Gotterdammerung?

 

           The French President’s plane was struck by lightening en route to meet Mrs Merkel. Was it some music of the spheres, some intervention of chance or the gods, to herald the crisis Euroland now faces?

             They needed all the time together they could get, to mend fences, and work out how to respond to the failure of the Greek politicians to form a government.  They needed time to discuss how the EU should handle the forthcoming Greek election. Should it be made a referendum on belonging to the Euro, with the public told the conditions that are attached? Or should the EU keep out, and let all parties pretend there can be a renegotiation of sorts, that the terms of membership and of the loans are flexible?

                    Recent Euroland elections have underlined how little power  old and the new governments have within the semi  disciplined framework of the Euro. Government A is thrown out for playing by the rules, only to be replaced with Government B  who also has to play by the same rules and offer the same policy. Membership of the Euro has been lethal for incumbent governments in recent months. Now Mrs Merkel herself faces voting meltdown, as Germans too grow weary of the current system.

                    Meanwhile, in the real world of the technocrats, Central banks and bureaucracies of Europe, there are grave nagging doubts and fears. Germany is worried that so much of her money has been deposited by commercial banks with the European Central Bank. The ECB has lent this  on to the struggling banks elsewhere in the Union. The ECB now makes the interbank market for many, as the markets themselves are too apprehensive to work well. Technocrats worry where the next government will come from in some countries to carry on approving and passing the necessary measures to comply with the plan.

              German taxpayers are worried about the potential liabilities under the various bail out funds, and many dislike the idea that the southern states will now flex the German credit card more. Meanwhile southern resentment and disappointment mounts, as their economies fall.

               The new leadership of Merkel as modified by Hollande, will probably talk more about growth – which is much needed. They will probably offer a few extra spending programmes from the European Investment Bank and some under raided EU budget headings. Meanwhile, the true battle of the gods will be the battle over the banks. Can the ECB keep on providing enough money to the banks in the weaker areas? Will the weak banks hold on to enough deposits? Will the rescuers have enough money to pay for past losses? It all gets much dearer and scarier if the southern economies continue to decline. That will mean lower asset values and more exposed banks. If the Greeks act irresponsibly in Euro terms they threaten the structure without willing the answer, their own exit from the currency.

                  The latest phase of the Euro crisis is the battle of the banks. Mrs Merkel and Mr Hollande have to be more than passive bystanders arguing over a  Growth Pact.

 

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88 Comments

  1. Single Acts
    Posted May 16, 2012 at 5:57 am | Permalink

    This is really simple. Would you leave money in a Greek or other south european bank because of political ‘guarantees’ if indeed they are forthcoming from the ECB ?

    Me neither, thus the WSJ report of E700B being withdrawn on Monday alone. I understand several billion a month has been slipping away and this is unlikely to ease anytime soon despite all the braying and bleating in the world from politicians.

    So, that suggests to a simply soul like me…..

    No more good money after bad. The game is up. Norman Lamont learned a similar lesson many years ago with the ERM. Must we repeat the folly?

    • Lord Blagger
      Posted May 16, 2012 at 9:11 am | Permalink

      Pity the poor citizen of those countries. Forced to ‘invest’ their retirement funds with governments that have spent the cash. Now up to their necks in debts, and those pension ‘promises’, the governments are going to default and screw their voters.

      End result of a fraud.

      Same is happening in the UK, and politicians won’t do anything about it.

      • Single Acts
        Posted May 16, 2012 at 4:54 pm | Permalink

        Quite right, not only not doing anything positive, Mr Brown’s intervention was actively harmful when he ended the contracting out of SERPS.

        Only solution is to privatise the whole thing because as you correctly say, the governments simply take the money and spend it in the hope of a bigger pool of suckers in the future. The demographics do not support such optimism.

        Try to get them to even admit the issue let alone talk about it or do something.

      • outsider
        Posted May 16, 2012 at 9:57 pm | Permalink

        Sir Mervyn says that a break-up of the EZ is the biggest threat to the UK economy. No, it’s no more than 1 per cent of gdp. The biggest threat is the excess inflation created and sustained by Sir Mervyn, which is squeezing real incomes against a virtual national pay freeze, squeezing consumer spending and generally squeezing the life out of the economy. Sir Mervyn now tells us that he will deliver more excess inflation for longer. Thank you and goodbye.
        Instead of having America’s Adam Posen pushing QE at the Bank of England can we please try to persuade America’s John Taylor (of Taylor Rule fame) to put some credibility back into our monetary policy?

    • Mike Stallard
      Posted May 16, 2012 at 3:26 pm | Permalink

      I am struggling here. I understand that people (including my friend x and her husband) have taken out every single penny they can from their Greek bank. Greece faces therefore a number of Northern Rocks.
      But what I do not know and, of course, nobody seems to be saying, is how much money the English banks have “invested” in Greece.
      Also I do not know how much money English businesses have “invested” in Greece either.
      Until I do, I shall simply disregard all this bleating about growth and austerity. They are just words. And I strongly suspect they ought to be interpreted as “borrowing when broke” and “going belly up”.

