"We have a deal" versus "There is no money left" – the future of the Euro

 

              Some today will heave a sigh of relief . They will say that Greece is saved. Now she has agreement to write off one quarter of her debt she can go off and borrow some more from the IMF and EU. Her debt burden is temporarily cut.

             They will say the EU banks can  now pay for their share of the  Euro 100 billion of losses they are losing on Greek debt because they are to raise Euro 100 billion of new capital.

             They will point to the Euro 1 trillion fund available to underpin the markets in Italian, Spanish and any other Euro area debt where markets might lose confidence. This money, they say, is available to prop up those debt markets and keep interest rates down.

          They will say that in future there will be more budget discipline enforced on all Euro members through stronger and better EU arrangements.

            Markets may believe this for a bit. The first reactions have been to rally on the news.

             Underneath the press statements we are told work needs to be done on the details. We need to know

Where does the Euro 1 trillion come from? Who has to pay it back in due course?

How much difference does cancelling Euro 100 billion Greek debt make to their budget? How will they control other spending? How does Greece now start to compete within the Euro area? Have all the banks agreed to write off some of their Greek debt? When does it happen?

What is the intervention policy to keep Italian, Spanish and other interest rates down to  an affordable level? Is the ECB going to buy any more bonds? Is it going to print any more Euros?

Where does the Euro 100 billion for banks come from?  Could it be that banks required to improve their position do so by lending less rather than by raising new money? How many investors want to put new investment  money into a bank in order to pay for past losses on Euro sovereign lending?

When will the new political arrangements  stop large deficits and the build up of debt occurring in the future? How will it work? What happens if a country still ignores the requirement to cut its debt and deficit?

We now have confirmed more of the characteristics of the Euro area. We know that it thinks  the private sector should take a big  hit when a country borrows too much. We need to see if the ECB and other public holders are also going to agree to losing half their(and our) money.  Greek taxpayers will still have to pay interest and repay capital to the various public sector lenders.

We know that Euro area leaders think it’s fine to say to private sector pension funds and savers that they should not expect a Euro area government necessarily to honour its debts and repay money owed.They own a lot of the banks that take the hit.  Some will say if one Euro country can get away with this, why not another?

We know that decision making in the Euro zone remains slow and chaotic. Having to get 17 governments around a table and then broker a deal in the full glare of the media is not an ideal way of making decisions that are dissected and assessed by fast moving markets.

This looks like another attempt to tackle the synptoms. The underlying problems remain. Many Euroland countries are not competitive at the current exchange rate. Several Euroland countries have too much debt and are borrowing too much. How much more of the bill will Germany pay? How can they earn their livings and grow their economies?

Meanwhile the two tier EU is taking shape. Euroland is becoming a club within the club. The UK needs to get on with negotiating a new relationship with it. The Uk has to accept that as Euroland presses on to fuller political and economic union, more and more will be decided by the 17.  In  return for this, the UK needs to make more of her own decisions about things that matter most to us, whilst keeping single market matters as the decisions of the 27 EU members, not just the 17 Euro members.

 

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129 Comments

  1. lifelogic
    Posted October 27, 2011 at 6:25 am | Permalink

    Exactly as you say:

    The underlying problems remain. Many Euroland countries are not competitive at the current exchange rate. Meanwhile the two tier EU is taking shape. Euroland is becoming a club within the club. The UK needs to get on with negotiating a new relationship with it. Now is exactly the time to do it, perhaps the only time to do it Cameron.

    Good to hear that they intend to reduce MOT’s to every two years they could also get rid of the silly things in the test like slight cracks in number plates and chips in windscreens that do nothing for safety. Brown and Cameron have made such a mess of the economy that voters can no longer afford such nonsense. The have to save up for their £130 parking tickets when they get back to the car one minute late.

    • lifelogic
      Posted October 27, 2011 at 7:30 am | Permalink

      Is David Attenborough finally becoming a climate change skeptic and distancing himself from the BBC hysteria on the issue?

      Listening to him yesterday on radio 4’s Front Row he made the usual on message, BBC type, of positive global warming noises. But when questioned he would only really say that the climate is warming (it clearly has done by about 0.7C over the last 100 years though not recently) and that the increasing population must have an effect (clearly one of very many things that do affect climate). Climate skeptics (deniers in abusive BBC language) would not disagree with this line just the absurd Al Gore/BBC type of evil, hyperbole and scare stories – endless pushed at us and our children – even in primary schools. With pictures of London under water and the endless silly assumption – that slightly warmer will always be hugely worse and have cataclysmic effects. This then all used to justify absurd expenditures and market distortions to reduce C02 emissions – when the money would clearly be far better spent on health care, inoculations, food and clean water.

      • alan jutson
        Posted October 27, 2011 at 5:09 pm | Permalink

        Lifelogic

        And Birth Control

        • lifelogic
          Posted October 27, 2011 at 10:09 pm | Permalink

          Indeed

      • lifelogic
        Posted October 27, 2011 at 6:35 pm | Permalink

        Reported in the telegraph today Every Household has paid £320 to fund wind farms and solar panels and home insulation official figures show. I am sure they are all very grateful.

        Also: Sources close to Mr Huhne insisted he was committed to cost-effective forms of “renewable” energy.

        Just a shame that no cost effective ones actually exist.
        Nor in fact do any “renewable” ones exist in fact as it would contradict the second law of thermodynamics.

        I think they mean collecting radiation from a nuclear fusion reactor on the sun. Perhaps getting one on earth would be a good idea.

        • Bazman
          Posted October 27, 2011 at 8:09 pm | Permalink

          How about a hydro electric or hot water from the ground? Funny how aluminium processing plants are near hydro electric dams. Some energy companies instead of spending the money given to them to lower carbon emissions, doing so by insulation, a secondary benefit being improve the living standards and lower bills of many people, chose to send florescent lightbulbs by post and claim that the carbon emission was lowered by installation of each bulb to avoid the work.
          Now what does that tell you about energy companies Lifelogic? Can they be trusted to do the right thing, or is anything they do in their what are effectively cartels acceptable?

          • lifelogic
            Posted October 28, 2011 at 12:32 am | Permalink

            Of course many of the electricity companies, forced by silly government rules to do something daft chose the cheapest daft option and sent out hundreds of useless dim light bulbs. Many of which were never even used.

            You ask: how about a hydro electric or hot water from the ground what is your question exactly? Clearly neither is “renewable”. In the case of hydro all the good cheap sites for it have already been taken – new sites are not in the main cost effective – in the case of geothermal it is also not cost effective in most locations. I have nothing against either where the numbers work but they rarely do.

          • Bazman
            Posted October 29, 2011 at 8:15 am | Permalink

            They where not forced to do this. This is what they chose to do to evade the work required of them. What is daft about loft insulation?

          • lifelogic
            Posted October 30, 2011 at 7:48 am | Permalink

            Loft insulation and draft proofing are indeed cost effective and make sense in general. Toy house bling windmills and Photo-Voltaic cells do not make sense in general.

          • lifelogic
            Posted October 30, 2011 at 7:53 am | Permalink

            Loft insulation and draft proofing are indeed cost effective and make sense in general. Huhne’s house bling windmills and Photo-Voltaic cells do not make sense even with the absurd subsidy.

      • forthurst
        Posted October 27, 2011 at 8:06 pm | Permalink

        “But when questioned he would only really say that the climate is warming (it clearly has done by about 0.7C over the last 100 years though not recently) and that the increasing population must have an effect (clearly one of very many things that do affect climate).”

        You are a warmist alarmist if you believe population increase inevitably causes warming. I think David Attenborough, as an evolutionary biologist, is trying to focus on the rather more pressing issue of the human population explosion and its unsustainability. However, Cultural Marxism prescribes that uncontrolled third world immigration and hence the transfer of Western levels of ( CO2) production to increasing numbers of third world populations is a very good thing indeed. This tells all you need to know about the sincerity of those behind the global warming scam. Incidentally, the proscriptive increase in the use of methanol in petrol has a beneficial effect on increasing cereal prices to add to the profits arising from ‘carbon trading’ for the financial spivs who are not unconnected to the purveyors of other lies emanating from the BBC et al.

