I was asked this week in the Commons if I thought Germany was an independent country. Some were surprised when I said that of course it is not. Some people keep on confusing power with sovereignty. Germany is a powerful country, but her actions are now very circumscribed by the EU and more especially by the Euro. Germany had no wish to lend large sums of money to Greece, but has done so indirectly via the European Central Bank because she cannot win the votes and arguments on that body on some of the most important issues.
Germany and Greece are now locked together in a relationship of their making which is bigger and more powerful than either government. Mrs Merkel has to allow more and more lending to Greece whilst in public saying there will be no more loans unless Greece agrees to austerity policies to cut the deficit more. Greece has to listen to endless sermons on how to change its public spending and tax policies.In order to qualify for official loans to keep it going she has to agree to some of the advice. Previous Greek governments accepted the requirements and presided over a 25% decline in the output and incomes of their country as a result.
I have always assumed they will muddle through to a “solution”, with Greece promising a bit more by way of reform, and Germany agreeing to more loans. That would be more of the same which has sustained this difficult and precarious relationship since Greece joined the Euro. Germany has more supporters in the rest of the Euro than Greece on some of these issues, but has lost the battle over quantitative easing and a generally easier monetary policy.
The brinkmanship is now quite extensive on both sides. Germany has recently threatened Greece with the imposition of capital controls. This would mean that instead of the European Central Bank continuing to lend the Greek banks any amount of money they need to replace lost deposits, the Greek banks would instead have to tell depositors they can no longer withdraw their money, or can only withdraw it on worse terms. This is what the Euro authorities made Cyprus do, creating effectively a Cypriot Euro which was worth less than everyone else’s euro. The Syriza Greek government for its part simply refuses to cut pensions and pay, pointing out that Greece needs more demand to grow, not less.
Germany has drawn attention to the possibility of capital controls because clearly Germany is rightly alarmed by the huge build up in ECB loans to Greece, now in excess of Euro 83 billion. Sometime these two – and the other Euro members- are going to have to sit down and talk about debt cancellation. The trouble is the creditors will want more austerity policies which the Greek people and their government do not want. That’s why it is always easier to put off a settlement, just as long as the Germans have under the rules of the game to stand behind ever more lending to an unreformed Greece.
Neither side has wanted to bring the crisis to a head. If one does, then we will see the real negotiation. If Germany wants to keep the entire Euro enough she will have to allow Greece more money and more leeway. If Greece is more worried about capital controls and being excluded from the full Euro scheme then she will have to bow to more of the demands of her creditors. Agreement means Greece spending less or taxing more, and it means Germany paying or lending more to Greece. It is still not clear which side is the stronger in its resolve.
June 18, 2015
The sooner they leave the Euro and write off the debt the better it will be for all. It is just accepting the existing reality after all.
Hopefully it will come to a head just before the UK referendum.
June 18, 2015
I hope so too and then everyone will see what a catastrophic ‘club’ it is. This has been going on for far too long. OUT is the only way forward for us.
June 18, 2015
@LL; “Hopefully [the Greek debt crisis] will come to a head just before the UK referendum.”
Unlikely, I doubt the second stage of the Referendum Bill will be complete, but that won’t stop the europhobes from pouring metaphorical petrol on the fire of course, anything that helps kill off the Euro, perhaps even the EU too. I find all this virtual gloating rather disgustful, we are talking about real distress for the ordinary people of Greece.
June 19, 2015
Real distress caused of course by the EU and the EURO structures, entirely predictably and indeed predicted.
June 19, 2015
Oh, but that doesn’t mean that you’re allowed any “gloating” about it. Maybe when you predicted that it would end in disaster you were ridiculed and called all kinds of names, but you’re not allowed to take any satisfaction from being proved right now while those who abused you have been proved wrong.
Personally I have very little sympathy for either the Greeks or the Germans over this; both countries are notionally democracies, but their peoples failed to exercise proper control over their political leaders and now they must lie in the bed that they permitted their respective politicians to make for them.
June 20, 2015
@Denis Cooper; “Maybe when [certain politicos] predicted that it would end in disaster…”
…and done their up-most to help such an outcome along…
“…you were ridiculed and called all kinds of names, but youâre not allowed to take any satisfaction from being proved right now while those who abused you have been proved wrong.”
A self fulfilling prophecy by an different name in other words, hence why some get annoyed when they are being ridiculed by self-congratulatory europhobes such as yourself. Perhaps if you stepped back once in a while Denis and took a less partisan view once in a while?…
Oh and once again, according to the europhobes, it is all the fault of the EU politicos and the plebs, the banks and speculating markets selling such debt and promises to a country they knew was economically unstable are not to blame one jot.
June 20, 2015
I write what I write, Jerry, and I would be obliged if you could possibly refrain from attempting to rewrite what I have written according to your own lights.
Many different people, not just politicians, predicted that the project to impose a single currency on disparate countries would end in disaster. However I can’t think of any opponent of the euro who actually did anything to help bring about that disaster. That was entirely the work of its advocates, who chose to push ahead with the project on political, in fact geopolitical, grounds, while blithely assuming and reassuring each other that the economics would somehow sort themselves out.
June 20, 2015
@Denis Cooper; I would dearly wish that you would take your own advice… What do you not understand about the effects of a world wide recession and its effects on economies, not just the EZ?
June 21, 2015
Jerry, what do you not understand about recessions being a recurrent phenomenon, and for a long time now becoming increasingly world wide in their nature as local economies have become more closely linked through trade? You talk as though this was the first ever major world wide economic reverse in human history, rather than just the first to test the politically motivated experiment of having widely different countries in Europe sharing the euro as their currency. An experiment which should never have been started as it was, which was intended to run forever, but in reality ran for barely a decade before it had to be rescued through illegal bailouts, fundamental breaches of the treaties setting it up – that is, illegal not only under EU law but also under the national laws of all the EU member states which approved it, including our national law. But I tell you what: when you discover the recipe for abolishing boom and bust do tell us all on here, and drop a line to Gordon Brown as well because I’m sure he would be very interested.
June 19, 2015
@LL; How did the “EU and the EURO structures” cause international banks etc. to unwisely sell so much credit (and thus debt) to the Greeks? Once again some seem to wish to purge the faults of the international financial industry, pre 2007-8 crash, from the historical facts.
June 20, 2015
It was EU nation state banks, like those in Germany and France lending to Greece under pressure and with the strong encouragement of their Governments Jerry.
Then we have ECB giving Greece billions as did the IMF
These are decisions made for purely political reasons ie to prop up Greece and to desperately try to save the Euro project.
June 20, 2015
@Edward2, So the EZ caused the banking crash in the USA now!
Carry on finding your scapegoats to prove your self-fulfilling prophecy about the EZ to be true….
June 20, 2015
Who mentioned the USA?
