Another bad day for the Euro


          The spin was fine. The Greek people had voted to save the Euro. The “right” parties had enough seats and votes to form a government which would support the loans which support the Euro membership. The spin was designed to reassure markets that the Euro is safe in our time.

         The markets did not see it quite like that. Initial sharp rallies petered out. The cost of borrowing for Spain and Italy rose further. In Spain’s case the cost of 10 year money remained clearly above 7%, the level that many say makes it unaffordable. The battle for Spain is now more important than the rows over Greece.

         The politicians gave out differing messages when interpreting the Greek election results. The Greek “victors” sounded more like the Greek opposition, saying there now had to be changes to the loan agreements to make it easier for Greece to survive economically. Germany repeated the mantra that Greece had voted for the Euro and for the disciplines embedded in the loan agreements.  In the days ahead Greece has to form a Coalition government, that government has to seek changes to the loan terms, and the rest of Euroland has to respond. If they are too generous to Greece they may find other nations with special programmes want better terms. If they are too tough they make it difficult for the new Greek government to sell it to the Greek people. If they are too generous to Greece they call into question the disciplined framework which many- not just in Germany – think essential to Euro success. If they demand too much austerity with no currency or monetary relaxation possible to compensate, the Greek economy could continue to fall badly, making it impossible to pay for all the remaining debts.

        Most of this is theatre. It is based on an unlikely set of assumptions.  The Greek loan agreements for the period up to 2020 are based on the assumption that the Greek economy starts to grow from the beginning of 2013, and carries on growing for each of the seven years up to the end of the decade. Few private sector forecasters would endorse such a forecast for such a long and unpredictable time period. If by any chance the Greek economy does not soon embark on a steady and long period of growth, all the numbers of the loan agreement will be wrong. Tax revenues will be lower, state spending higher, and Greece will need to borrow more to get through.

          It all asumes  that the Greek banking system copes well with the pressures. Let us hope it does. However, some in Germany are nervous about the extent to which  large German bank surpluses are being lent via the European Central Bank to the weaker members of the currency union. Somehow the deficits on trade accounts need to be financed. Somehow plenty of money needs to be supplied to banks in  weaker economies to meet demand for cash withdrawals or transfers as they arise. The surplus countries have to allow this to happen and to be happy with it for the union to flourish.


This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.


  1. Alte Fritz
    Posted June 19, 2012 at 5:10 am | Permalink

    Last night’s moment to shout at the TV screen came when the Commission President told the G20 summit, in strident tones, that the EU needed no lectures in democracy.

    Some lessons in democracy, history and basic economics would be a start.

    • lifelogic
      Posted June 19, 2012 at 6:31 am | Permalink

      Indeed they would – another academic lawyer who has never had a real job it seems.

    • Tad Davison
      Posted June 19, 2012 at 7:20 am | Permalink

      There are lies, damned lies, then there’s the whopping great big self- delusional BS spouted by pro-EU people who are trying to shift the blame for their own mistakes and discredited philosophy.

      I watched the BBC’s Newsnight last night, and the EU Commission president, one Jose Manuel Barroso, was ranting about the EU’s fantastic achievements. Really? When was that then? I have only ever seen massive amounts of waste, plenty of unaccountability, borrowing like repayments simply didn’t matter, an accounting system that even the EU’s own auditors won’t approve, social degredation and poverty not seen on the continent in decades, and no credible plan to extricate the EU from the mess.

      Barroso must surely even eclipse (the most infamous propagandists-ed)for lies and spin!

      Tad Davison


      • lifelogic
        Posted June 19, 2012 at 8:24 am | Permalink

        Indeed what are the achievements of the non democratic, socialist, top down, command economy, EU?

        • uanime5
          Posted June 19, 2012 at 3:03 pm | Permalink

          The common market, which allows free trade and movement of people throughout the EU.

          • Boudicca
            Posted June 19, 2012 at 5:00 pm | Permalink

            All perfectly achieveable via a free-trade treaty rather than the supra-national dictatorship which Barroso is leading.

          • lifelogic
            Posted June 19, 2012 at 5:13 pm | Permalink

            We would have free trade anyway, by negotiation and we could accepts just the people we actually wanted and needed on terms we could control.

            Anyway the EU has all sort of mad restrictions on free trade.

          • Richard
            Posted June 19, 2012 at 5:24 pm | Permalink

            If you tried to run a business and then tried to supply goods into Europe you would soon realise that it isnt “free” but a very complex area to import into.
            Far more complex than many non EU nations in my experience.
            The free movement of people may appear useful for holidaymakers but it has brought about unemployment and reduced wages for many in the UK and the unexpected consequences of the UK having to deal with over 500,000 new arrivals each year at a time when housing, jobs, heatlh services and education capacity is all stretched

          • zorro
            Posted June 19, 2012 at 5:37 pm | Permalink

            Clutching at straws as ever….


