The Greek government’s wish to put the latest Euro area/IMF offer to voters for decision is a game changer. It has left a wounded and surprised Euro area fulminating against the way Greece behaves.
The European Central Bank with the support of the Euro area has cut off all supply of Euro support to Greek commercial banks. As a result we now have our third Euro, the Greek Euro. Like the Cypriot Euro in their crisis, the Greek Euro is not freely convertible into the regular Euro as you cannot draw it out of a Greek bank when you want to. What kind of a currency is this European single currency, when the Central Bank does not stand properly behind all the banks in the system, and when in part of the zone they have to close the banks on a normal trading day?
I am on neither side in this damaging row. I think Greece should leave the Euro, devalue, write off debt preferably by agreement and have a fresh start.No-one with a powerful part in the crisis wants that answer.
My head is with the Euro area when they say Greece should honour her agreements, repay her debts, and seek to live within her means. The problem is their approach causes misery and mass unemployment,so my head also says they are wrong in the wider scheme of things.
My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them. My heart loses sympathy if their responses plunge themselves and the wider economic world into danger by their inability to get on with their creditors.
Many UK people are with the Greeks in opposing a mindless austerity policy at a time when Greeks have already lost a quarter of their national income,
have a quarter of their workforce unemployed, and lack demand and tax revenue to pay the bills. We are also with them when they say their democratic will and their elections should be able to change things for the better, and need to be recognised by the rest of the EU as important.
What a predictable tragedy the Euro has become. If you want a single currency to work you need a single government to back it, a single demos to decide who rules, and an economic policy which generates prosperity for the many. The Euro area still lacks all these features, so it is no wonder it limps from crisis to crisis.
June 29, 2015
The referendum should not be an in / out question but of further integration vs economic cooperation.
June 29, 2015
“Economic cooperation”? We already have it. Brussels says “We want” and Dave says “Ok”.
June 29, 2015
You are on neither side? How odd. It is clear the will of the people and its own government should prevail over unelected dictators who were prepared to sacrifice Greece to save private French and German banks, the Euro and EU project. The IMF should have helped Greece in distress not back the Euro or EU project, breaking all the rules to do so. What was the UK position in lobbying the IMF at the time, as we are a stakeholder? We need to know. Was it rigged liked the EU referendum in favour of the EU project rather than help a distressed nation? Cameron was eager to help Ireland with our taxes when he did not have to, so what was and is the position?
June 29, 2015
Just about sums it up BigNeil. I and many others are totally amazed at the way this whole EU debacle is panning out. Of course, many of us could see it coming but, honestly, there wouldn’t be as much of a mess at a chimps tea party! How long is this farce going to continue? Greece should leave and the other European nations should face the fact that this was a disaster from start to finish. I hope to God we have the sense to vote OUT. I just cant see it getting any better so why inflict to much pain and misery onto others? We are all losing the will to live while the leeches with their noses in the troughs just grin and bear it, telling us a load of porkies just as they did with the financial situation with Greece when it entered the euro. Is it any wonder there are so many cynics when we talk about ministers and governments?
June 29, 2015
Exactly perfectly put. This should be obvious to all but group think lunacy seems so common in government. We see it with the carbon dioxide exaggeration religion too.
I too think Greece should leave the Euro, devalue, write off debt preferably by agreement and have a fresh start.
Your last paragraph puts it perfectly. It was just as predictable as Major’s ERM fiasco – still even now no apology from the man who buried the party. Very many in the Tory partly (and “experts” in government and the Treasury) wanted the UK to join and many, even now, still do.
They have learned nothing from the ERM or the EU and have pissed away money in loans to Greece, ECB & IMF trying to prop up this absurd structure.
So what has Cameron got to say – is he a John Major or John Redwood on this issue? I assume he will say very little of substance on the issue – as usual.
June 29, 2015
A good article from Simon Heffer on Education this morning. Is Nicky Morgan doing anything much?
http://www.telegraph.co.uk/education/11702470/The-Tories-must-sort-out-this-Marxist-education-mess.html
June 29, 2015
No, she was reported to have stopped on the spot inspections at Trojan Horse schools. In contrast hot air Cameron and co talk about stopping radicalisation and promoting British values. They are not up to the job. We have the reports from Tom Windsor at the weekend in the press demonstrating white girls being abused by Pakistani men in Rotherham, Rochdale Etc and the authorities too scared to act through PC. About time Cameron acted on his words, got off his ar5e and did something like a public inquiry. We are not safe home or abroad because of his dopey policies and subordinating to the EU.
June 30, 2015
Yes excellent article by Heffer. The sacking of Gove was pathetic – but Mr Crosby does seem to have shown superb tactical judgement in the election overall. Cameron should put Gove back in charge of education, including universities which for some absurd reason are in the dept in industry (which should be closed in any event).
June 29, 2015
Sorry – They have learned nothing from the ERM or the EURO (not EU)
June 29, 2015
I see the BBC is getting excited about this silly solar electric aeroplane on its second attempt. Do these people not have better things to do with their money than these expensive stunts?
June 29, 2015
… I too think Greece should leave the Euro, devalue, write off debt preferably by agreement and have a fresh start.
Your last paragraph puts it perfectly. …
My sentiments, exactly, before I read your comment, Lifelogic.
June 29, 2015
The Greek bank holiday start today with the Bank of Greece closing and Christine Lagarde wants her money by 6.0 pm tonight. I would be very frightened living in those conditions.
Even holiday makers are being advised to take with them bundles of Euros to last them for the length of the holiday . I hope they have double locked wallets in these conditions.
June 30, 2015
But what do the members of the IMF say? What is the UK position? Cameron should be telling us, it is our taxes that are at stake. He gave away £7 billion to help the Irish why not Greece.
