Is Germany’s European Union falling apart?

A tired Mrs Merkel this week had to fly beyond the eastern borders of the Union she leads to deal with the revolt of Ukraine, and then fly back to the heart of her Europe to deal with the revolt of the Greeks. In a way they are the same problem. In Ukraine the people of Donbas do not wish their country to join the European Union and have rebelled against the pro EU government in Kiev. In Greece the electorate have rejected the usual parties that accept EU control and leadership, and have chosen a new challenger party which rejects the authority of the troika and wishes to renounce EU monetary and economic policy. The European Union looks overstretched.

It is true that the Ukraine problem is exacerbated by Russia. I will repeat again I in agreement with most western commentators condemn any arming of rebels or military intervention by the European Union’s neighbour to the east. The European Union is deluding itself, however, if it thinks the entire Ukrainian revolt is a put up job by Russia. There are many local people in the east of Ukraine who so dislike their government they will take up arms against it. The European Union, as Mrs Merkel showed this week, has to find a way of living with Russia to the east, as Russia will stay there as a geographical certainty and a well armed power that could be friend but might become a worse foe.

Mrs Merkel has rightly decided that a peaceful settlement in Ukraine is the best option. I wish her peace initiative well. The trouble is that for whatever reason the Ukrainian government finds itself in the position where a significant minority of its people will not accept its authority and have taken up arms against it. Now that the Kiev regime in its turn has shelled and bombed those it wishes to be its obedient citizens in the east it will find it very difficult to reassure and resettle the country. Without control of its borders it cannot be sure there are no military personnel and equipment coming in from outside. Without offering guarantees and home rule to its eastern citizens, it will be difficult to control its eastern borders. Meanwhile the European Union has to answer critics who ask why has it given so much support to the Kiev government, without condemning its excessive use of violence?

The Greek financial problems are but the most extreme of a set of problems that have emerged in much of the Eurozone. Ignoring those of us who warned that a single currency could not work well without first creating a single state to back it, Germany with her inner circle of supporting countries rushed into an arrangement which was bound to break. There has to be a transfer union, an agreed system of sending money from rich to poor, from more successful to less successful, in any flourishing currency union. There has to be a banking union where all stand behind the banks of all. Places in deficit have to be easily financed by places in surplus. We do not have cities or counties in England unable to finance their public deficits or their balance of payments deficits with the rest of the country. Nor should they have such problems in Greece or Spain or Ireland.

Could this be mended? Yes it could. The European Union could call a halt to expansion beyond its current borders. It could let the odd country leave as it moves towards political union, with trade and association agreements replacing membership. A smaller Union would have more chance of success. For the core in the currency has to embark rapidly and decisively on moves to full banking and social union, where each country is submerged in the greater whole and each part of the union pays according to its means and receives according to its needs. Germany wants to lead Europe on the cheap. Modern advanced states expect complex and expensive welfare systems, and economic policies which deliver growth and prosperity. The Euro area does neither at the moment.

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127 Comments

  1. Mark B
    Posted February 14, 2015 at 6:38 am | Permalink

    Good morning.

    I am sorry, but I cannot agree to the points raised in this piece.

    Germany does not lead the EU. It maybe a leading light, but not sole lead. And even if it did, I do not worry about this. I worry more for Germany and those that are part of the Eurozone, for reasons given.

    Ukraine is a problem created by the EU. It is something that has been well documented, both here and elsewhere. But I find it odd that, whilst the EU was very keen to have Ukraine sign a watered down version of its agreement, it seems less keen in being seen as an arbitrator of peace. They are most defiantly conspicuous by their perceived. absence. Perhaps they do not want yet another foreign policy disaster on their laps ?

    The current situation regarding the Eurozone is what as known as, ‘The Beneficial Crisis’. Those that created the EMU knew that this would one day happen and, that nations like Germany would be faced with some hard choices. Do they leave the Euro and risk breaking up the EU ? Or do they give in to the process of EVER CLOSER UNION ? Me thinks it will be the latter. And I think that countries like Greece, Spain, Italy, France and others know this too. Merkel is no ‘Iron Chancellor’ , despite what people might think.

    As for countries leaving ? Only if they want to. But who is willing to go first ? I’d say no one, not even the UK. Why ? Human instinct and the aversion to jumping into the unknown, and the lack of a clear and coherent plan. Other than Dr. R. North’s FLEXIT proposals, there does not seem to be much.

    But if one country does leave and is seen to be doing well, nay, even prosper ! Then all bets are off. It is this the EU fears most. Loss of confidence in the ‘Project’.

    The Euro will not end. The EU will not end. But nation states will. They will be sacrificed on those twin alters, and the longer those member nations remain wedded to this, old, tired and quite frankly, barmy idea of a Federal European Superstate, this is there destiny.

    They can only go forward, never back. That is how it was designed. We are all in a prison of our national governments own making. None of us wanted this, but we have no choice, and never ever had one.

    You should listen to us, the people. But you never will, until its too late.

    • Ian wragg
      Posted February 14, 2015 at 8:35 am | Permalink

      Mark. The EU will collapse just at the British, Roman, Ottoman and all other empires before. Richard North’s Flexit assumes an orderly exit or default but I fear it will be quick and messy as with the Soviet Union collapse
      Our political class are generally stupid and have no idea how to extricate us from this mess. They cling to Angelas coat tails as they are afraid to make any decisions remotely in the UK interest.
      Only today (3 party leaders ed) are signing up to close the rest of our coal fired power stations even though there is no prospect of any nuclear stations in the next 10 years.
      The ceasefire in Ukraine is already in trouble due to our unwillingness to arm ourselves.
      None of the Liblabcon deserve our votes in May. The future looks bleak.

      • Gary
        Posted February 14, 2015 at 10:11 am | Permalink

        I will venture to say that most everyone here has got it wrong. You have bought a pottage of lentils sold to you by interested parties, especially politicians and the press.

        The EU, while an abomination, is not the root of all ills. The entire globe is burdened by the same root problem : the banks are hopelessly bust , they have tens of multiples more debt than the entire global GDP and they are being bailout on an ongoing basis by a confidence trick called QE. Derivative debt alone is worth at least $700 Trillion outstanding, and that was back in 2009 and now it is likely far more. The global GDP is about $60 trillion during good times. We are all bust, some worse than others. This has nothing to do with the EU per se. This is a global banking problem dressed up as anything else.

        Only Simon Jenkins has the guts to tell it as it is.

        http://www.theguardian.com/commentisfree/2015/jan/22/qe-eurozone-confidence-trick-quantitative-easing-money-circulation

        Stop falling for red herrings. Focus on the real root of our global problems.

        • Gary
          Posted February 14, 2015 at 10:22 am | Permalink

          If you want to talk about EU sovereign(govt) debt, then the UK govt has a bigger debt load to GDP than any EU country. But I’m sure it’s all the EU’s fault.

          The EU is the best thing that this govt ever had. It can be kicked on cue, day after day.

          • graham1946
            Posted February 14, 2015 at 8:33 pm | Permalink

            The clever dicks who reckon they understand economics (even though that subject is more religion than science) have been predicting the end of the world for donkey’s years. It hasn’t happened, nor will it. There is far too much big money involved and big money people who would get hurt and they won’t let it happen, however much fudging has to take place. The ‘economists’ were telling us QE was going to cause Third Reich inflation and what have we got? Deflation, pretty much. The big players on the world’s markets have never had it so good – money just cascades to them, similarly with the global corporates. The world’s governments are undoubtedly bust, but they will be kept going, because if the music stops so will the world order. However much money they need will be provided – there is so much private money sloshing around, it has to go somewhere, which is why we get plenty at record low rates. If economics was a science this would not happen.

        • Mark B
          Posted February 14, 2015 at 12:53 pm | Permalink

          Gary

          You are quite correct, it is not all the EU’s fault. But they are at fault for the mess in Ukraine. They are at fault for sticking with an idea that has no democratic mandate, certainly not in the UK, for EVER CLOSER UNION. It is our fault for trusting the political class, and it the political classes fault for not acting in the interests of those that elect them.

          Looking back is not always the answer. We need to look forward. The EU, and in particular, the Eurozone, is going down hill. It’s dying on its feet. And it will take us all down with it as the political class, both here and elsewhere, are committed to its survival, even at the expense of our own nation.

        • Denis Cooper
          Posted February 14, 2015 at 2:57 pm | Permalink

          As I’ve said before, it is misleading to quote numbers for gross debt such as your “Derivative debt alone is worth at least $700 Trillion outstanding”. Almost all of that will be debt of a basically circular nature which would cancel itself out, with A paying B who paid C who paid A, etc, and the differences between the payments would add up to only a fraction of that gross total.

          As a simple hypothetical example, if you and I really wanted to scare and depress ourselves we could very easily do that: we could agree that I would lend you a trillion pounds, while at the same time you would lend me a trillion pounds, and as obviously neither of us would have a hope of ever being to pay off our gross trillion pound burden of debt, we would be bust, finished, kaput … except that we wouldn’t be, because for each of us our net debt to the other would be precisely zero.

          And as I’ve also said before, although some of the commercial banks have indeed been bailed out by the UK state that was not done through “quantitative easing”; that much should be obvious from the fact that the RBS and Lloyds bailouts took place long before there was even any talk of possibly moving to what was initially being referred to as “unconventional monetary policy”, later “quantitative easing”.

          • APL
            Posted February 15, 2015 at 4:08 am | Permalink

            Denis Cooper: “almost all the debt is of a basically circular nature”

            Which is true, until your counterparty collapses,….

          • Gary
            Posted February 15, 2015 at 7:42 am | Permalink

            If it is so easy to get out from under this derivative mountain then why don’t they just cancel them and be done with it. ?

            apl is correct, when just one counterparty cannot pay it ripples right through. Under such a likely condition this systemic bet puts the entire system at risk.

            At a minimum of $700 trillion notional, almost all in interest rate bets, a tiny move in rates is a huge swing (with leverage) in derivative winning/losing. In a zero sum game, one party loses, the other wins by equal amount. The numbers are so huge that the losers can’t pay the winners, the losses can be far greater than all the banks’ equity, so the central bank has to step in and meet the losers’ margin calls.

            Warren Buffett said “derivatives are easy to enter and almost impossible to exit.”

          • Denis Cooper
            Posted February 15, 2015 at 11:34 am | Permalink

            Why should they want to just cancel them?

            For many companies and individuals derivatives of various kinds are a perfectly legitimate way of limiting risk; in fact originally the term “hedge fund” referred to a fund which was managed to minimise risk to investors’ capital even if their returns tended to be reduced by the cost of hedging, it is a later development that the term has become associated with high risk speculative activities.

            As for the speculators, just as aristocrats liked to gamble and in some cases gambled away their families’ fortunes so there are some modern day speculators who will win and others who will lose, and provided that their losses which will “ripple” out pose no significant risk to the financial system that is really just their business and nobody else need concern themselves about it.