          • Lindsay McDougall
            Posted June 19, 2012 at 5:39 pm | Permalink

            Boudicca is right. As Enoch said at the time of the 1986 Single European Act “You don’t need to share someone’s bath water in order to have a trade agreement with them.”

          • Tad Davison
            Posted June 19, 2012 at 6:39 pm | Permalink

            Free trade is one thing, free movement of labour is another. So who do you pro-EU people think has nicked all the jobs that British people should have? Eastern Europeans from inside the EU maybe? Never!

        • lifelogic
          Posted June 19, 2012 at 4:00 pm | Permalink

          So David Cameron has pledged to “roll out the red carpet for Gallic tax exiles” – to the great annoyance of the current mad socialist leaders of the republic of France – good for him. The more hard working and rich non doms the better. Just a shame that Mr Morally Repugnant’s tax system is pushing, rather more, of the hard working and rich British out as they cannot enjoy the same system. Why is one good and the other bad I wonder Cameron?

          • norman
            Posted June 20, 2012 at 7:23 am | Permalink

            If you can afford the £50k annual ‘donation’ (or whatever it is) to attend breakfasts with him and Osborne maybe you could ask him? No doubt there will be a lot of these non-doms (who I’ve nothing against, good on them for paying as little as possible) at the same breakfasts who can also give their point of view.

      • lifelogic
        Posted June 19, 2012 at 2:14 pm | Permalink

        I see radio 4 today is pushing the prevention of tax avoidance again lie Mr morally repugnant. Perhaps they could start with all the service companies the BBC “employees” and other parts of the state sector use, but I did not hear any mention of those.

        Just for once it might be good to hear someone on the BBC saying that more taxes on the productive, pushing them away and starving them of capital, just in order for the state to waste it, is perhaps not the best way after all.

        • lifelogic
          Posted June 19, 2012 at 5:15 pm | Permalink

          “like” non lie sorry.

    • norman
      Posted June 19, 2012 at 7:39 am | Permalink

      It seems he also believed America needed lessons in economics, pleading for them to come to the Euro’s rescue because all Europe’s problems stem from the USA.

      Who elected him again and when is he up for re-election?

      You have to wonder if he really is as stupid as he’s making out or if it’s a cunning plan to make the Americans feel sorry for the retarded cousin.

  2. Gerry Dorrian
    Posted June 19, 2012 at 5:41 am | Permalink

    It’s basically a Whig settlement, bursting with Panglossian assumptions that everything will turn out for the best. Surely the failure to learn from history on the part of the Eurocrats is now at the scale of culpable negligence?

  3. Mike Stallard
    Posted June 19, 2012 at 6:02 am | Permalink

    On Dan Hannan’s blog today is an article that our oil and gas are just about to follow the Common Fisheries Policy into Europe along with our banking system.
    Meanwhile we are being treated to BBC people standing there, on our money, telling us what we already know: Greece leaving the EU would be a “disaster”.
    What would be a disaster would be for us to lose our oil and gas and also to lose our Banking.

    I for one am fed up with hearing about Greece. Why don’t the EUrocrats just throw them out and have done with it! I hate to see middle class people on the streets and people who have been middle class rummaging through dustbins. Once they leave, just like us with the ERM, they will soon get back on their feet.

    • lifelogic
      Posted June 19, 2012 at 6:34 am | Permalink

      The BBC has indeed done a great deal, to help set the climate, that created this pointless mess. It still continues on this mistaken path.

    • APL
      Posted June 19, 2012 at 7:02 am | Permalink

      Mike Stallard: “Meanwhile we are being treated to BBC people standing there, on our money,”

      BBC news is nothing but village gossip, bBut worth less.

      Mike Stallard: “telling us what we already know: Greece leaving the EU would be a “disaster”.”

      Yes it would be a disaster, for Credit Agricole, Bank National de Paris, Societe Generale which are apparently holding $44billion of, to all intents and purposes, worthless Greek debt. A Greek default will make a bit of an impact on their (words left out) balance sheets.

    • Tad Davison
      Posted June 19, 2012 at 8:50 am | Permalink


      I’m not exactly enamoured by the BBC’s coverage either. On Newsnight last night, (see above) they only had studio guests who were basically pro-EU. Not a Euro-sceptic in sight, to give any dimension and depth to the debate. That made the whole exercise pointless, and yes, we’re paying for that, like it or not!

      Personally, I resent it.


      • lifelogic
        Posted June 19, 2012 at 11:31 am | Permalink

        Yes and never any comparison to John Major’s self inflicted ERM fiasco (again cheered on by the BBC) and the economic bounce back on exit from it.

