Madame Lagarde wants more adults in the room to negotiate a Greek settlement. Is she just being dismissive of the Greek government? It does not help find a compromise or solution to be cutting in public about the principle actors in the drama.
Or does she also have in mind those mysterious sources who are foolishly briefing that the Greek banks might have to close on Monday? All those who from positions of authority suggest capital controls or restrictions on Greek bank accounts must know they are fostering a run on the Greek banks.(I am publishing this at the week-end as most banks in Greece are normally closed then. I have no position of authority in the Eurozone anyway). Adults would know this does not help either Greece or the rest of the Eurozone. Responsible custodians of the Euro would see problems in Greek commercial banks as problems for the zone as a whole. After all, the European central Bank has already poured Euro 83 billion into supporting those banks. You would have thought the last thing they wanted was further withdrawals of deposits which simply mean the rest of the zone has to lend Greece yet more money through the ECB.
This blog has also advised the IMF to play no part in financing member governments of the Eurozone, pointing out that a Eurozone member cannot meet usual IMF criteria for loans. A Eurozone member state cannot devalue to become more competitive, and cannot print more money to repay loans. The IMF would not lend money to Scotland but would expect the UK to borrow the money Scotland needs, so why does it lend money to Greece when the Eurozone could borrow the money Greece needs if it wished to do so? How grown up has the approach of the IMF been?
The modern temptation for prominent politicians and senior officials to take to the media and negotiate in public on sensitive matters of finance and confidence makes it more difficult to stabilise troubled situations and to find a solution. How grown up is it to think that another round of public spending cuts will help the Greek economy recover, after falling by a massive 25% in incomes and output? The UK by agreement of all parties usually allows the deficit to rise when the economy is in deep recession. How grown up is to think pay and pension cuts and more redundancies in an economy with 25% unemployment will be acceptable to Greek people and therefore something the Greek government can sign up to?
My view is both the Greek government and the Eurozone bosses are wrong about how to solve the Greek economic crisis. The first step I would recommend is exit from the Euro and devaluation. Given that both sides refuse to do that, the Eurozone has to accept Greece needs more money to keep going, and Greece has to accept it needs to work with the agreement of its creditors. The complete absence of give and take on both sides is worrying and prolongs the agony and the damage. This is not how a single currency should be run. It confirms my view that EURO stands for European Unemployment and Recession Organisation.
June 20, 2015
To everyone in the newsroom it was pretty obvious that Mrs. Lagarde meant the Greek minister of Finance, a very original but not always predictable character, and therefore not always taken seriously, while the situation is gradually getting more serious.
Now that geopolitical considerations may come into play (leaving the euro, leaving the EU, being seduced by Putin, etc.) the UK gets a nice glimpse how it is to be looking on as an outsider. If Obama feels that Greece needs to be kept in the western alliance, he will no doubt call Cameron? 🙂
Reply Childish threats like these do not change my view of the situation. I do not want a war with Russia, and do not want the UK dragged into conflict in the Ukraine.
June 20, 2015
Reply to reply: I saw the newsconference (online, it was about Greece) but I didn’t hear Mrs Lagarde make a threat, let alone a childish one.
Nobody in the EU (let alone the Eurozone) wants a war with Russia, nor being dragged into a war in the UKraine. Engaging with Putin (Minsk agreement, sanctions, pressure on Ukraine government) would seem the best way forward. Losing Greece wouldn’t make things any better.
June 20, 2015
“Losing Greece wouldn’t make things any better.”
That sounds rather proprietorial to me, Peter; should not Greece decide its own destiny? As a member of the Eurozone, it’s economy is in tatters with little possibility of edemption; as a member of the EU, it’s suffering a migrant invasion from the neocon ME warzone. What’s in it for Greece?
June 20, 2015
@forthurst: We were discussing geopolitical dimensions, as such, losing Greece from the Western alliance.
June 20, 2015
Well you might have been, but that is nor the topic we have been invited to discuss; however it does indicate how you view the EU, as a tool of US hegemony which you obviously regard as desirable and legitimate. At what point will you change your mind? Before or after they have engineered open warfare with Russia? If you are a Dutch patriot, which I’m beginning to seriously doubt, you should want the best for your country not for the warmongers in Washington.
June 20, 2015
The action of the EU was provocative. Cameron’s speech he wanted the EU to expand the the Urals was not a mistake it was a statement of intent. Russia was given assurances when the Berlin Wall came down and the West has failed to honour its promises. Quite rightly it feels threatened, as would other countries in similar positions ie USA over Cuba.
June 20, 2015
Looking from the outside at what may I ask. A declining customs union, wedded to red tape, high energy prices and a faltering currency. How many countries are NOT in the EU and manage perfectly well.
Yesterday I visited an ex council flat on behalf of the charity my wife works for. The couple told me of their move to Spain 12 years previous on retirement to their dream villa. They had the UK pension and rental income from the flat.
Wind on to today, Needing some medical treatment which has been refused in Spain, they have moved back to their ex council flat and now only have the basic state pension., The Spanish house is up for sale £80,000 less than they paid with no takers. their capital is in the house so they are struggling. This is the reality under the Euro and as they say, most of the Spanish youth are hanging about or leaving the country.
The southern Med countries will never survive in the EZ and it is being seen as a stitch up by the Germans.
June 20, 2015
@ian wragg: The eurozone isn’t the only area with problems, so these situations may be more complicated: If you had bought a £300.000 house in Spain in 1-1-2007, and assuming that house prices in Spain had remained stable, what could you have sold it for on 31-12-2008, £210.000! That is £90.000 less (only due to the drop in the pound sterling value).
If the UK embarks again on a path towards splendid isolation, pushes out the Poles (which nicely contribute to your economy) and see its many pensioners (who don’t pay any national insurance anymore) returning, just think of the effects on your economy and your cost of NHS!
Of course things are still bad in Spain, although picking up now, but do realise that even in the early nineties the overall unemployment in Spain was above 20% (compared to 5% in the Netherlands). Leaving Greece aside, why be still so pessimistic about the southern part of the Eurozone?
