The UK says “No” to more IMF funding for the Euro

The UK was right yesterday to rule out giving more money to the IMF to finance a currency. The Chancellor, asked to commit Euro 30 billion to IMF resources to defend the Euro, sensibly pointed out that the IMF is there to lend money to distressed countries against the security of better economic policies, not to aid currencies. He could have gone on to say it is not there to try to defend a currency bloc which is following the wrong policies, was improperly constituted at the beginning and has broken its own rules ever since. It is great to see the UK government offering tough love as advice, and protecting the UK interest. The Euro does not need a bigger bail out fund. It needs reconstruction, and policies which allow its subject economies to grow.

Yesterday in the Commons also served as a reminder of just how much power previous governments have given away to the EU. The Chancellor’s main task was to present his findings to the Commons following the Vickers Report into banking. That should have been work enough for him. He was kept on a long conference call until almost the last minute for his appearance in Parliament, discussing the Euro’s problems with many othher Finance Ministers. Our Ministers today have to be involved in two governments at the same time, which is demanding.

When it came to his announcement, the Chairman of the Treasury Committee and others asked about how far the UK is now free to do as it wishes on banking regulation. The Chancellor explained that the EU was now considering the Vickers Report with a view to seeing how much the UK can do without infringing the EU’s growing mastery of financial regulation. There are queries about whether the UK is any longer able to impose its own capital requirements on banks, one of the three main recommendations of the Report.

The government correctly wishes to implement the Vickers preference for more competition in the banking industry. So far the plans just revolve around the disposal of branches by Lloyds which were demanded by the EU competition authorities. It is I suppose good news that in this area the EU is following a policy which I think is a good one, but I would like to see the UK show some independence of spirit in going beyond the recommendations of the EU in this important area as well.

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96 Comments

  1. Freeborn John
    Posted December 20, 2011 at 6:51 am | Permalink

    It is incorrect to say the Uk has ruled out giving money to the IMF to support the eurozone. The EU press release and reports from the Dutch finance minister are that Osborne is prepared to do this in January in the context of a G20 meeting. The effect would be the same though as if he had handed the money over yesterday. Many billions of good British taxpayer money will be thrown after bad to support a currency we did not join and this profligacy supposedly justified by the creation of a ‘fiscal union’ which does nothing to address the root cause of the crisis (which is bad Eurozone monetary policy).

    Osborne has played into the hands of federalists already in being chief cheerleader in the English-speaking world for fiscal union and now seems intent of compounding his error with billions of money routed to the eurozone via the backdoor of the G20 & IMF.

    William Hague is also making mistakes in Europe, standing silently beside a German foreign minister who openly advocates European political union as a ‘common destiny’ for the Uk and Germany. Hague needs to promptly and publicly correct german politicians on such occasions or they will interpret his silence as tacit consent that the Uk will be party to Eu political union. 

    • Andrew Duffin
      Posted December 20, 2011 at 9:00 am | Permalink

      “they will interpret his silence as tacit consent”

      In the case of Hague, I strongly suspect that that is exactly what his silence means.

    • Duyfken
      Posted December 20, 2011 at 9:28 am | Permalink

      If what you say FJ, is truly the case, Osborne must be confronted to explain why he has allowed the UK public to be misled in this way. Such deceit, if that is what it is, needs nailing.

      As for William Hague, I fear he has allowed himself to be controlled totally by the mandarins of the FCO, and is but a front-man delivering anodyne sound-bites with the aim of upsetting nobody and achieving little in promoting/defending our interests abroad.

      • Disaffected
        Posted December 20, 2011 at 12:07 pm | Permalink

        Spot on. He is a changed person ever since the reports about him and his SPaD. I also agree with Free born John. The French are still saying the UK will contribute -throw away- billions of taxpayers’ money as part of the G20 in January.

        Why does Cameron let Clegg and ministers from the EU undermine his position on policy issues, yet sacked a Tory peer for making, what he perceived to be, inappropriate comments??? What action has he taken in respect of Cable, Huhne or Clegg?? Why has he not forced Hague to correct the German minister yesterday? Pro-European Cameron still has Heseltine, Clark and Major as advisers.

        • uanime5
          Posted December 20, 2011 at 4:15 pm | Permalink

          Cameron realised that any problems with the Euro will become his problems during the 2015 election.

          • Disaffected
            Posted December 21, 2011 at 2:15 pm | Permalink

            He has got the Euro problem now and where the Uk sits within Europe or not. Cameron’s PR stunt for the veto that never was is being unravelled. All Eurosecptic talk without action.

    • norman
      Posted December 20, 2011 at 10:06 am | Permalink

      It’s difficult for me to treat anything a politician says in a non-cynical manner such has been the performances over the last 15 years (and it may have always been thus but 15 years is the span of my adult life).

      Which may be fair, or it may be unfair, but my very first thought on the EU treaty veto wasn’t ‘We’re going to get a new relationship’ but instead ‘Yes, EU institutions will be used in furtherance of this fiscal union and not only won’t we stand in the way of anything, being safely sidelined now, we won’t see any repatriations’. A complete disaster.

      Similarly I now doubt it when I hear we’re not going to be contributing to an IMF bail out fund of the Eurozone.

      And I don’t want to be right about these things, I’d love it if we did see some honest and open dealings where people didn’t try and say one thing to appease faction ‘a’ while doing something completely different in order to appease faction ‘b’.

      • Bob
        Posted December 20, 2011 at 12:51 pm | Permalink

        With all the tough sounding rhetoric from Cast Jelly, one could be forgiven for thinking there was an election in the offing. Christian morality, tax breaks for married couples and no to the EU’s money grab.
        What’s going on? Is it smoke and mirrors to take our eye off of the ball while more power is expatriated?

