Many commentators write about Greece as if she were some helpless victim of forces beyond her control. I myself have expressed some sympathy for Greek people caught up in a crisis of their government’s making, especially for those who thought the Euro and their government’s policy was ill judged. I have no sympathy for the Greek political classes and for the general Greek approach to the Euro over the last two decades.
Greece is one of the rich countries of the world. It has many advantages. It has a great climate, a wonderful history, and many talented and well educated people. Greece made her own decision to join the Euro. She signed up to a scheme which very clearly included rules to limit the amount a member country borrowed in any given year to just 3% of national output, and limited the total amount a country borrowed to just 60% of GDP.
No-one can deny the solid historical achievement of the Greeks of the classical period, leaving aside the embroidered tales of great feats in the legends. Today’s events are enough to make one ask if Agamemnon ever managed to pay off the loan for his armour, or if Odysseus was forced to take ten years getting home as he did not want to face the mortgage.
Those who are ever ready to criuticise the morality of the market when some private sector organisation behaves badly are surprisingly quiet about the morality of a state cheating its creditors, whether by reneging on debts or inflating them away,
The Greek government decided the rules did not apply to her. Without a thought for the good reasons why those rules were in place, Greece decided to go on a borrowing binge. The country lived well beyond its means for many years. Instead of cutting the excessive stock of debt, it embarked on a course of increasing it at every opportunity. Some of the money was borrowed from countries poorer than Greece. Some was borrowed from low income individuals who depend on the income on the Greek bonds to pay their retirement pensions or meet their daily outgoings. Some was borrowed from banks, who were told by European regulators they could rely on Greek government bonds as part of their capital.
Now we read in briefings that the authorities are moving towards the idea that it would be just fine if Greece decided to repay only half of all the money she has borrowed. Poorer countries, weak banks and poorer savers would be told they are only getting half their money back. It is difficult to know what the moral justification for this will be. Richer countries and richer savers will no doubt be told it serves them right for being rich, and they too will lose half their invested money as well.
If Greece does default, as the markets expect and as some sources close to the IMF and the G20 are now putting about, this is no victory. It is a moral disgrace. It is the failure of a rich country to manage its affairs properly and meet its obligations. If a company goes bust owing to misjudgements, changes in the market place, or the economic cycle, that can be an understandable price of having competitive markets. The company has no power to demand money of its customers. A state has the power to demand money of its citizens under pain of imprisonment. That’s why government debt is usually regarded as much lower risk than company shares. A company can go bust owing to a shortage of revenue. A state can only go bust by deliberately spending too much.
It is not just a case that state default is wrong. It is also the case that it is very destablising. It leads markets to ask is debt refusal catching? Will other Euro members think it is just fine? Why should people and banks go on lending to these countries if they behave like this? The markets might move on from Greece and try to topple another risky sovereign.
Greece has three simple options that could offer a better choice than ratting on its debts. The first is to spend less. The second is to raise more in taxes. The third is to sell more assets. Greece can have a perfectly good political argument about the best way forward, the right mix of spending less, raising more in tax and privatising more.
If the sources are right and Greece does default, it would be best done quickly. It also needs a follow up to persuade people it will not happen again. That follow up has to be credible decisions to spend less or tax more. Default and spending restraint are not alternatives.
The west’s economic and financial power rested heavily on providing a clear framework of law, and insisting that my word is my bond. Any western sovereign default would be witness to the declining power and authority of the west in world markets.
September 28, 2011
Indeed – all is going as I expected given the absurd system and the politics.
September 28, 2011
Listening to Ed Miliband this morning he sounded as absurd as usual. He clearly seems to have not a clue about running a business or even what happened to Southern Cross and why. It is perhaps not something one learns doing PPE at Oxford.
He seems to think yet yet more regulation is needed to pick between long term and short term, good and bad companies. I assume it will all be in the short term interests of the state sector unions and an ever larger state that have caused so much damage to the UK.
If a business does well in the short term (making a fast buck as he puts it) and do this again and again consistently it will clearly do very well in the long term too. Perhaps he did not looked at compounded returns either in the PPE course.
We do have poor banking and a bad tax systems (thanks mainly to Brown) just sort these out and business will make its own sensible decisions the last thing we need is Miliband making them.
September 28, 2011
You must have been on an advanced PPE course if you believe that many businesses will share their profits for a greater good which is what he is saying. An ever larger private banking system is what has caused the greatest damage to this country not the state, which many people rely on as private business can never fill the gap. Your blind belief in business is starting to get laughable. Non of the normal problems that normal people face will be faced by your business elite. Sure Thayne have other human problems, but not financial hardship.
September 28, 2011
Businesses do indeed usually act for the general good – not always from the goodness of their hearts but because it is in their interest so to do – that is how they best profit.
September 29, 2011
Amen. How very true and logical. However. Woods and trees spring to mind.
September 29, 2011
Indeed! A bit like crime.
September 28, 2011
I actually thought Miliband made some sense for the first time in parts on Today this morning. Perhaps it was the change of tablets (joke), but it is the first time I have thought he posed any danger to Cameron/Clegg. Never even dreamed of voting Labour before, bit I thought it was a good interview, and if he builds on this he could do well.
1 He was passionate
2 The Southern Cross issue is an appalling situation. Folk with Alzheimer’s shouldn’t be shoved from one home to another when the operator goes bust or can’t pay its rent. The sale of a Care Home should come with a tenancy right for those patients to stay in perpetuity. If the owner goes bust the real estate shouldn’t be able to be sold on for development, but revert back to the state. These situations do call for Government regulation.
3 He made a point that actions taken against the banks by the current administration were “too little” and promised to do more
4 The general point that businesses should be working for the long term benefit of their customers, rather than slicing them up, is a good one. Whether you look at RBS, Lloyds, Rover Group, British Steel the path is normally private ownership to Government screw-up to overseas/VC screw-up, with customer service deteriorating along the way.
4 He disowned Brown
With more regulation, however, intellectually he needs to bring in more democracy. You can’t have nanny state knows best without a more open, transparent democracy than we presently have.
Miliband could still set out a path of being the first main party to turn against Europe, towards protectionism and more regulation against predators. It is an attractive combination, as long as you don’t think too hard.
September 28, 2011
John, for all the reasons you cite Greece should not be bailed out and allowed to stay in the EU. Why should they have benefits of the club without any pain? The course they chose was not an accident or happened over night. There is life beyond the EU despite scare tactics to convince us otherwise. Iceland appears to be recovering okay at the moment.
I suspect Mr Borroso actually uses the delay in the default to his advantage of scaring people to believe it is so important for fiscal union (half way to a European state)- as he was yesterday in his speech. He wants more unification and a transaction tax. He was spouting his pro pan European state beliefs in Strasburg- you know, the building which Cameron was going to oppose and now has done a U turn on.
The US (Democrats) want a pan European state as it will mean fewer people to deal/bargain with and easier to manage their bully boy foreign policy. It is claimed the Fed Reserve is currently propping up European banks. Obama doing his best to force the situation by using inflammatory language that the situation is scaring the world. Although it was alright for him to bargain until the last minute thougha few weeks ago.
September 28, 2011
The Greek government decided the rules did not apply to her
Clearly following the example of both many Eurocrats and other southern Euro nations. It’s a variation of the problem that we have seen in Westminster over the last few years….