June 20, 2015
It is not just Spain. Portugal, Italy, Ireland all suffer because of the EU project. Fanatics who do not care about ordinary citizens. And for what? Unemployment, destitution, no self worth. Trade and friendship is all that is required. The fat cat project needs to be brought to an end.
The same people who were prepared to sacrifice Greece to save French and German banks and the EU project! The IMF needs radical change, it’s remit should be to help distressed countries not form an alliance with The EU to save a currency and private banks. Cameron needs to be held to account what the UK position was/is in this disgraceful episode.
June 20, 2015
I’d rather that my country – MY country, Peter, not YOURS – was in splendid isolation rather than be degraded to legal subjugation within a pan-European federation as you would wish. But of course there is no chance that we would be in any kind of isolation other than in the geographical sense; our international connections did not start on January 1st 1973, as some would have us believe.
Overall the (migrants ed)do not “nicely contribute” to our economy on a per capita basis, even over the short term they are more likely to represent a net cost for the established population and with the passage of time that will become even more negative as first they produce children who need public money spent of their healthcare and education, and then as they themselves age and ail and need to be looked after at public expense, arguably necessitating further waves of mass immigration of “young workers”. If you still wish to recommend this demographic Ponzi scheme I suggest you do that to your own countrymen, although as I understand many of them have already seen through it themselves. However many of them have been settled here for more than a decade now, having been invited by our political leaders, and even though that was against the wishes of the great majority of the people there is no risk that they would now be “pushed out” even if we left the EU.
June 21, 2015
JR, I mentioned the Poles in particular simply because Peter had mentioned them in particular, and it is actually relevant to my point that many of them have now been settled here for more than a decade, since 2004, and will have started to become well integrated into local communities and in some cases with children born here and attending local schools, and it would be unjust and inhumane and impractical to withdraw their right to be here, not forgetting of course that some of the parents will now be naturalised UK citizens as well as their children being natural born UK citizens. As far as citizens of the 2004 accession countries are concerned it is already far too late to do much about it even if we would prefer to, apart maybe from the small number of criminals. And by the time we have had the EU referendum and left the EU the same will also be true for the Romanians and Bulgarians; most of those who wish to come here will have already come here, it will be too late to do much about it, and we should accept that and make the best of it.
June 20, 2015
@ian wragg: Actually, I made a silly mistake, sorry! 🙂 You would have made a handsome profit in (devalued) pound sterling terms in the given example! However, if I, living in eurozone paradise ( 🙂 ) had bought a £300.000 house in Britain on 1-1-2007, I would have made a £90.000 loss, selling it on 31-12-2008 due to the drop in the pound sterling value.
June 21, 2015
A Dutch friend of mine bought in central Amsterdam. He is nursing a fat loss and wants to move. Everything is not rosy in Euroland, but it North, South, East or West. But you were warned and you wouldn’t listen.
June 20, 2015
Peter vL
” If you had bought a £300.000 house in Spain in 1-1-2007,”
Oh dear Peter, stop being silly. Since when did the Spanish sell property in pounds sterling? This is the trouble with people like you, acorn, Jerry, Yulway and others you live in a little world of theory. The rest of us exist in the real world where things are done pragmatically. I could make up a dozen fictitious scenarios which make Euro exchange rates look bad too. I can assure you that China, USA, Canada, Australia, Singapore, India aren’t in splendid isolation. One wonders how they survive outside the EU. Your thinking is just so backward, limited and unimaginative, but then you still support 20th century style politburo top down centralised control mechanisms in a peer 2 peer 21st century world
June 20, 2015
@libertarian; “Since when did the Spanish sell property in pounds sterling?”
Quite a few UK (would-b) ex-pats have done and will carry on doing so, of course the transactions are in EURs but once converted from/back-to pounds sterling it is the value of pounds sterling they judge good luck or not. I fact, such are some ex-pat communities that many try to shop in ‘English’ shops because prices are often priced-up, in both EURs and GBPs by the proprietor to aid the UK community.
“This is the trouble with people like you, acorn, Jerry, Yulway and others you live in a little world of theory”
libertarian, I can’t speak for the others you name but I live in the real world of the actual (often historical) facts rather than your world of partisan spin.
“Your thinking is just so backward, limited and unimaginative,”
Says someone still worshipping the out of date policies from the 1980s.
June 21, 2015
More of the personal attacks we have come to expect from you Jerry
Do have no idea what being polite is all about?
June 24, 2015
@Edward2; Still not bothering to read the context before trying to have an argument. What ever…
June 21, 2015
If the UK embarks again on a path towards splendid isolation…
Look, we want a similar relationship to the EU as we have with anyone else. We aren’t in “splendid isolation” from the USA for example. Just the opposite. It worries me that we’re too close.
BUT we don’t share a common currency with the USA and we do not wish to share a common currency with the USA. They don’t usually insist that their laws override ours. They might sometimes, though, but that’s another story and we need to be vigilant about that too!
June 20, 2015
Interesting because my friends in Slovakia, Estonia and Latvia have had a totally opposite experience. Their prices have stabilised, the economies are growing and businesses are thriving. All within the eurozone. My former cleaner purchased a flat in Bratislava two years ago from earnings made and prodigiously saved in the UK sand she has just sold it for 40,000 euros more than she paid.
June 20, 2015
Peter vL
Your pompous assertion that this gives UK a glimpse of being an outsider. You seem to have overlooked that we were the most successful country on the planet for many hundreds of years as an “outsider” & its only since we’ve been an “insider” that things started to go wrong.
Peter please explain to me simply why the fabulous EU has a few 1,000 people living illegally in squalor in France ( a leading Western Democracy and one of 2 leaders of EU ) waiting to make a life threatening, dangerous and illegal crossing across 24 miles of open water in order to settle in UK. Please tell me why refugees from the developing world don’t want to settle in France or Holland but insist on coming to the UK. Why is the EU seen as such a failure amongst 3 rd world citizens?
June 20, 2015
@libertarian: Simple explanation? It would have to be speculation of course: family in Britain? Less efficient police dealing with illegal immigrants? Happen to have heard about Britain being a paradise? Already speak English? (In the Netherlands you may be required to speak Dutch before getting employed). I really don’t know and I don’t think of the UK as being any failure.
