Greece is impaled on austerity by the Euro – elections don’t change that

I understand why Greeks voted in large numbers for an anti austerity party. They did so out of desperation with the misery inflicted on their lives and living standards over the last five years. A fall of one quarter in national income, massive job losses, and pay cuts for those still in work should drive any electorate to want radical change. Both their old main parties offered more of the same – sticking with the cuts, the debt control packages, the large interest bills from past excess.

The problem for them is the cruel logic of the Euro, and the imprisoning austerity of their huge debts. If the voters had chosen a party which recommended leaving the Euro it would have been better, with more hope for the future. Instead they voted for a party which both says it will not accept Euro austerity, and that it plans to stay in the Euro. How will that be possible?

Syriza hopes that Germany and the others will willingly cancel some debt and grant easier terms on the rest in the name of preserving the Euro. But why should they? How could they refuse doing the same for Spain, Portugal, Italy, Ireland and the other countries that have played by the rules and have too much debt for comfort? If Syriza is determined to stay in the Euro there is no need to offer them anything to save the currency. If Syriza works out that leaving would be better then the rest of the Euro area should help them to the door.

The Euro area may I suppose realise that this political shockwave could happen elsewhere, and may think they need to show some modest understanding of the Greek feelings. It is unlikely, however, that they could cancel enough debt or cut the Greek interest rate sufficiently to resolve the problems. Any such move may destabilise other countries, rather than calming things down.

If Greece left the Euro, devalued in line with market movements, and had access to her own Central Bank to decide how much money to create and have in circulation, she would have more chance of rebalancing her economy and meeting her large obligations. If Greece stays in the Euro and threatens default on her debts, she helps undermine the very currency zone she wishes to belong to. Without the power to create Greek money, and in the bad books of the ECB and the major countries in the zone, it could mean an even worse future for Greece than sticking with the old austerity medicine.

The joy on people’s faces when they saw the victory of Syriza was understandable. They felt they had dealt a lethal blow to austerity. The problem is, by wanting to stay in the Euro they either have to carry on with the Euro austerity policies they do not like, or follow a lonely and defiant course which will damage the Euro. Voters may think once in the Euro they can have a genuine choice if they sweep aside the conventional parties that took them in and back the scheme. In practice the challenger parties too are imprisoned by the Euro unless they want to leave.


  1. lifelogic
    January 26, 2015

    Indeed as you say “the challenger parties too are imprisoned by the Euro unless they want to leave”.

    “Instead they voted for a party which both says it will not accept Euro austerity, and that it plans to stay in the Euro.” Well voters will often vote for their cake and to eat it.

    The Euro has inflicted huge damage to so many countries. Yet those is favour of it, economists, failed politicians, the CBI, FT and other economic journalists and the ERM are still constantly wheeled out by the BBC to give us their latest words of wisdom on the EURO.

    Some new fudge, just kicking the can down the road and some new sticky tape will doubtless be found. How much did Osborne lend to the PIGS? How much have the UK banks and the Irish got at risk? Italy, Portugal, Spain, Ireland, France….. it should be interesting to see how this bureaucrat and EUphile politician created tragedy finally works out.

    1. lifelogic
      January 26, 2015

      I noticed that on Question Time last Thursday the chairman proudly announced that 40% of their guests we female and the BBC were aiming for 50%. Yet the House of Commons is only 22% female. Were the “right on” BBC not doing brilliantly!

      These figures (assuming they are reflected across the MPs selected as is likely) suggest that a female MP has 2.4 time more chance of appearing on QT than a male. Yet the BBC want to raise this huge bias anti-male to a factor of 3.5 times plus.

      The quality of the females on the program (with the exception of Ruth Lea and one or two others) seems to me to be already far lower than the males on average, the quality of the males is already lamentable.

      If you had the same quota driven nonsense in say Engineering, Physics and Computer science, company directors you might have to discriminate against good qualified males by a factor of well over ten times relative to females. Do we really want to hugely lower the standards in this way or do we want the best person for the job with or without a womb?

      Clearly the BBC and Cameron types want lower standards, more token woman and superficial gender “equality”. Cameron even extended it to insurance and pensions does he think he is a God and can control longevity and driving styles now?

      He has not even won an election yet and never will on the current path.

      1. Mondeo Man
        January 26, 2015

        I note Mr Cameron seems to have more respect for Greens and the Left than for Ukip.

        The latest concession is to the Greens on fracking.

        The last two referenda on mainland UK were at the behest of Lefties: the LibDem AV referendum and the Scots Nationalist referendum.

        A vote on Europe ? Jam tomorrow as usual.

      2. Mondeo Man
        January 26, 2015

        I note that the BBC’s narrative on the Ukip defection is that it is still a Ukip loss rather than a Tory blunder.

        The BBC can’t be that anti Tory then.

        (Guido Fawke’s questions to CCHQ have gone unanswered thus far.)

      3. Ralph Musgrave
        January 26, 2015

        “proudly announced that 40% of their guests we female” Hardly an achievement given that given that the BBC could very easily invite a female only audience if it wanted to. Come to think of it, the majority of presenters and people invited to appear on Woman’s Hour are probably female. I bet everyone is amazed and dumbfounded by that bit of information….:-)

        1. APL
          January 27, 2015

          “Come to think of it, the majority of presenters and people invited to appear on Woman’s Hour are probably female”

          Do the BBC screen a ‘Men’s hour’?

          1. Jerry
            January 28, 2015

            @APL; “Do the BBC [broadcast] a ‘Men’s hour’?”

            Many might suggest that Top Gear is very close to being a ‘Men’s Hour’, in a sort of ‘Lads Mag’ style, type programme…

          2. APL
            January 29, 2015

            Jerry: “Many might suggest that Top Gear is very close to being a ‘Men’s Hour’,”

            Actually I thought that myself. But disqualified it because it was called ‘Top gear’ not ‘Men enjoying fast cars’, the ‘Womans hour’ title is somewhat exclusionary.

            ‘Top Gear’, if you are a woman, a motor car enthusiast or just a Jeremy Clarkson groupie doesn’t mitigate against you watching the programe.

        2. Lifelogic
          January 27, 2015

          Woman’s hours is is very funny though especially the view of the token men they get on.

          They can never quite decide if women are the same as men or are just better. Better at multi-tasking, better at languages and communication and better at empathy and “showing their emotions”

          Or if they are just interest in a good recipe, their victim glass ceiling culture and what they should wear this spring.

  2. Leslie Singleton
    January 26, 2015

    I vaguely remember reading (I think) that the IMF has never lost a penny on one of its loans. Is that right and if so how can that record be maintained now? Can it possibly be that the money that the Greeks will need in a matter of weeks, and not just for debt servicing, can be borrowed now? It would at least keep the accounting simple if new lending, if such can be obtained, were written off as it is lent. Again if I understand right the port of Piraeus has already been sold to China and if that is indeed the case maybe the Greeks should sell off more of the dreaded family silver, in particular their lovely islands one by one to the proverbial billionaire oligarchs one reads about. The terrible fear of contagion across borders is so real that the Troika should not even begin to talk or negotiate until Greece affirms its debts (perhaps giving islands, or the Acropolis, as security), It would at least be interesting to see what would happen in a reversion to the Drachma; but even if that worked one presumes the debts will stay denominated in Euros. What a game of soldiers. Does anybody have any clear idea what happened to the last lot of hundreds of billions of Euros? Is the ECB planning to go ahead with its latest national Euro QE scheme as regards Greece?

    1. Lifelogic
      January 27, 2015

      Osborne assured us of a good profit did he not?

  3. Mick Anderson
    January 26, 2015

    There are a couple of other possibilities. Perhaps the Greek people take the view that their vote is irrelevant because their country is being dictated to by the EU. If so, they might as well vote for the Party that sends the strongest message.

    Equally, perhaps leaving the EU is the de facto “plan B” for Syriza; this is the last roll of the dice. The only way to make the EU shift its position is with a plausible ultimatum, and this is it.

    It’s a shame that this episode won’t play out fully before the beginning of May, because it would be good if this example of people expressing a view had an effect on the Party leaders in the UK.