It is a moral disgrace
Yes, although apparently a common enough cheat to try. I hate to think how many phone calls have I received from companies telling me how I can “legitimately” wriggle out of paying the credit card and mortgage debts that I don’t have. My answer to them is that there might be a legal loophole, but that does not make it right to go through it. This is the same situation, simply on a different scale.
September 28, 2011
My favourite
“if Odysseus was forced to take ten years getting home as he did not want to face the mortgage”
Classic in both senses.
September 28, 2011
The French and Germans knew the financial problems of the Greeks and still wanted them in to fulfil their political ideology of a European state. Therefore if France and Germany want to pay the debts of Greece, let them NOT us. This was political ideology for a pan European state above sound economics. Now they must let Greece default or help them pay. Successive Greek governments knew they were in debt and continued to build further debt.
The IMF and EU knew Greece could not pay their debts but bailed them out to allow time for the debt to be serviced by the banks through the taxpayers of Europe.
September 28, 2011
Mick
Agreed, there seems no shame in not being able (or more importantly not wanting) to pay for what you have purchased nowadays.
It seems its all too easy to just want to default and walk away from your financial obligations.
Similar applies to Companies with the Friday-Monday trick of pre-packaged administrations, often used to just wipe out debt, and start again as if nothing had happened.
September 28, 2011
Hi John, I’m here to be a pain again by disagreeing with almost everything you have said. All you said about Greece living beyond it’s means is true of this country as well, but the issues with the system go much deeper then that and we both know it. Privatisation is not solving problems, it’s making them. It removes power and control from democratically elected government and hands it to big corporations and the rich elite, who as we can plainly see are rarely accountable to anyone but themselves, and who use this power to influence and corrupt the democratic institutions of the nation state. The fact that these coorporations are usually multinationals only further protects them from any threat of justice being done. The global financial system is crumbling because it is built on sand. When the gold standard was finally killed off around 4 decades ago any sense of stability was demolished, and the free and easy credit that followed in the fiat economic system has finally caught up with us. We can’t even close our deficit, let alone pay of our debts, and by the time we try to sell the bank shares we now own they are going to be utterly worthless. The too big to fail crises will become the too big to bail crises, and then what will you do? More importantly, with respect, what will WE do? We can’t have interest rates any lower, and more quantative easing as wages tighten is going to see thousands unable to feed themselves. The bag of tricks is close to empty, and the suggestions box is being opened only to those who will tell you what you want to hear. Not only will Europe default on it’s debts, but America will too, and then paper currencies will fail. What then? Perhaps you could answer that question for me.
Reply: We seem to agree that the UK and US have to bring their deficits down and live within their means as well. The US and the UK have in the past used inflation to erode their debts. I have offered advcie to cut inflation in past postings.
September 28, 2011
Good post . Think many of us could do with some of your teenage passion !
It has taken approximately 40 years to get us into this situation .
Abuse of credit and fudging the accounts has just obscured the true picture which .
As you say the issues with the system go much deeper ; they are endemic .
No amount of tweeking will provide a satisfactory solution .
We need a leader who can sell the people a dream so that they can see real light at the end of the tunnel for themselves and their children .
We need a complete rethink like Germany had after 1945 and a Marshall plan .
September 28, 2011
An answer of ‘sort it with inflation’ is a bit disappointing. We are in a very different circumstance than before, the west is in decline, and unless we pull trillions of pounds worth of innovation out of a hat that’s not going to change. The problems were never solved before, just side stepped and swept under the rug. By inflation you presumably mean quantative easing or zero interest rate policy, which as I noted above will simply either destroy our currency or devalue it so badly that the middle class will become the poor and the poor will be unable to feed, home and clothe themselves. Debt forgiveness is the only way out of this mess. Of course the issue is that a cancelled debt for us is a lost asset for someone else. The point is we need an international response, and no that does not mean we need to go and bomb some innocent civilians in some poor country where we feel it will be easy to win and there will be plenty to pilage afterwoods. We need an international response where the west and the BRICS nations can come together, amongst others, and wipe large amounts of debt from our tab. Ofcourse because of the mess that globalisation and privatisation has left us in were not nearly self sustainable enough to be able to survive without imports from these nations, theyre holding all the cards. It’s time you politicians got your egos and careers out of the way here, because if you don’t it won’t be your job were calling for, it will be your head. (you can take that as a metaphor for purposes of moderating the comment) Returning to your original point, the west already looks weak, because it is. It’s desperate, and it’s got no good options. Who put us in that position? Was it me? Or was it decades of irresponsible, self serving, short sighted politicians who have allowed special interests and a rich, criminal minority to horde the wealth, power and influence at the top of the pyramid? Well I’m afraid this pyramid is much like that of the ancient egyptians. It’s a tomb. The question is, who’s? Will it be the ridiculously rich and well connected elite, or will it be us cattle, grazing at the base of the structure, too obsessed with our own lives, endlessly consuming what little is given to us from higher up to see everything crumbling around us? Why don’t you do your duty, as a representative of we the people, and try answering those questions.
September 29, 2011
Wow.
I mean REALLY.
September 29, 2011
Vigilante teen
Agree with many of your comments, but the problem is if you simply forgive debt and write it off dbt without any penalty, you have rewarded profligate uncontrolled expenditure, and it will occur again.
The problem we have, is that we need to curb the power of politicians to borrow in our names.
I have lived within my means all my life, as did my parents.
I have forgone many luxuries because I could not afford them.
I ran my own Company for 30 years without borrowings.
I have now just retired, and am now on a fixed income, so devaluation of the pouind is theft from me and others like me, who have tried to provide for themselves.
The country however has lived beyond its means for decades.
The long term solution is for a country never to be able to spend more than it collects in the preceeding year in taxes, and until that is made law, and politicians face jail for exceeding it, you will not get back to any sensible policy initiatives.
For years politicians have been bribing the voters with their childrens, and granchildrens future debt payments, it has been a unmitigated diaster of a policy, and now the truth, at last, is out.
We simply have to cut back in a huge way in what the state does, what it provides, and the number it employs, clearly this has to be done in some controlled way if possible, but the longer we leave it, the faster the need for it to be done.
