Euro 50 billion more for Greece

The IMF has apparently come to two conclusions on Greece which the rest of the Euro area does not wish to admit. First, Greece will not be able to pay back all that she owes. Second, she needs another Euro 50 billion. Why then did the IMF lend Greece so much before with the pretence that it would work?
If Greece is to stay in the Eurozone she will need Euro 50 billion or more, to have enough cash for her banks to distribute and enough money for her government to pay its bills. In a normal currency zone this money would be sent to the poorer part of the zone and much of it would be grant, not loan. A city or county in the UK with low incomes and high unemployment does not have to borrow from the rest of the UK, but receives central cash to pay welfare benefits, pensions and local authority costs by way of grant.
If Germany wants to carry on with her currency zone then she has to accept that German taxpayers – and the taxpayers of other rich countries – have to fork out to pay for Greece. Greece, for its part, has to accept that the Eurozone can then settle its budgets and interfere in its government decisions.
It is deeply damaging to the Greek economy and people to go on pretending that Greece can pay her way locked into the Euro, and to pretend the European institutions can get all their money back with the agreed interest. After seven years of agreed programmes for reform and all that borrowing Greece is no nearer today to being able to repay than when it all started. So the rest of the zone must either pay up or tell Greece to leave. Outside the Euro Greece will become more competitive immediately and better able to pay her way. Her borrowing will then be limited by the market to levels she can afford.
the zone is cruel and unrealistic. It needs to tell Greece to leave, or it needs to pay up and take social responsibility for the unemployment and severe cuts it has helped create.


  1. Richard1
    July 4, 2015

    Those are certainly the two logical alternatives. Unfortunately it is likely a third way will be chosen – the Greeks will vote yes, do a bit more blackmailing and begging, perhaps accept a technocrat in govt instead of the ridiculous Syriza. the EU will then bung them a bit more money with continued austerity (the real kind not the imagined kind leftists bleat about in the UK), and so the show goes on with everyone hoping something will turn up.

    1. Richard1
      July 4, 2015

      Greece could recover her dignity and economic competitiveness by exiting the euro – there is no reason at all for this to mean exiting the EU as Juncker and others say. Perhaps the UK govt should veto a move to chuck Greece out of the EU if they exit the euro? It would mean accepting market economics of course, but the turnaround could happen remarably quickly, as it has in other countries which have moved from socialism and the politics of class war to open markets and self reliance.

      1. Hope
        July 4, 2015

        Greece should a resounding vote NO. Junker should be given the medicine he deserves after his appealing fantastical remarks this week. Osborne should be taken to task whether the remarks attributed to him re accurate ie Greece is signing its own suicide note. Why is he so keen to support the EU project and Euro currency.

        JR, what has been the UK position within the IMF over the last five years. Osborne appeared cheered by securing LeGarde at the IMF. Did the govt go along with breaking all the rules to save the Euro and EU project? Were they in line with the countries who spoke up for Greece that it could not afford to pay back its debts? Was the govt. in favour of saving the French and German banks rather than a distressed state as it should have been? What did Cameron negotiate in return for the UK?

      2. Vanessa
        July 4, 2015

        The trouble is Greece is incapable of paying taxes. Before it joined the European Union it was a failed State and so it had to join the euro. But the bad habits persisted. The rest of the Eurozone did not seem to realise what membership of Greece would mean for them but they do not pay their dues into the State so they are always begging for more money. As we all know, it seems to be a game as to who can get away with paying the least ! Despite all the shipping billionaires etc. the Greek government does not insist on its dues.

        1. Richard1
          July 4, 2015

          True, Greece should never have been admitted either to the EU nor to the eurozone before it had sorted itself out. To its credit the British Embassy in Athens pointed out that official stats in Greece were bogus in 1984. The question is what to do now. The best cure for Greece – and it will hurt in the short term – is the discipline of the market. The eurozone is a proxy for the market, but it can never replace the market as politicians such as Syriza – supported by many leftist economists such as Stiglitz and Pikkety – can always blame what they perceive as the mistaken ideology of German politicians. If Greece leaves the euro the people will have to identify and elect politicians who will implement policies which ensure competitiveness, the rule of law – including payment of taxes – and incentives for employment and investment. It can easily be done. Eastern Europe after the collapse of socialism was in far worse shape than Greece, yet far sighted and determined leaders turned it around. But as long as the excuse of blaming the Germans and begging and blackmailing the EU exists, the reform will never happen.

    2. Lifelogic
      July 4, 2015

      The third way is just the same, but after a further delay and a bit more money down the drain.

      1. Richard1
        July 4, 2015

        Actually it’s worse as the problem gets postponed – but enlarged.

    July 4, 2015

    A tick, gold star and a House Mark for the International Monetary Fund. It figures Greece will not be able to pay back all she owes. Well done! Keep up the good work Lagarde’s team!

    Yes JR, why did the IMF lend Greece the money? Irresponsible lending should lead to legal action, surely. But no. Greece should vote No.

    A cacophony of voices repeating several times per day, for weeks,both sides of the Atlantic,saying “Of course, Greece is a tiny country, its downfall can’t affect us. And anyway, various measures have been taken to ring fence any possible contagion. ” Hmm, so why go on about it?

    Actually it is devastating for the EU. It goes against all the theory that sticking together like chocolate to a blanket will bring wealth and prosperity to all. A true Common-Wealth. It sticks out the massive EU cannot take care of a few million people on its southern border. And Lagarde’s team turn out to be Payday Lenders.