Changing the terms of your argument again instead of facing up to arguments well made.
June 21, 2015
Edward2 – One estimate is that more than half of the bailout money went to private investors, and in particular French and German banks:
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.”
Of course they only behaved like that because Greece was in the euro and it was assumed that if it came to a crunch the other eurozone states would have to step in with some kind of bailout and save their bacon, notwithstanding anything it may say in the EU treaties, and it seems those particular investors were proved correct in that judgement. However overall private investors have lost about âŹ100 billion.
June 19, 2015
You say: I find all this virtual gloating rather disgustful, we are talking about real distress for the ordinary people of Greece.
And: anything that helps kill off the Euro, perhaps even the EU too.
Are you not confusing cause and effect? Europhobes shrewdly perceive the structural weakness in the Eurozone, itself the misconceived construct of the EU. Without the Eurozone it is probable that the Greeks would not now be suffering the current distress. So there is no ‘disgustful’ gloating about the plight of the Greeks, but sympathy. The disgustful gloating is reserved for those who still cannot see that the Eurozone is doomed and that on its demise the EU will most likely disintegrate too.
June 20, 2015
@bluedog; “Are you not confusing cause and effect?”
No! Some have been wishing the Euro and EZ to fail since before Black Wednesday.
“Without the Eurozone it is probable that the Greeks would not now be suffering the current distress.”
Yet many international banks, traders, even speculators (who did so much to cause Black Wednesday), never mind the US and IMF, all accept that a full implantation of the EZ (and yes that might mean Federalisation) would solve many of the problems. Hence why some have actually been calling for “More Europe”, not less. Greece outside of the EZ will just face other problems caused by the same debt, unless it really is going to team up with Putin and raise two fingers to the RotW…
June 18, 2015
It is reported that the UK will lose ÂŁ1.7 billion if Greece defaults to the IMF. Could the UK reduce the EU contribution by the same amount? Ironically it is the same amount Cameron willinglygave to the EU as an extra payment in October after trying to con the public he would not pay! Let us see his mettle and get the money back from the EU. After all he said he would not bail out Eurozone countries directly or indirectly. He knew what the IMF was doing, did he lie to us JR?
Shultz today says the UK belongs to the EU! How is Cameron going to negotiate with him? Is it not time Cameron told his boss, the public, what he trying to negotiate? Why is he intent on rigging the EU referendum? Still totally untrustworthy.
June 19, 2015
Hope; “It is reported that the UK will lose ÂŁ1.7 billion if Greece defaults to the IMF. Could the UK reduce the EU contribution by the same amount?”
You want the UK to break its legal contract, not only that but with a third party to the original contract, the UK entered an agreement with the IMF for ÂŁ1.7 billion not the EU. Oh and if we did do as you suggest what do you think the international markets and ratings agencies would make of our actions – probably consider the UK to be no better that Greece!
Shultz today says the UK belongs to the EU!
Indeed and without the Brexit camp putting up a credible and overwhelming economic alternative he might be right, woolly semantics about who rules who won’t cut it with the average UK voter, many actually look to the EU as their saviour when it comes to keeping overzealous, reactionary national executives in check…
June 19, 2015
The IMF should never have been involved in Greece. It was a EuroZone problem and they should have solved it rather than lumbering the IMF.
June 19, 2015
The UK should be a sovereign nation state and able to to spend the taxes it raises however it wishes. Your point, once again, is redundant and lame, even though you might think it clever! You also need to understand the difference between patriotic and nationalism, you do not appear to grasp the nettle. Not that there is anything wrong with nationalism, it is only the connotation the Clarke types try to place on it. Very dull reply Jerry. You must try harder.
No need to repeat all he economic benefits of leaving the EU they are well rehearsed. We have not heard of any to keep the UK in he EU just bland untruthful statements. I’d do not hear one good argumNt advanced by Clarke for the UK to remain the EU, all bluster and no substance, a bit like your reply.
June 20, 2015
Hope; “Your point, once again, is redundant and lame, even though you might think it clever!”
Oh look at all those filthy pots and pans on the shelf…
For all your hot air and bluster Hope you have not answered my question, do you want the UK to default on her legal contract to the IMF?
June 19, 2015
”… many actually look to the EU as their saviour when it comes to keeping overzealous, reactionary national executives in check⊒
Good Lord…
June 20, 2015
I agree bluedog Jerry comes out with some amazing comments but none yet surpasses this one.
June 20, 2015
@bluedog; @Edward2; Considering that to be a member of the EU a member state has to sign up to the ECHR and abide by their rulings…oh hang on, I see what you mean….
June 20, 2015
Another irrelevant comment Jerry on a different point
Dont you ever stop?
June 19, 2015
https://euobserver.com/tickers/129193
“British debate on EU ‘spreads hate’, says Schulz
By EUOBSERVER
Today, 09:12
Britainâs debate on Europe is spreading hate, resentment, and scapegoating of Romanian and Bulgarian immigrants, European Parliament president Martin Schulz said Thursday. “There are attempts by people in Europe and also in this country to create new barriers between countries,â said Schulz following a meeting with David Cameron.”
June 18, 2015
What a beautifully harmonious society the EU and the Euro have created.
June 18, 2015
Plus they have prevented wars too they claim, and saved us from their paper tiger of their forecasts of catastrophic, runaway, global warming.
Aren’t they wonderful.
June 18, 2015
Germany and Greece may not manage to muddle through to a deal. Greece may then exit the Euro.
The good news is we may then get extremely cheap holidays in Greece as in the good ole days with our Pound exchanging for whole buckets full of Ouzo and the preferred beverage of Bacchus.
The bad news is, too many of us will already have used up this years holiday entitlement from work.
June 18, 2015
To me, Germany is not an independent but interdependent country, and so is the UK. It is a gross oversimplification to replace eurozone with Germany, that is not how the eurozone or the eurogroup (its 19 ministers of finance) work. The agreement between the other 18 countries so far has been pretty strong and a unified stance towards Greece doesn’t mean that 17 countries are subservient to Germany. Oversimplification doesn’t help understanding. According to the Dutch media, Greece has been free since February to propose any alternatives to austerity measures which would collect enough money to keep its own agreement with the eurozone, but Greece has chosen not to do so yet and go really to the wire.
June 18, 2015
Yes, they will “take it to the wire” then come up with a “fudge” that as we say here “kick the issue in to the long grass” for a few more months.
Is this really the best thing for the Greek people? Even though as discussed before opinion polls show that they wish to stay with the Euro and in the EU?
Is it possible that there could be a treaty change to allow Greece to leave the Euro and stay in the EU? Which would be interesting as that would trigger another referendum here đ
June 18, 2015
It can’t be assumed that an EU treaty change of that kind would trigger a UK referendum. The European Union Act 2011 was drafted to allow the government to block unwanted referendums, and loopholes have been invoked on two previous occasions.