It is not just me who sees the UK as already more isolated. Maybe you think that is splendid. It has happened before.
June 20, 2015
Peter vL
So what you’re saying is that despite the fantastic utopian option of being in the glorious non peoples republic of Euroland, refugees, economic migrants and people fleeing persecution STILL prefer to be in tiny, excluded, isolated Little England.
At some stage Peter you and your Euro friends have to wake up to the reality of the 21st century
June 20, 2015
By the way Peter what exactly is it that you think the UK is isolated from? Customers of our products? Suppliers of goods and services to our citizens? The world banking system? The internet? Please tell me what we are isolated from by not being in a club with 26 other countries. Meanwhile the UK IS in a club with 53 countries, 2.1 billion customers and some of the fastest growing economies on the planet. Some isolation. Meanwhile in your little corner of Northern Europe you are still playing with 19th century customs unions. Oh dear
June 20, 2015
@ Peter van Leeuwen – the saving grace for the UK in this present Greek/EZ crisis is that “the UK gets a nice glimpse how it is to be looking on as an outsider. The prospect of being an insider in this appalling mess, to bear some responsibility for its outcome, is one surely any sensible country would eschew. If anyone, Obama or other, calls Cameron about it, my earnest hope is that he would put down the telephone.
June 20, 2015
Quite – I’m rather enjoying being an outsider – the thought of being an insider is fairly depressing.
June 20, 2015
@formula57: There are likely to be many problems in the world and in Europe and in the Eurozone for many many years. Being part of a large block like the EU and really engaged in it, would give the UK more clout.
Whether its future isolation will turn out so splendid is questionable.
June 20, 2015
Actually, Peter, what Mrs Lagarde implied was that Yanis Varoufakis, rather than behaving like a good little quadruped and coming to heel, was exhibiting bipedalism similar to that of Samual Johnson’s proverbial dog, walking on its hind legs, surprising, even if not well done. Of course, Mrs Lagarde herself belongs to a class of unelected globalist functionaries whose behaviour is reminiscent to many of the quadrupeds exhibiting bipedalism in George Orwell’s ‘Animal Farm’.
June 20, 2015
@forthurst: On 28 June 2011, the IMF board elected Lagarde as its next managing director and chairman for a five-year term, starting on 5 July 2011. Is she less “elected”than your Mark Carney (BOE)? I doubt it.
Do you want elections among many million of peoples for such executives? 🙂
June 21, 2015
You’ve shown that you want whatever your party tells you to want. You’ve won your meal ticket for another five years and you’re bound to win again so there is no need to convince those who can’t vote for you that you can change anything.
The Greek ‘crisis’ is nothing more than meaningless theatre intended to convince those who pay for everything that those who spend their money are worth the cost. You’re not, but there are sufficient enfranchised idiots to vote you and your ilk in again, and again, and again, and again, and …
June 20, 2015
Exactly, well said.
Why on earth can the EU officials and their “experts” not see all this. Surely it is all blindingly obvious. Both sides are behaving like stupid and petulant, children.
June 20, 2015
Madame Lagarde could be frustrated.She’s an old hand at the game.
If the behind-closed-door negotiations are similar to the rhetoric coming from the leaders of the Greek government then she perhaps would be wise to quote Lenin ( as one of the Greek leaders at least, is a former communist. ).Lenin wrote a book titled: “Left-wing Communism: An Infantile Disorder.” One would think it is fair to describe the position of the Syriza Party in insisting on paying full pensions to local authority workers, for example , who retired at the age of 50, as at least a youthful idealistic notion. To spout such nonsense in serious negotiations shows the Greek leaders have much of the boy in them. Yes, early retirement was also a device to allow youngsters to gain employment. But it was also used improperly to fill the pockets of the rather well-paid upper tiers of local government who took retirement as a very generous gift.. Mr Osborne has noted a similar problem in the UK. Had he not noticed it then perhaps Madame Lagarde could be forgiven for mentioning his own age.
All is not what it seems in the Greek economy. ( nor here ) It is not the custom here in the UK to ignore debt owed by pensioners on a basic state pension. They have to pay. However little. However long. To the grave if necessary and even beyond via what could be a poor estate indeed.
I agree Greece would find some relief if it abandoned the Euro. It is understood the Greek electorate is against austerity; that is paying their debts. But dividing one Euro into 100 Dracmas would convince perhaps a five year old Greek child playing Monopoly that he had suddenly increased his money a hundred fold but would not impress an adult. The debt owed in Euros would not become one hundred times less, nor that owed in US dollars, nor that owed in Sterling. Also Greece’s imports would not suddenly become 100 times cheaper.
If I were the EU and IMF I would insist Greece pay up. However, I would also consider it none of my business to dictate or advise what internal measures if any the Greek government needed to take to come up with the cash. That is a matter for their concern and the concern of the Greek people.
June 20, 2015
All sides could doubtless do with being rather more adroit in their negotiations, helped perhaps by some adult supervision but who could step in to provide it now?
Although “the European central Bank has already poured Euro 83 billion into supporting those banks” has it not done so only through authorizing the Greek central bank to advance loans under the Emergency Liquidity Assistance measure? Recourse would then be to the Greek central bank alone, as and when any of those borrowing banks default, with the ECB escaping the direct consequences.
Reply The Greek National Bank is a creature of the ECB, issuing Euros or IOUs on the whole system
June 20, 2015
At a personal level why would any sensible Greek leave their money in a Greek bank?
Surely as suggested on your Blog many times, a fresh start for Greek out of the Euro (and by default the EU), could mean that Greece would already be on the road to recovery.
Also, as also suggested tourism could be the answer, although I always felt that they (the Greek people) found tourism a bit 2demeaning” – but that’s just a personal view 🙁
And on another subject – From the BBC website:
“The man, a 39-year-old imam known as DD, is one of two suspects in the UK who are subject to a TPim – a Terrorism Prevention and Investigation Measure.
The order requires the Somalian refugee to wear a monitoring tag, but the High Court ruled it must be removed due to a deterioration in his mental health.”
What is the matter with our judges and legal system?
Seems like they are totally out of step with the Home Office and Security Services…
What about the human rights of the majority?