    A two-tier Euro has been mentioned before as part of a solution and that in effect the Cypriot Euro became a devalued form of the Euro proper. Perhaps having its own currency again, whatever its name, will help a recovery. But I think not. I believe its recovery will be relative. The Euro-economies are destined to fall if some economists are to be believed. It seems likely.It is all based on fractional reserve banking and this seems to work very effectively until a sufficient number of people/entities in essence are asked “Show us your money. ” and they timidly declare they actually do not have any. Then it all collapses when this illusionists’ trick is uncovered. Contagion. Better to call it “Hey Presto Tommy Cooper Style.”

    1. acorn
      July 4, 2015

      There has not been any “fractional reserve banking” since 1971. Banks are capital constrained, not reserve constrained. Banks don’t lend reserves except to other Banks that clear through a Central Bank. There is no broad money lending (M3) multiplier of reserves and never has been. It’s a myth.

      Strangely, the EU never took over the IMF memberships of its member States. This may have been a political compromise. Or, more likely, the eurocrats didn’t and still don’t understand how fiat monetary systems work. Particularly, the fact that the IMF, as an external lender, is totally irrelevant to an institution that issues its own currency; be it national or supra-national like the Eurosystem or Denis Healey.

      Sadly, I have yet to hear or read a politician in the UK or the EU, that understands the fundamental difference between Greece, that USES a foreign currency, the Euro, and the UK that ISSUES its own currency. The killer problem is that the Eurosystem has fatal design faults.

      Greece had been badly managed by three oligarch families and the odd General, since WW2. The Greek elite had created a fiscal wreck before it joined the Euro; the flaws in the Euro magnified them by an order of magnitude.

      PS. I have given up putting links in my posts JR, as you take them out and destroy the overall thread of the debate. Now see, if you had been elected in a “Primary Ballot” as an individual indicating if you had a party preference or none, rather than being bought and paid for party lobby fodder, you may have had the confidence to be somewhat less addicted to the delete button.

      Hence, if you want to see the beginnings of the UK route to a balanced budget, and how the private sector is going to pay for it; Google the following paragraph.

      On the five sector chart you can see that all the domestic sectors are in net borrowing territory now. I can’t see in the data when that has ever happened before. The UK truly is the purveyor of the finest financial savings to the globe.

      1. sjb
        July 5, 2015

        I have given up putting links in my posts JR, as you take them out and destroy the overall thread of the debate.

        I think JR is concerned that if the link contains defamatory material he risks being sued. However, s5 Defamation Act 2013 provides assistance to website operators by introducing a ‘report and remove’ system. In essence, this means the operator will be in the clear if he removes defamatory material posted by others with 48 hours.

  3. eeyore
    July 4, 2015

    Greece could sell assets. What about a 99 year lease of Crete? I don’t know how the figures would stack up, but I understand Crete is relatively prosperous.

    I made this suggestion in a mood of frivolity a few months ago. Compared with the position the Eurozone has now got itself into, it’s beginning to look sensible.

    1. Nick
      July 4, 2015

      So the Cretans don’t get a say?

      Sell ’em off eh.

      Does their labour come with the same? Do you get to own the children as well?

  4. Sandra Cox
    July 4, 2015

    John, off topic, but relevant to your recent Diary on English votes:

    FT Weekend front page:
    Regions from Cornwall to Yorkshire to gain powers. : Push to hive off central authority

    George Osborne will next week signal a sweeping transfer of power to regions … ”

    Shouldn’t that read “The EU, via its mouthpiece, George Osborne, will signal a sweeping transfer of power to regions….”?

    Yes, a revolution is required – by the English! For starters, how about a referendum to ask the English if they’d like their own English Parliament to decide on these matters?

    1. Hope
      July 4, 2015

      You are correct to ask why Osborne, with the able help of Hesltine, is dissolving our country for the regionalisation plan of the EU. It is not required in any way and will be hugely costly to the taxpayer. The public rejected regionalisation last time it was asked. Once more instead of treating the public with distance or contempt, Osborne needs to ask the public for its views because if it happens in a few years time dopey politicians like Osborne will be wondering how the country became Balkanised and areas subject to Sharia law etc. You could not make up the stupidity of the plan at a time when the country’s finances are a complete mess , namely £90 billion deficit and £1.5 trillion debt. Osborne ought to concentrate on this.

    2. turbo terrier
      July 4, 2015


      Second add into the English referendum would have to be how the 50 million residents of Britain really feel about supporting and paying for all the susbsidies to Scottish renewable projects and all their community benefits.

      If CMD is really committed to stopping all these subsidies as stated in the manifesto he could start a massive wake up call to the Scottish people and the 56 members of the house.

      He has to do something to address the millions in fuel debt and poverty.

      Playing patsy with empress Nick is not the answer.

    3. alan jutson
      July 4, 2015


      No mention of regionalisation of Scotland or Wales then !

  5. Peter van Leeuwen
    July 4, 2015

    Obvious to me the eurozone should not hide from the fact that Greece debt is largely unsustainable.
    Maybe that a large turnout for this crazy referendum, irrespective of the outcome, will bring the message home that a thorough rethink of dealing with Greece is long overdue. Even if many (including the Dutch government while denying it in public?) may want Greece (temporarily) outside the euro, I doubt that this will solve Greece’s problems in the economy, the public sector and the fiscal regime. Just one example – in the Washington Post an interesting statistic about uncollected tax receipts, Germany: 2.3%, Greece: 89.5%. That simply won’t disappear if the euro become the drachma! Also during its many drachma decades Greece has been in financial default for half of the time. The way forward now may prove to be a very generous debt restructuring, grant and investment programme (a kind of marshal plan) conditional on enforcible huge reforms in many areas. How to pull that off with very proud (even stubborn?) people is not an easy question.