September 30, 2011
Alan
What you say about not letting politicians borrow excessively is interesting, but that’s not going to get us out of the current mess. Your main issue with debt forgiveness seems to be that you think it would send the wrong message, you believe it would be rewarding and even encouraging uncontrolled expenditure. I understand this viewpoint, but then look at what’s happening now. We allow banks to invent money as debt at uncontrolled and excessive rates then spend and lend it however they like. Then when these banks fail, we bail them out using tax payers funds, trillions of it. Of course taxpayers don’t have trillions, so we borrow this bailout cash. That’s right, we borrow it from banks. So we then have to pay it back to banks, with interest, meaning that we’ve escalated the debt problem whilst making the top bankers richer and more powerful. A wall street trader said the other day ‘it’s our job to make money, not to care about little things like the economy, or people’. The simple fact is our entire system is completely corrupted and wrong. We live in a world where profit is put before people, corporate greed rules over human need. This insanity tells us that uncontrolled fake capitalism is the only way. It’s why our politicians like John redwood don’t even have any real power, or at least don’t attempt to use it. It’s why special rich interests lobby hard and get their way, and the people get screwed. It’s why allowing millions to starve through inflated food prices or destroying the planet through global warming in order to make a profit today is considered good business. It’s why taking control of someone’s life by putting them in huge amounts of debt for going to university or wanting to own a house is a possibility for those with money, or the means to create it. Anyone thinking ‘taking control of their life’ was dramatic, your wrong. in this system, everything requires money, and if you owe someone so much money that they can dictate to you how you will spend your money, they can control many of the things you do. It’s true for the individual and the state. Back to your comment, there’s no suggestion of how to get us out of our current mess. You suggest how we could have avoided getting here, and you mention cutting back what the state does and spends. This won’t help. We can’t even cut enough to close the deficit, because if we cut jobs then welfare spending goes up, and if we cut welfare then people lose their homes and starve, which is clearly unacceptable to most of us. Even if we slashed our budget, we will never pay off the trillions of pounds we owe, because it would mean bringing in tax surplus as our nations, and indeed our continents economy declines, plus funding interest payments, and having spare for paying towards the debt which is still growing now. For ways to stop the problem growing so fast, consider not spending billions on illegal wars with underdeveloped nations that pose no real threat to us and a transaction tax would be a smart way to increase the tax intake. To get growth we could do some simple and moral things, such as switching all hospitals, schools and prisons food to locally sourced and ethically grown, making the nation more self sufficient as our currency declines and building business and therefore tax revenues. You could come up with thousands of great ideas like these, but it’s not going to touch a debt that’s still going up. Were still borrowing more, to meet interest payments, let alone keep the lights on. Debt forgiveness is the only way out of this mess, but theirs not the political will, courage or sense to deliver it. Not only that, but we should be very radical here. We should be having great debate about wether or not to abolish the concept of money all together, or how to take it back from that of cheap credit and debt. We should be debating about how the world is chaning, how our foreign policy leaves us increasingly isolated, mainly due to the fact that it is decided not by us but by America. we should be having revolutionary debates about the pros and cons of a resource based system, about how the rich have control and how the current style of capitalism, if you can even still call it that, is completely incompatible with our current ideas of democracy. Look at our politics. The govt says let’s just roll along attempting to cut the deficit a little, while not taking on and regulating the bankers who could crush our economy with a snap of their fingers. What does the opposition party say to this madness? “too far too fast”, let’s do that but a little slower. These selfish puppet politicians are only worried about their careers, and don’t have any real decision making power anyway, unless they stand together and rally the people, getting the media on their side. Good luck doing that in this system. The biggest failure, however, is us. We are supposed to be citizens of a democracy, we are supposed to hold those in power to account, to keep the pressure up for real change, to work together, peacefully and productively. This system though with it’s advertising propaganda makes that the lowest of people’s priorities, don’t be a citizen, be a consumer it says. It’s time for real change. It’s time to send a message. It’s time for global change. ( words removed-ed)
September 29, 2011
”Of course the issue is that a cancelled debt for us is a lost asset for someone else.” Bingo.
The debt in reality in some cases is worthless, some realised earlier, some later,some apparently not at all.
Why are central banks buying this bad debt? or attempting to inflate it away. Direct and open government action has political problems such as accountability, tiresome elections etc
The apparent ‘central bank independence’ some have said is independence from the people.
JR does to his and parliaments credit question the status quo on Central banks and moral hazard.
Ask why the market solution of debt deflation is not allowed to take place whilst the government goes into major restructure re-stimulate mode. We can and should offset the worst of this contraction based on inclusivity not vested interests.
I await the inevitable discussion on positive money versus the fractional reserve banking system we have now? We now have the internet!
Ask who created this bad debt and who creates the money supply and who pulls the strings behind this?
Consider Free Trade? and watch a few youtube videos of Sir James Goldsmith.
http://www.youtube.com/watch?v=4PQrz8F0dBI&feature=related
September 30, 2011
Here’s a 3 minute video that briefly explains fiat economics for those of you who would like to know more but don’t seem to care enough or have the time to really study it all. http://t.co/LQU7B12w
Reply: I have not had time to view this video
September 30, 2011
You don’t reply to the direct questions or statements i posted above but are able to post a comment stating you have not had time to view a 3 minute video. This is one citizen feeling a little disappointed. Send me a copy of your schedule and prove your not just dodging the tough questions and attempting not to get shown up by an annoying know it all 18 year old.
reply: my views of the main topics have been stated at length here so there is no need to restate them
September 28, 2011
Agreed, excessive spending and borrowing by the Greek government is a moral disgrace.
Question, why is it OK for Britain’s politicians to do exactly the same then stealth default using inflation/ devaluation?
September 28, 2011
And we hear today that David Miles has followed Messers Broadbent and Posen in moving towards more QE.
Although JR indicated in a previous reply that if the Govt didn’t offer a vote on more QE , that it might be expected that the Backbench Business Committee might look to schedule a debate. My fear is that this is too little too late.
We are in the position that MPC members with unelected power can just signal the intention of more inflation/devaluation whilst the elected Govt does nothing to prevent it. The thought that the Chancellor is not making a statement that there will be no more QE, and that failure on the inflation target will no lomger be tolerated is quite sickening.
Stealth default using inflation/devaluation? Its not that stealthy.
Reply: the Chancellor’s permission is needed for more QE
September 28, 2011
My concern is that the Chancellor seems to have already signalled agreement,
Financial Times September 11 –
““I have made it clear that the administrative arrangements that were established by my predecessor Alistair Darling for the operation of quantitative easing remain in place, so I don’t have to get into a discussion of how I would handle a request from the MPC,” Mr Osborne said.”
[JR, I do though like your idea of an Operation Twist twist, of first selling gilts and buying Corporate debt without increasing the total QE beyond the £200bn]
Reply: I think the Chancellor’s consent is still needed for additional QE
September 28, 2011
Why do I get a bad feeling that UK taxpayers will end up paying for the EU crisis and in particular bailing out the outright dishonest Greek politicians?
If this happens and Cameron and Osborne (as expected) roll over and make up specious arguments for doing so I will join any anti-protest. I will NOT keep paying taxes for foreigners, whether it be bailouts, the EU, immigrants, their education, housing and health costs or misguided foreign aid!! The mad middle have had enough and we want change not spin!
September 28, 2011
A very valid assessment. Now if you go through your posting and substitute Greece and Greek each time it appears with “EU” or “EU Commission” or “EU Council” whichever is most appropriate you will arrive at the true depth of the problem.
Yet your presence in Parliament, supporting the Coalition Government, is one of the factors that underpin the absolutely abhorrent undemocratic entity the EU is becoming. Rightly you point out “A state has the power to demand money of its citizens under pain of imprisonment.” and the EU is obtaining such powers with an armed gendarmerie to enforce them.
Reply: I do not support the Coalition on EU matters when I judge them wrong
September 28, 2011
A few points
Your assertion that “A state has the power to demand money of its citizens under pain of imprisonment.” may be true for a short period, but if the taxes are unfair then democracy will unseat the Government, the prisoners will be released. I for one never believed that Sovereign risk was zero. When you think about the actuality it is not. In otherwords there is a responsibility on those that buy debt on behalf of others that is akin to the responsibility of those that borrow too much.