In October 2011:
http://blogs.fco.gov.uk/davidlidington/2011/10/13/first-use-of-the-european-union-act-2011/
“First use of the European Union Act 2011”
“The Foreign Secretary has today made a statement to Parliament which explains the Governmentâs first use of the European Union Act 2011. This use of the Act is required by the proposed treaty change to enable Eurozone countries to set up the European Stability Mechanism, which aims to secure economic stability in the Eurozone countries (not including the UK).
The European Union Act 2011 requires a referendum in the UK if this â or any future Government â agrees to a new European treaty, or an amendment to existing treaties which transfers powers from the UK to the EU.
Our assessment, explained in the Foreign Secretaryâs statement, is that the treaty change to enable the establishment of the European Stability Mechanism does not require a referendum in the UK, as it affects only the 17 countries which are members of the Eurozone, and not the UK itself.”
The second occasion related to Croatia joining the EU; no referendum on that, and nor would there be if it was Ukraine or Turkey.
June 18, 2015
PVL, it is the aim and purpose of the IMF to help distressed countries. Not to save currencies or private banks. The IMF took action to save Frencha nd German banks and the EU project. The EU was prepared to sacrifice Greece for the its project. Totally unacceptable.
What did Cameron do on behalf of the UK to influence the IMF either way? Was his priority the EU or Greece? JR, could you shed any light on this, as Cameron stated he would not bail out Eurozone countries directly or indirectly.
June 18, 2015
@Know-Dice: You already have your referendum.
I doubt there will be treaty change soon. If only the Greek government could come with a growth formula which is sustainable and doesn’t require further austerity. But either it can’t or it won’t. Maybe an international investment plan based on revenue-sharing ( say in the tourist industry) might bring some prosperity, but that is not really a left-wing first choice of policy.
June 19, 2015
In fact Hague had made that clear in November 2010 soon after Merkel had demanded that EU treaty change:
http://www.telegraph.co.uk/news/politics/8115730/William-Hague-no-UK-referendum-on-EU-treaty-changes.html
“William Hague: no UK referendum on EU treaty changes
Changes to the fundamental rules of the European Union will not lead to a British referendum, William Hague has insisted.”
“David Cameron has signalled he is prepared to give his consent to a German plan to alter the EUâs basic rules to support the euro.
The Conservatives have promised a referendum on any transfer of British sovereignty to Brussels, and some Tory MPs will this week demand such a vote.
Ministers insist that the German plan does not justify a British vote because it affects only eurozone countries and has no impact on the UK. ”
“âAs proposed, it would not give rise to a referendum,â he said in a BBC interview.
âWhat is being proposed by Angela Merkel does not affect the United Kingdom and the powers of the United Kingdom.â”
It’s a pity that it wasn’t put to a referendum, because then we could have rejected it on the grounds that Cameron had got nothing in return for his agreement to Merkel’s proposal.
June 18, 2015
As I and others have been saying here for many months there must eventually be some debt forgiveness. Anything else is continued and costly pretence.
Some countries that are most opposed to writing off the debt have themselves benefited in this way in the past and owe their current economic success in no small way to this – Germany on three occasions last century and Poland in the 1960’s. They have short memories.
You may be proud of the political will and unity behind the Euro in this process but that doesn’t make it a good idea. It just means it will do damage for longer.
The Greek bail-out was for the benefit of the creditor banks, not for the benefit of Greece. Greece has no good options at the moment. It may as well go for a proper default as it is not being offered any real help.
But if it was in a good state to manage that process successfully and emerge the other side stronger it probably wouldn’t have arrived at this impasse.
June 18, 2015
@John E:
I thought that by now the very long periods given to pay back and the very low interest rates ought to make the burden relatively light. But for the inevitable debt-forgiveness it is still too early I think. How to forgive debt without first having trust that the economy will be run more effectively?
June 19, 2015
You forget that private investors have already been compelled to forgive the Greek government âŹ100 billion of its debts.
June 19, 2015
The Greeks have already had a whooping lump of Debt forgiveness – 53% if memory serves me right. The problem is really that Greece has not reformed her economy and State, and come January they elected a set of clowns. The behaviour of Tsipras and Varoufakis has been nothing short of a disgrace.
June 18, 2015
Some may think the Dutch media is guilty of an even greater over-simplification. The Greek case (as articulated by Syriza) as I understand it is that it does not wish to be free to implement its own agreement with the eurozone since that agreement (concluded by a now repudiated goverment) is what is destroying Greece.
In the case of the Dutch media, over-simplification does more than hinder understanding, it perpetuates a lie it seems. Shameful!
June 18, 2015
@formula57: As far as I know (and I have access to more than just Dutch language media) Greece is still free to come with its own solutions, its alternatives to austerity. The only requirement is that the figures tally up. If you want to collect âŹ10,- you owe an international agency in, do it in any way you want, but come with a real workable alternative.
June 18, 2015
As Bill Mitchell said today. “It has been argued for some years that one of the important consequences of Germanyâs obsession with fiscal surpluses in recent years, articulated by Chancellor Merkel and Finance Minister SchĂ€uble as the âSchwarze Nullâ austerity policy, is that Germany has been under-investing in its physical infrastructure. But it has taken the recent industrial unrest to bring that to the fore into the public debate.”
“Even the IMF is now getting on the bandwagon. In its in-house journal (Finance and Development, Vol.52, No.2, June 2015) there was an article â Capital Idea â which says that âBy increasing spending on infrastructure, Germany will help not only itself, but the entire euro areaâ. At present, Germany is trying to take the high moral ground in the Greece negotiations, but its motivations are obvious â it doesnât want the generosity that the rest of the world has shown to it in the past (debt forgiveness) to be given to Greece now because that would allow the Greek government to stimulate growth and demonstrate that the austerity path is destructive and myopic.
It doesnât suit Germanyâs own vision of itself (as articulated by its own crazy government) for an anti-austerity stance to be given any oxygen. But if it looks at itself in the mirror it would see an economy that is barely capable of economic growth itself, most recently has zero employment growth, has decaying physical infrastructure such that bridges are roads are becoming dangerous, has generated no meaningful real wages growth in years, and as a consequence, has a workforce that is now showing signs of open revolt. Some moral high ground.”
Germany has a domestic economy which is falling apart. This crazy export drive and its equally crazy “zero deficit” fiscal policy means stagnant wages and zero domestic growth. Being an overlarge exporter means Germany ends up with a lot of foreign currency sitting in foreign Banks. You can bring some of it home but too much will push up the value of the German currency. Thankfully, club-med keeps the Euro nailed down.