    1. Lifelogic
      July 4, 2015

      Kick the can down the road a little yet again – more extend and pretend I assume you mean?

      1. Peter van Leeuwen
        July 4, 2015

        @Lifelogic: that is not what I read above or would want to continue paying for as part of the creditor countries.

    2. bluedog
      July 4, 2015

      Mr PvL, reality will come to the EU/EMU when the leadership publicly admits that the money lent to Greece can never be recovered, it’s gone. This is true whether Greece is in the Eurozone, or only in the EU but outside the EMU, or outside both. In this situation, uncollected tax receipts are irrelevant. Thanks to the EU, the Greek economy has shrunk by over 25%, and you think the Greeks can afford to pay taxes? As our host has been saying for quite some time, Greece must leave the Eurozone and re-introduce the drachma. Debt forgiveness is simply an exercise in accepting the inevitable.

      There have been times in the post-war period when the Greek economy has shown remarkable growth, eg the mid-sixties to mid-seventies when GDP growth was over 7%pa. Then the Arab oil crisis and the Cyprus blunder intervened.

      1. Peter van Leeuwen
        July 4, 2015

        @bluedog: To me, collecting taxes is rather relevant to running an economy, unless you want to run a country without any public sector and without any public investments.

        1. bluedog
          July 5, 2015

          Of course tax are important in a conventional situation. However Greece has been so badly handled by the EU that expecting Greek tax receipts to match budgetary projections is unrealistic. But then you believe in the EU.

    3. Richard1
      July 4, 2015

      If the euro becomes the drachma it will make all the difference. Greece would then be economically independent and would have to stand on her own feet. That would mean finding a formula for getting taxes paid, allowing access to international capital markets, ensuring competitiveness etc. at the moment all they think they have to do is winge loud enough, and German and other EU taxpayers will send more money.

      1. Peter van Leeuwen
        July 4, 2015

        @Richard1: That returning to the drachma will result in getting taxes paid seems fantasy to me. And that is only one example out of many things which need to be changed in Greece.

        1. Richard1
          July 5, 2015

          You are missing the point Peter. It’s not the fact of the drachma, it’s that outside the eurozone there won’t be anyone else to blame, as there is now. Greeks will need to elect politicians who will run Greece properl. Now all they think they have to do is winge loud enough.

          1. Peter van Leeuwen
            July 5, 2015

            @Richard1: the Greeks may hope to elect a stronger and more unifying politician in future, which once again, is not related to being inside or outside the euro.

    4. libertarian
      July 4, 2015

      Peter vL

      The OECD estimated in August 2009 that the size of the Greek grey market to be around €65bn (equal to 25% of GDP), resulting each year in €20bn of unpaid taxes.This was in comparison almost twice as big as the German black market (estimated to 15% of GDP).Data for 2012 place the Greek “black market” at 24.3% of GDP, compared with 28.6% for Estonia, 26.5% for Latvia, 21.6% for Italy, 17.1% for Belgium and 13.5% for Germany.

      If this is a fair reflection then the most obvious tax that isn’t being paid is in fact the Eurotax VAT. Maybe thats why the Greek economy worked better before the EU despite is poor record of fiscal management.

      You will notice a number of wannabe Euro countries there that have similar levels of tax collection issues, you routinely cite these countries wanting to join as evidence of the Euro’s efficacy, you may want to rethink that

      By the way Peter do you not see that Greeces situation is a major reason why a lot of us in UK do not like the EU. We do not trust the judgement or leadership capabilities of a bunch of people who despite knowing all of this about Greece STILL allowed them to join the Euro. We distrust political motives in lieu of economic sense. We have a saying in UK politics “Its the economy, stupid” and parties that ignore this get smashed at the ballot box ( witness Labour recently)

      1. Peter van Leeuwen
        July 4, 2015

        Your comment is awaiting moderation.
        @libertarian: The issue of uncollected tax receipts in Greece is a lot bigger than having a black market, which indeed other countries including mine have as well. And I cited only one of the many things wrong in Greece. Having been in default for half of the time as an independent country doesn’t really point to a well performing economy before joining the EU. You mention Latvia, already a eurozone member, and a great example of how to deal with the financial crisis! (google for Latvian lessons: Extreme economics – The Economist). It was hard to deny euro entry to Greece after allowing it to Italy, which the Netherlands tried to oppose. The EU never was and never will be a purely economic venture, politics are important too. If the UK doesn’t like that, it knows it can leave.

    5. alan jutson
      July 4, 2015


      Understand the reasons you suggest debt restructuring, but do you not think other Countries will then want the same treatment.

      What would be the incentive to try to run a balanced budget.

      Any Country (both the people and the Government) have to realise that you cannot borrow forever.

      Its not really difficult, it is simple mathematics.

      1. Peter van Leeuwen
        July 4, 2015

        @libertarian: The issue of uncollected tax receipts in Greece is a lot bigger than having a black market, which indeed other countries including mine have as well. And I cited only one of the many things wrong in Greece. Having been in default for half of the time as an independent country doesn’t really point to a well performing economy before joining the EU. You mention Latvia, already a eurozone member, and a great example of how to deal with the financial crisis! (google for Latvian lessons: Extreme economics – The Economist). It was hard to deny euro entry to Greece after allowing it to Italy, which the Netherlands tried to oppose. The EU never was and never will be a purely economic venture, politics are important too. If the UK doesn’t like that, it knows it can leave.