June 20, 2015
Greece does not wish to leave the Euro because she has become a dependant.. Much like the mother of ten children in one of the flatter parts of the UK economy, it is far easier to live on the generosity of the state.
Having said that, you are quite right, Greece should leave the Euro and use the Drachma to create an attractive tourist destination, among other advantages it might give to her economy.
The government of Greece then have a responsibility to sort out the nonsense way they run their finances, with regard to taxation, pensions, size of civil service, and the drain of wealth from banks due to the understandable fear of depositors.
Maybe they could create a Monaco on a grand scale and see the money come pouring in. In ten years Greece could be turned round, at which point they could then start to repay the various IMF and ECB loans that are in arrears. That would put real fear into the austerity mongers of the EU, because it would point a way forward to other EU members that would be anathema to Brussels.
June 20, 2015
The temptation to be cutting in public about Mme Lagarde is irresistible, Dr JR. The lady’s comments suggest that she has forgotten that she works for the IMF and is acting more as an EU functionary. If only Mme Lagarde and other EU insiders could step out of their Euro-mindset and view the Greek crisis from a detached perspective. If they did so they would realize that the EU is inflicting irreversible reputational damage on itself.
The natural consequence of this loss of credibility is that when the pressure shifts to the ECB, as it surely must if Greece defaults, there will be no appetite to support the ECB outside the EU. It is no exaggeration to say that the EU is creating the pre-conditions for a financial panic that will make the Lehmann crisis look like a minor inconvenience. The numerous diplomatic enemies of the West will scarcely be able to believe their luck at the resulting loss of capacity.
June 20, 2015
Children are as children do , but I am pretty sure that children could sort and upload my computer devises better than I can and I am fairly sure that when a child does not want something it would say NO and not try to hard to manoeuvre the consequences, being frightened of a potential scenario which means hard work, innovation and a new way of life for the Greeks. Children would just do it.
The only way is out and perhaps as PVL suggests an international type of trade support built on their holiday industry. There would be other saleable products but one which is established and anchored on to would give them more chance to bring their finances into order.
I see why Christine Lagarde wants adults to handle this situation though, as the display of adolescent stubbornness is cutting in itself.
June 20, 2015
“and not try ( sp too) hard. “Sorry sir.
June 20, 2015
Well the way bank customers were treated in Cyprus is a realistic prospect now in Greece.
June 20, 2015
Surely the IMF should tell eu countries to find an auditor to sign off the EU accounts (12 years and still going) before it lends more money.
Head of IMF a dream job for socialists of French provenance like DSK and Lagarde, you never run out of other people’s money
June 20, 2015
Ms Lagarde was Finance Minister in Nicolas Sarkozy’s Government. I would not dare calling him a Socialist, he might get very angry.
Maybe you need to check your facts before writing?
June 20, 2015
The IMF and ECB are trying to cause a bank run in Greece to bring the country to their knees. This is economic sabotage.
June 20, 2015
Why? To what end?
June 20, 2015
So they can appoint their own technocrat to run Greece. Look what the EU did in Italy.
June 20, 2015
“It confirms my view that EURO stands for European Unemployment and Recession Organisation. “
Yet, John, you pose a question at the head of today’s diary entry and then ask for our suggestions/answers, one has to wonder why with a sign-off comments like that! Anyone might think that some actively wish for the Euro to fail, just to prove a political point. 🙁
I wonder if any wise cracks were ever made of the abbreviation “UK” during the 1980s, the Unemployed Kingdom perhaps…
June 20, 2015
If you look at the figures Jerry, for economic growth and employment for the Eurozone since the currency was launched you see only a downward decline in the overall figures. Low growth and high unemployment.
We were told constantly by many Europhiles that only greater prosperity awaited those nations who joined the Euro and that the UK was very foolish to stay out.
They are a bit quieter now.
So Mr Redwood is absolutely correct in saying the EURO stands for European Unemployment and Recession Organisation.
June 20, 2015
Many are not quiet about it even now. Many in the Libdems and Labour & indeed several in the Conservative party (on the Ken Clarke/Cameron wing) would still join the Euro now I suspect.
June 20, 2015
@Edward2; What is the unemployment figure in Germany, does the it stand for the “European Unemployment and Recession Organisation” in that country too?…
June 20, 2015
Is that your best retort Jerry?
Germany, with rising unemployment and falling growth versus the UK with rising growth and falling unemployment.
What about all the other Eurozone nations?
Perhaps you would like to give us figures.
June 20, 2015
The German unemployment rate in April 2015 was 4.7%.
The rate in the whole EU in April 2015 was 9.7%, which highlights the extent to which German exports include misery for other members of the EMU. With 50% of German GDP dependent on exports, a down-turn in global markets could see German unemployment spike upwards sharply.
June 21, 2015
Correct bluedog
Without a strong euro biased by about 30% towards the success of its exports Germany would be in trouble.
June 20, 2015
Jerry
Oh Jerry Mr Pompous “read your history” Jerry. Take your own advice son. During the 70’s that is exactly how we were known ( quite rightly too) Unemployed Kingdom, sick man of Europe, strikers paradise , winter of discontent etc . Luckily Thatcher pulled us out of that downward spiral so no they weren’t used during the 80’s because the UK grew quickly
The Euro HAS ALREADY failed, the countries in it are failing, even the mighty German economy is now going backwards. UK unemployment down to 5.3% and going down, Germany 5.1% and going UP.
June 20, 2015
@libertarian; “During the 70’s that is exactly how we were known ( quite rightly too) Unemployed Kingdom, sick man of Europe”
OK then tell us what the unemployment figure was for the late 1970s (the hight of the so called sick man of Europe syndrome) compared to the mid 1980s… I’ll save you looking them up, 1.5m in 1979 (5.5%), over 3m in 1984 (11.9%) and was still 0.5m higher in 1989 than it was ten years earlier in 1979, now tell me in which decade the UK was actually and truly the “sick man of europe” if not world…
“[the UK in the 1970s, a] strikers paradise”
It always takes two to tango, funny how the unions (note for the pedantic – or indeed workers councils etc) in Germany are much stronger but strikes are less common than in the UK and were back in the 1970s .. Along with France (who also have strong, if not very strong, unions), guess which two countries has the strongest car industry in the EU, which two countries have world beating railway industries, exporting around the world, guess which two nations can still build both merchant and navel ships and sell them to the world.