  2. Antisthenes
    Posted May 16, 2012 at 6:12 am | Permalink

    The euro crisis is now heading towards it’s end game the likely outcome of which is that Greece will exit the euro and in doing so will not just destroy the euro but much else as well. Then those who now clamour for less austerity and more growth will find that they get much more of the former and a lot less of the latter for a very long time to come. Not that austerity is working particularly well but under the current European economic, social and political structures it is the only solution available. Austerity can work but it needs the demise of the euro, the abolishing of the commissars in Brussels and strong right wing leaders for it to do so. Greek exit now even if it gave all three of those requirements which it will not is too late to save the situation and what will follow is going to be very unpleasant.

    • stred
      Posted May 16, 2012 at 9:01 am | Permalink

      Can austerity work? Well, if austerity means that privately employed overtaxed and regulated people have less to spend, this is obviously not good for growth or private industry, except the big business monopolies, which like and lobby for regulation.

      However, would the overtaxed care if police or firemen had to work to 65 like the rest of us, doing the form filling jobs that most of them seem to spend most of their time on already? Would I care if the municipal men who have to inspect my boiler, front door, fire alarm, sound insulation between rooms, roof repairs and conservatory suddenly were put on the scrap heap?
      Maybe, if they stopped charging £3k to have an icecream van, they could buy one and do something useful, or if they prefer, jump of the Town Hall roof.

      And if we decided to sack all the civil servants who decided that everyone around a child had to obtain a separate criminal record check every time they took a job, would anyone care? As far as I am concerned they should be charged for wasting millions and lose their pensions. Perhaps a job in a garden centre might not be above their abilities. I met someone from Whitehall once, whose job was to write speeches for a semi literate minister. Maybe a job teaching our many semi literate school leavers would be a suiatable re-deployment. And the heads of the border agency who let in the odd extra million illegal immigrants and gave billions of £ away to big companies- just sack them and confiscate their pensions.

      What about lawyers? They have doubled the number of daft laws and their own numbers in the last 20 years. To undo these laws would take much less time, providing a non-lawyer was put in charge. Would we worry to much if a monopoly profession law was brought in, one sentence long. Here it is: the maximum hourly charge for a lawyer of any kind is £40. Just imagine the effect on the ambulance chasing industry. Austerity for lawyers, yes please!

      • stred
        Posted May 16, 2012 at 9:04 am | Permalink

        Oops. ‘semi-literate’. Like me.

        • stred
          Posted May 16, 2012 at 9:07 am | Permalink

          like me to’o’.

    • Cliff. Wokingham.
      Posted May 16, 2012 at 9:59 am | Permalink

      Yes, perhaps the EUSSR will revert back to being just a trading block agreement and we’ll all be able to stop paying for the extra government that we neither want nor asked for. It would be nice if our decisions could be made in Westminster again, instead of Brussels. Let’s just hope our politicians are still up to running a country.
      I think I could suffer a few years of misery in order to get our country back, rather than the rest of my life in misery living in a European, socialist, un-democratic superstate.

      • lifelogic
        Posted May 16, 2012 at 2:36 pm | Permalink

        Indeed – but the Libdems and the Cameron types of pro Euro, fake green, tax borrow and waste, ever bigger state politicians will have to do a bit of rewriting history as their pro EURO agenda, their Co2 Green tosh religions and ever bigger state policies all collapse in ruins about their feet.

      • Bob
        Posted May 16, 2012 at 5:45 pm | Permalink

        “Let’s just hope our politicians are still up to running a country.”

        I haven’t seen any evidence to suggest that this is the case.

      • Max Dunbar
        Posted May 16, 2012 at 6:18 pm | Permalink

        If you remove the “European” and “super” from your last sentence then that is what you will get from Westminster post-EU I’m afraid. Who got us into this mess? Heath & Co.
        You will never “get our country back” under this shower of PC Quislings. Where are Britains strong right wing leaders? This country appears to be the only one that does not have any right-wing parties worth mentioning.

    • Susan
      Posted May 16, 2012 at 5:12 pm | Permalink

      Antisthenes

      There is no reason why it should be the end game. The problem in the EU is that there is no one is in overall control, it feels a bit like the London riots when no one was in place to take control of the situation. The EU, if I remember correctly, describes itself as a supranational democracy, or at least I believe that was the original concept. Unfortunately there is not much democracy because the people of the EU have not been brought close enough to the decision making process. No one takes any real control because they have to deal with their own Countries interests first. I can for instance understand why Germany does not want to pay to solve the problems of less responsible Countries such as Greece, it is not in their own Countries interests to do so. However Germany has benefited considerably from being in the Euro and believes in the single currency therefore they should be prepared to put their money behind it. For those who say Germany will leave the EU, I doubt it. If Germany returned to the Deutsche Mark it would rocket in value and effect their competitiveness.

      The answer to the problem for the Eurozone has to be fiscal federalism, where the debts of the Eurozone Countries are pooled with further integration to save the currency. This would surely solve their problem very quickly. This would also allow strict rules to be put in place to make sure Countries did not overspend again.

      Taken as a whole the Eurozone is economically better placed than the UK, even through this crisis they are not in recession and Britain is. I hope Greece will decide to stay in the Euro because it will not improve their situation to come out and the fall-out from their exit could be pretty dire. However I do not believe this would be the end of the Eurozone, they may even do better eventually if it is a managed exit.