      2. Peter van Leeuwen
        July 4, 2015

        @alan jutson: I think that a lot more peer pressure is possible and is already happening in the less extreme cases. Measures to (threatening with cutting off money supply earlier might also be possible, now that the ECB controls the larger banks in the eurozone. I also wonder whether any other government would like to follow Greece’s example in over-borrowing and may come to their senses much earlier. Obviously, the creditors have to take blame as well and must adapt their methods.

    6. agricola
      July 4, 2015

      Thank you for talking constructive sense. As I have suggested, perhaps those with the best interests of the Greek people should offer their constructive support and a route to normality for the first ten years after an exit from the Euro.

      1. Peter van Leeuwen
        July 4, 2015

        @agricola: support yes, but it has to be accompanied with rather strict conditions and the means to enforce those. It requires some clever thinking so that it will be felt as national enforcement.
        (when the Netherlands recently had to reduce is debt level to under 3% again, the Dutch government clearly presented this as something that THEY wanted, not as something we did for the sake of the EU demanding it)

    7. petermartin2001
      July 5, 2015

      Peter Van Leeuwen,

      Unfortunately it isn’t just Greece! Spain has unemployment of 23%. The average of the Eurozone is 11%, which is way too high.

      Growth is non-existent in the EZ and there’s no plan to create it.

      That’s the real problem.

      1. Peter van Leeuwen
        July 5, 2015

        Unemplyment reached 18% in Spain shortly before adopting the euro, so you cannot really compare it to British or Dutch statistics. There is growth in the EZ plus a plan to create more growth. Unemployment and youth unemployment are coming down in Spain as well.

        1. petermartin2001
          July 7, 2015


          I don’t know where you get 18% from. The euro came into being in 2002 and according to this graph:

          Spanish unemployment was less than 12% at the time of the introduction of the euro.

          Growth in the EZ? Since 2008 the economy of the EZ has contracted by 0.7%.

    8. Denis Cooper
      July 5, 2015

      I’ve no idea why you refer to the Greeks as a “very proud” people, when clearly something like half of them have so little national pride that they have simply given up on the concept of Greece as a sovereign independent state and can be cowed into accepting that it should be a kind of German protectorate.

      1. Peter van Leeuwen
        July 5, 2015

        @Denis Cooper: Being nationalistic and being proud are two different characteristics, my friend. It is very well possible to be pro-EU and being proud. You cannot demand from every Greek to see reality through your prism.

  6. formula57
    July 4, 2015

    There is perhaps nothing to be done for Greece, not that can be agreed anyway alas.

    It is perhaps not too early to adapt Sir Edward Grey’s famous remark and state: –

    “The lamps are going out all over Greece, we shall not see them lit again in our life-time”.

  7. JoeSoap
    July 4, 2015

    Well perhaps we in the UK should be encouraged by our new government (post their Eurozone exit) to invest in Greece. Perhaps some decent tax breaks? That’s for proper investment in making and doing things for export, in a part of the EU with a fair amount of recently built infrastructure, a currency on the floor and a few million folk needing to work to live.

    The Germans have signally failed there, and won’t likely want to show their faces for a while. An opportunity for the UK to show what can be done with competing currencies and outside the Eurozone?

  8. lifelogic
    July 4, 2015

    Exactly right.

    I see that the Government is trying to present the hugely delayed, watered down, complex and heavily restricted £1M IHT (now only for homes) proposal as generous. Paid for as it is be further robbing pension. Far too little far too late and to complex. £1M threshold each was promised by Osborne about 7 years ago and we will not even get this pathetic & watered down version until 2017.

    Osborne need to listen to Alastair Heath.

    Better still just replace him with Alastair Heath.

    1. Lifelogic
      July 4, 2015

      Some Tory spokesman just said Osborne was delivering on a promise he made. He is certainly not doing. He is continuing his ratting (in the Cameron mode) even though he no longer has the Libdums to hide behing.

      George Osborne promised in 2007 to raise the inheritance tax threshold to £1 million each (should be more like £1.3m each now). This is no where near that promise and is severely restricted. It also robs pensions further to pay for it and is not to even be delivered until 2017. Delivering on a promise? Just how stupid do they think we are?

      Always remember with the Tories when you have earned your money, paid 45% tax on it plus NI it still is not yours. They will pinch another 40% off you when you die too. This might not be too bad if they spent it efficiently, but they largely tip it down the drain as we see every day.

    2. alan jutson
      July 4, 2015


      All speculation of course, but as I understand it its not £1 million, but £500,000.

      Why not be honest about it, and why not be simple instead of complicating matters with house values, lock in’s for downsizing etc etc.
      Just make it £500,000 of any assets if that is what it should be.

      Given we have had no indexation in IHT for years it probably is only the adjusted value anyway.

      More complication in its make up for the sake of it, pointless.

    3. Atlas
      July 4, 2015

      Lifelogic, if only…

      When it comes to Chancellors, remember the rather appropriate phrase for John’s topic “Beware Greeks bearing gifts”.

  9. Margaret Brandreth-J
    July 4, 2015

    I agree there is only one way to regain Greece’s dignity; Grexit. The rest of the world would then endeavour to invest and build up the Drachma , but in this set up no one wants to invest.

  10. Ian wragg
    July 4, 2015

    So our deposit guarantee is in Euros although we are not in the EZ. Another step to ever closer union which CMD is keen to pursue. We are still waiting to see what is being negotiated with Brussels (Germany). I suppose Dave will get 100% of f-all and declare a victory. Do you really think the Germans will part with another 50 billion after writing of the majority of Greek debt. Serves em right for lending in the first place.

  11. Douglas Carter
    July 4, 2015

    ‘Greece, for its part, has to accept that the Eurozone can then settle its budgets and interfere in its government decisions.’