  4. Jerry
    January 26, 2015

    John the Greeks want to stay within the Euro in the hope of easy money, or at least easier money, to fuel their traditional ways, but who knows what the Greek people will want once the EU, ECB and IMF say No! No! No! to the demands of Syriza. Indeed they might well decide to kowtow to the autocrats, but they could equally realise that being independent of the Euro together with a 50 to 100% default leaves them no worse off domestically and if that also means failing out of the EU then that might also be a ‘price’ worth paying too – the boot is well and truly on the other foot, like it or not!

  5. Peter van Leeuwen
    January 26, 2015

    What happened in Greece is democracy. (Younger) people voted against corruption, against austerity, etc. and they voted to stay in the euro. There is nothing wrong with accepting a democratic choice and first work towards a solution. The Greeks don’t share the eurosceptic opinion that all will get well if they leave the euro, as that happens to be what eurosceptics long for. It is however their democratic choice and for the conflict that it may cause a solution will have to be sought. So let’s wait and see. Already some changes in the “package” for Greece have been floated before the elections.
    It should be left to the Greeks and the Eurozone to work this out. It is their business.

    1. Jerry
      January 26, 2015

      @PvL; “What happened in Greece is democracy. (Younger) people voted against corruption, against austerity, etc. and they voted to stay in the euro.”

      Like hell they did, they voted to be rid of the mess, rid of the inflicted austerity, this is no vote of confidence in the deeply flawed currency. Of course they would prefer to remain within the Euro, just as they would like to stay in the EU, but they have not “voted to stay in the Euro”. Also Peter, there is a lot more to the whys and wherefores of the Greek vote, in some ways the EU and the Euro are side players, I suggest you read up on Greek and European history from around 1940 on (to save John work in case I might say anything that our Host feels he can’t host).

      “It should be left to the Greeks and the Eurozone to work this out. It is their business.”

      The international members of the IMF might, nay, will disagree with you on that, even if the international markets and currency exchanges are prepared to sit back and hold their deals until when ever!

    2. Mondeo Man
      January 26, 2015

      It isn’t really democracy.

      As with the North of England and Scotland – voting for the easy options all the time is not grown-up democracy.

  6. Lifelogic
    January 26, 2015

    I see the sensible Alastair Heath has suggested that a council tax giveaway could be the Tories’ game-changer. That combined with abolition of IHT (to redress their past blatant IHT ratting) sounds like a very good plan to me. Cameron certainly needs to do something very soon as he enters the last 100 days.

    1. Bazman
      January 26, 2015

      He proposes a council house give away not a council tax give away. Learn to read and try understand what this deluded idea would entail. Money raised from giving councils house away to their owners who pay 35% of there value if they sell in five years falling to 20% over time he proposes this money being used to build more houses?! Most are in private landlord property anyway cussed by selling off of council houses and none being built to replace them.
      IHT is paid by less than 5% of the population. It is a just tax and where would the revenue then come from? Vat on everything that it is not already on with massive hike to boot. That would be ‘sensible’ in your opinion?
      Absolute drivel that you did not even read properly, but still agree with because its in the Telegraph and wrote a right winger. What does that tell you? Disgusting stupidly it tells me.

      1. Mondeo Man
        January 27, 2015

        Council houses were meant to enable low paid workers to live within range of work.

        Once ownership has moved into the private sector the house’s rent is ramped out of affordability and so workers are either subsidised by the state or – as is happening – workers who are prepared to live six to a room are imported.

        If the UK’s housing obsession was a good thing then I draw attention to the national debt and personal debt in the UK. Especially to the size of the welfare bill – much of which is taken up with housing costs.

      2. Edward2
        January 27, 2015

        However it would be popular with voters.
        Which Baz, in a democracy is good.
        The houses don’t cease to exist, its just the ownership that alters.

        1. Bazman
          February 1, 2015

          Then in that case we should repossess all the council houses sold. The houses don’t cease to exist, its just the ownership that alters.

      3. Lifelogic
        January 27, 2015

        Indeed you are right (for once), I did type “council tax” instead of “council house” perhaps because for the last three week I have been dealing with endless, absurdly complex, UK tax returns so perhaps have the word rather imprinted in my mind at the moment.

        What a complete waste of my valuable time they all are too.

        1. Bazman
          January 28, 2015

          Not for the NHS and the road user they are not.
          We could just tax the amount of wealth you own in this country to save you time and effort? You own it or benefit from it you pay.
          Your lifestyle will be taken into account if you try to hide it.

    2. William Gruff
      January 26, 2015


      Who would believe him after so many broken promises, some of them ‘cast iron’ guarantees?

    3. Hope
      January 27, 2015

      It is a stupid idea that will cost us all a fortune. Without the ability to limit EU immigration more would come to obtain a free home, in contrast to those having to work hard to pay off a 25 or 30 year mortgage! Social housing is now the same as ordinary housing in the same development. More building on green land to house East Europeans! How in any way is it a good idea?

      1. Lifelogic
        January 27, 2015

        It could stop us being ruled by Labour and the SNP. You just convert rent to mortgage in some way on some reasonable basis then the new owners have more of a stake.

        1. William Gruff
          January 28, 2015


          We need to be ruled by Labour and the SNP.

  7. APL
    January 26, 2015

    JR: “They did so out of desperation with the misery inflicted on their lives and living standards over the last five years. ”

    Isn’t it interesting, the BBC doesn’t thing austerity isn’t news from Greece, yet a *threat* to freeze government spending in this area or that in the UK, is treated as actual cuts, by the BBC news editors.

  8. JoeSoap
    January 26, 2015

    A milk run for the UK with its massive debts. The irony of watching Peter Hain. a primary exponent of the Eurozone and of Brown’s massive borrowing, welcoming the Syriza victory, was a moment to endure rather than enjoy.
    You do of course “get it” that we could eventually print and inflate our way out of these debts, although that alone will cause similar issues which the Greeks would endure were they to exit the Euro.
    When you go on a borrow and spending binge, whether you’re Greece or the UK under Liblabcon, there IS a hangover afterwards.

    1. Ralph Musgrave
      January 26, 2015

      You evidently haven’t noticed, but over the last 3 years or so we’ve “printed” away most of the debt incurred over that period via QE. But where’s the inflation? Nowhere to be seen just as I and numerous others predicted.

      Unfortunately it looks like the “QE causes hyperinflation” brigade are just never going to give up.

      1. APL
        January 27, 2015

        Ralph Musgrave: “Unfortunately it looks like the “QE causes hyperinflation” brigade are just never going to give up”

        Even the Bank of England admits the value of Sterling over the last 100 years from 1913 to 2013 has been decimated.

        In the strictest sense ‘decimated’ means destruction of 10%, But the Bank of England and the British government proudly boast they have managed to make one hundred 2013 pounds buy less than one 1913 pound.

        The Heavy lifting of destroying the value of sterling has been done. Pre Euro, Lira valuations for Sterling are but a ‘blink of an eye’ in our future.

        1. APL
          February 1, 2015

          And a little arithmetic by reference to a £ 1913.

          if a 2013 £ bought the same amount of goods as a 1913 £ that would be 0% inflation. However if ..

          one 1913 £ = 2 2013 £ then there has been 100% inflation.

          What we have actually had in 100 years to make one hundred 2013 pounds equal to one 1913 pounds is …

          9,500 % inflation in one hundred years!

          By comparrison with the previous 163 years for which the Bank of England keeps records, over the period 1750 to 1913 there was an inflation rate of 92%

          Ralph Musgrave: “But where’s the inflation?”

          What’s wrong Ralph, 9,500% inflation isn’t enough for you?

  9. Mark B
    January 26, 2015

    And excellent piece, Mr. Redwood MP.

    I have a little, and only a little sympathy for the Greeks. Much of the problem has been brought on by themselves and, as stated, by their desire to join and remain in the Euro. We had a little flirtation with something similar regarding the ERM and got burned – remember ? So I was surprised to see countries like Greece and all the other Club Med join. Clearly they thought that the rest of the Eurozone would pick up the tab when the bills started to come in.

    Germany, France and the EU Commission are as much to blame. They lent Greece the money and looked the other way when it was clear that Greece in no way met the criteria for joining the Euro.

