Greece and Germany blink – who is winning?

Greece said she could not proceed with a new version of the loan agreement, but seems now to be negotiating over its terms. She has conceded she accepts 70% of the old conditions. Greece refused to sit down with the troika of the EU, the ECB and the IMF, but Greek officials have held exploratory talks with each of those bodies apparently. It appears that Homer nods.

Meanwhile Germany and her allies in the rest of the Eurozone have allowed the European Central Bank to lend more money to Greece. It is being done by the Emergency liquidity assistance scheme, where Greece has now run up a bill of Euro 65 billion. The money has been needed to pay for deposit flight from Greek banks. Those same Greek banks have been buying Greek state Treasury Bills, to allow the Greek state to spend more than it collects in taxes, something it was not meant to do under the rules of the loans. It appears that Germany has given way on the hugely important issue of no more borrowings. Germany bows.

The outgoing Greek government was pleased to announce that after many cuts it was only spending day by day what it was raising in tax revenue, leaving aside debt service. This government seemed to think that would continue and placed it in a stronger position, as it did not need new loans for current spending. Instead in January tax revenues fell, leaving the accounts back in deficit.

There can be no winners in a compromise. The two sides started so far apart that both sides will have to surrender a lot if there is to be an agreement. Greece will have to accept some creditor imposed discipline and controls over both her spending and revenue collection in return for new loans. She will not like all the policies this requires. The rest of Euroland will have to lend Greece yet more money, and probably agree to a cut in the money they will get back for past loans by some new debt deal. Such a compromise will not be the end to the saga, as it is likely to leave Greek finances still precariously placed. All may agree new language about growth and an end to austerity, but when a state is spending more than it earns, and has outlived its creditors’ patience, there do have to be cuts in spending it does not want, and creditors have to come up with more money or demand less back. There is no third way, no win win.

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81 Comments

  1. Lifelogic
    Posted February 16, 2015 at 5:39 am | Permalink

    Kick the can down the road and extend and pretend yet again.

    Meanwhile is Cameron really going to do nothing to try to win this perfectly winnable election against the hapless Miliband?

    No vision of real jobs, real growth, lower simpler taxes, far less government, public services that actually work, cheap energy and far less EU anywhere to be seen.

    No case made for a far smaller state sector and resultant booming economy at all? Why did Cameron ever join the Tory party?

    • Bob
      Posted February 16, 2015 at 10:15 am | Permalink

      @ll

      “Why did Cameron ever join the Tory party?”

      To subvert it?

      • Lifelogic
        Posted February 16, 2015 at 12:42 pm | Permalink

        Or Ted Heath, Ken Clarke, John Major ……. “We are not quite as useless as Miliband” does not seem a good way to win an election to me. Some vision is needed. Lady Thatcher did not will three elections (four with her man Major before the public sussed him out) by going to the country say we are pro EU, green crap, tax borrow and waste, big state socialists just like Labour – just not quite as bad.

        • Bazman
          Posted February 16, 2015 at 5:30 pm | Permalink

          Big state socialism is paying for the massive rental market don’t forget and you have yet to explain what ‘green crap’ is in your endless black propaganda deluded rants with little basis other than your religious belief that you own the facts.

        • Jerry
          Posted February 16, 2015 at 5:54 pm | Permalink

          @LL; “Lady Thatcher did not [win] three elections [..//..] by going to the country say we are pro EU, green crap, tax borrow and waste”

          True, but (New) Labour did!
          Your point was what -other than perhasp to point out what happens time and time again when the political right fall out with each other!…

          • Lifelogic
            Posted February 16, 2015 at 10:19 pm | Permalink

            There is nothing “right” about Cameron he could very easily fit into the Labour party and would be to the left of many already there – and far less in touch with the reality than most Labour MPs.

          • Jerry
            Posted February 17, 2015 at 8:00 am | Permalink

            @LL; There is no way Cameron would have “fitted in” to any Labour party before Blair’s leadership, I suspect the real problem is that Labour have moved so far towards the middle that even Thatcher can appear to be lower case socialist in some of her policies – people like you have in turn moved further to the right – and the second part of your comment (after the word “party”) makes no sense what so ever!

      • Jerry
        Posted February 16, 2015 at 3:36 pm | Permalink

        @Bob; Judging from some of your opinions even Thatcher herself subverted the Tory party and was a total “wet” too, and as for those who rid the UK of Rotten Borough’s…

        • Lifelogic
          Posted February 16, 2015 at 10:22 pm | Permalink

          Lady Thatcher certainly made several large mistakes – the single European Act, the absurd ERM, the politically moronic pole tax, the failure to cut back the state sufficiently and John Major – to name but five.

          • Jerry
            Posted February 17, 2015 at 8:01 am | Permalink

            @LL; Nice rant!