      • Denis Cooper
        Posted December 20, 2011 at 5:14 pm | Permalink

        Well, it doesn’t seem to be working out quite like that so far, because Article 2 of the draft international agreement explicitly acknowledges the legal superiority of the EU treaties and laws.

        http://www.telegraph.co.uk/finance/financialcrisis/8961812/EU-fiscal-agreement-draft-in-full.html

        And because Cameron vetoed proposed changes to the EU treaties, whatever those proposed changes may have been, the EU treaties are unchanged and it is those unchanged EU treaties which are legally superior to the proposed international agreement between some of the EU member states.

        The threat that “If you don’t agree to the EU treaty changes we want, we’ll go ahead and do them anyway without you” is not materialising so far, and of course could never materialise except through breaking the present treaties.

        As for the use of EU institutions, there was a desire to use the ECJ for enforcement of the excess deficit procedure, presently blocked by Article 126(10) TFEU, and no attempt is made to circumvent that in the draft international agreement; contrary to media glosses, the only recourse to the ECJ would be if there was a dispute about whether the “Balanced Budget Rule” law installed by a state was strong enough.

        It would certainly be amusing to watch eurozone state A taking eurozone state B to the ECJ on the charge that the latter’s “Balanced Budget Rule” law was inadequate, especially if B was Germany and A was a newly reformed and therefore zealous Greece.

  2. Antisthenes
    Posted December 20, 2011 at 6:54 am | Permalink

    It is nice to see democracy when it actually works. The people were galvanised into expressing their opinion by Cameron saying no to a new treaty that opinion was decidedly that the UK should take a tough stance towards the euro-zone. It has emboldened the government to do exactly that and say no to the IMF loan I suspect that they would have said yes otherwise. It is unusual for the government to take any notice of what the people want and no doubt it will not happen very often again in the future. It is a pity because government if they only realised it are there to serve the people and that the people can never actually be wrong. Yes the people can make mistakes in what they want but that is their privilege it is not for a small group of politicians and bureaucrats to question that right but to do their bidding otherwise all you have is a form of dictatorship.

  3. Kevin Ronald Lohse
    Posted December 20, 2011 at 7:00 am | Permalink

    Dear John.
    Given the EU’s track record on matters economic, I’m not sure that, ” mastery”, implying a high degree of competence, is the correct description. How about, “malign influence?

    • Andrew Duffin
      Posted December 20, 2011 at 9:01 am | Permalink

      It’s not that meaning of “mastery” that Mr. Redwood was intending.

  4. Mick Anderson
    Posted December 20, 2011 at 7:07 am | Permalink

    As I understand it, when the IMF bails out a country, there are lots of strings attached. The IMF effectively dictates a new economic policy in order to make sure that its money will be returned safely, and this loss of control is a key reason why sovereign Governments only approach the IMF as a last resort.

    It seems unlikely that the EZ politicians would agree to any austerity measures demanded by the IMF. There is even less chance that they would actually honour any agreement that they actually signed up to.

    So, the best advice I can think of for the IMF when they consider helping the EU is to steer well clear.

    • Phil A. Grey
      Posted December 20, 2011 at 11:01 am | Permalink

      Italy have an IMF team invited by Berlusconi himself to monitor their progress towarsd austerity if memory serves me right.

      • Javelin
        Posted December 20, 2011 at 6:45 pm | Permalink

        It’s “informal” – which probably means an invite to a bunga bunga party.

        Italy is totally scr&wed. It’s growth rate is at least -2% for 2 years according to the Italian Industria. It has the lowest tax take in the EU and the highest debt. Its Mom and Pop economy cant compete with the BRICs. Its biggest bank, inte credit has been (in financial difficulty-ed) at least twice in the past 3 months. Today it lent itself a further 20+billion through the IMF. Unbelievable. Simply getting away with borrowing from its children because the IMF was a legitimate commitment.

        • APL
          Posted December 20, 2011 at 9:30 pm | Permalink

          JR: “(in financial difficulty-ed)”

          Ho ho, we all know what that means.

          PS. no implied criticism of your editorial policy Mr R.

  5. figurewizard
    Posted December 20, 2011 at 7:22 am | Permalink

    The Chancellor’s response makes perfect sense but also raises the question that if the IMF remit does not extend to bailing out distressed currencies, should they be getting involved in any form of rescue at all? If this is so then as a leading member of the IMF we should surely be considering exercising a second veto here.

  6. Peter van Leeuwen
    Posted December 20, 2011 at 7:34 am | Permalink

    If siding with anti-EUROpeans is considered a British interest, so be it. Time will tell.

    • David Price
      Posted December 20, 2011 at 12:53 pm | Permalink

      No one can accurately predict the future and so usually the key factor is attitude. We simply require a government that looks out for our interests first, the attitude of ministers must be to focus on preserving and improving the lot of us citizens.

      Conversely the attitude of the EU players and bureaucrats, their supporters and helpful idiots is to overwhelm countries with onerous, protectionist and uncompetitive regulations; to demand ever more funds for no return of any fair value; to interfere destructively with the democratic processes and economies in the various countries and to waste money on themselves and nepostistic patronage.

      The attitude of the EU players bureaucrats simply stinks and the Euro is their method of enslavement.

      Tell me, why on earth do you support such a set up and why are you so anti-British? Before answering you may want to consider that on several occaisions this island and it’s true allies have made extreme sacrifices to pull Europe’s backside out of the fire. We have paid an horrendous cost each time so why do you expect us to do it again given the hateful reaction we have received recent years and the fact that you don’t seem to have learned from your mistakes?