      In the end the EU must stop the uncertainty about Greece, which is actually contributing to bringing the Country down. Had there been some overall control in place to deal with these kind of problems, without consultation, as soon as the Greek crisis began it could have been solved very easily, Greece after all is a small economy. Fiscal federalism leading to a federal Government is the only answer to the problems in the Eurozone. Otherwise it will just disintegrate, I believe.

  3. colliemum
    Posted May 16, 2012 at 6:51 am | Permalink

    The sooner people in the €-zone and the rest of the EU realise that it doesn’t matter if they elect left or right or even middle-of-the-road parties because, thanks to Brussels, their politicians cannot do anything without running up against Brussels Diktats, the better.
    Yes, everybody is now talking about ‘growth’ – after all, Barroso did a very short while ago.
    Nobody has any idea how that should be accomplished, so expect more meetings of heads-of-state, and more smoke and mirrors.

    Regarding the battle of the banks: here as well politicians and Eurocrats are simply achieving nothing except more talks. Nothing will be achieved because these politicians have been had by banking CEOs. We all recall the “too big to fail” mantra.

    I think it is time to get back to free market tenets, and let banks fail, with all consequences, rather than propping them up with more and more tax payer contributions. after such a long time, it is better to have an end with horror rather than horror without end.

    Btw – why does the government/treasury not instigate a thorough audit, without obfuscation, of at least all the banks it has shares in, and make the data available in a form accessible to us all, in ordinary English? We ought to know where our money went, and we should not be obliged to spend days searching the internet for this.
    The same goes for our EU contributions – it is a scandal that the EU budgets still have not been independently audited, for a dozen years now, iirc -, those to the ECB and the IMF.

    Why can’t we be told? Are they that scared of our reaction?

    • A Different Simon
      Posted May 16, 2012 at 11:41 am | Permalink

      Colliemum ,

      It’s coming up to five years since the GFC and not only has the concept of “too big to fail” flourished but we’ve complimented it with “too big to jail”.

      Our banks are still hybrid retail/hedge fund . The threat to reinstate Glass Steagal type seperation has died a death – evidently retail deposits are needed to pay off imminent credit default swap losses .

      I don’t find the argument that Northern Rock were a retail bank a compelling case against seperation .

      We will always be slaves to the (names investment banks-ed) .

    • uanime5
      Posted May 16, 2012 at 4:02 pm | Permalink

      “The sooner people in the €-zone and the rest of the EU realise that it doesn’t matter if they elect left or right or even middle-of-the-road parties because, thanks to Brussels, their politicians cannot do anything without running up against Brussels Diktats, the better.”

      Given that the people of the EU elected the national leaders and MEPs that made these laws they only have themselves to blame.

  4. Pete the Bike
    Posted May 16, 2012 at 7:13 am | Permalink

    What it comes down to is that the politicians can’t keep the ponzi scheme going much longer. They’ve lied and schemed for decades to manipulate the system for their, and their friends, benefit and now it’s all going wrong for them.
    Sooner or later reality bites and everybody finds out you can’t spend more than you earn forever. Sooner or later appears to be very soon now.

    • Lord Blagger
      Posted May 16, 2012 at 8:06 am | Permalink

      Quite correct. The debts are real. The debts are too big to be paid. The ponzi is collapsing.

      Meanwhile politicians stick their heads up their arses when it comes to the debts.

      Those who relied on, or are forced to rely on the state are going to be shafted. In that area I agree with Labour on the outcomes. That they are largely responsible for the cause is omitted.

    • Tad Davison
      Posted May 16, 2012 at 9:05 am | Permalink

      I do hope so, but people will still vote for whoever promises the most, regardless of their ability to deliver.

      Tad

    • norman
      Posted May 16, 2012 at 10:43 am | Permalink

      Exactly. Money and wealth are different animals, we can print all the money we want and invent ever more intricate ways to shuffle numbers around on paper but we don’t have the wealth to support the current system. We’ve squandered the lot and are not generating nearly enough to keep up.

    • Sally C.
      Posted May 16, 2012 at 11:37 am | Permalink

      I agree, but how will it play out?
      The Greeks want to keep the Euro – and who can blame them. They want everything to carry on as before with the ECB still ready to take Greek government bonds as collateral against which the ECB will continue to provide cheap loans to the Greek banks, despite constant credit downgrades.
      The ECB has been bailing Greece out for years – in fact of course, all they have been doing is enabling Greece to dig a deeper and deeper hole for itself. In the meantime, other Eurozone states have kept saying that Greece can’t leave the Eurozone. Angela Merkel reiterated this point on CNBC this morning.
      So how do they make Greece go away now?
      If they take the decision to cut Greece off it will be like a declaration of war, n’est-ce pas?

  5. alan jutson
    Posted May 16, 2012 at 7:16 am | Permalink

    Certainly a time of real worry for those Greek Citizens who “did the right thing” and saved for their future, as it looks like they are about to be screwed big time, unless they can get their money out, whilst those who borrowed and lived to the limit of their debt, may get some relief upon revaluation/devaluation or default.

    What encouragement to live within your means for future generations !

    We sure are living in stange times at the moment.

    On another topic

    I see from the newpapers that Ed Milliband is musing an in out referendum on Europe, as part of a future policy initiative.