Alas, it appears the big German exporting corporates are not doing that, they are investing their circa âŹ500 billion in foreign currency, building manufacturing plants in the countries where they are stacking up the foreign cash. BMW is currently spending $1 billion on turning its Spartanburg, South Carolina USA plant into its largest worldwide. Daimler-Benz now assembles the new C class Merc, for the American market, in the town of Tuscaloosa, Alabama. And painting equipment manufacturer DĂŒrr, expanded its factory building in Shanghai last year so that it matches the size of its headquarters in Bietigheim-Bissingen, near Stuttgart.
Why would big German corporates, bother about the state of German roads and railway bridges, when it appears they are not particularly fussed about a down and out Eurozone.
PS. You will probably have spotted that the UK and Australia are also working through the same script as the German neo-liberals have been using.
June 18, 2015
I see that the Pope has described global warming as a major threat to life on the planet. Well I suppose he is at least recognising that the global warming (the exaggeration of) is essentially just yet another religion and therefore comes into his domain of expertise.
In May 2009 Prince Charles said 100 months to save the World. So we are all very nearly doomed one assumes. Just a few month left for him to spend over ÂŁ1M a year on his worldwide travel (etc ed).
The really damage is being done by the green energy religion itself – bio fuels pushing up food prices, wind farms, PV and other totally uneconomic lunacies. All alas being pushed by the EU, Cameron, Huhne, Davey, Rudd and the Dept. of Energy and Climate Change.
June 18, 2015
I see Delingpole put this rather well in the Spectator this week too.
http://www.spectator.co.uk/columnists/james-delingpole/9559302/if-the-pope-keeps-pushing-climate-alarmism-his-church-and-the-world-will-suffer/
June 18, 2015
I though he had a direct Hot Line to the boss.
I guess a Plague of Locusts and Darkness is a bit passĂ©…
June 18, 2015
I am sure locusts plagues and everlasting darkness will also be used to advance the religion. Everything else (even earthquakes seems to blamed on the harmless plant food of C02).
June 18, 2015
All roads lead toRome
June 18, 2015
I see we have an announcement from the DECC at last regarding wind farm subsidies but nothing on Contract for Difference payments which could mean Scotland still gets hit by massive wind farm development. Also there is yet to be a decision over community owned wind farms. Unless the feed in tarrifs etc get stopped completely then it still means rural communities get hit with numerous turbines and all the noise, views and devaluation of property while the local towns get all the financial benefits with the approval of most because they don’t have to live with the damned things. It’s fine to support wind farms when you don’t have to live with them on your doorstep and can saddle your neighbours with it and reap all the benefits at the same time. Cameron must go further to stem this curse. Bring on fracking and nuclear which is far less intrusive, works and will provide us with reliable and cheaper power for years to come bring economic benefits to the UK at the same time.
June 18, 2015
Here they go again from the comfort of their small island bathed by the North-Atlantic end of the Gulf Stream, they obviously know all about temperature, precipitation, ice and glaciers, soil moisture, storms and tornadoes.
They all know about the details of scientific papers reporting observations (not model projections), they are more intelligent than the military strategists who now for almost ten years have been accounting for climate-induced disruption in their planning.
Blessed be the old ignorami who will not have to bear the consequences of their blindness.
June 19, 2015
In view of their record I wouldn’t pray military planners in aid.
June 20, 2015
Military planners plan, politicians decide (rarely Parliament).
June 18, 2015
Somebody should tell him that over-population is a far worse threat.
June 18, 2015
@LL; “I see that the Pope has described global warming as a major threat to life on the planet.”
Indeed, perhaps it might have been better for the Pope not to enter disputed science, after all if he really want to have it that science has proved AGW then perhaps his next move should be to dissolve the Roman Catholic Church and return Vatican City to Italy etc. as science has also shown much doubt about the existence of God and thus religions built upon such beliefs – there being relatively more atheists within scientific world than anywhere else were there is a free choice.
June 20, 2015
Why so Jerry?
If man with free will given by God has burnt too much fossil fuels, increased CO2, put that into the atmosphere and raised the average global temperature thus creating a change in the climate, then why does that mean that God does not exist?
June 20, 2015
@Edward2: I said that many/some scientists say that there is no scientific proof that God exists, so if the Pope says it is a “scientific fact” because many/some scientists say that AGW is caused by man then it is also surely by the same score a “scientific fact” that God doesn’t exist?!
June 20, 2015
No thats not correct logic.
There is no connection between the items you mention.
That some scientist are athesists is irrelevant to global warming or those who are Catholics or those Catholics who believe in global warming.
June 18, 2015
“Sometime these two â and the other Euro members- are going to have to sit down and talk about debt cancellation”. And thats just it.
If it takes so painfully long for a handful of leaders to get to this critical point how will “other Euro members” ever get to an agreement? That would be an agreement that allows those in Greece who have no connection to whats happened to live without threat. And those “others” to walk away quietly with massive losses. Pity the punters…again and again!
DM today…Michael Fallon said the UK would not be intimidated by the Russian leader and Nato was determined to match his âsabre-rattlingâ by increasing military strength.
I did think that Fallon was a common sense person. Perhaps not? And of course sanctions on Russia are extended…..the madness simply continues.
June 18, 2015
Odd that the Pope wants to talk about saving the planet but has nothing to say about family planning.
June 19, 2015
He has something to say about it, and it’s just as well that many otherwise devout Catholics choose to ignore what he says, but not so much in parts of the world where they have the greatest need of family planning.
June 18, 2015
Cancellation of debt has been on the books for a long time.I simply cannot understand why any more was lent to Greece when they were already struggling.The dependency Greece are setting up for themselves is a tragedy . I do believe that they could have made it alone prior to the last loan, but now if will be such a struggle although on TV interviews last night a strong possibility of an exit from the union was voiced.
Listening to the debate on productivity yesterday made me think how Greece could improve their productivity or how we could possibly link with them in some way to share trade prospects .I was surprised at the vote yesterday as public and private spending go hand in hand and they do impact on each other whether it is in an overt way or not . The motion did not state whether the impact was negative or positive so it seemed a waste of a vote and a poorly phrased motion.
Reply It was Labour’s motion. I think it was a worthwhile subject for them to select, but I found their approach to it very limited and muddled. I thought it a pity they would not explore with me the issue of public sector productivity as that is the one area where the government has a direct role.
June 18, 2015
Huge amounts of debt have already been cancelled, private creditors of the Greek government have most of their money. No matter that was described as “debt restructuring” rather than “default”, the effect was much the same.
From March 2012:
http://www.economist.com/node/21550271
“The biggest sovereign default in history, and the most anticipated”
“After a tortuous process, the majority of private holders of Greek government bonds had agreed by March 9th to trade in their bonds for new longer-dated ones with less than half the face value of the old ones and a low interest rate. The biggest sovereign-debt restructuring in history allowed Greece to wipe some âŹ100 billion ($130 billion) from its debts of around âŹ350 billion.”
June 18, 2015
Correction, they have LOST most of their money.