A second point. How is it “weak” of the West that a Government defaults on 50% of it’s debt. I think the term “weak” is wrong and the generalisation of the “west” is wrong. Certainly I would use the term ineffectual to describe the process of letting the Greeks into the Euro and Banks risk assessment of Greek Soverign debt as security.
It’s a moral and evolutionary issue for me. Banks have not been careful and banks will have to learn to deal with reality – even if it involves them thinking beyond the credit ratings and historical volatility.
September 28, 2011
“A state has the power to demand money of its citizens under pain of imprisonment.” may be true for a short period, but if the taxes are unfair then democracy will unseat the Government, the prisoners will be release”
But if the only democratic options that receive money and media coverage are all jailers (as they all are) then the statement holds true.
September 28, 2011
Default/bankruptcy is of course the solution. Whether you are an individual, business or a nation state that is the normal way to deal with debt that cannot be serviced or realistically repaid. How that situation occurred is no longer the point for that particular entity, what is done post the event that counts. Normally that means living within the boundaries that can be afforded which usually means in the short term and maybe the medium term at least a less prosperous situation. After which, if a structure of better management of affairs and an environment put in place that is conducive to encouraging income higher than expenses then in the long term prosperity will return. When a default/bankruptcy occurs it highlights the conditions that caused the failure and spotlights other entities that are similarly badly managed and structured. Close scrutiny now indicates that there are many such entities and that they will all eventually have to go into default or go in for serious retrenchment and structural change. If the same or the same type of managers that introduced the badly structured and financed entity or managers who are unable to manage because of external interference are the ones that are now in charge of rescuing the entities in difficulties then in most cases the rescue will fail. As that is basically the scenario western nations are faced with now poor management or noneffective management and badly structured and financed nation states then it is when not if most of them will go into default.
September 28, 2011
A few points
Your assertion that “A state has the power to demand money of its citizens under pain of imprisonment.” may be true for a short period, but if the taxes are unfair then democracy will unseat the Government, the prisoners will be released. I for one never believed that Sovereign risk was zero. When you think about the actuality it is not. In otherwords there is a responsibility on those that buy debt on behalf of others that is akin to the responsibility of those that borrow too much.
A second point. How is it “weak” of the West that a Government defaults on 50% of it’s debt. I think the term “weak” is wrong and the generalisation of the “west” is wrong. Certainly I would use the term ineffectual to describe the process of letting the Greeks into the Euro and Banks risk assessment of Greek Soverign debt as security.
It’s a moral and evolutionary issue for me. Banks have not been careful and banks will have to learn to deal with reality – even if it involves them thinking beyond the credit ratings and historical volatility.
CityAM captures the new problem. “Brussels wants to underwrite Greek debt with German cash – all without letting the voters know”. They want to “bundle junky assets” and turn them into “triple-A-ratings”. It’s 2003-2008 subprime all over again. How can the politicians criticise the banks when they are doing exactly the same thing? The people of the world have seen a subprime crisis and will not let it happen again. That is why the Greek bailout will not work.
September 28, 2011
Thank you for this excellent analysis. The word morality is rarely heard in the context of the ongoing political and economic debacle in the West.
September 28, 2011
“A state can only go bust by deliberately spending too much”
This absolutely sums up the total and utter mismanagement, and dishonesty to the population by politicians.
In my view there are only three reasons why politicians overspend.
1. They are totally and utterly incompetent in financial matters.
2. They are deliberately trying to bribe the population in order to collect votes, to extend their time in power.
3. To finance a long running war to preserve freedom.
Which one of these is applicable to most countries in the World. ?
Who suffers from the above, once again all those who tried to do “the right thing”.
September 28, 2011
I see Mr Miliband now seems to want a more complicated tax system, where Bad Companies pay more tax than Good Companies.
So how do we go about getting a listing ?
Do we go on trial, present our case and get a judgement.
Once a year, once every 5 years, once every 10 years, never ?
Are we all declared Bad until proven Good. ?
Who will make the decision/judgement, will it be legally binding.
Can you have a Bad Company and a Good Company in the same competitive market, with one paying more taxes than another ?
What an absolute bloody farce.
What planet are these politicians on !
September 28, 2011
Mainly the Oxford PPE planet it seems. Just pay people to dig holes and fill them in again and dictate all from head office – they clearly know best – even though they have never been to the coal face once.
September 28, 2011
Mr Miliband’s startling revelation that he wasn’t Gordon Brown or even Tony Blair got me thinking about how we might help him with his identity crisis. In terms of presentation and mannerisms I reckon Wallace (the partner of Gromit). Politically, he reminds me most of Michel Foot. Genial, intelligent, well meaning and daft as a brush.
September 28, 2011
alan jutson: “What planet are these politicians on !”
Planet fascism.
Which is the new Labour policy Milibrain has just proposed.
The government will permit certain companies and discourage other companies judged on completely arbitary metrics.
Its hardly a stretch of the imagination that one such measure is how much a given company contributes to Labour election fund, AKA ‘a good company‘ or how much a given company contributes to the green scam, AKA money for old rope and a circuitous means of raising more money for politicians to play with.
As government has grown in size, it has grown in scope. Nobody in the political sphere is arguing to combat this cancer.
September 28, 2011
What worries me is that the government were able to do this then is opens the door to both massive corruption, and political patronage (which is also corruption, of course).
Also a tool to control companies “Mr Murdoch we didn’t like your coverage of Ed’s speech, so you’re on higher taxes until you co-operate”
September 28, 2011
Bad: Company donating money to Conservatives
Good: Company donating money to Labour
We don’t need any further definition do we? Simple, easily found out , correctable and administered.
September 28, 2011
I seem to remember that the EU deficit rules were broken by both France and Germany when it suited them to do so, and following that example, it became impossible for the EU to insist that the rules should not be broken.
If Greece has behaved like a wayward child, its parents, (the EU), have a responsibility too.
September 28, 2011
“Greece made her own decision to join the Euro”
NO, the Greek Government did, just as it is now the Greek Governments decision to rape her taxpayers of every penny they earn to pay for the great EU project and its banks.
You seem to forget the huge divide between what you politicians do on “our behalf” and what we actually WANT YOU TO DO.
Infact, we didn’t even get asked if we wanted to join the great EU CON.
I can’t tell you how livid I am with the Conservatives. Before you got voted in, many people thought a bit of sanity would return to government. Things haven’t changed, they’ve got worse and you have a Conservative leader who is a socialist. I don’t know how you lot live with yourselves. You do nothing to show your contempt by resigning or speaking out. With your nice salaries and pensions assured, you are beyond our contempt.
Rewply: The UK was asked to join the EEC and voted Yes. I spoke out against it at the time and voted No
I resigned from the Cabinet to defend the pound and say No to the Euro
September 28, 2011
Well done JR why on earth did the tory MPs vote for Major when he “sort of” resigned as leader?
They were clearly totally mad – are they still that mad I wonder – I suspect many are?
September 28, 2011
Well said Sue. And for these and other reasons I will not vote Tory while Cameron is at the helm. I will vote UKIP so it appeases my conscience. For those who say it will be a wasted vote, I say not as much as it was voting Tory at the last election and getting nothing in return because it will make me feel better.
September 28, 2011
Setting ad hominen attacks to one side, there is a lot of truth about what Sue says. The crisis we are in now is the logical conclusion of the erosion of liberty by an overweening political and bureaucratic elite on both sides of the Atlantic. Our coalition government seems determined to stick with the big state/bureaucrat-knows-best model that has led us to the abyss.