Personally I would not have helped either as the Euro was a fanatical part of the project to help create the EU superstate and they wanted to be part of it. The IMF broke the rules to help the Euro and EU project. Cameron should have shouted from the tree tops that UK taxes would not be abused in a such a way alternatively got something in return. As we have seen, he is not very good at negotiating, he only gives away other people’s money!
Clegg, Clarke and co would have had us in the Euro and Branson and Heseltine still think the UK ought to be in it. The UK deficit is still higher than Greece. The country would be up a gum tree left to the in brigade.
Reply Ireland was seen as a special case and we are being repaid with interest – good job we won the battle not to help finance Greece
June 30, 2015
No special case, Ireland fought to be independent of the UK and subordinate to the EU. Ireland chose its bed to lie on etc. Ireland no different from any other EU country. It strikes me this was a flimsy excuse to creatively help the EURO bail out and the EU project after Cameron promised not to. Another broken promise.
June 29, 2015
Yes. I pretty much agree with all that, except both my head and my heart are on the side of the Greeks. My head understands they are being asked to do the economically impossible. My heart is with them too. They’ve suffered enough and it is time for fresh start.
My suggestion to the Greek government is that they should defy the ECB and continue to produce ‘euros’ as they require via their Bank of Greece. Short of military intervention, which is possible but not likely, what can the EU and ECB do, other than to decline to guarantee those Greek euros on a par with other euros? Greek euro notes have their own letter code and Greek euro coins have their own script. They aren’t quite the same.
The Greeks will therefore instantly have their new currency, the Greek euro, which will float. Some may say sink. That’s OK. The Greek economy desperately needs that devaluation to be able to succeed in the medium to long term.
June 29, 2015
Indeed it has to sink perhaps to circa 50% of current value. But does that mean that every time I buy EUROs I have to carefully check them, to ensure that the bank is not passing me off with duff Greek ones?
June 29, 2015
They will still need to fire half their state sector though and cut state pensions.
June 30, 2015
When they can borrow no more the choice will be to cut or to print. Without the burden or repayment the cutting will not have to be so drastic.
June 30, 2015
” duff Greek ones” ?
That’s a good question. I would say the euro isn’t quite the single currency it is claimed to be but instead is a collection of different euros (German euros, French euros etc) all guaranteed at parity by the ECB.
If the powers that be in the EZ had truly wanted a single currency there wouldn’t have been any need for different euro notes and coins, and there wouldn’t have any need for subsidiary central banks. But we still have the Bank of Greece, we still have the Bundesbank etc.
If it were just a few euros I wouldn’t worry about it but, just to be on the safe side, if there was a considerable sum of money involved I might just check the letter codes on the euro notes!
June 29, 2015
Well said.
June 29, 2015
Just out of interest how much money does UK have at risk in this ? If Greece defaulted on all their debt how much would it cost UK taxpayers ? When I know that I’ll decide which side I support. The Greek referendum pledge is not much of a game-changer except as a negotiating tactic, we already know that they would vote for the mutually incompatible options of refusing the creditor’s terms and refusing to leave the Euro too. Referendums are (counter-intuitively) a potentially powerful weapon of dictators. Greece has a history of military dictatorships, I suppose that is one possible outcome too.
June 29, 2015
Can you give an example of a Referendum being a powerful weapon of a Dictator?
June 29, 2015
Such is the urgent need for the Euro to succeed that I wonder if now the only solution to the Greek problem will be for the the EU and IMF to let Greece off the hook and impose unelected EU technocrats to run the country instead of its democratically elected government. Let us not forget that the EU toppled a previous Greek prime minister from office when he threatened to hold a referendum and is quite capable of repeating that exercise.
The will of the Greek population (and that of other nations) is of course quite irrelevant and they must do as they are told by their betters in Brussels. You couldn’t make it up!
June 29, 2015
Astonishingly, Richard Branson has not only said that it would be catastrophic if we left the EU – apparently that would mean the restoration of the all trade barriers which were in place forty odd years ago when we joined the EEC, nothing else having happened in the meantime which means that would not be the case – but also says that we would be better off in the euro – because that would mean that we had a cheaper currency which would encourage exports, so he seems be in a “we should adopt the euro because the pound is too strong” phases rather than a “the pound is a weak currency” phase, of course either can and has been deployed as an argument for scrapping it.
But while we now know better than to listen to Branson on this some woman on the Sky press review displayed an even greater level of ignorance by saying that Greece should leave the euro, of course that wouldn’t mean that it would leave the eurozone …
June 29, 2015
Indeed quite right on Branston.
The other absurd quote is almost as funny at John Major’s:-
We will do precisely what the British nation has done all through its history when it had its back to the wall — turn round and fight for the things it believes in, and that is what I shall do.
or
All my adult life I have seen British governments driven off their virtuous pursuit of low inflation by market problems or political pressures. I was under no illusions when I took Britain into the ERM. I said at the time that membership was no soft option. The soft option, the devaluer’s option, the inflationary option, that would in my opinion be a betrayal of Britain’s future.
June 29, 2015
I agree with everything you say. I do not think history will look kindly on any of the players in this tragedy.
What happens next I wonder? Can Greece be ejected from the Eurozone and/or the EU against her wishes? What will be the point of the referendum on a bailout package that is no longer being offered? Can the Greek democracy survive? Can they be kept within NATO?
I am deeply suspicious of Syriza and do not in my heart believe they have been negotiating in good faith. I have my doubts about some of the the EU players too. The only body I saw as really pushing for an agreement was the Commission.
But the plot is not over. The play has many acts to come and actors still to play their parts, both on and off the stage.
June 29, 2015
Well, the EU treaties have no provision for a country which has joined the euro to ever leave it, quite deliberately, and the Article 50 TEU mechanism for a country to leave the EU is supposed to be for voluntary withdrawal not expulsion.