      • lifelogic
        Posted June 19, 2012 at 4:39 pm | Permalink

        To be fair to the BBC if they take someone put forwards by the three political parties, or anyone at the BBC, or any of the tame BBC “experts” then they always will be pro EU people. They only seem to have Nigel Farage who they pull out once on the while or perhaps Jon Moulton. Not many others talk much sense on the BBC perhaps Andrew Neil sometimes.

      • Bob
        Posted June 19, 2012 at 7:50 pm | Permalink


        “we’re paying for that”

        Join the refuseniks!

    • davidb
      Posted June 19, 2012 at 6:02 pm | Permalink

      I dont listen to the Beeb news any more. However I woke up early one morning last Thursday I think, switched on the World Service and heard a gentleman explain how a Grexit would lead to inward investment and growth in Greece. I got what he was saying. The Beeboid interviewer however failed to understand what he said and proceeded to shoot down the idea with illogical ill informed Stepford Eurocrat speak. In disgust I turned it off.

      On Friday I think it was, I turned on Radio 4 by accident a few minutes before 9 to be greeted by some discussion of the late Enoch Powell’s infamous speech. I understood what the guest speaker said, and his reasoning was simple enough. Our PC Beeboid was having none of it and repeatedly called Mr Powell a racist, despite an intelligent argument being advanced that this was not so.

      It is time, well past time for the BBC to be reformed, broken up, scrapped or privatised. I hear Grommit thinks there shouldn’t be large media companies, and I find myself in agreement. Break the Corporation up with no cross ownership of channels or radio stations. Lets get rid of the telly tax and make sure an active regulator sees impartial reporting and free thought on all the new stations.

      I am sick of the BBC.

  4. colliemum
    Posted June 19, 2012 at 6:02 am | Permalink

    Spin – theatre: indeed. What is astonishing is that this has been going on for years now, and the whole situation has become successively worse, across the EU, not just in Greece.

    What is also astonishing is the selective reporting about the “crisis”. Perusing our media, one would think that Greece is the only country in difficulties, with a bit of Spain thrown in. Ireland or Portugal don’t seem to exist, nor do any of the newer EU countries.
    The only other country which exists in the media is Germany, and that country has become the scape goat for every commentator, poster and blogger, certainly in this country.
    It is as if the minds of the economic journalists have collectively reverted to the kindergarden socialist mind which blames “The Rich” exclusively for all their ills, giving elaborate reasons why slaughtering the Golden Goose is the right thing to do.

    It is extraordinary that actual numbers are still so hard to come by. Politicians and journalists talk about billions and trillions which will be needed – but never say what happened to all the money already having been paid. Or has it? Where has it gone? What and how much will be needed in the worst-case scenario? It’s as if those involved are going to great lengths to hide all the small print, adding more lines to that as time goes by, while trying to tell us, who will have to pay, that all will be well, especially if those nasty germans hand over all their money …

    Actually, I think it is well past spin and theatre – we’re well into a time of collective insanity.

    • zorro
      Posted June 19, 2012 at 6:27 am | Permalink

      More like tragedy….these EU types don’t give a damn about Greece…..they have their Protectorate in all but name and will soon start looting it. Wait until they start on the UK and they blackmail us into the Euro and some politician says…..’Delay could be deadly’. But don’t worry, Cameron will keep us safe, he’s a Eurosceptic…….


    • APL
      Posted June 19, 2012 at 7:15 am | Permalink

      Colliemum: “Germany, and that country has become the scape goat for every commentator ”

      Agree, the treatment of Germany is shameful.

      • norman
        Posted June 19, 2012 at 7:59 am | Permalink

        I’ve said it before but if I was a German and not entitled to a modest state pension until the age of 67 and was being castigated for balking over sending ever more money to Greece while at the same time being told that the reason for the whole shebang is to stop another war of German agression I’d be livid.

        We daily hear of Greeks rioting in the streets, the German populace have shown incredible patience up until now, they should be the ones in the streets over the situation they’ve found themselves in with no exit in sight.

        • JimF
          Posted June 19, 2012 at 11:51 am | Permalink

          Erm.. they signed up to this marriage.

          • zorro
            Posted June 19, 2012 at 5:34 pm | Permalink

            Klaus married in haste and will repent at leisure…..


          • zorro
            Posted June 19, 2012 at 5:34 pm | Permalink

            Oh and the divorce settlement will be huge!


          • APL
            Posted June 19, 2012 at 7:54 pm | Permalink

            JimF: “they signed up to this marriage.”

            I don’t think they signed up to be the whipping boy of last resort to the rest of Europe.