Just one example of the debasement of the political settlement was Nick Clegg’s interview on Guardian FM (sorry, the Today Programme). His claim that “no-one knew that the countries joining the euro would break the rules” and his admission that the UK will not join the euro “in my political lifetime” were breathtaking. JR resigned from Cabinet for defending the pound and Clegg stays deputy PM despite being proved utterly wrong on euro membership and refusing any contrition.
September 28, 2011
We did not vote to join the EEC, we weren’t given the chance to. In 1975 we were asked if we wanted to stay in the Common Market and said yes.
We won’t be asked again!
September 28, 2011
John is speaking out, Sue.
September 28, 2011
But this lady is right. Nothing has changed under this Government and you are fooling yourself if you think lifetime Tories haven’t noticed. Most people I know are saying why vote for the Tories anymore if all you get is the SAME socialist policies? We have to give UKIP a try to turn this country around as Cameron/Osborne are afraid of their own shadows!
September 28, 2011
Sue: “I can’t tell you how livid I am with the Conservatives.”
Seconded.
JR: “The UK was asked to join the EEC and voted Yes. I spoke out against it at the time and voted No”
John, you were fortunate to get to vote, I didn’t get that chance. I have been living under foreign rule all my life.
In Ireland, the EU kindly arranged for multiple referendums over each treaty. Why can’t we have loads of referendums on the EU say at five year intervals?
Reply: Because the UK voters keep electing a majority of MPs who block referenda
September 29, 2011
JR: “Because the UK voters keep electing a majority of MPs who block referenda”
Because the UK voters keep trusting their politicians to reflect their individual opinions**, not realising that an MP owes his livelihood and chances of preferment to the PARTY.
Who determines the agenda in Parliament? The PARTY.
Which two mainstream parties are indivisible on the issue of the European Union, have between them shared power since the last World war?
**Which the way the United Kingdom political system should work, but can’t as the PARTY has inserted itself between the voter and government.
September 29, 2011
Why don’t we get a referendum:
Reply: Because the UK voters keep electing a majority of MPs who block referenda
No. This is because all of the major parties keep putting forward Europhile candidates.
You seem to be saying that we should vote for UKIP or BNP in order to signal our desire for a referendum.
Perhaps we should all join the Conservative party and change it from within.
September 28, 2011
I agree with this post. Much of what you say could be applied to post war UK governments. The main difference is that UK governments have defaulted via high inflation and/or (usually and) a devalued currency over a period of time rather than in one fell swoop. The present government/Bank of England policy appears to be more of the same.
September 28, 2011
Good point. In a fiat monetary system, inflation is taxation in disguise.
September 28, 2011
excellent! we’ve got both!
September 28, 2011
Greek 2 year govt bonds are paying 70%. They are in a debt trap. Can’t pay the interest, never mind the debt.
But, the real story is that after 4-5 years of spraying money at the global crisis, it is now in worse crisis. So, you would think the politicians would sit back and realise that this is not the solution. Instead they are throwing even more money at it. They are doing it by decree, through the back door, via the IMF etc. The people are paying and they are not even being asked.
I get nauseated watching these political Nuremberg rallies in this 2 1/2 party dictatorship. The media fawns over these incompetents, as if they have God’s answers. They know nothing. Their hubris is strewn all around us. There they are STILL trying to bribe the electorate after all that has happened. The grinning , gurning triumphalism makes me cringe.
This crisis will never get fixed, until we get these people out of the way. Fat chance. We don’t really have a say anymore. Just a figment of a say.
September 28, 2011
History has shown, time and time again, that a system of government that acts in it’s own interest and ignores the people will eventually collapse.
People are getting fed up of the 3-but-only-1-actually party system and of being ignored by the government, who are completely incompetent whoever is in, as shown by a general trend down in voter turnout.
A party which says what people want, AND THEN DOES IT, would be very popular and may save the country before we go over the edge of the precipice…
-A
September 28, 2011
“But, the real story is that after 4-5 years of spraying money at the global crisis, it is now in worse crisis. So, you would think the politicians would sit back and realise that this is not the solution. ”
Quite .
September 28, 2011
Extremely well put …
“The media fawns over these incompetents, as if they have God’s answers. They know nothing. Their hubris is strewn all around us. There they are STILL trying to bribe the electorate after all that has happened. The grinning , gurning triumphalism makes me cringe. “
September 28, 2011
Gary: “This crisis will never get fixed, until we get these people out of the way.”
Perhaps a solution is to implement a two term restriction on MPs, and abolish life peerages too.
While we might lose some good apples like for example, our host we would have got rid of others like Clarke, Pattern, that porn woman who used to be home secretary, Brown, Balls, Hattesley oh and the pie man who used to be deputy prime minister before they did too much damage. These people collectively have done more damage than one or two genuine folk.
September 29, 2011
“These people collectively have done more damage than one or two genuine folk ” [have done good].
But essentially we need to stop politics being a profession that is pursued instead of some other more socially useful job.
September 28, 2011
This crisis is just like the film “Groundhog Day” except that with each day things continue to look even worse. Is not the determination 0f politicians and bureaucrats to maintain the Eurozone, whatever the cost, the real problem? If those same politicians ever consulted their electorates directly about their plans they know they would be routed and so they plough on regardless. These are the same people who laud the introduction of democracy in the Middle East whilst leading its destruction in their own countries.
September 28, 2011
John, if you want to understand Greeks, think about the Trojan horse…..It is all very well saying that the Greeks were very naughty in borrowing so much money and living off others. But were the Germans and EU so stupid to allow them in to do that. I don’t think so….As you have said so many times, it was clear that the Euro would fail so would that not have been apparent to Germany or are they so naive….I don’t think so.
None of this is unexpected, so one would assume that the EU has a plan to take advantage of the situation. By the way, did you
not hear? Mr Barroso just said that Greece will not leave the Eurozone. Maybe we should take him at his word. There really is no way out….
Your post today contained one immutable truth….’A state has power to demand money of its citizens under pain of imprisonment’….Did you hear that slaves? Now get back to work and give the majority of you income back to government. Now do you understand?
Zorro
September 28, 2011
Poorer countries, weak banks and poorer savers would be told they are only getting half their money back. It is difficult to know what the moral justification for this will be.
Countries and weak banks deserve minimal sympathy, maybe tough but its hard to believe they were naive.I doubt the majority of the debt was due to poor orphans and widows. If you could identify them and the amounts i bet it would be a relatively small problem.
I do wonder what the criteria is to get bailed , i was thinking it might be those who claim to be ”too big to fail”, campaign contributing companies.
Lets face it if debt is written off, investors will lose, these are generally not poor , but maybe afterwards. I suspect that as wealth is skewed to the top so will be the hit hence the political problems.
The Greek people probably do feel quite helpless, reportedly they do not listen to politicians anymore something called ‘anomie’ and civil disorder/democratic disobedience is gathering pace. I am sure they feel democracy has somehow eluded them.
Greece should be a warning to MP’s about unelected EU government, private interests and unrepresentative politicians.
Why would admitting errors and fixing them be a sign of weakness? Instead of claiming to abolish boom and bust or similar?