          • APL
            Posted February 17, 2015 at 8:20 pm | Permalink

            Jerry: “@LL; Nice rant!”

            But true.

          • Terry
            Posted February 18, 2015 at 1:15 pm | Permalink

            The ERM fiasco was after Mrs T had stepped down. And as for the Single European Act that went back to Heaths day but Mrs T wanted to stop the advance of the EU but was stabbed in the back by the Europhile traitors in her own Government.
            As for the “Poll Tax” it was a great idea, badly communicated and completely mishandled.
            What was wrong with every adult in a household contributing to the Council Taxes? Those on benefits were to claim for it so they would lose nothing . Now a single householder has to pay for everyone in their and single occupants, even pensioners have to pay 75% of the total against the 25% it would have been under “Poll Tax” (- an emotive leftie name of course).
            The problem for the socialists was that it would give power to the electorate and that is anathema to the dictatorial left. Everyone would have to contribute and therefore would take note of expenditure so any council excessively hiking up the rates could find themselves out of office very quickly.. Today the Government has to maintain that disciple for us instead.I’d rather have the power with the people.

      • Hope
        Posted February 16, 2015 at 4:02 pm | Permalink

        Yep, mass immigration helps cultural subversion which the cartel are all about.

        • Jerry
          Posted February 16, 2015 at 5:59 pm | Permalink

          @Hope; “mass immigration helps cultural subversion”

          Indeed, some of the Spanish Costa’s are now just like Little England’s, complete with warm beer, the full English breakfast, not forgetting Fish ‘n’ Chips served in (faked) old English newspaper…

        • Bazman
          Posted February 16, 2015 at 9:42 pm | Permalink

          Mass immigration by an alternative Middle Class Social Security System. (MCSSS). Oh Dear!

          • Bazman
            Posted February 17, 2015 at 9:46 pm | Permalink

            Well? It’s my new slogan. Ram it. Was deemed offensive.

    • Denis Cooper
      Posted February 16, 2015 at 12:05 pm | Permalink

      Reportedly Blair tossed up in his mind whether he should join the Labour party or the Conservative party and concluded that Labour offered better prospects for advancement of his political career; it’s not inconceivable that the “heir to Blair” also considered that question and came to the opposite conclusion.

    • Qubus
      Posted February 16, 2015 at 1:17 pm | Permalink

      I get the impression that the Labour party is far better than the Conservatives at publicity. Is this just my opinion, or is it shared by others? Or is the Conservative line not as widely publicised by the media? Let’s have a few more Conservative big-beasts trumpeting Conservative successes … including UC.

      • Jerry
        Posted February 16, 2015 at 6:20 pm | Permalink

        @Qubus; I think you are correct on publicity, and they need to be, the problem with the Conservatives is that they now seem to wait for their supporters in the press to publicise their successes and policies.

        As for UC, we shall have to see how it all works out, the proof will not be in a phased roll-out but if it does what it needs to do once rolled out and do so with the minimum of issues for claimants, fortunately for the government and DWP the results will not be known until after the general election!

        I declare, and I don’t think I have ever hide the fact, that I’m not hopeful, the wheel didn’t need reinventing, it just needed a new tyre of the correct sizes fitted! On the wider point, DWP policies could be the single issue that costs the Conservatives the election (and their coalition partners many seats), their opponents really do see it as the equivalent to the despised Poll Tax, even UKIP are anti the spare room subsidy (otherwise known as the “Bedroom Tax”)…

        • a-tracy
          Posted February 17, 2015 at 3:54 pm | Permalink

          There is another side to the anti-bedroom tax argument, I know of three successful moves from large housing association family homes, one to a flat, a bungalow and a homestead, when all three people are financially better off and happier there, the gardens and homes they used to occupy are now filled with local families who had the need for three bedrooms. It wasn’t done just for the sake of it, it did have a moral collective argument, social housing of that size was provided for families when they no longer need a home that big and are fully subsidised by the state for their housing costs why shouldn’t people downsize. I know the arguments for disabled people and their carers and obviously concessions can be made. I also hear of towns that didn’t have sufficient homes build to re-accommodate people and in those towns we must invest in these complexes to save money on B&Bs, expensive private rentals, etc.

          I never agreed with selling off council homes, where I live the housing association homes were only built in the 60’s and 70’s and they were sold to a housing association for peanuts so why haven’t those housing associations been building new homes?

          • Jerry
            Posted February 18, 2015 at 9:44 pm | Permalink

            @a-tracy; Yes, the principle of the “Bedroom Tax” is sound, and I suspect few could truly object had it not been for the shambolic implementation, not having enough suitable properties within the social housing sector for people to down-size for example but still expecting them to downsize, or the collateral damage caused when people who should have never been in the caught up in it in the first place -many of them very sick!