“Luckily Thatcher pulled us out of that downward spiral so no they weren’t used during the 80’s because the UK grew quickly”
Yes and many of our current problems, an over dependency on the service (especially financial) sectors have become an economic noose around our necks, with ever some Thatcherite’s openly talking of having to rebalance our economy back towards more manufacturing and heavy industry.
Oh and as for the EZ economic downturn, tell me what country hasn’t suffered due to the ‘bankers’ Great Recession of 2007-8, sure if you look at the EZ area in isolation it appears to have failed, but I suspect if someone was to look at our own economy they might draw the same conclusions, what is the current deficit, what is the true likely figure of unemployment figure, hasn’t Osborne had to revise downwards the expected tax receipts for current and next financial year?
The only person being “Mr Pompous” is you libertarian, indeed like Edward2 you should check your history before jumping shooting yourself in both feet yet again. I’m starting to understand why some within the Brexuit camp do not want to argue the economic case for leaving the EU…
June 20, 2015
I notice a little bit of abuse targeted at me at the end of your rant Jerry.
Still on the agressive, defensive tack towards everyone on here I note.
June 20, 2015
‘Yes and many of our current problems, an over dependency on the service (especially financial) sectors have become an economic noose around our necks, with ever some Thatcherite’s openly talking of having to rebalance our economy back towards more manufacturing and heavy industry.’
The basis of prosperity for any enterprise is where the return on capital employed by the enterprise exceeds the weighted average cost of capital. This holds true for an individual, a corporation or a nation-state. If the UK can achieve a superior economic outcome by specialising in services there is no reason why it should not continue to do so. There are clear risks where there is an over dependence on any one form of service, as there are when an enterprise depends on any single customer or client. Diversification away from the EU would therefore seem prudent for British business, as the Chancellor understands.
June 20, 2015
Under the headline:
“EU referendum to be held in October 2016, sources say”
the Telegraph reports Cameron saying:
“In a nutshell, it comes down to this: is the European Union a flexible enough organisation so that it can include and work for Eurozone members and non-eurozone members,” he said. “That is the question. I believe the answer will be yes. But with my fellow heads of government and state, we have got to prove that point, because that is the question the British people will be asking.”
Well, two questions I would more likely ask are:
“Is the EU flexible enough to allow any of the present eurozone countries to leave the euro because they do not want to be part of the highly integrated eurozone federation
which Cameron and Osborne are proposing, or simply because it has been found by experience that the “one size fits all” euro does not in fact fit them?”
and
“Is the EU flexible enough to allow all of the non-euro countries treaty opt-outs from ever having to join the euro, rather than all but two having a treaty obligation to join the euro at the earliest opportunity?”
Because as thing stand Cameron’s professed concern about the relationship between the euro countries and the non-euro countries within the EU will become irrelevant when Merkel’s goal is achieved and all the member states of the EU adopt its currency.
June 20, 2015
@Denis Cooper: I don’t think that a clause which regulates Euro members to leave the currency will come anytime soon. Firstly, the euro has to perform better than now, it is still too close to the financial crisis and not enough fiscal and monetary integration has yet been achieved. Secondly, any adverse effects on the remaining eurozone members has to be studied and to be mitigated in case a eurozone member leaves, Germany leaving having more effect than Malta. I can’t see any like that happening before 2020, aslo because it would require pretty sinificant treaty changes. It may yet be another reason that Mark Rutte isn’t still floating this idea. By that time, Denis, you may already he let the EU, so why care?
June 20, 2015
@Denis Cooper: I don’t think that a clause which regulates Euro members to leave the currency will come anytime soon. Firstly, the euro has to perform better than now, it is still too close to the financial crisis and not enough fiscal and monetary integration has yet been achieved. Secondly, any adverse effects on the remaining eurozone members has to be studied and to be mitigated in case a eurozone member leaves, Germany leaving having more effect than Malta. I can’t see any like that happening before 2020, aslo because it would require pretty sinificant treaty changes. It may yet be another reason that Mark Rutte isn’t still floating this idea.
By that time, Denis, you may already have left the EU, so why care?
June 20, 2015
Reply is further down the thread.
June 20, 2015
It keeps coming back to the IMF, why did they keep bailing Greece out with such huge loans? How was LaGarde able to do so? She is at the very heart of this fiasco and perhaps it is time she makes way for a more competent individual. The questions you asked in your article about the IMF and why they seemingly broke so many of their own rules gets to the centre of the issue, standing back it looks like the French or Germans are not the best person for the job as it looks increasingly like they are biased in their decisions favouring euro-area nation states.
June 20, 2015
I think it started with DSK and LaGarde has simply continued the process of supporting the EU when the EU is and was perfectly capable of supporting itself. Some of the poorest countries in the world are IMF members and they’re picking up the tab to help the likes of Germany and France and Italy, it is a disgrace that it’s been politicised to this extent. No wonder that many of the IMF members have criticised the leadership.
June 20, 2015
But Lagarde was installed at the IMF to make sure that it could be brought fully into service to help Save the Euro, and that is what she has done – while having openly admitted that all the rules have been violated in that process. So I don’t think it is her competence which should be called into question.
June 21, 2015
The IMF hasn’t actually advanced Greece huge sums. They have a 28 Billion dog in the fight. They should not have been involved in the first place. It was for the Eurozone to sort out.
June 20, 2015
Fully agree with all of that.
June 20, 2015
JR, Norman Lamnt writes an article about the same topic in the DT today. What is your view on it? He writes the Eau will move from coordinating elation all economic policy to controlling them.
What has been Cameron’s position on Greece through the IMF or the EU over the last five years? Has he helped Greece or has been behind the juganaught dictatorship of the EU to squeeze Greece and its national government into submission?
The IMF has, according to some commentators, been acting in concert with the EU. W saw this in the coups de tats of Greece and Italy a few years ago. Either agree to the Eau demands of the national government is changed! Is this what the EU fanatics want? I never see or hear Clarke portraying a balanced view or even criticising the clear faults and dominance of national government and it s citizens over unelected bureaucrats who do not have our interests at heart, how could they as there are 28 countries! About time you and your colleagues spelt out quite clearly the dangers of this political project that has NO benefits for the citizens of this nation.
