Germany and Greece both lose

As expected, Germany blinked and Homer nodded. The Germans had to agree to more money being lent to Greece whilst they have the proper argument about what the future should hold. The European Central Bank continues to bail out Greece via emergency assistance to its banking system. There is a delay in implementing all the requirements of the last loan package, whilst Greece tables new proposals. Germany’s promise to enforce all the old loan agreements and to offer no new money has been broken. The message to other countries strapped for cash and disliking the conditions of loans is to cause trouble.

Greece had to swallow much of their bold rhetoric. Greece has had to apply to extend the old loan agreement which it said it intended to tear up. Greece does have to deal with the troika, though perhaps under a different name, when she said she would not do so. Greece will have to table austerity proposals next week to substitute for any of the current austerity requirements in the loan agreement which she does not like.

Meanwhile, in the real world, Greece will spend and borrow more, with likely overruns on the permitted deficit (called a primary surplus by being struck before interest charges). The European institutions will continue to finance Greece. It is more extend and pretend. The Euro has decided to be a bit more flexible to avoid a Greek exit, despite their fine strong words that a Greek exit would now be a minor matter for all but Greece.

Is this just kicking the can down the road for a couple of days? Or for a few weeks? Or will it result in a longer term fix? Time will tell. It appears that Germany is allowed to make the weather with the words, trying to spin the outcome as a tough settlement, a victory for austerity. Meanwhile the officials and the institutions which increasingly drive Euro policy are working behind the scenes on flexible language to cloak the truth, which is the zone so far has decided to extend more credit and pretend Greece can meet her obligations.

It’s no way to run a serious major world currency. If they carry on like this their economies will continue to malfunction, unemployment in parts of the zone will stay far too high, political protest will grow, and from time to time there will be alarms in the markets and in the weaker national banking systems. Cyprus shows us one way out of a financial mess for a state in the Euro – capital controls. Another way is for the rest of the zone to write off more of the offending state debts. They still have to arm wrestle electorates and some political parties as they seek to impose stricter controls on future spending and borrowing by states that cannot pay their way. Greece does not today suddenly become a paradigm of German virtues meeting all her loan conditions as some German comment would have you believe.

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66 Comments

  1. petermartin2001
    Posted February 22, 2015 at 5:22 am | Permalink

    The current Greece/Germany problem is just a symptom of a badly designed system. No doubt there will be a patch-up on that, but there’ll inevitably be another problem to follow.

    We need to make a comparison with the failing Euro project, with a successful currency union. The United States has, as we all know, a common currency but also a Federal Government to conduct macroeconomic policy, and transfer surpluses from the wealthy parts of the US to the poorer parts. It transfers surpluses. It does not normally arrange loans, except perhaps for special projects. If it did, the wealthier parts of the USA would end up as massive creditors. The poorer parts would end up as massive debtors. There would be clashes between New Jersey, the wealthiest state, and Mississippi the poorest. I had to look this up , by the way. I suspected that Mississippi might be the poorest but I had no idea which was the wealthiest. I had thought maybe California. That’s as it should be. It should not be like it is in the Eurozone where the wealthy states never tire of letting everyone else know who is paying the bills.

    So, imagine New Jersey providing big loans to an impoverished Mississippi, dictating that it implement privatisation of public assets at knock down prices and drastic cuts to state spending, pensions, its education services etc to be able to repay those loans. The Mississipians and the New Jerseyites would be saying exactly the same things about each other as the Germans and Greeks are saying now! It would be an absurd situation.

    So, just as any transfer of funds between New Jersey and Mississippi has to be just that, ie a transfer and not a loan, so too it needs to be between Germany and Greece in the Eurozone.

    The German taxpayers may well not like this idea. It certainly would not have been properly explained to them just what they were letting themselves in for when the Euro was created. No politician in any of the Eurozone countries would have dared make that explanation! It would have been career suicide. There were economists around who did their best to explain it all but they weren’t listened to.

    It is too late for that now, but the reality of what has been created, in their name now needs to be recognised and understood by all. Some rethinking is in order. That has to start with the Germans, then the Dutch and then everyone else too. The sooner the better.

