Greece versus Germany

Greece and Germany have two different visions of their shared currency zone and common government.

Greece, the debtor, claims that Germany must write off substantial sums which Greece owes her. In the name of solidarity within the zone, the rich country should come to the financial aid of the poorer country. In the name of common humanity Germany should allow Greece to spend more, offering free energy and food to the poor by increasing public spending. The extra spending will need to be borrowed.

If there are further troubles with people withdrawing money from Greek banks,. the European Central Bank should provide the money the Greek commercial banks need to pay out their departing depositors. Greece cannot cover the interest charges on her large debts out of tax revenue, so she thinks Germany should accept a lower interest rate or deferral of the charge on that part of the debt which is to remain.

The Greeks point out Germany has run a large trade surplus within the Eurozone since its birth. Germany has sold many cars and other products to Greece. She has had to lend Greece the money to cover the deficit. The gap cannot be closed by devaluing the Greek currency, as would happen if they still had their own money systems. So say the Greeks the gap has to be closed by writing off debt.

Germany says the opposite. When she joined the Euro she made it clear that Germany had no wish to stand behind foreign banks and foreign states within the zone. They all had to show similar discipline in their finances to Germany’s. They all had to cut their costs and raise their productivity so they could compete with Germany at the locked in effective exchange rate when they joined the Euro. Germany explained it would be a tough discipline with no bail outs.

German public opinion is against money printing by the ECB. The German economy does not need it, and Germany sees it as a soft option to help weaker countries borrow  more at low interest rates, to finance deficits which Germany thinks are too high. German public opinion is also against a Greek debt write off, as this time it will be the main creditor countries like Germany which will lose out. Last time it was the private sector that took the cuts, with states protected.

Germany lost the battle of Quantitative easing. It is gradually losing the battle to keep each country’s commercial banks apart, as the responsibility of the sponsor member state. Will it now also lose the battle over Greek debt? If so, will more Germans wish to leave the Euro? Many Germans remember just how dear the enforced merger of the Ostmark and the DM was to West Germany. They do not want the same again on the much larger scale of the Euro. The fundamental flaws in the Euro’s construction are becoming all too visible in the row between Greece and Germany. Germany has the money but it does not have many allies.

I do not see an obvious way of squaring this painful circle or reconciling these two very divergent views. Trying to resolve the two visions means deciding between a transfer union that might work, and a disciplined Euro which means more austerity and more bankruptcies.

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109 Comments

  1. Posted January 28, 2015 at 5:54 am | Permalink

    The fundamental flaws in the Euro’s construction were always visible from the outset as were the fundamental flaws in the whole anti-democratic, top down EU structure.

    The usual, group think, lunacy of bureaucrats, academic “experts”, deluded and/or corrupt career politicians and their sectional interests took over as usual.

    Clearly they need a devaluation and substantial write off in some form. Then (rather like the UK) the over paid (and delivering very little of real value) state sector needs to halve in size.

    • Posted January 28, 2015 at 6:04 am | Permalink

      It is unlikely to go smoothly with this new lefty government and their farcical 40 point programme as below. Doubtless they will ignore most of it (as politicians usually do once elected) given a list as halfwitted at this they would be wise too drop it very quickly.

      1. Audit of the public debt and renegotiation of interest due and suspension of payments until the economy has revived and growth and employment return.
      2. Demand the European Union to change the role of the European Central Bank so that it finances states and programs of public investment.
      3. Raise income tax to 75% for all incomes over 500,000 euros.
      4. Change the election laws to a proportional system.
      5. Increase taxes on big companies to that of the European average.
      6. Adoption of a tax on financial transactions and a special tax on luxury goods.
      7. Prohibition of speculative financial derivatives.
      8. Abolition of financial privileges for the Church and shipbuilding industry.
      9. Combat the banks’ secret [measures] and the flight of capital abroad.
      10. Cut drastically military expenditures.
      11. Raise minimum salary to the pre-cut level, 750 euros per month.
      12. Use buildings of the government, banks and the Church for the homeless.
      13. Open dining rooms in public schools to offer free breakfast and lunch to children.
      14. Free health benefits to the unemployed, homeless and those with low salaries.
      15. Subvention up to 30% of mortgage payments for poor families who cannot meet payments.
      16. Increase of subsidies for the unemployed. Increase social protection for one-parent families, the aged, disabled, and families with no income.
      17. Fiscal reductions for goods of primary necessity.
      18. Nationalisation of banks.
      19. Nationalisation of ex-public (service & utilities) companies in strategic sectors for the growth of the country (railroads, airports, mail, water).
      20. Preference for renewable energy and defence of the environment.
      21. Equal salaries for men and women.
      22. Limitation of precarious hiring and support for contracts for indeterminate time.
      23. Extension of the protection of labour and salaries of part-time workers.
      24. Recovery of collective (labour) contracts.
      25. Increase inspections of labour and requirements for companies making bids for public contracts.
      26. Constitutional reforms to guarantee separation of church and state and protection of the right to education, health care and the environment.
      27. Referendums on treaties and other accords with Europe.
      28. Abolition of privileges for parliamentary deputies. Removal of special juridical protection for ministers and permission for the courts to proceed against members of the government.
      29. Demilitarisation of the Coast Guard and anti-insurrectional special troops. Prohibition for police to wear masks or use fire arms during demonstrations. Change training courses for police so as to underline social themes such as immigration, drugs and social factors.
      30. Guarantee human rights in immigrant detention centres.
      31. Facilitate the reunion of immigrant families.
      32. Depenalisation of consumption of drugs in favor of battle against drug traffic. Increase funding for drug rehab centres.
      33. Regulate the right of conscientious objection in draft laws.
      34. Increase funding for public health up to the average European level.(The European average is 6% of GDP; in Greece 3%.)
      35. Elimination of payments by citizens for national health services.
      36. Nationalisation of private hospitals. Elimination of private participation in the national health system.
      37. Withdrawal of Greek troops from Afghanistan and the Balkans. No Greek soldiers beyond our own borders.
      38. Abolition of military cooperation with Israel. Support for creation of a Palestinian state within the 1967 borders.
      39. Negotiation of a stable accord with Turkey.
      40. Closure of all foreign bases in Greece and withdrawal from NATO.

      • Posted January 28, 2015 at 1:06 pm | Permalink

        I think no.38 will be the clincher…. As the French say….’ca va etre chaud’ ….. Already some reports are appearing from Day One of Syriza that Greece is a ‘haven for terrorists’….. The powers that be will not allow them to govern.

        zorro

        • Posted February 7, 2015 at 3:24 am | Permalink

          Zorro,

          The Euro powers that be vote against Isreal routinely, and for the Palestinians routinely. The Americans is POTUS-and he’s already proposed negotiating from the basis of the ’67 borders. So, no, that one will generate talk, but no heat from any “Powers.”

      • Posted January 28, 2015 at 1:43 pm | Permalink

        Interesting list. Points 1, 10 and 27 have merits. There needs to be a grand reckoning of European debts. Greece is bust, so probably are Portugal Spain and France. Ireland I understand is recovering but I wonder whether she is really solvent. So a grand reckoning, with recognition of losses is the first step in the road to recovery. Greek military expenditures are absurd and who can disagree with an EU referendum?

        If Mrs Merkel has any sense she will say that the best thing is Greece leaves the euro – perhaps other countries will as well. Otherwise the German taxpayer has an open ended liability with no end in sight.

      • Posted January 28, 2015 at 2:41 pm | Permalink

        Has the Millipede joined their advisory panel.

      • Posted January 28, 2015 at 3:01 pm | Permalink

        Someone was saying they want to ban all in holidays too, as they damage the local economy by stopping holidaymakers using other restaurants. There really is no limit to areas where the socialists know best. There should be some good deals later, when they discover no-one has booked.

      • Posted January 28, 2015 at 3:18 pm | Permalink

        Thanks for that. It is amusing to go through that list and see which items the Labour party support here – almost all in one form or another. It is even more amusing to see which items Labour are totally opposed to despite their lunatic fringe praising the Greek Trotskyites to the heavens – how about them adopting (4) and (27) for example ?