What moral justification is there for deliberate inflation or taxes on other poor people to pay for richer peoples misfortune or investing mistakes? How many key influencers have interests which should really preclude direct involvement? Again ‘who guards the guards’.
Your diagnosis to restructure the weak banks is the correct and painful choice. Perhaps this will happen when no more bad debt at the front of the queue can be made good by the taxpayer.
September 28, 2011
Barroso says the solution is more Europe, fiscal union and Eurobonds. Well he would, wouldn’t he. But Osborne too has been cheering this on from the sidelines, why?
September 28, 2011
I would love to borrow £10 from Christine Lagarde.
Naturally when time comes to pay it back I would offer £5.
BUT to even get that £5, she would have to wait for me to stop my expensive gambling and alcohol habits. And get a job. Neither of which looks likely.
On second thoughts, make it £10 Billion!
September 28, 2011
Another option is that the countries of the euro zone stand behind Greece and deliver them aid, take on their debts.
A default would be indeed be a disgrace to all those creditors who would suffer. Meanwhile the Euro has been a huge boon to Germany, the financial stability it has generated, in holding down labour costs.
German exports are healthy and unemployment has been falling for two years.
If Mr Cameron doesn’t chose this time to gain concessions that help the competitiveness of the UK then I’m not sure that it will ever happen.
I’m sure a few Lib Dem ministers will fall on their swords, but I don’t think the voters will care too much.
September 28, 2011
YES WHAT IS ANATHEMA about spending less for any government,what is it about any
politician to promise to provide SERVICES [I hate that word, for instance subsidising a single mother to have 6 children by five DIFFERENT fathers IS NOT A SERVICE among many other examples] EXCEPT that it is BUYING votes,AND AND WORSE STILL how stupid can the electorate be to continue to fall for it. All of US six that started being friends in 1960 are now 65 or over 3 are still working,I was the only one who stayed at school and I got 6 “O” levels
and 3 “A” levels followed by a degree,all have worked without a break,the other five actually left school at 15,all have houses and decent ones at that,HOW? hard work and sense in
living one”s lives,IF SO WHY CANNOT OTHERS and why cannot politicians encourage virtues such as these,the collective value of the 6 properties is by the way about £ 5 million
one of the lads as we call ourselves erects estate agents boards as a contractor STILL at the age of 65,he says if or when he stops he will be bored to death, plus he takes his one grandson with him and is going to hand over to him when he stops.What more can a country ASK as JFK said.
September 28, 2011
JR puts too much blame on the Greek elite, and not enough on ordinary Greeks. It’s not just the elite which is corrupt: (many-ed?) shop-keeper and small business in Greece cheats the tax authorities, with doctors being particularly bad in this respect.
The idea that Greece should “raise more in taxes” sounds wonderful. But if the tax collectors are corrupt and a large proportion of those they are supposed to collect tax from are also corrupt, then it ain’t going to happen. The phrase “beware of Greeks bearing gifts” did not arise for no reason.
The recently introduced land / property tax in Greece might work, but I’ve got doubts.
September 28, 2011
Actually, the West has a long history of defaulting on debts (whether domestic debt or external debt), including by debauching the currency.
For example, after WW2, Britain devalued the pound thereby wiping out India’s foreign exchange reserves, which India had accumulated by selling war goods to Britain on credit.
The suspension of the Gold Standard in the 30s was also a form of default, and the suspension of the Gold Exchange Standard in the 70s another example.
There is no way Greece could recover from the slump just by cutting spending/raising taxes whilst it remains within an overvalued Euro. Even if it were to cut spending/raise taxes, it would still have a debt overhang of 150% which will limit its ability to grow out of the crisis.
September 28, 2011
Cecily, you will read your Political Economy in my absence. The chapter on the Fall of the Rupee you may omit. It is somewhat too sensational. Even these metallic problems have their melodramatic side.
The Importance of being Earnest, Oscar Wilde
(First night: Valentine’s day , 1895)
September 28, 2011
Motes and beams …
All banks are bust, including ours. That fact would become apparent even if they didn’t have to take a hit on Greek sovereign debt. Fractional banking, my arse. Pace Greece, a proper mark to market of assets and liabilities – where, courtesy of PWC, one side of that equation was not to mutate miraculously to the other, via a credit default swap – would put the lot into Carey Street and possibly up the road to the Old Bailey.
Morality has nothing to do with it. We’re doing it for survival.
Or rather, what we’re doing is what might be called bankruptcy for softies as in inflating our debts and liabilities away … and screwing the hell out of all the poor bastards who’ve done the right thing and saved all their lives.
The problem I have in reading this post, John, is that you know all this and yet choose to lecture morality to the Greeks.
Socrates weeps.
Reply: UK banks are not bust, nor are many others around the world. The regulators do make them mark to market or make adjustments to values on balance sheets to satisfy themselves of capital adequacy. The big issue causing worries about some EU banks is they have not traditionally applied mark to market haircuts to sovereign debts in the same way.
September 28, 2011
…and Atlas shrugs 2,500 years later.
John,
Are you talking about the same auditors and regulators which gave a clean bill of health to RBS et al in 2007?
UK banks are not bust…hmmm….well if you are in a world where you have a taxpayer cast iron sorry copper bottomed (better than cast iron apparently) guarantee you cannot go bust. They were and still are hollow husks on life support living in fear because of their over valued assets and liabilities to basket cases.
As I have said previously, the clear trend is to inflate away debts all over the Western world as the ECB joins the club. Get ready for EURO mega printing to cover Greece and I suspect that it will stabilise the markets and be enough psychologically (for a while) until they seek their next victim….UK? (which is merrily being set up to pay for some of this nonsense through the transaction tax)
Greece will not be allowed to leave the Euro, and Germany will keep its ready made market, no matter how much the supposedly average Klaus thinks it is wrong. But then…he is not part of the Euro elite.
zorro
Reply: The UK banks have a clean bill of health from their regulators and continue to trade under a law which says it is illegal to trade if insolvent.
September 29, 2011
Yes. The world of fiat paper and cental bank support is being manipulated to keep the banks apparently solvent until they are without that support. Kick away that support? For example if we were in the Euro would the UK government and banks be solvent?
September 28, 2011
*The UK was asked to join the EEC and voted Yes*
I am to young so I was not able to take part in that vote, what with being in nappies.
But every single person of the generation I know of who voted yes at that time, says that they would have voted no, what they voted for, was not what they got.
Successive labour and conservative governments, including the one you now serve have signed more treaties, signed away more power, and continue to refuse a referendum.
You will make noise about the EU, but only enough to make noise, and not enough to risk your job.
September 28, 2011
When the £ dropped 20% this was indistinguishable from a default. Greece’s problem is that, being in the euro, they cannot devalue and thereby make their entire economy more competitive. Default without devaluation combines the worst of both worlds.
September 28, 2011
hence the 50% cut in their debt payments….
September 28, 2011
If the Greek government defaults on its debts then it will be breaking the promises it gave to all those who bought its bonds.
Of course that’s deplorable, but I think also probably now unavoidable; and it has to said that investors had fair warning that Greek governments were unreliable borrowers as this would be the sixth such default since modern Greece came into being as a state, and if they allowed themselves to be convinced that it would be different this time with Greece in the EU and the euro then more fool them.
