving the euro at any cost. I have no faith whatever that the current UK government will take any kind of effective stance. I am slightly more surprised though that the Americans – who could teach us a thing or two about looking after the national interest – are not more worried about prospect of pouring untold billions down the drain… maybe they are, in private.

    Keep plugging away Mr Redwood, your points are sound as usual, but unless and until your party as a whole starts to take these issues of sovereignty seriously, nothing will be done.

  13. Brian Tomkinson
    Posted July 4, 2011 at 9:44 am | Permalink

    Not surprising that the IMF expect us to pay more than other countries when every day we hear that this government has “found” so many £millions for this or so many £billions for that. The problem is, of course, that we are borrowing the money and increasing our taxes and devaluing our currency. The fourth thing the government probably thinks but won’t say is that they had better keep on the right side of the IMF for the day when they have to go with the begging bowl, because that seems to be where we are heading. We ejected the profligate Labour party at the last election but find that they have been replaced by a coalition clone (that was clone not clown!). Instead of just worrying about circus animals, for goodness sake will you backbenchers force some reality into this shower.

  14. Electro-Kevin
    Posted July 4, 2011 at 9:55 am | Permalink

    Off topic, I’m sorry :

    Communities Secretary Eric Pickles indicates in a letter that a proposed benefits cap will render 40,000 people homeless. Are the Tories beginning to waver on yet another election pledge ?

    Will those homes really remain empty if benefits are capped so that unemployed people can’t get paid more than average workers ? Hardly. And I think most would view such a cap as more than fair bearing in mind that most workers earn far less than the proposed cap of £26k.

    Perhaps the rental market – over inflated by benefit loopholes – might drop and those homes will come into reach of workers earning average wages who are unable to afford them because they are stupid enough to have jobs.

    40,000 people may be forced to move out. Do not despair because 40,000 more deserving will be able to move in.

    I thought this was precisely the sort of thing the Tory party was supposed to stand for.

    • Electro-Kevin
      Posted July 4, 2011 at 12:12 pm | Permalink

      I suppose I could make a tendentious link between my post on the benefits cap and the IMF by saying that at least if Britain went bankrupt we’d be spared the iniquitous benefits system – the one that positively encourages benefit claimants to breed whilst discouraging the hard working from doing so.

      I know many hard working young people who are resisting the urge to start families because having jobs means that they simply can’t afford to.

      Whether to work or not to work ? At a certain level (lorry drivers/shop workers)you’re better off not doing so. Your material wealth is below that of your idle neighbours.

      It’s like communism, only worse.

      • alan jutson
        Posted July 4, 2011 at 4:18 pm | Permalink

        Electro-Kevin

        Agree with your sentiments, we are paying too many people to do too little, or nothing at all.

        Just a thought, why not make pay people on the Benefits system (exclude those who ar not capable of course) the minimum wage, and then find them something to do.
        They could:
        Keep the streets clean.
        Cut the grass.
        Tidy up parks.
        Get rid of graffiti.
        Clean Council offices.

        You do not require many skills for the above other than being willing and average (nomal) fitness as they are everyday jobs that obne should do in your own house.

        Higher skilled people could be paid a bit more and do Council maintainace on disabled pensioner homes, like fixing handrails, smoke alarms, extra locks, security lights, tidy the garden, decorate etc etc.

        A bit of Daves “Big Society” and savings on the Benefits system at the same time. At least we then get something for our money and the general area improves. It also promotes the work ethic, no work, no benefits.

      • Caterpillar
        Posted July 4, 2011 at 8:07 pm | Permalink

        I’ll pick up on the off-topic discussion. There seem to be 3 ‘classes’ of people at the moment:

        (1) Those on transparent state benefits that are better off than their neighbours
        (2) Those motgagees on the smokescreened benefit of negative real interest rates (just as socially divisive, and less ethical grounding), and
        (3) Those who work and save to pay their way who receive neither of these benefits (and as ElectroKevin says neither have kids nor mortgage.)

        I have heard no MP of any party strongly arguing for the fair response of putting the base rate up several per cent and cutting benefits. (The only use of the ‘nerve’ word relates to Sir MK’s misguided policy, it appears no MP has any nerve.) This is the only fair approach for now and the future, without it at least one, but probably both, of the over-claiming or over-borrowing cultures will carry on (its not economics, its short term populism.)