      Or do you believe the clap trap put out by some Belgian fellow that the EU has preserved the peace in Europe and it is the “mother and father” of democracy, in which case should we leave you to your own devices the next time a brushfire starts?

      • uanime5
        Posted December 20, 2011 at 4:46 pm | Permalink

        “The attitude of the EU players bureaucrats simply stinks and the Euro is their method of enslavement.”

        You do realise that most UK ministers, including the Prime Minister, are EU bureaucrats.

        Also regarding the Napoleonic Wars, WW1, and WW2 if the UK hadn’t got involved it would have been very bad for us.

        • APL
          Posted December 20, 2011 at 9:39 pm | Permalink

          uanime5: “You do realise that most UK ministers, including the Prime Minister, are EU bureaucrats.”

          Yep.

          The attitude of the EU players & bureaucrats simply stinks.

        • David Price
          Posted December 21, 2011 at 9:06 am | Permalink

          “it would have been very bad for us”

          You miss the point completely. It is what did happen that is important, not what might have happened. It is about keeping your promises and supporting your friends and not trying to constantly undermine them or reneging on agreements.

          People like Peter, and particularly French politicians, mock us from the vantage of safe circumstances that in a large part only exist because of a terrible price paid by the UK and others. But still they keep demanding more and more for nothing in return. How is that pro-British or even neutral?

          If we baulk they accuse us of being xenophobic, little englanders pre-occupied with empire who must be stripped of all our commerce and industry. If we refuse they smugly declare we are isolated but have no choice and they will legislate it all away from us in the end anyway.

      • Peter van Leeuwen
        Posted December 20, 2011 at 8:50 pm | Permalink

        @David Price: How come that, dealing with the same regulatory framework, The Netherlands and Germany are both more competitive than the UK? I don’t see protectionism in the Netherlands, and I consider Germany a more successful economy than the UK. Does that make me anti-British?
        Are all the LibDems anti-British? Are most of my British family, living in Britain, anti-British?
        And yes, there is a strong connection between the European Union and peace, but I’m not your history teacher, let people in Britain explain that to you. I’ve witnessed for decades the kind of information people in Britain get about the EU and I don’t mind that we seem to be living on different planets in that respect. Your City’s prime-minister now also has to satisfy big business (who pleaded in a letter today) and is being ushered back to the negotiation table as an observer. Your minister of finance may yet agree to further IMF funding within a G20 framework. It is quite a bit of brinkmanship (ropemanship?) for them in such a polarized and divided country. But anti-British? – no I’m not.

        • David Price
          Posted December 21, 2011 at 8:31 am | Permalink

          You insinuated that because anyone is against the EU and the failed Euro experiment they are therefore anti-European. My point is that the UK, not just the British, and friends have demonstrated just how supportive of the people of Europe they have been on a number of occaisions. That support has gone far beyond that which we would clearly ever get in return though I doubt we would get anything at all.

          It is the undemocratic EU government and bureaucracy that many of us don’t like.

          As to dis-information? I’m sure there is but there have been many plain actions to base an opinion on – the loss of fisheries, the sanctity of the CAP, the refusal by the EU bureaucrats to live in the real world – demanding increases when the world economy has tanked, the continual efforts to strip our economy and control everything, the tendancy to ignore democratic objections (France and Ireland), etc, etc. More to the point is the continual diatribes of abuse from certain quarters that our political classes may see as standard operating procedures but which I suspect that the UK public see for what the clearly are – “you are not welcome but open your wallet”. As the second largest net contributor we seem to have lost far too much, we certainly haven’t got our monies worth and yet the EU keeps pressuring for more, to insane levels.

          I note you don’t mention protectionism in Germany, which I have experienced, or other EU countries. I wonder just how competitive they would really be if they operated as free a market as in the UK, US and elsewhere? I can’t comment on the Nederlands as I have no direct experience though I do recall questions about the sale of Corus to Tata closing off steel production in Wales but leaving the facilities in the Nederlands untouched (isn’t that a form of protectionism?). Or, how about EU legislation on lighting technologies?

          How exactly has the EU kept the peace, has NATO had nothing to do with that? Or is this yet more of the EU modus operandi – explain and justify nothing but dictate and demand everything.

          • Peter van Leeuwen
            Posted December 21, 2011 at 9:10 pm | Permalink

            @David Price:
            I’m not unfamiliar with your list of EU grievances, but biased lists could be made by any country. EU democracy is still far from perfect and deserves a lot of criticism (prefereably the constructive type) but do realise that many of us don’t have much regard either for British democracy (the mere thought of living a life in Stone and having my pro-European vote wasted at every national election, or the weird idea that if someone is pushed through a by-election in an utterly safe little village qualifies for being an “elected” MP or prime-minister dealing with national and international issue).
            As far as I know, Hoogovens ceased to be a Dutch company when acquired by British Steel, which constituted two-thirds of Corus, like Tata Steel Europe headquartered in the UK. You might have a strange definition of “protection” but it doesn’t fit mine, because the Dutch state has no influence in Tata. Nato may have prevented a war with an outside force, the USSR with its deterrent, but preventing a war is different from building peace and Nato’s role wasn’t to protect France from Spain or Greece from Turkey. Why was Nato looking for a new role after the collapse of the iron curtain if its role had been to maintain the peace between e.g. Holland and Belgium? Finally, it would be fun to have “abuse” independently researched and measured. My sincere belief is that most of it comes from across Britain, eternally unhappy and internally divided about “Europe”.