        • lifelogic
          Posted October 28, 2011 at 12:42 am | Permalink

          All I say is that humans activity, emissions, agriculture, building, forestry is clearly one (of very many factors) that affect the climate.

          Not that it inevitably causes warming or even that some warming is a bad thing anyway.

          • forthurst
            Posted October 28, 2011 at 11:09 am | Permalink

            I agree that man’s activity can affect the composition of the atmosphere but I’m not sure of the extent to which one can extrapolate that to a significant change in the climate. Cloud formation is the key.

      • Steven Whitfield
        Posted October 28, 2011 at 3:18 am | Permalink

        Much as I admire Sir David, it was unfortunate that he accepted the ‘hockey stick’ graph that we now know to be deeply flawed. I welcome his more measured response to the subject.

        I have forned the view that Politically correctness, which dictates that it’s followers must always identify amd support what or whom they perceives to be ‘powerless ‘ (The third world) against the ‘powerfull’, (mostly us and the US) , explains why global warming theory has gained such a foothold. It fits in with the mindset perfectly.

        Of course this warped ideology, placing one group above critism without making any moral distinction between what is right or wrong,or whether power is malign or benign leads to terrible contradictions and great harm.

        The family unit , education system and criminal justice have all been dealt deadly blows by this menace. Politicians routinely talk about the consequences but rarely speak about the real cause. Perhaps because for too many politicians, there is no absolute factual truth – only the politically correct truth.

        Many issues that have been discussed here ,I believe, have their roots in Political correctness or Marxism. These issues cannot be remedied by reason or logic, for they are immune to them.

        The outcome of most European issues seem to be pre-ordained by Political Correctness. The Federalists pick and choose from a very limited menu of set arguments to support whatever position they take. The ‘doctrine of the unripe time’ is a prime example.

        Take the Eurocrisis for example.

        The PC establishment identifies Greece as having ‘victim’ status, being the least powerful performer in the Eurozone.
        Having victim status classify’s the country as largely blameless ,thus mind boggling sums of money are being thrown away on a currency that cannot work.

        Our own chancellor is so deeply mired in PC he cannot stop writing cheques to support this foolish currency that we rejected, using money we do not have.

        • lifelogic
          Posted October 28, 2011 at 1:38 pm | Permalink

          I agree with much of this though I have some sympathy for the Greek people it is the Greek state and state sector (in unison with the EU) who have taken the ordinary people for a ride and mortgaged their futures for decades to come.

          • Steven Whitfield
            Posted October 28, 2011 at 5:38 pm | Permalink

            I too have sympathy with the ordinary Greek people – many of whom face hardship through no fault of their own. But to throw money at the problem will only hazard other countries causing even greater suffering.

    • lifelogic
      Posted October 27, 2011 at 8:35 am | Permalink

      Osbourne on radio 4 just now clearly intends to pour more of our, good money after bad, on this EU/PIGIS half baked, sticking plaster holding operation – but through the international IMF (so that is OK then).

      I do like it when politicians say as they so often do “Let me be quite clear on this” and then follow it with something that is totally ambiguous and as clear as mud.

      How are out Irish profits coming along then – please can he update us?

    • A different Simon
      Posted October 27, 2011 at 10:30 am | Permalink

      Two of my friends are MOT testers and they will tell you that 2 years is far too long between tests Lifelogic .

      You may well be right about most things Lifelogic but you are clearly making a statement here on a subject you have insufficient knowledge of .

      Two years is always too long , in a country like ours with salt used on the roads corrosion can really take hold . The standards which are applied will have to be ridiculously high , for instance a brake pipe which shows the slightest pitting from corrosion will have to be failed as the tester will not be able to determine whether it is good for 2 years or

      Money is tight at the moment , people are cutting down on maintenance of cars . The last thing to do is extend the period between MOT tests .

      • alan jutson
        Posted October 27, 2011 at 5:14 pm | Permalink

        A Different Simon

        Whilst I agree with you point about yearly inspections, you I think are in error in your other comment.

        The requirements of the MOT Test are that the car has to be road worthy, only on the date of inspection.

        The fact that it could fail in a few weeks/ months (depending on use is why they use an advsory notice, to let you know of a possile problem which is ok at the moment but will need attention in due course.

        When purhasing a second hand car, just because it has a current MOT certificate does not mean it is roadworthy, just that it was at the time of inspection.

        • alan jutson
          Posted October 27, 2011 at 5:51 pm | Permalink

          sorry sticky keyboard

          Advisory notice, to let you know of a possible problem.

        • A different Simon
          Posted October 27, 2011 at 7:07 pm | Permalink

          Thanks for correcting me .

      • HJBbradders
        Posted October 27, 2011 at 5:53 pm | Permalink

        As I understand it, a tester doesn’t have to decide whether a component will be safe at the time of the next test, only is it safe now. Would the tester fail a car because in 12 months’ time the brake-pads might be worn down.
        In any case, this puts the UK in line with other continental countries, e.g. Germany, where the test is already at two-year intervals.

        • A different Simon
          Posted October 27, 2011 at 7:14 pm | Permalink

          You are correct about it being roadworthy on the day of inspection .

          Harmonisation with Europe is not a good enough reason for sacrificing safety .

          The Germans may have the solutions to regulating the housing rental but they also think David Hasselhoff is the King of Rock and Roll .

        • Bob
          Posted October 27, 2011 at 7:28 pm | Permalink

          So it’s to get us into step with Germany is it?
          I wondered where the impetus was coming from.

          Quite frankly, if people are going to be feeling the pinch and cutting back on car servicing, then reducing the inspection frequency may not be such a good idea after all.

      • lifelogic
        Posted October 27, 2011 at 7:09 pm | Permalink

        I agree there is a slight risk but the vast majority of accidents are caused by stupidity, inattention and bad driving not mechanical failures.

        There is also a slight risk of accidents while doing the additional travelling to and from the tests and a risk while doing the additional work needed to pay for the tests. So it is not a zero sum gain it is as always a balance of risks – otherwise perhaps we should do one every hour. Life is not a safe activity.

        As it happens I do check my tyres before any long journey that might be a better course of action on balance.

        • A different Simon
          Posted October 28, 2011 at 10:11 am | Permalink

          Yep ,

          I congratulate you on checking your tyres .

          The biggest problem is the loose nut between the steering wheel and the drivers seat . I’d argue that that has probably got worse over the years .

          Modern front wheel drive cars with rack and pinion steering and disc brakes require much less skill to drive . However , put the driver in an unfamiliar situation and they are less likely to have developed the skills to drive their way out of it than they would be if they were used to driving reer wheel drive cars with steering boxes and drum brakes as may have been the case in 1966 .

          The brakes are better so the prevalence of tailgating increases .

          Simmilarly with all this safety equipment – it makes some people feel invincible . People would likely drive more safely with child seats in the front bumper and a spike sticking out of the steering wheel .

      • Bazman
        Posted October 27, 2011 at 7:28 pm | Permalink

        You only have to look at the amount of junk cars on the road to see this is a stupid idea. A lot can happen in two years to a cars brakes, suspension and tyres which is critical to handling and stopping distances. Many lighting faults are going to be missed and you can see at night how bad this already is.
        Like much of Lifelogics ideas it is silly middle class ideology that involves doing nothing with the results hopefully not effecting him personally. The lorry I often drive is tested every few weeks. Maybe we could extend this to a few years as well? He could pontificate about the pointlessness of the tests as it rear ended the first two cars and then started to ride over the top of the next ones. Believe me. It wouldn’t stop.

        • lifelogic
          Posted October 28, 2011 at 8:05 am | Permalink

          Bazman

          Let test all cars one an hour then – even if this causes more deaths on balance than not doing – as is rather likely!