June 30, 2015
So as ever they will fudge it. In the EU but not the EZ. They may even try to pretend that eventually the Drachma will be tied to the Euro.
The can has reached the end of the road. It is time to see how much it sprays when opened.
June 29, 2015
The only thing the EU cares about is continuing its drive to its desired end. A new country called Europe. Greece’s problems are a minor inconvenience to the EU leaders.
I hope the final result of the Greek referendum means Greece will leave the Euro and the EU. The road will be tough for them, but they will get their country back. I hope their experience will open the eyes of people in the (dis)UK to what the EU really is.
June 29, 2015
…’ If you want a single currency to work you need a single government to back it, a single demos to decide who rules…’…
Not a recent or modern sentiment – it’s effectively exactly what some senior Civil Servants delivered as their advice to the UK Government in the early 1960s when the earliest evidence of plans for a single currency emerged. Its logic is crystal-clear and as far as I’m concerned, essentially self-evident. However, no senior political figure who was pro-Euro two decades ago had the public front to even acknowledge that point.
Whilst I know the policy of the Conservatives, John, is that we should not join the Single Currency, and indeed that Mr. Cameron has publically rejected Single Currency membership emphatically, I’m wondering if there would be benefit in:-
(i) Requesting of Mr. Cameron or Mr. Osborne to comment on that quoted sentiment above? Not on the Euro Single Currency itself, but on the stated principle of the democratic consequences of such membership?
(ii) Having that principle written as an elementary benchmark into Conservative Party policy?
There are still a tragically high number of your party colleagues who remain dogged enthusiasts of the Euro, albeit less publically these days. It’s reasonable for them to account at least to your party the resultant democratic outcome to the electorate their otherwise unwanted ambition represents?
June 29, 2015
Heart and head don’t quite work in this context. The aim of Germany and France was to allow Greece in and some others. So their head was somewhere else, particularly when breaking clear rules to prevent this foolishness happening.
They both need to save Greece from this disaster that Greece is also responsible for. Or should I say certain individuals are responsible in the 3 countries plus some other Federalist fools. Perhaps they personally might donate? It has to be a write down of about 50 to 75%.
June 29, 2015
“What a predictable tragedy the Euro has become.”
It’s pathetic, is what it is. Totally pathetic. European UNION? Ha – what Union?
It seems like an excuse for incompetent bureaucrats and politicians to ignore real problems. Whether one is pro- or anti-EU, surely the whole project is meant to be about the people of Europe rather than bits of paper and electronic money? It seems to me it’s about a bunch of people in Brussels having talks and dinners. We have to get out of this totally incompetent and failing organisation. If we sat on the outside we could possibly even use our influence to talk some sense into these people whose SOLE aim is a nation of Europe, and to hell with what effect it has on the 450 million who pay the taxes.
Sick of hearing about it and seeing their stupid faces on the telly and in the papers.
June 29, 2015
Oh boy! Could not have put it better!
June 29, 2015
I see that Boris Johnson has an article in the Telegraph today questioning whether we should refer to “Islamic state”.
Personally I think people who still proclaim “This has got nothing to do with Islam” are either deceiving themselves or they are trying to deceive others, and I can only suppose that they have failed to notice the ridicule now being heaped on any such claim.
So the question of whether or not “Islamic state” should be regarded as a “state” is in fact more interesting than whether or not it is “Islamic”, which it clearly is, and I would say that while it has not achieved formal recognition as a state by the United Nations it does have many of the attributes of a state, and if it endures for long enough then it could eventually achieve that official international recognition.
In the meantime, its leaders claim that it is a state, and those who are going there to assist it apparently accept that it is a state, so I see no compelling reason why we should not take them at their word and declare that anyone who gives it their allegiance will not be deemed stateless if they were deprived of their UK citizenship.
June 29, 2015
Yesterday, I heard a Kurdish caller to LBC say that the US is charging the Kurdish fighters for the bombing support missions against the ISIL nasties. Is this true and do we also charge them? If so this seems very mean, though not without precedent.
June 29, 2015
Yes, Lend – Lease all over again…
How are the Kurds going to be rewarded at the end of this, is Turkey going to recognize an independent Kurdistan?
June 29, 2015
Indeed. Also I see reported that Boris want a no vote in the referendum just as a lever to extract a better deal from the EU with a second referendum.
Any comment JR?
June 29, 2015
John,
It seems from broadcasts that the majority of Greeks interviewed don’t want to leave the Euro but also don’t want to pay the piper, and don’t seem to want to recognise the connection. They sound as if they’ll vote to agree to the deal as it’s being made out (at least by our news organisations) that it’s a referendum on the EU rather than the deal on the table.
Of course, our news organisations may not be showing us the true picture. Surely not?
June 29, 2015
But is there actually a “deal on the table” at all now? So far as I could tell from the Sunday Times, the deal that was on offer to Greece was withdrawn upon the announcement of the referendum.
June 29, 2015
Given that the Greek Government was elected on a stop austerity package, and to renegotiate its financial terms with the EU only recently, its leaders are making absolutely the right decision to go to the people with the new terms being offered/imposed, otherwise they are betraying the trust people put in them with their votes.
You cannot have a single currency without a single financial plan and single controls, unless one Country is financially prepared to support another so called partner in times of need.
When eventually the people, and the Euro Mp’s of the Euro area realise the above (especially Germany) then I think the Euro and perhaps the dreams of ever closer Union will start to crumble.
Given what is being required by the SNP in Scotland (financial support and independence), we may well have the same problem within the UK shortly.
Governments are responsible to the people, the sooner all governments wake up and realise this the better, but at the same time it is the duty of government to be true and factual, and to outline the possible consequences of the peoples wishes, hence the problem with making unrealistic promises in the first place.