    • Kenneth
      Posted December 20, 2011 at 4:07 pm | Permalink

      I certainly consider the eu and its supporters to be anti-European. As that who you meant?

      • Peter van Leeuwen
        Posted December 20, 2011 at 8:57 pm | Permalink

        @Kenneth: You’re clever enough to know what I meant.
        Interestingly, the British eurosceptic ideology goes a little further than just the EU. One is also expected to be angry at the European Court of Human Rights and to want to withdraw from the European Convention (“no interference with British laws!”). The only other European country (out of 48) in that position is Belarus. So I have some difficulty perceiving euroscpetics as pro-European.

        • APL
          Posted December 20, 2011 at 10:10 pm | Permalink

          Peter van Leeuwen: “So I have some difficulty perceiving euroscpetics as pro-European.”

          Firstly, is there anything wrong with Belarus?

          Secondly, you are playing with us, Peter. I have said it before, but I will say it again, the British by and large, like and admire European people. Heck, some of us have married a few.

          You seem to be implying that to dislike an institution that happens to be constituted in the European geographical area is synonymous with disliking Europe. That is incorrect.

          • Peter van Leeuwen
            Posted December 20, 2011 at 11:08 pm | Permalink

            @APL:
            – Belarus, the “last dictatorship in Europe” plus a dismal human rights record.
            – In this political blog, is it interesting if you love Europeans, marry them, are fond of Gaudi’s architecture, French impressionists or Irish folk music? Pro- and anti-European (I actually wrote anti-EUROpean) are obviously meant in a political sense.

        • Kenneth
          Posted December 21, 2011 at 12:43 am | Permalink

          Peter van Leeuwen

          “So I have some difficulty perceiving euroscpetics as pro-European”

          I take it back. I am sorry. Of course eu supporters are pro-European.

          What is more ALL Europeans, like me, are pro-European.

          However, the eu, the European court of human rights and the European convention are not remotely Europe.

          If you have so misunderstood those that have a different vision of Europe to you as being ‘anti-Europe’ then I fear you are suffering from a bout of fundamentalism.

          I think we should engage in debate rather than slogan-slinging.

          I am no more anti-Europe than I am anti -food and -water.

          • Peter van Leeuwen
            Posted December 21, 2011 at 6:46 pm | Permalink

            @Kenneth: I’m all for exchange of ideas or debate, but I remain surprised that someone cannot grasp what is meant by anti-EUROpean. And as far as your pro-European attitude is concerned, Binning all Europe’s political institurions, it’s a bit like the Guy Falkes manner of loving England, trying to split England from its political institutions. A view, not generally appreciated in England.

  7. lifelogic
    Posted December 20, 2011 at 7:39 am | Permalink

    Indeed how can they govern and make efficient decisions when it is not even clear who actually holds the powers. Particularly when the European Court, as we have seen many times, is rather likely to extend its remit all the time.

    You say “He could have gone on to say it is not there to try to defend a currency bloc which is following the wrong policies, was improperly constituted at the beginning and has broken its own rules ever since.”

    Why did he and indeed the whole government not do so?

  8. Javelin
    Posted December 20, 2011 at 7:58 am | Permalink

    Looking at the figures I see

    Italy has paid 23.48bn to bail out Italy
    Spain has paid 14.86bn to bail out Spain
    France has paid 31.4bn to bail out France

    All those bazookas pointing at each other – a bazooka daisy chain.

    • uanime5
      Posted December 20, 2011 at 4:47 pm | Permalink

      So 3 European countries have bailed themselves out. Does the UK’s qualitative easing count as bailing themselves out?

      • Winston Smith
        Posted December 20, 2011 at 4:54 pm | Permalink

        That is precisely the point. They cannot print their own money.

      • Denis Cooper
        Posted December 20, 2011 at 5:20 pm | Permalink

        Not the same thing; that’s the UK’s central bank creating new money to bail out the UK government, not the UK government borrowing money to bail out the UK government.

  9. lojolondon
    Posted December 20, 2011 at 8:09 am | Permalink

    John, RBS has been a disaster. But forcing a company to sell off profit-making portions of it’s portfolio, at the same time as rebuilding it’s balance sheet is craziness. There is a time and a place for this regulation, but while the Euro breaks down is not the time to weaken, for idealogical reasons, our banks.

    Reply: It is the time to create some profitable and strong competing domestic banks, which could be done from within the RBS portfolio. RBS is broken. It needs fixing. It should never have been assembled from so many differign busiensses.

    • lifelogic
      Posted December 20, 2011 at 9:44 am | Permalink

      The main goal should be to get the UK lending arm into a condition that it can lend again rather than just paying for “Helpful Banking” adverts and pretending to.

      RBS/Natwest have caused huge damage to the UK and are still continuing to do so by pulling good loans back.

      • Graham C
        Posted December 20, 2011 at 12:39 pm | Permalink

        I agree.

        We are doing everything but signing in blood for our loan and keeping all the lawyers in the region employed – all at our cost.

        Won’t embark on anything like this again.

      • lifelogic
        Posted December 20, 2011 at 5:20 pm | Permalink

        Any reason the banks for not giving a loan is being taken or any reason for calling one back. Property development is hard to fund and very expensive. Decisions take forever so often the opportunity has gone by the time the bank finally decides. It is hardly surprising their is no growth. Every development loan they do not refuse for not good reason is several jobs gone.