    The question now is, as this piece alludes to; “What now ?”

    Greece is not in a strong position. But if they can false the house of cards to topple, they just might be pushed into it.

    I get the feeling that the Greeks, by voting in Syriza, are coming to the end. If they cannot get the kind of things they need to turn things around, I fear both for their and our future.

    1. Mark B
      January 26, 2015

      Sorry. Good morning.

  10. Roy Grainger
    January 26, 2015

    A good summary. In the background here is the Greek history of military dictatorships which may reassert itself if whatever course they decide to take proves too difficult. My guess is the EU will run true to form and tear up whatever rule book they are using for Greek loans and debt and produce some gigantic fudge which means thing stumble along pretty much unchanged, forever moving the eventual crisis further into the future.

  11. TrT
    January 26, 2015

    Greece did play by the rules
    It was the job of the ECB to control inflation in Greece
    It failed
    It is the job of the ECB to prevent inflation in Greece
    It refuses to

    Greece simply is the victim of German dominated euro policy.
    As are the rest.
    Much as the UK was during the ERM madnesd

    1. Mark B
      January 27, 2015

      NO ! Greek politicians, with the help of (others ed) lied about Greece’s eligability to join the Euro. The Eurocrates looked the other way, because Germany and France lent vast amounts of money too them.

      The Greek’s want to keep the Euro. But they do not want to play by the rules. Tough ! Just like our politicians, if you do not like the rules of the club, LEAVE !!

    2. Denis Cooper
      January 27, 2015

      Greek politicians cooked the books.

      1. APL
        January 28, 2015

        “Greek politicians cooked the books.”

        And pro Euro Euro politicans looked the other way.

        Who is more culpable? He who sets out to deceive, or he who is willingly deceived?

        I’m not sure which category prominent Tory politicians like Ken Clarke fall, is he a liar or a fool?

  12. Narrow Shoulders
    January 26, 2015

    Typically, and to return to the theme of yesterday’s diary, all members of the EU wish to have their cake and eat it. Except for the (foolish) UK establishmemt which gold plates EU legislation, the other EU states achieve their aims by ignoring legislation they do not like or failing so miserably that they must be helped.

    This is incompatible with the UK’s best interests.

    I note from the borrowing figures published last week that we paid the full 2.7 billion, demanded by the EU for our outstanding performance in drug dealing and hookers, in December.

    Reply Not so. The liability was recognised in full, but the payment will be much less and later.

    1. Narrow Shoulders
      January 26, 2015

      Reply to reply

      I stand corrected about the cash movement Mr Redwood but the amount has been accounted for in full and has contributed to £2.9 billion increase in PSNB for December. Evidently ONS does not share your optimism.

      * From April to December 2014, public sector net borrowing excluding public sector banks (PSNB ex) was £86.3 billion; a decrease of £0.1 billion compared with the same period in 2013/14.

      * In December 2014, PSNB ex was £13.1 billion, an increase of £2.9 billion compared with December 2013.

      * In December 2014, central government expenditure included a £2.9 billion European Commission (EC) budget contribution. This expenditure in turn increased the public sector current budget deficit and net borrowing but has no corresponding increase in net cash requirement or net debt (until the cash is actually paid in 2015). Details of this payment can be found in Section 8 (Recent events and methodological changes) of this bulletin.

      * Due to the volatility of the monthly data, the cumulative financial year-to-date borrowing figures provide a better indication of the progress of the public finances than the individual months.

      * From April to December 2014, the central government net cash requirement (CGNCR) was £87.1 billion; an increase of £18.9 billion compared with the same period in 2013/14. This was largely as a result of cash transfers from the Asset Purchase Facility being £20.2 billion lower in year-to-date 2014/15 than in the same period in 2013/14.

      * At the end of December 2014, public sector net debt excluding public sector banks (PSND ex) was £1,483.3 billion (80.9% of GDP); an increase of £94.6 billion compared with December 2013.

      Reply I was talking about the movement of cash which is what matters. The cash will move this year and will be less than the reported sum thanks to the rebate.

      1. Narrow Shoulders
        January 27, 2015

        Forgive my persistence but PSNB and PSND have both increased as a result of this charge. One assumes it can not be paid before the election for political reasons so any rebate we are emtitled to and actually recieve (the ONS is evidently not convinced or it would apply the rebate to the charge) will not be accounted for in this fiscal period. We could therefore miss financial borrowing targets based upon EU demands with the potential for political capital and market retribution that will bring.

        Another black mark against the EU.

        We could have just refused the premise of the charge, a black mark against your government Mr Redwood. What will our net contribution to the EU be this year? And in 2010 ?

    2. Brian Tomkinson
      January 26, 2015

      Reply to reply,
      Are you saying that the Chancellor didn’t have to borrow an extra £2.9bn in December to pay to the EU, as was widely reported in the press and also given as an excuse for the 2014’s figure being exactly that amount higher than 2013’s?

      Reply Yes, I am saying that.

    3. Hope
      January 27, 2015

      It is not true to write it will not be less. The rebate was always going to be applied. The full amount is going to be paid. What has the UK got from the extra £1.7 billion JR.? I thought you wrote you would not pay an extra penny! Now you appear to defending the obfuscation of the Cameron and Osborne con.

  13. Lifelogic
    January 26, 2015

    I just hear Joan Walley MP (Chair of the Environmental Audit Committee) on radio 4 living up to her name in spades. What sort of system is it that lets people like her (BA in Social Administration Hull and University College of Wales, Swansea a Diploma in Community Work Development) have any significant say in the UK’s energy systems. She is clearly not hardly up to primary school level in the subject of energy production.

    Can we not find some decent scientists and engineers to explain to these green religion “believers” just how energy (and the economics of energy) actually work in the real world? Nature (and the physics of energy production systems) will not be fooled by their silly green religious beliefs and expensive gesture politics. It will just impoverish the country and the gas/coal/oil will be produced elsewhere anyway.

    1. Bazman
      January 26, 2015

      I bet she could explain a KW/h and what green energy is. You do not understand either and tell us that wind turbines cannot produce KW/h of energy. This is a wind turbine, please hold these two wires…That would soon disprove that theory!

      1. Jerry
        January 27, 2015

        @Bazman; “[Lifelogic does] not understand [so called renewable’s] and tell us that wind turbines cannot produce KW/h of energy.”

        I know I’ve been away from John’s dairy fort a while but I can’t ever recall LL suggesting that, what he and many others are saying is that they can not be relied upon to provide the required KW/h of energy 24/7 to make CO2 producing (and perhaps even nuclear, as some would like) electricity generation redundant. If he has indeed suggested what you claim then perhaps you might care to supply a link to his comment(s)?

      2. Lifelogic
        January 27, 2015

        I said then cannot produce KWatts of energy, as that is a unit of power. They can indeed produce “KW hours” of energy as that is indeed a unit of energy. The BBC and green loons get it wrong all the time.

        1. Bazman
          January 28, 2015

          Wind turbines come in many sizes 2 KW, 10 KW, 100 KW and Siemens produce a 3.6 MW, 5, 6 and 7 MW are not uncommon with Vestas V164 8MWproducing an offshore turbine with 80 metre long blades producing a staggering 8 MW of power.
          For a large, modern wind turbine (in the 1000 kW range) is approximately £800 per kW of electrical power to install. A 1000 kW turbine would be expected to produce 26,280,000 kWh in a year, although this depends on the wind obviously.
          So tell us again lifelogic.
          “A wind turbine cannot produce ‘KWatts of energy, as that is a unit of power” His words. He has repeated it for you Jerry. 1 KW or 8MW is not a measurement of power.
          My car/wind turbine can produce at its peak output 200 KW of energy would be an incorrect statement lielogic? Why?
          It is obviously you who does not understand and Jerry does not understand that demand in some cases can be matched by by wind power given the application. It may not replace other forms of energy, but whilst the wind blows sufficiently other sources could be switched off. The wind can be predicted quite accurately by past events. Walney in Barrow-in-Furness is consistently windy and it can be said how consistent and how windy hence the massive amount and size of the turbines.
          Now unless both of you are able to refute what I have wrote do not write about The BBC and green loons who get it wrong all the time as it is you two who are lacking in any understanding and ignorance and propaganda does not trounce facts as you do not own the facts.