    If he chooses to go or support a clear cut referendum, it will leave Camerons Government dead in the water, and playing for catch up.

    I along with many of your bloggers have raised this possible scenario many times before on this site and elsewhere, as dissatisaction is steadily growing, and as Europe appears to becoming slowly more and more important in peoples minds.

    The problem for the Conservatives is, who would believe Cast Iron Dave a second time, unless he fixes a date in THIS PARLIAMENT and it is held BEFORE the next election.?.

    Given Mr Osbourne appears to be in charge of policy and strategy, and given his success of it so far, I do not hold out much hope for a second term at the moment.

    • alan jutson
      Posted May 16, 2012 at 7:25 am | Permalink

      Never mind.

      “The IMF has always got its money back”

      Let us hope so, otherwise it is many £ billions we have just given away and maybe lost forever.

      Any idea of the exact total we have underwritten so far since DC came to power in loans and guarantees, when you include all Country’s we have helped bail out or support ?.

      We are not exactly a shining example to anyone, given our debt is still rising.

      • norman
        Posted May 16, 2012 at 10:50 am | Permalink

        Osborne was also extolling the virtues of the Euro as an instrument of growth and prosperity yesterday. The man is either a modern day Kim Philby planted by Labour into the Conservative party to ruin it’s previously decent economic reputation or completly insane.

        I can come to no other conclusion, even his complete ignorance of economics cannot explain his behaviour.

        • lifelogic
          Posted May 16, 2012 at 4:43 pm | Permalink

          Indeed billions down the drain – could Darling & Osborne perhaps update us on all the pointless UK losses so far – it is the very least they owe us for having wasted our billions on their absurd damaging experiment. Instead Darling talks nonsense on BBC radio 4 – who ask him not a single sensible question for some reason.

          • zorro
            Posted May 17, 2012 at 5:22 pm | Permalink

            They’ve wasted more on bailing out the Euro mess than they have in trying to cut spending……Cut the army, cut the Border staff, impose more stupid laws to strangle business……increase overseas aid, spend more on NHS, unreformed education system,….they are totally inept.

            zorro

        • Single Acts
          Posted May 16, 2012 at 4:56 pm | Permalink

          I am amazed you got that comment through moderation.

    • Lord Blagger
      Posted May 16, 2012 at 8:07 am | Permalink

      I see from the newpapers that Ed Milliband is musing an in out referendum on Europe, as part of a future policy initiative.

      ==========

      Pretty empty policy. The Eurozone will collapse before there is referenda

    • Mike Stallard
      Posted May 16, 2012 at 3:32 pm | Permalink

      And here is the motion to vote on:
      “Would you like to see Britain try renegotiate its terms and conditions within the EEC?”

      Turn out: 23%

      Majority in favour.
      So?
      Mr Rumpuy has a heart attack? M. Barroso gets the vapours?

      • Lindsay McDougall
        Posted May 17, 2012 at 8:33 pm | Permalink

        Mike, don’t let the enemy set the rules. There were no referendums in favour of the Maastricht, Nice, Amsterdam and Lisbon, so we can repeal those treaties without the need for referendums. Just put these repeals in the Conservative 2015 Manifesto, then if elected simply do it.

    • Bob
      Posted May 16, 2012 at 5:55 pm | Permalink

      “…it will leave Cameron’s Government dead in the water…”

      Which is where they are now to be honest.

    • David Price
      Posted May 16, 2012 at 7:10 pm | Permalink

      But why would anyone believe Milliband & co – didn’t they vote against having a referendum in the last HoC debate?

  6. NickW
    Posted May 16, 2012 at 7:17 am | Permalink

    The problem is that in a democracy, voters will not vote for high taxes and nor will they vote for reductions in established benefits, pensions and entitlements. This is why Labour is so high in the polls, and why there is no flesh on the bones of the Labour economic policy.

    We will see how Labour’s policy plays out in France.

    Labour has put Party before Country; its implied policy mix is not possible in the real world, but its lies and pretense are misleading voters into thinking that that they can have their cake AND eat it.

    In order for the Coalition to do its job and save the Country from disaster it has to expose Labour’s policy vacuum; something Labour’s fellow travelers in the Lib Dems are unwilling to do.

    • Lord Blagger
      Posted May 16, 2012 at 8:08 am | Permalink

      The problem is that in a democracy, voters will not vote for high taxes and nor will they vote for reductions in established benefits, pensions and entitlements. This is why Labour is so high in the polls, and why there is no flesh on the bones of the Labour economic policy.

      Slight flaw in your argument. Voters have never been asked to vote for taxes. They have only been asked to vote for the next MP in Westminster.

      • uanime5
        Posted May 16, 2012 at 4:06 pm | Permalink

        It would be interesting to see what the result of voting for taxes would be, given that median wage is £26,000 you can expect a large amount of support for higher taxes on amounts most people will never earn.

        • Lindsay McDougall
          Posted May 17, 2012 at 8:27 pm | Permalink

          Yes, indeed. Envy is a very common emotion, even when it is totally unjustified. Take Richard Branson. He has founded Virgin Records, Virgin Airlines and Virgin Money, not to mention nearly killing himself in balloon rides sevral times. A man with that amount of creative energy deserves to earn a few bob. Compare him to a Professor of Mathematics who delves ever more deeply into the theory of transcendental numbers, or a religious nut who wonders how many angels can be accommodated on the head of a pin. Have they been more useful to humanity? You can find the answer in Gulliver’s Travels and other works of Jonathan Swift.