        • lojolondon
          Posted December 20, 2011 at 8:21 pm | Permalink

          The banks have been told to reduce their leverage. So if a bank has £1 in hard currency, they used to lend out, say, £8. Now they have £1 in the bank and they are being told to lend out no more than £5. Result is they have to stop lending to about 40% of their previous clients – this is simple maths. Ironically, the politicians (eg. Cable) who are saying ‘the banks will lend, we told them to lend’ are the same people who are telling the banks ‘reduce your leverage and exposure, and while you are about it, time to build up your balance sheet’.
          AND these are the same politicians who told banks in the last 3 years ‘sell all those risky shares, time to buy something secure like government bonds, I see that Greek bonds, backed by the Euro give great returns’

          You couldn’t make it up!!

          • lifelogic
            Posted December 21, 2011 at 1:49 pm | Permalink

            Indeed but it is shooting ourselves in the foot, putting more on the dole and generating less tax revenue, less bank profits – so developers go slow with their developments and industry delays investments for lack of cash. Meanwhile we lend (throw away) billions on the PIGIS, Green nonsense and spend a fortune on the state sector much of which clearly does nothing worth doing at all or often just makes things worse still.

  10. ian wragg
    Posted December 20, 2011 at 8:25 am | Permalink

    Whats the betting that we stump up some money which ostensibly will be for other purposes but will migrate to the EU bailout fund.
    Alexander said he was relaxed about the money we contributed being used to bail out the Euro. Has anyone told him it’s not his money.
    Anyway, how can France & Germany make these arrangements on behalf of the IMF. Is it now an exclusive EU institution since Lagarde took over?

  11. Steven Granger
    Posted December 20, 2011 at 8:46 am | Permalink

    “The UK was right yesterday to rule out giving more money to the IMF to finance a currency” Actually, John I don’t believe this statement is correct. According to the EU finance ministers’ statement, this is the UK’s position “The United Kingdom has indicated that it will define its contribution early in the new year in the framework of the G20.” In other words, the UK has not ruled anything out at all, merely saying it will defer its decision and work within the G20 framework. Are you deliberately misleading your readers or are you ignorant of the facts? Or, have I misunderstood something?

    Reply: The UK said it would not give to an EU only IMF fund raising. The US has already said No to a Euro bail out fund raising, so I was not trying to mislead. Were there to be back tracking on No I will oppose it.

  12. Electro-Kevin
    Posted December 20, 2011 at 9:02 am | Permalink

    The more the EU pushes its luck the better as far as I’m concerned.

  13. MickC
    Posted December 20, 2011 at 9:06 am | Permalink

    The phrase “subject economies” is nicely turned, and very true.

    • zorro
      Posted December 20, 2011 at 11:15 am | Permalink

      ‘Vassals economies’ would probably be more accurate now….

      Zorro

      • forthurst
        Posted December 20, 2011 at 3:53 pm | Permalink

        Steady on; the Euro doesn’t yet have a country, never mind men under arms so is in no position to launch a blitzkreig against recalcitrant protectorates.

  14. Viv Evans
    Posted December 20, 2011 at 9:12 am | Permalink

    The fact that Brussels has to ‘consider’ the Vickers Report should be yet another wake-up call to the europhiles.
    Do they really think eurocrats are so much wiser than our own business people?
    Do they think we need to be taken by the eurocrat hands and guided to the ‘Europe’ which is, as the German Foreign Minister said yesterday, the German way to atone for WWII?
    And do they really think that it is a mistake by the government to refuse to borrow more money to help pay for debts in other EU countries – who, as we saw, are borrowing to pay into this fund while deeply into debt themselves?
    Does none of them ever ask how this will be paid back?

    I think that a very large number of Mandarins here and Eurocrats in Brussels have totally lost any sense for reality, being drunk on larger and larger numbers.

    • Antisthenes
      Posted December 20, 2011 at 10:32 am | Permalink

      “Does none of them ever ask how this will be paid back?”

      Unlike personal debt I would propose that governments do not have to worry about certain classes of debt at all. This is because governments can print and inflate out of debt and/or default and/or devalue. However there is the nub of the problem for euro land devalue is to a certain extent off the cards although the euro is currently slowly doing just that no doubt to Germany’s delight. It must also be to the UK’s consternation as exports to euro land will be curtailed somewhat. Printing currently cannot be done under current rules but they can be changed given the political will to do so. As for default well a limited amount can occur it has already been done as in the case of Greece and euro land got away with it so I expect to see some more. Of course all these measures exact a price and that is recession and austerity and as the new envisaged treaty is more or less going to do that anyway debt is probably the last thing on eurocrats minds.

  15. Brian Tomkinson
    Posted December 20, 2011 at 9:15 am | Permalink

    It is good to learn that Osborne has not agreed at the first request. Previous experience however shows that this will not be the last request but merely part of a progression during which he will agree and attempt to convince us that it was essential in the British interest. There are no limits to the methods the EU will attempt to use to preserve their goal of a political union of which fiscal union and a common curreny are integral parts.

  16. NickW
    Posted December 20, 2011 at 9:20 am | Permalink

    Not so long ago I made a humorous comment to the effect that it would significantly reduce contagion if bankrupt countries loaned themselves the money to pay off their debts, rather than lending to other countries with similar debt problems.

    I am pleased to report that the EU has taken up my suggestion.

    Spain and Italy between them are now contributing 37 Billion Euros to the IMF to bail themselves out.

    • APL
      Posted December 20, 2011 at 10:16 pm | Permalink

      Nick W: “Spain and Italy between them are now contributing 37 Billion Euros to the IMF to bail themselves out.”

      Is that what they have done?

      I mean, are they just lending to themselves to cover their extravagent lifestyle? Will the loans mean that in one years time ( for example ) they will have a balanced budget or, more likely in my estimation, they will just have to borrow again to cover the shortfall?