      • Posted January 28, 2015 at 8:17 pm | Permalink

        What is the source for this?

        • Posted January 29, 2015 at 10:50 pm | Permalink

          Sorry. Either John has censored this or you are not saying. I’m interested, and not telling is absurd and pointless as I’m sure you agree as a rational non PPE graduate.

      • Posted January 30, 2015 at 5:07 pm | Permalink

        Ah yes I see where this comes from now. No wonder the right is worried many of the points are quite fair and in the average persons interests. Making large companies pay a fair share of the tolls for the services they use to fund healthcare, workers right, infrastructure , human rights etc. It all just so deluded to you all I’m sure. The rich have done so much to help us all with all that wealth tickling down to the peasants in the past.

        • Posted January 31, 2015 at 10:18 am | Permalink

          Are you claiming standards of living in Western democracies and the Anglosphere have not risen dramatically in the last 100 years or even the last 25 years Baz?

          • Posted January 31, 2015 at 2:19 pm | Permalink

            The incomes of the middle classes has dropped dramatically in the last twenty years with the metal trades showing stagnant level of pay for the last ten years at least. The pie getting bigger is not shared by those making it bigger and as we have seen instead of the trickle down effect we are seeing puddling up of wealth to the top and especially the very top.
            Immigration has at least shown that larger profits do not make for more pay, but only the fools though the companies would share, hence the need for union to make them pay a fair rate for those who create the profits and not make the workers rely on state handouts to subsidise their income and the companies profits has we see now.

    • Posted January 28, 2015 at 6:23 am | Permalink

      Cameron unfortunately forgot the rules of politics and ratted BEFORE the last election – thus throwing it. Then he ratted on nearly all the sensible parts of Tory manifesto, using the LibDems as a ruse.

      Still (and no thanks to him) all looks far better than he could expect given his absurd pro EU, high tax, fake green policies.

      Labour under the hapless Miliband looks totally absurd, the SNP, the greens and even UKIP will hit Labour hard. Cameron with some sensible adjustments, promises to the English, promises of tax reductions and other giveaways might even yet win despite his Libdem agenda.

      He will, in the end, probably only lose due to his abject failure to get fair constituencies, his past serial ratting, absurd policies of 299+ tax increases so far, bloated/inept state sector, his love of the EU and the endless greencrap & expensive energy drivel he pushes at every turn.

      Some UKIP accommodation is really needed but Cameron just prefers to take his chances. At best to have another dreadful pro EU/lefty/greencrap/tax increasing coalition.

      • Posted January 28, 2015 at 8:33 pm | Permalink

        What do you define as ‘endless greencrap & expensive energy drivel’ a question you have yet to answer and how do you square off the ‘absurd employment rights’ you constantly mention with Britain being one of the countries with thee lowest level of workers rights of any OCCD countries? IHT being a fair and just tax without which the poor would face more burdens.
        Do you think you own the facts as you never have any specifics and when you do they are just deluded or wrong. Such as we have seen by claiming that wind turbines cannot product a KW or more of power, or they cannot produce KW/h of power. Even you are not sure and both are wrong. They can. Constant repetitive posts does not make truths, but this is what we are dealing with and as the election looms we will see more of these people who are not about reason or truth.
        In short like UKIP and many Tories they need political fighting as they do not understand anything else believing their own reality is the only one and right like all extremists do except when they are extremists against them as the right see the new Greek government.
        A society based on a financial aristocracy/oligarchy is wrong. Count on that.

  2. Posted January 28, 2015 at 6:41 am | Permalink

    It is difficult to explain the situation to Germans. I have tried with varying degrees of success, but ultimately they do have to accept that they need to do whatever is necessary to keep their customers in funds so they can continue to purchase German products. That is if they wish to keep running up surplus after surplus, year after year.

    A more intelligent approach would be to accept that it doesn’t make any sense to do that. It doesn’t make any sense to swap €5 of goods and services for €4 of goods and services indefinitely. OK so they have a surplus, but what can they do with it? If they spend it they aren’t in surplus any longer!

    If the Germans genuinely want to be repaid it is they who must run the deficit. That way Greece exports real goods and services to Germany to repay that debt. That’s how Germany repaid its debts after WW2. By exporting real goods and services to the UK and the USA. Germany ran the surplus and others ran the deficits and so loans were repaid.

    It’s not that hard when you think about it. But many highly paid economists have it all the wrong way around! Is there any chance of anyone paying me for this advice? 🙂

    • Posted January 28, 2015 at 5:49 pm | Permalink

      Peter, you are just going to have to show some patience with the Germans. They probably figure that, as the third largest exporter of goods in the world, they know something about running a successful economy and ought to be the ones proffering advice.

      It’s not the job of the Germans to keep their customers in funds, it’s the job of their customers to do that. If certain customers no longer pay the Germans for their goods, it’s time for the Germans to look elsewhere in the world for customers. There are plenty of people around the world who will pay for the high quality engineering in which the Germans specialise. In the highly unlikely scenario that most countries in the world started behaving like Greece, then it would make sense for the Germans not to export and concentrate on production for the domestic market.

      With their surpluses, the Germans can buy stocks and shares in other countries or even foreign government debt. In both cases, they get paid through dividends and interest. The problem with Greece is that it wants to renege on part of its debt and then no doubt, borrow some more. The solution for the Germans is certainly not to lend the Greeks any more to keep them in funds. The solution is to stop the debt merry-go-round and this, I believe, is what the Germans are quite prepared to do.

      • Posted January 28, 2015 at 9:01 pm | Permalink

        Stephen,

        Yes, you are right, that is how the Germans see it. But don’t you see the logical flaw? You’ve equated a successful economy, as indeed they do, with an exporting economy. So, does that mean that half the world’s economies are destined to be failures? Think about it. What’s the point of always swapping more goods and services for fewer goods and services?

        You say “it’s not the job of the Germans to keep their customers in funds”. If that’s the case, how is it that the streets of the UK are full of German cars? They’ve always kept their UK customers in funds through the process of the purchasing UK gilts which the UK government spent back into the economy by deficit spending. Same story in the USA too.

        So if they can do that for countries who use different currencies, why can’t they do it for countries who use the same currency?

        • Posted January 29, 2015 at 3:37 pm | Permalink

          @petermartin2001

          1. Peter, you are quite right to point out that an exporting economy is not the only successful type of economy. Throughout most of the 19th century, the USA ran a balance of payments deficit and used the subsequent foreign investment to build up their industry. Nothing wrong with that. But you have to concede that, with German engineering goods sought the world over, the Germans may also be doing something right.

          2. No, UK customers for German goods keep themselves in funds by producing goods themselves or having an economy and society in which foreigners feel it is worthwhile to invest.

          3. I think the Germans are perfectly willing to invest any surplus in the Eurozone, but they not unreasonably want a return. How would you feel if on your next visit to the Building Society you were told that they wanted to write off half your capital and – please could you give them some more? And all so that they could stay in funds.

          @William Gruff

          William, my dear fellow. We have a worldwide system of production and supply. German producers need not and do not care what their customers in other lands produce. It is sufficient that the customers produce what will be purchased and can use the proceeds to pay the German producer.

      • Posted January 28, 2015 at 11:13 pm | Permalink

        Stephen Berry:

        It’s not the job of the Germans to keep their customers in funds, it’s the job of their customers to do that …

        Which shows how little you know of economics. The way it works is this: You buy a widget from a source of widgets that is at the end of a widget supply chain, a chain in which every link takes a link’s worth of the chain plus mark up, and the producer of the widget you’ve bought gives you, from the money the chain leaves, enough money to buy another widget at retail price.

        Only an idiot is unable to understand that.

        • Posted January 29, 2015 at 10:12 am | Permalink

          William Gruff: it shows how many and the type of economics books you read but it also shows how little thought you put into the conclusions

          • Posted January 30, 2015 at 1:26 pm | Permalink

            waramess

            I was being ironic but, not having made that clear, it hasn’t come across, which it seldom does on the internet. I thought I’d shown the fallacy in arguing that a producer can subsidise the purchase of his products by the end user.