            If you have ever thrown a stone into a pond you will have noticed that the amplitude of the ripples diminishes as they move outwards; so it is with the effects of some speculative company going bust, the consequent losses usually get absorbed by a progressively increasing number of other companies and individuals and most of them survive their small shares of the losses.

            Only if it seems that there would a significant systemic risk does it become necessary for governments and in particular central banks to intervene, obviously a highly undesirable situation and one which should be prevented from arising by regulators as far as that is possible.

            As for Warren Buffet’s claim, it doesn’t make a lot of sense when most of these instruments expire at a certain date; if you don’t want to continue with any future involvement with them then you don’t.

          • Gary
            Posted February 15, 2015 at 4:49 pm | Permalink

            ah, Denis. I see you insist on saying commercial banks don’t get bailed out by QE, and guess what ? I agree with you(and maybe Jenkins does as well)!

            It is the broker dealer banks that get bailed out by QE, what most people call investment banks. And it doesn’t matter if they are intermediaries of the treasury or from holders in the secondary gilt market, they can sell at a profit to the central bank, and do it again and again and again. If you deal with the central bank , whether the treasury or a pension fund, you must go through the broker dealer banks. These are the same banks that are the big derivative dealers. Coincidence? I doubt it.

          • Denis Cooper
            Posted February 16, 2015 at 11:46 am | Permalink

            Gary,

            I’ve referred in the past to “transmission losses” as the new money was passed from the Bank to the Treasury via the gilts market. But that is all they were, relatively small sums creamed off by the various market participants in the form of commissions and small profits from selling to the Bank at favourable prices while in parallel buying from the Treasury at favourable prices, basically sweeteners at each turn to get their willing cooperation in the scheme.

            I can’t say with any certainty how much of the £375 billion was creamed off in that way but it would be a small fraction, and I guess that 99% plus of the money ended up where it was intended to go, with the Treasury, which then used it to help pay the government’s many bills, including those for state pensions and social security benefits .

            If Simon Jenkins had been paying proper attention during 2009 he would have seen this for himself and would not now be claiming that the point of QE was to bail out wicked bankers. He only had to keep an eye on the appropriate sections of the websites of the Bank on the one hand and the Treasury’s Debt Management Office on the other, where the information about the Bank’s purchases and the Treasury’s sales was being constantly published week by week, to see what was happening, and if he had any brains he would have soon realised then that it was the Labour government which was being bailed out, not the banks.

            Alternatively he could have just kept an eye on this blog, where JR was publishing articles about what he called the “money-go-round” and detailed information about the latest purchases and sales of gilts was offered in some of the comments, with links to the documentation.

            In fact looking back I find that my own first comment on this matter on this blog was on March 13th 2009:

            http://johnredwoodsdiary.com/2009/03/13/what-the-regulator-should-say-today/

            “Shouldn’t the FSA have a view on the government rigging the market in its own bonds?

            And shouldn’t the Official Opposition also have, and forcibly express, a view on that?

            Mondays and Wednesdays, Bank of England uses newly created money to buy existing gilts and remove them from circulation.

            Tuesdays and Thursdays, Treasury’s Debt Management Office sells new gilts to help fund the government’s budget deficit.

            Nothing peculiar about that? And no political or electoral implications worthy of note by the Official Opposition?”

            As I say, it shouldn’t be so difficult to understand this.

          • APL
            Posted February 16, 2015 at 8:08 pm | Permalink

            Denis Cooper: “Why should they want to just cancel them?”

            The problem Denis, is that derivatives are largely unregulated. If we had an exchange where margin had to be posted – that would go some way to addressing my concerns.

            Otherwise, it’s a bit like floating shares on the stock market (without a legitimate company) betting that hysteria will carry the price higher. It’s been done before but in most regulated markets that sort of thing is illegal. It should be for derivatives too.

            ( Even in the regulated markets during the dot com boom it happened)

        • Denis Cooper
          Posted February 14, 2015 at 4:27 pm | Permalink

          Well, I’ve just read that article by Simon Jenkins, and it’s clear that he’s labouring under the same basic misconceptions as yourself and indeed many other people. Which is rather worrying, when they’ve now had five years to understand something which became obvious within just a few months of QE being started in early 2009 – that its primary purpose was to make sure that the Labour government wouldn’t run out of money to pay all of its bills in full and on time and without having to make drastic cuts in its spending during the year leading up to the 2010 general election. The key being that as the Bank of England was buying up previously issued gilts from normal investors the Treasury was selling new gilts to much the same set of investors at much the same rate, so that money flowed through the gilts market from the Bank to the Treasury while gilts moved in the opposite direction and the Bank (or more exactly its wholly owned subsidiary) ended up being the government’s largest single creditor, a kind of captive gilts investor.

          • Gary
            Posted February 15, 2015 at 7:58 am | Permalink

            bonds that are bought under QE are, as you say, previously sold gilts already in circulation. The govt gets nothing from the actual trade in these secondary bonds. What the govt does get is the benefit of lower rates caused by the QR trade. And even that’s a chimera, because while the govt has lower rates to pay now, the liquidation cost of its debt rises. A big future problem.

            All dealings with the central bank are done through designated broker-dealers ie banks. It is these “investment” banks that reap(are bailed out) from QE. It is a bank bailout. These banks have a guaranteed buyer of all the bonds they can lay their hands on, at any price. Why must they lend to anyone when they have risk free profits? They don’t.

            Jenkins is correct.

          • Denis Cooper
            Posted February 15, 2015 at 12:07 pm | Permalink

            You’re still missing the most important point: above all else, what the Labour government got in 2009 was the certainty that it could sell new bonds to normal investors to fund its budget deficit, unlike the Greek government which got into the position where it could no longer sell its bonds at any feasible interest rate let alone a low one.

            And that was the case because despite the Treasury selling huge volumes of gilts, enough to fund about a quarter of government spending, there was no significant net increase in the total volume of gilts held by those normal investors, who overall were selling gilts to the Bank as fast as they were buying gilts from the Treasury.

            It shouldn’t be so difficult to understand this!

            And, once again, you and Jenkins fail to recognise the simple truth that commercial banks were not and are not major investors in gilts; most of the gilts bought by the Bank came from pension funds and insurance companies and various other investment bodies rather than from banks, just as most of the new gilts were sold to pension funds and insurance companies and various other investment bodies rather than to banks.

            You can see from the Table for September 30th 2014 here:

            http://www.dmo.gov.uk/documentview.aspx?docname=publications/quarterly/oct-dec14.pdf&page=Quarterly_Review

            that of the £1,490 billion of gilts in issue only £140 billion were held by “Monetary Financial Institutions”, that is banks and building societies excluding the Bank of England; that was less than 10%, against 25% being held by the Bank, the government’s largest single creditor by far.

            The fact that banks may act as agents for buying and selling gilts on behalf of other investors is irrelevant, as agents they are not themselves the beneficial owners of those gilts.

          • petermartin2001
            Posted February 15, 2015 at 12:28 pm | Permalink

            Denis,

            The distinguishing characteristic between QE and monetising debt is somewhat arbitrary and depends on motivation. With the former, the central bank creates money to supposedly stimulate the economy, and which incidentally I’d agree can’t work because its just an asset swap, not to finance government spending, which is the motivation for the latter.

            You’re obviously convinced yourself that it’s all about monetising the debt or financing government spending. That could be a good or bad thing depending on circumstances. Say inflation went went very low, or even negative. Furthermore say there was a general suspicion that the banks were close to being insolvent. The sensible thing, under those circumstances may well be to just save money as bundles of cash hidden away or in a safe.

            Government wouldn’t be able to borrow that money. But to keep the economy moving, and prevent further deflation, that saved money needs to be utilised somehow. The sensible thing for Government is to just ‘print’ some more and spend it. Effectively it is just borrowing the saved money in the way it would had it been put into the banking system.

            So what’s the problem? High Inflation? Well if that is the problem then government needs to stop doing that and even reverse the process. We’d all agree on that. But if it isnt? Then there’s no problem at all!

          • Denis Cooper
            Posted February 15, 2015 at 1:55 pm | Permalink

            Peter

            “The distinguishing characteristic between QE and monetising debt is somewhat arbitrary and depends on motivation”

            No, it doesn’t depend on “motivation”, it depends on the use to which the new money created by the central bank is put; and with the form of “quantitative easing” practised in the UK almost all of the newly created money was used to help fund the government’s budget deficit and make sure that it didn’t run out of money to pay its bills; and referring to that as “monetising debt” is just another obfuscation.

            How do we know that almost all the new money created by the Bank was used to make sure that the government could pay its bills?

            Because although Darling initially said in his letters to the Governor that the Bank should purchase private sector assets, and only later added gilts, it quickly became clear that in reality the Bank was ONLY buying gilts in any significant volume; one Telegraph journalist asked why the Bank was not purchasing other assets, but seemed unable to understand that it would be pointless for the Bank to buy anything that the Treasury did not have for sale; then on May 6th 2009 a Spectator journalist wrote an article about

            “The alarming trends surrounding quantitative easing”,

            saying:

            “The Bank of England today confirmed that less than 1% of the £44.5bn it has printed has gone to buy company loans – it had indicated that as much as a third of the £150bn pool would go to companies. Instead, it is a mechanism to help the government issue the £240bn of gilts it’s issuing this year. Why is this important? Because if the markets think QE is actually a way of one department of the government printing money for the other departments to spend (a la Weimar Germany), then confidence in the currency collapses. And right now, it looks very much like the Bank of England’s asset purchase programme is a device to buy state debt, masquerading as an attempt to target inflation.”

            but thereafter remained studiously silent on the subject.

            If the Bank of England had wanted to supply commercial banks with cash, as Jenkins mistakenly supposes, then it could have offered to buy bonds from them; the same with other private companies, if the Bank had wanted to inject new money into private companies to get investment going then it could have made it known that it would be willing to look at buying new bonds from them; instead the Bank ONLY bought up bonds previously issued by the Treasury while in parallel the Treasury was issuing new bonds, and these two processes, the Treasury selling gilts and the Bank buying gilts, were running in parallel week after week.

            And that is why the Bank now owns about a quarter of all the gilts in issue, as the government’s largest single creditor by far, but it no longer holds even the very small volumes of “corporate bonds” or “secured commercial paper” which it bought in early 2009:

            http://www.bankofengland.co.uk/markets/Pages/apf/results.aspx

            Purchases financed by creation of central bank reserves:

            Gilts £374,932mn
            Corporate Bonds £0mn
            Secured Commercial Paper £0mn

        • Lifelogic
          Posted February 15, 2015 at 5:50 am | Permalink

          If someone has a debt then some one else holds the asset of that debt – we thus cannot all be “bust”.

          • Gary
            Posted February 15, 2015 at 8:07 am | Permalink

            when a loser cannot afford to pay the winner because the losses are larger than his total equity, the the winner’s “asset” is zero. And the winner may as a result also go bust. When $700 trillion is outstanding, BUST is the operative word on minute rate swings.

            We speak too freely of assets, and never mention the quality.