    • rose
      Posted July 4, 2011 at 10:52 pm | Permalink

      Not off topic at all Kevin. Rents are so inflated by government subsidy that even professional young people with no commitments can’t afford them. A twist on the situation when the government used to keep private rents so low that landlords coudn’t afford them – so there weren’t any. Remember that? (In the seventies, the last time we had a disastrous socialist government.)

  15. Javelin
    Posted July 4, 2011 at 10:10 am | Permalink

    The most probably scenario (i.e. peoples intentions happen) is that the Rating Agencies will announce a default but the Swap Dealers Associations won’t. AI said before I think this will have the effect that the CDS market will become confused – and will PUSH UP SOVERIGN BORROWING COSTS. This is because CDSs act as a voluntary insurance cost on the Soverign borrowing. Without the certainty they will pay out then buyers of Soverign Bonds will put the cost of insurance onto the cost of the bonds. For example CDS spread is 0.75 on 5 year Gilts, which are running at 1.75 – so a VERY signficant rise in the cost of borrowing for the UK Government.

    There is a direct link between Soverign Bond prices and Mortgage Prices, because Bonds are considered safer people who lend on the money markets want a higher return to lend to banks for mortgages. This means that banks will have to raise their mortgage rates to attract money. We could see a drying up in the mortgage markets and a forced rise in mortgage rates as investors move ther money into sovereign bonds.

    It’s worth reading S&P and the other credit agencies to find out what they are thinking.
    http://www.standardandpoors.com/ratings/govs-sovereigns/en/us

    A good S&P document you can search on google …

    “Credit FAQ: When Would A “Reprofiling” Of Sovereign Debt Constitute A Default?”

    http://xa.yimg.com/kq/groups/10924458/1351289987/name/S_and_P_.pdf

    “We generally define a sovereign default as the failure to meet interest or principal payments on the due date, or within the specified grace period, contained in the original terms of the rated obligation when issued. … we may lower the rating on the obligation to ‘D’ (default), even if only a portion of the rated bonds is subject to the exchange offer. We would furthermore lower the sovereign’s issuer credit rating to ‘SD’ (selective default) in such cases, indicating that the sovereign is proposing to pay less than what it had originally undertaken.”

    “reprofiling … (an extension of maturities in order to allay concerns regarding the encumbered short-term liquidity situation) … would constitute a default under our criteria because the sovereign debtor will pay less than under the original terms of the obligation.”

    “If the issuer credit rating is ‘B-‘ or lower, we would ordinarily view the exchange as distressed and, hence, as a defacto restructuring.” (Greece is now CCC)”

    “An S&P’s definition of default be different from that in CDS contracts?
    Yes [S&P’s definition of default be different from that in CDS contracts]. We follow the definition of default described above and in our criteria, irrespective of whether an event of default has (or has not) occurred under a credit default swap.”

  16. Damien
    Posted July 4, 2011 at 10:11 am | Permalink

    JR: Todays news confirms that your views are soundly reasoned as the S&P and now Fitch ratings agency are suggesting the Greek bailout may in amount to a default. This would mean that the ECB would refuse to purchase EU bonds.

    What we are witnessing are politicians using ‘Enron style’ accounting mechanisms (especially French banks with e47 billion exposure to Greek debt) trying to ‘buck the market’ albeit unsuccessfully!

    Meanwhile the suspicion here is that our own politicians are pushing through an enhanced payment to the IMF without transparency as to why our percentage contribution is so much larger than other countries.

  17. Acorn
    Posted July 4, 2011 at 10:21 am | Permalink

    Interesting to see just how many countries are borrowing from the IMF. Unfortunately the table needs an extra column titled, “amounts probably in a Swiss Bank account”. http://www.imf.org/external/np/tre/activity/2011/062311.htm#tab2a

    BTW. They tell you how the quota is worked out on this site as well.

  18. Peter van Leeuwen
    Posted July 4, 2011 at 10:32 am | Permalink

    ” Euroland members are no longer sovereign in any meaningful sense.”
    Please advice your IMF representative to duck after uttering these words, as there may be a number of shoes being thrown at his/her head. You might find more disliking minds than like minds and there might be satire about UK “sovereignty” as well.