    • agricola
      Posted February 23, 2015 at 10:02 am | Permalink

      A good analysis and comparison, but could it now happen. Even the Americans had their civil war before they concluded that they would all be better off together. I wonder if the various component countries are all of the mindset for giving up their sovereignty and going federal. Even within some of those countries, Spain for instance, there are rumblings for separation from some of the provinces. At this stage it could be a very hard sell until the people begin to feel that their lives are improving by being in the EU. Long term it is probably the only answer other than the reversion to national and currency sovereignty for the struggling members of the EU.

  2. Brian Taylor
    Posted February 22, 2015 at 6:00 am | Permalink

    Now Is The Time!.
    David Cameron should say give me a Conservative majority and on day one I will invoke article 50.
    That should concentrate everyone’s mind for serious renegotiation under Article 50.
    Otherwise I can see a hung parliament and any input from the SNP with labour could see a law that all parts of UKmust vote to leave the EU before any of us could leave, that could well scupper any future EU referendum.

    • Lifelogic
      Posted February 22, 2015 at 2:26 pm | Permalink

      That alas is hardly likely with Cameron is it? Rather more chance of his jumping ship and joining the Labour party I suspect. That is clearly where he should always have been given his views on the EU, greencrap, the NHS, ever higher tax rates and the likes.

      Reading yet more about the offshore hugely expensive offshore wind fiasco (Booker and Delinpole in the Sunday Telegraph today) one is left wondering if the Dept. of Energy can really be that foolish, lacking engineering expertise and in rapture to the green crap religion or is the whole green business merely a corrupt way to funnel tax payers cash into the pockets of friends & contacts of the powerful?

      After the election there should be a full inquiry and if the latter is found the government should clearly renounce the subsidy contracts and simply not pay these absurd subsidies. This would be entirely fair as clearly the recipients must know what an absurdly pointless and expensive way to generate energy it is.

      Indeed perhaps they should perhaps be collecting the files now.

    • Leslie Singleton
      Posted February 22, 2015 at 5:48 pm | Permalink

      Brian–I like your style on this but am afraid what you say is self-defeating in that unfortunately there are plenty of people (I speak as someone who badly wants OUT) who either want to stay IN or are vacillating so will never vote for the Tories on that basis. Personally I shall never vote Tory while Cameron is leader, this because of what our host calls etc ed but that’s another story. There must still be hope that Germany vetoes the pretend and extend tomorrow. If not we must hope that Podemos gets in in Spain. All the good stuff about how we need fiscal, monetary, political union for the Euro to work is obvious twaddle. None of that will do any good till the EU fanatics manage to abolish individual national electorates. I see no chance of that anytime soon but with their conceit and inability to admit disaster (which means “ill-starred” BTW) I have little doubt they will try given half a chance.

    • Jerry
      Posted February 23, 2015 at 5:59 pm | Permalink

      @Brian Taylor; Invoking Article 50 before the election might well concentrate everyone’s mind but in ways you would not wish, it would be a very high risk strategy, one that could indeed put a majority Labour government in place, either in their own right or as a coalition with the SNP, Greens and even a resurgent LibDems as elements of the pro-EU Tory voters, mistakenly, move their vote to what they think is a centrist party.

      The use of Article 50 is a non starter, even if it was actually capable of leading to a successful and reasonably speedy Brexit – which it is not.

      Reply There is no majority for this in Parliament!

      • Hope
        Posted February 25, 2015 at 5:40 pm | Permalink

        Not in parliament, but that is why it should be the people, through referendum, who decide not those with vested interests!

  3. oldtimer
    Posted February 22, 2015 at 7:16 am | Permalink

    Indeed, it is more smoke and mirrors. The can that continues to be kicked down the road is bginning to look more and more like a dustbin.

    • alan jutson
      Posted February 23, 2015 at 7:34 am | Permalink

      oldtimer

      …”can…..dustbin…..”

      Like it.!

  4. Lifelogic
    Posted February 22, 2015 at 7:28 am | Permalink

    Indeed exactly as expected. Now the rest of the pigs will just join the queue one assumes. Clearly no way to run a major currency as you say. Nor is CAP a sensible way to run farming or the common fisheries policy a sensible way to run fishing, nor the energy policy a way to run energy, nor is open door unselective immigration sensible, nor their defence policy nor ……..

    Indeed is anything much about the EU remotely sensible? Yet Cameron, Miliband, Clegg, the greens, SNP etc. all clearly love it and want more of it.

    The BBC seem to be presenting it as a victory for the EU needless to say.