  7. Duyfken
    Posted May 16, 2012 at 7:39 am | Permalink

    I’ve come across this comment on an article by Simon Jenkins in the Grauniad today:

    Go to France and Germany and they blame Britain and the British Government who protect the very people who are destabilising Europe and the global economy.

    I tell you Britain is not very popular in Europe. It doesn’t shelter cruise issiles any more, but it shelters the followers of Naomi Klein’s shock doctrine, the companies like Goldman Sachs and Standard and Poors and the whole blood sucking financial mafia.

    The British government is scum and the British media who support the destruction of Europe bit by bit are dangerous.

    Now that all may be a scatty rant but if the references to the Continental attitude to all things British are correct, what is it that provokes such a reaction? Seemingly the (British protected) blood-sucking-financial-mafia is the cause (!) and the Eurozone’s difficulties have nothing to do with the political machinations in Germany, France and Brussels, nor presumably with the European central banks.

    So, if Britain is in such bad odour, we should not lift a finger to pick up the pieces after the coming storm, except strictly for our self-interest. May Mr Osborne draw the same conclusion.

    • Lord Blagger
      Posted May 16, 2012 at 8:08 am | Permalink

      Except it isn’t banks that have caused the problem. It’s politicians and their Ponzis.

    • outsider
      Posted May 16, 2012 at 9:37 am | Permalink

      If Britain has inherited the blame that Harold Wilson attached to “the gnomes of Zurich”, perhaps we should imitate Switzerland in other matters.

      • lifelogic
        Posted May 17, 2012 at 4:42 am | Permalink

        Indeed certainly in our currency/financial management. But not in only crossing deserted roads when the green man lights up comes.

    • Martyn
      Posted May 16, 2012 at 9:39 am | Permalink

      Britain never has and never will be popular with the EU elite. The same can be said of the USA and other Anglosphere nations. And as for Mr Osborne drawing the same conclusion from the statement “So, if Britain is in such bad odour, we should not lift a finger to pick up the pieces after the coming storm, except strictly for our self-interest”, a squadron of pigs will be seen taking to the air before that happens. “The Euro is here to stay” he said in response to a question in the HoC last September, which pretty much says it all.

      My guess is that with the failure of politicians to sort out Greece and the other tottering national economies, the EU Commission will impose new ‘governments’ on those nations. Since almost a new generation has grown up under the EU umbrella, it would not surprise me to find that they may conclude that being ruled by people appointed by the EU Commission could hardly be worse than being ruled by their home-grown failed and partisan politicians of whatever hue.

      • uanime5
        Posted May 16, 2012 at 4:09 pm | Permalink

        Well if would guarantee that EU countries would always have a Government.

    • StevenL
      Posted May 16, 2012 at 12:21 pm | Permalink

      Where I’m staying I get to speak to young Europeans all the time. They do aportion some blame on the British, and each other, and on themselves.

      Intelligent Germans are not daft enough to believe that Deutschebank and Commerzbank never made any stupid decisions. Spanish folk do resent the fact that greedy foreign investors (mainly British) stoked up their property bubble. However they also see Germany as a bit of a bully and Germans as having a bit of a superiority complex.

      But having said all that, I’ve met some really great people and made some new friends I fully intend to visit and have a party with.

      • Mactheknife
        Posted May 16, 2012 at 2:53 pm | Permalink

        @ StevenL

        ” Spanish folk do resent the fact that greedy foreign investors (mainly British) stoked up their property bubble”

        You’re having a laugh right ? A friend of mine was a UK representitive of several Spanish property developers who could not wait to build anything anywhere in Spain and get their mitts on the Brits cash. Spanish greed, Spanish crash.

    • jose
      Posted May 16, 2012 at 12:50 pm | Permalink

      It’s interesting that we’re such bad Europeans, picking only the parts that benefit us and ignoring all the good citizen parts….if we’re such bad Europeans how come we’re financing them to the tune of almost €150bn…read this and revolt!:

      http://www.brugesgroup.com/EuropeanInvestmentBank.pdf

    • peter
      Posted May 16, 2012 at 12:56 pm | Permalink

      Agreed – when you design something and it goes wrong blame someone else…

      All the financial institutions do are assess a country of zones viability – its the architects of the Euro that are to blame for this mess.

      Osborne needs to stop throwing good money after bad as this is only going to end up one way.

    • libertarian
      Posted May 16, 2012 at 5:47 pm | Permalink

      Err both Goldman Sachs and Standard Poors are US corporations. GS has more offices and employees in Europe than the UK. The other ratings agency Fitch is a French company. I guess deutsche bank and parisbas santander and UBS don’t operate in financial markets then ? So not sure your argument is accurate.

      It isn’t the banks that caused the problem its the politicians and their control freak meddling

  8. Paul Danon
    Posted May 16, 2012 at 7:57 am | Permalink

    Curious how the southern Europeans seem to blame the north for their economic woes (like some Scots are still blaming Mrs Thatcher). Don’t they realise that these troubles are partly the consequence of their, erm, relaxed commercial and fiscal practices? The left will have them think it’s all down to top-hatted bankers.