          • norman
            Posted June 20, 2012 at 7:33 am | Permalink

            Do you think German politicians don’t lie to their voters too? I’m not talking about the political classes but ordinary working people, Franz the plumber from Hamburg. I’m sure most didn’t have a clue about the implications of what they were ‘signing up for’ and didn’t understand the implications.

            Did they even have a referendum or, like here in the UK ,did the political class simply decide they know best, all parties follow the same line, and then when the main parties get 80% of the 50% of people who can be bothered to vote use that as evidence that everyone agrees with them?

            If not for Brown we’d also have signed up to the marriage. How would you feel now if that was the case and we were borrowing more than we already are to send to bankrupt nations?

      • lojolondon
        Posted June 19, 2012 at 12:57 pm | Permalink

        My sympathy for Germany is tempered by the realisation that they are the people who profit most from every Euro disaster, as the gap between their produce cost and sale price widens with every slump in the Euro. So they profit in a very real way from the misery and failure of the Mediterranean states.
        The only way this will end is in bloodshed, the Europhiles will never give up because that is how they ‘earn’ their bread.

        • colliemum
          Posted June 20, 2012 at 9:38 am | Permalink

          Germany has been the main contributor, by a huge margin, to the EU, since its inception.
          These contributions are possible because Germany has been working and ‘profiting’, not just from the €, they did very well when they still had the DM.
          Thus the poor EU countries have been profiting from a working and profiting Germany themselves, for decades.

    • Gary
      Posted June 19, 2012 at 2:27 pm | Permalink

      You are right. The media is engaged in spin. They hardly mention the true UK total debt of 1000% of GDP. That is far worse than Greece. Ireland is also given a free pass. Don’t believe half of it. This is economic warfare. Follow the money.

  5. Sue
    Posted June 19, 2012 at 6:18 am | Permalink

    The markets know the Euro is dead. They are just trying to make a fast buck out of the uncertainty and the mess that has ensued. It’s just a matter of time. Unfortunately, the longer they leave dismantling the Euro, the worse it will be for everyone.

    Mr Carswell has just discovered that he and other MP’s cannot influence British Policy making, I could have told him that years ago.

    Mr Hannan has just posted his latest blog. Apparently, the EU is now after our fossil fuels. Do you think Mr Cameron will hand control of them over to Brussels, or do you think he’ll actually grow a spine and tell them to foxtrot oscar?

    Barroso has done wonders for diplomacy by blaming the whole crisis on the USA at the G20. Blame everyone but a badly thought out currency union.

    Our best hope is that we somehow extricate ourselves from the stone around our necks and start governing ourselves again. We can’t possibly make a worse job than the EU has.

    • Denis Cooper
      Posted June 19, 2012 at 10:06 am | Permalink

      Daniel Hannan gives no details of the proposals.

      So there’s no clue as to the claimed legal bases for the proposals.

      So there’s no way of telling from his warning whether these are proposals which depend upon one or more of the treaty changes brought in with the Lisbon Treaty, which is here:

      Despite Cameron’s false claim that it no longer existed as a treaty, as a justification for the abject surrender he announced on November 4th 2009.

      I do recall that during the Commons debates on the Lisbon Treaty concerns were expressed about its provisions relating to energy, and its Article 2 inserted a new Title into the EU treaties, under which “energy” is listed as a “shared competence”, meaning that:

      “When the Treaties confer on the Union a competence shared with the Member States in a specific area, the Union and the Member States may legislate and adopt legally binding acts in that area. The Member States shall exercise their competence to the extent that the Union has not exercised its competence. The Member States shall again exercise their competence to the extent that the Union has decided to cease exercising its competence.”

      In the absence of any detail on the proposals, it’s impossible to say if the UK government would have had a veto on them prior to the Lisbon Treaty coming into force, but now no longer has a veto, or it still has a veto.

      Assuming the worst case that the UK government has no veto and is likely to be outvoted on the proposals, there are really two options.

      The first approach, routinely adopted by UK governments, is to pretend that they are good proposals, or even better that they started out being bad proposals but have become good proposals because the UK government fought hard and won the argument and built up a coalition to get them improved, and therefore switch from opposing them to supporting them and explaining them in favourable terms.

      The second approach is to say that if other countries persist in trying to impose these proposals on the UK then the UK government will not accept the outcome of any vote, and moreover will withdraw its co-operation in other fields.

      And one obvious case for withdrawing co-operation is to stop the passage of the Bill to approve the radical EU treaty change that Cameron generously ceded to Merkel on March 25th 2011 without asking for anything substantive in exchange:

      and re-introduce the Bill with provision for that EU treaty change to be put to a referendum:

      “That notwithstanding any provision of the European Union Act 2011 the planned European Union (Approval of Treaty Amendment Decision) Bill should include provision for a UK referendum on the relevant EU treaty change, that agreed by EU leaders through European Council Decision 2011/199/EU of March 25th 2011.”