            That aside, having missed the irony, I doubt you can deduce anything about the sort of books I read or the conclusions I draw.

      • Posted January 29, 2015 at 9:10 am | Permalink

        Neil Wilson sums it up better than any. (Accountants that understand MMT will hopefully end up running the planet.) “Export-led nations have to constantly provide liquidity into the rest of the world to allow others to buy their goods. Otherwise the rest of the world runs out of the particular money that is needed for the export transaction to complete and the export never happens (UK buyers buy Chinese goods with GBP, but Chinese workers are paid in Yuan. The relative shortage of Yuan due to the export differential has to be provided by the Chinese or Chinese goods become, in absurdum, infinitely expensive).

        No country has an automatic right to import any more than it exports. The corollary to that is that no country has an automatic right to export more than it imports. It has to buy that right – either by stockpiling foreign financial assets or by convincing a bunch of dumb countries into a monetary union so that it can export its unemployment to them – cf. Ecuador vs. USA, Greece vs. Germany and arguably Scotland, Wales and Northern Ireland vs. England.”

    • Posted January 28, 2015 at 6:15 pm | Permalink

      Some will have noticed that the QE program to be enacted by the currency issuing ECB, no longer has the Troika “austerity” condition attached to it, as the previous SMP (2010) had.

      The ECB at that time, demonstrated the overwhelming power of the CURRENCY ISSUER, to take the private bond markets out of the game and control bond yields, across all maturities, to whatever rate it chose; using selective purchasing in that market. You will have noticed that the “markets” don’t want to get their rectums rebored this time.

      Under the (stupid) Eurozone EMU rules, Euro using countries are forced to borrow from the secondary bond markets to fund budget deficits. This is where they got screwed last time with high interest rates, because the ECB does not back-stop Eurozone country deficits; like the BoE does for UK and the FED does in the USA.

      So, as Bill Mitchell says, ” … why not call for the rules to be changed to allow the ECB to properly act as a currency-issuer? The reason is obvious. Germany would never allow it and it, basically rules the Eurozone. […] most Eurozone nations will not be able to run the necessary magnitudes for their fiscal deficits (to favour ‘pro-growth’) under the current terms that restrict the ECB – the monopoly-issuer of the euro – from funding such deficits. […] If fiscal deficits are prevented from rising and austerity is maintained, QE will not do much to stimulate growth.”

      QE only works if in encourages SPENDING MONEY. If the private sector does not want to spend, the public sector MUST, to prevent the economy from stagnating and damaging the productive capacity through lack of use.

      A sovereign fiat currency issuing government (public sector), can spend as much as it needs to fully employ all those who want to work and get the expensive machines that make stuff, running flat out. Inflation is not the prime concern for now, unemployment and underemployment IS.

      One man’s spending is another man’s wages. I recently spent a lump of money to attend a southern motor race event. Guess what? My neighbours’s graduate daughter, was being paid to collect my ticket at the gate!

    • Posted January 28, 2015 at 7:55 pm | Permalink

      I think most Germans have enough brain to get the point that one country’s surplus must be another’s deficit. The big problem is how to get Germans to VOLUNTARILY spend on periphery country products. That can only be done by making those products competitive, and basically that can only be done via cutting costs in the periphery – internal devaluation. Unfortunately internal devaluation is a slow painful process. That’s a fundamental flaw in common currencies.

    • Posted January 28, 2015 at 8:01 pm | Permalink

      The knack of being a well paid Economist is to get paid before you hand over the advice.

    • Posted January 29, 2015 at 10:07 am | Permalink

      There is really no reason why nations need to run deficits; it is no more than governments borrowing in order to live beyond their (our) means.

      Greece and other countries should be required to live within their means over the short term by importing no more than they export.

      Should Greece default then that will be their lot, as they will be unable to obtain debt and this of itself will require its government to be more restrained fiscally.

      The reason why Greece is such an impoverished nation is that it has insufficient earning power to support the population (in the manner to which they have becoome accustomed); not a very profound observation but one that explains their current inability to exist in the absence of debt.

      Left to their own devices and without debt to sustain them they will have no option other than to become sufficiently productive to support the population that remains.

      This is the only long term option open to them and it is a nettle that needs to be grasped sooner rather than later

      • Posted January 29, 2015 at 3:09 pm | Permalink

        Waramess,

        You might be on to something here. Let’s indeed make it an international law that ” countries should be required to live within their means over the short term by importing no more than they export.” Importing more than you export is a bad thing. Every country should be a net exporter. Germany and Switzerland have shown it can be done. So if they can do it everyone can.

        On a slightly different topic, I’m told that girls tend to do better in single sex schools. Whereas boys do better in mixed schools. So isn’t the solution obvious? Have single sex schools for girls and mixed schools for boys? What’s the problem?

  3. Posted January 28, 2015 at 7:23 am | Permalink

    Good morning.

    When you sign on the dotted line of a contract, it pays to read it first. I seem to remember on our contract, as with everyone else’s, that it stipulated EVER CLOSER UNION. Exactly what did the German government think it was signing up to at the time ? Because EVER CLOSER UNION also means, financial, fiscal and political UNION. And as we know, a UNION such as ours required fiscal transfers but, it also requires financial and political harmony, and that can only come once all nation states are one. Which begs a further question to the previous article. As Scotland and other parts of the UK move to more fiscal and financial autonomy along with political, are we in danger of going the other way ? And if we are, has anyone stopped to think about what we are doing ?

    Greece was allowed into the Euro on Germany’s insistence. Gordon Brown MP when he was PM, allowed both Germany and France to break their financial expenditure restrictions along with the obligatory, nothing in return. So both France and in particular Germany can hardly say they have clean hands in this. Neither can the EU.

    The problem as I see it, is not Greece. The problem is all the other debtor countries. Greece is too small. Italy however, is a totally different kettle of fish. And what ever goes for Greece, goes for all the others too. And where then does that lead us ?

    Interesting times.

  4. Posted January 28, 2015 at 7:34 am | Permalink

    Both Germany (discipline) and Greece (unemployment) have strong arguments. The troika cannot claim a big success and may be ready to modify its policy. The one thing that neither Greeks nor Germans contemplate is breaking up the euro. So that won’t happen.
    Some British may keep dreaming of a euro collapse, but they are not part of the decision making process.

    • Posted January 28, 2015 at 1:07 pm | Permalink

      PvL–Stuff doesn’t always happen by reason of decisions, certainly not Brussels’ decisions; and I suggest don’t bet your farm on what Greeks want or may soon have to accept. Possibly they, or some of them, hope that some sort of white knight like their friends Russia or even China (which latter might decide to build on their ownership, so I read, of the Port of Piraeus) might come along and take out the debt, monstrous though it is. My understanding is that, till he recently changed his mind, the new Greek PM was proclaiming that he wanted to get rid of the Euro and, back to China, I also understand that he once described himself as Maoist, and that his partner still does. I wonder what Brussels decision makers would make of that. Maybe China wants a Mediterranean Fleet, who knows? I greatly puzzle at the “no default” declarations. A white knight may be far-fetched but something has to happen.

    • Posted January 28, 2015 at 1:09 pm | Permalink

      At around Eu 1.34 = £1.00 it is on a downward slide, initially brought about by printing Eu1.3 Trillion. I think the Eu 180 Billion Greek debt had already been factored in.
      The Euros one size fits all does not work for the Mediterranean countries. They would be better with their own currencies which would put them in control of their own economies. No sensible person wishes to see the Euro collapse, but it would be better to contract in area to those countries whose economies are in harmony.

      • Posted January 28, 2015 at 9:05 pm | Permalink

        @agricola: The pound is still quite below its 2008 level of €1.50.
        I’d never claim that all eurosceptics were sensible people. There will be those too who prefer the euro to succeed. We must wait and see how it will all play out between Greece and the Eurozone. My minister of finance (Dijsselbloem) is (for the EZ) going to see his Greek counterpart this Friday and I expect that there will not be a lot of firework in press conferences afterwards.