  9. oldtimer
    Posted May 16, 2012 at 7:59 am | Permalink

    Lagarde`s warning yesterday to the EZ re Greece, to be ready for anything, was significant given its origins (1 French and 2 IMF MD). My impression is that the EUrocracy is leaving it to Greek voters to decide if they want to remain in the euro with the austerity programme, or exit to the drachma and a different set of uncertainties. Presumably the EUrocracy hopes to continue to muddle through without a Greek exit and is relying on the Greek desire to remain in the EZ to carry the day at the forthcoming election.

    As for the banking structure, for some reason it reminded me of the Tay bridge disaster. Until the disaster cast iron had reigned supreme because of its impressive strength under compression. But it, and the bridge design and construction, lacked resilience when subjected to the gale force winds on the night of the disaster. Afterwards it was back to the drawing board for the engineers to invent new steels and new structural designs. With this in mind, has the ECB learned anything from the earlier financial crisis? Or is it too presiding over a financial edifice that is also on the verge of collapse?

    • Lindsay McDougall
      Posted May 17, 2012 at 8:42 pm | Permalink

      Angela Merkel has said that she is determined to keep Greece in the Euro Zone. Now that really is frightening. Does she have no inkling that it’s not her decision?
      Germany has always wanted an Empire within continental Europe. It seems that nothing has changed.

  10. backofanenvelope
    Posted May 16, 2012 at 8:25 am | Permalink

    I thought the Portillo TV programme was very interesting, because it showed that the Greek problem is that they have a corrupt incompetent political class. The people don’t want to go back to the Drachma because that will place them firmly in the grasp of the people who got them into this mess in the first place. He certainly tried hard to get people to accept his Drachma notes, but there were no takers.

    • Single Acts
      Posted May 16, 2012 at 5:20 pm | Permalink

      “it showed that the Greek problem is that they have a corrupt incompetent political class”

      Thank God we don’t have the same problem.

  11. Lindsay McDougall
    Posted May 16, 2012 at 8:38 am | Permalink

    Short of Germany leaving the Euro – which could yet happen if France interprets ‘growth’ to mean running up a fiscal deficit – there is only one way out of this. Member States should leave the Eurozone one by one as they fail to meet the Eurozone fiscal obligations. The important things about the Greek exit are (1) It should be announced as a definite decision (2) A date for the last bail out payment should be set so as to avoid a default (3) A date and methodology should be set for conversion to the new Drachma – to include a measure of financial assistance during the transition.

    If we can engineer an orderly Greek exit, much of the fear will disappear. A successful precedent will have been set. Given the Greek election results, it should not be impossible to form an interim Greek government willing to co-operate.

    This should be British policy and we should be shouting it from the rooftops. For far too long we have allowed the Franco-German axis to dominate.

    • StevenL
      Posted May 16, 2012 at 3:44 pm | Permalink

      They would suprise them. Announce it Saturday morning and turn the atms off.

    • uanime5
      Posted May 16, 2012 at 4:14 pm | Permalink

      The problem with this is that once the exit date is known people will try to move their money to a non-Greek bank to ensure that it remains euros, rather than drachmas which will rapidly decrease in value. This will cause major problems for the Greek economy because as the change over date occurs no one will want to spend any money in case it gets converted into drachmas.

      • Lindsay McDougall
        Posted May 17, 2012 at 11:41 am | Permalink

        The financial assistance might take the form of allowing the Greeks to convert all their debts to new Drachmas, subject to an agreed maximum inflation rate. That would be a parting gift of generous proportions but at least it would get rid of the obscenity of organisations like the IMF being preferential creditors.

  12. Martin
    Posted May 16, 2012 at 9:13 am | Permalink

    I think the greatest thing we learn is that the first act of the new French president was to go to pay homage to the Empiress in Berlin.
    Bringing countries to their knees is all part of the great Imperialist plan, and it is right on course.

    Extreme you might say .. History is repeating itself.

  13. outsider
    Posted May 16, 2012 at 9:47 am | Permalink

    “They will probably offer a few extra spending programmes from the European Investment Bank and some under raided EU budget headings.”

    The new EU Maritime Policy seems tailor-made to help Greece but initially has only modest funding. If other funds could be re-directed into this, a lot of investment could be channeled into Greece without bi-lateral aid, whether it leaves the euro or not. Of course, a lot of that investment might be wasted if Greece remains uncompetitive on price. But hey …

  14. Atlas
    Posted May 16, 2012 at 9:58 am | Permalink

    In this game of brinkmanship I suspect it will the Germans who blink first. The prospect of the whole EU going down and around the ‘U’ bend of history is anathema to them.

    • Mike Stallard
      Posted May 16, 2012 at 3:32 pm | Permalink

      But what if the Germans decided to devalue the Euro?

  15. Michael Read
    Posted May 16, 2012 at 11:19 am | Permalink

    Rightly, you concentrate your fire on potential EU support to prop up the continent’s banks with the implication that it is a bad thing.

    So you disagreed with the Bank of England propping up our own set of zombies with taxpayers’ money, and paying them bonuses to boot for the privilege of not being allowed to fail?