    • Jerry
      Posted February 16, 2015 at 3:31 pm | Permalink

      @LL; “Why did Cameron ever join the Tory party?”

      Well that depends on whose idea of what the Tory party should is correct!…

      • Bazman
        Posted February 16, 2015 at 5:33 pm | Permalink

        Cameron is the Tory party as we are starting to see with his schmoozing of wealthy donors.

        • Jerry
          Posted February 16, 2015 at 10:41 pm | Permalink

          @Bazman; “Tory party [and] wealthy donors”

          Cue numerous comments about how many millions have been donated to the labour Party via wealthy unions -ho hum…

  2. Mark B
    Posted February 16, 2015 at 6:01 am | Permalink

    Good morning.

    It seems to me, Alexis Tsipras is a far better negotiator than CMD. He knows that when someone wants something, it is usually a good idea to ask for something in return, rather than just meekly roll over and allow you tummy to be tickled.

    Greece was not in a good position. But few will argue that, Alexis Tsipras has done a bad job up to now. He even got the POTUS to make a few remarks that helped the Greek cause.

    Some movement and relief of Greek debt will be seen as a triumph. They have had the boot of the Troika on their throats long enough. The Greeks went looking for other options, and I guess they may have found one or two that helped move the unmovable Germans. How much Russia came into play, is anyone’s guess. But it would not surprise me if they did.

    Alexis Tsipras looked at the problem and saw weaknesses and some hypocrisy in the German arguments. He stated that Germany was a debtor to Greece and, that that debt was cancelled. If Greece can cancel a debt, why not Germany ?

    It is not about winners and losers. It is about getting a just settlement that meets, as far as possible, everyone’s needs. A compromise. Not perfect, but, if it helps Greece and ordinary Greeks, then one worth pursuing.

    Alexis Tsipras has so far done the right thing. He has done what Lady Thatcher herself had done when negotiation our rebate. Something that was never done by any that followed her. What Alexis Tsipras has done, is stand up for his country and his country men.

    Oh for such a man as this at Number 10.

  3. Richard1
    Posted February 16, 2015 at 6:38 am | Permalink

    It would be better for Greece and probably the euroland also if Greece left the euro, suffered a c. 50% devaluation and then got to decide and implement economic policy on her own two feet. The reason the leftist lunatic fringe like Syriza and the Spanish party are attracting support is begging and blackmailing the Germans is more important than economic policy. Once Greece is on her own two feet people will vote for policies which make Greece credit worthy and an attractive investment environment.

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

      @Richard1; “Once Greece is on her own two feet people will vote for policies which make Greece credit worthy and an attractive investment environment.”

      Why would they do that, after all they never done so before, either before joining the EZ or after, its only been the control from the Troika that forced the previous government to try.

      Greece outside of the EZ, outside of the EU will do fine, as it always has, in its own sort of way – and that might also apply to other “clubMed” countries too!

      • Richard1
        Posted February 16, 2015 at 3:45 pm | Permalink

        The party would have ended in Greece a decade earlier if they hadn’t been able to join the eurozone.

        • Jerry
          Posted February 16, 2015 at 6:36 pm | Permalink

          @Richard1; You really have no idea about Greece and quite possibly any ClubMed country, with the exception of certain areas of Italy perhaps, “Mañana hará” (Spanish for Tomorrow will do) really will do, after all it’s been that way for hundreds of years…

          Of course had Greece not joined the EZ there would not have been the easy money to buy the plentiful supply of EZ loans and EZ consumer goods, thus; no EZ entry = no EZ loans = no EZ goods to buy = no EZ debt!

          • zorro
            Posted February 17, 2015 at 5:03 pm | Permalink

            Indeed, and all the Greek taxi drivers on the islands wouldn’t be driving in Mercedes or BMWs without the EZ…. The Greeks know how to negotiate. They have an argument and they will exploit/use it (debt forgiveness/reparations) against the Germans…. Let’s face it, who feels sorry for the Germans. We’ve hardly been deafened by outpourings of grief 🙂

            zorro

          • zorro
            Posted February 17, 2015 at 5:08 pm | Permalink

            Unfortunately, CMD is not very adept at the negotiation malarkey. He has a habit of not attracting sympathy to his cause but rather antipathy because of his unfortunate manner in riling the Europeans. He obviously needs some lessons in Greek dramatic acting (note to John – please do not insist on him wearing a toga)

            zorro

  4. Douglas Carter
    Posted February 16, 2015 at 7:29 am | Permalink

    In the strictest terms, I’d say it was Greece which was winning, but the illustration of this being a Germany vs Greece contest is also illuminating.