    • Denis Cooper
      Posted February 22, 2015 at 11:20 am | Permalink

      Well, it certainly isn’t a victory for the Greek government. And as that becomes abundantly clear to the Greek people there must the possibility that the present government will no longer be in office in June to deal with the next crisis.

    • Jerry
      Posted February 22, 2015 at 12:17 pm | Permalink

      @LL; “The BBC seem to be presenting it as a victory for the EU needless to say.”

      As indeed are all the main EU area news outlets, including the UK based Sky News whilst ITN/ITV news is a little more measured, on the other hand Reuters are far more measured (at the time of posting this); Germany and the ECB/EU most certainly seem to blinked first judging from their reporting of the facts…

  5. sm
    Posted February 22, 2015 at 7:28 am | Permalink

    No politician – any Party, any country – should now be ignorant of why they are held in such contempt (I exclude our host from this). The bare-faced, massive lies we were told about the EU decades ago and ever since, the cynical manipulations over Greece’s (largely self-induced and with German stimulus) problems which were predicted by serious journalists and bloggers, seem not to bother anyone who is supposedly ‘in charge’.

    What kind of fur-lined, gold-plated, triple-glazed palaces do these Eurocrats inhabit, that they appear to have no shame about their cynical, ruinous dealings? And have none of them studied the history of 18th century France, where many events parallel what we are seeing in Europe today?

    • Mitchel
      Posted February 23, 2015 at 2:44 pm | Permalink

      More like Ceausescui’s Romania than Bourbon France.It’s a question of breeding!

  6. Lifelogic
    Posted February 22, 2015 at 7:32 am | Permalink

    And in a few months they will be here again and will need to kick the can a bit further down the road. Still the voters in the PIGS now know what to do at the next elections.

    • John E
      Posted February 22, 2015 at 9:14 am | Permalink

      Exactly. This will help Podemos for sure.

      Trouble is the little can is getting bigger each time – more of an oil barrel now.

    • Jerry
      Posted February 22, 2015 at 12:34 pm | Permalink

      @LL; “Still the voters in the PIGS now know what to do at the next elections.”

      Well yes, but then perhaps they just see it as a way of gaining the Federalised EU (or at least EZ) they though they were being promised by both the EZ and Lisbon Treaty, that Germany also signed up to…

    • fedupsouthener
      Posted February 22, 2015 at 2:33 pm | Permalink

      In the meantime here is a way of spending taxpayers money at a rate never seen before and all for nothing. EU driven of course and backed up by Labour who have been propped up by wind farm money! Strange that today they announce John Prescot is going to promote global warming and climate change more. Am I being cynical?

      http://www.telegraph.co.uk/comment/11426890/Gold-in-them-there-windmills.html

      Take a look at the above link and weep.

  7. Gary
    Posted February 22, 2015 at 7:52 am | Permalink

    it’s all extend and pretend. From New York to London to Athens it is one big ongoing bank bailout. And there is no end in sight, the debt can never be repaid.

    • Denis Cooper
      Posted February 22, 2015 at 1:24 pm | Permalink

      Come, come; even according to the version retailed by the Observer only a bit more than half of the Greek bailout money went to private investors:

      http://www.theguardian.com/business/2015/feb/21/greek-warriors-battered-soldiers-white-flag-eurozone

      “And as the Jubilee Debt Campaign recently pointed out, more than half of the bailout funds went not to keep schools and hospitals open, but to repay the private sector speculators, in many cases German and French banks, that lent recklessly to Greece in the runup to the crisis, charging the government in Athens little more to borrow at the time than they asked of the parsimonious Germans.”

      Well, in fact only some of the private investors were actually “banks”, others were various investment funds rather than “banks”; and their “bailout” was such that they actually had to accept massive losses, so-called “haircuts”, while the “official” creditors, the EU, ECB and IMF, refused to take any losses; and they were not actually “speculators” who lent “recklessly” to the government in Athens, they were fund managers and bond market participants who either did not understand the EU treaties, or did understand the treaties but had seen on previous occasions that the EU does not adhere strictly to its own rules, and who therefore made a fairly reasonable assumption that if it came to a crunch the EU would bail out any eurozone governments which got into trouble.

      For many of the weaker countries which joined the euro a strong motivation for the government was the prospect of being able to borrow on Germany’s credit rating rather than their own; and as time went by bond investors increasingly came to accept that this was OK, and that in turn was partly because the credit rating agencies also succumbed to the delusion and said that it was OK.