    • libertarian
      Posted May 16, 2012 at 5:50 pm | Permalink

      Dear Michael Read

      Have you ever read this blog before? I’m sure Mr Redwood will answer you himself. But he and most of the commenters on here were adamantly AGAINST bailing out the UK banks. Do keep up.

  16. Mark
    Posted May 16, 2012 at 11:21 am | Permalink

    Since Europe is no longer -kozy, is it simply H-el being driven by a Merk?

  17. Phil Richmond
    Posted May 16, 2012 at 12:24 pm | Permalink

    In the meantime your center-left leader thinks our future is in Europe. Imagine if Labour offers an EU referendum!! Good-bye 100 Tory MPs!

    • Single Acts
      Posted May 16, 2012 at 5:23 pm | Permalink

      You mean like the vote on the Lisbon constitution they promised? Mr Cameron is not the only one who has not lived up to expectations in this regard.

  18. PaulDirac
    Posted May 16, 2012 at 12:35 pm | Permalink

    What happens to countries / banks / individuals holding Euro’s if the Euro collapses?
    Will Germany give them New D-Marks in replacement?

    If “the world” suspects that the end-game is plausible, central banks will start acting on it, dumping Euro’s for just about anything.

    The Euro stability (so far) is puzzling, if you think about the 18 months of crisis after crisis and nothing much changes in the value of the Euro.
    Is there a behind the scenes some Euro buying program?
    I just hope our dear old George isn’t stacking our larder with too many Euro’s.

    • Bob
      Posted May 16, 2012 at 6:16 pm | Permalink

      I just hope our dear old George isn’t stacking our larder with too many Euro’s.

      Didn’t Gordon Brown invest the proceeds of the sale of our gold reserves into Euro denominated securities?

      I’d wager a bet that we are well stuffed with Euros, which is why George & Dave have been looking so nervous lately.

      The most telling thing would be to find out if they have a significant amount of their personal wealth invested in Euros, which I very much doubt. Just like Mervin King moving his own pension fund into inflation proof securities, while telling us not to worry about inflation.

      It’s not what they say that matters, it’s what they do!

      • zorro
        Posted May 17, 2012 at 5:38 pm | Permalink

        Yes he did….his comment in the House was that he had not made an unwise decision in selling the gold because he had ‘invested’ the proceeds in Euros. Gordon obviously thinking that fiat paper would hold value despite the fact that he was overspending and borrowing, and allowing ridculous amounts of credit to come about to increase house prices and create the impression of a false boom….Another inept politician.

        zorro

  19. Alan Wheatley
    Posted May 16, 2012 at 12:43 pm | Permalink

    Thunder and lightening is not restricted to franco-german relations.

    Another potentially stormy meeting of minds, reported on the BBC News this morning, is today at the 1922 committee, which was pitched as a conflict between new-intake pro-Cameron and the old-guard – perhaps a split between those aspiring for promotion and those who know their prospects are scant under the present leadership.

  20. Christopher Ekstrom
    Posted May 16, 2012 at 1:10 pm | Permalink

    Mr. Osborne is a member in good standing of the political elite of Europe; the real blood-sucking mafia that’s “good works” are playing out now. As for the (former) UK the booster shot of Thatcherism has long since worn out (20 years ago!). The “new labour, new danger” propaganda was not so far off! You have two hopes: England as your nation & The soon to be called (UK) Independence Party.

  21. Sue
    Posted May 16, 2012 at 1:12 pm | Permalink

    “Can the ECB keep on providing enough money”, probably not, but we know full well that laundered money from the IMF will be injected into the bail out fund and we also know who will have to pay, European taxpayers like us. You see, we have nobody to speak for us!

    “Government A is thrown out for playing by the rules, only to be replaced with Government B who also has to play by the same rules and offer the same policy.”

    That’s sounds familiar… perhaps if we change ONE WORD…… Membership of the “EU” has been lethal for incumbent governments. There, that’s better.

    It would save money if the Con/Lab/Lib anti-electorate alliance produced the next General Election manifesto between them. I see we’ve just funded a huge operation getting rid of Somali pirates with the EU taking the credit. That’s nice of them, perhaps we can get a refund???

    • rose
      Posted May 16, 2012 at 5:21 pm | Permalink

      We didn’t just fund it, we managed it.

    • Electro-Kevin
      Posted May 16, 2012 at 9:18 pm | Permalink

      So stealthy was the implementation of project that they changed the name of it three times.

      The ‘European Union’ would have been rejected had it been proposed as such at the time of the referendum.

  22. RDM
    Posted May 16, 2012 at 2:34 pm | Permalink

    Are you interested in this article:

    http://silberzahnjones.com/2012/05/16/culture-of-risk-culture-of-uncertainty-a-crucial-management-issue/

    I wish our Banks were?

    Regards,

    RDM.

  23. David Langley
    Posted May 16, 2012 at 2:47 pm | Permalink

    What is the ECB Euro worth? Has it devalued itself, is the face value not the real market value, and is the ECB therefore undercapitalised in even its own terms. What is the Euro pegged against? At least our Sterling stands or falls against itself. Is the Euro really a Deutsch Mark
    in disguise?