          • Denis Cooper
            Posted February 15, 2015 at 10:54 am | Permalink

            No, the value of the winner’s asset is not zero. It may well be a lot less than the value he still has recorded on his books, but not zero; and whether that loss will be something he can survive or it will be enough to break him will depend on how much it represents of his total assets and by how much his total assets exceed his total liabilities. Companies including banks can go bust without bringing down the whole system provided that the associated losses are spread around, and if the losses are so large and so concentrated that there is a significant risk to the financial system then governments and central banks can step in to limit the damage, as indeed has happened.

          • Lifelogic
            Posted February 15, 2015 at 11:00 am | Permalink

            Well if the borrow defaults (in full or in part) they, in effect, have a smaller or no debt at all. The lender thus has a smaller or no asset.

            As I say we cannot all be bust. Total debt balances total loans and there are still some tangible and real assets around.

          • petermartin2001
            Posted February 15, 2015 at 12:53 pm | Permalink

            Well if the borrow defaults (in full or in part) they, in effect, have a smaller or no debt at all. The lender thus has a smaller or no asset.

            Yes this is the view of classical economics.Its incorporated into their theories. Yet, whatever we feel should, or should not, be the case, our observations do tell us that large scale defaulting on debts does create havoc in the real economy.

            Of course, sovereign governments like the UK and USA can never default on their debts. Any defaults have to come from the private sector. We, unlike government, cannot create our own money.

            Consequently, any ‘theory’ which ignores the realities of what we know to be true must be seriously deficient. I think the economist Prof Steve Keen, who is easily found on the net, is the one who argues this point most strongly.

      • Timaction
        Posted February 14, 2015 at 11:37 am | Permalink

        The legacy party leaders always lie about the political project as to tell the truth would uncover their lies, treachery and deceit over 40 years. Even now we get the politics of fear from all three on the disaster that would befall us if we left this dictatorship. We simply do not need to be in the EU to trade (£77 billion annual trade deficit) with the nations that make up the union. We don’t pay £14.5 billion a year and rising to foreign Countries outside the EU to trade with them. The idea would be preposterous. We don’t have to have free movement elsewhere so why the EU? A country with such little control of its borders, its laws and trade is NO sovereign democratic nation at all. We need significant change and there is only one patriotic party left to remove the treachery from Westminster!

      • Mitchel
        Posted February 14, 2015 at 1:53 pm | Permalink

        It is reported on the Russian media today that the neo-nazi element of the Ukrainian war effort,the Right Sector,have stated that they will not be bound by the peace plan and will continue their fight against “Russian terrorists”.

        • Hope
          Posted February 14, 2015 at 7:43 pm | Permalink

          The LibLabcon cartel announce their joint venture to promote EU policy on climate change. It demonstrates there is no difference between them and that their overriding policy is all things EU. No wonder Cameron showed his allegiance to the other two at the Rochester by election.

        • bluedog
          Posted February 14, 2015 at 7:53 pm | Permalink

          Haven’t the ‘Russian terrorists’ said exactly the same thing? The simple fact is that Russia seeks to establish a land-bridge through Ukraine to its recently acquire province of Crimea, and there will be no peace until that objective is achieved. EU politicians not withstanding.

        • graham1946
          Posted February 14, 2015 at 8:51 pm | Permalink

          It is surprising that anyone really thought anything would come of this ‘agreement’. It was simply Putin playing the others and was a get out of jail free card. I doubt there will be any more ‘negotiations’ when it all comes unstuck and Russia does just what it wants anyway. They have an interest in stirring things up so that they ‘have to go in’ to sort it all out. It’s all orchestrated from Moscow.

    • Mondeo Man
      Posted February 14, 2015 at 9:16 am | Permalink

      This article seems remarkably pro EU.

      “We could make it work thus…” (Not quoting JR directly here)

      Most of the people in this country do not want to be part of the EU full stop.

      • petermartin2001
        Posted February 15, 2015 at 5:28 am | Permalink

        It’s not really fair to put words into John’s mouth like that. Anyone can take a pro or anti EU position. That’s fair enough either way in a democratic society.

        Its also fair enough, either way, and especially while the UK is still a member, to let the EU know where it is going wrong. Europe, with or without the EU, is likely to be our largest trading partner for the foreseeable future. We want them to do well so we can do well too.

    • Leslie Singleton
      Posted February 14, 2015 at 10:00 am | Permalink

      Mark–“Never back” is a major disillusion and problem and to the extent that it is true it makes far too many people and peoples, many of whom hate each other, and with good reason, feel trapped. I should be interested to hear of any other empires in history which agglomerated on any basis other, at the time, than what they were doing would, they thought, be forever. A jump to a single country, OK, if it could be done but the EU is nowhere near that and for my money never will be.

    • DaveM
      Posted February 14, 2015 at 10:16 am | Permalink

      In response to Mark and Ian;

      1. No, Germany does not lead the EU. I would describe Merkel as “Lead Planner” perhaps. But, characteristic of planners as opposed to leaders, she lacks the capacity to adapt and react. She sticks religiously to the path she thinks is right without the vision to see that either side of the path is chaos. Unfortunately, the only strong leaders in the EU at the moment seem to be opposed to the EU machine and therefore hamstrung by it and its systems, media control, etc.

      2. All empires collapse eventually because countries are countries for a reason – they are divided by natural geographic boundaries and different tribal customs and ways-of-life. People won’t accept leadership unless it comes from within their own society. Immigrants either have to adapt or become marginalised. If only the EU would realise this.

      • Mark B
        Posted February 14, 2015 at 12:59 pm | Permalink

        DaveM

        To quote (badly) Lady Thatcher (RIP).

        “He wants the Council of Ministers to be the Senate. The EU Parliament to be the Legislature, and the Commission to be the Executive.”

        “No, no, no !”

        Merkel only represents only one branch of our new government.

    • Timaction
      Posted February 14, 2015 at 5:05 pm | Permalink

      Whilst we’re into returning integrity by the legacy parties into politics the following link is worth a read:

      http://www.brugesgroup.com/eu/britain-and-europe-the-culture-of-deceit.htm?xp=paper

      It was written by Christopher Booker in 2001 following the release of Government papers under the 30 year rules. It demonstrates the lies, deceit and lengths of treachery our legacy party leaders have gone to hide their EU political project over 50 years. The main stream media are clearly colluding with the former leading parties.
      The people responsible should be held to account! Shame on them. The truth will come out from the only patriotic party.

    • Jerry
      Posted February 14, 2015 at 6:02 pm | Permalink

      @Mark B; “Do they [the economically strong, such as Germany] leave the Euro and risk breaking up the EU ? Or do they give in to the process of EVER CLOSER UNION ? Me thinks it will be the latter. And I think that countries like Greece, Spain, Italy, France and others know this too. Merkel is no ‘Iron Chancellor’ , despite what people might think.”

      Much the same was said in Washington DC (I think) about five or six years ago, their massage was that if the Euro is to survive and work properly then there needed to be “more Europe”, in other words a proper federalisation, and wasn’t this our hosts conclusions too?

      “The Euro will not end. The EU will not end. But nation states will. They will be sacrificed on those twin alters, and the longer those member nations remain wedded to this, old, tired and quite frankly, barmy idea of a Federal European Superstate, this is there destiny.”

      That makes no sense, no doubt many in the pre-federal USA probably thought the same, and even Texas eventually realised that Texans will always by Texans – and just look at how those in the USA celebrate not only their pride in the USA as a whole but of their respective States too – and unlike the old USSR they do so freely and willingly.

      My fear is not so much of a properly federalised European Superstate with a democratically elected President, Senate and Representatives etc. but some sort of make-do and mend muddle, not helped by the use of PR (and the different forms of it) to elect ‘parties’ were some are nothing more than NGO pressure groups that if elected can only then survive by the artificial creation of those silly “groupings” with a group-wide policy then being made on the hoof meaning that the electors often get nothing of what they actually voted for – if such groupings actually work then make the prospective parties/MEPs stand for election under the group banners and collective policy rather than some soon to be irrelevant party banner and wish-list. Yes I am perhaps calling for proper pan-European parties at the top level!

      “[MPs] should listen to us, the people. But you never will, until its too late.”

      No, what you mean is that they should listen to people like you and those who think like you, the vast majority of MPs do far more listening to their constituents opinions than I suspect you or I would over-hear people in a crowded building discussing the weather, the footy results or what ever, even if they do not they still have to listen every four to five years, but then the people don’t often change their minds – why, because as you said “Human instinct and the aversion to jumping into the unknown”. For the vast majority, life within the EU is not bad, if it was then they would change their minds and in the UK a party such as UKIP might well be the largest party at Westminster or, as in Greece, the people might opt for a radically left wing party that also vowed to leave the EU (and there is at least one).

      I know of a few hard core UKIP supporters/holder of office, some who are just voters, others party members, the odd local councillor, even a PPC, in more candid moments many admit that even if a referendum was held the wished for “Out” result is NOT certain. As much as many on Johns blog wish to leave, there needs to be “Plan B”, and that will need to be as a part of a Federal European Superstate and if the UK has voted to stay in then the UK needs to be sitting with both feet under the table and both fists banging on it so to at least try and take the EU in a better direction, but we can’t expect do that from only Referendum day+1 , we need to lay some foundations if we are going to stand any chance of being listened too – perhaps this is Cameron’s idea in wanting renegotiation first, and 2017 because it will be easier to do so whilst the UK holds the revolving Council Presidency…and thus we are back to John’s blog from the other day about honesty being the best course, I wonder if his boss read it…

      I will now put the fire retardant overalls on and await the flames!

  2. Lifelogic
    Posted February 14, 2015 at 7:02 am | Permalink

    Indeed you are surely right.

    Meanwhile we have Cameron (invariably 180 degrees out on nearly every issue) foolishly reverting back to his green crap husky hugging – with support for the moronic climate change act and the green exaggeration religion.

    http://www.theguardian.com/environment/2015/feb/14/cameron-clegg-and-miliband-sign-joint-climate-pledge

    I find it impossible to believe that Cameron is really a Co2 devil gas catastrophe believer – contrary to all the sensible science and indeed the simple temperature measurements. Surely he just thinks that is where the floating votes in the marginals are? He is surely wrong on that too. The votes are in cheaper energy, warm homes and fewer exported jobs as a result.

    As Freeman Dyson put it:- “If it doesn’t agree with experiment, it’s wrong.” how many more years of (unpredicted by the green loons) lack of world global warming is needed to show their models are complete drivel, 18+ years so far? Not to mention all the documented scientific manipulations, tricks and deceptions the fraudulent green priests have used to maintain the “c02 warming catastrophe exaggerations” and their research grant stream?

    The suggestion that any warming will be catastrophic is simply not supported by the science, there is no reason to assume huge positive feedbacks will lead to thermal runaway. Negative feed back is far, far more likely.

    There simply has been no “statistically significant” warming, outside normal variations. Nothing at all that gives any scientific reasons at all to assume any catastrophic thermal runaway is round the corner. Sensible atheist scientists (especially the physicists) understand this. Slightly warmer with more crop growing c02 is almost certainly preferable anyway.