    Ostensibly, we should be considering this as Greece vs the EU but ultimately, if it’s the German Taxpayer who will be footing the bill, then rightly it should be seen as a contest essentially between the leaders of those two single nations. However, in those terms, Merkel is siding with what she seems to see are her obligations to the EU. In that she knows that the punitive measures she’d wish to take must be diluted for cohesion and ‘pragmatism’ for the good of the EU project. Ultimately, where economic reality and EU dogma clash, it is the vanity of dogma which must win. Absurd, but no more absurd than many of the facets of these tragedies we’ve already seen. AfD will be rubbing their figurative hands with approval.

    ‘The Project’ is still too big to fail. The danger that dealing with Greece with the financial logic required endangers that project to such a degree that subsidising Greece as a preferred alternative becomes the reality that Greek Politicians can confidently pocket. Hence the EU decides itself to stumble on, staggering with the numerous financial bear-traps clamped round its shins. But only while the German taxpayer’s patience holds.

    As we saw with the recent elections in Greece, specific electorates in certain countries will not sympathise for ever.

  5. Margaret Brandreth-J
    Posted February 16, 2015 at 7:56 am | Permalink

    There could be a third way if they consider that compromise is the way . Greece may have had its mezzes with the IMF , EU , and ECB , yet it certainly will be an odyssey trying to get back to strength .They perhaps need to move on to enlightenment.

  6. Narrow Shoulders
    Posted February 16, 2015 at 8:10 am | Permalink

    The Euro is too important politically for practical decisions to prevail.

    The EU is too bureaucratic and blinkered for practical decisions to prevail.

    An idea which can not be agile and flexible to provide solutions for its protagonists should be avoided. Article 50 please.

  7. Jerry
    Posted February 16, 2015 at 8:12 am | Permalink

    “There is no third way, no win win.”

    But there is a third way, although it’s a loose loose one for all – a Grexit [1] and default.
    As such Germany, the EU and ECB know that Greece holds all the cards, yes it’s the ‘nuclear option’ for Greece but when pushed to hard, to far, to fast they might just choose it. What i do not understand is why Germany thinks it can push Greece, has it forgotten its own history and what happens politically when a country and its society is pushed to far.

    [1] from the EZ, and perhaps even the EU

    • Lifelogic
      Posted February 16, 2015 at 12:44 pm | Permalink

      Indeed perhaps the only real long terms solution.

    • formula57
      Posted February 16, 2015 at 12:56 pm | Permalink

      There are perhaps two reasons Germany thinks it can push Greece, being: –

      1. Pushing Greece at whatever cost is easier than being pushed by others, of the like of Podemos in Spain, Five star in Italy, and perhaps worst of all a President Marine Le Pen in France which all become a more likely prospect if Syriza is seen to get its way. (And who knows with what effect at home – AfD just won some seats in Hamburg’s government, getting over the 5% threshold.)

      2. Despite having available to it the legendary expertise of the Bundesbank, the German government and Finance Minister Schäuble in particular are afflicted by Eurocratic thinking where, per Greece’s Varoufakis following his recent tour of Europe, “A clueless political personnel, in denial of the systemic nature of the crisis, is pursuing policies akin to carpet-bombing the economy of proud European nations in order to save them”.

      (Obviously for accuracy Varoufakis needs a “once” before “proud” and strictly should have “economy” in the plural.)

      • Jerry
        Posted February 16, 2015 at 7:08 pm | Permalink

        @formula57; I see your point regarding the affects of Syriza getting their way, but on the other hand if they don’t get their way and the ClubMed countries (even France perhaps) find their standards of living falling still further and/or unemployment growing further [1] etc. then those parties you named are likely to gain anyway.

        The problem is not with the ClubMed countries (or the wider PIIGS), the problem is the EZ, the EU and how they work – it always has been, ever since the EU pressed on with creating monitory union without a full political union. Germany and the EU needs to understand that there will only be two losers, them, what ever, and if they try and crack down even harder then the likelihood of defaults and EU-exits grow further.

        [1] just look at the youth unemployment figures for Spain alone, even if you take the “adjusted” figure of 22%…

  8. oldtimer
    Posted February 16, 2015 at 8:12 am | Permalink

    What`s all this? More smoke and mirrors? Who would have guessed it?

  9. Old Albion
    Posted February 16, 2015 at 8:12 am | Permalink

    The EU will do anything, say anything to prevent a country leaving. That’s why Cameron’s pretendy re-negotiation is a sham.
    There is only one way out. Invoke ‘article 50’

    • Jerry
      Posted February 16, 2015 at 3:48 pm | Permalink

      @Old Albion;

      There is only one way out. Invoke ‘article 50′

      What, and they have two, three or more years of ‘negotiations’ with the EU saying anything to either try and get the request to leave withdrawn or to get the best terms for the EU before consenting to the exit?…

      If a member country wants to leave, because it doesn’t believe that negotiations can work then there is only one way out, the disorderly one, but watch out for collateral damage.