          1. Jerry
            January 28, 2015

            Bazman; “Wind turbines come in many sizes”

            True, but as for the rest of what you said, utterly irrelevant if the wind is not blowing, or is blowing to strongly -on the other hand a nuclear and most fossil fuel power stations will produce a known KW/h day-in, day-out, in any weather- and that is the single big flaw with wind turbines that can’t be hidden, it was even known about 200 or so years ago and is why the watermill was invented!

            Oh and Bazman, you might be able to help me out, someone asked me if they construct wind turbines or their component parts up in Barrow, and as you seem to know a lot about them – well to they?…

          2. Bazman
            January 30, 2015

            Not in Barrow to my knowledge and again you put ignorance as a defence. The the wind can be predicted by past events to an accurate enough degree to say whether wind turbines are economically viable, KW produced with an acceptable range of error and how many would be required. It is true that no wind means no power, but this is factored in to the capacity required at any given time. All magic and chicken entrails to you I know, but some people are smarter than me and you and have worked it out on fag packets in between drinking coffee.

        2. Bazman
          February 1, 2015

          Well. Where is reply to this lifelogic. Am I being unreasonable to expect one.

  14. alan jutson
    January 26, 2015

    The new government may well have promised an end to austerity, but did it say how this would come about.

    I am not up to speed at all on Greek Politics, so am unaware of the promises policies offered.

    Clearly Greece is desperate but I would have thought default was not really an option if you still want support from the same people who you are going to refuse to pay.

    I think real Civil unrest is not far away if the new government fails in its pledges made to the people.

    What a shame governments around the World are allowed to borrow in the peoples name without consulting them first.

    1. Paul Robson
      January 27, 2015

      The ‘policies’ consist of the various institutions abandoning the debt, or taking serious haircuts, and lots of electoral bribes.

      If you think of the magic wish fulfilment that Salmond spouted in the Referendum ; like that but about ten times worse.

  15. ian wragg
    January 26, 2015

    Little acorns John. When the penny (pun) finally drops the Greeks will see that it is impossible to stay in the Euro.
    The success of the anti austerity party will empower Spanish and Italian voters and may possibly help UKIP in England.
    How are you getting on with your splendid new defector, I see he’s been a Tory before as well as Labour and UKIP. etc ed

  16. Richard1
    January 26, 2015

    The Greek electorate have decided that they may as well roll the dice – take a bet that Germany & the EU would rather bung them a write-off + more subsidies as the cost of keeping the euro going. Of course from an objective point of view the best and only route for Greek recovery is an exit from the euro, allow Greece’s currency to find its own level and people in Greece to recognise they need to implement reforms so as to be economically viable – and solvent. Syriza’s policies of even more public spending wouldnt then work! But the Greeks reckon – not unreasonably – they they might get it for free through a renegotiaiton.

    What is incredible is the reaction of leftists elsewhere. Peter Hain, the left-wing Labour MP, is being heavily promoted on the BBC at the moment. He thinks the Greek debacle is an example of the failure of market economics. No Mr Hain, its a function of the distortive effects of introducing the euro, which enabled high spending, corruption and uncompetitive structures to persist for far longer than they would have done had there been a market in operation.

  17. David Edwards
    January 26, 2015

    If Greece were to leave the Euro and the new drachma devalued, what is the position when the debt is owed in Euros? Would it increase and investors become less likely to invest in its national debt? Tangentially, I’m not entirely sure it’s helpful that in every news report on the Greek bailout there is reference to obtaining agreement from Brussels and “Berlin” with the economic hegemony that is implied. Germany needs to recognise that its Mercedes cars and Siemens trains would have sold substantially less if the Deutche mark had increased in value against sterling, drachma, and others. A self correcting mechanism which the Euro took away!

  18. Alan
    January 26, 2015

    I don’t think Greece leaving the euro makes any difference. Greece would still have debts in euros, which have to be repaid in euros. Whether it stays in the euro or leaves, Greece must either default on its debts or find a way to repay them.

    Since it has borrowed more than it can repay the obvious conclusion is that it must default. What has to be decided is who absorbs the losses and when they take place.

    The only difference leaving the euro makes is that would enable Greece to issue and devalue a currency, lowering the value of Greek wages and savings and making it expensive to import goods from abroad. That is one reason why many Greeks don’t want to leave. Devaluation should encourage domestic employment and exports. But the debts would still exist and have the same value in euros. Greece would follow the path that the UK has followed since it devalued in 2008, but perhaps with less success since Greece is, I think, more dependent on importing goods than is the UK, so the people would suffer more from devaluation than the British have. Also most British debt is in pounds, so we lower the value of what we owe when we devalue the pound. A good trick if you can get away with it, which we can and the Greeks can’t.

    1. JoeSoap
      January 26, 2015

      Well the Greeks could if they walked away from the Euro debts then started borrowing again in Drachma. But like us devaluing Sterling, confidence is lost, inflation is revved up and savers lose.

      Imagine the scenario where a Miliband government extends the present and past UK government/PFI borrowing sprees, and a subsequent UK “Syriza” or similarly inspired government disowns the lot (or pushes it out 50 years).

      It could happen here.

      It might even come to that.

    2. Denis Cooper
      January 27, 2015

      If the Greek government and parliament decided that this time the government would overtly default on its debts, rather than disguising default as a “voluntary restructuring” of the debts, then the easiest and best way to do that would be to announce that all of the debts denominated in other currencies would be repaid but in New Drachma at some set exchange rates. Creditors would take losses, but as the Greek national central bank could then create as many New Drachma as would be required they could at least be sure that they would be repaid whatever number of New Drachma they might be owed.

  19. formula57
    January 26, 2015

    The new evil empire has received what could be a mortal blow, at least for its currency. Let us cheer the Greeks, founders of democracy once and maybe again.

    Je suis Syriza!

  20. Denis Cooper
    January 26, 2015

    I expect some kind of deal will be worked out with the EU, more likely a deferment of interest payments with maturing bonds being rolled over for a few decades rather than outright forgiveness of any of the debt. As I understand the IMF would not be able to accept any deal which meant that it was not repaid as promised, and there are still some private creditors who may refuse to accept losses, so it will primarily be the EU; and that is really how it should be, because it is the eurofederalists controlling the EU who above all else want to keep Greece in the euro and preserve the present eurozone intact so that it can continue to expand across the rest of the EU including the UK.

    1. Leslie Singleton
      January 26, 2015

      Denis–There are three ways of mitigating debt, viz 1) Reduce the Principal (essentially Default); Reduce Interest (too low already); and/or extend Maturity (but that would take the average Maturity in to subsequent generations). To agree to any of these would be imbecilic–who does anybody think would have to pay other than the rest of the EU including the UK?

    2. Mark B
      January 27, 2015

      And it was the Eurofederalists, amoungst others, who looked the other way when, it was clear that Greece and many other countries could not, and would never, meet the criteria for Germany.

  21. agricola
    January 26, 2015

    Absolutely correct John.

    Before it’s entry into the Euro Greece was badly run, a financial fantasy land in fact. A continuously devaluing Drachma might have sustained it , but entering the Euro was suicidal. The EU was culpable in the first instance by letting them in, only to discover in time that they had married a shopaholic.

    Greece cannot stay in the Euro without accepting it’s strictures. If the ECB and Germany invented some soft approach to Greece staying, then they would soon have Italy, Spain, France, Portugal et al banging on their door demanding the same.

    Realistically, as I have said before, they must leave the Euro and revert to the Drachma. As the EU is culpable in this disaster inflicted on the heads of the Greek people they should bare some of the cost of it’s resolution. The EU has entered the money printing business big time in the last few days with a resultant slide in the value of the Euro. If they wrote off the Greek debt it would only slide a bit more, but what the hell ,it makes the EU a cheaper place to buy things for a time.

    It is only then that the dream factory in Brussels might learn the basic lesson that stable finances should precede political union. etc ed

    1. agricola
      January 26, 2015

      I would also appreciate an explanation from your leader as to why he is so enamoured of the EU, other than for trade which we all know is not dependant on our membership.