  6. lifelogic
    Posted June 19, 2012 at 6:24 am | Permalink

    Indeed – how much longer will the rich countries be prepared to continue this way or their voters allow it. Surely the end is nigh.

    I see Prince Charles has learned little from his parents in staying out of politics. He is once again pushing his “sustainable” religion in a childish video to a UN conference. This from the man who spends over £1M (of tax payers money), on air and other travel every year, lives in huge houses, drives an Aston Martin, pushes quack medicines and remedies, and wants to be defender of faiths. All this while selling over priced and packaged “organic” biscuits and yogurts.

    Does he not see any slight inconsistencies here perhaps? Is it too late for his parents to encourage him back onto a sensible path of political silence?

    • lifelogic
      Posted June 19, 2012 at 7:19 am | Permalink

      I see that Norman Tebbit in his blog says:

      “It is encouraging that there now seems to be a growing awareness within the Coalition that we, the tiny minority of swivel-eyed xenophobic extremist anti-Maastricht bastards, have not only been right all along, but that we are in the majority too.”

      But is there really this awareness yet in the coalition? Certainly no sign of it at the BBC.

  7. lojolondon
    Posted June 19, 2012 at 6:28 am | Permalink

    I love the fact that 10,000 lying Euro politicians flying around in suits doing press conferences can’t stop this from collapsing, everything they throw at it fails, and they eat their own words every day.

    I hate the fact that it is my money they are using, they are destroying the economic health of Europe for at least a generation, and the supine / sponsored media never tells the truth, especially the Biased BBC.

  8. A.Sedgwick
    Posted June 19, 2012 at 6:43 am | Permalink

    “If by any chance the Greek economy does not soon embark on a steady and long period of growth, all the numbers of the loan agreement will be wrong. Tax revenues will be lower, state spending higher, and Greece will need to borrow more to get through.”

    Sounds a bit familiar George?

  9. GJ Wyatt
    Posted June 19, 2012 at 8:04 am | Permalink

    Each country may have different causes and consequences of its debt disaster, but there is a common thread of misunderstanding about debt in Euroland, even by the usually sensible German Council of Economic Experts. Its proposed “European Redemption Fund” would convert official national debts over(/i> a 60% of GDP threshhold into Eurobonds, i.e. common liabilities of the whole Euro area. But this would simply exacerbate the moral hazard which concerns Germany (and others), as it guarantees the profligate borrowing. Instead they should consider converting national debt below the 60% threshold into Eurobonds or “Blue Bonds” as argued by Delpla and von Weizsäcker, and leave the bond market to price the excess debt over 60% of GDP without taxpayer guarantees (“Red Bonds”), presumably giving it junk status. This should dissuade governments from running reckless deficits as it would reveal to taxpayers and voters their culpability for the debt imbroglio.
    See Jeffrey Frankel at for more detail

  10. NickW
    Posted June 19, 2012 at 8:18 am | Permalink

    German Companies are taking steps to prepare for the return of the D.mark.

    The link is to a recent 18 Billion Euro Volkswagen Debt issuance programme which allows for reversion to currencies other than the Euro.


    “References herein to a “Specified Currency” shall include any successor currency provided for by the laws in force in the jurisdiction where the Specified Currency is issued or pursuant to intergovernmental agreement or treaty (a “Successor Currency”) to the extent that payment in the predecessor currency is no longer a legal means of payment by the Issuer on the Notes”.

    (Source; Zero Hedge)

    It is to be hoped that Germany will resolve the Euro crisis by leaving the Euro and allowing it to devalue to the necessary degree to allow the Mediterranean Countries to regain their competitiveness; it is the least worse option.

    • Tad Davison
      Posted June 19, 2012 at 1:04 pm | Permalink

      I just want the whole lot to collapse, monetary and political union. It’s like an operation for the removal of a malignent growth. Leave the slightest remnant, and it can come back again. Better to have the operation sooner, rather than later, because the longer it is left, the more drastic the surgery. But with their interminable procrastination, that is precisely what the ditherers are doing.

      The only people who seem to being doing well out of this self-propelled debt crisis, are the airlines who ferry these over-blown, self-important, ponces around, and the caterers and hoteliers who feed them and give them shelter. I wouldn’t pay them in washers! (possibly even more valuable than Euros with holes in the middle)


  11. Roger Farmer
    Posted June 19, 2012 at 8:38 am | Permalink

    Read Max Hastings in the Daily Mail, he covers it well.

  12. zorro
    Posted June 19, 2012 at 8:43 am | Permalink

    Off topic but will probably soon be on topic if the economy gets worse……still think that we really live in a free country?….