      I’ve noted over the years that US commentators in particular often write about the EU as if it was already a full federation like the USA, despite what the EU treaties may say.

  8. Douglas Carter
    Posted February 22, 2015 at 8:19 am | Permalink

    It’s time to deconstruct one of the strange clichés which permeate this debate here and there – that the Greek electorate want to remain in the EU, and want to keep the Euro.

    The Greeks have, all the same, voted to end austerity. What they have is a Greek, and European Political host who don’t have the courage to tell the Greek electorate that they can’t have all that in one place. I’d love to keep all my savings and yet spend it all relentlessly for self-gratification. Keeping my health and living a lifestyle of hedonistic excess seems attractive but ultimately I can have one or the other at my age.

    If the Greek voter wants to end austerity and permit their Government to spend in a manner which resembles a single sovereign nation, then they can’t use the Euro. The strictures they permitted – inadvertently or otherwise – their previous Governments to agree to just don’t match the mathematics. If they want to keep the Euro, effectively they must accept that they lean on the charity of the German Taxpayer as guarantor of last resort (which is now getting inexorably closer to lender of first and only resort) which comes with the consequence that German Politicians become entitled to set the terms and conditions.

    At some point, the ‘keep it all’ delusion will have to be explained, honestly, unambiguously out loud and in plain language. It doesn’t matter that the Greeks ‘want to keep the Euro’. The facts on the ground will eventually establish the cold hard fact that they can’t. The sooner that is accepted, the better the chance they can come out of this chaos.

    • Mark B
      Posted February 22, 2015 at 1:16 pm | Permalink

      It is not just the Greek people and politicians that want to remain wedded to both the Euro and the EU. The EU wants them to stay as well. So all parties are guilty.

      The only option as I see it, is for Greece to leave the EU and the Euro, and have most of her debt repudiated. They could then join EFTA / EEA and then ask to use the Euro as their currency like some of the ‘Micro-States’ do.

      I am up for discussion for this.

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

        They wouldn’t have to ask to use the euro, but obviously using somebody else’s currency has major drawbacks and it’s better to have your own.

    • yulwaymartyn
      Posted February 22, 2015 at 1:41 pm | Permalink

      They don’t want to be a single sovereign nation – they want to be part of the EU and the euro. Its very simple. Partly because there is a single sovereign nation next door to them – with 75 million as opposed to their 11 million. I am sure if you lived there you would feel the same. From the safety of John Redwood’s blog the economic arguments may seem different.

      • Douglas Carter
        Posted February 23, 2015 at 1:46 pm | Permalink

        The Greeks ‘want the Euro’ but don’t want the obligations that go with it. That’s for them to clarify. They can have the Euro, with all the baggage that goes with it, or they can have something different without the Euro. But they can’t have the Euro and not the downside. They recently voted quite clearly against the downside.

        Their problem, not mine. Of course it may look a little different from the comforting stance of dogged religious following of failing utopian dogma.

  9. Margaret Brandreth-J
    Posted February 22, 2015 at 8:23 am | Permalink

    Well, they could just take more and await the next crisis until they exit.

  10. David Williams
    Posted February 22, 2015 at 8:26 am | Permalink

    Or in the big picture of things are both sides getting what they really want? Germany is dominating Europe and Greece has a seat at the top table.

    • Mark B
      Posted February 22, 2015 at 1:18 pm | Permalink

      Greece has a seat at the EU table. But the Top Table, is reserved for the EU along with those countries that are not members of the EU. ie All 28 Member Countries are out of the room, waiting to be told what the EU has negotiated for them.

      Oooh, can’t wait – not !

    • yulwaymartyn
      Posted February 22, 2015 at 1:43 pm | Permalink

      David Williams – exactly right. Germany is the big player and rightly so. Greece is at the top table. Job done. We in the UK have been carefully abstaining from eating at the table – soon I suspect we will be in the kitchen.

    • Bazman
      Posted February 22, 2015 at 7:48 pm | Permalink

      German efficiency will always win in any scenario. Unregulated activities are inefficient.

      • libertarian
        Posted February 23, 2015 at 10:46 pm | Permalink

        Bazman

        “German efficiency will always win in any scenario. Unregulated activities are inefficient.”

        Think you’re on the wrong side of history on that one old son !

        • Bazman
          Posted February 24, 2015 at 9:18 pm | Permalink

          If it is not allowed it is forbidden.