    • Lifelogic
      Posted February 14, 2015 at 7:17 am | Permalink

      The BBC reporter today described the UK climate change act as “world leading”. But leading where one wonders? To jobs exports, absurd green grants and frozen pensioners. Fortunately few others in the rest of the world are following.

      It is actually unscientific, economic, environmental and religious lunacy – endlessly propagated by the unscientific politicians & the arty loons at the BBC.

      • fedupsouthener
        Posted February 14, 2015 at 8:23 am | Permalink

        Once again, Lifelogic, the voice of reason. Totally agree with what you have said about Cameron and his U turn on climate change. You are right in saying the scientific evidence is not there and that global warming is not happening and has not happened for 19 years now. The figures produced by the ‘husky huggers’ have been manipulated to show that warming is happening and it is an insult to science. Agenda 21 springs to mind. All this is about is votes but as you say, he would gain more respect by standing up and saying that it is time to implement a proper energy policy and not one based on ideology. Still, it will present an opportunity to tax us more by the back door and hope nobody notices while they freeze in their homes. I would say that rather than climate change being the biggest threat to mankind, Mr Putin is a bigger threat at the moment. Cameron should deal with real politics rather than posturing on the ‘green’ front.. In light of this news I am not voting for any major party for the first time in 40 years.

        • Peter Stroud
          Posted February 14, 2015 at 10:19 am | Permalink

          Cameron has not made a U turn on climate change: he has always been on the side of the warmists. Remember, his government was to be the greenest ever. Cameron’s remark about “green crap” was made in a fit of pique. There are some back benchers who are sceptics, but they need to act as one if they are to be effective.

          • fedupsouthener
            Posted February 14, 2015 at 7:03 pm | Permalink

            It’s not important if Cameron remarked about ‘green crap’ in a fit of pique. He said it and many thought that he had at last come to his senses but it was all but a dream. In reality his energy policy means more fuel poverty for many and more job losses.

          • Lifelogic
            Posted February 14, 2015 at 11:52 pm | Permalink

            Well a double U turn – husky hugging, to green crap, to we will not reform the totally insane climate change act.

        • Hope
          Posted February 14, 2015 at 10:48 am | Permalink

          Drax- destroying forests and being transported across the Atlantic as well as diesel powered generators are the way forward to creat our energy supplies for these looney tunes? PPE courses at Oxbridge must be scrapped for our national security and well being.

          • Lifelogic
            Posted February 14, 2015 at 11:54 pm | Permalink

            They do not seem to hot on the E (in PPE) standing economics either. They all seem to think their is a magic money tree and endless government waste is a jolly good thing.

        • Atlas
          Posted February 14, 2015 at 11:34 am | Permalink

          fedupsouthener & Lifelogic

          Agreed.

          The climate change debate reminds me of a colander ( a kitchen device which has many holes in it). If you examine every claim you find it ‘leaks’ a bit but not enough to be a show-stopper. However all these leaky arguments taken together indicate that the basic premise (man made warming) is not strong.

          “The science is settled” – I think not !

          • Bazman
            Posted February 14, 2015 at 5:04 pm | Permalink

            You need to come with some sources and not crackpot sites and scientists agreeing with your nonsense.
            More simply a human made self sustaining environment has not survived for long so why do you think that mankind makes no difference to the climate or if we do it will all be OK. Religious nonsense based on right wing lassi faire beliefs that never apply to themselves. Bigotry.

          • Lifelogic
            Posted February 14, 2015 at 11:56 pm | Permalink

            Well a little warming perhaps but suggesting certain catastrophic & irreversible warming is clearly absurd.

          • Bazman
            Posted February 15, 2015 at 10:45 am | Permalink

            Not that absurd for an ever increasing amount of countries including here. Not catastrophic means anything that does not affect you as we have read.

          • Ted Monbiot
            Posted February 15, 2015 at 2:45 pm | Permalink

            As you say Baz mankind has not been around very long in terms of the life of the planet.
            Yet huge changes in temperature and physical geography happened before we came along.
            Its not that I refuse to accept mankind has an effect but that I refuse to accept that mankind is 100% responsible.

            Now we are all supposed to be alarmed because there is a less than one degree rise since 1900, and no rise since 2000 when the rate of temperature increase was predicted to accelerate.
            Yet the temperature of the planet has never had a fixed temperature according to scientists.
            Source UK Met Office and IPCC reports.

          • Bazman
            Posted February 15, 2015 at 9:32 pm | Permalink

            One degree is not in a cup of tea fools.

        • Timaction
          Posted February 14, 2015 at 11:39 am | Permalink

          ……………Then join the peoples party!

      • A different Simon
        Posted February 14, 2015 at 11:19 am | Permalink

        Lifelogic ,

        Are you questioning whether Bryony Worthington , the girl Ed Miliband got to draft the climate change act , was suitably qualified ?

        She did an English Literature degree at Queens College Cambridge and was previously employed as a Climate Change Campaigner for Friends of the Earth .

        Can it be right that these unelected , third sector NGO’s should formulate Govt policy ?

        Rather begets the lie that they are harmless .

        If the work of fiction was properly categorised one would find it in the tragedy section of a library .

        • Lifelogic
          Posted February 14, 2015 at 11:58 pm | Permalink

          Indeed would you want fly on a plane designed by an English Graduate even a Cambridge one?

          • petermartin2001
            Posted February 15, 2015 at 1:23 pm | Permalink

            If the mainstream scientific theories on climate change are correct then government policy simply needs to act in a way to reduce CO2 and or the Greenhouse gas emissions to a below a certain acceptable level.

            It’s not that hard in principle. Anyone could draft the legislation with a bit of help. But, in practice it is hard to find the necessary political will to get that legislation generally accepted and passed.

            The plane that we are being asked to fly on, by those who seek to undermine what political will there is, is neither designed by the said Ms Worthington, nor by those in the Royal Academy of Sciences. We are assured that we can safely carry on, flying along as we are, and that, whatever risk of a crash there might be, is so small as to be negligible.

            What happens if they are wrong and mainstream science is right? Sometimes we do get a second chance to correct our mistakes, but not this time we won’t!

          • Ted Monbiot
            Posted February 15, 2015 at 5:31 pm | Permalink

            Peter,
            We are signed up to the Climate Change Act which legally requires the UK to reduce its CO2 output by 80% by 2020
            The most radical attempt at tackling climate change of any other nation on the planet.
            So we can all now relax, as the end of the world has been postponed, at least for us here in the UK.

    • stred
      Posted February 14, 2015 at 10:02 am | Permalink

      The truth is the general population have been bamboozled by the AGW propaganda and will not even listen to the ‘lukewarmist’ or sceptic side. They are firmly labelled as ‘deniers’ as were the religious deniers, before they were executed. All that is required is a ‘consensus’, just as there was a consensus that peptic ulcers could not be cured by antibiotics. Surgeons continued to use the conventional surgery for 12 years before they ceased their trade.

      I emailed the recent lecture by Dr William Happer to my family and explained how he was a very experienced scientist and had put the case clearly. None of them have even bothered to watch it. It is embarrassing having a denier in the family! Actually I am a lukewarmist who thinks there is a reason to change to gas now, stop wind, reasonable cost nuclears asap and biofuels for aircraft when available and cooked by nuclear. The reason being that long term the demand for fossil will outstrip supply. But not many know this.

      • Martyn G
        Posted February 14, 2015 at 1:33 pm | Permalink

        I do understand your position. The younger elements of our families have now been exposed to the AGW stories that they have effectively been brainwashed, which of course has lain behind the AGW prophets of doom for many years past. On the other hand, for those with a longer memory here are a few examples by those prophets of doom…..
        1970 – We will be in a new ice age by 2000.
        1976 – Global cooling will cause a world war by 2000.
        1989 – Global warming and rising sea levels will wipe entire nations off of the map by 2000.
        1990 – We have but 5 to 10 years to save the rain forests.
        1999 – The Himalayan glaciers will be gone in 10 years.
        2000 – Snow will soon be a thing of the past.
        2007 – Global warming will cause fewer hurricanes.
        2008 – The Arctic will be ice free by 2013.
        2012 – Global warming will Cause more hurricanes (see 2007!)
        2014 – The science is settled, climate change is real.

        • Lifelogic
          Posted February 15, 2015 at 12:01 am | Permalink

          Did they not say we would run out of oil by about 1990 too? Yet it is still rather cheap (without the tax that is).

      • Bazman
        Posted February 14, 2015 at 5:06 pm | Permalink

        Fossil fuels will never run out a fact that many deniers seem to like and I agree with them.

        • Lifelogic
          Posted February 15, 2015 at 11:07 am | Permalink

          The clear solution is to use fossil fuels until we crack nuclear fusion or some of the many other solutions.

          There is no point in leaving cheap fuel fossil fuels in the ground. Use them to help fund the R&D for alternative or to cover the time gap. But do not role out daft engineering with tax payer subsidies until they are actually working economically. That way (as the current Ed Davey policy seems to be) is total insanity.

          • Bazman
            Posted February 16, 2015 at 7:51 am | Permalink

            Tell that to China choking in pollution from fossil fuels and desperate for an alternative in their case they are not economic or viable in the long therm. In many cases alternative energy sources are economically viable a point that you refuse to believe, but again you do not own the facts and how do you propose to get these new energy sources without research and subsidy.Will the free market fairy bring them? This is insanity and coming from someone in the most subsidised and least regulated industries in the world. The UK housing rental market.

          • Robert Christopher
            Posted February 16, 2015 at 8:40 pm | Permalink

            “Tell that to China choking in pollution from fossil fuels”

            They need to upgrade their equipment: there is no excuse for choking pollution. If the Germans can burn Lignite properly, the Chinese should be able to, even if they import German knowhow!

    • Hefner
      Posted February 14, 2015 at 10:20 am | Permalink

      £1.13 billions and £3.6 millions: the UK government spent 314 times more supporting the development of the fossil fuel industries abroad ( through its export credit agency _UKEF_) than it did for that of renewable energies.
      How much more should this or next government spend to please the commentators in this blog?

      • Ted Monbiot
        Posted February 14, 2015 at 3:58 pm | Permalink

        Billions are being spent on renewables not a few millions.
        I dont know where you get your figures from Hefner.
        But as fossil fuels are still over 80% of our energy source Im not surprised more is being spent on them.

      • Lifelogic
        Posted February 15, 2015 at 12:04 am | Permalink

        Oil, gas and coal industries are net tax payers – they are not subsidised in the round at all.