  17. A.Sedgwick
    Posted December 20, 2011 at 9:23 am | Permalink

    “Staying outside EU risks millions of jobs, warn 20 British businessmen” DT today.

    It is difficult to see Cameron and Osborne standing up to the lobby and vested interest groups that peddle this nonsense. If we ever are given a referendum this sort of propaganda will flow from these sources and others in mainland Europe. It is so reminiscent of the Euro scares ten years ago, if we don’t join we will revert to the bronze age. Regardless let us have this fight and see if a majority of the electorate are gullible mugs.

    The IMF will undermine its own future if it continues to flirt with the Euro. In the past it acted as a strict banker for distressed states. If it becomes involved in using loopholes to support a currency then the value for money question has to be asked and whether, like foreign aid, we are being duped.

    Reply: It is the constant repetition of this misleading nonsense that passes for debate on the EU. I have often written and spoken against the folly of thinking all our trade with the EU depends on staying in and accepting all the EU bureaucracy, and the one sided view that the rest of the EU would wish to endanger their trade with us in a fit of political pique.

    • backofanenvelope
      Posted December 20, 2011 at 9:40 am | Permalink

      Surely Mr Osborne has hit upon the correct approach. He will agree to this latest EU plan, as long as the rest of the G-20 agree. He already knows that they are not going to do so. He took the same approach to the Financial Transaction Tax – fine as long as everyone else agrees. And they don’t and they won’t.

    • Mazz
      Posted December 20, 2011 at 9:45 am | Permalink

      … let us … see if a majority of the electorate are gullible mugs. …

      They are. I used to be one of them myself.

    • Richard1
      Posted December 20, 2011 at 11:01 am | Permalink

      It must however be true to say that there are many international companies who would contemplate shifting significant resources out off the UK & into the EU were we to leave & were our being out of the EU to result in new barriers to business (as the EU would surely try to put in place)?

      • Jose
        Posted December 20, 2011 at 4:27 pm | Permalink

        Just adjust the corporation tax and see how many want to move from within the EU to the UK, we’ll be flooded…..

        • Kenneth
          Posted December 21, 2011 at 12:47 am | Permalink

          Quite. 15% NOW

    • zorro
      Posted December 20, 2011 at 11:18 am | Permalink

      Don’t forget ‘seat at the table’ and ‘influencing decisions’….

      Zorro

  18. Frank Salmon
    Posted December 20, 2011 at 9:59 am | Permalink

    When politicians discovered the Phillips curve in the 1970s. they tried to use it to control inflation and unemployment. No sooner did they do this than the relationship betweent the two broke down and the politicians had created a new phenomenon – stagflation. I mention this because there is another worrying discovery. This is that the IMF always gets it’s money back. So the argument runs that we should pump in as much as they demand, without care for who what or why. But of course, this truism will break down just like the Phillips curve.
    Lagarde, as leader of the IMF, could become the Joan d’Arc the French want and need and all our economies could end up in flames….

    • Antisthenes
      Posted December 20, 2011 at 3:20 pm | Permalink

      “Lagarde, as leader of the IMF, could become the Joan d’Arc”

      You stole my line plagerist. 🙂

  19. sm
    Posted December 20, 2011 at 10:07 am | Permalink

    No further UK funding via the IMF for now.

    Probably would worthwhile to keep on the lookout for evermore discrete and subtle methods of achieving some of the same.Although the subtle measures are probably to large to hide.

    At what point does the ECB go bang, £20bn a week *52 or 1 trillion a year (1040 billion). (ref zero hedge) How far up the richter scale will it go? I suspect the the IMF funding is being lined up for the World rescue plan called Project Euro Kaput either that or a well known Italian car maker should take over the production of euros.

    Meanwhile i read the Fed is up for 29 trillion, the interconnected nature of all this is the problem.

    http://www.huffingtonpost.com/l-randall-wray/bernankes-obfuscation-con_b_1147291.html

    So the EU controls the levels of bank capital, so how can the regulators protect the taxpayer if they cant insist profits are turned into loss absorbing capital rather than remuneration or distributions. Is the Bank of England Sovereign from the EU?

  20. Norman Dee
    Posted December 20, 2011 at 10:59 am | Permalink

    Beware of Germans bearing gifts !

  21. Martin
    Posted December 20, 2011 at 11:03 am | Permalink

    Given the difficult state of the UK public finances is what might be seen as aloof or snubbing sections of the international community such a good idea? Might look great in the short term in the tabloids might not be so clever in the longer term.

    • APL
      Posted December 20, 2011 at 10:21 pm | Permalink

      Martin: “Might look great in the short term in the tabloids might not be so clever in the longer term.”

      When we need help, they won’t be able to help us anyway. Better ‘not to go there’. That is why Cameron should have been slashing public spending for the last eighteen months.

      He hasn’t, we will.

  22. Robert K
    Posted December 20, 2011 at 11:29 am | Permalink

    The euro crisis is finally showing the EU in its true colours. Let’s get out while we still have a chance

  23. scottspeig
    Posted December 20, 2011 at 11:51 am | Permalink

    I get really disturbed by the seemingly lack of protest when you read the words “the EU was now considering the Vickers Report with a view to seeing how much the UK can do without infringing the EU’s….” in this country’s MPs.

    No matter how many jobs rely on the EU, or how much money, NOTHING can be said for giving up the right to self-determination. Any person considering doing so should be literally (that is literally as in not joking) charged with treason and hanged (I’d even settle for shot)

    And to think some people (my wife included) just don’t seem to care! It really winds me up something rotten!