June 29, 2015
But the problem with the Euro Government is that with its lack of demos, it is not responsible to ‘the people’, but to a gang of heads of government. No democratic vote can force its resignation.
June 29, 2015
William
I agree with your comment, but what is refreshing is that the greek Government are going to the people.
What the Greek people have to understand, is that you have to live within your means if you do not want to get into debt in the first place.
If you do that then it is usually possible to ignore outside influence.
June 29, 2015
The Greek economy and GDP are so tiny that apparently they could easily be paid off by Walmart. “The Greek economy is 1.3 percent of the EU economy. It’s 1.8 percent of the eurozone economy. Of the member states, it is only one sixteenth of Germany’s and slightly less than that of the Volkswagen group (and less than half the size of Walmart). Even the Irish economy is bigger (€185 billion). ” (EUReferendum blog).
Meanwhile, the future of the Eurozone and EFTA and the “preEuro” countries/states is being thrashed out in Brussels. By 2025, the Eurozone (hopefully much enlarged in the East) will be the United States of Europe.
Exciting times!
June 29, 2015
This all began, in my humble view, with the ‘forgiveness’ of third world debt. Do you remember that ? Millions upon millions of dollars/pounds were written off by governments in the West, in a sop to leftist pressure, so that countries mainly in Africa, could ‘wipe the slate clean’, and ‘begin again’.
In a classic example of unintended consequences, banks, financial institutions, and more particularly individuals, took a look at this situation and said “Hey, up! If such massive sums do not matter, why should my piddling loan, mortgage or credit card balances matter ?”
Thus began the idea that an obligation to pay back what one had borrowed was born. The perception that one had an obligation to meet one’s liabilities became ‘old fashioned’.
Individuals and instituions and countries saw, erroneously, that debt did not matter. What the hell, pay off five per cent and borrow some more! Hence what began as limited amounts within the compass of repayment, became not tens of thousands, but tens of millions, and thence to hundreds of millions and eventually to trillions
of dollars/pounds. And still the ugly excesses went on. Too much debt ? No matter. Re-package it and sell it on. Some mug will take the liability.
Well, the chickens are coming home to roost. The rotten system has been hedged and buttressed for too long. The entire world is wallowing in a quagmire of its own making. Greece is only a minor symptom. The more the IMF, Central banks and others try to evade the ‘predictable tragedy’, the more certain its ramifications will become.
Hold on to your hats. It’s going to be quite a ride…..
June 29, 2015
Feel sorry for the Greeks ? . The black economy has been rife there for more years than I can remember ; the financial data before entry into the EZ was fudged ; their way of life has not and will not change . The economic situation is best summed up by their PM who simply argues that the mess they are in is entirely due to international blackmail .
As members of the EZ Greece was obliged to live by its rules ; they wanted its – so-called benefits , its financial security and the international whack that came with it . They believed they could do what they liked under the EZ umbrella ; the sun outside was hot but they thought it was big enough to protect them . Finally they elected a (left winger ed) believing his words would pull the wool over the EZs eyes – it didn’t ; now they face the consequences of misbehaving .
In a way I am glad Greece has exploded . It has exposed the true weakness of the EZ that without political and economic control the Euro is nothing ; it is entirely an international monetary myth . I’m extremely pleased that we are not a part of it and the sooner we are out of the EU sham the better .
June 29, 2015
And still we have the great and the good telling us we should join the Euro. Yesterday Branson pontificating on the Marr show how we would have a weak currency to aid our exports. No acknowledgment that the pound is strong because of the awful state of the Euro.
Greece has to go back to the Drachma and start afresh, after all they have done so several times in the past. If they leave the EU it will be one less place for economic migrants and potential suicide bombers to get to Britain so a silver lining there then.
Fingers crossed that the Greek electorate vote down the proposals as they really have nothing to lose.
June 29, 2015
‘It has left a wounded and surprised Euro area fulminating against the way Greece behaves.’
But look at the performance of the Greek PM and his finance minister Yanis Varoufakis, Dr JR, it’s outstanding. These are young men showing complete confidence in their moves, which have clearly been chosen from a range of options plotted in advance. Read too the full text of Tsipras’ speech to the Greek people; quite excellent and framed around principles and policies, rather than being criticism of personalities and institutions.
One suspects that Varoufakis will now give the EU a master class in the dangers of fractional reserve banking where the lender of last resort goes off duty at the height of a financial crisis.
It is hard to imagine a more inept decision than that of the ECB to withdraw liquidity from the Bank of Greece. One can fully understand the motive, but the consequences will almost certainly be uncontrollable. Across the PIGS group of heavily indebted EMU nations, depositors will take note of the fate of the Greeks. Managing a currency without a sovereign is one mistake, but managing the same currency without a lender of last resort is voluntary euthanasia. If there is now a run on any commercial bank in the EMU, who stops it, where and how? The Euro is implicitly worthless from last night.
The EMU won’t make it beyond 2015, it’s doomed. The EU may limp on for another year in acrimony, but the collapse of the EMU will fatally wound The Project. Those who still believe in the future of the EMU and EU at this precise juncture will find their credibility and their careers shredded.
June 29, 2015
So Greece will be a good prototype to see if a “soft landing” is possible?
June 29, 2015
The history of every financial crisis is that there is never a soft landing. The crisis always arises because existing controls and constraints prove inadequate, which is precisely the situation with Greek debt on the one hand and the management of the Euro on the other hand.
June 29, 2015
SMEs in Greece must be very worried now as the leader of the EU finance ministers dealing with the problem is still Mr Dijsselbloem, who saw fit to raid ordinary bank accounts in Cyprus after much of the dodgy money had already disappeared. He referred to this raid as a template at the time and apparently sees nothing wrong in swiping money from honest depositors with large transactions to pay, while allowing time for others to put their money abroad. It would be good for honest Greek businesses and individuals to put their banks beyond the grasp of the EU fiddlers, who arranged for their awful politicians to have access to the never never at the start of the disaster.