    • Leslie Singleton
      Posted February 14, 2015 at 1:04 pm | Permalink

      Lifelogic–Is he or is he not in favour of green crap (his own phrase I believe) or is he or is he not in favour of minimising one’s taxes legally (Was it not either he or Osborne who started talking fatuously about “aggressive ” avoidance for which understand legal tax planning and minimisation? Does he or does he not believe in businesses being able, indeed encouraged, to maximise profit so that they can expand and hire? And his views on Brexit are opaque at least. The only opinions we can be sure he has are those etc ed

    • Bazman
      Posted February 14, 2015 at 4:53 pm | Permalink

      More science from a person who has religious views on scenice looking for anyone who agrees with him. Where is your answer to KW’s Lierlogic and your reply on Britains already low standards of employments law? No wonder you agree with Dyson. He is as deluded as you are on climate change. Carbon eating trees?!
      In the New York Review of Books, Freeman Dyson reviews two recent ones about global warming, but his review is mostly shaped by his own rather selective vision.
      1. Carbon emissions are not a problem because in a few years genetic engineers will develop “carbon-eating trees” that will sequester carbon in soils. Ah, the famed Dyson vision thing, this is what we came for. The seasonal cycle in atmospheric CO2 shows that the lifetime of a CO2 molecule in the air before it is exchanged with another in the land biosphere is about 12 years. Therefore if the trees could simply be persuaded to drop diamonds instead of leaves, repairing the damage to the atmosphere could be fast, I suppose. The problem here, unrecognised by Dyson, is that the business-as-usual he’s defending would release almost as much carbon to the air by the end of the century as the entire reservoir of carbon stored on land, in living things and in soils combined. The land carbon reservoir would have to double in size in order keep up with us. This is too visionary for me to bet the farm on.
      2. Economic estimates of the costs of cutting CO2 emissions are huge. In an absolute sense, this is true, it would be a lot of dollars, but it comes down to a few percent of GDP, which, in an economic system that grows by a few percent per year, just puts off the attainment of a given amount of wealth by a few years. And anyway, business-as-usual will always argue that the alternative would be catastrophic to our economic well being. Remember seat belts? Why is it that Dyson’s remarkably creative powers of vision (carbon-eating trees for example) fail to come up with alternatives to the crude and ugly process of burning coal to generate electricity?
      3. The costs of climate change are in the distant future, and therefore should be discounted, in contrast to the hysterical Stern Report. I personally can get my head around the concept of discounting if the time span is short enough that it’s the same person on either end of the transaction, but when the time scales start to reach hundreds and thousands of years, the people who pay in the future are not the same as the ones who benefit now. Remember that the lifetime of the elevated CO2 concentration in the air is different from the lifetime of CO2 to exchange with the biosphere. Release a slug of CO2 and you will increase the CO2 concentration in the atmosphere for hundreds of thousands of years. The fundamental tenet of civil society is to protect people from harm inflicted by others. Are we a civilized species, or are we not? The question is analogous to using economics to decide whether to abolish slavery. I’m sure it was very costly for the Antebellum Southern U.S. to forego slave labor, but it simply wasn’t an economic question.
      4. Majority scientists are contemptuous of those in the minority who don’t believe in the dangers of climate change. I often find myself contemptuous of efforts to misrepresent science to a lay audience. The target audience of denialism is the lay audience, not scientists. It’s made up to look like science, but it’s PR. We have documented Lindzen’s tortured and twisted representation of the science to non-scientists here and here. If Lindzen had a credible argument to support his gut feeling (and apparently Dyson’s), I can promise that I for one would take it seriously. I’ve got kids at home whose future I worry about. If Lindzen were right, no one would be happier about that than me. Etc ed

    • bluedog
      Posted February 14, 2015 at 8:01 pm | Permalink

      ‘Slightly warmer with more crop growing c02 is almost certainly preferable anyway.’ Elevated levels of c02 may indeed raise crop yields. The problem is that an increasing propensity to drought is leading to a corresponding reduction in yield in many cases around the globe. Net gain = zero. It is reckless in the extreme to claim that global warming is ‘green crap’ when the increase in atmospheric C02 is measurable and exactly correlates with the increased use of coal by mankind, leading of course to our current prosperity.

      • Lifelogic
        Posted February 15, 2015 at 11:09 am | Permalink

        Warmer air gives more precipitation not less in general. C02 certainly does give higher crop yields without any doubt at all.

        • Bazman
          Posted February 17, 2015 at 5:31 pm | Permalink

          Not if the crops are flooded or suffering from drought caused by global warming thats for sure. Thought of that one?

    • fedupsouthener
      Posted February 14, 2015 at 9:04 pm | Permalink

      See the link below. Speech in the EU parliament about job losses and our energy policy.

      http://en.friends-against-wind.org/realities/energy-prices-are-creating-an-industrial-massacre-in-europe

      Note the bored MEP in the front row playing with his phone!

  3. Margaret Brandreth-J
    Posted February 14, 2015 at 7:39 am | Permalink

    Yes a smaller union would work better , but it is the perception of gradations which are seen to be small which causes difference . What is smaller? How many nations would make it truly workable? Do they retract more and more or find a cohesive union where they would be allowed to be ether interdependent or trade more globally. Trading outside the union could mean growth of one nation and a fair divisible surplus which has the potential to impact on another positively. If they have the money they can buy.

  4. Ex-expat Colin
    Posted February 14, 2015 at 8:23 am | Permalink

    BBC R4 Today on about selling/giving obsolete Scorpion vehicles to Kiev? Thats the UK working on a solution then? Delivering bread are they.

    The USA and NATO are missing from this article and who are seeking head-on confrontation with Russia. Putin I think is going to put the ex Gulag residents back in their box fast… or slow. Merkel/Hollande…..useless, toothless and dangerous.

    I never experienced what went on between World Wars….the rise of the fools, only to get a hard slap down and taking the innocents with them. USA/UN/EU/NATO

    3 parties clearly supporting alarmist climate change. At last…my vote has only one place to go.

    • stred
      Posted February 14, 2015 at 10:09 am | Permalink

      The rest of Europe and even the US has held back from escalating the conflict that they kicked off. It appears Mr Cameron has decided to supply armoured cars. which carry lethal weapon, to the side trying to finish off the rebels. As he had to be stopped by the HoC from attacking the side fighting ISIS in Syria, would it not have been better to tell MPs before going it alone and suddenly announcing that the UK is leading the fight?

    • oldtimer
      Posted February 14, 2015 at 11:24 am | Permalink

      I believe the vehicles are Saxons (non lethal, troop carriers with some armoured protection) not Scorpions (tracked armoured vehicle carrying a gun). In any shoot out a Scorpion would be no match for modern tank.

      • Jerry
        Posted February 14, 2015 at 6:24 pm | Permalink

        @oldtimer; “I believe the vehicles are Saxons (non lethal, troop carriers with some armoured protection) not Scorpions (tracked armoured vehicle carrying a gun).”

        Does it matter, either will be seen as an escalation by Russia and those in the eastern Ukraine – and how do we the argue with Russia when it does even more of the same. Hopefully there will be a parliamentary vote first, and I hope the same MP’s who voted down Cameron’s misguided ideas on Syria will vote this down.

        • oldtimer
          Posted February 15, 2015 at 9:41 am | Permalink

          It matters to be accurate and factual. Lord Dannatt, on the BBC this am, confirmed (a) that they were indeed Saxon vehicles, (b) he took them out of servce in the UK army ten years ago and (c) they were being supplied by a private contractor (who no doubt bought them as army surplus) not by the UK government.

          • Jerry
            Posted February 15, 2015 at 4:44 pm | Permalink

            @oldtimer; Interesting, I wonder if this private contractor will need to apply for an export licence and if, will it be granted…

    • Ex-expat Colin
      Posted February 14, 2015 at 12:41 pm | Permalink

      Saxons…correction to Scorpion. Trouble is we likely don’t know whats being supplied in totality. It seems to be a before conflict contract.

      I assume its with containers loads of spares? A lot of spares.

      Junk….LOL

  5. turbo terrier
    Posted February 14, 2015 at 8:42 am | Permalink

    The whole shooting match is the price all countries have to pay for voting in career politicians. A couple of entries ago we discussed honesty. Something that is totally lacking within the EU and especially in the UK.

    The biggest threat is not AGW never was or will be, but a few clever people have made billions out of the fear factor. The latest announcement on AGW reeks of Agenda 21.

    I would suggest that the way that Russia is still flexing its muscles is by far the bigger threat to world survival . The EU are to blame in all this mess they should never have sucked up to get Ukraine to think about joining the madhouse.

    • Mondeo Man
      Posted February 14, 2015 at 9:20 am | Permalink

      Germany has always had expansionist tendencies.

      • Jerry
        Posted February 14, 2015 at 6:28 pm | Permalink

        @Mondeo Man; “Germany has always had expansionist tendencies.”

        Cough, and the UK hasn’t?!

        The only difference is, Germany started a couple of hundred years or so later than either the UK, Holland, France, Spain and Portugal…

      • Daisy
        Posted February 15, 2015 at 1:14 am | Permalink

        Germany is not the problem and ought to be a natural ally. Critics conveniently forget France and its history of imperial ambitions, its constant attempts to dominate the EU and its eagerness to drag other nations into fights that it starts but can’t win.

  6. ChrisS
    Posted February 14, 2015 at 9:07 am | Permalink

    Leaving the mess of Ukraine aside, your premise for solving the Eurozone problem is hopelessly unrealistic. But you know that anyway, don’t you, John

    As I have posted several times, there is no appetite whatsoever amongst Germany voters to send billions of Euros to the ClubMed countries, only to see them continue their poor work ethic, protectionist policies and early retirement strategies.

    Similarly, France before any of the other EZ countries will never accept full control of budgets and public spending restrictions set by German policymakers in Brussels.

    On both issues there are other countries lined up on both sides : Finland, Austria and the Netherlands are certainly standing square behind Germany on fiscal transfers as their taxpayers would face massive calls on their cash.

    The only way it is ever going to come about is if things get so bad that the politicians can convince their voters that the alternative to full integration and the loss of their country in all but name would actually be worse.

    That won’t happen : Voters will get fed up with the whole project long before they reach that stage and vote for anyone offering an alternative.

    Instead, the Eurozone will split into at least two separate currency blocks with some countries leaving altogether. It’s only a matter of how long the buffoons in Brussels and the political dreamers in Eurozone capitals remain in denial over the inevitable outcome.

    Only then, maybe, the whole EU project will revert to a genuine Common Market with no political aspirations. That is surely what all the citizens of Europe would vote for if the politicians ever give them a chance to do so. I include the UK here.

    Perhaps this is the kind of question Cameron should ask in his referendum :

    ” Would you like Britain to become a strong trading partner of the EU without any of the political integration proposed for the Eurozone”

    I suspect he would get a massive majority in favour and even idealists like Clegg would struggle to argue against it.

    Reply LIke you I want a relationship based on trade, not on common government. The Germans are accepting their role in helping finance Greece at the moment and are being drawn into a transfer or welfare union.

    • ChrisS
      Posted February 14, 2015 at 4:24 pm | Permalink

      Merkel can only get away with her current policy because she leads a grand coalition where both parties are 100% behind Brussels.

      There is no effective opposition within the Bundestag to stand up for the electorate which is very much against any kind of transfer union, especially as it would be German taxpayer’s money being used to pay the bills of Greeks and other countries.

      Either the constitutional court or the electorate will eventually force Merkel to change course.

      • Denis Cooper
        Posted February 15, 2015 at 10:37 am | Permalink

        I doubt that the views of the electorate will have any more practical effect in Germany than they do in the UK, not while the political establishment continues to hold opposite views and can still win elections.