I’m actually more concerned about deplorable behaviour closer to home, with the British government breaking the promise it gave to the British people and their Parliament that it was OK to accept the Maastricht Treaty because it included provisions to make sure that monetary union could never lead to EU member states being expected or even allowed to bail each other out.
As Christine Lagarde put it in her interview with the WSJ last December, the EU treaties are “… very straightforward. No bailing out”; and yet now the discussion is about how large the bail-out fund needs to be.
And we even have our government urging on other governments to further breaches of the EU treaties, apparently forgetting that those treaties are part of our national constitutional law by virtue of Acts of our Parliament.
September 28, 2011
Caveat emptor…percentage change that Cameron will agree to this nonsense one way or another…90%
zorro
September 28, 2011
I think it is too late for Greek not to default. They are spending more than they take in in taxes and no-one will lend to them. It’s immoral and unfair but that is the nature of bankruptcy be it corporate or sovereign. It is tough.
I agree that a Greek default will make it easier for Portugal and Ireland and others to do the same. The Germans will not accept this. The whole thing must unravel. It is going to get very messy.
September 28, 2011
Greece had a very troubled history in the 20th century, with periods of autocratic rule and periods verging on anarchy, and antagonism with communist and muslim neighbours. It is easy to see why the EU were keen to gloss over the problems and try to cement the country into the EU fold. Some may argue whether the ECB and Brussels were fooled by Greece’s accounting tricks (did they not do due diligence?), or whether they simply turned a willful blind eye to them, but that was when morally responsible attitudes were sold up and mortgaged to a penurious future. Default is merely the recognition of that failure.
September 28, 2011
….third possibility Greece was a Trojan horse for a purpose. I cannot believe that the EU (bearing in mind its political purpose) did not factor in this possibility and its opportunity to exploit it.
zorro
September 28, 2011
The Eu, the core of the problem, is run by Socialists who have no integrity or sense of history. The sooner the EU implodes the better for the moral welfare of humanity.
September 28, 2011
US banks’ cross currency swaps with fictional exchange rates enabled Greece and Italy to hide their true level of debt.
Source: http://www.spiegel.de/international/europe/0,1518,676634,00.html
It would be interesting to know whether any of the banks engaged in the practice (or their clients) now face a 50% ‘haircut’.
September 28, 2011
“A greek default would show the weakness of the west”
I think it shows the weakness of western democracy manifested in its inferiority to that invented and practiced by the citizens of Attica. Indirect democracy is too prone to being perverted by e.g. alien psychopaths like the Bolsheviks, or the Liberal Democrats who are actually a poorly disguised Marxist party or liars who make ‘Cast Iron’ promises they have no intention of keeping or anyone who has enough money to purchase a war or a policy or friendship for a deservedly friendless country. Then of course there are the latter day Bolsheviks and their money masters, the inheritors of Kuhn Loeb, whose grand scheme is to recreate the glory days of the USSR through the EUSSR when once again they will abolish nations and peoples and have five year plans and gulags and secret mass burials of fifth columnists and uncooperative proles.
If a Greek default would represent the highwater mark of the EUSSR, then bring it on.
September 28, 2011
Great post .
September 28, 2011
“…would be witness to the declining power and authority of the west in world markets.”
Well this was bound to happen because we kept expanding and redefining what and where the ‘west’ is to include some pretty backward countries. The geographical boundary of the ‘west’ is beyond recognition since our one and only referendum on EU membership and for which most of us have never had our say.
Some countries in the ‘west’ have sound economies and will not be tarred with the same brush. Certainly a few outside the EU and I must say that I’m jealous of them.
This shows just how badly Britain has been run.
September 28, 2011
I feel that some of us are at risk of making your blog seem like a gathering of ‘nutters’. I’m sorry if we do. All I can say about this is that I hear “What planet do politicians live on ?” asked everywhere and not just on the internet.
Well from our point of view the party conferences are like gatherings of cartoon characters but without the gags – judging by Sarah Tether’s efforts perhaps we can be grateful for that small mercy.
What a country !
September 28, 2011
‘Qui vit sans folie n’est pas si sage qu’il croit’ – (La Rochefoucauld)
September 28, 2011
Greece has three simple options that could offer a better choice than ratting on its debts. The first is to spend less. The second is to raise more in taxes. The third is to sell more assets.
Sorry – none of these will work to prevent default. Greece is in a debt deflation trap. Spending less reduces GDP (though will undoubtedly happen anyway), so worsening the deficit. Raising more taxes reduces disposable income, so they spend less. Selling assets reduces future income.
This is a problem of Greece but it is also a problem of her creditors. Banks buying sovereign debt supposedly have the best managers of financial risk in the World. It was obvious to the blogosphere over a year ago that the first bailout would do nothing but kick the can down the road. Why not these brilliant banking minds?
This sorry episode shows the hubris of supranational bureaucrats dreaming of a EU ruled by them, and of a western banking system that is completely out of control because it has abandoned capitalism (and the possibility of failure) for corporate fascism and rich monetary rewards for negligence/ fraud.
September 28, 2011
They will not stop in their efforts though and what will cause them to stop. They have shown what they think of EU laws around finance/bailouts etc
zorro
September 28, 2011
http://www.zerohedge.com/news/greece-runs-out-ink-cant-print-tax-forms
Greece Runs Out Of Ink, Can’t Print Tax Forms
Don’t know whether to laugh or cry.
September 28, 2011
Oh, laugh, I think, especially about this:
“… when Greece goes back to its prior currency, the drachma, or the obolus, or goats, or whatever, there will be no ink to print it.”
September 28, 2011
Questions please JR. Whom do you think is winning, the Inflationists or the Deflationists? Should we assume that we are in the deflation phase of the crisis and further QE will have no other result than to load the hyper-inflation spring, that will get triggered in the next year or so? Should I get out of Pound denominated assets?
The hot money is being bet on Greece defaulting and staying in the Euro. With the ECB printing train loads of Euro and pissing them into a Greek black hole for several years. The ECB is expected to arrange similar, regular default events for all the PIGS. This large amount of central bank organised inflation will be used to deflate the PIGS debt over the next decade. Should I get out of Euro denominated assets?
Reply: The Uk still has inflation which is too high. The danger is that US, UK and Euroland will all move to more money printing. I cannot give investment advice on this site.
September 28, 2011
A moral disgrace?
These were the Greek projects for 2000 – 2006 funded (partly or wholly) by the eu:
23,000 Greek companies financial help to upgrade technology
Further 80,000 firms internet connection subsidised
12,000 websites subsidised
1,000 Greek companies given cheap loans
53 Greek Business and Technology Development Centres
3,500 Greek research projects
1,000 Greek companies given cheap (subsidised) access to universities/research centres
Patra-Athens-Thessalonica-Evzonoi and EGNATIA motorways as well as many other new and upgraded roads
Construction of roads linking islands, including Crete, Rhodes, Lesbos and Corfu
257,000 Greeks given extra training with subsidised crèches
Greek ports upgraded
Greek Urban transport systems upgraded
“Action programme for 20,000 Greek women” (the mind boggles)
Training and IT systems for nearly all schools
480 Green energy projects
Financial aid to connect some islands to the electricity grid
The budget for further projects for 2007 to 2013 was (presume still is) 20 billion Euros wholly from the eu
Details here: http://ec.europa.eu/regional_policy/sources/docgener/informat/country2009/el_en.pdf
Although I admit that most of this money would have been wasted (as tends to happen with these kind of well meaning projects), Greece has ended up with tangible benefits such as new roads, IT and electricity connections. The Greek contribution averaged a 1:5 contribution meaning that is had these facilities built and upgraded for a fifth of cost.