  13. alan jutson
    Posted June 19, 2012 at 8:44 am | Permalink

    So the past COZY relationship between Germany and France is now falling apart as well, it would seem the only friend in political terms Germany has at the moment, is the UK.

    But even we seem to want the Germans to foot the bill.

    How times have changed.

    How long before the German people demand their Government leave the Euro, and simply leave the others to squabble amongst themselves.

    Who would the Piigs go to then, the IMF ?

    • zorro
      Posted June 19, 2012 at 5:44 pm | Permalink

      Life’s a drag for the Germans…but they were given debt forgiveness in 1953 (until reunification)……and in 1990 when they reunified they decided not to pay any further debts to other European countries only some individuals. Germany was forgiven big time, this is part of the payback. Germany also benefited greatly in the initial stages of the Euro introduction.


  14. waramess
    Posted June 19, 2012 at 9:03 am | Permalink

    Redistribution of income in any form is pure socialism. Argue as you may there are the rich and the not so rich and we must just accept that and allow the economics to sort it out.

    Sending money from Germany to Greece or from London to Glasgow is wrong and is no more than rewarding the unproductive at the expense of the productive.

    For Greece the only sensible option is to default and get rid of the excesses of the past. Banks stupid enough to have facilitated such excesses must be the losers and should their governments. who should have been monitoring their activities, be foolish enough to bail them out then they will have their own electorate to answer to.

    There is absolutely no imperative for Greece to leave the EU or indeed the Euro, and it is better they remain without their governments ability to print its’s own money, their government will simply be unable to incur more debt and it will have to reduce in size to the point where it can exist coutesy of its tax receipts.

    Greece will survive within the Euro without debt and without a socialist handout from the EU, and Germany will need to have greater cognisance of how the free markets function and as it relates to the bad risks taken by its privately owned banking system.

  15. oldtimer
    Posted June 19, 2012 at 9:51 am | Permalink

    I think that Allister Heath makes a good point today that it won`t be Greece leaving the euro that will cause its collapse but Germany deciding it has had enough. His article is here:

    He quotes the study describing the significant reforms that helped make Germany competitive after absorbing the costs of re-unification. Many commentators have described the internal imbalances in the EZ, Martin Wolf among them and how they might be resolved. No doubt one “solution” is for the elephant in the room (Germany) to quit the room. Then France can run its own little euro empire. With this in mind, is UK policy of promoting the further consolidation of the EZ actually in our national interest?

    • zorro
      Posted June 19, 2012 at 5:52 pm | Permalink

      ‘With this in mind, is UK policy of promoting the further consolidation of the EZ actually in our national interest?’……That depends what Mr Cameron thinks is in the national interest. He might decide that he wants to join a new Euro area with just Germany and France and a few others……in what he perceives to be the national interest if, for instance, we get targeted by the markets. He could call on Tories, Labour and Lib Dems to get that through (in their own interest of course).


  16. Winston Smith
    Posted June 19, 2012 at 9:56 am | Permalink

    I’ve just returned from Ukraine. That’s the place where the collective media led by the BBC declared to be a backward, violent society and slandered the population as racists. They warned English people not to travel to Ukraine. Cameron and Hague followed their left-wing masters and heaped humiliating snubs to the Ukranian Govt and their people. The local media are very unhappy about this, especially the unfair coverage from the BBC, who seem to use Euro 12 as a cue to bash Ukraine. The local people were very friendly and generous, despite the efforts of our media to provoke hatred.

    Meanwhile, the Swedish authorities took a contrary view. They actually encouraged Swedes to visit Ukraine, building a vast camp and other facilities for supporters. They built a ‘Swedish Corner’ in the middle of Kiev. They combined this with a trade mission.

    Ukraine is a poor, developing nation, but with many opportunities for UK trade. They need the income from tourists and they were very appreciative of the efforts of the 25,000 Swedes that came. As one of the miserly 6,000 from England I was embarrassed and very angry at the destructive self-loathing and pathetic moralising attitude of our political/media elite.

    • zorro
      Posted June 19, 2012 at 5:54 pm | Permalink

      Not surprising, this government is beholden to the EU in reality as is the BBC…


  17. Neil Craig
    Posted June 19, 2012 at 10:13 am | Permalink

    The “assumption” that the greek economy is suddenly, with no change in circumstances, going to turn round from 5 years negative growth to strong positive growth is merely the latest equivalent of the EU printing money and using it to “solve” the previous crisis’s. Prin ting money is equivalent to kiting cheques in the expectation somebody else will pay. Assuming non-credible growth is kitingg a cheque and assuming the next generation will pay.

    In fact Greece could get into the 6% growth the non-EU world is averaging & it is quite obvious how. Repeal all the EU regulations that restrict growth. Reintroduce the drachma and let it fall ro it’s natural level.