  11. DaveM
    Posted February 22, 2015 at 8:34 am | Permalink

    You sound quite angry Mr Redwood.

    I may be being naïve here. However, there has clearly been a desperation amongst EU members to keep Greece in the Euro and the EU, which I can only assume is politically motivated. And I can see no reason why the EU – and Germany in particular – shouldn’t just tell Greece to get out, and pay us back the money you owe.

    What I want to know is, if someone can explain, what is the EU getting out of Greece’s membership other than a market for export (which is still going to be there even if Greece leaves)? Is there any point in you selling stuff to a country which has to borrow YOUR money to pay for it and then can’t pay it back?

    If the reason is anything other than to keep together a tenuous political union I’d really like to know!!

    • Jerry
      Posted February 23, 2015 at 6:14 pm | Permalink

      @DaveM; “I can see no reason why the EU – and Germany in particular – shouldn’t just tell Greece to get out, and pay us back the money you owe.”

      That, I suspect, is a very quick way to a full international default by Greece, and no one getting a single “Drachma-2” in return…

  12. They Work for Us?
    Posted February 22, 2015 at 9:07 am | Permalink

    The essence of EU operation is that we are doing something because we can. There is no question of proper democratic control (populism). There is no question of asking the German electorate to endorse further transfers of money to more profligate States. Only the German electors can bring blessed Angela to heel. In any case there must be no further money from the UK ie England to prop up failing EU states however this is described. Conservative MPs must insist on this and protect our interests. Never mind if left wing softie luvvies wring their hands and tell us we are “bad Europeans”.

    • Denis Cooper
      Posted February 23, 2015 at 8:11 am | Permalink

      Perhaps you should change your moniker to “They Are Self-Employed”.

      • Jerry
        Posted February 23, 2015 at 6:23 pm | Permalink

        Denis, perhaps some of the MSM should use the moniker “EntrapmentsЯus”…

        When will the UK media be made to only report the news, not create it?….

  13. Brian Tomkinson
    Posted February 22, 2015 at 9:17 am | Permalink

    Despite all this your leader is determined to keep the UK in the EU. Thankfully we are not yet in the euro. However, if Cameron has his way and cons people into voting to stay in, as his EU mentor Wilson did in 1975, it is predictable that the next step will be for our mendacious politicians to tell us that, having confirmed our desire to remain in the EU, the only way we can exert ‘real influence’ is by joining the euro. The creation of the euro was just another step towards creating a country called Europe. We can only hope that the British people have more good sense than to vote away their democratic rights that have been fought for over centuries or the euro collapses.

  14. They Work for Us?
    Posted February 22, 2015 at 9:36 am | Permalink

    Slightly off topic, but we have been discussing tax over the last few days, what is the rough cost to the exchequer of “gift aid” ? Someone must know.
    Presumably we must all be paying more tax as a result with the added spice that “gift aid” is supporting all sorts of bodies that given a free choice we would not wish to support.

    • Jerry
      Posted February 23, 2015 at 6:39 pm | Permalink

      @TWFU; “[Gift Aid] supporting all sorts of bodies that given a free choice we would not wish to support.”

      Wasn’t that sort of ‘argument’ done to death back in the 1980s when CND attempted to have a proportion of their members taxes refunded because they did not want to support nuclear weapons – it was chucked out of the courts then and I would hope you suggestion -if ever the legitimacy of Gift Aid was ever challenged- will suffer the same fate.

  15. A.Sedgwick
    Posted February 22, 2015 at 9:40 am | Permalink

    Yes it is the EU gobbledygook most of us expected.

    If the UK stays in the EU we will end up paying in some form to cover the economic mess.

  16. Andyvan
    Posted February 22, 2015 at 10:10 am | Permalink

    Just as well Britain isn’t in the Euro considering the disastrous way our economy has been run by Westminster. The only thing saving us from similar problems is that our mob can print money and pretend we’re solvent.

  17. JoeSoap
    Posted February 22, 2015 at 10:23 am | Permalink

    Surely, this is the Eurozone acting as a de facto single nation state but with one difference – whatever the Greeks vote, they are in a debt noose with the creditor states? What happens when Spain, France and Italy play the same game?