    That’s a phrase with real consequences for the real front line in the tensions. Interesting as it may be in the sense of historical events, the Greek economic potential is too small to make current events anything more than a sideshow.

    Events in Calais this week and last demonstrate that there is not the remotest chance that France will ever accept the legal strictures and obligations that quoted phrase implies. At the moment they merely have an incompetent and mediocre leadership. In the years to come, they will once again under some leader of the future saddle themselves with a Government which will aggressively press for sole national advantage and will have no interest in the resultant disadvantage to alleged Union nations. There has been no historical appetite – let alone competent ability – to rein in the militancy and power of their Trades Unions and their Agricultural lobby.

    So – try …’France, for its part, has to accept that the Eurozone can [influence] its budgets and interfere in its government decisions.’… Doesn’t sound very realistic to me?

    When – not ‘if’, ‘WHEN’ – Eurozone stricture obligation of the future finds itself up against the French Trades Unions and\or Agricultural sector only then will the forlorn dogma behind the Single Currency and the feeble utopian hope underpinning the EU dreamworld become terribly apparent. There will be no French Government which will even wish to intervene, let alone be possessed of either the ability or even an electoral mandate to do so.

    I would hope Germany has a future Merckel\Schauble pairing up their sleeves to meet that head on?

  12. agricola
    July 4, 2015

    I think you have talked and written this one to death John. It is time to offer real help or just forget about it. I am sure there are still a few real tax inspectors left in HMRC who along with people like Frank Field and some of the abandoned talent in the Conservative Party who could offer Greece a blueprint for life outside the Euro. They could then come back in a years time with the full horror stories of what staying in the EU involves.

  13. Martin
    July 4, 2015

    You are assuming that all Greece’s debts were accumulated since it joined the Euro.

    Secondly if the (hopefully hypothetical) county in the UK didn’t collect its council tax/employed too many staff then Whitehall would have it on special measures. Indeed the present situation in Greece (with the banks closed) encourages a cash in hand no tax collected economy.

    My suspicion is (if Greece went back to the Drachma) that the present Greek government would let inflation rocket and interest rates rip due to classic printing of too much money.

    Maybe Greece will end up with a hybrid currency – the private sector uses the Euro to buy and sell things and the public sector uses the printing press Drachma ?

    1. alan jutson
      July 4, 2015


      “cash in hand”

      Exactly right I guarantee no tax will be paid on such transactions.

      Encouraging tourists to take cash will also probably encourage their mugging as well.

      Thus by closing the banks the government will get even less in tax, and crime will rise as people carry more money about with them.

      What a disaster of a policy !.

    2. Denis Cooper
      July 5, 2015

      Why put “printing press” in front of “Drachma” but not “Euro”?

  14. Nick
    July 4, 2015

    Greece can pay. The IMF is wrong.

    The Troika have bent over backwards to help Greece. Their current rate of interest is 1.6%, longer maturities, and rolled up interest so they don’t pay now. Their funding costs for the debt is 2% of GDP.

    On the other hand, their pension costs were 36%. They have cut that to 18%. Their pensions are still paid in lots of cases from 50, they are just talking about 67. Their pensions are more generous than UK pensions and German pensions, and their cost of living is 50% lower than the UK.

    So they can pay. All they have to do is cut their pensions to UK levels of purchasing power. Then the clear their borrowing in 10 years.

    Now what can the UK learn from this?

    The UK borrowing costs 45 bn per annum on 1,500 bn. The pensions 140 bn. That gives you an idea of the hidden scale of the pension mess in the UK. [PS Still waiting for those figures John, you did make the promise at the previous election but then reneged. Even the ONS have been told not to release under any circumstances. Silly ONS let loose an email and cc’ed me in]

    On the ONS methodology, its 9,200 bn owed, with another 1,500 bn in borrow, then there are still more debts.

    So the Greeks are the canaries.

    Reply. Don’t lie. I did publish the figures

  15. Brian Tomkinson
    July 4, 2015

    We are not in the € and yet, as reported in today’s Telegraph, the BoE said yesterday that from January next year bank savings guarantees will be reduced from £85,000 to £75,000. This is to fall in line with an EU diktat saying the limit must be €100,000. Due to failures in the €urozone the € has depreciated against the £, hence the adjustment.
    One more example of how we are dictated to by the EU. How does the BoE know that in January next year the € will not have appreciated again?
    There is a distinctly bad smell about the timing and nature of this manouevre by the BoE.

  16. Denis Cooper
    July 4, 2015

    Should people in the Baltic states be made to pay for debts accumulated by the Greek government when that saga of increasing and increasingly hopeless indebtedness started before their countries joined the euro and their governments had any say?

    (Estonia 2011, Latvia 2014, Lithuania 2015.)

  17. Ex-expat Colin
    July 4, 2015

    A comment somewhere the other day. “I don’t want Greece to leave the EZ/EU only to be come a part of N. Africa”. I thought it already was along with the rest of the southern states and moving ever north?

    I expect extra extended can kicking after a Yes this w/e. A No will likely lead to some near immediate and serious strife. Bail-ins might help, as with the money lost to UK at Calais which is about £1bn and rising.

    Perhaps we could sell Calais, since we seem to own it? Do gooders and their stupid ways!

    If the EU fools kept to their rules and/or common sense, preferably both I would think these problems would not be anywhere near as bad. Which really brings it to No to EU for us…some hopes?

  18. fedupsoutherner
    July 4, 2015

    Perhaps our contributions for next year are what they are thinking of giving Greece? No wonder they want us to stay in. If they don’t get our money then they are really in it up to their necks.