  10. Ian wragg
    Posted February 16, 2015 at 8:22 am | Permalink

    When a government spends more than it raises in taxes. ….. sounds familiar. When are you going to point this out to Gideon. Wasting billions on aid and EU subscription to run a £77 billion deficit is economic insanity. But then that’s to modern Tory party
    Hats off to Greece.

    • Sandra Cox
      Posted February 16, 2015 at 12:14 pm | Permalink

      Re foreign aid:

      ““It has taken almost five years but ministers are finally set to deliver on their promise to enshrine overseas aid spending in law. The move, which has come under prolonged fire from the Tory right and several newspapers, is due to reach the statute book just before Parliament is dissolved for the general election.” – The Independent”

      Another directive or “guideline” from the EU, all safely delivered – on time, surreptitiously salami sliced on “good time to deliver bad news” days, by the EU and UN ‘s useful idiots in our parliament!

      What a complete and utter waste of time, space amd money most of our politicians are?!

    • Lifelogic
      Posted February 16, 2015 at 12:45 pm | Permalink

      Indeed tax, borrow & waste in spades from Osborne.

      • Bazman
        Posted February 16, 2015 at 6:12 pm | Permalink

        More often than not wasted for political gain such as borrowing private money at a higher interest rate than historically low public borrowing and do not forget one of the largest government spending is on housing benefit to private landlords. Never mention that waste do we? I wonder why?

        • zorro
          Posted February 17, 2015 at 5:10 pm | Permalink

          Indeed, excessive housing benefit supports unjustifiably high rents…

          zorro

          • Bazman
            Posted February 17, 2015 at 7:31 pm | Permalink

            I would agree with this and be wrong like the government which cut rents available but saw rents continue to rise. They had their bluff called. I was surprised I have to say, telling us a lot about how short housing is.

  11. Bert Young
    Posted February 16, 2015 at 9:03 am | Permalink

    So who is surprised ? . That Greece has won an inch or two of loan territory and Germany has given way . The big question is whether others will now follow . The plight of Southern Europe is bigger than what the ECB can offer ; at some stage a line has to be drawn and reality faced . Germany is morally wrong footed and exposed ; my guess is they will see the Ukraine crisis out first and then apply the brakes .

  12. stred
    Posted February 16, 2015 at 9:15 am | Permalink

    As predicted, the possibility of an exit from the Euro has lead to a flight of deposits from Greek accounts and now the ECB is making emergency loans to replace the missing money. What happens to that loan in Euros the debts are not cancelled and Greece does withdraw? Will it have to be paid in Euros or will they offer payment in new Drachma or will they default on all the debt?

    • formula57
      Posted February 16, 2015 at 12:37 pm | Permalink

      With great finesse, the ECB is only permitting Euros to be made available, it is not actually providing them itself. Recall the Emergency Liquidity Assistance is undertaken by the Greek central bank under approval from the ECB – so the Greek central bank is (unusually and permitted only under ELA) creating new Euros to do that. That means if and when the Greek commercial bank borrowers cannot repay borrowings they have made under ELA, it is the Greek central bank that suffers the losses, not the ECB.

      • stred
        Posted February 17, 2015 at 8:42 am | Permalink

        The Greeks with large deposits will have transferred to Euro accounts outside by the time the country exits. If the new Euros issued cannot be repayed, the Greek central bank will be free to cancel the debt, issue new Drachma and start a QE fiddle similar to the BoE in order to finance government spending. Then the Greeks with accounts in Euros will be able to take advantage of the low Drachma rate and put the money back at higher value, or buy Greek assets at a discount. This is possibly what (mrs ed)Merkel would prefer, rather than carrying on funding the southern customers.

    • forthurst
      Posted February 16, 2015 at 4:07 pm | Permalink

      “As predicted, the possibility of an exit from the Euro has lead to a flight of deposits from Greek accounts and now the ECB is making emergency loans to replace the missing money.”

      This is disgraceful; how can politicians’ grand strategies and economists’ well thought through theories ever succeed if they can be so easily sabotaged by the base behaviour of people acting in their own short term self-interest? These foolish people could even bring about the Grexit that has unsettled them with the potential for most money in Greek banks being ‘loans’ from German taxpayers.

  13. alan jutson
    Posted February 16, 2015 at 9:37 am | Permalink

    It will be interesting to see how Germany sells this to its electorate if the loans continue without anything in return.

    There really must be huge panic in the EU to stop Greece leaving the Euro, it would seem at almost any cost.