June 29, 2015
The middle class in Greece have sent over 220 bill euros offshore since the crisis began – i believe that money will come back after a devaluation – as it would effectively double the wealth of that cohort (in local terms). The renewed financial strength of this cohort, historically very important in producing stability in societies – could form the basis for an investment led revival. Freed from the shackles of austerity and rolling with a new competitive exchange rate – i would say their chances are fair to good – which is far better than the alternative offered inside Eurozone. I would be interest to hear JR’s (or anyone else’s) views on the default procedure. What are the options etc.
June 29, 2015
It marks the failure of the political class in Greece as much as in the EZ to recognises and adapt to economic reality. So long as that situation persists both Greece and the EZ will decline and, ultimately, fail.
In its own corner, the UK continues to live in a cloud cuckoo land marked by a profligate state and a nation living beyond its means.
June 29, 2015
Old Timer.
How right you are. Funny we seem to hear nothing about our debt last mentioned to be at £1.5 trillion.
Still we can count on Mr Branson and others to get us out of the mess we find ourselves in. NOT
June 29, 2015
I hear US Treasury Secretary, Jack Lew has been in contact with the IMF, Germany, France and Athens in the last couple of days urging a form of debt forgiveness for Greece. America matchmaking in Europe. Sweet. Cute. Touching… clear across the vastness of the Atlantic ocean. Less TLC was paid to its own money problems in Detroit and New York.
Well yes Greece is in NATO but financial ineptness of a country has never stopped the West building army, air-force and navy bases. Warms the cockles of your heart too how the US is very concerned the UK should be part of Euroland though a major trading competitor. So what is the US up to?
Russia was supposed to join the EU in 2024. All the EU states were in favour. Something went wrong. Was the US in favour? Did it relish the idea of the EU getting an endless supply of cheap oil far from the political and military troubles of the Middle East?
Greece owes France billions. I wonder if Peugeot will get a sudden and most welcome influx of US money to keep it buoyant. If only Greece owed the UK more,how lovingly warm we might all feel with an extra couple of bob to go see Mickey Mouse.
June 29, 2015
The Greek PM and his Finance Minister both look curiously relaxed about the current “dire”situation.Do they have something up their sleeves?
June 29, 2015
Quite – especially when one considers how France and Germany have bent the Euro rules in the past to suit themselves. “Do what I say, not what I do” comes to mind.
I can see Greece going into the arms of fellow Orthodox countries Serbia, Russia – possibly taking with it Southern Cyprus as well (who have also suffered under the Euro’s dual standard rules). So much for EU ‘peace’.
June 29, 2015
Catherine the Great’s abortive “Greek Project” – the resurrection of the (European part of the) Byzantine Empire as a Russian vassal state making a comeback!
June 29, 2015
To your point about central bank support: the role of the central bank is to support liquidity, but not solvency. The Greek banks capital base is largely composed of tax credits – IOU’s from the Greek government. If the Greek government is insolvent these are worthless and therefore the Greek banks must be deemed insolvent.
Why these tax credits are regarded as an acceptable part of a bank’s capital base and to what extent other non Greek bank’s capital ratios depend on similar assets I don’t know – but I expect some people will be asking in the days to come.
Reply The ECB is the Greek banking regulator. It has not declared them insolvent nor has it demanded they improve their capital, so it should lend to them.
June 29, 2015
JJE, to add to JR’s comment. There have been, I think, three occasions when a Eurozone country has technically been insolvent. The ECB bailed them out by buying those countries IOUs (government bonds). This the ECB is not supposed to do, according to the Treaties. The Germans challenged this action at the ECJ and basically lost.
What the ECJ effectively confirmed was that there is no legitimate, democratic authority, in the Eurozone, to direct fiscal policy (tax and spending). There is no Eurozone Treasury, with an elected Chancellor of the Exchequer, with the constitutional power, to create “money” by spending it into existence and taxing it out of existence. The ECB is directing both monetary policy and fiscal policy for the Eurozone. Democracy; it ain’t.
The ECB will not let systemic insolvency occur in a member state, it would be the end of the EURO if it did, which is why the bail-outs on previous occasions. What the Greek central bank considers to be adequate collateral for its credit banks, may not be the same at the ECB. If Greece leaves the Eurosystem, credit banks holding there own government’s IOUs, would be the same as UK banks holding UK government Gilts, no problem.
Once Greece leaves the Eurosystem with its own currency, it can never be insolvent in its own new currency and can pay any bill presented in its own currency. Because it issues the currency and will make you pay your taxes in its currency, which is what will give the new currency “value”. Exactly the same as the UK and every other sovereign currency issuing nation on the planet.
PS. Africa has had the same problem for years. Central and West Africa use the CFA Franc in a dual currency union. To add insult to injury, the two CFA Francs are pegged to the Euro. You can’t get much worse than than that.
June 29, 2015
JR: “What kind of a currency is this European single currency, when the Central Bank does not stand properly behind all the banks in the system, and when in part of the zone they have to close the banks on a normal trading day?”
Not the kind of currency we should want to join, Mr Heseltine!
The Greeks are being kicked out of the Euro, pure and simple.
June 29, 2015
Not sure I agree with your last sentence Stephen – I think it’s far more likely the Greeks will be forgiven their debt or made to repay £1 a month for the next 2,000,000 years. The EC and EU will do anything to keep their ridiculous political project on track.
June 29, 2015
Quite so, Dave. As I said above, it seems to me that Greece will in some tangible but as yet unknown way be let off the hook, but the cost to Greece being the imposition of unelected EU technocrats to run the country – effectively on behalf of the EU itself.