          • Bazman
            Posted October 29, 2011 at 8:38 am | Permalink

            Is this supposed to be a ‘sensible’ answer? I mean you are always talking about ‘sensible’ methods.
            The reality is that MOT’s are a waste of time if the car is serviced regularly and quite often the MOT would does not mean the car is safe. It is a regulation and without any regulation of car maintenance common sense tells you that many people will not service or maintain their car. Two years is to long the car could have done 200k miles or stood for two years, both no good for safety. MOT’s based on mileage could be ‘clocked’.
            An example. The brakes on my lorry did not feel very good. MOT deceleration test and Mercedes said OK. Tests and inspection acceptable. Fault. Corroded brake discs. Changed at great expense to company. Common sense. What would you have done? What does this tell you? Testing is a waste of time and we should just drive our cars on instinct? No it does not. Interesting to see what a court of law with it’s ‘silly regulations’ would have said had carnage occurred.

          • lifelogic
            Posted October 30, 2011 at 7:59 am | Permalink

            Bazman you ask:- Is this supposed to be a ‘sensible’ answer?

            Yes all my contribution are serious. There is a balance for the best period for car safely testing. You cannot test every hour- it would clearly be counter productive. About every two years on balance is, I think, about right.

      • Mark
        Posted October 28, 2011 at 2:39 am | Permalink

        I recently had my car serviced and put through MOT. I told the garage that the rear brakes needed attention: they told me “Don’t worry, we’d have found that in BOTH the MOT inspection and our normal service inspection.” The question is, what does the MOT inspection really add so long as the car is regularly serviced to good standards?

        • stred
          Posted October 28, 2011 at 8:27 am | Permalink

          When the increased period for MOTs was proposed, the trade PR man was interviewed on R4 and said that the French had a higher rate of accidents because their cars were only checked every 2 years.

          I drive lomg distances eavery year in France and can confirm that their accident rate is because they are taught that road safety involves signalling everything, even going around corners, whilst assuming that, if the driver in front and waiting to overtake himself does not overtake, then overtaking on blind bends or undertaking is compulsary.

          I usually find that the garage puts things wong more than right during MOTs and fraudlent changing of ‘worn’ parts is common.
          My steering and headlights have been wrongly set in recent years. This year it failed because of a windscreen chip slighltly too large but where the licence disc was, covering 3 times the area.

          • Mark
            Posted October 29, 2011 at 8:56 am | Permalink

            The French rules of the road:

            Priorité à droite, priorité aux ascenseurs, avancez toujours

    • Tim
      Posted October 27, 2011 at 2:53 pm | Permalink

      Mr Redwood, your summary tells me that all our political leaders in Europe and here are clueless. They need someone who knows what they are doing, not people who have never had a proper job or qualified with a degree in …….politics. The advisers can’t be up to much either. I feel we’re heading towards a cliff with someone who can’t drive at the wheel and who won’t listen to us backseat drivers to turn left or right to avoid that collision. We need that in/out referendum NOW!

      • Bob
        Posted October 27, 2011 at 7:34 pm | Permalink

        Mr. R,
        What is the difference between imposing a three line whip and vote rigging?

        Reply: The 3 line whip is imposed openly

        • lifelogic
          Posted October 28, 2011 at 12:49 am | Permalink

          So it is open vote rigging.

          Where government jobs depend on voting the “right” whipped way it is clearly buying votes with public money and usurping what little democracy still exists.

          A practice the EU is also rather keen on.

          Reply: There is a good reason to allow whipping. Parties offer manifesto programmes to voters. In order to get these measures through the party needs to offer guidance to their MPs who stood on the party ticket to vote for them. If every vote was a free vote you might never get a budget or other necessities through.

          • lifelogic
            Posted October 28, 2011 at 8:09 am | Permalink

            Guidance in one thing firing them and deselecting them means they respond not to voters first but to party. You cannot they claim it is still democracy the party selects candidates and then makes them vote how they wish.

          • lifelogic
            Posted October 30, 2011 at 8:03 am | Permalink

            It is illegal to buy votes for a fiver. But not to buy MPs votes, once elected, using tax payers money (used to employ them in government or not to employ them). With the party control and whipping system telling them exactly how they must vote regardless of their electors or personal feelings.

      • Disaffected
        Posted October 27, 2011 at 8:40 pm | Permalink

        The server is down for E-petitions so people wanting a second referendum vote in Parliament are a bit stuck at the moment.

        Unfortunately no matter how solid John is on the EU and financial situation, no one in charge is listening to him or the public.

        What morality is there in Greeks living beyond their means, racking up huge debt and continue to borrow in the expectation citizens from other nations will pay for their lifestyle??? I know it sounds a bit like our welfare state but this is totally wrong. Who in their right mind will ever lend to Greece knowing they do have the means or intention of paying back the money they borrow?? The answer is other EU countries who want a pan European state. The EU countries will be so debt ridden (banks and countries) that the only answer will be to muck in together as a single country on a permanent basis.

        People write to your MPs that you want an in out EU vote ASAP before it is too late.

  2. Mike Stallard
    Posted October 27, 2011 at 6:37 am | Permalink

    Ever since Monnet began the project by intrigue and pulling strings with a fair amount of dissimulation and deception thrown in, Europe has had one immutable rule: nobody leaves once they have joined. The aim is unity and no power gained (ratcheted up) shall ever be returned. I won’t bore you with the quotations.
    But I could. And the dates.

    So let me add just a few other questions to your very thorough list:
    What would happen if Greece simply left the euro?
    What would be the effect on France exactly?
    What would be the effect on the UK exactly?

    We are simply told that it would be disastrous and even Mr Cameron seemed to believe this yesterday evening.

    Does anyone know? I wish I could find out.

    • norman
      Posted October 27, 2011 at 7:07 am | Permalink

      The truth is nobody knows. Politicians and economists can guess, and as they all have vested interests / biases on way or another treat everything said with a spadeful of salt.

      The ‘don’t rock the EU boat’ brigade (to which the majority of the political class in all 3 main parties belong) will say that Greece leaving will bring down the world banking system and within a month we’ll all be eating nettle soup, the ‘Euro is doomed’ brigade (to which stupid little people like me belong) will say that Greece is already de facto outside the Euro and bankrupt as it’s being so heavily subsidised by other Euro countries so there will be no real negative effect and it’s the only solution in the long run.

      • Nick
        Posted October 27, 2011 at 8:40 am | Permalink

        Lets do a bit of analysis on Greece leaving.

        1. New Drachma is introduced.
        2. All Greek debts and Greek bank accounts converted to New Drachma.

        That means that Greek banks are still solvent bar the issue of their loans issued under, say, English law. However, the Greeks could just effectively say bugger off. They are converted. Their banks don’t go under.

        3. Sensible Greeks have off shored their Euros. Freedom of movement of people and capital – its EU law. So they have a whopping FX profit.

        4. Non Greek banks now take a major FX hit. Not surprisingly, the hit is the same as the proposed haircut on the debt.

        5. If Greece gets to the point where government spending (without debt) equals government income, they default. After all, at this point they don’t need the money markets.

        6. The cycle repeats.

        7. French banks get into major problems. They have written a lot of CDS contracts on Greek debt.

        [The funny part is if the ratings agencies now declare a default on the basis of the 50% haircut]

    • Mick Anderson
      Posted October 27, 2011 at 7:14 am | Permalink

      Does anyone know? I wish I could find out.

      The only true method to find out is to leave the EU. Please. Pretty please.

      This latest summit has given more fudge, not a solution (for Greece or any other economy at risk). Once more, the battered can has been kicked a little further down the road.

    • Peter van Leeuwen
      Posted October 27, 2011 at 8:15 am | Permalink

      Mike Stallard: “nobody leaves once they have joined”
      If the EU were such a trap, why did Greenland leave it unhindered and why have there always been scores of aspirant members? A trap would have been discovered by now. With the Lisbon Treaty there is even a written procedure about how to leave the EU.

      • Tedgo
        Posted October 27, 2011 at 4:43 pm | Permalink

        re Scores of aspirant members

        Thats simple, they anticipate getting far more out of the EU, financially, than they pay in.

      • Denis Cooper
        Posted October 27, 2011 at 4:48 pm | Permalink

        But not about how to leave the euro while staying in the EU.

        • Peter van Leeuwen
          Posted October 27, 2011 at 5:31 pm | Permalink

          Leaving the euro was never envisaged, but who knows, in some future treaty, both an orderly default and an orderly leaving of the euro could be specified.
          Surprising that after almost 2 years of the Lisbon Treaty the UK has still not invoked this article to leave. It must be very advantageous to stay in the EU!