    • Posted January 28, 2015 at 2:56 pm | Permalink

      Not dreaming of a Euro collapse at all.
      Just either wanting a strong politically integrated continental Europe (a bad but necessary evil for the Euro to work) or national currencies as has normally been the case through the last millennium or 2.

      • Posted January 28, 2015 at 9:09 pm | Permalink

        @JoeSoap: steps towards integration will necessarily be small. It is a complicated process between now 19 democracies and they also have to do it in a way that all 28 democracies will be content with.

        • Posted January 30, 2015 at 11:39 am | Permalink

          They do not have to do anything, it was a common market for trade not a creation of an EU superstate.

    • Posted January 28, 2015 at 3:27 pm | Permalink

      There is no ‘decision process’ because what is to be decided has already been decided.

      Here we have Greece, which has decided that she’s had enough of real life, opting instead to dump austerity for a fantasy land of early retirements, long holidays, short working days, big state spending…

      She has decided that she will remain in the Euro and that someone else in the EU will pay her debts. The real ‘decision makers’ in Europe (Germany) will agree that someone else WILL pay in order to keep the precious Euro alive.

      In the absence of any real plans to leave the EU ‘some’ British (a majority according to recent polls) have only one option and that is to daydream that the Euro will collapse and with it the whole project.

      This is not ‘some’ but at the very least a sizeable minority in the UK, such is the democratic deficit that the EU causes. No wonder people throughout the Union are starting to reach for far right parties that make Ukip look positively moderate.

      • Posted January 28, 2015 at 9:14 pm | Permalink

        @Mondeo Man: The Eurozone ministers have taken up their initial (conciliatory) position. Now a complex play will start, and that will ultimately lead to some way forward. What I meant is that Britain is not at the table where this all is playing out.

    • Posted January 28, 2015 at 5:30 pm | Permalink

      It is not for either Germany or Greece to decide on the future of the Euro. Ultimately, the markets will decide.

      • Posted January 28, 2015 at 9:17 pm | Permalink

        @Jagman84: What have the markets decided in the period gone by when the breakup of the euro was predicted about every week? The situation now is more stable already.

    • Posted January 28, 2015 at 5:51 pm | Permalink

      @PvR; “The one thing that neither Greeks nor Germans contemplate is breaking up the euro. So that won’t happen.”

      Neither want it to happen, that doesn’t mean is won’t, the only way Germany can assure it won’t happen is to give Greece a new pre-signed blank cheque book, the only way Greece can assure it won’t happen is hand over the complete governance of their economy to the bureaucrats in Brussels, Frankfurt and Berlin – I doubt either will ever do such things…

      “Some British may keep dreaming of a euro collapse, but they are not part of the decision making process.”

      It’s not dreaming, it’s understanding how the Euro functions (from) outside of the EZ, it’s understanding how the non EZ markets think and act. So Peter, people like you may carry on being insular, dreaming that the international exchange markets etc. will never cause a run on the Euro – just remember, better (supposedly secure) currencies than the Euro have been brought to their knees!

      • Posted January 28, 2015 at 9:23 pm | Permalink

        @Jerry: Interesting that the majority of all 325 million people in the Eurozone are now called an island by a Brit 🙂
        I hear arguments repeated that I have heard for years, and these prophets of euro-doom sound ever more hollow. I expect a solution to be found. In the past I expected the euro not to collapse, and I was right. No guarantee that I will always be right bu my track record is getting better all the time. I even predict that the UK will not leave the EU. Want a bet?

        Reply Some of your proposals are bizarre – the idea that the Uk should be charged for using the Euro – would this also apply to all other non EU countries trading with the Eurozone? Why would anyone pay this new tax? We do of course already pay if we want to borrow Euros, and pay the switching charges into and out of the Euro. Euroland exporters would not want another (illegal) barrier on their trade.

        • Posted January 29, 2015 at 2:30 pm | Permalink

          Reply to reply: You are obviously right here, the Eurozone cannot charge the UK what it wouldn’t charge Canada or any non EU-member. Your position is special though, as you are within the EU and you are not going to be part of the Eurozone, a political project as you have stated. Not taking part in that political project may be judged a lack of loyalty to the EU. I don’t know yet how this would have to be paid for, but there is still time to think about it. If the UK leaves altogether, that would make you a country like any non-EU member.

          • Posted January 29, 2015 at 7:43 pm | Permalink

            Getting fined or charged for “a lack of loyalty” to the Euro.
            Hmm… nice way of treating one of the biggest contributors to the overall EU budget.

          • Posted January 30, 2015 at 9:25 am | Permalink

            “that would make you a country like any non-EU member.”

            Oh dear God, how I long for that day.

    • Posted January 28, 2015 at 5:52 pm | Permalink

      Must be very dark where you are Peter. Best keep on whistling.

    • Posted January 28, 2015 at 7:22 pm | Permalink

      ‘…but they are not part of the decision making process.’

      Promise not to ask for help then?

      • Posted January 28, 2015 at 9:26 pm | Permalink

        @bluedog: As the UK profits from a single currency in its largest market, I’ve always thought it natural to charge the UK for this benefit. My advice has not been followed.

        • Posted January 29, 2015 at 8:15 am | Permalink

          @PvL; “As the UK profits from a single currency in its largest market”

          Peter, please feel free to look up what is meant by the “Rotterdam fudge”, and even then the UK was trading with other European countries before the Euro, before even the old EEC, so don’t blame the UK for the failings of your beloved Euro!

          “I’ve always thought it natural to charge the UK for this benefit.”

          Do that and you know what will happen, we will simply buy our cars etc. elsewhere, not only that but unless the EU were to also charge all other non EZ countries that are at an exchange rate advantage the EU might find they have to answer some difficult questions at the WTO etc. It would also be totally self-defeating in terms of an “internal” trading agreement as it would hasten a Briexit.

          “My advice has not been followed.”

          Very sensible, I understand that shooting ones self in the foot only hurts the one you love the most!

        • Posted January 29, 2015 at 9:41 am | Permalink

          Peter – The UK doesn’t benefit from the “single currency” what it does benefit from is what the people of this island signed up for in 1975 – The Common Market…and that’s a two way trade.

        • Posted January 29, 2015 at 10:22 am | Permalink

          There you have it Bluedog. Classic imperial Eurothink. The case for Brexit in a sentence.

        • Posted January 29, 2015 at 11:03 am | Permalink

          PvL, As the UK already pays membership fees for the ‘benefit’ of trading with the shrinking EU economies, why should it suffer an additional impost? Would you propose similar fees for China, the EU’s largest trading partner? And if so, on what basis? Have you thought that these proposed fees are in effect tariffs which may contravene WTO membership?

          As usual, Europeans want to regulate and control, oblivious of the unintended consequences, a bit like the Euro really. What a success that has been, eh?

          Increasingly, I’m of the opinion that the EU desperately needs us to talk sense within Europe. Your flagship project of the Project, the Eurozone, is rapidly emerging as an intercontinental vector for both reputational and financial risk. Where, outside the Eurozone, are developed economies slowing by double digit figures and recording unemployment in double digit figures?

          You should be paying us for advice!

        • Posted February 1, 2015 at 12:17 am | Permalink

          PvL: “I’ve always thought it natural to charge the UK for this benefit.”

          So you advocate tariff barriers within the single market ?

    • Posted January 29, 2015 at 1:57 am | Permalink

      Peter vL,

      “Some British may keep dreaming of a euro collapse”

      I can’t speak for everyone but, for my part, I’d hope the Euro does collapse sooner rather than later. If it had collapsed after the 2008 crash and everyone had gone back to their own currencies, Europe would be in much better shape today than it is.

      Afterwards, those currencies would have all changed in value relative to each other, and relative to the US$, just as the £ was allowed to change in value. That would have caused some inconvenience to travellers but that variation in value would have allowed economies to recover. Just as the UK economy has partially recovered. Just as the Icelandic economy has partially recovered.