    The reason, they have taken the Greece negotiation seriously, because the people are behind the Government position, or should I say the Government are representing the peoples wishes.

    It may still all end in tears, but at least the Greek Government are fighting hard for their National interest first and foremost.

    • DaveM
      Posted February 16, 2015 at 11:59 am | Permalink

      “the Government are representing the peoples wishes.”

      “Government are fighting hard for their National interest first and foremost.”

      Does that happen sometimes then?!!! What a bizarre concept. If you said that kind of thing in Westminster they’d think you were a stand-up comedian.

  14. Brian Tomkinson
    Posted February 16, 2015 at 9:45 am | Permalink

    Meanwhile your arch Europhile colleague Clarke told the BBC’s Sunday Politics yesterday: “I can’t see how you can sensibly avoid the Greeks defaulting and the Greeks having to leave the eurozone.”. Wasn’t he a leading advocate of the UK joining the euro? A Damascene conversion? I very much doubt it. His and your other Europhile colleague, Lord Heseltine, recently declared, again on the BBC, that the UK would eventually join the euro.

    • Lifelogic
      Posted February 16, 2015 at 12:48 pm | Permalink

      Indeed there types are rather confused to say the very least. They are however both old enough to have a good excuse now. What is Cameron’s excuse though?

    • Jerry
      Posted February 16, 2015 at 4:05 pm | Permalink

      @Brian Tomkinson; Well yes Brian, if we remain in the EU many will indeed expect “that the UK would eventually join the Euro” -what is more- even if eurosceptics think that way it doesn’t make them any less eurosceptic, quite possibly it makes them more so…

  15. Leslie Singleton
    Posted February 16, 2015 at 9:55 am | Permalink

    I deprecate this business of “before debt service” (why not before salaries?) which merely encourages the dangerous idea that repaying debt is optional and, more generally, that money grows on trees. Obviously Greece should leave and not just the Euro. Turkey manages OK does it not and was not Greece part of the Ottoman Empire?

    • Denis Cooper
      Posted February 16, 2015 at 12:10 pm | Permalink

      Insofar as money grows on trees the Greek government had its own money tree in Athens, but agreed to have it transplanted into an orchard in Frankfurt.

  16. Denis Cooper
    Posted February 16, 2015 at 10:31 am | Permalink

    I very much want Greece to leave the euro, but I don’t expect that it will happen.

    The pro-EU think tank Open Europe has recently increased its guesstimate of the chance of Greece exiting the euro to 40%, but in my view it’s closer to 4% than 40%.

    I can’t say whether reverting to a national currency would make life better or worse for the mass of the Greek population in the short term – that would largely depend on how much help other countries were prepared to give to smooth the transition – but while it may seem callous I take the view that Greece is notionally a democracy and the Greeks have brought this upon themselves by failing to properly control their politicians, and by far the most important thing for the whole of Europe is that the EU treaties are amended to make provision for a country which has adopted the euro to subsequently change its mind and make an orderly withdrawal, and without the threat that it must leave the EU altogether – one of the demands that Cameron should have made as part of a quid pro quo for his assent to the EU treaty change that Merkel demanded back in 2010.

    By the same token, I’m quite sure that Merkel very much wants to keep Greece in the euro; we should always remember that back in May 2010 she publicly stated:

    “Our goal must be that all EU member States join the euro one day”

    and notably making no exception for the UK or for Denmark, the two member states which have treaty opt-outs from ever having to join the euro.

    Clearly allowing Greece to withdraw from the euro but remain an EU member state, and then making EU treaty changes so that in the future withdrawals from the euro would be legal under the EU treaties, and orderly, rather than illegal under the EU treaties, ad hoc, and disorderly, would not be the way for Merkel and those who are likeminded to move towards the stated ultimate goal of getting the euro irreversibly established as the single currency for all EU member states, including the UK; and so behind the veiled threats against Greece they will fight tooth and nail to try to keep it in the euro and so preserve the present eurozone intact so that it can continue to expand.

  17. Ex-expat Colin
    Posted February 16, 2015 at 11:00 am | Permalink

    O/T…sorry, UKIP saying:

    CALL FOR END TO FOREIGN AID TO ARGENTINA AS IT BUYS FIGHTER JETS FROM CHINA

    (unchecked source deleted ed)

    Or is it the other money they are using…whatever? Stuff seems to be happening faster than the numbskulls can keep up. This is seemingly the EU again!

  18. The Prangwizard
    Posted February 16, 2015 at 11:19 am | Permalink

    Off topic but..
    John Cruddas who is writing the Labour party manifesto has said he would like private business excluded from government contracts.
    What will Mr Cameron say in response?
    A) Nothing.