  19. A different Simon
    July 4, 2015

    What has Greece got to offer ?

    Tourism , olives , olive oil , cheese and shipping .

    It either needs to find new industries or maximise what it’s got .

    It’s 15 years since I’ve been to Greece but the tourism was tatty around the edges and needed investment . Same for the infrastructure .

    1. petermartin2001
      July 5, 2015

      “What has Greece got to offer ?”

      You’ve given some examples but its biggest export is refined petroleum products. Greece is like any other country in that it needs to grow its economy by 2-3% every year. So, nothing spectacular, just slow steady growth.

      But, growth stopped in 2008 and since then there has been a 25% contraction in GDP.

      That’s the problem.

      Your comments about infrastructure being “tatty” in Greece would apply to many EU countries. Like Germany for example. There’s a general need to spend more on railways, bridges, and the autobahn system. You might like to Google the words “low German spending on infrastructure”.

  20. bluedog
    July 4, 2015

    Dr JR, this writer continues to believe that the Greek government is doing an outstanding job in asserting Greek sovereignty. So much so that it will be profoundly disappointing if the Greek electorate votes Yes, with the inevitable consequence that Greece will become a vassal state of the EU, no better than a county council.

    If the Greeks vote No, Greek resistance to the EU will become a rallying point for Eurosceptic parties and Eurosceptic nations across Europe. If the British interest is to leave the EU, it is in the British interest for Greece to vote No, showing the British electorate the way out of the EU.

    It is quite wrong to focus on the fact that Syriza is a hard-left party run by Communists, which is undoubtedly the case. Judge them by their actions rather than by their past, they are not buffoons as an article in the DT claims. Syriza are a nationalist party with a clear vision of Greece as an independent and sovereign nation. In this regard, the Greek government is setting a wonderful example.

  21. oldtimer
    July 4, 2015

    What ought to happen is unlikely to happen – we are dealing with political situation after all. The referendum will, I expect, confirm that Greek opinion is split down the middle. Whatever the outcome, the chances of the present government negotiating a deal look slim to non-existent. The Eurocracy will want to deal with someone else – but who? In the worst case scenario, chaos and civil disorder look distinct possibilities in the circumstances with those ready and able to take to the streets likely to prevail in the short run. The more benign outcome would be a Yes vote, resignation of the current government, a new Prime Minister able to negotiate a new settlement.

    But underlying these speculations is the fact that the Greek public apparently wants to remain in the EU and in the EZ, yet (like its political class) appears unwilling to accept the full implications of membership.

  22. Alan
    July 4, 2015

    I don’t think the Eurozone is being cold and unrealistic. It is making the point that governments within the Eurozone need to have well run economies. They will not be allowed to default on their loans, although they will get additional loans to help them with temporary problems. In the short term this may seem unrealistic, but in the longer term it might result in countries running their economies more responsibly.

    The euro stops countries solving their problems by devaluation, which reduces the value of savings, salaries, and pensions, and encourages reckless lending. I have doubts whether the UK will ever be able to balance its government spending or its tendency to import more than it exports whilst it runs its own currency. Of course the fact that we can constantly overspend can be regarded as an advantage of running our own currency, but it seems to me more a method of hiding our long term economic problems.

    1. Denis Cooper
      July 5, 2015

      “They will not be allowed to default on their loans”

      In 2012 Greece defaulted on over €100 billion of loans from private investors, except that it was called “debt restructuring” rather than “default”.

    2. petermartin2001
      July 5, 2015

      “I have doubts whether the UK will ever be able to balance its government spending or its tendency to import more than it exports whilst it runs its own currency”

      If the UK runs a deficit in money terms, and the rest of the world is happy to finance that deficit by putting money into the UK bank, what’s the problem?

      A trade deficit in money terms, means a surplus in the trade of real goods and services. Germany runs a big deficit in the trade of goods and services. Is that really in the interests of ordinary Germans?

  23. Kenneth
    July 4, 2015

    Sorry for being a simpleton, but why can’t Greece print lots of Greek Euros?

    If the ECB is embarking on QE, surely the best place to create money out of thin air is in Greece?

    1. Denis Cooper
      July 5, 2015

      Because there are no “Greek” euros, just as there no “Cypriot” euros; there are just euros, the same official EU single currency which is the only legal tender across the whole of the eurozone and which cannot be issued by the national central bank of Greece without authorisation from the EU central bank.

      1. petermartin2001
        July 5, 2015


        Yes that’s the official line. Official fiction?

        But if that’s the case why do Greek euros notes have different codes to German euros? Why are coins different?

        Why does the Bundesbank, for example, still exist? Why is there a need for multiple central banks? If the euro was indeed a single currency then there’d only be a need for one. ie the ECB.

        On the other hand, if we view the euro as a series of different euros, French euros, Italian euros, all held tightly at parity by the ECB, then the present system makes perfect sense.

        1. Denis Cooper
          July 6, 2015

          It’s just a myth that the different country codes on euro banknotes can have any effect on their equal validity, as the Bundesbank has assured the German public:

          “What does the country code tell us?

          The country code printed on euro banknotes (eg X for Germany, see list above for all other countries) indicates the national central bank (NCB) on behalf of which the banknote in question was produced. Not every NCB produces all seven banknote denominations; instead, the production of all the banknotes required for the entire euro area is divided among the individual central banks, which generally focus on just a small number of denominations as part of a decentralised pooling procedure. This means that the NCB putting a banknote into circulation is not necessarily the same NCB that was responsible for the production of this banknote.