June 18, 2015
Hopefully Greece will default and be ejected from the Euro. They can then begin to grow with a much devalued Drachma. This may very well be the catalyst that destroys the EU. One thing is certain, Greece cannot repay it’s creditors ever and lending more money to repay debt is nonsense
June 18, 2015
Ian–We are now regularly told that every economist in the Universe all of a sudden reckons that it is obvious and unarguable that Greece has built up too debt ever to be able to repay. Said debt did not just appear out of a clear blue sky, very far from it, and till late last year said economists presumably thought the opposite, viz that the debt would be repaid. Why wasn’t it obvious then, indeed years ago, especially to the Titans in Brussels that Greece would never be able to repay? Why wasn’t something, anything, done sooner, much sooner? And then, changing gear, we have to try to understand why Greece’s leaving the Euro would reportedly be a “catastrophe” for the Greeks (I won’t be losing sleep over a catastrophe for Brussels–and the sooner the better). Of course there would be considerable short term grief but after say a month Greeks would simply be on a par with their neighbours the Turks who no doubt have their problems, don’t we all, but who are not about to go bankrupt.
June 18, 2015
All absolutely true of course but it is very doubtful whether a devalued Drachma will do that much to restore Greek fortunes for a long time.A post Euro Greece(still in the EU) is likely to be in need of substantial funding for humanitarian assistance -and the wider EU,including ourselves, will be obliged to render it -unless Russia and China step in.
No doubt the Bank that (helped the Greek state to present ed) the figures to get Greece into the Euro in the first place will benefit from any debt restructuring….for some Greece is the gift that keeps on giving,for the rest of us it is just a black hole.
June 18, 2015
In a secret deal CMD will borrow yet more billions on behalf of this nation and give it to the EU. After some has been creamed off for “transaction costs” this will be used to help pay down the Greek debt.
As for Greece leaving the EU, where does that leave all those from many countries going there from Turkey? Would they then have to make their way to yet another EU country to complete their journey here to the (EU version) “Land of the Free” – free house, money, healthcare etc?
June 19, 2015
@bigneil; “In a secret deal CMD [../rant/..]”
If it’s going to be a “secret deal” how come you know about it? Duh!
June 20, 2015
There have already been several payments made by the UK Government eg loans to Ireland and Greece and extra payments to the EU, which were initially not made public.
So “secret” is right because at the time the meetings and decisions are not publicised.
bigneil is correctly predicting that there may well be further deals like this.
Not a rant by him at all Jerry and a silly response by you again.
June 20, 2015
@Edward2; I guess you still don’t get irony/sarcasm, the clue was in the use of the words âsecret dealâ, what ever… đ
June 20, 2015
Still far too subtle for me Jerry what with no smiley faces.
Stick to your usual agressive attacks on everyone you disagree with.
June 21, 2015
I suggest that in the future you keep Jerry at bay by saying something like “little publicised” rather than “secret”. Vast quantities of official information are put into the public domain and so cannot be described as “secret”, but hardly any of the public will be aware of a particular item unless the mass media choose to publicise it.
June 18, 2015
@Ian wragg; “This may very well be the catalyst that destroys the EU.”
…and quite possibly the western capitalist economic model, if people are not careful, beware of unintended consequences!
We are told that the markets have already factored in a Greek default and Grexit, I just hope they have, but then why have they been getting jittery again since the ECB, EU, IMF and Germany have started to talk openly about just such a default/Grexit….
June 20, 2015
As Greece is around 2% of the total GDP of Europe it is unlike to precipitate a destruction of the Western capitalist model Jerry, as much as you may be hoping for it.
June 20, 2015
@Edward2; I sincerely hope you are correct; trouble is contagion tends to spread, even more so when speculators and traders are made to take a crew-cut, if not a shave.
June 20, 2015
I am correct Jerry
The sooner you realise this the better we will get on.
June 18, 2015
They will come to some compromise which defees the crisis, they always do. Things will only change in the medium-long term when a populist/nationalist party starts making ground in Germany which is opposed to the transfer of German money to Greece. Such nationalist parties already exist and are making gains in several European countries (including England & Scotland) but not to a significant extent in Germany. When it happens there the scope for the entire region to be destabilised both economically and politically is great and it will be entirely the EU’s fault.
June 18, 2015
At risk of stating the obvious, Greece should never have joined the Euro. She fudged the books , and the EU ,driven be the political imperative, ignored financial reality.
Germany finds herself,f as one of the few viable economies in the EU, between a rock and a hard place. It can only , in my view, be Germany’s history and a political desire to be part of a united Europe, that holds her in place. For Germany there is no financial logic to her remaining in the Euro, apart from it’s weakness which makes her exports more attractive. She should not be expected to support a collection of financially errant states that through the Euro have become dependants.
Greece should go her own way with the Drachma, and Germany should consider reverting to the sanity of the Deutchmark. The rest of the EU should accept that the Euro is a failed experiment and either scrap it altogether or withdraw it to a small nucleus of countries that are financially viable. My solution flows in the face of politics, and we all know that politics in the EU takes precedence over logic.
June 18, 2015
@agricola; “Germany finds herself,f as one of the few viable economies in the EU”
I hope you meant to say Euro-zone….
June 19, 2015
Euro – Zone ,EU, Europe, lets not get pedantic.
June 19, 2015
@agricola; Not pedantic at all, if you really do mean the whole of the EU (if not Europe) some might start making incorrect assumptions about the UK’s economy.
June 20, 2015
The UK economy is one of the strongest in Europe.
It has one of the lowest levels of unemployment (falling for over 18 months on the trot) and one the highest growth levels in Europe and the G7.
So they would be making “incorrect assumptions” Jerry
June 20, 2015
@Edward2; So they would be making âincorrect assumptionsâ
Indeed and stating the obvious but that might not stop then making them, even more so if people start banding about incorrect terminology.
June 20, 2015
But its not incorrect terminology Jerry.
These are ways of referring to our European partners.
I think we all knew what agricola was referring to..except you Jerry.
June 18, 2015
Germany and the other Eurozone countries could always take on the debt of other users of the common currency as happens in other shared currencies.
Sharing the debt would then give them the mandate for shared fiscal and economic policy in the future. Just demanding change and repayment will never wash with default as an option.
We should be thankful that Mr Brown was such a control freak and wanted to put one over on Blair sufficiently to keep us out of this mess.
June 18, 2015
You showed the other day how Germany will back down if pushed. But we all know that debts have to be paid sooner or later. If I were a German I should be hopping mad having been constantly lied to both by my own government and also, consistently, by the EU which deals in deception all the time. (“The Great Deception” by Christopher Booker). If I were a Greek, I should very worried about unpaid police and the valiant Greek army, gutsy and, I should imagine, very angry about that back pay.