    B)That Miliband and his crew are dangerous Marxists who have withdrawn non of their previous policy statements. That dismissing them as merely foolish and unworkable has been inadequate and they should now be shown up for what they really are and intend.

    C)That there may be some votes here, so I’ll say something similar.

    • DaveM
      Posted February 16, 2015 at 12:05 pm | Permalink

      Whatever it is, you can bet your bottom dollar the phrase “Long-term economic plan” will be in there. That seems to be the only thing that leaves his and his cronies’ mouths.

      Q: “What did you think of the cricket the other day, Prime Minister?”

      A: “Errr…long-term economic plan”.

      • Jerry
        Posted February 16, 2015 at 7:58 pm | Permalink

        @DaveM; “Whatever it is, you can bet your bottom dollar the phrase “Long-term economic plan” will be in there.”

        Why is it when ever anyone in the government trots out the above phrase, or even worse “We have a plan”, I immediately think of Blackadder and a certain Baldrick character, do they really think it ‘sells’ anything, don’t they realise that it just sounds naff -even when believed. Its a gift to Labour and MSM to ridicule, I do hope that they stop using it before the end of March, better still February!

    • Bazman
      Posted February 16, 2015 at 6:24 pm | Permalink

      Everyone is getting fed up with these companies ripping off the taxpayer and giving nothing back by paying no tax and poverty wages undercutting real companies. It could be a winner in some areas such as social care.Obviously not going towork on defence contractors massive projects.
      Socialism for the rich never seems to get a mention by our lassi faire deluded right whiners on this site.

      • Jerry
        Posted February 16, 2015 at 10:55 pm | Permalink

        @Bazman; “Everyone is getting fed up with these companies ripping off the taxpayer”

        Yes we they are, but which government gave such companies a free reign via the excessive and unwise use of PFI contracts?

        Five years might be an eternity for those in the Westminster village, especially when in opposition, but for the public it’s like only yesterday…

      • Mark B
        Posted February 17, 2015 at 1:10 pm | Permalink

        Those said taxpayers are only taxpayers because said companies employ them.

        • Jerry
          Posted February 17, 2015 at 7:20 pm | Permalink

          @Mark B; Only true if you are talking about income tax.

  19. Know-Dice
    Posted February 16, 2015 at 12:10 pm | Permalink

    What’s best for the Greek people?

    GRexit – A bit more pain now, but control of their future destiny.

    Stay in and have this ongoing “open sore”…

  20. Backofanenvelope
    Posted February 16, 2015 at 12:59 pm | Permalink

    Perhaps rather than transferring money from Germany to Greece, we should transfer people. All those unemployed Greeks could move to Germany, and retired Germans could spend their declining years in the sun.

  21. petermartin2001
    Posted February 16, 2015 at 2:26 pm | Permalink

    There is no third way, no win win.

    If there is no win-win there can only be lose-lose. The creditors won’t get their money back and the Greek economy will never improve. If Syriza don’t deliver on at least some of their promises then who knows who’ll win the next elections? Golden Dawn?

    Yanis Varoufakis has written in today’s New York Times ” No more loans — not until we have a credible plan for growing the economy in order to repay those loans”

    Shouldn’t it be the EU powers-that-be who are saying that to Greece? That’s what any responsible bank manager would say to a client who was asking for yet another loan.

    It’s in everyone’s interest that Greece should grow its economy to be able to service its loan. That’s the only possible solution and that has to be win-win.

  22. BeeCee
    Posted February 16, 2015 at 4:15 pm | Permalink

    It is all smoke and mirrors, and it will be so when BroDave and his team ‘do’ the renegotiations. By the way – does anybody know what he will ask for on our behalves?

    Paddy Ashdown let the cat out of the bag when being interviewed a few weeks ago about a different matter; both sides, he said, will sign off with an agreed ambiguity so that both sides can claim success. It was ever so I think he added.

    Explains why we are sold down the river by our ‘leaders’.

  23. JoeSoap
    Posted February 16, 2015 at 6:40 pm | Permalink

    First point – Germany wouldn’t have been here in the first place if a more cautious attitude to lending had been take rather than skirting round their own rules for Greece.

    Second point – surely default and hand back the keys is usually the rule – the collateral is membership of the Euro, for what that’s worth.. rather like handing back the keys on your poorly constructed MacHome and returning to the sanity albeit poverty of your trailer…

  24. Jon
    Posted February 16, 2015 at 6:50 pm | Permalink

    Perhaps Germany doesn’t want to be seen to let Greece tumble out of the Euro so has to engage in some reconstruction measures but I feel she would be happier with that. Merkel could blame them for the default on the debt but it would send a better message to those other indebted countries on what their options are. So I suppose I think Germany won’t be the full on sugar daddy that Greece needs to stay in.