    “all that is required to lift a nation from the lowest barbarism to the greatest wealth is peace, easy taxes and the tolerable administration of justice” Adam Smith

    There are 2 problems but both contain solutions within themselves. Firstly I do not think the euro would cease to circulate in Greece so that hoteliers and other parts of the productive economy would continue to be paid in euros while state employees got drachmas – however the pain that caused would be a spur to reducing parasitic government. Secondly the EU might get stroppy about Greece getting rid of all the parasitic rules that the rest of them labour under and either refuse to continue the loans or expel them from the EU – in which case Greek would be able to legitimately repudiate thay part of the debt owed to EU states and banks.

    The important point is that Greece can unquestionably achieve the sort of growth rates the rest of the world is managing and that if they do so all other problems sink to a managable size, whereas if their economy continues to contract the other problems become ever more insoluble.

    The inportant point for us is that the same applies except that our problems are currently less. It would be easy for us to reach not merely world average growth rates but much higher.

    The primary problem is not the failure of the euro, that is just the symptom, following automatically from government attempts to ignore low growth. The primary problem is the economic failure of EU bureaucratic, corporatist, eocfascist big state model, causing low to zero growth while the rest of the world grows faster than ever in human history.

    • uanime5
      Posted June 19, 2012 at 3:17 pm | Permalink

      Care to explain why the USA and Japan aren’t growing at 6% despite not being part of the EU? Could it be because the EU isn’t responsible for this.

      If the drachma and euro were both used in Greece the average person would be paid in drachmas while the wealthy would demand to be paid in euros. This is what usually happens in countries where a more valuable currency is available.

      If Greece repudiates their debts after being expelled from the EU then no one will lend to Greece. Without loans or bailouts the Greek economy will soon crash.

      • Lindsay McDougall
        Posted June 19, 2012 at 5:47 pm | Permalink

        It’s because the USA and Japan are developed economies. Take two nations, one with an average GDP per capita of $30,000 pa, the other with an average GDP per capita of $3,000 pa. In the next year, the former grows by 1%, the latter by 8%. Has the gap narrowed? No, it has widened. Do the maths.

        • zorro
          Posted June 19, 2012 at 5:59 pm | Permalink

          Yes, they are developed economies like the UK with massive debts which are inhibiting growth potential…..

          No-one will lend to Greece?… no-one lends to Russia or Argentina. Investors lend where there is an opportunity to make money. A debt free Greece would be an opportunity to make money…


        • uanime5
          Posted June 20, 2012 at 2:09 pm | Permalink

          My point was that Neil Craig was wrong when he claimed that not being in the EU = 6% annual growth.

          Also I do know the difference between developed and developing economies, and why the latter usually has higher growth than the former. Too many people on this site seem to believe the UK could grow as fast as China or Singapore by leaving the UK without understanding anything about why China or Singapore have high growth.

          • Bazman
            Posted June 20, 2012 at 6:13 pm | Permalink

            To get the growth they want everyone to work for Chinese wages or competing for Chinese wages would be better. With everyone living to Chines living standards. Everyone except themselves that is. The argument that we will have to soon anyway. I would like to see how long they would last in a Chinese/Russian system.

  18. Denis Cooper
    Posted June 19, 2012 at 10:53 am | Permalink

    This is going to drag on for months and years until either some of the weaker countries make their illegal and disorderly exits from the euro, whether or not that’s what their populations want, or it’s agreed that the stronger countries will if necessary provide them with subsidies in perpetuity.

    Not loans, or guarantees for loans, but subsidies, and not just to get them out of their present difficulties or to tide them over for a few years but potentially forever.

    I hesitate to even mention the Barnett formula, but it should be pointed out that in 1977 he, Joel Barnett, never expected that it would become perpetual:

    “Q2 Chairman: Can I perhaps go back to the origin of the mechanism that you introduced? When you introduced it, did you think that that was going to include the baseline grant to the devolved administrations or only changes in the overall amount?

    Lord Barnett: I thought it might last a year or two before a government would decide to change it. It never occurred to me for one moment that it would last this long.”

  19. Michael Read
    Posted June 19, 2012 at 11:13 am | Permalink

    To all your posters doing jigs on the death bed of the Euro project it might be a moment to pause for reflection, and horror.

    As that ultimate magnificent Ponzi scheme – post-modern banking – inflates, deflates, deleverages and implodes, we will almost certainly join Greece, Spain, Italy and France in the tomb.