      There’s been no recovery at all in most of Euroland. That’s why we don’t like the Euro. We do care about Europe. We don’t like to see 25% + levels of unemployment and we don’t like to see our trade suffer as our potential customers go broke. Others are more concerned about the influx of economic refugees. I wouldn’t rate that as the main problem but it is still a problem nevertheless.

      • Posted January 29, 2015 at 2:38 pm | Permalink

        @petermartin2001:
        For real eurozone recovery you may have to have a little more patience. It is however through having one currency, that real structural reform in some of the weaker economies is taking place, which would never have happened if we all had different currencies. The Netherlands, in spite of its huge private debt, is not doing too badly now. The crisis also taught us to reform. I wish the UK well in its current growth, but I don’t think this is due to having or not having the euro as currency.

        • Posted January 30, 2015 at 7:37 pm | Permalink

          PeterVL,

          I wish the UK well in its current growth, but I don’t think this is due to having or not having the euro as currency.

          I think this is an incorrect view. The experience of the UK is that the economy has done relatively much better when the pound has been allowed to float freely. One of the reasons that UK has not participated in the Euro project is due to the events leading up to what is known as ‘Black Wednesday’ in 1992. That time the Government was trying to peg the £ to the DM. Most of the attention was in how much money the Government lost to speculators but the real damage was to the economy which was hidden.

          Germany and Holland do well in the Euro because both countries are net exporters. They don’t need to run deficits like the UK. Those deficits would not be allowed in Euroland. The rules force governments to run trade surpluses. Even Greece now runs a small surplus! That’s just crazy.

          Britain runs a deficit of close to 5% on trade and helps Germany and Holland run their surpluses. That would never be allowed with the Euro. With the Euro we’d have to deflate our economy to such an extent that the population couldn’t afford imports, like Greece and Spain. We’d have 25% unemployment too!

  5. Posted January 28, 2015 at 7:35 am | Permalink

    I see a group of Labour MPs is celebrating Syriza’s win and urging even more leftwing policies on the Labour Party. 25 years after the collapse of communism and the intellectual collapse of socialism there are still quasi-marxists in the UK and elsewhere wanting to give socialism yet another go. The ridiculous Peter Hain is another such Labour MP. He wants much more spending just like Syriza want. But whereas at least Syriza and Mr Tsipras are clear and honest about where the money is to come from in their plans – the German taxpayer – there is no such clarity and honesty from these neo-marxists in the Labour party. The problem with socialism as Margaret Thatcher pointed out, is that sooner or later you run out of other peoples’ money.

    • Posted January 28, 2015 at 1:10 pm | Permalink

      Richard–And was it not Hain who proclaimed that Lisbon was just a tidying up exercise?

    • Posted January 28, 2015 at 5:13 pm | Permalink

      “there are still quasi-marxists in the UK and elsewhere wanting to give socialism yet another go.”

      Because the political right were too lazy about driving a stake through its heart. The left should have been hounded to the margins of society, never allowed to peddle their political ideology again with out it being drowned out.

    • Posted January 28, 2015 at 7:08 pm | Permalink

      Very true. The money for socialism always comes from the government’s magic money tree and the rich (who nearly all leave before they get mugged). This is then “invested” by the government in things that no one wants at great expense. Or pissed down the drain might be a better description.

      If you send someone else’s money on something for others (such as the NHS) then you do not care how much you spend or what you value you get for it. That is government socialist government is just even more of it.

      We have quite enough socialist drivel from Cameron and his beloved EU/green crap & tax grabbing coalition already.

    • Posted January 30, 2015 at 4:03 am | Permalink

      …….where the money is to come from in their plans …..

      Where does all money come from in the first instance? It isn’t defined in terms of gold any longer. So is it just printed or created in in a government computer? And who decides how much? Is that decided on the basis that creating too much will cause too much inflation and too little will cause recession and unemployment?

      If so, then that sounds fair enough to me. But I’m not sure that is the criterion. It seems to me that most voters, (and even most politicians?), have absolutely no idea on this at all. Most voters think in terms that government money comes from tax revenue. But, where does it come from before that?

  6. Posted January 28, 2015 at 7:43 am | Permalink

    The demolition of Rooosecoat power station in Barrow-in-Furness on Tuesday is a good example of Britains energy problems.
    http://www.nwemail.co.uk/news/photos-iconic-barrow-building-toppled-in-explosion-1.1189222It was proposed to run it on wood chips trundled halfway across the world instead of gas from one of Europes largest gas terminals less than two miles away which it was powerd for years by. The residents didn’t fancy living next to a cosy log fire and put a stop to it.
    About four miles away is one of Britains largest offshore wind turbine array which in one of the world most consistently windy areas is probably viable made even more viable by massive subsidy as Heysham nuclear power station is receiving further down the coast and Sellafield further up the coast.
    It not going to be houses or residential property any time soon as the area and the area around it is geographically isolated industrial wasteland and has been for the last 50+ years. It was my chilhood playground and I know it as well as you do your garden.

    • Posted January 28, 2015 at 1:54 pm | Permalink

      “The demolition of Rooosecoat power station in Barrow-in-Furness on Tuesday is a good example of Britains energy problems.”

      I think you mean energy lunacy. Only in a highly rigged market would offshore windmills or a power station burning imported wood be viable when a modern gas-fired generator was not.

      http://www.nwemail.co.uk/news/chimney-to-come-tumbling-down-in-controlled-blast-at-former-barrow-power-station-1.1159931

      • Posted January 28, 2015 at 9:49 pm | Permalink

        Energy lunacy, including nuclear don’t forget, which may well have a part in the solution.

    • Posted January 28, 2015 at 1:57 pm | Permalink

      Barrow is kept going by being the only place we can build submarines these days, and of course bog roll production.

    • Posted January 28, 2015 at 3:32 pm | Permalink

      And they reckon fracking (in a country for which wealth was built on mines) is too dangerous to contemplate. They also keep flooding the country with people whilst being concerned about meeting emission targets.

  7. Posted January 28, 2015 at 8:11 am | Permalink

    It is the way of the world that those who should be punished for wrong doing in the name of humanitarianism escape that punishment or at least are punished very lightly. So it will be with Greece who through prolific overspending, crony-ism and corrupt government are deeply in debt. Foolishly more prudent and law abiding states decided to share a bank account with Greece and others who were not so prudent and law abiding. It is therefore no surprise if the prudent find the bank account being raided by the others. This bank account is now full of IOUs and as we know it is human nature that those who gave these IOUs will be reluctant to honour them and some will never do so at least in full.

    More fool the prudent but the prudent have not been totally honest either as they had a devious agenda albeit a political and economic one. They wished to force a union of states by coercion and not agreement and the bank account seemed the ideal means for doing it. This bank account also allowed the prudent to benefit economically at the expense of those who wished to buy on credit but did not have the creditworthiness needed. The shared bank account fixed that. It also made the prudent’s goods and services more attractive to the rest of the world because because the shared bank account made their goods and services cheaper than they would have been without it. So the rest of the world have benefited from cheaper goods and services but at the same time have been cheated through unfair competition. A glaring example of this is the large current account surplus that the EU runs against the UK.

    It will be interesting to see how the Greek affair will turn out. The country is now being run by a motley collection of (politicians ed) which of course means all sorts of stupidity could be about to occur. Will they eventually bow to reality and do the honourable and sensible thing and see the reforms through to the end considering that those reforms are starting to bear fruit or will they carry through their infantile policies and threats? I suspect it will be a bit of both and instability, chaos, victim hood and tantrums will be the weapon of choice of the (challengers ed) and downright deviousness, obfuscation and threats will be the weapons of choice of the troika. In the end a compromise will be reached that satisfies no one but is made to look that it satisfies everyone and the the euro project will stagger onto the next crisis.

  8. Posted January 28, 2015 at 8:21 am | Permalink

    Alleviating action “in the name of common humanity” is a forceful and persuasive call. The EU has brought about the Greek tragedy, albeit aided by Greece, and whatever it stands for, it should not stand for what has and is happening to the Greek people. Germany must pay the price, preferably willingly and sooner rather than reluctantly and later, but one of those is inevitable since Greece retains the option of default on a massive scale perhaps accompanied by Euro exit.