  24. javelin
    Posted December 20, 2011 at 1:45 pm | Permalink

    ECB balance sheet is now $3.2 trillion, compared with the FED $2.9 trillion, and the ECB is now leveraged at 30x – the same as Lehmans at its peak.

    The ECB switcheroo with PIIGS bonds (6% soverign bond yield for 2% at the ECB – nice spread if you can get it) – means that commerical lending is drying up (why lends to Risky Ltd when you can get a sure fire 4% from the ECB).

    It’s all going HORRIBLY wrong !

    • Denis Cooper
      Posted December 20, 2011 at 5:45 pm | Permalink

      I thought you could now get a 3 year loan at 1% APR from the ECB, provided you spend the money buying Spanish etc bonds, and you get the interest on the bonds while the ECB holds them as collateral for your “easy terms” loan; and now that the ECB has started doing that on a large scale, notwithstanding all its loud public protestations about the much -vaunted legal constraints of the EU treaties including its own Statute, the future funding problems of the PIIGS seem to be completely solved and I don’t quite see why there’s all this faffing around trying to scrape up a mere 200 billion euros to launder through the IMF, and still worrying about whether investors will lend enough money to the EFSF etc etc.

  25. David Langley
    Posted December 20, 2011 at 2:34 pm | Permalink

    Cameron has said “You never lose any money lending to the IMF”, so we presumably get it back with interest. A bit like Wonga.com. Trouble is I don’t believe him and using the IMF to launder billions for the EU in effect is probably the same as all the previous contributors think. Its not on and some late grovelling if true by the Germans, will not appease my desire to resile from the EU in its current lemming like desires and get both my country and my money back. Better still my respect for what passes these days for Leadership.

    • cosmic
      Posted December 20, 2011 at 4:43 pm | Permalink

      Maybe no one has lost money lending to the IMF to now, but this appears to be a new direction it’s heading in. Future results are not necessarily dictated by past performance and all that.

      Doesn’t this involve borrowing at a rate and lending long term at a lesser rate? In which case I would say as well as the risk of not seeing the loan returned ever, there’s a very definite continuing cost.

  26. Barbara Stevens
    Posted December 20, 2011 at 3:39 pm | Permalink

    Osborne refused to pay for the eurozone currancy, but will look at it again at a G20 meeting, however, once money is paid we have no authority where it goes, we might earn interest from these loans but its putting salt into our wounds to know it might be paying for the euro. No Chancellor should put it’s country into such a situation it’s a disgrace if they do. The IMF was not intended for this, and we should withdraw if they continue to use funds to prop up currancies. We are not in this doomed currancy so why should we support it? I sincerely believed that this government would stop such foolishness, but I’m having second thoughts. Whatever they say over the water we are a free nation, so far, if this continues they will draw us into their nightmare too. Who will support us if we run out of money, oh yes, they’ll support us if we join the euro, what a joy that would be to the Germans. We should cease all money exchanges now, and tell the eurozone it’s their problem, their debts, and their currancy, sort it out themselves. Big problem, who will have the guts to do it? Osborne, Cameron, Hague, some how I have my doubts.

  27. uanime5
    Posted December 20, 2011 at 4:13 pm | Permalink

    Rest assured John that the UK Government can impose any financial regulations it wants as long as:

    1) The EU has not created any laws regarding these areas.

    2) If the EU has made laws regarding these areas the the UK cannot make laws that are more generous than the EU’s laws. Though we can make our laws much harsher.

    reply: Not so – that is one of the points at issue. The UK may wish to have higher capital requirements than the maximum under EU rules.

    • Andrew Johnson
      Posted December 20, 2011 at 8:37 pm | Permalink

      The British government can make or unmake any law, financial or otherwise it chooses to make and it all needs is a bill and a parliamentary majority of one. Contrary to urban myth Britain does have a constitution and parliament is sovereign. If anyone doubts this just ask a constitutional lawyer.
      We can reject anything that is not in Britain’s interests. What is the EU going to do to us. Fine us? We pay considerably more in than we get out.
      Stop us exporting goods? We import far more than we import.
      All it needs is for British politicians to have the courage to start putting British citizens interests first. Anyone got any examples of when this last happened?

      • Vanessa
        Posted December 23, 2011 at 12:09 am | Permalink

        You forgot one more option….invade us? Well, look what happened the last two times!

  28. stan francis
    Posted December 20, 2011 at 4:28 pm | Permalink

    You report what’s not there John…everyone has told u this?

    Report: I report what happened

  29. alan jutson
    Posted December 20, 2011 at 4:28 pm | Permalink

    I am pleased DC has said No (at least for now) he needs to practise this phrase until he is word perfect, because he may have to say it many, many more times yet.

    I hesitate to say it, but are we at long, long last, begining, just beginning to see politicians standing up for the UK’s interests against Europe, or is it a dream.

    Keep up the pressure John.

  30. MajorFrustration
    Posted December 20, 2011 at 4:48 pm | Permalink

    So what happened to the first euro bailout fund. I seem to remember that it would be finananced to tune of circa $440m.
    If the present Government gets anywhere near providing the IMF with “cash or gtees” which would be used towards Euro bailout then they can kiss the next election goodbye.
    Finally has the USA made its contribution as agreed in 2009? Nope.
    And another thing – India is buying 125 jet fighters at a cost of £10b – yet we are still sending them 280m in aid- you do wonder sometimes if anybody is minding the shop.

  31. Norman Dee
    Posted December 20, 2011 at 4:48 pm | Permalink

    No money for the IMF “save the Euro” plan, but we will coincidentaly give them exactly the same amount for “other investments” just how stupid do these people think we are ? And no doubt you will stand up and make one of your “hand wringing” speeches, then sit down and nothing will change, but you will vote against it , and as usual a fat lot of good it will do.