If that happens many will say that the EU is yet again showing that it is quite capable of acting as a dictatorship, benign or otherwise.
Losing Greece from the Eurozone could well be fatal to the Euro and so regardless of the cost Greek democracy, something will be put in place to prevent it happening.
June 29, 2015
I still doubt that Greece will be allowed to leave the euro, if there is anything that the eurocrats can possibly do to prevent that happening. They are already trying to intimidate the Greeks into voting for the troika’s last offer in the referendum, and I guess they may well succeed.
June 30, 2015
Denis, I now see I should have said that when the ECB refuses to stand behind the Greek banks it means one of two things:
i) The Greeks are being eased (kicked) out of the Euro.
ii) OR the ECB is deliberately making things difficult for Greek citizens in the hope that the Greek government becomes more unpopular.
The second reason would mean that the Troika is using the European Central Bank’s power to damage a democratically elected government. Naturally, I had discounted that as being flatly opposed to the ideals of the EU.
June 29, 2015
How is devaluation going to help? If a country spends too much on its public sector then it will struggle whatever the currency. Greece’s holiday sector was reported to being doing very well with little or no excess capacity.
Greece should have have stuck to selling its state assets and starting to tax properly.
The Greek government blaming the IMF/ECB reminds me of Harold Wilson blaming the Gnomes of Zurich!
June 29, 2015
If you devalue you cut the pay of the state sector in one quick move (and their pensions unless they are index linked). This is politically easier than just cutting their pay.
But you are right too many people in the state sector, overpaid, over pensioned, inconveniencing, misdirecting and over taxing the productive. This while producing very little of true value themselves.
Rather like the UK in many respects but even worse.
June 29, 2015
Agree with you JR this could, and should be a game changer. It will be a big decision for the Greek people. If they vote to resurrect their old currency, it will be tuff for a while. Internally, the Greek Treasury can buy anything for sale with its new currency and get people back to work doing anything that is even slightly infrastructure productive. The private sector will join in when it sees customers with money in their hands and wanting to spend it once more.
The Greek Central Bank can clear all internal trades. Greek exports will look cheap and there is considerable upside for those. It won’t be long before foreigners start pricing Greek economic opportunities and are prepared to hold its new currency. All Greek supporters should book holidays in Greece and spend spend spend.
The Eurozone and the Troika, will try and stop this happening any way they can because, if Greece starts to thrive outside the Eurozone, it will have proved for all to see, that Troika style austerity does not work and is positively harmful. Hopefull Spain; Italy; Portugal and the rest of club-med will realise this fact.
The single currency experiment, being a fundamental component of the EU, has failed and should be put into administration. All debts Greece owes to fiat currency issuing sovereign states, including supra-national institutions like the IMF, should be written off. Sovereigns states will eventually get all there fiat currency back via taxation mainly, when those who have got it saved, get the confidence to spend it somewhere in the next decade or so.
June 29, 2015
John,
I recall when Greece was first accepted into the Euro area, you complained bitterly in a television interview about the dubious criteria and ‘the European fudge factory’. You were proven right. It has all come to pass, just as you said it would, but evidently, there are those who still say what a good thing the Euro is, and that the UK ought to join it.
It really is hard if not impossible, to educate those without the capacity to learn in the first place. Ineptitude, fuelled by misinformation and propaganda put out by those with a vested interest, is a very difficult obstacle to overcome in the struggle for truth and common sense, but please keep the fight going. It is sincerely appreciated.
Tad
June 29, 2015
In politics being consistently wrong seems to be the best way to get to the top. It is just the same with the greencrap issue.
Being consistently right seems to keep one on the back benches, or you even get your parents marital status questioned. For promotion you have to join in the group think lunacy and all jump off the cliff together.
June 30, 2015
Absolutely LL,
And the evidence to support that is all there.
My old friend, Sir Teddy Taylor, had all sorts of insults thrown his way, but he has been proven absolutely right. He’s a modest man, but when a person gets to know him, they soon realise just how exceptionally clever he really is. He has been a fantastic mentor to me, and even now, we often communicate whereupon I am able to draw upon his vast experience.
Teddy resigned from the Heath government, and fell out of favour with the bulk of the pro-Europeans who went on to dominate the Tory party with such disastrous consequences. He was subsequently overlooked.
JR is of a similar calibre. He too has had some nasty remarks aimed in his direction, and this makes me all the more certain there is a campaign by those who have lost the intellectual arguments, to undermine decent people and wreck any chance of a proper debate.
Tad
June 29, 2015
The Euro:
Please note:
It is not going to stay the same for much longer. In 2017 there will be an EU White Paper, due for expediting in 2025 which will make the Eurozone and the “pre-Euro” states (not countries) into the Federal Democratic Republic of Europe with one President, one Council, one Parliament with no state representatives, one army, one flag and one national anthem.
If you want to be a member of FDRE like that, please vote “yes” in 2017.
The status quo is not an option.
(Why do I waste my breath?)
June 29, 2015
As I write, Mr Juncker is speaking directly to Greeks on TV, over the heads of the Greek government. He says “I would say to you….” and ” The Greek Government did this wrong ..etc etc …in negotiations ”
So is this what we are to expect in the UK Referendum? A foreigner speaking over the heads of the British Government ( however the Government decides ) running down the British Cabinet, the British Government, and every previous democratic decision taken over the past 10 years and more and advising the British people how to vote?
If Mr Cameron even bothers to “negotiate” one minute longer with the EU and fails to recommend immediate withdrawal from the EU then he is wanting.
June 29, 2015
Yep, if the polls go wrong the Voice of Brussels will speak.
June 29, 2015
Precisely my thought when I read that, and as far as I know the government is still insisting through its Referendum Bill that foreigners should be allowed to intervene in our referendum.