  20. stred
    Posted June 19, 2012 at 11:44 am | Permalink

    During dinner with two middle class Greek academics I tried to convince them of the benefits of starting again with a new currency and adopting the British or American fiddles. Neither would consider leaving the Euro. They worry about what is happening but their families can get by as they are farmers and can barter, and the middle class publicly employed and smater business people have put their money abroad. Apparently, the UK is a favourite destination, which may explain the high £. The attitude to the scewing of the private sector is much the same in the UK.

    N.Ferguson’s Reith lecture had some interesting points, very clearly explained this morning. Maybe he will be listened to and eventually the young people on the left will realise which side their bread is buttered.

  21. peter
    Posted June 19, 2012 at 12:55 pm | Permalink

    I heard that Euro notes are marked to their Countries of origin so those that come from PIIGS countries are easily identifiable.

    As a result, many people are refusing to accept Euros identified with these markings – so it seems not all Euros are equal.

    • zorro
      Posted June 19, 2012 at 6:02 pm | Permalink

      People in Spain are….I know of one guy who is constantly changing his Spanish Euro notes for northern European (Germany/Finland) ones just in case…..


  22. matthu
    Posted June 19, 2012 at 1:24 pm | Permalink

    Meanwhile The telegraph Tells us:

    In an unusual intervention, the Church urged Britain’s leaders to take a more “constructive and positive” attitude towards Brussels because splitting from the EU would be a “travesty”.

    So does it look as though we may need to engineer a split from the CoE as well as the EU if the CoE is so intent on being left behind?

    • zorro
      Posted June 19, 2012 at 6:03 pm | Permalink

      11th commandment – Thou must stay forever within the EU!



    • Bob
      Posted June 19, 2012 at 8:23 pm | Permalink


      “…does it look as though we may need to engineer a split from the CoE…”

      We need to engineer a split from Rowan Williams!

  23. Bert Young
    Posted June 19, 2012 at 2:26 pm | Permalink

    Dr. JR . When I saw Mr.Barroso exclaim that the fault all lay with the US Bankers exporting their loans to Europe and creating the subsequent mayhem , I let out quite a laugh . He feels that Europe has all the skills and expertise and does not need the US to tell Europe how to put its house in order . We all know that the solution lies in effective international co-operation and reform and control of the Banking system . You are right to point out that Greece stands very little chance in meeting its financial objectives without a strong and sympathetic support . This has not been solved by the Barrosos in the EZ , or , by any of its operations . The time-scale you indicate is likely to stretch beyond the continuation of the EZ and highlights the reason why the only solution rests with the international community getting its act together . This is particularly so in the case of Spain and Italy .

  24. uanime5
    Posted June 19, 2012 at 3:20 pm | Permalink

    Given that the markets were concerned about the effect Greece could have on Spain and Italy it’s no surprise that they were only mildly enthusiastic that Greece wasn’t going to make the problems in Spain worse.

  25. Atlas
    Posted June 19, 2012 at 4:35 pm | Permalink


    Has the view of the majority of Conservative MPs that “being in the EU is a good thing” been in anyway affected by Eurozone events?

    What I’m trying to get a feel for is whether we are seeing a re-run of the 1930s, this time in the political sense of complacency about events. David Cameron seems to have strong parallels with Stanley Baldwin in his manner of dealing with events – even those few still left under his control. Have we a Conservative party which is in sore need of a Sir Winston to speak out fearlessly?

    Reply: I guess around 150 Conservative MPs or more want a new relationship based on trade and/or a referendum on our whole relationship.

    • zorro
      Posted June 19, 2012 at 6:14 pm | Permalink

      It’s a shame it can’t transfer into votes when needed to encourage Cameron….


    • Tad Davison
      Posted June 19, 2012 at 8:22 pm | Permalink

      Atlas, I agree, except I think of Cameron as a Chamberlain or Halifax. Even Mrs. T is more of a man than Cameron.


      • Atlas
        Posted June 20, 2012 at 1:31 pm | Permalink


        For what it is worth: I think of Chamberlain as a man who fancied the position of PM, but when he got it found he was out of his depth. I can see what you mean about Halifax – he comes over in the history books as a bit of an appeaser.

  26. Lindsay McDougall
    Posted June 19, 2012 at 4:43 pm | Permalink

    “Somehow the deficits on trade accounts need to be financed.” Only if there are deficits. This is precisely the reason that Greece needs to get its own currency back – so that it can float downwards and the deficits disappear.

    I am a very simple person. Please explain why it is in Germany’s interest to pay itself for its own exports.

  27. zorro
    Posted June 19, 2012 at 8:31 pm | Permalink

    Britain today – Julian Assange is claiming asylum from the Uk in the Ecuadorian embassy in London.

    Spain will more than likely need another bailout of 250bn Euros…..and in Germany, the Constitutional Court has ruled against Merkel over the ESM issue……..real life more interesting than fiction!


  • 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.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page