  22. oldtimer
    January 26, 2015

    Agreed. There is an evident unwillingness, among most Greek voters, to accept the compelling, if extremely uncomfotable for them, logic that an exit from the EZ is the way forward. Greece would have been in a much better position today if it had left the EZ before it piled up even more of the debt that hangs around its neck today.

  23. Bert Young
    January 26, 2015

    A “one size” does not fit all and imposing a rigorous economic discipline on Greece has proved it . In the first place Greece entered the EZ on figures that were proved subsequently not to be true ; if the bureaucracy in Brussels had been up to its job , Greece would not have been able to join the euro . Year after year auditors have refused to “sign off” the EUs’ accounts more than likely due to the inadequacy of the way they have been administered .

    Today the media are now turning its attention to Brussels and GERMANY ! . This tells us where the real power lies and once again shows that Germany cannot impose its will across a Europe of many different cultures . Military and political determination have failed to unite . Angela Merkel is to make an announcement today and the media relate this as the centre piece of the EU’s response . She will not be allowed to use Germany’s wealth to buy off the Greek debt – her citizens will not allow it .

    Of course the only practical solution for Greece is to exit the EZ and recreate its own currency . Once it is able to devalue it will increase its tourism and be able to adjust to its own laid-back style of life free from outside pressures . Breathing in this kind of fresh air will , inevitably , spread to other Southern EZ countries who have taken on levels of debt they cannot afford . Portugal and Spain are next on the list .

  24. stred
    January 26, 2015

    Prof Varoufakis was interviewed on RT last week and he seems to be a very intelligent and persuasive person. He has been invited to join the new party as they have adopted his ideas. he said that the idea of becoming a politician ‘freaked him out’ and that whereas you and I might have a conversation, argue and learn, politicians never listened but just tried to score points off each other. He added that if he did the same thing @you could shoot him’ What a pleasant change.

    He also said that it would be impossible to leave the Euro, as all the Euro money would drain out of the country. But he added ‘ Unless you did it overnight’. Like the Swiss did when they revalued and did not even tell Mrs Lagarde. Re RT Boom Bust.

    1. stred
      January 27, 2015

      Now Prof Varoufakis has been promoted to finance minister and will be going to see his bank manager. Hopefully, his old job will still be there.

  25. rick hamilton
    January 26, 2015

    Surely if they leave the Eurozone their debts converted to devaluing Drachma will be even more impossible to repay ? It seems that a default is inevitable unless their creditors accept maturities of 50 years or longer with practically zero interest.

    As an aside, the Germans really cannot claim to be whiter than white considering their unpayable national debts have been written off I think four times in the last 100 years. They colluded in the fraudulent entry of Greece into the Eurozone in the first place, making them at least partly responsible for this outcome.

    1. Lifelogic
      January 26, 2015

      If you debts are in a devaluing currency they are easier to repay not harder as the debt is devaluing!

      “It seems that a default is inevitable unless their creditors accept maturities of 50 years or longer with practically zero interest.” That is anyway just another form of default. Indeed they are several well know banks colluded in creative accounting and thus putting Greece on the damaging EURO/perpetual recession rack. Soon Italy, Portugal, France, Spain to join the queue?

      1. rick hamilton
        January 26, 2015

        My point is that their debts will remain denominated in Euros, which obviously would be much harder to pay off with a devaluing Drachma.

        And Greece has already had extended maturities and reduced interest compared with the other countries bailed out. They will be looking for more of the same.

  26. bluedog
    January 26, 2015

    Not so long ago, former US Treasury Secretary Timothy Geithner reported on conversations that he had had with officials of the ECB when the full extent of Greek indebtedness became known. The ECB reaction was ‘we were lied to, we’re going to teach them a lesson’. In effect the ECB was playing Russian roulette with a bullet in all six chambers of the revolver, and Geithner managed to cool ECB passions.

    Now we seem to be approaching an identical stand-off. A very young man has won power in Greece on the basis of unrealistic assumptions. The ECB reaction – we’re going to show him who’s boss. In short, back to square one with the ECB giving us a dead-line for the collapse of the Greek banking system, 28th February 2015.

    Unless some grown-ups emerge who can talk sense into these opposing parties, both spoiling for a fight, things can only get much, much worse.

  27. English Pensioner
    January 26, 2015

    All the “experts” claim that austerity is the solution, but its hard to see how the huge amount of unemployment, lack of medical treatment due to there being no drugs, and people both starving and freezing can be the solution to anything. The country’s GDP has apparently declined under the measures imposed by the EU so there is clearly no signs of things getting better.
    I suspect that most people in this county, if faced with such conditions imposed by the mainstream politicians would turn to the extreme right or left (which offer much the same anyway), simply on the basis that they would be hard pressed to make things worse.
    I have no clue what is the solution to Greece’s problems, but it seems that I’m not alone as all the experts have done is to force the country back to the living standards of the Victorian era!
    Italy next?

    1. Mark B
      January 27, 2015

      This is the problem regarding the Continentals. They see everything through their eyes and are only interested in gaining advantage over each other. There is little love between them, despite everything said to the contrary. That is why the EU came about. To stop all the petty arguing and squabbles by creating a single European Nation. Even on its most basic and fundamental founding principles, the bloody thing is a failure. I mean, when Scotland, Wales, N.Ireland or the North of England needs help, wealthier parts contribute to lessen the burden. Pre-devolution, this was OK. Now ? And this should have happened with the Euro. Full transfers ! But the German’s did not want it, and demanded as a precondition upon them joining. The whole thing, EU and Euro is fundamentally flawed.

      You could not make a worse situation up.

  28. Nick
    January 26, 2015

    Very flawed analysis

    The problem for them is the cruel logic of the Euro, and the imprisoning austerity of their huge debts.

    The wrong way round. It’s the debts and the debts alone that cause the problem. If they had a gold based currency it would be exactly the same. The debts run up by the government are the problem. Just as they are in the UK. On and off the books [hidden like pensions] dictate in the UK.

    Since the majority of those debts are inflation linked, you can’t devalue. You have to default.

    I think you are closer on the EU approach. Greece is 2%. Letting the Greeks go, kicking them out, demonstrates to the others that they don’t want to go down that route.

    If Greece left the Euro, devalued in line with market movements, and had access to her own Central Bank to decide how much money to create and have in circulation, she would have more chance of rebalancing her economy and meeting her large obligations.

    Completely wrong. She owe 300 bn Euros. So she goes to the Drachma, one to one. The Drachma falls to say 1 Euro, 2 Drachma. Instead of owing 300 bn Drachmas, she now owes 600 bn Drachmas because the debt is denominated in Euros. She’s just as screwed as she was before.

    So that leaves default. The Armageddon scenario is that Greece is cut off from TARGET2. There are additional problems. Every Greek bank loses its capital. Entirely. Depositors now come after secured lenders so get a pittance back. They even have to wait for the liquidators get the money from the borrowers, if they can. A great start.

    So the Greeks are stuffed. Not because of the Euro, because of governments racking up debts and in the Greek case, employing GS to hide the numbers.

    In the UK case, its politicians hiding the pension debts.

    1. formula57
      January 26, 2015

      Indeed, very flawed analysis but not by Mr Redwood, rather where you say: –

      “It’s the debts and the debts alone that cause the problem.” is not the explanation since the debts arose through the ineluctable mechanics of the Euro, as more particularly explained by Michael Pettis (finance professor at Peking University) who cogently shows that the “The European crisis, in other words, had almost nothing to do with thrifty Germans and spendthrift Spaniards [and others similarly affected],. It had to do with policies aimed at boosting German employment, the secondary impact of which was to force up German national savings rates excessively. These excess savings had to be absorbed within Europe[the common currency area], and the subsequent imbalances were so large (because German’s savings imbalance was so large) that they led almost inevitably to the circumstances in which we are today.”,/I>

    2. Mark B
      January 27, 2015

      I disagree with some of your analysis. If the Greek’s never joined the Euro and continued with the Drachma, then those lending to them, given Greece’s credit history, would have lent to them at higher interest rates. This would have meant that they would have to raise taxes and/or reduce spending.