June 29, 2015
It is a tragedy and neither side is blameless. The Euro as a currency should not have been made available to Greece. The Euro authorities did not show due diligence. Loans from the IMF were a political abuse, by which I mean that the IMF do not and should not lend money to such as Cornwall which is the responsibility of the UK government. Greece is part of the EU and the responsibility of the EU.
Greece themselves were guilty of a fraud in suggesting that they met the financial criteria for Euro membership. The real losers are the Greek people and they are the ones I have sympathy with. They have been very badly led.
My solution is that Greece should revert to the Drachma, and devalue sufficient to make the place an attractive tourist destination. A return to reality in terms of public spending and tax collection is a component part of any recovery. There should be no repayment of the unwise loans made by the IMF and ECB, because they are as guilty as the Greeks in this tragedy. Given ten years to get their economy in order they might then consider a start at repayment. By this time the value of their various loans will have dropped and the Euro might not even exist.
June 29, 2015
It is, as you have said here many times, a simple choice. The Euro-zone is either one country with one government and one currency or those countries stick to their own governments. This should all have been put to these Countries including Greece in a full referendum – something simple and unbiased like “Would you prefer the European Parliament in Strasbourg to govern Greece, or to remain governed by your local representatives in Athens?”
Without any such mandate from the Greek people to effectively change their nationality, it is the ECB which has the biggest problem. The Greek people can just throw away the keys and walk away.
June 29, 2015
Jean-Claude Juncker is heading up the ‘Yes’ campaign in Greece.
What arrogance.
Is this the kind of interference we should expect in our own referendum?
June 29, 2015
JR – I agree with your comments on what Greece should do. But, of course it is not what the EU will let them do. For Greece to make a clean break and re-introduce the Drachma would be hell for a couple of years but would give them independence and control back again. Of course the EU elite will never let this happen, no matter how awful it gets for a country. They are not in this for the 500 million people of the European Union but for themselves and their precious little “project” which they do VERY NICELY out of – thank you very much ! When will governments wake up ? The Greek government seems to realise this but no matter how difficult they are, they are unable to wrench themselves away !
June 29, 2015
Democracy is anathema to the EU.
June 29, 2015
Grexit has become much less attractive for the Greek economy than it might have been a few years ago. Devaluation is likely to be large and disorderly. As one business leader put it, Greece is not a production economy and relies on imports. On top of a moribund economy, a cost spiral could make things much worse (if that is actually possible!)
June 30, 2015
There was a suggestion a few days back on BBC2 News Night, even if all of Greece’s dept was written off and they had a fresh start, that they would still not be economically viable without other major changes.
Can they expand tourism above it’s current level without considerable investment?
They certainly could bring retirement age in line with the other European countries at 60+
They could also make sure that they collected all taxes that were due and also trim down their state sector.
Any other ideas?
June 29, 2015
So John Redwood’s conservative head says Greece should honour it’s debts, I suggest that if a country or a person is forced to take on more and more debt when it plainly and clearly cannot and will not ever be able to pay it back, then the lender is at fault. Look at the huge outcry in the UK at loan sharks and the Wongas of the world when many poor people were being induced to take on bigger and bigger loans just to stay ahead of foreclosure. What happened? the wonga’s were regulated and brought into line, loan sharks were and still are illegal, but the EU is not, it can act exactly the same and John Redwood thinks that Wonga (EU ed)should be paid. No, they lent it unwisely they bear the cost. Then someone decides who was at fault and people go to prison, just like any other criminal does, but EU criminals don’t have to do that, they just pick up a sack of our money and disappear (etc ed)
Reply Read my piece again. I did not back the EU and do think they and the IMF. Lent too much
June 29, 2015
To put it bluntly, The EU authorities are flexing their muscles and forcing the issue trying to make the Greeks bend to their will no matter what the consequences. I sincerely hope that it boomerangs back in their faces….
zorro
June 29, 2015
The ONLY answer IF Greece is to remain in the Euro is to right off of at least 50% of the country’s debt and for the economy to then be run from Berlin. Oops, slip of the tongue, should have said Brussels !
Trouble is Merkel would then have to start telling her taxpayers the truth about the liabilities she has accepted on their behalf. At last.
So would the leaders of Holland, France, Italy, Finland and a few others.
Well, they do say all political careers end in failure, don’t they ? *
The Greek crisis is the perfect example of the stresses and strains that were predicted for the single currency all along but were ignored.
What is necessary to solve the Greek crisis is exactly the economic and political union they all go on about including unlimited fiscal transfers.
Yet, when it comes down to it, none of the players could get the necessary debt right-offs past their own parliament let alone their electorate. Greeks, meanwhile, won’t accept external control of their budget.
This is only the start. Sooner or later the same problem is going to crop up with a much bigger country. But before then, Marine Le Pen might have already taken France out of the Euro.
It’s why the project is ultimately doomed to fail.
* Except our kind host’s of course.
The same
The country is incapable of getting to grips with its economy otherw
June 29, 2015
It is frankly naive and stupid to think that Tsipras & Varoufakis are a dream team. Pair of idiots. I have watched with increasing dismay how their actions have impacted on the Greek economy – the endless silly and pointless games and abuse of all and sundry. Before their election the Greek economy was growing, albeit slowly, and now it is in recession and you have a collapsing banking system in a country where that system was not well developed to begin with. This idea of plucky little Greece you need to go and look. I go to Greece a lot and one of the places I visit there would be no pharmacy had a group of us (foreigners) not put our hands down and lent the chemist money. Why did we do this ? Because the Greek States has not paid its bill in nearly 2 years and had we not stepped in the local people would have had no access to medical supplies. I believe the hospital (more like a large doctors surgery) is in terrible state – no drugs, no supplies. I heard yesterday of one island that had not had a ferry dock in a month. What are the people supposed to eat ? Don’t say grass as even that is now burnt to a frazzle. Food supplies will very quickly begin to run down as will fuel, like last year when there wasn’t a drop of petrol to be had not even for ready money. I could go on and on about this.