  9. Posted January 28, 2015 at 8:35 am | Permalink

    The recent-past Governments of neither Greece nor Germany can claim innocence here, and naturally it’s the electorates of both nations which cast accusing glances around to no acknowledgement.

    The current Greek coalition Government have yet to honestly explain to the Greek electorate that they can either have Euro membership, or they can have relative financial sovereignty. Ultimately, the Greek electorate want both according to their voting results. They can’t. They will also need to account to that same electorate why they wilfully lied about achieving Eurozone qualification status.

    Recent past German Governments still needed to explain to the German electorate that when Greece was admitted to the Eurozone on known – known – falsified conditions, that it would be creditor nations which would ultimately foot the bill for the guaranteed financial fall-out. The German Chancellor at the time knew full well that Greece was profoundly unready for the Single Currency and should have vetoed Greek membership. They failed to do so and therefore ‘entitled’ the German taxpayer to the unwanted – and unadmitted – role of future creditor of last resort. Chancellor Merkel would do well to throw off the artificial hurt indignation that Germany has adopted on this matter – they’re as complicit in the chaos as Greece itself – as are all other Eurozone nations who acted similarly.

  10. Posted January 28, 2015 at 9:02 am | Permalink

    Sound Money.

    Sound Economic Policy.

    Without one of the above, you eventually have to rob the people.

    Without both of the above, you have to rob another Country.

    When are governments going to learn, you cannot borrow forever.

  11. Posted January 28, 2015 at 9:09 am | Permalink

    To be honest I have little sympathy for either the Greeks, who welcomed their politicians blagging their way into the euro so that they could borrow excessively on Germany’s credit rating, or for the Germans, who stood by while their politicians allowed the Greeks to blag their way into the euro. They have both made their own beds and helped to make each others’ beds, and now they must both lie in them.

    • Posted January 28, 2015 at 2:36 pm | Permalink

      Beautifully put, Denis.

      They all created this. And should all work together to solve it.

  12. Posted January 28, 2015 at 9:14 am | Permalink

    We’re not in the Euro but we still had to bail out Ireland (around £7bn wasn’t it a few years ago) and how much did we bail out Greece with, a similar amount to Ireland? Are we still getting our repayments or are we going to get treated like mugs too.

    Then we’re being told there’s no money for our higher education, no money for our hospitals, well there won’t be if people from other countries spend like Billio and then cut and run.

    • Posted January 28, 2015 at 2:26 pm | Permalink

      The UK government was under no compulsion to directly extend a bi-lateral loan to the Irish government, but chose to do so as a gesture of goodwill more than anything else.

      https://www.gov.uk/government/publications/bilateral-loan-to-ireland

      It seems that loan was £3.2 billion, while the £7 billion you mention includes the indirect loans through the EU and the IMF, which are a different matter.

      Osborne explained why he was doing this:

      http://www.theguardian.com/business/2010/nov/22/ireland-bailout-uk-lends-seven-billion

      “It’s in everyone’s interest that we make the euro work, so that it can continue its expansion across the EU and eventually engulf us as well, which is what my party has really always wanted.”

      OK, so I made the last part up, from the comma after “work” onwards; but I think we know that this is the truth of the matter because otherwise the Tory decision to join the Save the Euro campaign would be illogical in the absence of any quid pro quo to protect our long term national interests.

      • Posted January 29, 2015 at 6:15 pm | Permalink

        Denis, regarding your last paragraph. This is part of the Ireland “financial” unification plan. The next move is to align the north and south fiscal tax structure. That means, for a starter, the north adopting the 12.5% Corporation tax the South uses; and a few other tricks that you are not supposed to notice. Ireland and the UK created the latest version of the “Common Travel Area” in late 2011 for reasons that were not disclosed at the time.

        Persons who speculate such matters, say that the bilateral loans etc, are the lubricant for a smooth transition to the new improved “British Isles”, with a united Ireland providing the resurrected and federalised “British Isles” a simple mechanism, to slip quietly into Euroland via an Irish back door.

      • Posted January 29, 2015 at 11:15 pm | Permalink

        Thanks for the correction and info Denis.

  13. Posted January 28, 2015 at 9:16 am | Permalink

    To repeat a previous comment, the Germans have benefited from debt forgiveness several times, latest being in the 1950s, so they have only relatively recently become the paragons of virtue which they wish the Greeks to be.

    Here we see the irresistible force of political will meeting the immovable object of financial rectitude. I expect in the end the numbers will be bent to meet the human need.

    I have often thought that economists spend a lot of time trying to capture human behaviour in mathematical terms, but they are missing a formula for the decisive element: Work Ethic.

    Can the citizens of the Club Med countries ever change into Northern Calvinists ?

  14. Posted January 28, 2015 at 9:38 am | Permalink

    Dr.JR , your last sentence says it all . Germany – whose own debts were eliminated post war and who were assisted into the modern age through the ultra cheap Marshall Plan , does not have many allies . Recent media events have highlighted the extreme features of German dominance in Europe and they will never be forgiven by those who were exposed to its forms of discipline .

    The Greeks are simply not made in the same way as the Germans and will never be able to sustain any prolonged period of economic restraint . They foolishly let themselves into the EZ believing they could keep to its rules ; they fudged their financial case in order to join it ; they agreed to loans they knew they would not be able to honour ; they believed that the rich would take care of the poor .

    Germany is at the heart of the problems the EZ has . The growth and development of Europe does depend on its financial resources being made available for investment and not simply for the Bundesbank . Germany cannot expect to go on benefiting from the European market place without making the protection necessary for its markets . This has not happened in proportion to its wealth . Equally the disciplines possible in Germany do not fit with Southern Europe .

    The face-off that now exists will not be resolved by agreeing to a more prolonged pay-off arrangement with Greece . Wiping off debt will also not be agreed . Germany will not allow itself to be “fined” by Greece . Greece is bankrupt and will have to declare itself . There is no choice other than for Grexit and facing up to the consequences of the markets . If Greece had been likened to a mortgage applicant , no bank or institution would ever have agreed to a loan ; in this respect – with the loans having been made and the assets being unrecoverable , the institutions have to take the losses in their stride and simply recover what they can .

  15. Posted January 28, 2015 at 9:39 am | Permalink

    I gather Mr Tsipras was an apprentice of Hugo Chavez . Chavez had massive oil revenues to pay for his socialist dream ( even then it wasn’t enough). Tsipras has some deluded idea that Germany will be his money gusher to pay for his Greek socialist dream.

    I think he , his Marxist, Trotskyist, Maoist fellow travellers are going to have a rude awakening.

  16. Posted January 28, 2015 at 10:20 am | Permalink

    On the whole I think the Greek position is more logical. For a currency union to work there have to be subsidies and cash transfers to the poorer regions – the model here is the UK where the English subsidise the Scots and Welsh. Personally, as a London resident, I am happy enough that my taxes preferentially benefit people in other parts of the UK as we are historically “one nation” and I have relatives living in various parts of UK and have lived in the regions myself and so on. But I WOULD have a big problem if my taxes were used to give debt relief to Greece which is an entirely separate nation with no historic ties to UK. Having designed and set up the Euro Germany now have to bite this particular bullet.

    • Posted January 28, 2015 at 2:03 pm | Permalink

      Personally I’m not at all happy with these internal transfers; was it ever the case that these transfers were necessary, even when our engineering prowess was second to none? No. These regions now have no point, as the point now is to focus on banksterism and saving the planet by ensuring we have unviably expensive energy.

    • Posted January 28, 2015 at 6:00 pm | Permalink

      Most Scots (and quite a few Welsh) don’t seem to think we are one nation (except for the purpose of fiscal transfers to them). You are too tolerant.

  17. Posted January 28, 2015 at 10:53 am | Permalink

    Another very good and timely analysis. On might also have referred to an earlier contrast between the German approach to the Greeks today and the generosity of the victorious USA`s Aid Plan to set up their post-war economy. That aid was given despite known atrocities and horrors, not least in Greece itself.