  18. Bert Young
    Posted February 22, 2015 at 10:35 am | Permalink

    The medic looked carefully at the patient and said ” This is a terminal condition and I have nothing in stock to save his life”. The patient was well aware of his condition and knew time was not on his side , “Simply give me a few pain killers to keep me comfortable for a while is all I ask for ” , he then closed his eyes .

    Greece has no alternative but to accept it is not able to match up to the standards required . The resources of the ECB/German wealth do not equal the debtor countries and those aspiring to get just as rich . We all know that the EZ is a dead duck and it should be disbanded .

  19. bluedog
    Posted February 22, 2015 at 11:05 am | Permalink

    The only thing this huge fudge proves, Dr JR, is that the EU is running very scared indeed. As a political project on which many well-padded careers depend, the EMU will defy economic logic and will continue to reflect political expediency. One now suspects that there is no conceivable crisis which will cause a reversal of policy within the EMU. The end will be bigger and messier than one can imagine.

  20. Denis Cooper
    Posted February 22, 2015 at 11:14 am | Permalink

    Adoption of the euro is intended to be irrevocable, and therefore the present EU treaties provide no mechanism for an EU member state which has joined the eurozone to later leave it; that is also why such short shrift was given to Thatcher’s proposal that the euro should be not be the “single” currency for the EU but instead just a “common” currency, with countries retaining their national currencies in parallel to the euro.

    In consequence it is repeatedly argued, and generally accepted, that as the treaties stand an EU member state which has adopted the euro cannot leave it without leaving the EU altogether. Of course the EU member state governments could all agree to change that, so that for example Greece could leave the euro and revert to a national currency while staying in the EU; and if they hadn’t suitably amended their treaties beforehand, as the Dutch Prime Minister Mark Rutte proposed, then they could do that afterwards and so retrospectively legitimise what they had done in breach of the existing treaties.

    However that would require the agreement, or at least the acquiescence, of all the EU member states, and technically it would only need one country to determinedly stand against that and refuse to allow it to happen; and in the case of Greece we have just heard very clearly from the leaders of two major EU countries, Germany and France, that they would not be prepared to agree to that:

    http://www.telegraph.co.uk/finance/economics/11426378/Greece-averts-bankruptcy-and-softens-austerity-in-last-ditch-deal.html

    ““Greece has to stay in the eurozone,” said Mrs Merkel.”

    “Mr Hollande said a Greek withdrawal from the euro was out of the question. “The position of France is that everything should be done – by both the Greek side and the European side – to restore the cohesion of the eurozone. There can today be no scenario of a Greek exit from the euro,” he said.”

    It follows that if the Greek government was driven to a unilateral decision that Greece must leave the euro then it could expect no help at all from other EU member states in making that difficult transition, and nor would the IMF be able to help because of their opposition; on the contrary, it is plain to see that the German government in particular would be minded to insist on severe reprisals, visiting the maximum financial and economic devastation on Greece as a deterrent to any other country which might be tempted to try to escape from the euro in the future.

    And so we come to the role of the UK government in helping to shape the political future of Europe, which it may be recalled is always advanced as one reason why we need to be in the EU, at the top table, exercising our good influence on how it develops, rather than isolated outside the EU with no influence on its evolution.

    Back in 2008 and 2009 we saw those leading the Tory party standing aside and allowing first the Irish people, then the Polish government, and finally the Czech President, being pressured and bullied into accepting the Lisbon Treaty, rather than putting a stop to it by pledging that they would insist on the British people being allowed to have their say even it was in a retrospective referendum; then in late 2010 we saw Cameron agreeing to give Merkel the EU treaty change she wanted while asking for nothing substantive as a quid pro quo, declining to make use of that “golden opportunity” to extract EU treaty changes that he said he wanted; and then again in 2012 we saw Cameron staying silent after Rutte had proposed that the EU treaties should be changed to provide a mechanism for a member state country to make an orderly withdrawal from the euro:

    “We want to allow a country to leave the eurozone if it wishes to. At the moment that is not the case. A country can only give up the euro if it leaves the EU. We should revise the Treaties to change that. We are ready for this.”

    So what can we conclude about Cameron’s real feelings about reshaping the EU more as we would like it to be, and about his real intentions regarding “renegotiation”?