      The Euro allowed the Greek’s to borrow, mostly from German and French banks, at incredibly low interest rates. So the Euro ‘is’ to blame ! But I accept that the Greek Government, in league with others, did not act in an honorable manner.

  29. James Matthews
    January 26, 2015

    An interesting game of brinkmanship about to be played out. Are the Germans more frightened that Greece will leave the Euro and prosper than they are that concessions to Greece to stay in the Euro will have a domino effect.

    Put another way, will the Germans show more backbone when dealing with Greek blackmail that Cameron did in the face of Scottish blackmail.

    Watch this space.

  30. Mike Stallard
    January 26, 2015

    Fundamentals are just that. If they are wrong, then wrong things happen.

    There is no demos in Europe. In England, I do not mind supporting my fellow countrymen if they get into difficulties. I used not to mind if Scotsmen fell on hard times – give them support too. Mr Salmond changed that.
    Why should Germans be fleeced for Greeks?

    There is a lot else wrong too: an unaccountable unelected Commission which is unchecked and secret; the law courts where strange laws are enacted by shadowy people from dodgy forensic backgrounds.

    Get the fundamentals wrong and don’t be surprised if a lot of fundamental things go wrong. I thought that was obvious. And are the Greeks going to be angry when they realise Syriza cannot cut the mustard!

  31. John E
    January 26, 2015

    I think the compromise deal is already done in principle, hence the Syriza stance.
    Greek debt will not be forgiven but the repayment dates will be moved into the distant future, and possibly tied to Greek GDP growth.

    Greece has a primary budget surplus and a balance of trade surplus, unlike the UK. What’s our excuse?

    1. Lifelogic
      January 26, 2015

      “What’s our excuse?”

      An incompetent, dishonest and bloated government living off the backs of the productive and delivering almost nothing of any value!

  32. The PrangWizard
    January 26, 2015

    It will be interesting – if they are granted concessions we should stop imagining that our present weak and gentlemanly approach to reform is the right one, and get some backbone into getting our problems solved.

    If they don’t it will of course prove, if further proof were needed, that they, and we, are part of a undemocratic and unresponsive regime; a neo soviet-union; if such is not self-evident yet to enough of the people of the UK it should be demonstrated further with example, and apologists for the EU more firmly confronted. The bias and partiality of the BBC, of course, as has been said many times, must be changed.

    We have next to see what the people of Spain say.

    Out, of course is what we should aim for, not some internal reform which will prove useless.

  33. Denis Cooper
    January 26, 2015

    Off-topic, it seems that we have MPs who are determined to wreck our economy for the sake of complying with EU policies and laws and targets:

    You can read their names here:

    1. Lifelogic
      January 26, 2015

      Do any of these people know the first thing about power generation & distribution? Do any even have a decent Physics A level?

      1. fedupsouthener
        January 26, 2015

        Everyone is going on about fracking and meanwhile nothing is said about wind energy and the effects of low frequency noise on residents. See the latest from a peer reviewed study in Australia with consent from the developer for a change.
        In a groundbreaking study at Pacific Hydro’s Cape Bridgewater windfarm in the state of Victoria, Australia’s leading acoustical engineer Steven Cooper found that a unique infrasound pattern, which he had labelled “Wind Turbine Signature” in previous studies, correlates (through a “trend line”) with the occurrence and severity of symptoms of residents who had complained of often-unbearable “sensations”. These include sleep disturbance, headaches, heart racing, pressure in the head, ears or chest, etc. as described by the residents (symptoms generally known as Wind Turbine Syndrome (WTS), or the euphemism “noise annoyance” – ed). (1)

        The acoustician also identified “discrete low frequency amplitude modulated signals” emitted by wind turbines, and found the windfarm victims were also reacting to those.

        The Wind Turbine Signature cannot be detected using traditional measuring indexes such as dB(A) or dB(C) and 1/3 Octave bands, concludes his study. Narrowband analysis must be used instead, with results expressed in dB(WTS).

        He suggests medical studies be conducted using infrasound measurements in dB(WTS) in order to determine the threshold of what is unacceptable in terms of sound pressure level.

        infrasound 150

        The findings are consistent with the official Kelley studies published in the US more than 30 years ago, which showed that infrasound emitted by early, downwind turbines caused sleep disturbance and other WTS symptoms (2). These studies were shelved, upwind turbines were designed, and the regulatory authorities simply trusted the wind industry’s assertion that the new models did not emit dangerous infrasound. The Cooper study now proves they were wrong.

        Another conclusion of his study is that the Danish method used for measuring low-frequency “noise annoyance” near wind farms is inadequate. So are the wind turbine noise standards applied to wind farms in Victoria, Australia and New Zealand, known as New Zealand Standard 6808. Just as inadequate are all other standards regulating “annoyance” near wind farms around the world. They simply don’t take infrasound into account.

        The Waubra Foundation, Dr Sarah Laurie, Dr Nina Pierpont, Dr Robert McMurtry, Ms Carmen Krogh, Dr Michael Nissenbaum, Dr Chris Hanning, Dr Jay Tibbetts, Dr Sandy Reider, Dr David Iser, Dr Amanda Harry and scores of other medical practitioners and researchers from around the world are vindicated by this benchmark study, as are the residents reporting WTS symptoms themselves, many of whom have had to regularly or permanently abandon their homes.

        Regarding the future, Steven Cooper recommends that further studies be conducted in order to establish “a threshold to protect against adverse impacts.” (1)

        He also writes: “the vibration surges described by some residents as disturbance during the shutdown could be attributed to wind gusts exciting resonances of the blades/towers and requires further investigation“. (1)

        This is a turning point. The wind industry can no longer claim that their machines do not emit enough infrasound to affect residents, nor that health professionals publicising the problems and calling for further research are causing the suffering, nor that wind farm victims are causing their own woes (the often-used argument that “it’s all in their heads” – i.e. the “nocebo effect”). Yet the wind industry and its abettors had clung to that straw despite the numerous accounts of ill-effects on animals. (3)

        How long before the medical profession in the Uk take this seriously and more importantly, how long before our MP’s take notice of this? I wonder how long it will be before the lawyers get involved?

  34. peter davies
    January 26, 2015

    It seems to me that they have voted for something totally different outside the establishment mainstream without really understanding what they are voting for or understanding the art of the possible inside the Euro straight jacket.

    I guess they will stir up a hornets nest, realize that they have nowhere else to go and finally accept that they only way out is back to the drachma and massive devaluation – time will tell.

    Had they pulled out of the Euro 5 years ago, devalued and got the supply side of their economy going again they surely would have been back to normal by now – what was that saying about insanity being defined as doing the same thing over and over again whilst expecting different results?

  35. DaveM
    January 26, 2015

    So, in summary:

    1. If Germany wants to keep this political project on track, (which Merkel does), it needs to cancel debt and bail out the Greek economy. And that’s where our PM takes his orders from.

    2. If Germany does that, the other Club Meds and Ireland will go the same way sooner or later.

    3. If the above two don’t happen, there will be a huge economic crisis in Greece.

    4. If 1 and 2 do happen there’ll be a big economic crisis in the Eurozone, and the German population may finally lose their patience.

    I’d like to feel smug and say “I told you so”.

    However, how much will we in the UK have to pay? Is the PM waiting with his cheque book open for his boss in Berlin to tell him how much UK taxpayers’ money will be going to the Euro instead of the NHS, roads, defence etc?

    And is anyone going to calculate the difference between the value of the Euros we hold versus the value of the gold which Brown sold in order to buy them?

    What a total mess.

    1. ChrisS
      January 26, 2015

      Thanks to Cameron and co, we don’t contribute anything to Eurozone bail outs but we do have to make a contribution in respect of our substantial share of IMF guarantees.

  36. ChrisS
    January 26, 2015

    Given that Merkel has assured the German voter that the money given to Greece is not lost, it seems unlikely that Germany will be willing to write off a large proportion of the debt.

    With Spain, Italy, Portugal and Ireland watching and waiting in the wings it’s hard to see how Brussels can square this particular circle.

    Despite their wishing to remain in, Greece may well have no alternative other than to leave the Euro. In my view reverting to their own currency is their only way out of the mire. It will be messy but they can then repudiate the debt and start again.