    A belated congratulation to you too on your earlier exposure of the folly of our embrace of appeasement in the disguise of fatal devolution.

  18. Posted January 28, 2015 at 10:53 am | Permalink

    No one comes out of this situation smelling of roses. The founding states of the EU because they let the political imperative cloud their judgement as to the suitability of such as Greece to join the Euro. States such as Greece for being less than honest about their financial state. There must be a price to pay for this dishonest and turning a blind eye approach to political unity. Everyone has egg on their faces.

    I note you only comment on the situation, rather than offer any form of resolution.

    I think the EU must swallow the £180 Billion Greek debt and Greece must leave the Euro, reverting to the Drachma. Remember there are millions of Greek citizens who are the ultimate losers, so the EU must be as supportive as possible over the next ten years at least. If we all end up eating Feta and Kalamata olives washed down with Retsina and Ouzo it is a small price to pay.

  19. Posted January 28, 2015 at 11:17 am | Permalink

    Unfortunately this is not just an economic issue. It is a highly charged political sore. The prompt placing, by the new Greek PM, of flowers on a memorial to Greek partisans who were killed by the Germans during the Second World War, speaks volumes.

    The Germans consider the Greeks feckless – The Greeks consider the Germans… I’m not sure exactly what. The Germans had their debts written off in order to get a new start after the war and get away from the issues that yesterday’s Holocaust rememberance so vividly described. Also France and Germany broke the Euro’s conditions when it suited themselves – so the Euro rules are not sacrosanct.

    As you say John, Germany will have to accept that some financial flows from it to other states are necessary if their cherished Project is to survive.

  20. Posted January 28, 2015 at 11:32 am | Permalink

    You sum it up very well. Germany, along with China, has run up huge trade surpluses with the rest of the world over many years. In China there is a slow shift as domestic consumption is encouraged and the renminbi is allowed to strengthen. Germany, in contrast, is running a tightly controlled economy with a weakening euro. At some point, something will have to give. It must either exit the euro, or it bales out the profligate states, or it must face the uncertain political fallout of standing firm. That is a decision that the German governing class will have to make. My guess is they will try the third of these choices.

  21. Posted January 28, 2015 at 11:36 am | Permalink

    If I were a German taxpayer, I would vote for Germany to leave the Euro, reintroduce the DM, and stop bankrolling insolvent countries. As an English taxpayer, I am heartily tired of the Barnett formula’s continued existence. For Greece, read Scotland.

  22. Posted January 28, 2015 at 12:00 pm | Permalink

    This is history to all this isn’t there? Weren’t war reparations required after 1918 and then again in 1945 and didn’t Germany under Hitler suspend repayments? In the end the reparations were made but only after a many decades and after Hitler’s defeat.

    The questions for me are (a) how did Greece get into this mess? And the answer is by governmental incompetence and civil service corruption. And (b) is there any genuine parallel between German reparations and Greek debt? I read somewhere that the Greek finance people think that there is.

  23. Posted January 28, 2015 at 12:03 pm | Permalink

    It used to be said of NATO that its purpose was to keep the Americans in, the Russians out, and the Germans down. The third objective has failed.

    Having recovered from a nasty bout of National Socialism, there is extraordinary irony in the mercantilist trading policies adopted by Germany, which seem destined to cause (problems ed) at the eastern extremity of Europe, if not more widely.

    At present Syriza in Greece has mutually exclusive policy objectives which guarantees failure, while causing utter panic in the EU. Once Syriza has been out-played by the Eurozone wing of the EU, as seems inevitable, the mendicant Greeks will face a major crisis. Syriza will then have very few options other than adopting a highly introverted form of nationalism, while blaming everyone but its own leadership for the failure of the Greek state. Syriza of course is already a socialist party…

  24. Posted January 28, 2015 at 12:14 pm | Permalink

    I think the greece want money from germany for the war and i can see them going east to russia. AS if greek government would ask millionaires and big companies to pay tax, never happen, just like here. The cap on benefits to 23000 pounds , i take it will not be coming out the government beloved buy to let money for rent so it will coming out of their spending about 60 pounds a week if your now getting 26,000 pounds. nice one.

    500 usa troops in ukrainian.

  25. Posted January 28, 2015 at 12:53 pm | Permalink

    Why is it that when the banks quite consciously overlend to governments their failed investments then have to be guaranteed by the poor?

  26. Posted January 28, 2015 at 1:09 pm | Permalink

    I am/was told by all and sundry that I have to keep my finances in order…repeat, always in order. Or else? So I did.

    So most anybody in government(s) do the exact reverse. Is it the same with their own finances – spend and wreck? Probably not in most cases I suspect having coined it in while in power.

    So add that to everything else screwed up and you might partly understand why hardly anybody votes. So we get the vast amount who need to vote Labour…because their dad did. And so on!

    Greek vote results looked like the common 50% with and 50% without and a lump of floaters amongst. The loons in the EU need to roll over here and go away forever. Relieve those in the southern states of long misery…that was clear to see from the very KO of this criminal piece of business.

    Eden project want deep drilling for geothermal……oh dear ! Screw up ahead?

  27. Posted January 28, 2015 at 1:15 pm | Permalink

    I really wouldn’t give a damn about any of them other than that I know it’ll cost the UK taxpayer money that could be better spent in the UK.

  28. Posted January 28, 2015 at 1:55 pm | Permalink

    Time for Germany, Europe and yes the UK government to bail out Greece. Why? Because it is not a “bail out” except in the technical sense. It is Migration Reparation and Migration Transit Fees for those who consider immigration to Germany and the UK a positive.

    Roughly (official figures not counting estimated massive illegal immigration ) Greece has a 10% foreign/migrant population because it has abided by the laws formulated on migration by Germany, the EU and the United Kingdom government.

    Due to Greece’s impoverished border, internal security and geography which are historically well-known factors, poor people external to the EU chose Greece amongst others as first base in their quest to enter more prosperous EU countries.

    For those in the UK who believe immigration is a economically good thing for the country then a payment to Greece must be made for the Transit Costs of migrants coming here via Greece in the same way a fee for say oil in a pipeline transiting over a country to another country would need to be paid.
    Also a Migration Reparation fee should be paid to Greece for having suffered economically and culturally for being the first base for migrants who would go on to enrich Germany and the UK.

    Because of EU migration policy which the UK government has consistently and enthusiastically supported, 200,000 Greek university graduates have felt the absolute need to get out of their own country away from their families and in some cases their children to find even the most basic jobs.Some of them are perhaps making sandwiches for UK office workers or hoovering UK government departments. These people need compensation for the indignity which they no doubt have suffered and are suffering; compensation for their flights here and back visiting relatives and for fees levied by international companies for sending money home to their families.

    Germany in its own words and the UK in its own words..at least the words of the Labour Party in the latter case owes Greeks a living. Now pay up!
    Alternatively assist Greece to exit the Euro and Euroland by financial grants, assistance and support so it can stand on its own two feet again.

  29. Posted January 28, 2015 at 3:00 pm | Permalink

    If this uk parliament has never paid back any money that it borrow in it history why should greece.

  30. Posted January 28, 2015 at 3:11 pm | Permalink

    I am a fan of the German philosophies, especially fiscal. However, it is worth remembering that German technology exports (especially cars) are cheap in foreign markets only because of the wastefulness and now the suffering of the PIIGS. The Euro is no more sustainable than the EU is, and the sooner it is brought to an end, the better. One point that has been brought up but never reported by our corrupt MSM and most especially the Biased BBC, is the outstanding reparations owed to Greece by Germany following the second world war. If Greece called those in, they could start to rebalance the economy, but two things : “don’t mention the war” has prevailed up to this point amongst the professional politicians in Europe, which may all change now an “amateur” is running Greece. Secondly, it could very well open the floodgates, if every country owed money unclaimed for 60 years calls those debts in.
    Speaking for the UK, we will be happy to settle if they just hand over Porsche (joke).