  25. Bazman
    Posted February 16, 2015 at 10:06 pm | Permalink

    How are you nitwits getting on with the C4 spoof documentary on UKIP? LOL! BBC? No it was not. Reply needed ASAP. Drowing in your own stupidy? Did i spaell stupg wromng WELL!

    • Jerry
      Posted February 17, 2015 at 8:25 am | Permalink

      @Bazman; That rather silly spoof documentary programme on Ch4 last night reflected far worse on Ch4 that it did on UKIP – unless of course they follow it up with a similar programme about the first 100 days of a Green government, even a Labour/SNP coalition etc.

      But yes, I agree with your implied comment about the BBC / Ch4, I do hope that those who constantly berate the BBC now call for funding sanctions against Ch4, why should the general public be forced (in a way that the TVL fee does not [1]) to fund those sorts of programmes, if Ch4 want to broadcast such blatantly politically motivated programmes then they should do so from behind a pure subscription funding model.

      [1] with the TVL fee one can at least choose not to receive broadcast television, Ch4 gets funded by those who do not even own a TV, even those who have no use for a TV due to being blind

  26. javelin
    Posted February 17, 2015 at 9:08 am | Permalink

    The EU are playing politics with politics which always ends in tears.

  27. petermartin2001
    Posted February 17, 2015 at 11:03 pm | Permalink

    It strikes me that the Greeks are playing a cat and mouse game with the rest of the EU. They have a much better hand than is commonly accepted. Under the terms of the provisions of the European System of Central Banks ( yes there is more than one!) , the Greeks have a lot of scope for creating as many Euros as they like under the Emergency Liquidity Assistance scheme. Although the ELA isn’t referred to as such under the Institutional Provisions.

    http://www.ecb.europa.eu/pub/pdf/other/ecbinstitutionalprovisions2011en.pdf

    What they do say is:

    “National central banks may perform functions other than those specified in this Statute unless the Governing Council finds, by a majority of two thirds of the votes cast, that these interfere with the objectives and tasks of the ESCB. Such functions shall be performed on theresponsibility and liability of national central banks and shall not be regarded as being part of the functions of the ESCB. ”

    ” functions other than those specified” clearly means issuing their own Euros. So the Greeks aren’t going to “run out of money” anytime soon unless there is a two thirds vote mentioned, or there is a malfunction in the computers of the Bank of Greece or their printing presses. Greece could, of course, accept that vote and return to the Drachma. But what if the Greek government ignored it and just carried on regardless? What could the ECB do? Issue arrest warrants? I don’t think so!

    At that point the “Greek Euro” would start to float. It would all be very messy – especially as there are lots of Greek Euros outside Greece and lots of non- Greek Euros inside Greece but there would no doubt be a way found to muddle through. And who would take the ultimate decision to pull the plug? It couldn’t be the ECB itself. It would have to come right from the top of the EU governing class.

    Greece doesn’t have to do very much at all. It doesn’t have to make a decision to leave the Euro. Better to let, or dare, someone else to throw it out. And , arguably, it won’t have ‘left’ the Euro, the Greeks will just have a different Euro.

    Reply Greece needs the permission of the ECB to create euros- their TB issue is controlled by the EU authorities and they have to seek emergency cash from the ECB for their banking system when in need

    • petermartin2001
      Posted February 18, 2015 at 4:11 pm | Permalink

      The Bank of Greece is classed as a “National Central Bank” which means they can’t create euro liabilities on behalf of the European Central Bank but they can create them as their own liabilities. Just like a UK high street banks creates its own liabilities in pounds sterling when it lends. This is happening now under the ELA scheme.

      Yes, the ECB can lend to the BoG but the BoG then has a liability to the ECB instead. So its liability isn’t reduced. The ECB imposes rules and naturally if the BoG breaks these rules, essentially by issuing too many liabilities, the ECB will withdraw its support from the BoG.

      That will be a big step. Too big, politically, for the ECB itself to take. Essentially it means expelling Greece from the Eurozone. So, in a sense, the ECB and the EU governing class only has a ‘nuclear’ option. How far will the Greek government be able to push things before that big red button is pressed?

  28. petermartin2001
    Posted February 18, 2015 at 9:41 pm | Permalink

    I don’t know if I would quite put it like this myself but I noticed this quotation in today’s Guardian:

    Under the headline:

    “It is time to break away from the European Union”

    Antarsia , which is to the left of Syriza …blasted the euro group and the Syriza-led government for its handling of the Greek crisis.

    “What has happened has proved yet again that the EU is the most reactionary, undemocratic and authoritarian construct in Europe after Nazism ”

    So opposition to the EU isn’t just on the right of the political spectrum. It goes right across!

  • About John Redwood


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

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