June 20, 2015
@Hope
If the EU is such a bad deal for the UK then why do you think support for staying in at a 24 year high?[1]
[1] https://www.ipsos-mori.com/researchpublications/researcharchive/3589/Support-for-staying-in-the-European-Union-at-a-24-year-high.aspx
(Fieldwork: 14-16 June 2015)
June 20, 2015
“When asked about preferences for Britain’s future role in Europe, one in three (33%) would like to return to being part of an economic community, without political links, while 31% would like it to remain broadly as it is at present. Fourteen percent would like closer political and economic integration and 13% would like to leave the EU altogether.”
The question is whether when it comes to the actual vote – in the future, not now as asked in that opinion poll – the 33% and the 31% will fully understand that nothing agreed by Cameron will give them what they want, instead it will be the 14% who still have cause for satisfaction.
June 20, 2015
SjB, because most people do not understand the issues or do not have the time to find out the true facts. The people rely on politicians to tell the truth and stand by what they said when they voted for them. Sadly, a large proportion do not tell the truth or portray an accurate picture for people to make informed choice. Schools teach by differentiation of ability. Good teachers make all pupils learn and understand. Pity politicians do not use their intellect, where present, to help people of all ability to understand and make an informed choice. Deceitful underhand behaviour to con people of all abilities appear to prevalent as we read from the FCO paper. The intention was to deceive the public about the real intention of joining the EU. It was even spelt out in a private letter by one of the founders to do exactly that until it was too late to do anything.
June 20, 2015
Actions speak louder than words, and Cameron’s actions since he became Prime Minister in May 2010 have consistently shown his position to be that of a fully signed up, albeit not yet fully paid up, member of the Save the Euro campaign. He agrees with Merkel and others that everything possible must be done to prevent any country which has joined the euro ever leaving it, and he is content to see every other country in the EU pushed or pulled into joining the euro over time, until the UK is left as the only member state of the EU which has not yet adopted its currency, or one of just a few with the others being relatively new member states and all well on the way to adopting it; whereupon some future government will declare that our isolated position is no longer sustainable and take us into it as well, with or without a referendum. That is the only plausible explanation of his conduct over the past five years, whatever he may say to the contrary, that like his predecessor Major at Maastricht he is looking to the longer term when internal opposition to scrapping the pound and joining the euro can be weakened and finally defeated.
June 20, 2015
Ambrose Evans-Pritchard’s article in the DT today also provides a neat summary of the acts of democratic subversion and (what is in effect) financial terrorism carried out by the EU and ECB.There’s nothing particularly new in the article as such but putting them together makes for chilling reading.
June 20, 2015
More evidence of why we should leave this anti-democratic EU. Although the UK is not yet in the eurozone we and Denmark represent a tiny minority of countries in the EU. The ongoing debacle between Greece and the EU is a microcosm of so much of what is wrong with this “project”.
As for the IMF what influence do we have over their behaviour when 4.51% of their funding is provided by the UK? Very little it would seem.
June 20, 2015
I guess that while Greece is pushed further down on its knees, it too cannot trade with Russia? You need money from sales of stuff to pay citizens and perhaps debt…but you are stuffed in almost each and every direction.
I’d simply have to go with Russia and every other non EU state. Cracking the deals I need …not the one fits all foolishness.
Must get into the border fence business!
June 20, 2015
“Responsible custodians of the Euro” do not exist. Greece is being looted for the benefit of big banks and their crony politicians. This is true across the EU and beyond. The only solution for Greeks is to accept their debt slavery or to leave the EU and become a sovereign state again. The question is just how brainwashed are the ordinary Greek people?
June 20, 2015
It looks like it’s crunch time. Either there will be some last minute cobbled together agreement to prolong the agony, or Greece will be forced to leave the Eurozone. May Europeans take the simplistic view that Greece borrowed the money and has an obligation to repay – come what may.
When bankers issue loans they have to be sensible and only issue loans to creditworthy customers. If the customer cannot repay, the days when they were placed in a debtors prison are long gone. In any case we should not look at macroeconomic problems in microeconomic terms. Germany has a net annual surplus of over €200 billion which, by definition, it is not re-spending. Another few billion euros, extracted under duress from Greece, would make no difference whatever to the living standard of ordinary German workers – many of whom are not at all well paid.
It would make much more difference if Germany moved to abolish its trade surplus. That would certainly increase living standards in Germany, and also better allow Greece and others to trade their way out of their debt problem.
Germany has been foolish in several ways. Foolish to lend the money, but also foolish in not understanding the basics of macroeconomics. Prof. Yanis Varoufakis reports that he’s done his best to explain some basic theory to their supposed brightest and best but the more he tries the more upset they become!
Simply, they don’t understand that there are consequences to running an annual surplus of over €200 billion. Where do the Germans think those euros come from? They cannot print them themselves like they could with the DM. They cannot come from the UK or USA. They pay for German exports in £ and $.
They have to come from other euro using countries which means they don’t have enough euros left to run their economies properly. It’s not just Greece. Albeit to a slightly lesser extent it’s Italy, Spain, France etc too.
Alternatively, they have to be created by the ECB or by the Bundesbank with ECB approval. So if the ECB can do that for Germany, why not for Greece?
June 20, 2015
I agree that the IMF should not have been drawn into any financing prop ups in the EZ in the first place ; it was up to the ECB ( and , of course , its masters ) to decide when and how to finance member countries . I don’t think less of Mdme. Lagarde for letting her hair down and showing some exasperation over the dealings with the Greeks ; she was drawn into this mess by her predecessor who had no right to involve IMF resources .
As it stands the proper course is for Greece to default , to face up to the drachma and all that the future entails . I still don’t think that this will happen because , one way or another ,I believe a stitch up will be made and Greece will continue to hiccup its way with the Euro . Germany will apply more pressure in the future on Greece to maintain conformity and obtain the advantage and reality of a reduced Euro in world markets . One way or another , the EZ will suffer the consequences of a North / South divide ; it will be ultimate proof that culture is stronger than politics .