          Euro banknotes are not issued by the member state whose country code is printed on the banknote. It is the national central banks of the participating member states, together with the European Central Bank who are responsible for issuing euro banknotes.

          Irrespective of the county code, euro banknotes are legal tender in all euro-area countries. The rights that result from a banknote vis-à-vis the national central banks are stipulated in Article 3 of the Decision of the European Central Bank of 13 December 2010 on the issue of euro banknotes. In accordance with Article 3 (2) of this decision, the national central banks shall accept all euro banknotes, ie irrespective of their country code, for exchange against euro banknotes of the same value or, in the case of account holders, to be credited to accounts held at the recipient NCB.”

  24. waramess
    July 4, 2015

    Surprising how many questionably conclusions can arise from one post.

    What we know about devaluation is that it results in the country receiving less for it’s exports and paying more for it’s imports. Not very clever it would seem.

    JMK however tells us that by charging less for our exports we will sell more and by paying more for our imports we will impose a wage cut on workers.

    That has never in fact been the case as the Brown and before that the Wilson devaluations showed.

    When the devaluation is in response to a market forced correction that is a different matter because an exchange rate held at a falsely high level distorts prices.

    Not so in the case of Greece. An olive sold in Germany for 1 euro would sell in Greece for 1 euro so, what JMK was after was the proverbial “free lunch” of selling the Greek olive for (a Drachma equivalent) of 90 cents in order to compete successfully but, arbitrage (by their own exporters) will quickly sort that one out.

    I don’t understand why you should think that Greece will not be able to stay in the Euro, even as a Nation that has defaulted on it’s debts: of course they can and, having defaulted on it’s debts, which means no interest or capital repayments to reduce its resources, it will be in a pretty good position to go forward.

    There is a very good article on the Institute of Economic Affairs website to this effect which is at the least food for thought.

    And finally, whilst it is good capitalist stuff that lenders who make bad loans must take the full consequences, to then suggest this in any way paves the way for a redistribution of EU wealth is a false premise.

    To repeat, an olive sold from Germany for 1 euro can be sold from Greece at the same competitive price; the Greeks must just get their act together and reduce the size of their government so that more investment capital is left with their olive growers.

    The Euro zone is not cruel and unrealistic, except in the manner in which it has been devalued by politicians, it is exactly what one might expect from a gold standard: a level playing field where one ounce of gold will buy the same product whether from Germany or from Greece even though the benefit to each of that one ounce of gold will depend on their fiscal management of their respective economies

  25. alan jutson
    July 4, 2015

    Simple question John.

    Why is the IMF involved at all with Greece, given that we are talking of an area that has a common currency and Banking set up with many other areas.

    Surely the IMF should treat this as a complete Eurozone case spread across the whole currency region.
    Should refuse to get involved at all.

    After all the Eurozone is not bust yet.

  26. Peter Stroud
    July 4, 2015

    Who really knows how this Greek tragedy will finally pan out? But it is pretty certain that the EU hierarchy will fight tooth and claw to keep her within the fold. We are assured that they are now more confident that Greece’s exit will not trigger a flood of other nations out of the union – but surely the risk is still too great. Nevertheless, fudging the issue will only put off the evil day. It was sometimes said that Gordon Brown only kept us out of the Euro to spite Tony Blair. If so, never before has a personal feud been so beneficial to our country.

  27. Bert Young
    July 4, 2015

    The plain fact is unless all the countries in the EZ agree to pool their resources including their financial balances and redistribute them , there will never be a co-ordinated union . This could only be achieved with fiscal and political unity .

    The likelihood of achieving a unity of the EZ within a time span that could save Greece and the other ailing countries is remote . Brussels ought to acknowledge this and look the other way ; a common market condition did work and would work again . The power base of a European Common Market would be an international force that would count for something and bring about a unity that would satisfy the likes of me . Brussels ought to press this button again and face reality .

  28. ChrisS
    July 4, 2015

    So, at the eleventh hour, the IMF has finally told taxpayers in Germany, Netherlands, Finland, France and Austria just how much they have lost because their politicians have so recklessly poured so much of their tax Euros into Greece – and also how much more it’s going to cost them over the next few years.

    This must surely be a game-changer in public opinion within the richer Eurozone Countries? What will happen the next time that Merkel and Juncker er al make another public pronouncement about Ever Closer Union and the need for fiscal integration – a euphemism for vast fiscal transfers from the Northern states to Club Med ?

    The human cost has been out in the open for all to see for many months but those responsible for the disaster that is the Euro will surely no longer be able to fudge and hide the enormous financial cost of their flagship project.

    Hopefully it will truly be a game changer.

    The only sensible option for Greece is to vote No tomorrow. The gravy train has come to a shuddering halt so leaving the Euro has to be the least worst option.

  29. terry
    July 4, 2015

    Egos will deflate but amongst the Brussels political commissary, counter blaming and face saving will become the name of the game . And the ball? The poor Greek proletariat. They may well find themselves flat (broke) and kicked out of touch but that is the only way they are going to re-inflate.

    Good luck to the Greeks and thank you, Gordon Brown, for fighting off the obsessions and Presidential aspirations of Tony Blair. You saved us from him and our own Greek tragedy.

  30. Bill
    July 4, 2015

    My friends in Europe told me this week that the Greek situation is keeping the euro low in relation to the pound. It is said that, once the rest of the EU dumps Greece, the euro will strengthen. If this is true, British holidaymakers should take advantage of the current rates and enjoy the pleasures of southern Europe at a discounted rate.

  31. M.A.N.
    July 4, 2015

    In a nutshell then…Germany thinks the EU is the best thing since sliced bread as long as it doesn’t have to stand behind anyone else’s debt. But selling to these countries is ok….it’s like kindergarten really.