    • Jerry
      Posted February 14, 2015 at 6:49 pm | Permalink

      @ChrisS; “As I have posted several times, there is no appetite whatsoever amongst Germany voters to send billions of Euros to the ClubMed countries, only to see them continue their poor work ethic, protectionist policies and early retirement strategies.”

      They are very happy to send their ex-pats, their cars, their electronics, their pharmaceuticals etc etc, if the Germany government does end up “sending billions of Euros to the ClubMed countries” (or indeed simply writing off their debts) then much of that money will quickly find it’s way back either to Germany or German nationals, and as it will keep/create employment in Germany… OK, it’s a bit -no, very Keynesian but it would not be the first time Germany has used such economics to help their economy and not all countries are so anti John Maynard Keynes as the UK and USA. So I would not be so certain that there is no appetite whatsoever amongst Germany voters, their test will be simple, does it helps Germany.

    • acorn
      Posted February 14, 2015 at 7:07 pm | Permalink

      Don’t forget how Germany got itself in this position. In the late nineties the German government crushed the labour movement, with the result that German wages and productivity have barely moved in the last decade and a half. Hence German current account has moved from deficit to a 7% surplus, to the benefit of its 1% Elite.

      As the foreign earnings were diverted from the worker’s wages to the capital owner’s bank accounts. German banks were lending at what were low interest rates, to create the Spanish property boom. In fact they were creating large capital transfers and creating non-productive booms all over Club Med.

      Now the Germans are reaping what they have sown. Perhaps controlling global capital flows should be put back on the agenda. ( Thinks: who was it did away with capital controls???).

      • Denis Cooper
        Posted February 15, 2015 at 10:33 am | Permalink

        Free movement of capital is ordained by the EU treaties.

        In the present Article 26 TFEU:

        “The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties.”

        And in the present Article 63 TFEU:

        “Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.”

        Of course there are caveats, and there is even provision for some reversal, with difficulty, in Article 64 TFEU:

        “Notwithstanding paragraph 2, only the Council, acting in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament, adopt measures which constitute a step backwards in Union law as regards the liberalisation of the movement of capital to or from third countries.”

        As I recall it was Thatcher who removed capital controls as far as the UK was concerned, in line with the EEC treaties and policies.

        • acorn
          Posted February 15, 2015 at 4:56 pm | Permalink

          Thatcher will never know just how much damage was caused by the de-regulation of financial services she inspired world wide. She and Reagan, lit the fuse on the 2008 Great Financial Crash. The “causation” path is becoming clearer now. Even the IMF has woken up to the massive currency rate distortions, in emerging economies, caused by “hot money” bouncing around the globe. Mainly orchestrated by and through the Spiv City of London.

          Reply Complete nonsense. Under Thatcher banks were tightly regulated on cash and capital and did not get into financial trouble. It was Labour’s tripartite regulators who allowed the massive over leveraging to take place.

          • Lifelogic
            Posted February 16, 2015 at 5:29 am | Permalink

            Indeed it is complete nonsense. Mrs Thatcher made many mistakes: from the political mistake of the poll tax to failing to cut the size of the state enough, to signing the single European act extending QMV and above allowing Major to take us in to the EMU and then take over.

            But blaming her for the 2008 Financial Crash is just absurd.

          • acorn
            Posted February 16, 2015 at 8:38 am | Permalink

            Thatcher was the mother of “Securitisation”, which started the world wide disconnect between “Saving” and “Investment”. She and her advisers had no idea what they were unleashing.

            The result was a massive increase of capital mobility, particularly into the US in the 1980s. But the magnitude of the inflow in the first instance, was attributable to the unprecedented large decline in “national” saving.

            Securitisation led to the creation of “Derivatives” as insurance for massively overleveraged lending. All of which, lit the fuse for the October 1987 stockmarket crash and the subsequent birth of “casino banking”. Several further crashes occurred around the planet, by now, a fully liberalised global Capital market. Second order Derivatives were invented along with “Collateralised Obligations”. Every Spiv on the planet was playing pass the parcel with these financial hand grenades, until they exploded, like dominoes, in the cesspit that was the US sub-prime mortgage fraud market, in 2008.

            Reply Absurd! Mrs T favoured living within your means, regulated the banks quite tightly for cash and capital. and did not mother derivatives which were around before she arrived and grew after she left!

  7. alan jutson
    Posted February 14, 2015 at 9:09 am | Permalink

    Commonsense in your post today John

    The simple fact is if you join a club all members have to abide by the same rules, pay the same membership fee, and are allowed the same benefits.

    Thus until you have complete and total unification, with all that it means, both financial, civil and criminal law making, taxation systems, pensions, benefits,employment laws, trade laws, etc etc, a union is not a Union at all it is a halfway house of chaos.

    The above was only ever a plan conceived by politicians, the people in general do not want the above in my view, and I think they will eventually revolt and turn against their own Governments as is presently being shown by Greece.

    The politicians may put sticking plasters over the cracks, but that is not a solution, it is simply a cover up.
    The cracks will continue to grow as debts get larger.

    Perhaps the politicians will wake up and give the people a choice, complete unification with all that, that entails, a slow organised break up, or the risk of greater civil unrest in many Countries.

    The people are waking up, but the politicians are still asleep.

  8. Ralph Musgrave
    Posted February 14, 2015 at 9:12 am | Permalink

    John Redwood says “For the core in the currency has to embark rapidly and decisively on moves to full banking and social union, where each country is submerged in the greater whole and each part of the union pays according to its means and receives according to its needs.”

    That would work if for example Germans regarded Greeks, Spaniards etc as the same people or “volk”, and as a result were prepared to dish out very large dollops of assistance to Greeks etc. However, the reality is that simply passing a law which says “now we have fiscal union” does not automatically bring that level of pan European political and cultural cohesion.

  9. Richard1
    Posted February 14, 2015 at 9:26 am | Permalink

    Perhaps its time to revive Margaret Thatcher & John Major’s hard ECU proposal? It would have to be set up initially by reference to those currencies still in independent existence such as GBP, NOK and CHF. This would provide many of the benefits of transparent trade without the disadvantage of a political currency such as the euro. As countries saw the hard ECU worked they could pull out of the euro and regain economic independence. If it doesn’t work its no big deal we just allow it to lapse and return to the current status.

    Certainly the hard ECU would have been preferable to the euro.

  10. boffin
    Posted February 14, 2015 at 10:12 am | Permalink

    The antepenultimate sentence gives food for thought …. Uncle Karl advocated “..from each according to his ability, to each according to his needs” some time ago.

    Must a Union be essentially communist to survive? (Discuss).

  11. Bert Young
    Posted February 14, 2015 at 10:16 am | Permalink

    The EZ countries must pool their resources if it wishes to survive . Without an integrated political and fiscal relationship the Union has to rely on giving financial support to each other . Germany – with its huge balance of payment wealth , has no choice other than to temporarily prop up the weaker performers and then proceed with a programme of investment outside of its borders . The hope must be that all members of the EZ will then pull their weight . If this does not happen , the EZ might as well come to an end .

    The Ukraine is a mess exacerbated by EU interference . Only its own people can decide what its future should be ; if its Eastern States vote for an alliance with Russia then this must be acknowledged by Kiev . Kiev deludes itself if it believes it can force its will on an unwilling sector of its population who only identify with Russia .

  12. Gary
    Posted February 14, 2015 at 11:03 am | Permalink

    It’s NOT the EU ! Deflation is going to kill the global economy and there is not a thing that can be done about it. Policymakers are pushing on a string. Nature will not allow perpetual motion, it cannot be done. If the banks cannot play a rising yield curve to borrow short to lend long, the financial system implodes. THAT is the real global problem.

    Of an impending collapse, Bill Gross, founder of PIMCO(and now with Janus), the largest bond fund in the world wrote this recently :

    “Stopping the printing press sounds like a great solution to the
    depreciation of our purchasing power but today’s printing is simply
    something that the global finance based economy cannot live without. Going
    home again, to paraphrase Thomas Wolfe, is something you just can’t do.
    Modern economies have grown used to inflationary sand and cannot grow in
    the concrete based economy that Grant eulogizes in his magnificently
    written histories.

    Why not? Simple math, I suppose. Our 2014 U.S. Oldsmobile requires 4%
    nominal growth just to keep it running, and Euroland economies need at
    least 3%. Having created outstanding official and shadow banking credit of
    nearly $100 trillion with an average imbedded interest rate of 4% to 5%,
    the Fed presses must crank out new credit (nominal growth) of
    approximately the same 4% to 5% just to pay the interest rate tab. That of
    course wasn’t the case in Grant’s 19th century version – there was very
    little debt to service. But now at 500% to 600% of GDP (shadow debt
    included), it’s a Sisyphean struggle just to stay above water. Inflation,
    in other words – or in simple math – is required to pay for prior
    inflation. Deflation is no longer acceptable.”

    https://www.janus.com/bill-gross-investment-outlook

  13. Atlas
    Posted February 14, 2015 at 11:24 am | Permalink

    Quote: “Germany wants to lead Europe on the cheap”.

    I think you forgot to include France as well …

  14. Vanessa
    Posted February 14, 2015 at 11:33 am | Permalink

    I agree with all the sensible comments above. Greece was not eligible to join the euro neither was Italy but they were allowed to join anyway and now they see the error of their hubris !
    As has been mentioned above, Richard North’s document “FLEXIT” is an excellent measured way for us to leave – there is also a half hour YouTube video with him talking about it.
    The EU is an albatross around Britain’s neck and will be for as long as we stay a member. They will have to go down the route of EVER CLOSER UNION just to stay together and we do not want that. Britain will leave – how long that will take ? heaven alone knows. With such nincompoops in government we will be dragged along for too long until we are virtually kicked out (as Greece should be) for being the ever-whinging cousin ! Then watch us FLY !!!!!

  15. acorn
    Posted February 14, 2015 at 11:33 am | Permalink

    The fundamental problem with the Eurozone is it does not have an equivalent of “Uncle Sam in Washington”. The fiat Euro has no “spender of first resort”, because it has no single fiscal authority as the monopoly issuer (spender) of Euro into the “non-government” rest of the economy. The job the UK and US Treasury departments do for their respective sovereign, country monopoly, currencies.

    The Greek finance guy, an economist, wants to invent the CUB-EIB to overcome the defects in the system. Basically he wants a Single Currency Union Central Bank (CUB) merged with the existing European Investment Bank (EIB). This to form some sort of fiscal authority within the existing Treaty rules. The ECB becoming a proper central bank like the BoE or the FED. Can you see the Germans going for that??? Who knows?

    There is a much simpler way for the 19 national Treasuries to spend lots of new Euro; 100% backed by the ECB at no cost. The Eurozone needs a massive massive spending spree. It needs a Eurozone Chancellor of the Exchequer, who can spend the fiat sovereign currency, which will cost him nothing; and, he will never run out of. The exact opposite of Mr Osborne would be the perfect guy.