    • acorn
      Posted February 23, 2015 at 12:25 pm | Permalink

      1. Sovereign state risk. Can I challenge the actions of a state which unilaterally exits the Eurozone?

      It is unlikely that a state’s decision unilaterally to exit the Eurozone could be challenged in any domestic courts because, even in those jurisdictions that permit foreign states to be sued before their courts, a decision to exit the Eurozone or to change its currency would be considered to be the exercise by that state of a sovereign act. Even in countries which permit exceptions to state immunity, these are not matters about which a state may generally be sued.

      http://www.nortonrosefulbright.com/knowledge/publications/68749/eurozone-risk-matrix-and-qampa

      • Denis Cooper
        Posted February 23, 2015 at 4:55 pm | Permalink

        Of course it is still open to the Greek government and parliament to take a unilateral decision that Greece will abandon the euro and revert to issuing a national currency. However it would then be open to the governments and parliaments of other countries to decide how they would react to that unilateral decision by the Greeks. The other EU member states could agree to accept the Greek decision with good grace and co-operate to make the transition as smooth and painless as possible, or at the other extreme they could agree that as Greece had reneged on its solemn treaty commitments to them they in turn were freed from their treaty commitments to Greece, and proceed to wreak financial and economic havoc on the country. Given the attitude of the German government especially I would expect reprisals rather than magnanimous attempts to assist the Greeks.

  21. ian wragg
    Posted February 22, 2015 at 11:33 am | Permalink

    Another day another crisis. I bet the German people are getting really hacked off. The Greeks will continue to retire at 55 with a Euro pension whilst the rest of the world works to 65.
    AfD will be the winners in all this as the people realise they are on the hook for billions.
    After the cock up in Ukraine and the latest climbdown with Greece, the (German led EU ed) is l;ooking increasingly dodgy.

  22. ian
    Posted February 22, 2015 at 11:59 am | Permalink

    Sound like and city of london and IMF talking to the govewrnment hear.

  23. Jerry
    Posted February 22, 2015 at 12:01 pm | Permalink

    “It’s no way to run a serious major world currency.”

    Indeed, and it won’t be long before the international FX markets etc. decide that the EZ is a joke and take flight, I’m just amazed they have not already done so in earnest.

    • libertarian
      Posted February 23, 2015 at 10:48 pm | Permalink

      Jerry

      FX markets don’t normally bail out, they’re more likely to short. Black Monday was a great time for shorting FX allegedly Soros made $5billion

  24. Tony Houghton
    Posted February 22, 2015 at 12:22 pm | Permalink

    John, what we are all saying without actually saying it is that Germany should never have agreed to let Greece join the Euro in the first place. Theirs is a country that never liked to pay their taxes and prefer to lie in the sun rather than work for a living – or am I being too hard on the Greeks?

    Reply. No, Greece as you say should not have been allowed in. Greece was the most extreme case of a country that could not hit the specified criteria for membership, but there were others.

  25. Ex-expat Colin
    Posted February 22, 2015 at 12:28 pm | Permalink

    I suppose the unemployed youth won’t get any help…to become employable? Just a few government workers and some pensioners get a lift. Austerity will remain for the half of Greece that has no chances. Germany needs to slice the debts big time otherwise this rats nest will remain….stagnant.

    Its loading the problems into the future again. Crazy stuff!

  26. Chris
    Posted February 22, 2015 at 1:11 pm | Permalink

    Thank you, Mr Redwood, for such a clear analysis of what has gone on.

  27. Peter Stroud
    Posted February 22, 2015 at 1:53 pm | Permalink

    These crises will continue within Euroland until some of the weaker economies leave the Euro, and the EU. Every sensible person realises that a single currency is a pretty hopeless idea, without political union. But could countries like Greece seriously politically integrate with the likes of Germany? Culture plays a great deal in the politics of all states.

  28. ian
    Posted February 22, 2015 at 2:28 pm | Permalink

    Look like the greeks PM back pocket is nearly full after three weeks of running around.

    You do well to stay well away from putin, he comes fully loaded, you would do better to invite him to the opera and dinner and will fine that he will be no trouble at all. At the moment he just playing with you.

    You know what he wants the financial system put right and more freedom for people, it might not look like it but putin is a freedon fighter and he can send this planet back to were it come from

  29. M Davis
    Posted February 22, 2015 at 3:31 pm | Permalink

    Hopefully, this episode is the beginning of the putrefaction of the Eurozone and the decomposition of the foul-smelling European Union which, stinks to high heaven. Bring it on, I say, it can’t come soon enough for me. Time for Article 50, Dave!