Silly people think that government by experts (Plato’s Guardians) is more efficient than democratic, elected, transparent government. Up till now, the EU has got away with government by Guardians. At long last, the thing is falling apart. Greece is the first domino. Now we have the idiotic policy (policy?) of the Africans at Lampedusa and the new tent city at Calais. The Ukraine is going to blow up any minute as it is causing trouble in the Baltics. Even Moldova and Georgia are now being approached by the EU. And who is in charge?
I look forward to the moment when Greenpeace turns all the lights of Europe off.
Reply The curious thing is the continued German solidarity behind the EU/Euro project. I guess the fact that they have done so well out of the exports and their economy is in reasonable shape means they do not worry too much about the big build up of liabilities elsewhere in their currency zone.
June 18, 2015
Mike,
I read that that paragon of peace making, Tony Blair, has been appointed to advise the Ukrainian government. Another move to prod the Russian bear.
June 18, 2015
…and the EU coughed up a further 1.8bn (can’t remember whether it was Euros or dollars) in assistance to Ukraine last month(any discussion of that in parliament?) before any agreement has been reached on debt restructuring for that country – and whilst it appears to be attempting to re-arm.
June 18, 2015
Reply to Reply: I think that is a rather limited view on Germany’s support for the EU/Euro. Its certainly right Germany has done well out of it economically, but the EU is much more than that for Germany. Most civilized and intelligent Germans are horrified by anything resembling nationalism, due to German history, and have no problem with merging Germany into a pan-European federation. The German political establishment has shown and will continue to show infinite patience and flexibility to achieve that over-riding goal, which they see as guaranteeing peace and stability in Europe. What will be interesting for the UK is to see whether that flexibility extends the other way, and the UK can be accommodated with the much looser trade based relationship which suits us. I think its doable.
June 18, 2015
Reply to reply: There is also, maybe more amongst the older Germans, a huge desire not to upset European stability as they know what happened last time they tried imposing a German outlook on Europe. This is often expressed to me by German friends and colleagues.
However they are increasingly fed up of ‘bailing out’ Greece and at some point I think the balance between doing what is may take to keep the Euro project together and running out of patience with sending their hard earned money down the drain will tip. The question is how much longer that will take.
Another, less asked, question is will that process of tipping the balance be the result of a change of mind by the mainstream parties or be pushed by more radical parties, as in Greece, because the politicians don’t follow the voters fast enough? Hopefully it is done soon and thus by the more mainstream parties.
June 18, 2015
correction: “doing what *it* may take”
June 18, 2015
“….running out of patience with sending their hard earned money down the drain”
I agree that this will doubtless be the attitude of the average German. However, if they hadn’t lent such huge amounts at such low rates in order to enable the PIGS to buy their cars etc they wouldn’t have quite as much hard-earned cash in the first place. You reap what you sow.
One can’t help thinking that the Germans – maybe only on a subconscious level – are waiting to make a hugely magnanimous gesture to Greece in order to assuage their own consciences regarding the 1953 London Agreement……
June 18, 2015
The tragedy is that the whole EU “project” has been a fraud. It has always been predominantly political. That is why so much time has been taken during which things have deteriorated in Greece. Failure of the “project” cannot be tolerated. Ending “extend and pretend” is a good description used today by the Greek negotiator on ‘Today’. Those involved over the years have taken Greece to the point where they have only the choice of a least bad option.
It would appear that the Greek government may have to call a referendum or another election to take the next step.
June 18, 2015
A couple of days ago SpiegelOnline drew attention to the gap opening up between the views of Merkel and Schauble on the way forward; Merkel wants to preserve the EZ while Schauble wants Grexit. German domestic politics, at some point, will impact on the outcome. Like everyone else I haven`t a clue how long Eurofudge will paper over the cracks and the politics will trump the economics. But it seems to me that Merkel could find herself the last woman standing in defence of the EZ with Greece still inside (the IMF rep having left the talks)..
June 18, 2015
Good summary JR.
Now a ‘real’ UK negotiator would be using this event to extract as much as possible from the corrupt EU. Can we assume that this is happening behind the scenes?(joke)
More likely Dave will wade in with more assistance for the troika with the hope that he will get a pat on the head and a few more crumbs for his efforts
June 18, 2015
Little progress will be made while (to the Greeks) the cure feels worse than the disease. Write-off and decoupling is the only way forward. The German banks need to cut their losses and remember the lesson for when the next hopeless case turns up with the begging bowl. If it is Spain or Italy, the game is up for the Euro & EU.
June 19, 2015
We have already had the ‘write-off’, but not the decoupling. And you do realise just exactly who owns the outstanding Greek Debt ? The German Banks share is less than 11 billion. The German Taxpayer is on the hook for 65+ billion.
June 20, 2015
Since the “debt restructuring”, aka “default”, in 2012, something like 85% of the Greek government debts are now owed to various EU institutions and the IMF, the so-called “official creditors”, and only the remaining 15% or so the private investors who have already taken heavy losses.
June 21, 2015
More precisely, 17% of Greek debt is owed to private investors:
http://www.bloombergbriefs.com/content/uploads/sites/2/2015/01/MS_Greece_WhoHurts.pdf
June 18, 2015
The Greek position is much more of a political game than it is an economic one . Germany has weakened more than once from its rigid stance on economic discipline and will probably do so again . Just around the corner is the French election and the growing support of Marine Le Pen ; Germany knows full well that there are numerous cracks developing so , to her , it is a now or never condition for her to protect her position . Germany wants and needs the Euro alliance and regards the political scenario as the basis to it all . If Greece defaults the contagion begins .
Germany only needs a slight “give-away” from Greece for a stitch up agreement to be reached ; if this happens , the ECB will be authorised to prop up the Greek banks . Greece will remain completely dependent on German complicity for many years ahead ; they are in no position to face the reality of the drachma and the inevitable higher cost to their living that would follow . Germans have to face the fact that they have to dig deeper into their coffers for their wish to keep the Euro alive .
June 18, 2015
Greece is a matter for the Greeks and the Eurozone to sort out (if they can!) and they should of course have regard to the international impact of what they do. Two points the UK government would do well to make clear are: –
1. The IMF must be repaid. It would be shameful for a European Union member to default and cause loss to IMF members, especially in the case of Greece where the IMF’s involvement is seen by many as contrary to its purpose, being a political move to save a currency. The Eurozone members should be pressured to make the IMF whole, either directly or through the ECB or one of the many special funds.
2. If Greece does not wish to face the strictures a deal with the Eurozone would bring, it otherwise receiving some of the benefits through EU emergency aid should not be at a cost borne by non-EZ members.
The Eurozone was wished for by those who participated in it and they alone should bear the full costs of the consequences of it turning so sour.
Reply You may remember I said on this site when IMF loans were being considered that the IMF should not lend to any Eurozone state – that should be the duty of the rest of the zone to undertake. The IMF would not lend to part of the UK but would expect the UK government to sort out financial problems within the sterling zone.