  19. Andy Baxter
    Posted July 4, 2011 at 11:19 am | Permalink

    the answer to “why can’t we…..?” for all your questions Mr Redwood is so simple…

    we have a neutered impotent Parliament subserviant to the EU…..populated for the most part (there are a handful of exceptions) with lickspittle lackeys in thrall to the party machines…

    why don’t they all grow a pair and practice saying ‘No’, or should that be ‘Nein’

    • BobE
      Posted July 4, 2011 at 11:14 pm | Permalink

      It took Germany three goes but she finally rules europe

  20. Mark
    Posted July 4, 2011 at 11:53 am | Permalink

    At least the IMF is no longer led by the would-be Socialist French Presidential candidate and EU integrationist DSK. Christine Lagarde has a life history that includes a professor of English as a father, and periods of education and work in the US (rising to head a Chicago law firm). Whether she can get the IMF to do some synchronised swimming (she was in the French national team) in the right direction may be a different matter.

    Unfortunately, the Euro is not the only currency with problems. The dollar, pound and yen are also the subjects of overborrowed governments. Our overall government liabilities relative to GDP are the highest in our history, above those at the end of WW II or even the Napoleonic Wars. Perhaps we should get on and apply for our own IMF bailout before all the money has gone. One advantage would be little tolerance for backsliding on measures to cut spending.

  21. Mr Leslie Smith
    Posted July 4, 2011 at 12:24 pm | Permalink

    What is Cameron’s real Agenda in all of this? He clearly is not a stupid man but is certainly acting like one over EU Bailouts and bad loans to the IMF. If John Redwood is ignored, what hope for the rest of us? Even though we fully and heartfeltly support John on this matter.

    • BobE
      Posted July 4, 2011 at 11:17 pm | Permalink

      To provide himself with a good job in europe after he looses the next election.

  22. Denis Cooper
    Posted July 4, 2011 at 12:38 pm | Permalink

    Some years ago the government of Portugal gave financial assistance to distressed pig farmers, which was subsequently ruled to be illegal state aid under the EU treaties.

    Here’s a hypothetical question: could the Portuguese government have got away with giving that money to pig farmers if it had routed the payments through a fund set up in Washington?

    It seems unlikely that such a device would have washed with either the EU Commission or the EU’s Court of Justice; they would have said that it was still illegal state aid.

    As Christine Lagarde, then French Finance Minister and now the new head of the IMF, openly admitted last December that the eurozone bail-outs are similarly illegal under the EU treaties, how can such bail-outs become legal under the treaties if the money is routed through the IMF?

    She said that the treaties were “very straightforward. No bailing out” – and not “No bailing out, except through the IMF”.

    If government ministers believe that it is necessary to break the EU treaties by providing money to bail out eurozone states – distressed PIIGS, rather than pig farmers – then let them at least be open about that and show respect for the Parliament which approved those treaties through its Acts.

    Which must mean that they should not attempt to sneak the increased subscription to the IMF through by secondary legislation, an Order, but should instead ask Parliament to pass primary legislation, an Act to approve the payments “notwithstanding the European Communities Act 1972”.

    • APL
      Posted July 4, 2011 at 9:00 pm | Permalink

      Christine Lagarde: ” the treaties were very straightforward. No bailing out”

      Thus have the treaties been abrogated by the signatories and our obligations under them void.

    • BobE
      Posted July 4, 2011 at 11:24 pm | Permalink

      they can’t tell the truth

  23. Neil Craig
    Posted July 4, 2011 at 1:07 pm | Permalink

    I would not be happy with our government arguing that members of the EU are no longer sovereign. Even if it is true I would not wish to admit it.

    Note that the EU supported the break up of Yugoslavia on the astonishing grounds that the federal states of Yugoslavia already held sovereignty, neither the central government nor the local peoples had any right to determine the country’s future or borders. If the EU says Yugoslavia was never sovereign how many thousands of times moreso isn’t the EU itself?

    • BobE
      Posted July 4, 2011 at 11:25 pm | Permalink

      The EU is the new EUSSR. government by tractor production.

  24. Steve Cox
    Posted July 4, 2011 at 1:23 pm | Permalink

    John, nobody sane or intelligent could disagree with what you have written here. Sadly, this apparently doesn’t include our masters in Downing Street. Every day we read about various items of expenditure that cost £30 million, or perhaps £500 million, or a few billion quid even, and the commentators seem aghast at such sums. Yet when it comes to the EU, and IMF, not to mention the overseas development budget, we are willing to hand out MUCH larger sums – and for what return? Salving a guilty political conscience, perhaps? And then there’s the madcap plan to spend £100 billion on windmills while having to also spend £10 billion on gas turbine generators to provide standby power when the wind doesn’t blow – all leading to ZERO carbon savings.