          • Denis Cooper
            Posted October 27, 2011 at 6:13 pm | Permalink

            Why wait for a “future treaty”, when euro exit provisions could and should be added to the radical EU treaty change which was agreed by EU leaders on March 25th?

            Which is not yet in force, and could easily be modified.

            Along with at least seven other necessary treaty changes.

          • forthurst
            Posted October 27, 2011 at 6:15 pm | Permalink

            All Eurozone countries should have a living will.

          • Bob
            Posted October 27, 2011 at 7:45 pm | Permalink

            Advantageous to who?
            Do you mean like Tony Blair relinquishing the UK’s rebate in the hope of gaining some advantage?

          • forthurst
            Posted October 28, 2011 at 1:08 pm | Permalink

            Bob

            So they can effect an orderly departure from the Eurozone without provoking an international crisis every time they in Club Med and outlying Tigers find themselves with uncompetitive exchange rates and unsuitable intrerest rates.

      • alan jutson
        Posted October 27, 2011 at 5:20 pm | Permalink

        Peter

        Most country’s join now, because they think they will get benefit in the form of a positive payment of grants towards the inprovement of the infrastructure.

        When I went to Malta many years ago it was a typical bankrupt Island economy, they could not wait to join, to get their hands on some grant money. Now I think you will find after the flush of excitemnet at the beginning, most are perhaps having second thoughts as the hidden costs surface.

      • Electro-Kevin
        Posted October 27, 2011 at 5:37 pm | Permalink

        Peter van Leewen

        Quite.

        Our ruling elite does not want us to leave the EU.

        The worst effects of EU legislation and directives have been caused by our own ruling elite.

        At least we know where we all stand but I don’t expect much to change. Well actually I do – it will change further in the wrong direction. Away from the stable and united country which I was lucky enough to be born in.

        Britain has been mismanaged beyond the point of criminality over the past 20 years.

        I predict that Britain will be at civil war within 50 years. A struggle between ideologies.

        It’s all too late. Nothing can be done.

        • Bazman
          Posted October 29, 2011 at 1:36 pm | Permalink

          So stock up beans, bullets and gasoline Son, There’s a storm coming.
          If you think tax cuts for the rich whilst the poor face ever harder living, to fund these cuts, then you may well be right. A war between the haves and have nots across the world. You are stealing from us so we are going to steal from you. Oceans of poverty surrounding a few islands of wealth should not be tolerated. This is where (unrest-ed) comes from. Anyone disagree with this?
          It’s a war on drugs and the people on drugs are winning. (Bill Hicks)

      • Mike Stallard
        Posted October 28, 2011 at 9:20 am | Permalink

        I always read your posts which are to the point and interesting.
        Greenland did indeed leave the European Communities following a referendum in 1985. She is now ranked as an OCT (Overseas) member although Greenland citizens are full members of the european Community.
        Since then we have had the Lisbon Treaty, though. As I read Title 5 sections 4-6, members can be asked to leave by a majority vote.(4) However, if a state wishes to withdraw, all the others do is to “take note”.(5) “The decisions and recommendations of the Council within the framework of permanent structured cooperation, other than those provided for in paragraphs 2 to 5, shall be adopted by unanimity.” So I suppose that this means you need full approval from every state for withdrawal?

    • javelin
      Posted October 27, 2011 at 9:16 am | Permalink

      The real fear for Europe is that the UK will become more successful – just like leaving the ERM. That would encourage the breakdown of the EU.

      Cameron reminds me of a boy who is admiration of Europe, like a parent – but normal boys grow into men and one day when they grow taller than their mother they will start to respect them as equals and as their mother and not be beholden to them as their mummy.

      • zorro
        Posted October 27, 2011 at 9:56 pm | Permalink

        Cameron looked very beholden to Sarkozy when he sought him out in supplicant mode to get back in his good books after Sarkozy had told him to butt out of their talks…..Sarkozy shook his hand without looking at him.
        Cameron needs to know how to deal with the French…they are no problem if they respect you…..(clue) Mr Cameron, Sarkozy does not respect you. You need to make him respect you.

        zorro

    • ms m davies
      Posted October 27, 2011 at 9:44 am | Permalink

      … Europe has had one immutable rule: nobody leaves once they have joined. …

      It reminds me of some of the words to Hotel California:

      We are all just prisoners here
      Of our own device

      and

      You can check out any time you like
      But you can never leave

      • Denis Cooper
        Posted October 27, 2011 at 4:52 pm | Permalink

        At present we can still leave any time we like, once we have managed to elect a majority of MPs who will vote for us to leave.

        It will become much more difficult once the EU has its own armed forces.

        • alan jutson
          Posted October 27, 2011 at 5:24 pm | Permalink

          Dennis

          Agreed, we just walk out and stop the payments, (or the other way round) what are they going to do, fine us !

          Be like the French, simply ignor the fines.
          Then what !

          Lots of hand wringing, but we are out.

          So they threaten they will not let us sell them things, but we also purchase a huge amount from them, so the threat can work two ways.

          • Bob
            Posted October 27, 2011 at 7:53 pm | Permalink

            Actually our trade deficit with the EU means that we have a bigger pile of bargaining chips.

            Also, I heard that UK exports to the world markets which are transshipped at Rotterdam are counted as exports to the EU – can you verify this Mr. R?

            Reply: I explained the adjustment you need to make to the figures before on this site

    • Single Acts
      Posted October 27, 2011 at 11:06 am | Permalink

      If Greece left the Euro, the Euro would strengthen a bit. There would be pressure for Portugal, Spain, Italy and Ireland to leave. The Europeans might see Greece as the first crack in the bridge that would lead to collapse. They maybe right.

      My bet is you would end up with Germany, Austria, maybe Benelux and France left in but the overall European project hammered possibly terminally because the obvious end-game is total unification and the de facto extinction of nation states. A single currency is vital in this regard, so is supra-national organisation of finances.

      Make no mistake, this is what they want.

    • Disaffected
      Posted October 27, 2011 at 1:56 pm | Permalink

      It would be disastrous for the EU fanatics who want a pan European state irrespective of the majority of the public who wish to remain independent as part of an EU trade group. It would take their progress for a single European state back 36 years. Trade will continue whether the UK is in or out of the EU. It would bring an end to the Coalition and cause an election, but only those in power get concerned about this scenario.
      Clegg would not want the UK to leave the EU or get rid of the social, political of monetary ties the UK has with the EU. Let us remember the LIb Dems overwhelmingly lost at the last election and came a very poor third. Less of the vote and fewer MPs than the previous election. It was clear the public did not agree nor want with their policies on Europe, immigration, defence, crime and disorder and budget. Yet the Lib Dems have a disproportionate influence on the country’s policy despite what the public want. The same is mirrored by Monday’s back benchers vote on Europe. MPs showed complete contempt for what the public want. Some even had the bare faced cheek to speak for the public as if they knew what was best for us irrespective of strong evidence to the contrary.

      • sjb
        Posted October 27, 2011 at 5:56 pm | Permalink

        Disaffected wrote: “Let us remember the Lib Dems overwhelmingly lost at the last election and came a very poor third. Less of the vote and fewer MPs than the previous election.”

        For every 361 people who voted Conservative, 230 voted LibDem, and 31 voted UKIP. Therefore, if it is fair to say the LibDems “came a very poor third” then how might UKIP’s fourth place showing be described?
        Source: http://news.bbc.co.uk/1/shared/election2010/results/

        The LibDems share of the vote increased from 22.1% (2005) to 23.0% (2010).

      • A different Simon
        Posted October 27, 2011 at 7:25 pm | Permalink

        “Clegg would not want the UK to leave the EU”

        Do you think that would result in his EU pension entitlement being revoked ?

        Nice to know our MP’s are not suffering from a conflict of interest or acting under the instructions of foreign powers .

      • Peter van Leeuwen
        Posted October 27, 2011 at 8:04 pm | Permalink

        Applying your logic on UKIP, should we not conclude that “the public did not agree nor want with their policies on Europe”, i.e. the British public doesn’t care for leaving the EU? UKIP: zero MPs.