    With a very Left wing government now in power, it seems unlikely that they will want to reform their economy to become more competitive. Their new currency will therefore suffer continuous devaluation rather like the Turkish Lira.

    At least the economy will then recover as the tourists will flood back to take advantage of cheaper holidays.

  37. petermartin2001
    January 26, 2015

    If Greece’s creditors wish to see any of their money back, there has to be a recognition that something has to change, and notwithstanding any useful improvements that might be made to the Greek taxation system, primarily that change has to come from the Germans and the EU governing class.

    The Germans, and others, have to realise that if they want to run a trade surplus, which they seem to like doing (it was about 7% of GDP the last time I looked), they should be actively encouraging other countries, including Greece, to run deficits. The larger their deficits the higher the German surplus.

    Naturally, those trade deficits translate into government budget deficits too. That way governments spends into their economies so that ordinary citizens and companies will be able to afford more German imports and so further increase German trade surpluses.

    Theoretically, this is still possible for Greece whatever currency it uses, even the Euro, but Ms Angela Merkel is unlikely to see it that way. She is unlikely to allow the SGP rules to be changed. But, she would if Greece didn’t use the Euro – she wouldn’t care about Greek deficits just as she doesn’t care about UK , US or Egyptian deficits! In fact she must know that if countries such as the UK and US didn’t run trade deficits, then Germany could not run its trade surplus.

    Until politicians such as Ms Merkel come around to a more sensible way of thinking, both the UK and Greece are better off out of the Euro. It is a pity Greek voters don’t quite see that yet.

    1. Denis Cooper
      January 27, 2015

      “Naturally, those trade deficits translate into government budget deficits too.”

      There’s no “naturally” about that assertion at all, when the government is only one of many actors in the economy and does not itself conduct the trade which leads to the trade deficit.

      1. petermartin2001
        January 27, 2015


        You might want to take a look at the concept of sector financial balances as originally described by Prof Wynne Godley.

        It’s not difficult. We can start by dividing the UK economy (in terms of transactions conducted in £ sterling) into two sectors. Government and Non-Government. If I get a £10 tax rebate the government deficit increases by £10, my assets increases by the same amount. The opposite for imposed taxes of course.

        So, if we count up all similar transactions in any time period, we can say:

        Government Surplus + Non government Surplus = 0

        The Non Government sector can be further divided into everything that happens in the Private sector in the UK and the Rest of the World.


        Gov Surplus + Private Domestic Sector Surplus + ROW Sector Surplus =0

        In the UK, Governments usually run a deficit. The ROW is usually in surplus , meaning that the UK has a trade deficit. Therefore

        Government Deficit = PDS Surplus + Trade Deficit

        This is the basis of the link between the two deficits. If you lookup in WIKI Lists of countries by current account (as % of GDP) and by Government deficit (as % of GDP) you’ll see the connection.

        The PDS has some influence on the link of course. But the behaviour of the PDS in different economies tends to be pretty similar. If they borrow too much they end up in deficit, but overall the PDS tend to run, on average, at a surplus of a few %. Which means that Govt Deficits always tend to be slightly larger than Trade Deficits.

        Currently, the figures are GD = 6%. PDS Surplus = 1% Trade Deficit =5%

        That PDS surplus is quite small. If it goes negative that’s a good indication that the private sector is in financial strife and that a recession will occur.

    January 26, 2015

    40% of Greeks did not vote at all. Given the austerity/poverty one could not say this was the result of apathy.

    Corruption is the key. Syriza comes to power on its anti-corruption stand and on deep-level patriotism. 4 out of 10 voters are so unbelieving that politicians have the wit and integrity to genuinely fight corruption they did not vote.

    One sees not dissimilar attitudes of UK non-voters.

    Syriza will fail to achieve a meaningful outcome. Immediately, it needs to jettison the Euro. But there are sound arguments for keeping it if not accompanied by other more radical measures. Such measures for Greece have always been to distance itself, at least, from the West as an economic and political guardian and companion.

    Greece never was in historical fact the birthplace of democracy ( as we know it ). The relatively liberal communist model of former Yugoslavia sits much better with the nation’s spirit.

    Democracy in our terms and capitalism rely on a certain culture, consensus of sorts of the limits of behaviour. It helps if the nation is prosperous at the outset such as the UK and America. In poorer nations our model merely leads to a level of corruption which blackens and destroys the workings and relationships of industry and commerce. If the word Communism or Socialism grates the ear of Democrats then let it be called a “Command Economy which endeavours to be benevolent.”

    From a purely economic perspective Greece would be well-advised to join Russia’s Eurasian Economic Community. At least then hundreds of thousands of Greeks would have their electricity and heating supplies turned back on. And there would be a most massive boom in their tourist industry due to low prices for just about everything. Cheap enough for even middle-income Russians, not to mention people living in the north of England.

  39. John B
    January 26, 2015

    Prior to the Industrial Revolution, 80% of British workers worked on the land (now it is about 1%). During the Industrial Revolution they left the land to work in mills, mines, factories and other occupations in which wealth was generated through voluntary exchange, that is mill workers exchanged their labour for money exchanged by consumers the mill workers made, capitalists exchanged their capital for a share in the profits of the mill.

    None went to work for the Government.

    Everyone grew richer by making others richer, even though their intention was to make themselves richer and nobody else… but that is unavoidable.

    So wealth was created in that exchange and the aggregate wealth of Britain grew.

    In Greece prior to joining the EU, I don’t have a percentage, but mostly worked on the land/fishing/tourism. Post-EU entry they left the land to work in Government paid jobs which did not involve voluntary exchange so consumed wealth and generated none.

    The wealth consumed came from wealth generated elsewhere in the EU, Germany, UK for example, shipped to Greece, and from debt but this did not generate new wealth so Greece did not in aggregate grow wealthy.

    Once the inflow of external wealth and debt was turned off, Greece had nothing.

    The people who have lost their jobs or had pay cuts are mostly not wealth generators, but wealth consumers, or those who relied on wealth consumers.

    The blizzard of EU regulation and subsidies – designed to protect businesses in Germany and France – ensured the innovation and creative destruction needed to create an expanding, modernnindustrial base in Greece was stifled.

    Greece will only get out of this hole, if it is able to start making things that others want to buy competitively, rather than building short-term vanity projects like another new road to nowhere or hospital or airport surplus to requirement.

    It can do this only as a sovereign, independent nation outside the clutches of the EU and constricts of the euro.

    Greece is but France, Spain, Portugal in miniature (Italy is a basket case in another category entirely) and heading the same way is the UK – how quickly depends on what happens in May and whether or not it leaves the EU.

    When will politicians learn they do cannot have sufficient knowledge, never mind the wit, to plan and control economies and societies? How many times must they fail and bring about unintended consequences?

  40. John Page
    January 26, 2015

    The Greeks think the rest of the world owes them a living. We don’t.

    1. William Gruff
      January 26, 2015

      John Page:

      The Greeks think the rest of the world owes them a living …

      There are far more Britons who think that way and disabusing them of that deeply ingrained belief is probably beyond the ability, or the desire, of most, if not all, of those currently sitting in parliament. There seems to be a substantial number of supposedly intelligent MPs who think their job is to throw sweets at an over excited pantomime audience. Given the state of contemporary politics and the degradation inevitable with universal suffrage and an infantile and uninformed electorate, I suppose it is.

  41. BeeCee
    January 26, 2015

    According to the lunchtime news Germany has warned the new Greek Government not to cut back on the austerity measures and other fiscal constraints imposed as part of the ‘bail out’, including no tax cuts and nor policies to get the unemployed back in work.

    Good for Germany for making it entirely clear who is in charge of the Euro zone.

    So – do as you are told, …….(sorry, be quick about it)!

    Are you listening Bro David?

  42. ian wragg
    January 26, 2015

    Off topic but EU related. Why is the government advising MEP’s to vote for an amendment to the Market Stability Reserve (MSR) bringing implementation forward to 2017 instead of 2020 when it is economic suicide.
    Why should anyone believe a single word you say.

    1. Lifelogic
      January 26, 2015

      Well we all know the Cameron and half the Tory party speaks with forked tongue, can only be judged from his actions not his words and is totally full of EUphile, unscientific, expensive greencrap.