    The Coalition seems as content as NuLab ever was to chuck our hard earned away on their pet passions, no matter how much the public abhors them. If they were actually cutting public spending it may not be so bad, but they are increasing it at an alarming rate, as well as beggaring us with high inflation. To be honest, I may as well have voted for (Mr Brown-ed) to stay in power last year for all the difference it seems to have made.

    • Tim
      Posted July 4, 2011 at 6:15 pm | Permalink

      Everyone is saying the same thing Steve. What is the difference? What have the coalition done other than give more money to foreign causes like the EU, bailouts, foreign aid, IMF whilst doing nothing about immigration, free public services for all, the Human Rights Act, The World Health Service (formerly the NHS)? I for one will not be voting for the Tories again UNLESS significant action on the above issues are taken. One fed up life time ex Tory voter!!

    • BobE
      Posted July 4, 2011 at 11:27 pm | Permalink

      government by power point is why you get this. Common sense is gone,

  25. Liz
    Posted July 4, 2011 at 2:18 pm | Permalink

    The government is just giving money to Greece via the IMF instead of through the EU and hoping we won’t notice – such contempt for the public!. I totally agree that it is mad for us to be giving larger amounts to the IMF than richer countries. There seems to be an unwillingness in the Coalition to recognise internationally our true financial positition whilst at the same time expecting the British people to accept cuts in their standard of living to prop up with these delusions (of grandeur) so we can reduce the deficit and improve our dire financial position!

    • BobE
      Posted July 4, 2011 at 11:32 pm | Permalink

      They need to win friends before they loose the next election

  26. EJT
    Posted July 4, 2011 at 2:30 pm | Permalink

    “the UK needs to remain as part of the IMF”

    Why ? Not saying it’s wrong for us – under the correct conditions. But we should start asking these questions. Ditto UN etc.

    • BobE
      Posted July 4, 2011 at 11:28 pm | Permalink

      So they can give jobs for the crew when they loose the next election.

  27. Bernard Otway
    Posted July 4, 2011 at 2:56 pm | Permalink

    John why were my two posts on the issue of the road funding not allowed,they are absolutely
    true checkable on the internet and in the press,my observations and similarities noted are that surely observations are allowed.I had already copied what I wrote to you and many people I know have heard me on this issue,and sent it on to the many people I get emails from
    including from South Africa ,canada ,australia,new zealand and all my contacts in the UK
    many from UKIP,they now know censorship is alive and well,in this supposed haven of free speech and are surprised to hell it is YOU censoring.Marta Andreasson my MEP totally agrees with me about what I said ,YOU know WHY given her whistle blowing inside the EU.Yet again I am dissappointed.

  28. rose
    Posted July 4, 2011 at 6:29 pm | Permalink

    The IMF should return to its original ways: when it lends to a country in trouble it has traditionally done so on the following conditions, 1) cut public spending, 2) raise taxes, and 3) devalue. Without the third the first two are not enough. Will the new head of the IMF be American or French in her attitude to Greek ways of working? She is capable of both and should be encouraged to do the right thing by the UK who sponsored her. She may however decide to try and save the Euro.

  29. simple soul
    Posted July 4, 2011 at 6:32 pm | Permalink

    At least the turmoil in Greece disposes of the hair-brained idea that we must return the Elgin Marbles to Athens “for their safe keeping.” Or perhaps they will now want them back more than ever now, to sell to the Americans.

  30. EJT
    Posted July 5, 2011 at 9:02 am | Permalink

    At £10 bn s, that’s real value for money.

  31. Scottspeig
    Posted July 5, 2011 at 11:29 am | Permalink

    In fact, does the IMF lend to California or any other state in America as that woukld be a closer analogy?

  32. Stephen Gash
    Posted July 5, 2011 at 12:56 pm | Permalink

    Under devolution-max or independence-lite (pretendy-inde) will the IMF be able to loan directly to Scotland? If so, will it be able to do the same to England? Or will loans to England be classed as the UK, so Scotland benefits?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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