  30. Martin
    Posted February 22, 2015 at 5:10 pm | Permalink

    On the subject of borrowing how much is the British Government borrowing this year?

    The interest payment for 2015-16 has risen to £40 Billion !

    http://www.telegraph.co.uk/news/general-election-2015/11339921/David-Cameron-and-the-national-debt-monster-in-three-charts.html

    No wonder the new Greek Government came to visit the British Government – you British you are experts at borrowing – we admire you!

    • Denis Cooper
      Posted February 23, 2015 at 8:08 am | Permalink

      Well, there’s a lot in Andyvan’s comment above:

      “The only thing saving us from similar problems is that our mob can print money and pretend we’re solvent.”

      Except that the solvency of the UK government is not a pretence, it is a reality, as a crucial consequence of still having our own national currency under national control, unlike Greece; and it will remain so unless the UK government goes completely over the top with the creation of new money and the international markets lose all confidence in sterling. So if the Greek government wanted good advice from the UK government it would be “Leave the euro”.

  31. Terry
    Posted February 22, 2015 at 6:56 pm | Permalink

    It is so clear that without Germany there would be no Eurozone. They are the ones pulling the strings for they are the ones who haveg ained so much from this dire single currency set up. “Set up” being the operative words. The Euro “set up” or to put it another way, “Stitch up”, has done absolutely NOTHING for the Southern States within the EU and it has not done that much for most of the Northern ones either. Apart from Germany. Where all the others have been damaged by this single currency, Germany has excelled in it. It was and is a simple case of economics and superior productivity winning the day.

    Yet, after all of the proof at the feet the lumpen politicians running these ‘German satellites’, they are still convinvced they did the right thing. What arrogance and what shameful naivity. I just hope their respective electorates wake up and smell the corruptive coffee at election time.

    The Greeks have already put their feet on the ladder of political change so I hope there are more over the coming year. The Euro and the EU have failed the citizens of Europe so they MUST be fired as total incompetents and let the peoples of Europe get on with the lives, independently. There is no alternative to their future growth.

  32. Bigneil
    Posted February 22, 2015 at 7:20 pm | Permalink

    How much is this going to cost us? – 0r will we be lied to yet again?

    • DaveM
      Posted February 23, 2015 at 8:48 am | Permalink

      “How much is this going to cost us? ” Probably loads.

      “will we be lied to yet again?” Obviously!!!

  33. ChrisS
    Posted February 22, 2015 at 10:28 pm | Permalink

    The whole political class, with the exception of a very few brave people like Dan Hannan and our host, are in complete denial over the future of the Euro and the EU.

    It’s the fable of the Emperor’s New Clothes writ large and being acted out on a continental stage. It is so obvious to everyone that the thing cannot possibly survive in it’s present form yet nothing is done other than kick the every growing can a little further down the road.

    A victory of sorts for the EU, just maybe, but on Friday night, even the BBC has come to the conclusion that it couldn’t defend the indefensible :

    Robert Peston said that they’ve saved the Euro for all of two days and for the first time ever, all three guests on Newsnight were saying the same thing. One economist even stating openly that there isn’t an economist in the world that thinks this can go on.

    It’s so depressing because the longer they fail to put the single currency out of it’s misery, the more painful and disruptive it’s going to be.

    As Margaret Thatcher famously said, You can’t buck the market yet that’s exactly what they are all trying to do.

  34. majorfrustration
    Posted February 23, 2015 at 9:54 am | Permalink

    More sticking plaster. I only hope that at some stage the Greek see the light and start printing their own money. That’s the only way that the remaining Europeans will see the light and start making changes to the union – political and financial.

  35. Mike Stallard
    Posted February 23, 2015 at 10:07 am | Permalink

    You rightly notice the lies, the prevarication, the covering up, the pretence of the EU. People break their word and go back on agreements – the German Bank has been cruelly tricked, for example. Inflation matters to Germans who lost everything twice in the last century. The Greeks are pretending to reform when they have no intention of so doing.

    Which leads me to ask this question: dear old GB still playing by the rules and not cheating. Very commendable. We are, of course, going to get shafted as we always do. Why not just leave, break our own word, and have done with it? We could then become Norway. One thing is for sure: our referendum had better come up with the right result, or it will be repeated or swept arrogantly aside.

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  • By 5 likes on March 3, 2015 at 11:27 am

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    Germany and Greece both lose

  • 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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