  31. Posted January 28, 2015 at 3:52 pm | Permalink

    I know this is a very simplistic question but what collateral was put up against the loans?Why can’t what happens to normal people when they renege on a mortgage, car loan debt occur – they lose the assets? Doesn’t Europe Central Bank now own the Greek owned power companies and other nationalised industries if Europe’s money had to bail out the country and they won’t repay?

  32. Posted January 28, 2015 at 4:42 pm | Permalink

    They both had their eyes wide open,but as usual, compromise is needed.

  33. Posted January 28, 2015 at 4:57 pm | Permalink

    The Greko-German debt situation reminds me of our post War 2 debt to America. How many years did it take for us to pay off our debt? Why can’t the same situation be applied to Greece here if/when they switch back to the Drachma?

    It seems so grotesquely unfair and unreal that we had to borrow money from an ally in the War in order to save Europe and the German people from the Nazis.
    The Germans were then given loadsa money to rebuild their State when we had to find our own. We were given nowt. The Cold War that followed ensured that the Germans had a very cheap Defence Force (British Army on the Rhine, et al) which must have saved them £Billions of Defence Budget cash. And now, due to their past savings in expenditure (At our expense) and their creditable productivity rates of today, they have become the number one lenders within the Eurozone.
    They encouraged Greece to join their club and to buy German Cars and luxuries on tick with Germany the lender. So the Germans were raking in the cash from the exports and cash interest repayments as Greek creditors. If that is not another stitch up I must be missing something.
    They played the Allies post War2 and now they are playing the co-members of club Euro. They sowed this whirlwind disaster and now they have to reap it. It will not be easy but it is clear the Greeks have had enough.

    And for ourselves, having spent £Billions of our own money helping the Americans in several wars since, I would have though the very least they could have done was write off that WWII debt. But did they? Not one bit.
    Given the amount of Brussels and German fiddling to promote the Euro and exports to Greece, how can I blame the Greeks for wanting the same write offs?

  34. Posted January 28, 2015 at 5:32 pm | Permalink

    Very good entry today and the last paragraph sums it all up there is no easy way out. It all could well end in tears.

    But in the real world of business if you sign up for a contract you have to abide by the rules and that works for both sides. Germany especially and all the other EZ members sowed the seeds and now will have to reap the harvest of their mistakes.

    Germany should take remember the rules of gambling ” You can always get out by paying” It will upset a lot of people and give other countries that are also struggling, hoping for a get out of jail free card. It is amazing that all the EZ never onced asked the question about what would be PlanB in the event of such a scenario ever raising its ugly head.

    But the way that politicians spend our money what can one expect.

    With a private and old age pension I do not get £23K a year to spend and have to make big sacrifices. But as it appears like Greece, those with nothing expect and get so much more.

    That is why I personnally feel that Germany will have to take the hit over Greece but will lay down rules regarding any others who might vote for the same option.

  35. Posted January 28, 2015 at 6:36 pm | Permalink

    I can’t see a solution. Our Union was formed just before the industrial revolution started and the huge foreign trade wealth, before the population had regular news of goings on in the country, political and economic, largely unaware of the transfer union going on. Today to start one you can’t hide that fact and the population northern Europe has wealth and assets to consider.

    I saw there was the attempt at reviving the FTT across the EU. Initial thought is that this latest attempt is not to be taken seriously but serves to remind why we don’t want more integration with the EU project.

  36. Posted January 28, 2015 at 9:06 pm | Permalink

    There will be no solution, just another attempt to kick the problem into the long grass by offering debt rescheduling and a reduction of interest rates in the interim.

    Every time the Eurozone does this the problem always comes back with the situation much worse. Sooner or later they will come up against difficulties they cannot avoid and the whole mess will implode.

    I sense we are not at that stage – yet. Pity.

    We know that Greece should never have been allowed to join the Euro but the cynical way that the Troika imposed draconian terms to put off the problem last time was nothing more than a blatant attempt to stave off the collapse of the single currency. It had nothing to do with saving the Greek economy or looking after its people.

    The outcome for Greek citizens has been the collapse of the economy but more seriously, it has cost many Greek lives thanks to the failure of the healthcare system.

    Equal responsibility for this can fairly be laid at the door of the former Greek Government and those that are in charge of the EU and the Eurozone.

    Put simply, they all have Greek blood on their hands.

    It’s an utter disgrace and those responsible should be turfed out of their Ivory Towers and put to work as cleaners and Porters in Greek Hospitals.

    I know, I’m talking like an old fashioned Communist Roader but this Conservative would have voted for Syriza had he been Greek.

  37. Posted January 28, 2015 at 9:49 pm | Permalink

    Germany has to recognize that it has a moral obligation to help, just as the U.S. and its allies, including Greece, helped Germany after World War II. This is a forgotten history. There is now false narrative of virtuous Germans and feckless Greeks. Then it was the narrative of less virtuous Germans and heroic Greeks!

    That help isn’t just about the debts it’s about putting the Greek economy back on the right path and creating the conditions that will allow Greece to export to Germany and so pay off its debts and create jobs for Greek workers. Just the same as that process created jobs for German workers in the post war period. There’s no point excusing the present debt if the Greek economy isn’t going to function any better in the future than it does now.

    The introduction of the DM in 1948 wiped out most of Germany’s huge domestic debt. This move helped Germany to start afresh and begin the so-called economic miracle. Of course it wasn’t a miracle – it was deliberately planned by the Aliies.

    In 1953, the U.S. also insisted on the London Debt Agreement despite the reluctance of its wartime allies, which largely wrote off Germany’s external debt. There was a desire not to recreate the same conditions, as after WW1, which led to the rise of a vengeful Nazi Germany.

    Greece also contributed to the postwar German debt relief. Signatories to the London agreement, including Greece, agreed to defer settlement of war reparations and debts. Although Germany paid some compensation to individuals in the 1960s, the process was never completed. If the true economic cost of the trashing of Greece by Germany was totalled it would make the costs of putting Greece back on a good economic footing seem like chickenfeed by comparison.

    The bailout of Germany in 1953 was probably more controversial as the Greek one today. If it could be done then it can be done now.

  38. Posted January 28, 2015 at 11:31 pm | Permalink

    http://www.theaustralian.com.au/business/opinion/greeces-new-finance-minister-is-just-what-europe-needs/story-fnp85ntp-1227200321095?nk=bc4184c6c00ebceefad25b39b9b3b349

    From 2012: this may no longer be directly relevant, but it does show the new Greek finance minister can think.

  39. Posted January 29, 2015 at 6:37 am | Permalink

    What is the likelihood that the whole question of an in/out referendum for the UK is overtaken by events and becomes irrelevant? 50:50?
    The Eurozone Crisis could easily lead to a fresh relationship between countries within the Eurozone and is not that hard to see it spilling over to the relationship member countries have with the EU.
    Is there much thinking going on within the Westminster bubble of how to manage such a situation? What leverage can Britain use to push for an outcome in line with its interests?
    If it involves providing cash upfront on a one off basis to secure an outcome beneficial in the long term, I would think that would be a valid use of our inflated, superpower sized the foreign aid budget (only the US has a bigger foreign aid budget), so I hope it is not being fully committed to other projects.

  40. Posted January 29, 2015 at 2:36 pm | Permalink

    If Germany weakens on this then the “moral jeopardy” for the euro will become enormous…The well rehearsed arguments against the euro are overwhelming. The one thing to be grateful to Gordon Brown for is that we did not go into this perilous project!

  41. Posted January 29, 2015 at 3:19 pm | Permalink

    The sticking plaster remedy no longer works, and the patient is now in need of urgent attention, and perhaps an amputation, then a long period in intensive care.

    What is needed is an old fashioned District Commissioner to sort this out!

  42. Posted January 29, 2015 at 5:06 pm | Permalink

    Perhaps we ought to partially blame the big banks who allowed Greece swaps to keep their debt from being as easily seen .Two bail outs, a large deficit and then borrowing money to try and get them out of paying a large deficit does not make sense.Last quarter Greece were hurraying a modest recovery though.

  • About John Redwood


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

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