        • Bob
          Posted October 27, 2011 at 11:53 pm | Permalink

          It’s not that simple.
          There is a phenomenon called tactical voting, whereby people vote to keep out the party they dislike the most. This is why we have been stuck with a virtual two party system for the past 80 years.
          Most Brits were happy to have a common market, but never in favour of a superstate, but the political parties always played it down around election time and even portrayed themselves as EU sceptics to throw the voters off of the scent.
          The public saw what happened on Monday so perhaps now the scales will drop from their eyes and we may see a new UKIP dawn in 2015.

          Reply: Dream on! No sign of a UKIP surge in the polls. Last night on Question Time Mr Farage seemd to have adopted my labnguage by asking for a new relationship based on trade and co-operation. Why aren’t you denouncing him for that as some do when I say it?

  3. Robert K
    Posted October 27, 2011 at 7:11 am | Permalink

    Only in Euroland could a deal in which a sovereign state within a currency union renege on its debt could be called a positive result. The effect is the same as ever – the profligate get bailed out and the prudent saver – including people such as myself with private sector pension plans that invest in government bonds – get hammered.
    The more this debacle carries on the more obvious it becomes that the people at the wheel of it will drive Europe off the cliff-edge for the sake of ideology. Mr Sarkozy says that Europe cannot survive without the euro. I reckon it’s the other way round.
    Please keep up the good fight.

    • william
      Posted October 27, 2011 at 12:53 pm | Permalink

      Absolutely right,Robert K.The EU has just made theft legal.Greece is not a business enterprise,quoted or unquoted,with shares and secured or unsecured debt instruments.It is a democratic state,and the EU has said it is OK not to repay in full its liabilities.Euroland is now Uruguay,Paraguay,Argentina, Mexico,Indonesia,Russia et al.

    • Derek Buxton
      Posted October 27, 2011 at 2:36 pm | Permalink

      Yes Sir, you have that correct. We must be driven into penury because Cameron wants to save the EUro…..WHY? I would dearly love to know from whence comes these trillions of EUros. There cannot be that many around and printing, which I imagine they are relying on, will just lead to massive inflation. That incidently is where we are presently going.

  4. Michael
    Posted October 27, 2011 at 7:32 am | Permalink

    We need a referendum. See this petition. https://submissions.epetitions.direct.gov.uk/petitions/20133

  5. alan jutson
    Posted October 27, 2011 at 8:01 am | Permalink

    Yes lots of Questions John, and too few answers.

    If Banks have to raise their own capital reserves,
    I guess that means less to lend to business.

    If Banks are still required to have to purchaser soverign debt,
    I guess that means less to lend to business.

    If banks are required to take a haircut on sovereign debts they purchased,
    surely their capital reserves are diminished.

    The telling line is:
    If one is allowed to dismiss/simply write off, some of its debt without any form of penalty, why should not the others. why bother to run a balanced budget.

    Does this mean that the last tranche of money given to Greece only a few days ago, has already been taken to the barbers for a short back and sides.

    All of this hardly inspires confidence, it seems to me its all just a manipulation of paperwork, (creative accounting) without resolving the real problem.

    The problem is, they are simply spending more than they get in, in income, and until they get this into balance, they will continue to go backwards.

    What I cannot understand is why the markets are still rising on this sort of news, or did they really expect it to be worse than this. !

  6. Ferdinand
    Posted October 27, 2011 at 8:18 am | Permalink

    There seems to be no limit to the willingness of the Euro leaders to look at their enterprise with rose tinted glasses. Are we really to expect that Greece will completely change its ways, or Italy for that matter ? Nothing in this plan gives any confidence to those who saw it coming, saw it happen, and are now watching for the final crisis.

  7. Peter van Leeuwen
    Posted October 27, 2011 at 8:31 am | Permalink

    So this was the “financial-political” maximum achievable to date, “something between a bazooka and a water gun”. The Eurozone´s strength is similar to that of Greece: “if you don’t help me, we’ll all suffer together”. That is why I expect the proposals of getting the IMF involved to gain strength. The BRIC countries have expressed an interest in the euro succeeding and channeling their surplus cash through the IMF carries the lowest risk I’ve been told.

  8. Nick
    Posted October 27, 2011 at 8:34 am | Permalink

    Now the Euro is saved – Can we have our referendum as Cameron promised?

    • RB
      Posted October 28, 2011 at 5:21 am | Permalink

      No.

      We have been told for years that we couldn’t have a referendum because the EU was not a priority. Now we are being told we can’t have a referendum because the EU is a priority.

      Now we see that ministers are saying that the proposed treaty change to legalise bailouts is not important enough to trigger the referendum lock Mr Hague and Mr Cameron constantly refer to as the benchmark of all they have achieved in pursuing their goals in the EU.

      Default is not default, but a “haircut” – presumably the distinction being justified by the fact that banks “consented”. But how did that consent arise? Is it, as the BBC said earlier this evening that 100Bill is written off but the banks get 30Bill to assist them and then recapitalisation is a further 106Bill. On those figures its easy to see why they might consent to someone else (taxpayers?) really taking the hit.

      Smoke and mirrors, as always?

      • lifelogic
        Posted October 28, 2011 at 9:21 am | Permalink

        No chance but you might get some more hollow, worthless, promises for after the next election from Cameron.

  9. Martyn
    Posted October 27, 2011 at 8:51 am | Permalink

    Almost daily we see the French President and German Chancellor in effect dictating who is to do what without regard, it seems, to the democratic right of other nations to make their own decisions. Meanwhile, on the sidelines we see the pathetic, expensive and useless EU Parliament and its MEPs simply waiting to be told when and how to vote.
    The German Chancellor now says that if the Euro fails it will lead to war. Hmmm, a rather extreme point of view I would have thought? Is that a personal opinion, or are we supposed to take it as a veiled threat?

  10. Brian Tomkinson
    Posted October 27, 2011 at 8:55 am | Permalink

    Another ‘Groundhog Day’ in Euro fantasy land. The EU has constructed this monster as a means towards their ends of a United States of Europe and will do anything but face the reality that it will never work as constructed. Any change towards a fiscal union will remove what little is left of the sovereignty of the eurozone states. This whole ‘project’ is anti-democratic.
    If a single currency is such a good idea why don’t we have a single currency for the world? The answer to that will show why on a smaller scale this is equally unworkable.

  11. Ian Wragg
    Posted October 27, 2011 at 8:57 am | Permalink

    Cameroon is way behind the curve. Europe is imploding and looking at him last night reminded me of the poor kids looking through the window of the rich folks with the xmas tree and burning log fire. Desperately trying to get attention and an invitation to the party.
    It’s time to get away from the EUSSR and plough our own furrow. Greece has defaulted but to the political nerds this is a positive result. magic. I think I may try that with my car loan.

    • Bob
      Posted October 27, 2011 at 8:06 pm | Permalink

      I wonder if the BBC would like to take a 50% haircut on the TV licence fee (in these straitened times)?

    • Bazman
      Posted October 29, 2011 at 1:39 pm | Permalink

      Tell them you can’t afford the loan anymore, but will settle up right now for the right price. You might be surprised at the result.

  12. javelin
    Posted October 27, 2011 at 9:12 am | Permalink

    I always find it puzzling how people say the markets will do this or do that. All the markets try to do is find a fair price for a particular instrument. Most traders use similar pricing algos and will find a price to buy and sell. They also use similar historical data, read the same news etc. The weaker pricing algos die out – the more accurate ones survive.

    For me what stands out from this agreement is that it kicks the can down the road and costs the economy more. A meltdown has been prevented by borrowing / reducing (via taxation) future growth. The REAL problem is however lack of growth in Europe. It’s not the size of the debts – its the lack of tax to pay it back.

    The hope is that growth will return and the economy will return to normal – sure it will take longer to get out of recession because we are paying all this extra tax (the ECB could have simply printed more money) but I still see all these socialists spending money and I don’t see wealth creators paying tax. As long as these tax and spend economists are running the show things will only get worse. We need invest and growth policies NOT tax and spend policies.

  13. Gary
    Posted October 27, 2011 at 9:17 am | Permalink

    They cannot even solve the Greek problem. And that is the smallest problem. Wait until this circus moves on to Spain Italy, and the Big One , the UK. The UK is by any measure in a bigger hole than Greece….. I forgot, we have the luxury of printing.