  43. William Gruff
    January 26, 2015

    Isn’t the real problem that people who believe in government as Father Christmas with a sackful of winning lottery tickets have been given a political voice?

    Despite a hundred years or more of compulsory education, rising living standards, wider access to higher education, easily available information on current affairs and other essential elements of an informed electorate, the majority of voters still think of government in the way mediaeval peasants thought of their kings: possessing a bottomless and inexhaustible chest of gold and glittering jewels to be doled out like sweets when the whining becomes unbearable or the threat of rebellion alarming.

    Perhaps we should think again about ‘democracy’ and universal suffrage, and the role of government.

    1. bluedog
      January 27, 2015

      ‘Perhaps we should think again about ‘democracy’ and universal suffrage, and the role of government.’

      Indeed, and it just gets worse. Ochlocracy seems guaranteed as the political class pushes the voting age inexorably down towards the age of consent, a risky equivalence.

    2. Excalibur
      January 27, 2015

      Two excellent posts, William Gruff.

  44. Margaret Brandreth-J
    January 26, 2015

    It is about that abusive relationship again. They are cornered and haven’t got the guts to leave, yet are shouting out that they don’t like it.It would be hard going to become independent again.

  45. Jon
    January 26, 2015

    One aspect of Greece’s election is the coalition that is forming. On the same day we hear Nicola Sturgeon saying she want’s to team up with Labour and Plaid Cymru to overturn votes on English matters. Add those MP’s together and it would add up to more than the current Conservative MP’s.

    Although the GE is about the UK there is a big need to advertise this issue for the English.

  46. acorn
    January 26, 2015

    JR, you are forgetting “Lex Monetae”. Greece would introduce its own sovereign currency and redenominate its debt, at some exchange rate, under current international law. The Troika has no legal status in International Law (I am told) and no democratic accountability either. As far as I understand it, after a week in Italy and not understanding a word of Italian, the bail-out agreements, were forced, by the Troika, to use English Law for hedging the possibility of Greece doing a runner out of the Euro.

    Again, as I understand from Prof’ Bill Mitchell’s blog, “Lex Monetae also has been taken to mean that if, say, an Italian had borrowed US dollars from a London bank operating under English law, the definition of the ‘currency’ for the purposes of resolving this contract is governed by US law […] the principle also means that if a government changes its currency and re-denominates at some given parity, all contracts must be honoured at the re-denominated rate.

    The new Greek government is all piss and wind according to some Italians I met. They still want to remain part of “Greater Germany” (previously called, the Eurozone). They still want an Osborne style austerity “balanced budget”. Neither of which will generate any growth. At my hotel in the Alps, the multinational consensus was, Germany IS the problem and should be the first to exit the Euro!

    The Stability and Growth Pact is killing the EU. A 3% budget deficit needs to be, IMO, 1o + %. Fiscal policy is the only mechanism that will save the Eurozone and the rest of the EU. Monetary policy and its QE, has proved to be a failure. Even the US neo-liberal Conservatives and Republicans are having to admit that it was the FISCAL stimulus that has pulled the US economy out of stagnation. And; they still want to kill it off!!!

  47. Terry
    January 26, 2015

    What the Greeks have, is the impossible dream. They want their own way but wish to retain the euro at the same time. It does not compute.

    The Euro is the nub of their problems and they will never become competitive while chained to that single currency and never have control over their own finances while locked into it. Their productivity is below those of other Eurozone Nations.
    To halt austerity, to increase pensions and do all of those daft socialist things that have been promised will not happen. They are broke they have huge interest payments to meet and they rely on further loans to prop themselves up. Now, to tell your creditors to “do one”, is certainly not the way to gain more loans at favourable rates.
    Greece is a fruit and nut case and always will be. If they are to turn themselves around (without a Mrs Thatcher to help them), they must re-instate the Drachma and let FX do the rest. Yes, it will dive but everything Greek will become incredibly cheap and extraordinary good value. Olive Oil, Tourism, the works, all will sell better than hot cakes and boost the economy back onto its feet. But No more Government spending! Same goes for the UK!

  48. Bazman
    January 26, 2015

    The Greek people have decided that they are not personally responsible for the crisis of corruption and banking incompetence knowing that like here the architects of this are sitting in their drawing rooms of their tax haven mansions twiddling a pencil wondering where it all went wrong.
    Sky high rents, bills, unemployment across Europe with not one banker in jail and a ever richer elite telling us a financial oligarchy is for our own good and their is no alternative.
    It’s not going to end good and anyone who just sits back and accepts that they should be poor as they are undeserving of anything else and the rich deserve all their wealth deserves all they get. Poverty in the EU is man made not put there by higher powers.

    1. Edward2
      January 27, 2015

      Its the long term result of Western political parties seducing us with promises of more and more spending (sorry Govt investment).
      We are at fault for continually voting for those who promise us the most goodies whilst expecting sombody else to pay for it.
      We in the UK are still spending 100 billion a year more than we get in tax revenues.
      Greece is just the biggest example of this failing tax, borrow, spend, big State idea.

      1. Bazman
        January 28, 2015

        It’s more complicated than that.
        Spending just what we earn would lead to a subsistence economy which is not realistic in a modern society. With other countries borrowing and surging ahead to give a double whammy. Companies are never going to provide roads health law and order or fill in the gap of the state. Comparing tax havens is just wrong and they should be tackled like the pirate ships they are.
        Large companies should pay up on profits made or leave. Which is it? They get asked for a tax, we get a bill for tolls incurred. That is the difference. Billion are lost that could be spent on debts infrastructure and people. They need to employ those to make these profits and soon they will not by the introduction of more modern cheaper automation. Then what?
        We don’t respond to threats do we?

      2. petermartin2001
        January 29, 2015

        Edward 2,

        You need to take a look at the other deficit. ie the Current account or trade deficit. That is currently running at £85 billion per year. In other words £85 billion per year is leaving the country annually to pay for imports.

        So what has to happen? Yes the government needs to deficit spend to make this up. Therefore most of that £100 billion per year you mention is to make up for this loss to the economy.

        If Britain had balanced trade, which would mean devaluing the pound, then it could have close to a balanced budget too.

        Reply It does not need to be the government that runs a deficit to offset this. Private sector individuals or companies can do so, and may have better credit than the state.

  49. Jon
    January 26, 2015

    Have a laugh and look at the Guardian. In Greece this is a “Left Wing” party that has pinned itself against “austerity”. The paper is clearly worried that their association with “left” could undermine their position and economic credibility here, Polly must have been elbowed on this one.

    It’s interesting that normally they have no competence on economics but bring out a bit now on Greece. They do play a game.

    With 4 months to go to our GE they anticipate that the anti austerity party in Greece may have a u-turn soon. Not the best message for Labour.

  50. Kenneth R Moore
    January 26, 2015

    It seems that the people of Greece have been sold a plan that cannot possibly work.

    It has about as much substance as Mr Osborne’s much over trumpeted ‘Long term economic plan’ that the Conservatives insist on shoehorning into every sentence.
    Do they think if they repeat a line often enough it will have anymore meaning…do they think we are all fools ?. Yes and yes evidently. It’s just the usual media management shtick…

    To Dr Redwood’s enormous credit, he has wisely refraimed from making any reference to said plan. I suspect he knows that the only plan is to try to keep spending increases down a pathetically small amount and hope that mass immigration will push up the GDP and employment figures. Add in a plenty of sloppy talk over the definition of ‘debt’ and deficit’ and that is what passes for the recovery plan of Great Britain.

  51. Kenneth R Moore
    January 27, 2015

    ‘It’s one thing to give a dog a bone..quite another to take it back again’

    Anyone visiting Greece before and after they joined the Euro will note the improvement in living standards (much fewer battered and old cars on the roads etc.)
    They aren’t going to give it up without a fight as Mrs Merkel will find out…even if is’t the Germans who pay.
    The tragedy of the Euro is that it has destroyed all incentive towards competitiveness post the rash in 2007 leaving the Greeks extremely vulnerable. They need to have their own currency, devalue and make it cheap again it’s got way too expensive with the Euro.

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