  16. Tad Davison
    Posted February 14, 2015 at 11:44 am | Permalink

    ‘The European Union is deluding itself, however, if it thinks the entire Ukrainian revolt is a put up job by Russia. There are many local people in the east of Ukraine who so dislike their government they will take up arms against it.’

    I had a brief disagreement on this very issue a few days ago with a friend who went to Ukraine as an observer for the EU council of ministers. He seems to take the view that it is indeed a put up job.

    My own view falls somewhere in between, and that Putin is looking after the interests of ethnic Russians, just as we did in the Falklands. But Putin is also guarding against the further expansion of NATO and the USA’s sphere of influence by proxy. And I repeat what I said in an earlier post that I don’t blame him one iota!

    History is absolutely awash with instances of where the USA has either directly or indirectly brought about wars and civil unrest for their own ends, and thanks to the internet, people are waking up to that fact. I just wish the UK wouldn’t keep hanging onto their coat tails, and that more people would take the time and the trouble to seek out the truth – including my friend.

    Tad Davison

    Cambridge

  17. Boudicca
    Posted February 14, 2015 at 11:55 am | Permalink

    When it comes to the Euro, Germany wants to have its cake and eat it.

    It loves the cheaper exchange rate which membership by the PIGS results in because it makes German exports so much cheaper ….. but it doesn’t want the expense of propping up their weaker economies with its own money.

    They need to understand that it doesn’t matter what rules they put in place, they will never make Greeks (Italians, Spanish, Portuguese, Irish) behave like Germans. It doesn’t matter how long the EU lasts, the peoples of Europe have deeply ingrained cultural differences which will not be eradicated.

    Just look at the UK which has been a successful union for over 300 years. Yet there are deep cultural differences between the people in the constituent parts. There are even deep cultural differences between the various regions of England.

    • petermartin2001
      Posted February 15, 2015 at 11:34 am | Permalink

      It loves the cheaper exchange rate which membership by the PIGS results in because it makes German exports so much cheaper ….. but it doesn’t want the expense of propping up their weaker economies with its own money.

      Couldn’t have put it better myself!

      But I’d disagree that its cultural differences that dictates Germany has a surplus whereas Greece, Ireland, Spain etc have deficits. It’s simple arithmetic that all countries can’t have surpluses. The UK and USA don’t have a surplus. Are we less virtuous than the Germans? Its the rules of the SGP that mean the deficit countries, or rather the ones that don’t run a large surplus, have a difficult time.

      A surplus in money means a deficit is goods and services. It is really that smart to swap 5 pears for only 4 equally valuable apples and take an IOU to make up the difference? Maybe a few times it would be but always? I don’t think so!

  18. oldtimer
    Posted February 14, 2015 at 12:00 pm | Permalink

    Your word “overstretch” sums it up. It is the reason the UK lost the American colonies in the 18th century, and the reason why the US is in relative decline today – the cash has run out.

    For the EU the decline has set in even before it has been able to build any military capability worth talking about. In the Ukraine, Putin holds all the ace cards and Merkel/Hollande/the EU can do nothing about it. The best that can be hoped for is for NATO members to stiffen their resolve to stand by Article V against the day when Putin decides to try his luck in the Baltic states by seeking to protect the “interests” of Russians who live there.

    The EU is sinking because of the cost of the social measures in place, unique in a global context, and the undisciplined spending of so many of the national governments. Too many EZ members have, at one time or another, broken the rules they all signed up to. Too many are effectively bust and on life support. There appears to be little sign or recognition of the fact they are are all living on borrowed time and borrowed money or that this problem can be resolved. It prompts the question which EU “colony” will be the first to declare its independence?

    • lojolondon
      Posted February 14, 2015 at 1:02 pm | Permalink

      Oldtimer, do not believe the propaganda – We have no evidence that Russia has any expansionist plans into the Balkans, only the USA and EU are positioning the whole debacle as “Russian expansionism”. Russian financial security was threatened by the EU in the Ukraine, and they responded only to secure their assets.

      • oldtimer
        Posted February 15, 2015 at 9:53 am | Permalink

        Please read my comment more closely. I referred to the Baltic states not the Balkans!

    • Mitchel
      Posted February 14, 2015 at 2:06 pm | Permalink

      The EU and the USA look to me look respectively like Austria-Hungary and Germany before WWI,the former expanding while decaying from within and the latter militaristic and egging its partner on.Just as well there is no equivalent of the Austro-Hungarian army to blunder into war in Ukraine.

      However,I am waiting to see if there is going to be an economic equivalent of the Brusilov Offensive…Greece by itself is probably too small to have that effect.

  19. Bob
    Posted February 14, 2015 at 12:07 pm | Permalink

    “In Greece the electorate have rejected the usual parties that accept EU control and leadership, and have chosen a new challenger party”

    The UK should follow suit.

    “There are many local people in the east of Ukraine who so dislike their government they will take up arms against it.”

    I know how they feel.

    “It could let the odd country leave as it moves towards political union, with trade and association agreements replacing membership.”

    Yes, indeed it could.

  20. Richard
    Posted February 14, 2015 at 12:09 pm | Permalink

    Without a doubt it is the expansionist EU who has caused the current problems in the Ukraine by attempting to bribe the Ukraine into joining the EU.

    It was always going to be the case that Russia and the eastern parts of the Ukraine would not want to belong to the EU and would not want the EU to “expand all the way to the Urals” (Mr. Cameron’s speech in Kazakhstan 01/07/2013) and we have seen the tragic results.

    The people of Eastern Ukraine have paid a very high price to save us from the EU expanding to encompass several Muslim countries.

    • Mitchel
      Posted February 14, 2015 at 1:47 pm | Permalink

      The EU has in the past considered the possibility of Russia joining but the view was that it would probably end up as a case of the EU joining Russia rather than the other way round…..and with the leadership vacuum in Europe and an assertive Russian President that seems a quite likely outcome!If the EU was to be reduced to a purely trade alliance and all the political apparatus dropped it might be a possibility,although the US would almost certainly do everything in its power to prevent this happening.Merkel herself spoke of the idea of a free trade area stretching from Lisbon to Vladivostok just recently at Davos.
      Cameron has repeated that comment about the EU stretching to the Urals again since the start of this crisis.Apart from showing that he has no credibility as a Eurosceptic,it was quite the stupidest foreign affairs statement I can remember hearing from a serving PM and srongly suggests a personal element.It looks like Cameron is suffering from sore loser syndrome,having been worsted by President Putin each time they have crossed swords – Syria,gay rights,the World Cup 2018 bid process and now Ukraine-and it is probably just as well he is not involved in the diplomacy.

    • Jerry
      Posted February 14, 2015 at 9:14 pm | Permalink

      @Richard; “The people of Eastern Ukraine have paid a very high price to save us from the EU expanding to encompass several Muslim countries.”

      Let me re-write that – The people of Eastern Ukraine have paid a very high price to save us from the EU expanding to encompass several more countries – there, that makes far more sense and is not so needlessly inflammatory, never mind totally illogical…

  21. forthurst
    Posted February 14, 2015 at 12:28 pm | Permalink

    “There has to be a transfer union, an agreed system of sending money from rich to poor, from more successful to less successful, in any flourishing currency union.”

    The idea that ClubMed should exist in a state of permanent semi-retirement funded by Germany because their economies cannot function effectively within the Eurozone is deplorable. Greece with its Classical heritage and Islands is a wonderful holiday destination, but who wants to pay high prices to see beggars in the streets?

    JR is being far too sympathetic towards a monstrous and quite unnecessary destruction of peoples lives, particularly the young in southern Europe. Permanent supplication or emmigration? There are better choices than that, and hopefully the people will eventually see sense, since their troughing politicians never will.

    • petermartin2001
      Posted February 15, 2015 at 4:36 am | Permalink

      The idea that ClubMed should exist in a state of permanent semi-retirement funded by Germany……

      No you’ve got this the wrong way around. If you look at the flow of goods and services between any two countries you can see that the one who has a surplus in terms of money has a deficit in terms of goods and services and vice versa. Think of the USA and China.

      So, if and when, Germany gets around to recycling its surpluses it does that by spending money in Greece who provide the goods and services to Germany and create employment for themselves in the process. So, the Greeks won’t be in retirement! On the contrary!

      • Denis Cooper
        Posted February 15, 2015 at 10:10 am | Permalink

        Or economic actors within the surplus country, public and/or private, can buy up assets, public and/or private, within the deficit country, and thus balance the overall payments even though the trade in goods and services is not in balance; at least until there is nothing of value left to sell within the country with the trade deficit, and maybe it even ceases to exist.

        • forthurst
          Posted February 15, 2015 at 3:15 pm | Permalink

          Peter Martin has this rather strange and dangerous idea, one has only to consider the horrors inflicted by the Bolsheviks on their Slavic slaves in the furthering of their loathsome and batty ideas, that if the system doesn’t work, then it’s the people that need to change, not the system. I beg to differ. Greece leaving the Eurozone followed by currency devaluation would allow Greece to become competitive in what it does best; this would be infinitely easier than changing German and Greek behaviours which are deeply ingrained in their respective national psyches.

        • petermartin2001
          Posted February 15, 2015 at 7:56 pm | Permalink

          Denis,

          What you say is correct. So, that does mean that a deficit country, like the USA or UK , does have to be particularly vigilant about what money is spent on. Would the USA let China buy Boeing for example? Civilian aircraft, yes, but not military aircraft and certainly not the company itself. I’m less confident about the UK and Rolls Royce though! Or even about the UK and its housing stock. That is the main reason for worrying about the trade deficit. The secondary reason is that the trade deficit is linked much more closely to the budget deficit than is generally realised.
          Any attempt to reduce the budget deficit whilst leaving the trade deficit as it is will be disastrous for the economy.

          forthurst,

          I agree with you. Sorry about that. It’s the system that needs to change not the people. I agree with you, too, that the best option for Greece is probbaly ‘Grexit’, but that’s not the platform Syriza were elected on. Alex Tsipiras and co therefore need to change the system of the Euro. If they can! Who knows? If they can change it enough then it may even make sense for the UK to enter if the 2017 result doesn’t go our way that is!

          • forthurst
            Posted February 16, 2015 at 12:11 am | Permalink

            A currency union which of itself creates chronic imbalances within its purlieu does not serve anyone’s interest other than those whose political capital and economic credibility would be diminshed were it either abandoned or severely constrained to matching economies. Recession and low growth is not a price worth paying for the convenience of a shared currency.

          • Denis Cooper
            Posted February 16, 2015 at 10:58 am | Permalink

            Amazingly, forthurst, it seems that the raving eurofederalist FT columnist Wolfgang Munchau agrees with you, urging that “Athens must stand firm against the eurozone’s failed policies”, “an utterly dysfunctional policy regime that has proved economically illiterate and politically unsustainable”, and concluding that:

            “It would, of course, be better for this nonsense to stop while Greece remains in the euro zone. But the most important thing is that it has to stop.”