    Reply: Thanks for your support! Would you rather I voted for more EU cash and power?

    • Norman Dee
      Posted December 21, 2011 at 9:03 am | Permalink

      It’s not that you don’t have my support, you have my full support (for what it’s worth), and you will continue to have that when you break out of the mould and get something moving. I am like many others frustrated by what appear to be ineffectual activity, honestly , what do you believe your stance has achieved ?

  32. Norman Dee
    Posted December 20, 2011 at 4:53 pm | Permalink

    sorry, and re “you never lose money lending to the IMF” there is a first time for everything, and of course it won’t be lost, “we just can’t put our hands on it at the moment” “we are waiting for a cheque from Australia” “will you take it in euro’s ?
    whichever way you put it we are stuffed, and you’re passing the kapok, no matter how unwillingly it’s getting passed any way.

  33. Martyn
    Posted December 20, 2011 at 5:41 pm | Permalink

    John, I will quite understand should you choose not to post this, but there follows the text of an open letter written by Frederick Forsyth to Chllr Merkel. I cannot vouch for its veracity but it reads rather well I thought….

    Reply: Yes, it is authentic, and was published by the Express. It is their copyright – with Mr F – so I recommend reading it on their website.

    • Martyn
      Posted December 21, 2011 at 9:08 am | Permalink

      John,

      Thank you. Keep up the good work!

  34. Frances Matta
    Posted December 20, 2011 at 7:23 pm | Permalink

    The UK Says “No” to more IMF Funding for the euro.

    Quite so.

  35. Chris
    Posted December 20, 2011 at 7:37 pm | Permalink

    Worth looking at “debate” on Der Spiegel on issue of IMF bailouts:
    “A Currency Crisis Debate
    ‘The Euro-Zone Bailout Programs Must Be Stopped'”
    http://www.spiegel.de/international/business/0,1518,804700,00.html

  36. john w
    Posted December 20, 2011 at 7:45 pm | Permalink

    John,i would like to say happy crimbo to all the eurosceptics.I will be back in the new year .

    reply: have a good time on your break.

  37. Conrad Jones (Cheam)
    Posted December 20, 2011 at 10:26 pm | Permalink

    David Cameron is right to say NO to IMF contributions.

    But is Boris Johnson right when he says that the City of London contributes £53 billion to the Treasury? (Answer: HMRC clearly states that this figure is actually closer to £21 billion.
    http://www.hmrc.gov.uk/stats/banking/menu.htm
    “Banking sector PAYE and CT receipts publication (PDF 175K))”

    THE ANDREW MARR SHOW
    INTERVIEW: BORIS JOHNSON, MP (MAYOR OF LONDON)
    DECEMBER 18th 2011
    http://news.bbc.co.uk/1/hi/programmes/andrew_marr_show/9664340.stm

    .ANDREW MARR:

    Sure. You’re obviously a key player in the argument about banking reform. Tomorrow George Osborne announces the government’s response. It looks pretty clear that banks are going to be split up. What is essential in your view to ensure that the City of London keeps making money and keeps its mojo?

    BORIS JOHNSON:

    Don’t forget that … I mean I heard Peter Mandelson say just now that you know we’ve become excessively dependent on financial services. Okay, I would love to see the UK economy rebalanced, I’d love to see the growth of the manufacturing industry, but those guys, all those great glistening Temples of Mammon I can see behind you in the City and Canary Wharf, they produce 53 billion quids worth of tax. Now that is …

    ANDREW MARR:

    (over) So what do you need to see from the government tomorrow?

    BORIS JOHNSON:

    (over) … that is something that is of huge value to the UK. That’s schools and hospitals and all the rest of it.

    ANDREW MARR:

    Yeah, sure. So what do you need to see tomorrow on the banking regulation?

    BORIS JOHNSON:

    Just don’t kill the goose. Don’t kill the goose. I’m sure they will … There’s no doubt there’s something you know creepy about the huge bonuses that bankers are still continuing to receive in spite of the fact that they were effectively bailed out by the taxpayer. ”

    I agree with Mr Johnson’s last comment. Andrew Marr should have corrected his “£53 billion” mistake and also mentioned the £100 billion of tax payer subsidies. Even with the 53 billion figure this puts the City of London as a loss of 47 billion – its’ actually losing £79 billion.

    • StevenL
      Posted December 20, 2011 at 10:49 pm | Permalink

      Are the subsidies from ‘taxpayers’? Or are they from the savers and buyers of annuities that lose out on zero-interest rate policy? HMT/BofE charge the banks fees on the bond guarantees, asset swaps and other loans.

      The media keep talking about ‘taxpayers’ bailing out ‘the bankers’ but any fool can surely see that savers are bailing out borrowers and ‘bankers’ (who as individuals could be either) are largely an irrelevance in this transfer of wealth.

      Your pension savings are being transferred to the government coffers, your mortgage deposit to your overstretched landlord.

  38. Andrew Smith
    Posted December 20, 2011 at 10:36 pm | Permalink

    If the UK goes ahead with changes which add to the costs of banks, the UK sector will be at a competitive disadvantage and trade will more overseas. Is that a good idea?

  39. Neil Craig
    Posted December 21, 2011 at 12:59 pm | Permalink

    This appears not to be IMF funding but more funding by the EU countries using the IMF bank account to fight the nasty wolves, plus the law of economic gravity, in a way that won’t be noticed by us sheep.

  • About John Redwood


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

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