June 20, 2015
I really think this post misses the point. Greece have borrowed bucketloads of money that they are now unable to repay and have spent it on entirely worthless vote winning projects.
The last bucketload of money they got their hands on they spent re-hiring around 5000 Civil Servants.
They complain that without demand they will be unable to break the deadlock of depression and so they, having run out of money, now want some more of other peoples money to spend creating a mythical Keynesian demand.
The ECB won’t subscribe to the idea and quite reasonably so; they want austerity, ie they want the Greeks to stop spending.
Here then is the secret of redemption; you must earn before you spend. Here is another; the minimum wage is preventing a private sector recovery and yet another; government spending is at the root of this problem so austerity is indeed the right way to go.
The Greeks are unable to repay such huge sums of borrowing that have now been incured but a long term repayment should be a practicality with level debt repayments spread over forty or fifty years.
After that, fiscal discipline should be the way forward, not de-coupling from the Euro and devaluation, which is the way forward to yet more fiscal hooliganism that will bring further poverty to the Greek people.
It is probably too late for any resolution other than kicking the can further down the road to await tomorrows crisis or to allow the entire system to fail.
Just of now neither side seem to be too bothered by such an outcome so maybe we should just prepare for rioting in Athens as the devastation takes hold.
Reply The ECB is still lending them large extra sums. Their problem is they cannot generate a private sector led recovery without their own currency
June 20, 2015
Reply to reply: more likely the private sector will be unable to recover so long as they are squeezed out by the government and the minimum wage prevents the private sector from hiring at a wage rate condusive with the cost of production.
The Greeks have had their chance and have rejected it in favour of a posturing left wing government. Printng paper is not the answer, it did not work before and there is no reason to think it might work now.
This is a self induced car crash and it is hard to know whether, what will we do with the drunken sailor or the grand old Duke of York would be more appropriate .
What advice to give to the Greeks just prior to impact? Make sure your seat belts are securely fastened
June 20, 2015
The EU birthed Syriza with the terms of their previous bailouts, there will be only losers from whatever the result.
June 20, 2015
I assume she was referring to the Greek Finance Minister.
Mr Juncker has also expressed views on the EU-Greek negotiations in an interview with SpiegelOnline. He also is drawn into comments on the forthcoming UK referendum. FWIW this exchange, including the nuanced response, will interest you.
“SPIEGEL: Yet the British prime minister would like to make some fundamental changes. He would like to remove the phrase “ever-closer union” from the preamble of the Lisbon Treaty, for example. What is your response?
Juncker: Why shouldn’t some in Europe go faster than the others? If the British don’t want to be part of this move, then we can make it possible for them, but in such a way that it doesn’t prevent others from going forward. That has long been the case with the currency union. Those who want to bind themselves closer together should be given the possibility to do so.”
June 20, 2015
The eurofederalists have long recognised that it is the final destination which is far more important than whether everybody arrives there at the same time. So what if the UK prefers to have a rather slower process of “ever closer union” than some others? The assumption is that it will still get there in the end.
June 20, 2015
The whole bunch of them are incompetent fools. The EU and the Eurozone masters are behaving like weaklings who have been put in a privileged position and are abusing it by kicking a dog just because they can, and the Greek politicians are behaving like stubborn kids who don’t want to eat their greens.
Who exactly is enjoying this humiliation of the birthplace of democracy, philosophy, and western civilisation? They bicker and squabble over sums which are chickenfeed to some but life-or-death to others. Meanwhile the Greek people are living on peanuts whilst EU-sponsored naval vessels continue to dump half of Africa and the middle east on the few places which could start generating a bit of cash for the Greek economy.
The joke used to be “if you can’t do, teach”. Now it’s more like “if you don’t understand real life, go into euro-politics”.
June 20, 2015
Perhaps the Greek Prime Minister should put the Greek Islands under Russian protection(and as his party wants to leave NATO,its a possibility!),in which case I’m sure the flow of unwanted visitors would promptly cease.
June 20, 2015
The Greeks are desperate because their Country is in an appalling condition and the EU wonks are desperate because their lofty project is coming off the rails . This is the Union that Cameron is desperate to keep us joined to . Why anyone votes for the LibLabCon EU Alliance Party is beyond me . The Liebour Party saved Cameron’s bacon (Halal) by abstaining on the Purdah amendment . Mr Redwood voted for the amendment to his credit .
June 20, 2015
” It confirms my view that EURO stands for European Unemployment and Recession Organisation” – -you really surprised me with this Mr Redwood – and made me laugh. It seems that someone from a group that is usually regarded as unconnected from reality (MPs) has actually been listening to the masses and the way we see things. Cheekily I will add – welcome to “our” world.
June 20, 2015
Well, Peter, you may be right. Cameron had the opportunity to demand that change to the EU treaties, among others, back in the autumn of 2010 when Merkel tabled her demand for an EU treaty change to provide a legal basis in the treaties for setting up the European Stability Mechanism. He failed to do that and simply gave her what she wanted without asking for anything substantive in return, and moreover that EU treaty change was quietly approved through an Act passed by both Houses of Parliament with hardly any objections in either chamber, and unbeknown to more than maybe a few tens of thousands of people, or perhaps only a few thousands, in the UK because there was a virtually complete media blackout. Speaking in the Lords on May 23rd 2012 the Minister of State, Lord Howell of Guildford, made the government’s understanding clear: “… it has always been the Government’s opinion that without the agreement to amend the treaty there would be no European stability mechanism”, and yet while Cameron knew at that crucial point in late 2010 that he was in a position to demand a high price for his assent to that EU treaty change he had chosen to demand no price at all, such was his generosity to the governments of the eurozone states but disregarding the vital long term interests of his own country. And again it should be noted that he could have demanded as part of quid pro quo that decisions under the abused Article 122(2) TFEU must be returned from qualified majority voting to unanimity, but just that small treaty change alone would have destroyed the government’s argument that none of the treaty changes applied to the UK and so there was no requirement for a referendum.
June 20, 2015
As I posted the other day it was a huge mistake putting a French economist and politician at the head of the IMF. Thanks George, ( it was he that nominated her ).