    • zorro
      Posted October 27, 2011 at 10:06 pm | Permalink

      So does the ECB as you will see on a large scale….treaties, sweeties pah!

      zorro

  14. GJ Wyatt
    Posted October 27, 2011 at 9:19 am | Permalink

    Plus ça change …
    Quoting Forbes: “The combined length of period under which Greece was in default during the modern era totaled 90 years, or approximately 50% of the total period that the country has been independent.”
    http://www.forbes.com/sites/investor/2011/09/28/debt-defaults-have-greek-history/

  15. Conrad Jones (Cheam)
    Posted October 27, 2011 at 9:49 am | Permalink

    Mr Redwood,

    You raise the most obvious and pertinent question that requires answering by the EU Bail out Politicians – “WHERE DOES THE MONEY COME FROM?”.

    Excellent question.

    Is it possible that the Banks themselves will create Loans to themselves and get Europeans to pay back the principal and interest through taxation and austerity measures?

    The IMF is known to use some contribution money from it’s members and use the Financial Markets to raise loans using member state future taxation as collateral.

    If you could clarify the “Where does the EU the money from ?” question it would be greatly appreciated.

    Thank you.

    Reply: I cannot, because the EU does not yet know. It is one of those boring technical details that may come later!

    • zorro
      Posted October 27, 2011 at 10:07 pm | Permalink

      leveraging and printing….no other option which they would be prepared to consider.

      zorro

      • zorro
        Posted October 27, 2011 at 10:08 pm | Permalink

        Gideon might give them some money one way or the other too…

        zorro

  16. Posted October 27, 2011 at 10:01 am | Permalink

    More sticking plaster….

    Ive read it that should Greece leave the Euro then their debts would mulitply drastically because they would still have to pay back in Euros with a devalued currency.

    The only way forward once the sticking plaster stops working in my opinion is to go on to the full centralized United States of Eurozone Land model so each country becomes an assembly and allocated a central budget thus keeping control of spending and deficits.

    If this goes ahead then by default the UK should be able to return the political powers surrendered by Brown/Bliar and just continue with the free trading block which is vital – important not to let Cameron off the hook though.

    One thing Brown did get right though – staying out of this Euro mess.

  17. oldtimer
    Posted October 27, 2011 at 10:04 am | Permalink

    So many unanswered questions – as you helpfully point out.

    A central one, for the future, must be this. If you are one of those bondholders “volunteered” for a 50% haircut, why would you want to go back to that barber shop ever again?

    • zorro
      Posted October 27, 2011 at 10:10 pm | Permalink

      they might call in their insurance…..as the French banks shiver.

      zorro

  18. m wood
    Posted October 27, 2011 at 10:08 am | Permalink

    Is there an element of ‘Pass the Debt parcel’ in this settlement?
    – Make 50% of Greek debt go away by passing it onto banks
    – recapitalise banks by Euro states buying shares,
    – Euro states borrow money to buy those shares??

  19. Posted October 27, 2011 at 10:24 am | Permalink

    Won’t reneging on 50% of the privately held Greek debt just make it impossible for them to raise money from other than government sources in the future?
    Certainly I wouldn’t even be thinking of lending money to an individual who had previously refused to pay me what they owe. Indeed, I’d go further, I wouldn’t lend money to anyone who aided and abetted that individual on the basis that they presumably find it morally acceptable and could thus do it themselves.
    I know banks don’t think like us ordinary people, but where is all this money going to come from other than us taxpayers, as it sees that in spite of Osborne’s superficial assurances that Britain is not contributing to this European fund, we will be contributing via the IMF.

  20. Caterpillar
    Posted October 27, 2011 at 10:29 am | Permalink

    Well today would have been a good day for the backbench business referendum debate that the PM insisted on moving. One cannot help but wonder.

  21. Alistair Watson
    Posted October 27, 2011 at 11:45 am | Permalink

    I’ve subscribed to the belief for a long time that to find the truth follow the money . I lack the knowledge, as do most people, to unravel the present bowl of spaghetti that is the Euro, it is however clear that EU politicians lied to the banks and now tell the banks they must pay for their mistake of believing them. How are the banks going to raise the money, I assume no one in their right minds will lend to them, the banks hold our savings, a fact the politicians will not have missed in their desperate quest for a solution.

    I assume they are coming after our money – banks will accelerate the slow motion rape of our savings characterised by the difference in inflation and the interest rates we are paid. Central Banks will print more money further diluting the value of our savings.

    I do not have a good feeling about our future and must remind everyone that the Euro, the EU and the present mess must be laid at the feet of those responsible who must be made to pay – start by ripping out the pensions, salaries & expenses of those who were on watch when these projects were thought up and put into action.

    We need to say this loud and clear to the incompetent Elite who like politburo children think they were born to rule us – keep repeating it until we are shown the door or the EU reforms.

  22. Anne Palmer
    Posted October 27, 2011 at 11:49 am | Permalink

    These proposed vast Treaty changes to the Treaty of Lisbon, require the promised referendum for the people of this Country on an ” in or out of the EU” which must be held and held soon. There is no way this Country can remain in the EU. Just reading of the Treaty ESTABLISHING THE EUROPEAN STABILITY MECHANISM (ESM) alone, requires the promised referendum in this Country, and THAT was before the ‘Jolly Get Together’ yesterday.

    It would have been far better if our Prime Minister had not have attended, he rather let us down trying to become part of the situation when clearly he was so obviously ‘surplus to requirements’.

    • zorro
      Posted October 27, 2011 at 10:12 pm | Permalink

      It was embarrassing to see….

      zorro

  23. Posted October 27, 2011 at 12:02 pm | Permalink

    I guess that the EU will in due course find a method of ensuring that taxpayers bail out the ‘unlucky’ French banks, those foolish virgins who lent to Greece. And you may be sure that they will ask for a British taxpayer contribution to the binge.

    Just think: Portugal, Ireland, Italy and Spain are waiting in the wings. Superficially, the Spanish situation doesn’t look too bad but their regional governments got their fingers badly burnt in the property boom and bust, and expect central government to pick up the tab.

    We want a referendum NOW!!!!!!!!!!!!!!!

  24. Alan Wheatley
    Posted October 27, 2011 at 12:13 pm | Permalink

    While renegotiation does not seem to be about to happen, there is nothing to prevent and everything in favour of setting out objectives for the renegotiation when it happens.

    It is best to have a good idea of where you are heading before starting out on the journey.

    It is also necessary to have a plan for what to do should the objectives not be met: I think we all understand the course of action in such circumstances is to leave the EU, but to be credible there needs to be in place the strategy for so doing. And if the strategy is to attract majority public support it must be shown that to leave the “frying pan” of unsatisfactory renegotiations is NOT to leap into an even less satisfactory cauldron of “fire”.

  25. Posted October 27, 2011 at 12:28 pm | Permalink

    They make me LAUGH,except the laughter is ANGRY,the eventual denuement [not long]
    will not be pleasant for the architects of this,I use the term architects advisedly because
    NORMAL architects make sure PROPER FOUNDATIONS are built or the building COLLAPSES,the likes of the Greek people will still evade tax,expect to retire at 50,Greece will still have an army bigger than ours etc etc as will other Southern Nations,Greece should
    concentrate on being good at shipping,being a MUST VISIT tourist destination ,producing WELL it’s unique range of food products based on it’s agriculture and being a pivotal joining point [land based] between the east and europe,all based on a PROPERLY valued Drachma which immediately will get back more than 1 million tourists a year and very soon many more,it’s agriculture will become very affordable as exports and it’s shipping companies will get more cargo to carry etc etc.As an example I have a friend who farms
    table grapes near Upington in South Africa who 25 years ago produced 100,000 cases per
    annum for export,because the Rand has gone from R2.5 to the £ to R12.5 in that time he now produces 1.5 Million cases a year and his acreage has increased by 2500 acres in that time,he even flies his own Piper Seneca Twin off his own landing strip,all based on a properly valued Rand as opposed to the FIXED rate [Apartheid] Rand,just google Map
    the Upington area and look at all the GREEN which represents these farms and imagine the far smaller area 25 years ago,OH and not to mention the unexportable grapes which get dried and turned into dried fruit also a huge export crop talk about WIN WIN WIN.