  32. turbo terrier
    July 4, 2015

    The long drawn out saga with Greece will carry on and on unless they are told to leave or go on their own accord. Politicians on both sides have to draw the line as it seems to me inhuman to keep the people living constantly on the edge. All this uncertainty will effect any sort of recovery in the way of investment in their future.

    Hopefully after the vote tomorrow some common sense and agreement will take place and then the people themselves will realise that they are the only ones who will get them out of this terrible situation.

    On a slightly different note it is about time that the Uk was told just how we are going to reduce our national debt. Whichever way you cut the mustard £1.5 trillion is a lot of money. I cannot see the budget addressing this issue unless some really radical actions are taken. Cancelling HS2, all subsidies on existing and new green crap proposals are but two that would have the quickest impact on saving money. How can the country justify being so much in debt and continue to pay out so much in these subsidies and interest payments? The way we are going there is not a fag packet between us and Greece if our creditors decide to pull the plug. Old granny had it so right “if you can’t afford it you can’t have it” Greece the EU and the UK should all have sat up and taken notice of old granny over the years!!

  33. Anoneumouse
    July 4, 2015

    “Why then did the IMF lend Greece so much before with the pretence that it would work?”

    Because the “……..Mario Draghi of the European Union Central Bank told a lie to the IMF when the said he would do “what it takes”.

    You just cant trust European Union technocrats or it’s employees to tell the truth.

  34. Hefner
    July 4, 2015

    The amount on a UK saving account in a given bank guaranteed by the FSCS will from 1 January 2016 change from £80,000 to £75,000. It must be part of George Osborne’s effort to make British people save more?

    And some distinguished commentators relate this to the euro’s drop in value?
    Please can somebody explain the logics?

    1. miamimode
      July 5, 2015


      As I understand it the guarantee in the EU is €100000 and due to the drop in value of the Euro we have been instructed to alter our guarantee accordingly.

      Quelle surprise!

    2. Denis Cooper
      July 5, 2015

      Simple, it’s not set by the UK but by the EU, in its currency, so: “From 1 January 2016 deposit limit will be £75,000. This figure is the sterling equivalent of €100,000 as required by the recast Deposit Guarantee Schemes Directive.”

  35. Mark B
    July 4, 2015

    Good evening.

    All good stuff. But I have recently spoken to some Greeks working in the UK and, each and every one of them both want to remain in the EU and, the Eurozone.

    If you believe in democracy and the will of the people, then you have to accept their decisions and they in turn, have to accept the consequences of those decisions.

    They will have of course a chance to express this. If they choose austerity and the EU / Euro, then they have made their bed and can lay in it for all I care.

  36. petermartin2001
    July 4, 2015

    Yes, good article and exactly right.

    As a scientist and an engineer, I have to say I really don’t understand most economists. It’s natural for anyone to get things wrong from time to time. But, when we do, we learn from our mistakes, work out what went wrong, and, most importantly, we try something different, next time, to fix the problem!

    Not so with economists. The IMF/ECB forecast for Greece in 2010, and the eurozone in general, was that a couple of years of recession and belt tightening would lead to a slight increase in unemployment. They forecast it might rise as high as 12% in Greece, but also forecast good growth for the years afterwards. This would of course have made that temporary pain worthwhile. We now know that the reality and the so-called expert forecasts have been as divergent as they possibly could be.

    But do those economists now recognise their economic models were erroneous? Do they show the slightest inclination to go back and correct them?

    They don’t. They just keep pumping out more of the same. Economics may never be a perfect science in the same way as are, say, Physics and Chemistry. But, it could be a lot more scientific than it is. Economists have to accept that the results of real world economic experiments are paramount and trump theory every time. For any scientific theory to be valid it has to be able to both explain and predict. Otherwise it’s useless and needs to be cast aside.

  37. Richard
    July 5, 2015

    Greece’s debts are tiny in comparison to the economy of the whole Eurozone and could easily be resolved.

    The reason for the continued struggle between the EU and Greece is to keep the German taxpayers onside as there is no way that the EU wants to lose a Eurozone member.

    So the Greek situation will only be satisfactorily resolved when either the German taxpayers revolt and begin to request that Germany itself leaves the Eurozone or the EU takes total control over Greece.

    Also, with allegations of massive tax avoidance in Greece being made it can be expected that the ECB will be instructing Greek banks to take money from every bank account in Greece, just as they did in Cyprus.

    As net contributors to the EU budget our money will be used to continue to support and prop up the failing Eurozone countries even while we are racking up our own debt even further.

    Another very good reason to leave the EU.

  38. Javelin
    July 5, 2015

    This is why the YES in the referendum is yes to further integration and the NO is for less integration.

    The referendum actually doesn’t make any sense because Europe is going to integrate further so unless Cameron put the UK on a separate path then we are heading for further integration. Negotiating on a few benefits for Poles will not alter this.

  39. Lindsay McDougall
    July 6, 2015

    Greece has now had its referendum and the ‘no’ vote is in excess of 60%, the result that the Greek government wanted. However, the Greek electorate cannot speak for Germany. If Germany had a referendum, the German electorate might want to be offered a 4 way choice:
    – Give in to Greek demands for some debt forgiveness and an additional bail out
    – Refuse these demands and see what happens
    – Greece to leave the Euro zone
    – Germany to leave the Euro zone

    Inevitably, giving Greece what it wants would lead to a soft Euro and Germany will not want that. I therefore think that either Greece or Germany will eventually leave the Euro zone.

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