The job should have gone to an American who would have had a much less Euro-centric view of the world.
As has been stated, the IMF should not be lending to individual Eurozone states, only to the Eurozone as a whole. When Greece leaves the single currency, every member of the IMF including much poorer non-EU States, are going to have to pick up a share of the tab.
June 20, 2015
Off-topic, I see that Sturgeon is trying to muscle in on Cameron’s EU renegotiation:
http://www.scotsman.com/news/politics/top-stories/nicola-sturgeon-demands-say-in-eu-negotiations-1-3806901
“Nicola Sturgeon demands say in EU negotiations”
“SCOTLAND will not settle for anything less than a formal role at the UK negotiating table on EU reforms ahead of the in/out referendum, Nicola Sturgeon has warned.”
“The First Minister has demanded London “formalise” the positions of devolved administrations in crunch talks which could decide the future of Britain in Europe.”
She is trying to set herself up as the leader of the devolved administrations – Scotland, Wales and Northern Ireland, but not England of course because we are not considered worthy of having one – and intervene in a matter which is very clearly a matter reserved to the sovereign UK Parliament and government under the Scotland Act 1998 through which the UK Parliament created her position as First Minister in Scotland, a matter in which she has no more legal right to be involved than Boris Johnson as the Mayor of London, or the leader of Kent County Council, or the leader of my local council, or indeed myself.
On the other hand, members of the UK Parliament obviously do have a right to be involved in the EU negotiations, including of course the SNP members; and I wonder, JR, which parliamentary committees will be following the discussions and calling Cameron and Hammond and Osborne to appear and give accounts of the progress being made? Is there a case for setting up a special committee, perhaps a joint committee of the Commons and the Lords, with that specific remit? It could, I suppose, meet in camera if particularly sensitive issues were to be discussed.
June 20, 2015
Excellent comment, Denis Cooper.
One can see a pattern in Cameron’s activities that continues to give cause for deep concern. Reading Dr JR’s post about his contribution to the debate on the Scotland Bill (now deleted, so why?) one can see that members of Parliament were to some extent in the dark. This applies to members of all parties. In other words, just as Cameron set off on a jolly around the EU without his Foreign secretary, so it appears that Cameron is now negotiating the future of the UK with Sturgeon, all without reference to his Cabinet or his party. Comments by SNP members suggest that Sturgeon is playing Cameron’s game in this regard. If one had confidence in Cameron’s ability, judgement and integrity, this would not necessarily be a problem.
But we know him too well.
June 20, 2015
Just a reminder of how this started five and a bit years ago, from April 23rd 2010:
http://www.telegraph.co.uk/finance/financialcrisis/7625267/Greece-seeks-aid-from-EU-and-IMF.html
“Greece seeks aid from EU and IMF”
“Billions of euros of emergency loans will arrive in Athens within days, after the Greek Prime Minister officially requested assistance from fellow euro members and the International Monetary Fund.”
Then it was a mere €45 billion, and:
“Axel Weber, of the European Central Bank, insisted in a news conference in Washington: “There is no problem for the euro.” “
June 20, 2015
At the time of the first Greek bailout, Madame Lagarde admitted that the EU had not kept to the terms of the Treaties and the IMF was acting outside its remit
“We broke all the rules because we really wanted to save the Euro.”
Note that she didn’t say “because we really wanted to save the Greek economy.” It had nothing whatsoever to do with helping Greece …. and everything to do with saving Eurozone banks, primarily in France and Germany, which had foolishly lent far too much to Greece and would probably have collapsed without taxpayer support. Greek taxpayers were to be loaded with obscene levels of debt to support them.
How can you have any respect for the leader of an institution like the IMF which deliberately broke its own rules to protect the Euro.
How can you have any respect for, or trust in, a Treaty Organisation which ignores the terms of its own Treaties when it suits.
The Euro is a failed experiment. The EU is a failing project. Yet Cameron is determined to protect both and keep is in bondage. I have no respect for him either.
June 20, 2015
Well Said !!!!
June 21, 2015
Perhaps the most shocking aspect is that by conniving at breaches of the EU treaties the UK government broke not only EU law but much more importantly our national law – Parliament having passed Acts to approve the EU treaties, including the articles prohibiting bailouts, thereby incorporating those treaties and that prohibition into our national law, indeed into our constitutional law according to the interpretation of our national courts – and yet there was hardly a murmur of dissent from our elected representatives in Parliament.
June 20, 2015
Well said!
Ironic that the SNP rejected the Euro as a currency for their independence stance but want less to with the common UK currency. The sooner these non players bow out of the main currencies the better for us and the better for them.
June 21, 2015
Ahh, by the way, whilst I rant , whoever suggested that devaluation would increase exports, other than Keynes?
Devaluation as you will know simply results in the income you receive from exports less and the income you pay imports more.
If your exporters increase the price of their goods by the same percentage as the devaluation, which has been the experience of the past two big devaluations, then you end up earning the same from your exports but still paying more for your imports.
Everybody believes that devaluation is a way of increasing exports. So, explain why Greece is not a vastly more wealthy country than Germany.
It is, no more or less than all other Keynesian theories, an excuse for politicians to discover the quick fix, except it doesn’t work
June 22, 2015
What currency do the Greek people pull their savings out of the banks in?
If it is the Greek Euro what happens if they pull out of the Euro, is the money then not worth the paper its written on?
What happens to Greece if all of their well educated Doctors, nurses etc leave?
June 22, 2015
How terrifying it is that we would be considering closer integration with a bunch of countries that would so coldly allow Greece to crumble into oblivion to protect their precious little currency.
The EU is not interested in rescuing Greece, it is only interested in saving the Euro.
They bent the rules of admission to allow Greece into the club knowing full well that countries as different as Germany and Greece could not exist together in the same structure and are now happy to leave Greece out to dry rather than admit the stupidity of their grandiose delusions.
June 23, 2015
I do hope that when the UK cabinet next meets that there are adults in the room. In particular I would like the Foreign Secretary to remind the cabinet that it has been UK foreign policy for centuries to ensure that no single power dominates continental Europe.
So why have we pronounced ourselves in favour of the Euro Zone, with its inbuilt Federal model?