It then took full advantage of its renewed borrowing power when it joined the Euro and it seems it will have 50% of its debts forgiven (and a lot more than that if it has an uncontrolled default)
Immoral? From our point of view (and of other European countries whose taxpayers were also forced to pay) yes it was. However, from the Greek point of view, it was doing what any democratic government should be doing: looking after the interests of its people.
It has acquired assets it could not afford on its own and done this without its large army firing a shot in anger. If it defaults and brings back a devalued Drachma, after a short period of pain and adjustment and it may then carry on as before but with upgraded infrastructure. I’d call that a net profit.
Greece may have put its citizens through a roller coaster, but they may thank their politicians in the end.
Now compare that with today’s government statement: the eu quango is planning to grab our money through a financial transaction tax and our government promises to ‘resist’.
Resist?!! I have been understanding and sympathetic to the fact that in a coalition we cannot always get what we want. I also understand our need to keep language diplomatic. However this response is pathetic. This cannot stand and I will be writing to my MP (a Conservative – not John) and asking for an assurance that he will demand something stronger than ‘resist’.
September 28, 2011
Goodness what a lot of postings.
If a company goes bust owing to misjudgements then the Directors may be held accountable and may be barred from Directorship for a period of years. If they continue to trade after changes in the market place, or the economic cycle have made the enterprise unviable so they cannot pay the debts, they can be made personally liable for the debts.
We should apply some of those ideas to politicians and central bankers directly. They should at lease be barred from public office for a decade if there is a default.
Greece is entitled to a political argument about the way forward, best or second-best. But we should not have to support their decisions. Whether they get the right mix of spending less, raising more in tax and privatising more is for their account not ours.
I suppose when Cameron or Osborne announce the subsidies the UK tax payer is to make it will presented in a combination of ways:
1
It is in our interests because we trade with Greece/EU/the world; rubbish! Why subsidise a customer who cannot or will not pay for goods and services supplied.
2
Ah, well! We are not in the Euro but we have common ionterests or obligations and have to show solidarity; rubbish again. We chose not to join the Euro because some of us made enough fuss that Greek-like disasters would happen. In the end Kimmy Goldsmith frightened off Major and against the wishes of the political class we stayed out. I am sure they thought it a temporary reprieve.
3
Ah, well (2). We are in the IMF. If they want to support the Euro fantasy we have to join in. Well last time the IMF raised cash our share was excessive, so next time it should be scaled back to equalise things. And our representative at the IMF should vote against supporting a common currency which has and will again cause so much suffering to its users and by-standers. The IMF was not created to sustain a bunch of 4th form monetary theorists and fantasists.
September 28, 2011
As usual one tends to agree with this blog and the logic within. (Heaven knows how JR is not ensconsed in No 10.) However, one also understands that Argentina and Brazil went bust/defaulted (in the 80’s methinks) and they seem both fine and the world still turned. One acknowledges that ones understanding of the Latin American defualts may be shaky but surely it wouldnt be the end of the world and might just put this whole Euro issue to bed. A precent for others de-coupling and devaluing their historic currency (Portgual, Irleand et al) and the Euro is a dead issue for another 2 generation. Or not?
Reply: Greece does not have its own currency to devalue, and no-one inside the Euro bunker wants to countenance their ejection.
September 28, 2011
The Third European War is being fought by consultants and burocrats bearing power point presentations and regulations. Who will emerge the winner this time?
September 28, 2011
Dear John,
Could you explain: the new bailout fund is backed by the ECB, so is rated AAA, borrows cheaply, then loans the money to higher risk borrowers. How is this different to CRedit derivatives designed to conceal sub prime debt? How is this going to have a better outcome this time round.
Reply: if they do this too much then surely the Rating Agencies have to downgrade these debts.
September 28, 2011
John, I like the idea that nations are morally obliged to repay their debt. But there is also a strong opposite argument: that it is immoral to lend money to irresponsible governments whose citizens will not be able to comfortably repay that money.
If I had lent money to Colonel Gaddafi with which he bought weapons to use against his own people, should I expect those same people to repay me now he is deposed?
If I had lent money to a desperate left-wing leader intent on spending money the country can’t afford in order to help his own re-election (not mentioning Mr Brown’s name), do I deserve my money back?
It takes two to tango, and when a nation takes on debt it cannot repay both the nation AND the lender are at fault.
September 28, 2011
I still doubt that Greece will be allowed to default on their obligations, we simply must not underestimate the willingness (and ability) of Germany (and France) of continuing to bail out that incontinent country (also known as sending German tax and French tax receipts to Athens).
Even if private creditors are forced to take a haircut (rumours point to 50%) it will be dressed up as a technical event, lacking in substance etc or a ‘managed consensual’ restructuring. It has to be as otherwise it will likely trigger many events (Credit Agency downgrades, CDS events, margin calls etc) which may have unknown impacts. For sure, in such a scenario, the French banks (and other major holders of Greek state debt) will be ‘helped’ by the sheer magic of ECB leveraraging itself. Yet more socialisation of the EuroLand!
Here in the UK we imagine that the German taxpayer will finally lose patience, sadly (or depending on your POV, happily) this is not going to happen. The German taxpayer fully did not want the Euro project to be born (back in the 90’s), completely understood the implications of losing their beloved DM, but nevertheless still allowed ‘the project’ to continue. One has to look back into history to understand the motivations as to why Germany will not ‘rock the boat’ and why such a motivation (and recognition) that ‘Europe’ must continu. A recognition that their tax euros will, partially, be used to prop up Greece (and Spain, Eire, Italy ….). So long as their intrinsic wealth (personal and corporate) is not materially harmed. Which is not going to happen.
Germany has a sneaking admiration for the UK not having joined the Euro and understands why not (specifically due to the ERM debacle and more generally our history). Unfortunately Germany is bound by the sweep of its own history, it recognises this and understands it can not do anything to avoid it.
So the 2 or 3 trillion idea (based on magic debt!) will simply put the project into the long grass for another 10-15 years – way beyond the electoral cycle and employment contracts of people like Merkel, Sarkozy and Lagarde.
September 29, 2011
Today the BBC states that the ‘The Lib Dems have traditionally been the most pro-European of the three biggest UK parties’ (this page http://www.bbc.co.uk/news/uk-politics-15098567)
This is completely wrong. The Liberal Democrat policies towards the eu are as anti-European and extreme as the disastrous policies of the anti-European eu itself.
The BBC should not push its own opinions especially when they are the opposite of the truth.
September 29, 2011
Would you please tell me, Mr Redwood, what is wrong with forcing Greece out of the Euro, allowing them to convert their foreign currency debts to new Drachma and to inflate at an agreed 5%? That would be a backdoor default of a much smaller magnitude than 50% and, being gradual, would allow everybody to adjust and cope.
And we in the UK need not get on our high horse. In 1989 and 1990, we had two years of Public Sector Debt Repayment, during which time we repaid a lot of our debt in clipped coinage (the inflation came later).
Reply: No-one in power in the EU and member states wishes to do that.