    • zorro
      Posted October 27, 2011 at 10:15 pm | Permalink

      Greece would get a lot more tourists and foreign exchange if it traded on its natural heritage and beautiful climate after withdrawal and devaluation. Its political class are scared of losing their gravy train and Eurojobs. It just needs the confidence to live within its means and use its natural advantages.

      zorro

  26. Tony
    Posted October 27, 2011 at 12:43 pm | Permalink

    I can never understand why the pro – EU ‘ers intimate that our European export markets would be denied to us if we left the EU. Sure, there might be customs tariffs, but the EU are hardly likely to impose a blanket ban on UK goods, as that would probably in turn deny them access to UK markets.

    The EU isn’t paranoid enough to cut off its nose to spite its face; or is it ?

    • forthurst
      Posted October 27, 2011 at 7:08 pm | Permalink

      I think they might try to exclude us from pan-European Defence and other projects. We might need to focus more on developing our own resources and other World markets; how bad is that? Our politicians might like not to have to argue so much with the French, who knows?

  27. sm
    Posted October 27, 2011 at 1:20 pm | Permalink

    What happens to the derivative positions? Are these now being controlled by our regulators to ensure we have systemic stability, whereby taxpayers are protected?

    How much more has the UK become liable for via any other means. You mention the ECB purchases (is it solvent?) George Osborne didnt seem to mention the ECB or state influenced banks or any other means we are not yet aware of? It is important as some conflicts of interest could arise?

    How should we expect the write offs in bad debt will effect the money supply versus the effect of the extra bailouts and government debt spending? Currently it seems to favour further worldwide price inflation of basics. Can we expect rent, house prices,fuel,food, power prices to fall soon?

  28. Mike Chaffin
    Posted October 27, 2011 at 1:23 pm | Permalink

    So the ECB can’t bail the banks out (mainly the French banks, almost all of whom have already held out their begging bowls) because it can’t realistically leverage more.

    So the bailout fund is itself leveraged, which to my mind makes it a bank. So the Eurozone now needs two banks as lenders of last resort….

    It is an interesting twist on printing money. Rather than print the money itself, print the banks that lend it out.

    There has been no default, hence CDS’s don’t come into play, but the Eurozone public sector will not be writing the debt down in the same way as the seemingly insolvent private banks.

    Meanwhile outside investors are required to pump money into the Eurozone banks…. There are many people in the world stupid enough to do such a thing given the comtempt for the rule of law and even common sense shown by the Eurozone leaders.

    Meanwhile they’re relying on the Italians to take shorter lunch breaks and retire before the age of 39…

    Good luck to them.

  29. Posted October 27, 2011 at 1:24 pm | Permalink

    Further to my comment above.Try telling the exporters of South Africa that their Rand will go to say R6 to the £,and that now their gold will earn $4 an ounce x $1600 an ounce as opposed to $8 an ounce, I know what would happen, the Greek riots would look like a children,s Tea
    Party,when I lived in Durban in the early 2000,s ,10,000 African taxi driver owners BLOCKADED the city for 2 days,NOTHING moved,the authorities gave in and tore up the motoring summonses,I am not saying it was right ,just showing an example of What they are capable of,over motoring offences!!!. A proper valued Drachma is the only answer AND
    public spending = Taxation collected ,NO BORROWING.

  30. LJH
    Posted October 27, 2011 at 1:45 pm | Permalink

    The only way to deal with the Byzantine machinations of Euroland, is to do it on a country’s own terms, not those dictated by Brussels. Definitely time to go.

  31. Robin
    Posted October 27, 2011 at 1:51 pm | Permalink

    Listening to Putin the other day, I believe he said the EU has imposed more laws/rules upon its members than the communists, in the Kremlin, imposed upon the USSR. It certainly feels like that to me!
    We have probably given up more to the EU than any other member state and yet we are disliked immensely by the eurocrats. We are only tolerated for what they can get out of us and soon there will be nothing left to give.
    Time to get out without delay.

    • Martyn
      Posted October 27, 2011 at 6:14 pm | Permalink

      Of course we are disliked by the Eurocrats. The EU is effectively a benign dictatorship and Great Britain/UK has in the past at huge cost has brought down dictator after European dictator and they are determined that never again will we be in a position to do so. Success at last so far as the Eurocrats are concerned…

  32. Bruce
    Posted October 27, 2011 at 1:56 pm | Permalink

    The Greek government lied to get into the EU, lied to get these loans, promised its people benefits they couldn’t possibly afford, and now get the EU to pick up half the tab for their lies! This is the biggest embezzlement in history. And the “deal” only encourages Greece (and the rest of the PIGS countries) to do more lying, more over-promising, secure in the notion that the EU will make sure that somebody else’s taxpayers will be stuck with the bill.

    • alan jutson
      Posted October 27, 2011 at 5:59 pm | Permalink

      Bruce

      Exactly

  33. Ben Kelly
    Posted October 27, 2011 at 2:10 pm | Permalink

    One more pertinent question.

    If all governments merely guaranteed all deposits would it cost less than this while ensuring that there were no profits left for bonuses?

    Reply: Many deposits as in the UK are guaranteed.Deposit insurance plus proper regulation would be cheaper.

  34. RCS
    Posted October 27, 2011 at 3:45 pm | Permalink

    Watching the Euro rescue is rather like MacBeth with 100 scenes involving the three witches. I have come to the conclusion that the Euro is unsalvageable because of the political tensions any form of centralised economic government would create. Scenes in Athens might be a foretaste of what will happen in Club Med.

    I am still trying to understand how one levers one trillion euros, when one’s major asset is soverign debt. Isn’t this rather risky? Could someone please enlighten me?

  35. Posted October 27, 2011 at 4:50 pm | Permalink

    Walk away from all this nonsense right now.The government has no mandate to give one penny to the EU.It is a criminal cartel.To mortgage us and future generations should be a criminal offence with a long jail sentence.The EU traitors are many and they should be named and exposed.Is Bernie Madoff running this Ponzi scheme and why on earth does Mt Redwood persist in telling us we have to remain inside this madhouse. His denial on this issue borders on the pathological.What is the point of having a superbrain if you cannot figure out that we must leave this lunatic asylum called the EU.Now.My three year old child could figure that out.(if I had one)

    Reply: Try reading what I write instead of slanging me off for things I have not said. I voted No in 1975. I have just voted to give you and everyone else the right to vote to leave, or to negotiate a new relationship based on trade and co-operation. What more do you want? What is your plan to get the UK out of the EU, when UKIP regularly polls 3% in General Elections offering that policy?

    • zorro
      Posted October 27, 2011 at 10:27 pm | Permalink

      Come on people, give John a chance. From what I have read he has always been reasonably consistent on Europe.

      1. He voted NO in 1975. That would suggest to me that he does not think that British membership of the EU now is necessarily a good thing, if it was not a good idea in 1975.
      2. We are currently in the EU. Some things in principle over time have been useful to us, notwithstanding the cost. It makes no sense to deny things in our national interest.
      3. He suggests that we should be able to choose what we agree to. How can that not be a reasonable request? Whether the Europeans accept that argument does not matter, the request is still reasonable.
      4. He, along with others, has asked for a referendum and would honour the choice made by the electorate.

      Is that summary OK? I would prefer as a matter of principle that we rule ourselves without fear or favour and trade freely with whomever we choose. I see no need to antagonise people unnecessarily. Use a rapier rather than a broad sword, it can often be more effective.

      zorro

      Reply: And more. I have made proposals to get powers back, want to negotiate a new relationship based on trade and co-operation, and have never once suggested I think membership on current terms is a good idea. I still think the politicians who seem to like the EU and who are in charge should negotiate the best deal they can get and then put it to the people to decide whether to stay or quit.

  36. uanime5
    Posted October 27, 2011 at 5:01 pm | Permalink

    So Greece’s debts are going to be cut by 50%. Does this mean that the banks who kept lending Greece money despite Greece’s questionable ability to pay it back will suffer for their poor judgement?