June 18, 2015
JR, I also remember telling you that the EU is not a member of the IMF, the individual States are the members; Greece being one of them.
June 18, 2015
I’ve been thinking for some months that the crunch point is now very close and they will not be able to kick the Greek can down the road yet again.
Sadly as we really do appear to be approaching the point of no return, they may do the unthinkable and come up with another fudge. If they do it will be a mistake.
Whatever they come up with, to have any chance of getting out from under, Greece will either need at least 50% of its loans cancelled or another bailout within a year. Both will cause Frau Merkel immense problems at home because her taxpayers will not want to see at least âŹ20bn of their hard earned cash disappear.
The same will apply in France and Hollande knows that, with a presidential election on the horizon, Mme LePen will make immense political capital out of French losses.
Let’s hope that common sense reigns and Greece does leave the Euro. The financial losses for Germany and the rest will be even more but Merkel and Hollande can blame the Greeks for the problem. As for the Greeks themselves, they will then have a chance of economic recovery after a couple of more difficult years.
Within the Euro all they have to look forward too is endless misery.
June 18, 2015
Germany’s enthusiasm to keep Greece in the euro makes perfect sense once you accept the EU is a (political project to create a political union ed).
……………………………………
I expect a last minute deal on Greece there wont be any cheap holidays.
June 18, 2015
I dont see any sound reason for my comments to be deleted/edited.
My father can still remember his terror as a boy of hearing the drone of german bombers overhead. Mps at westminster can daily see the scars inflicted on the palace of westminster by german aggresion.
Yet Dr Redwood is saying yes but dont mention the war ala basil fawlty!. Like the war is some irelevance to our politically correct age
The war happened it was not our fault but we cannot pretend it didnt happen or have relevance to a new form of european dominance.
If we are not to be allowed to discuss the mistakes of the past we are doomed to repeat them.
The British instictively know this.
Reply Talking about the war is fine. Suggesting modern people are nazis etc is not acceptable
June 19, 2015
Thank you Dr Redwood
I never suggested modern people are ‘nazis’ or indeed national socialists that would be absurd.
My point is well made by your former colleauge,Mr Ridley who was more or less correct, describing monetary union as ‘a German run racket designed to take over the whole of Europe’.
Like Mr flight ,Mr Ridley was sacked – why is your party so afraid of different views to those pre approved by HQ.
Why else do you think Greece has been loaned money, simply to pay
interest on debts that it cannot ever repay?.
The architects of the Euro are prepared to pay a VERY heavy price to hold it together and that should trouble us.
June 19, 2015
@ken moore; “My father can still remember his terror as a boy of hearing the drone of german bombers overhead.”
Whilst my father was critically wounded by Rommel’s forces, yet he never held malice towards the post-war German nation nor its people, even though his life was always blighted by his injury and much worse mental scars.
The EU, unlike war time Europe, is built upon political agreements not military force and aggression, and anyway the original idea for a single United (states of) Europe came from a pre WW2 French Prime Minister, not that of a certain someone and his wish for a “Greater Germany”.
June 18, 2015
The impression that I get is that the EU, and Germany in particular, are scared stiff of the consequences for the EU should Greece leave the Euro or worse still, leave the EU.
In a Grexit, Greece will suffer but survive somehow. In due course it will recover and demonstrate that it can do very nicely outside the Euro/EU. This, of course, would put paid to the arguments that the financially stronger UK couldn’t survive outside the EU.
Merkel et al aren’t worried about Greece, they are simply worried about the possible knock on effects on countries such as Italy, Spain and even Ireland.
I suspect that the present crisis will be met with another compromise, with a repeat performance in maybe a year’s time.
June 19, 2015
For the eurocrats Greece leaving the euro would actually be worse than Greece leaving the EU. After years of claiming that EU membership is irrevocable they were forced to acknowledge that it is not and there is now provision in the EU treaties for a country to make an orderly withdrawal from the EU. Despite it being suggested by the Dutch Prime Minister Mark Rutte there is no similar provision for a country to leave the euro while staying in the EU, and making any such provision would be an acknowledgement that joining the euro is also not an irrevocable decision. That is why they will do whatever they possibly can, legal or illegal, ethical or unethical, to keep Greece and other distressed eurozone states in the euro, and indeed I’m still expecting that there will another fudge to do that even though time is running short.
June 18, 2015
Those of us who don’t go around wearing blinkers, or sipping the wine that makes the EU seem so rosy, can see for themselves that the entire project is an absolute nonsense. Maybe in the interests of keeping it all together, Germany might wish to send some of her more profitable businesses to Greece to bolster the Greek economy that way. Otherwise, it’s going to take an awful lot of olives and feta cheese to pay this lot off.
Tad
June 18, 2015
With an 180% of Sovereign debt to GDP ratio and a weak will and institutions for reform Greece will never pay this back. The only sensible way forward is the same tried, trusted and proven route that Iceland took in 2008 by defaulting and closing down any insoluble banks. At the same time Greece needs to leave the straight jacket of the Euro as they are not compatible with the constraints it imposes. Iceland recovered very quickly and so will Greece. The reason why the Icelandic solution was not on the table in 2008 for Greece was French and German bank liabilities from Greece bonds and loans. Literally, EU/ECB/IMF loans to Greece, went via their central bank to pay off these bank loans by the backdoor, so these liabilities have gone from private banks to EU/Euro country tax payers and those countries that lent the IMF money, including Gordon Brown’s generous loans that for the first time in the IMF’s history will probably turn into donations and out tax liability.
The IMF has been politicised by the French and EU to lend outside of its original remit of leading money to sort a country’s balance of payments problems and it will probably make its first losses as a result. It is very important that the next head of the IMF is not French and not European to get the institution ‘back on track’.
Germany and Greece both want to have their cake and eat it. It is now a question of how much cake each get. Germany likes the low Euro exchange rate, the competitive advantage it got by ‘cheating’ on an EU Euro agreement on the rate of inflation and expansion of wages to give it a competitive advantage over the other Euro countries and to help it to have a positive balance of payments. This means that for all other countries to be competitive they need to compete instead by the constraints of the old Gold Standard the new version is the German ‘cost base, productivity standard’. Greece cheated to meet the Euro entry terms and then went on a ‘free’ borrowing and spending spree where they could borrow at cheap Euro rates financed primarily by German and French banks, where the loans were used to buy their goods. The EU/ECB didn’t take away the ‘punch bowl’ as the Greek party got going and the ‘hangover’ is not only a Greek problem, but also Euro area, EU and IMF one.