And a referendum on what ? The memorandum expires tomorrow at midnight. Done, finished, so you cannot vote to accept something that no longer exists. It is nonsense. Tsipras was elected on promises he knew he could never keep and were blatant lies. It was this idea of turning back the clock to the days of Andreas Papandreou, who is the author of so many of Greece’s problems, that so seduced the Greek people. Like our people they must be made to face reality, and that reality is you cannot spend, spend, spend. And nor can you do that and send the bill to someone else.
I do now think that Greece should leave the Euro, which she should never have joined in the first place. But do not think this will cure all. It won’t. Greece’s exports are tiny and frankly I doubt it will make much difference, save it will stop another credit bubble growing. Greece will need huge humanitarian aid for what I believe will be many years to come – she will need this regardless. The debt is not really the problem. The more immediate problem is the destruction of the Greek economy and the crumbling of the Greek State. I do not think a bunch of useless Marxist are the solution to these problems, but a huge part of those problems.
June 29, 2015
The UK owes 1.5 trillion plus about 0.5 trillion unfunded liabilities, pensions etc. Increasing by what about 2 billion a week or a month is it?
The UK is in no position to comment. A little bit of humility from everyone in the UK is needed as we are in our own dire straights we just have not faced up to it yet.
June 29, 2015
Interesting that the Leftwing Syriza has pitched this stand off as a democratic issue.
The Right has always been Euro-sceptic but this is the Left being effectively Euro-sceptic, it’s core support. I think there is potential for a large shift and that is what the EU and Euro supporters are now looking down the barrel off.
If the EU and the Euro is no home for the Left then it has little support.
June 29, 2015
But Greek democracy – whether a general election or a referendum – cannot determine the opinions of German electors and those of other member states.
It seems that the maximum austerity that Greece is prepared to implement is less than the minimum that the creditors are prepared to accept.
June 30, 2015
“It seems that the maximum austerity that Greece is prepared to implement is less than the minimum that the creditors are prepared to accept”.
This is the problem in a nutshell, very well put.
It proves that voters in the Eurozone and many of the foot soldiers amongst their elected politicians lag way behind their leaders and the dreamers in Brussels who thought up the whole misguided project. With the example of what has happened to Greece, they are increasingly unlikely to want to continue down the road of “Ever Closer Union”
The irony is that the project was born out of fear over the re-ascendency of Germany and yet the Euro has facilitated the very thing it was designed to prevent and at the same time it is impoverishing the same countries that suffered throughout WWII.
June 30, 2015
” What kind of a currency is this European single currency, when the Central Bank does not stand properly behind all the banks in the system, and when in part of the zone they have to close the banks on a normal trading day?”
That’s a good question! The ECB’s duty should have been to stand behind the Greek banks providing they are financially solvent. That’s a key duty of any central bank in the modern economy.
The Greek banks cannot all have become insolvent simultaneously. A run on a bank doesn’t make any difference to its balance sheet. For every € the banks pay out they have one € less liability to their customers, so they lose both assets and liabilities simultaneously when there is a run.
The decision by the ECB to remove their support was purely political and possibly even technically illegal according to EZ rules.
June 30, 2015
This is all very confusing to me, the UK are told just to suck up austerity and take it, our deficit is bigger, our state pensions that we were originally promised at 60 and 65 have been set back to 67 and potentially 70 and we just passively take bailing out Ireland, bailing out Iceland and watching our councils savings in Icelandic banks sink without a trace or any recourse on the officers who took these risky savings (on rates that were too good to be true and I wouldn’t have invested in, without the investment background they’re supposed to apply on rate payers behalves).
It seems some nations can just walk away from debts. The UK paid our war debts back to the USA, we sorted out our own massive repayments after the ERM didn’t we (aren’t those still part of our massive debts). I saw a Greek MP on C4 news last night say the people of Greece weren’t responsible for their banks investment failures???? The have been overspending, overpaying public salaries with loan money, it all sounds very familiar to the UK. The people are getting hoodwinked in the UK and Greece and we just need to all begin to live within our means.
I would like to be able to ask the government questions such as:
1) How much short is the NHS each year from just half the NHS contributions taken in? Going back to the original principal that half + 1% was for healthcare and half -1% for state pension and short dole payments.
June 30, 2015
A report in the Guardian today confirms exactly what many of us have been saying for at least a year : huge debt write-offs are essential if Greece is to have any chance of economic recovery.
To make matters worse the authors of the report are the members of the troika !
It means that all the negotiations and bluster we have seen over recent months have been utterly pointless and the last thing on the mind of the leading players has been the interests of the long-suffering people of Greece.
Nothing changes in Brussels : this profoundly undemocratic organisation and the politicians that support it are willing to sacrifice everything and anyone to maintain the fiction that the EU and the Euro are working.
And this is the organisation Europhiles would like us to become fully subservient to.
Merkel has effectively ruled out debt write-offs for Greece because of the political difficulties it will cause her with German taxpayers. Hollande would be similarly embarrassed and has one eye looking over his shoulder at the threat from Marine LePen to his already-slim chance of re-election in 2017.
You can read it all here : http://www.theguardian.com/business/2015/jun/30/greek-debt-troika-analysis-says-significant-concessions-still-needed
June 30, 2015
I know – why doesn’t every country have it’s own currency, and then the various markets could decide what they’re worth, and they could float up and down, and it would be up to those countries’ governments to have policies which were advantageous to their economies, and.. well, there are lots of implications which would need quite a bit of working out, but it might be worth a try.. mightn’t it?
Sorry, just something off the top of my head.