  24. Brian Tomkinson
    Posted May 16, 2012 at 3:46 pm | Permalink

    It’s ‘Das Rheingold’ they’re all after of course!

  25. uanime5
    Posted May 16, 2012 at 3:59 pm | Permalink

    It seems that the end may come very soon if Greeks keep sending money out of Greece.
    http://www.bbc.co.uk/news/business-18091109

  26. rose
    Posted May 16, 2012 at 4:07 pm | Permalink

    (words left out)
    We are also wondering how to stop Mr Putin jumping in and making Greece Europe’s Cuba.

    • rose
      Posted May 16, 2012 at 4:43 pm | Permalink

      We’ve also noticed M. le President is waiting until he has seen the Empress before appointing his ministers. Decide on the strategy first and then choose the team?

  27. Barbara Stevens
    Posted May 16, 2012 at 4:25 pm | Permalink

    The problem with Germany it remembers the days before of hyper inflation and the problems it bought. Printing money caused it, and they won’t go back to that again. I’m suspicious of QEasing here, will that lead to the same scenorio? However, the euro was their idea, and to encompas all the nations of Europe, well they got their way and now we see the results. All those who have taken the euro now have to support it or leave it. The ECB needs to take its role seriously, or the whole of Europe will fail, and the concept of the EU.
    Of course its not what we voted for here, we anticipated a ‘common market’ for trade only, its become a monster and out of control. Its become an expensive club with poorer nations not able to afford the fees, yet, the rich ones don’t want to support the poorer ones. I’m glad we’re not in the euro or we would have been brought into the fray. We are members of the EU, and I fear we may be expected to support these failing nations financially. That I would not support. Those who adopted the euro should support it.
    Of course Germany won’t make its self poorer it will protect it’s self by all means, so the ties Barroso claims are in place a not true. Europe will break up, but not to the extent Merkal as proclaimed, by wars and the like. I think we have grown in a bit of stature from the last conflict. The sooner all nations are once more individual nations once more the better.

  28. Bernard Juby
    Posted May 16, 2012 at 4:26 pm | Permalink

    Not only was it struck by lightning but he got drenched twice that day. Once at his Inauguration and again on arrival.
    Perhaps the Gods were trying to tell him something?

  29. Dan H.
    Posted May 16, 2012 at 5:07 pm | Permalink

    The basic situation for the EU and the Euro is this: they’re stuffed. There is now nothing that any of ’em can do to rescue the situation they have landed themselves in, and the only way out of this one is for a lot of countries to simply default and revert to their own currencies. Everyone says that this will cause the collapse of civilisation as we know it, and that nobody will ever lend these countries money again, but once again history proves otherwise.

    Of the period Greece has been an independent nation, it has spent roughly half that time completely bankrupt and in default, and most of the rest of the time waltzing merrily towards that state. Despite this, people have always been ready to lend to Greece. This proves once again that people are stupid, banks are stupid, and with such idiots as this about governments will always be able to run up huge liabilities then default on them.

    The one thing not to do now is to give money to any government since it will only piss it away on yet another madcap scheme to fix the unfixable. Avoid tax wherever possible and starve the beasts, and be certain to keep a proportion of your money in fine metal for when politicians decide to gamble with someone else’s money and lose it all.

    Finally, stop worrying about EU referendums. Neither Labour nor the Tories are going to give the electorate a referendum on the EU, until the EU has completely collapsed and the corpse is stinking to high heaven. Fortunately the EU seems composed of even stupider politicians than we have here, so the death of the EU won’t be long in coming.

  30. Denis Cooper
    Posted May 16, 2012 at 6:26 pm | Permalink

    “Can the ECB keep on providing enough money to the banks in the weaker areas?”

    I’m still not clear whether there’s any formal limit to the amount of money the ECB can create.

    Obviously if it created enough trillions of euros then that would start to drive down the euro exchange rate and drive up inflation; but are there any international rules, external to the EU treaties and laws including the ECB statute, which would kick in to restrict the volume of euros it could create out of thin air?

    Or would it be a case of other central banks starting to demur about accepting euros for swaps with their currencies?

    And, setting aside the minor matter that it would be illegal under EU law, would there be anything to stop the Greek national central bank deciding to create new euros to lend to the Greek government so that it could pay its biills?

  31. David Williams
    Posted May 16, 2012 at 6:41 pm | Permalink

    We ought to be making the most of our new-found safe haven status. I would like to see our politicians putting out the message to international companies to come to the UK and leave the unstable EZ.

  32. Alte Fritz
    Posted May 16, 2012 at 7:53 pm | Permalink

    What baffles me is that, unlike Groucho Marx, the Greeks wish to be members of a club which will have them as members.

  33. David Langley
    Posted May 17, 2012 at 8:17 am | Permalink

    Good read Jose, what a mess we are in if we have to meet the obligations to support these banks.
    No credit management in sight there.

  34. Atlas
    Posted May 18, 2012 at 6:57 am | Permalink

    I am confident that the Germans and the French will do something to avoid Greece leaving the Euro. We’ve been up this “it all going to crash” track too many times over the EU’s history and seen it not happen.

    Cameron’s public intervention will just mean that Merkel and Hollande can now publicly ask for us to help bail Greece out more than would otherwise have been the case. Cameron should have kept his opinions for private consumption.

  • 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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