Now if both countries had their own currencies it would not be a problem as the exchange rate would act as an automatic stabilizer, but as they don’t the only way that these ‘imbalances’ between different countries can be resolved is through capital transfers like the Sterling currency area has the Barnett settlement for Scotland and more generous settlements for Wales and Northern Ireland. The alternative is wage deflation which is a much more painful way of making the adjustment with a much higher human cost. These transfers not only need to apply to Greece, but also Spain and Portugal.
Now Germany with their balance of payments surplus are the only country that are in a position to make these transfers, but after the pain they went through in their own previous currency union when the Eastern and Western parts of the counties merged and the exchange rate for the common Western Mark was set at the wrong value, this is a political impossibility if Merkel and her ruling coalition want to stay in power. Greece, and to a lesser extent Portugal, Spain and Ireland have all shown the constraints of the deflation route and with Greece they have showed at the ballot box that they have reached the limit on what they are prepared to endure.
Now some of you may of heard of the previous French currency union the Latin Monetary Union (LMU) that ran from 1803 until 1927, which funnily enough the Greeks were forced to leave for a time due to cheating on the amount of silver in their coins and which primarily failed through no corresponding political union.
And this is the nub of the problem either the Euro countries agree to a full political union with capital transfers or like our children and grandchildren might enquire: “What was the LMU?” Where they are learning about it in history, their children and grandchild might ask: “What was a Euro?”
The choices are actually very simple either a full political union with capital transfers or if the current imbalances continue, Herbert Stein’s law will prevail: “If something cannot go on forever, it will stop”.
June 18, 2015
Please tell me again, why it is good to give up our sovereignty to the EU hell hole.
Sure we need their trade as the need ours, but why do we need to give away our country and money? Loans to prop up other countries economies, yet we can help our own.
I could go on all day telling you the disadvantages and stupid waste of money being spent, but I have to hit me head really hard against the wall right now.
June 18, 2015
Think of this as a family with a spendthrift son or daughter. The parents will go on lending till the debt gets so high it affects the other members of the family so badly that they have to say enough is enough. What happens when the son or daughter says he can’t pay any more ? He or she goes off and lives elsewhere and the parents do not get their money back. But they all survive.
June 18, 2015
Excellent entry John for me you covered all the angles.
Facts of life:
When you are broke you are broke.
Debt is debt.
As tragic as it will surely be for the Greek nation to leave the euro zone this public humiliation has got to bought to a close. They are a very proud nation but they might when free from all the constraints unite as a nation and find their own salvation.
With our national debt running as high as it is, the whole UK nation should heed the Greek gypsy warning and start to work together to resolve our financial problems. The constraints placed upon us by the EU would be a very good place to start. Like Greece our destiny is in our hands not that of the EU.
It is broke and it needs fixing.
Shame that a lot of our politicians and industrial leaders cannot see it. All too busy fire fighting on the decks whilst the damage below the water line increases.
June 19, 2015
You’re omitting something. Following two highly damaging bouts of hyperinflation in the first half of the twentieth century, the desire for – nay, insistence on – a strong currency is deeply held by Germany’s people.
If Angela Merkel allows the Euro to become a weak currency, her party will probably be kicked out in the next German general election. German people may even insist on a restoration of the Deutschmark.
Everyone knows that if Greece is let off its debts, then Spain, Portugal, Italy, even France perhaps, will join the queue.
Greece’s debts are 180% of GDP. In the late 1940s, following WW2 and the Attlee government’s nationalisations, UK debt reached 240% of GDP. We had benevolent creditors (the USA) who charged a reasonable rate of interest and it took us 35 years to get UK government debt down to a reasonable level. That is what the EU institutions are likely to offer Greece – no overt debt forgiveness but a rate of interest that makes the burden just about bearable.
The UK should prefer a Grexit to this.
Reply Mrs Merkel did not win the last election outright, and governs in a grand coalition. The AFD party which seeks a return of the DM only commands around % support, though that could grow. There is no evidence that Germany is yet tired of the Euro.
June 19, 2015
Reply to Reply
Strictly speaking you are correct in saying that the German taxpayer has not yet lost patience with the Euro.
However, they are roundly against any more of their money being used to subsidise the lifestyle of ClubMed and particularly Greece. This is why Merkel and Hollande in particular have been playing hardball with the Greek Government and why, against all reason, there has been no cancellation of at least 50% of Greek debt, the minimum necessary for the country to have any chance of meeting at least some of its obligations. It’s also why full fiscal integration will not happen and as a result the Euro will ultimately fail.
If there is a Grexit at least Merkel can blame the unreasonable behaviour of the Greeks for the loss of at least âŹ20bn of her citizen’s hard earned cash.
Reply Whilst the German public are against loans and subsidies, the ECB is pouring money into Greece which has a German and French guarantee behind it.
June 19, 2015
When I look at the institutions to which it is proposed that sovereignty is to be handed over, Iâm aghast. Seventeen unelected reject politiciansâ â âwith no accountability to anybody, who are not responsible for raising taxes, just spending money, who are pandered to by a supine parliament which also is not responsible for raising taxes, already behaving with an arrogance I find breathtaking â the idea that one says, âOK, weâll give this lot our sovereigntyâ is unacceptable to me. Iâm not against giving up sovereignty in principle, but not to this lot’.
Perhaps Mr Ridley was right to be suspicious his words are just as relevant if not more so today.
June 19, 2015
Mr Ridley described the EU as a ‘German racket to take over Europe’. It was an absurd remark and patently untrue – Germany, as JR points out, has ceded sovereignty and power to the EU. Odd that such an able man as Nick Ridley could have made such a fool of himself. We may well not agree with German Eurofederalism in the UK but does us no good – and certainly wont help the Eurosceptic cause in the UK – to make out its all a continuation of WW2.
June 21, 2015
Mr Ridley described the EU as a âGerman racket to take over Europeâ. It was an absurd remark and patently untrue â Germany, as JR points out, has ceded sovereignty and power to the EU.
It’s naĂŻve to suggest the Eu has diminished German power.
The position of John Redwood and Nicholas Ridley are aligned in my view . Although JR has a tendency to bend his knee occasionally to the ‘You can’t say that’ brigade over a misplaced fear of causing ‘offence’.
Presumably to the sort of people that believe that beneath the surface of British society lurks a cauldron of bubbling hatred which can only be kept in check by enforced speech codes. A deeply patronising view.
German has indeed given sovereignty – but always on it’s own terms. I admire and respect Germany for looking after her own interests.
I just want British politicians to do the same for US.
NR – Can you imagine me going to Jarrow in 1930 and saying, âLook boys, thereâs a general election coming up, I know half of you are unemployed and starving and the soup kitchenâs down the road. But weâre not going to talk about these things, because theyâre for Herr Pohl and the Bundesbank. Itâs his fault; he controls that; if you want to protest about that, youâd better get on to Herr Pohlâ?â
JR has said much the same thing about the lack of accountability of modern politicians …
June 19, 2015
Thanks for raising these issues and for speaking out.