  22. Denis Cooper
    Posted February 14, 2015 at 3:50 pm | Permalink

    My reading of the situation is that after a period of some years during which the US was prepared to consider Russia as a potential “partner” it has reverted to the much longer standing habit of seeing Russia as a potential “enemy”, or at least an “antagonist”, and has been jockeying to try to complete an encirclement of Russia to the south with a view to weakening it and possibly later breaking it up altogether. The precipitating factor has been Putin, who unlike Yelstin has been prepared to push back against the US and its allies in an attempt to restore some of the previous (albeit meagre) prosperity and power and status of the USSR and Russia. And he has the support of most of the Russians in this, whereas Yelstin ended up being seen as weak and became deeply unpopular.

    The US has found willing supporters within the EU for its strategy of further encircling Russia and eroding its power, and NATO is their joint military instrument to progress that common geopolitical strategy, to be followed up in due course by the EU taking over the civilian government of the newly acquired territories once they have been secured by NATO; hence my references to the US/NATO/EU “troika”, the three being harnessed together to pull in the same direction. The UK government has been and continues to be an enthusiast for this strategy, and as it is supported by all three of the old parties it is likely that there will be no significant change in that after the general election.

    The bugbear is that Russia has nuclear weapons and cannot be bullied and intimidated in the same way as a country lacking the capability to hit back hard in response to any blatant military attack by the US or its NATO allies, so their strategy has to be one of gradual steps which do not provoke outright war while seeking ways to undermine the Russian economy in the hope of getting Putin removed.

    In all this, the Greek problem is seen as a nuisance but really just a sideshow, admittedly with the complication that the Greek government might possibly turn to Russia for help, and as has become clear from recent comments by a spokeswoman the US government reckons that Germany and the other eurozone/EU member states should just hand over the money that Greece needs and get that distraction out of the way.

  23. Denis Cooper
    Posted February 14, 2015 at 4:50 pm | Permalink

    Off-topic, JR, the Telegraph has an article today with a video from 1997 about the Bank of England being stripped of its powers to supervise the City, which more specifically included the prudential supervision of commercial banks:

    http://www.telegraph.co.uk/news/politics/labour/11411593/Caught-on-camera-the-day-smoking-Ed-Balls-triumphed-over-the-Bank-of-England.html

    “Caught on camera, the day smoking Ed Balls triumphed over the Bank of England”

    “1997 documentary reveals how Ed Balls and Ed Miliband helped Brown redraw banking regulations, despite Treasury fears and Bank of England protests”

    It’s interesting that having repeatedly, routinely laid the blame for banks being allowed to go off the rails onto Mervyn King as Governor of the Bank of England, the Telegraph should now publish a condemnation of Balls and Miliband for their role in stripping the Bank of the relevant supervisory powers and transferring them to the new Financial Services Authority; however I note that even so they cannot bring themselves to name the man who was put in charge of the Financial Services Authority and who presided over that gross regulatory failure which eventually took the financial system and the whole economy close to meltdown:

    Reply -name and material deleted – it was the new system which let us down badly, not just the Chairman of the FSA. The system comprised 3 elements, Treasury/FSA/Bank with Chancellor as the top man. Peter Lilley and I opposed the stripping of powers from the Bank of England in 1997 (he was Shadow Chancellor and I was Shadow DTI at the time) because we thought it was dangerous to disrupt banking regs.

    • Denis Cooper
      Posted February 15, 2015 at 9:41 am | Permalink

      Why should the name be treated as a state secret?

  24. Stephen Berry
    Posted February 14, 2015 at 5:02 pm | Permalink

    To imagine that the present situation in the Ukraine is the fault of the EU is to miss the elephant in the room. The present strategy of the US is to weaken Russia and one of the means of doing this is to make states on the borders of Russia anti-Russian. The EU can be used as an inducement to these states to leave the Russian orbit. First this was done with Georgia, now it’s the Ukraine’s turn to be the patsy. That’s how the US sees the EU in this matter.

    But there are a number of countries in the EU who want and benefit from good relations with Russia. The most prominent of these is Germany who is Russia’s most significant trading partner. Merkel must be hopping mad as to how the Ukrainian stand-off is damaging Russo-German relations. It’s clear she wants this problem fixed and German differences with the US on the matter are not just ‘tactical’ as Obama fondly maintains.

    The US also sees Greece as a pawn in the geo-political game. But the Germans, along with the French and Italians, see the problem as a matter of finance and national politics. If the Greeks default, the German taxpayer can probably bear their share of the cost. But what would be the financial and political implications for France and Italy? Already we see in Greece and Spain that the centrist parties are being sidelined by the Euro crisis. If tens of billions of Greek debt go down the tube, I am sure that other anti-Euro parties like the Front National and the Five Star Movement will get a tremendous filip.

    US and EU interests by no means coincide on these two crises.

  25. bluedog
    Posted February 14, 2015 at 8:26 pm | Permalink

    Germany’s economy is heavily biased towards exports, with 50% of GDP being directed to production of same. 25% of German exports go to the EU.

    The possible collapse of the EMU and potentially the EU itself therefore presents Germany with an existential risk – it is hard to see how the German state would survive the ensuing economic depression. We are fortunate that Germany is lead by Angela Merkel, a woman whose instincts are always peaceful, reasonable and constructive. However, it is somehow inconceivable that the German people would ever consent to the abolition of Germany and its replacement by an EU super-federation in which the German Lande were merely EU regions. It is within the German nature that in any partnership, Germany is the senior partner, and an EU super-federation precludes German dominance. If this truth holds good and if Germany is to survive, at some point Germany will be forced to emerge as the dominant player in a more manageable grouping within Europe. A smaller common market and currency union run by Berlin would seem to be the only viable alternate model for the continuation of the German state.

    As a federal republic, Germany is uniquely placed to be able offer statehood to smaller nations wishing to become parts of a greater German federation.

    The names of the likely candidates are familiar.

    • Denis Cooper
      Posted February 15, 2015 at 9:40 am | Permalink

      That may be the attitude of most ordinary Germans but not necessarily that of the politicians they elect to decide such matters on their behalf. Very few German politicians have had any problem with Germany signing up to eurofederalising treaties and the laws to ratify them usually pass with little opposition. Even when the EU Constitution explicitly asserted the primacy of EU law over national law there was very little opposition among the politicians and the law to ratify it was passed by 569 to 23 in the Bundestag and 66 to 0 in the Bundesrat.

  26. petermartin2001
    Posted February 15, 2015 at 3:44 am | Permalink

    I wouldn’t quite agree on the description of Gemany’s EU but nevertheless we do have to recognise that Germany does have a disproportionate influence. Yes, indeed, “places in deficit have to be easily financed by places in surplus”. The Germans were always happy to finance their customers when they used the DM. They’d buy up the treasury bonds of the deficit countries, like the UK and US, and that way their surpluses were recycled to their customers by the process of government deficit spending. So why the problem now? From their POV now, they should be even keener to do that. It would keep “their” trade zone healthy. They could impose conditions , of course, but there would be no reason to impose such stringent conditions as they do.

    They seem wedded to the idea that internal devaluations are now needed in the peripheral countries of the Eurozone. General devaluations are no longer possible within the common currency zone. But can internal devaluations work? We know external devaluations can work. Recently the Canadian dollar has fallen by about 20% against the US dollar. This isn’t particularly noticeable to Canadians until they cross the border into the US. Then they realise that their wages and salaries are now worth 20% less, in terms of US$, than before. Canadian prices, at least the ones unaffected by import costs, such as rents, in are now 20% less too. Imports from the USA are now 100*(0.2)/(1-0.2) =25% more expensive.

    This shift is necessary for the Canadian economy to adjust to changing conditions. But what would have happened if Canadians used the US$? Theoretically if Canadians had reduced all prices and all wages by the same amount the outcome would be the same.But would that have happened? If Canadian companies had faced falling demands for their products, they would do what all companies do. They’d cut back. But there wouldn’t be pay cuts and price cuts. Maybe just no pay rises and no price rises. They’d lay off some of their staff and stop recruiting others. They would adjust to being 20% (or close to it) smaller in this way. That would be repeated right through the Canadian economy which would end up 20% smaller too. Unemployment would skyrocket!

    That’s what’s happened in Greece, Spain and elsewhere. Economists, of the classical variety, can argue that shouldn’t have happened. They can show nice mathematical models of how an ideal economy would be able to restore its competitiveness if only people would just behave rationally – according to their definition of rationality. But real people behave rationally as they see it, not how anyone else might see it. That needs to be understood by real economists too. Including real German ordo-liberal economists!

    So instead of imposing austerity on countries like Greece and Spain, to force internal devaluations, the Germans need to come up with some other way. Otherwise their dream of a united Europe will become ever more nightmarish as time passes.

    • Stephen Berry
      Posted February 15, 2015 at 4:28 pm | Permalink

      Firstly Peter, we should not dismiss out of hand the idea that workers would take wage cuts if they knew that this would save their jobs. After the crash of 2008 when output in the UK may have dropped 6-7 per cent, it seems that unemployment did not rise to the feared four million level precisely because workers accepted reduced wages. In your Canadian example, it ought to be even easier to do this as workers can be told that the prices of most goods are going to fall too.

      Of course, classical economists of a German or any other variety, envisaged the situation you described where there are initially no pay cuts and no price rises. But you must follow the example through. Workers are indeed laid off, but then search for work. They will then bid the price of labour lower. The price of goods will be bid lower too as demand for them falls. Precisely in fact, what happens in any run-of-the-mill recession.

      So, why is the adjustment of the Greek and Spanish economies such a tortuous process? It seems that the institutional arrangements in these countries make it extremely difficult to lay off and take on workers or lower wage rates. I know this to be the case in Italy whose GDP has now headed back to the level of the year 2000. It’s the difficulty in adjusting prices and wages in these countries which is the problem, not the so-called austerity which the Germans not unreasonably require in return for extending loans. After all, the Greeks can refuse the loan conditions any time they want, but they know that when they leave the Euro they will immediately understand the true meaning of austerity.

      People always behave rationally, it’s in their nature to do so and something they can’t escape, however hard they try. Most economists assume this, though they don’t have to. But that’s another subject for another day.

      • petermartin2001
        Posted February 16, 2015 at 12:34 pm | Permalink

        Stephen,

        Yes I would agree that workers may well take a pay cut if faced with the alternative of the loss of their jobs. However, that’s usually not an option. We all know what happens whenever a company suffers a drop in sales. The management will take a decision to make savings which will inevitably involve shedding a proportion of the workforce. They’ll do everything possible to maintain their profitability and they’ll do everything possible to avoid reducing prices.

        They won’t want to lower wages and salaries either. That would adversely affect the morale in the workforce in ways that seem quite obvious.

        So whereas it is theoretically possible for the process of an internal devaluation, ie falling wages and prices, to exactly reflect what happens in an external devaluation, simple observation tells us that, for whatever reason (maybe human psychology?), it doesn’t happen in practice.

        If there is one key lesson that the discipline of Economics can learn from the real sciences, it is that practical observations and experiment trumps theory every time. If theories don’t explain what we see, they need to be discarded.

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    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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