    • A different Simon
      Posted October 27, 2011 at 7:47 pm | Permalink

      Given the amount of interest at high rates which Greece have already paid and will have to pay on the remaining 50% it is possible that some banks will still make a small profit .

      The principle of tax payer bailouts has been established as a legitimate business , a growth one even . Sure as eggs are eggs they will keep coming back for more .

      Does anyone know whether the big consulting firms have set up departments selling services to companies which are looking to get their slice of the action ?

      With their links with the treasury and EU they should do pretty well .

      • zorro
        Posted October 27, 2011 at 10:30 pm | Permalink

        Just like all those sharp firms looking to help you with IVAs to write off your debt doubtless…..but on a mega scale.

        zorro

  37. Denis Cooper
    Posted October 27, 2011 at 6:04 pm | Permalink

    As I’ve mentioned before, the EFSF does not actually have anything like the €440 billion which the media keep describing as its “firepower”, its “reserves”, its “funds” as Robert Peston pretends here:

    http://www.bbc.co.uk/news/business-15411380

    The EFSF operates by borrowing money and lending it on.

    Its subscribed share capital was minimal – less than €29 million, and I do mean million not billion, as can be checked on page 4 of the Articles of Incorporation:

    http://www.efsf.europa.eu/attachments/efsf_articles_of_incorporation_en.pdf

    So far it has borrowed a total of €13 billion through three bond issues as detailed here:

    http://www.efsf.europa.eu/investor_relations/issues/index.htm

    and it has disbursed a total of €9.5 billion as detailed here:

    http://www.efsf.europa.eu/about/operations/index.htm

    on which basis it will presently have less than €3.5 billion to hand.

    It’s not an EU body; in fact it’s a Special Purpose Vehicle, a private company, as explained in the factsheet available here in this official “FEATURE: European response to the debt crisis”:

    http://www.eucouncilfiles.eu/european-response-debt-crisis.aspx?lang=ro

    “European Financial Stability Facility (EFSF) is a private company established by euro area Member States in June 2010. Its aim is to provide financial assistance to euro area Member States to preserve stability in the euro area. Its total effective lending capacity is 440 billion euro. The funding comes from the EFSF’s borrowings on financial markets, guaranteed by the shareholders, i.e. euro area Member States.”

    Describing the EFSF as SPV1, one of the two options being considered is to set up a second SPV, call it SPV2, as explained in this official factsheet “Increasing the Impact of the EFSF”:

    http://www.eucouncilfiles.eu/media/443137/27.10.11-efsf-leveraging-pressfiche.pdf

    SPV2 would also operate by borrowing money:

    “The SPV structure would be set up so as to attract a broad class of international public and private investors with different risk/return appetites.”

    with SPV1 in effect indemnifying those “international public and private investors” against losses if SPV2 loses money on its business of “extending loans for bank recapitalisation … and/or for buying bonds in the primary and secondary market”, but with SPV1 only indemnifying the SPV2 investors for consequential losses on their investments up to maybe 20%.

    As investors are already becoming wary of the bonds issued by SPV1, when it has only borrowed €13 billion so far, how likely is that they’ll believe that if they lent SPV2 say €1 trillion to keep Italy, Spain etc afloat, and if/when that bail-out attempt failed SPV2 suffered losses of say €200 billion, nevertheless SPV1 could then borrow €200 billion from investors to make sure that the SPV2 investors were paid on time and in full?

    And given the 50% losses on Greek bonds, how likely is it that under those circumstances the losses incurred by SPV2 would exceed the 20% guaranteed by SPV1, even if it could borrow enough to meet that guarantee?

    On the whole I think I’ll keep my money in the building society, rather than investing any of it in either SPV1 or SPV2.

    • Andrew Johnson
      Posted October 27, 2011 at 7:41 pm | Permalink

      Great piece of research which shows us something of the complexity of the EU machinations. Thank you Dennis

      • zorro
        Posted October 27, 2011 at 10:32 pm | Permalink

        Good one Dennis, even Paul Mason called them ‘SPIVs’ on Newsnight yesterday!

        zorro

  38. Posted October 27, 2011 at 7:07 pm | Permalink

    “Euroland is becoming a club within the club. The UK needs to get on with negotiating a new relationship with it. The Uk has to accept that as Euroland presses on to fuller political and economic union, more and more will be decided by the 17. In return for this, the UK needs to make more of her own decisions about things that matter most to us,”

    Goodness, Dave won’t like that being said; he wants the word to get around that he is robust, determined, prepared to have a faux row with Sarkosi.

    I am not sure whether the banks who write off the Greek debts any longer have any claim on their CDS “insurance” against default. If the losses are enforced would CDS “insurers” pay and if so have they subrogation rights against the original debtors.

    For what reason would a private sector insurer or bank agree to accept less than full repayment from a sovereign debtor? Settlement by another – yes; a guarantee by another – maybe. But the fact is most of the institutions who may agree to a write off are not private, they are controlled by the member state governments to one degree or another and the management wants its benefits and advantages preserved; its corruption hidden; its privileges preserved.

    If any UK pension scheme, insurer or fund or any Anglo Saxon bank were to agree to forgive the Greeks I bet there would be litigation in London over it; if they are really unlucky it would be in New York!

  39. Posted October 27, 2011 at 7:45 pm | Permalink

    Having watched the stock markets gain sometimes more than 20% today ,because of this DEAL who would bet me a £ to a pinch of …t that the inside information of this happening was not used to buy in at 100 yesterday at sell out today at 120,I won’t name names or anything,BUT for those of you that have not seen my older comments I will just tell you that I am one of the parents of the MAIN WITNESS in the corruption trial of the financial advisor to the current PRESIDENT of the Republic of South Africa who was found GUILTY of corrupting the current President . So I know what I am talking about having lived with a child who had BODYGUARDS for 9 [NINE] years,plus I know ALL there is to know about the WHOLE scandal involving hundreds.So although I am speculating the saying “There is NO SMOKE without FIRE” comes to mind with regard to current times. AND John
    before you Ed. me everything I say is on the PUBLIC record All over OUR PLANET,all you have to do is look back at the press reports,and my appearances on the SA News on TV.

    Reply: Which Stock market rose 20%? The range of rises was around 2% to 5%. I can’t see how any of this enthusiaism was insider dealing, as the terms of the possible “deal” were well trailed in advance in the press, and yesterday the markets moved in response to published information. Some things in life just result from the legal actions of large numbers of people.

  40. Peter van Leeuwen
    Posted October 27, 2011 at 8:45 pm | Permalink

    The UK will still be involved in the euro:
    Mr. Barroso today announced a commissioner for the euro, which the UK through its duly elected MEPs can keep accountable for economic governance and euro issues: Olli Rehn, Vice-President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro (the last three words added to his already long title)

    Olli Rehn will become responsible for coordination, surveillance and enforcement in the area of economic governance of the union and of the euro area.

    • JimF
      Posted October 27, 2011 at 10:41 pm | Permalink

      I’m not sure we want to keep him accountable for Euro issues. The Eurozone countries can do that.

      Czech Republic, Sweden, Denmark and the UK are the Freezone. We are in the Freezone. Floating currencies, in charge of our own currency, but just needing to regain control of our own rules and regulations as to how we run our daily lives. We don’t need a Mr Rehn to do that for us.

  41. brian kelly
    Posted October 27, 2011 at 11:01 pm | Permalink

    We now have an alternative phrase for ‘Living in a dream world’. It is called ‘Living in a Euro world’.

  42. Posted October 28, 2011 at 12:50 pm | Permalink

    John I watched Sky business news and actually it was some banks that had gained those
    percentages at about 2pm,so I apologise I did not mean the entire stock market but some,
    particularly Banks ,and of course they are the main recipients of news perceived to be favourable to them.

  43. REPay
    Posted October 28, 2011 at 2:13 pm | Permalink

    Until we have some honesty about why we are where we are we will get nowhere. Unfortunately that would involve the politicians and commentators reading this blog, understanding it and acting on it. I am grateful that you (and a few others) continue to cry in the wilderness…I am not relieved but I have not given up hope!

  • About John Redwood


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

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