Debt relief for Greece?

The Germans have some good points to make about Greece. Perhaps their best one is to remind people just how much debt relief Greece has already enjoyed.
In March 2012 97% of all the bonds held by the private sector representing money lent to Greece were reduced in value by 53.5%. This meant a Euro 107 billion gift to Greece and loss to the bondholders.
At the same time the Greek Loan Facility from the EU accepted a 1% or 100 basis points reduction in the interest receivable on its loans. The EFSF guarantee commitment fees were waived and the maturity date of all GLF and EFSF loans to Greece was extended by 15 years. Interest on loans from the EFSF (which became the main lender to Greece) was deferred for ten years.
These very generous terms were not made available to other emergency borrowers from the EU. The ESM official website tells us these changes cut Greece’s debt burden by a handy 49% of 2013 GDP.
The problem is, the Greek economy has not recovered and Greece has not found a way to prosperity, despite this debt retirement and despite substantial new loans being offered. If Germany were simply a profit oriented bank manager she would conclude that this had so far proved to be very bad business, and would also conclude that lending more was unlikely to be more successful than past loans.
Were the EFSF and the IMF to contemplate writing more debt off or extending it further and making its terms yet more lenient,they would also be wise to change the policy they are recommending attached to any future loans. Why should the next lot be any better at triggering prosperity than all the debt so far advanced?

If the rest of the Euro area want to keep Greece in and avoid perpetual crisis, they need to put Greece on grant aid. If they want a real Greek economic revival, they have to allow Greece out of the Euro, and have a proper IMF recovery package which usually includes a devaluation and an accommodating money policy to permit growth without too much inflation.  The Euro is just giving Greece permanent deflation. In such a circumstance more public sector cuts depress demand further, as the private sector cannot take up the slack.

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46 Comments

  1. Leslie Singleton
    Posted July 19, 2015 at 5:29 am | Permalink

    It is not that the Greeks like the Euro, in fact they hate it, it is just that they hate, indeed fear, the Drachma even more. They have no confidence in their own Government and I take their point. I do not know what the answer is but I do know that pumping money in ad lib combined with wholesale write offs and loosening of terms is just plain bonkers. Somebody has to find the nettle and grasp it.

    • Denis Cooper
      Posted July 19, 2015 at 8:22 am | Permalink

      I guess that may be a pretty fair assessment of the attitude of most Greeks towards the euro in particular and the EU in general. They have no confidence in their national political system, and probably their domestic legal system as well, and being governed by foreigners through the EU system is seen as the lesser of two evils. I recently mentioned a vox pop TV interview with a businessman in Athens who said that returning to the drachma was unthinkable, it would be a “disaster”, almost as if he wasn’t already surrounded by disaster.

      There will be a minority of eurofederalists who take a more positive attitude and who are prepared to go out on the streets waving their EU flags to declare their allegiance, and probably they are a larger minority than the few percent here who are so disaffected with their own country that they want to see it extinguished as an independent sovereign state.

    • Hope
      Posted July 19, 2015 at 9:03 am | Permalink

      Cameron claimed the UK would not bail out Eurzone countries directly or indirectly when he knew the country’s involvement in the IMF and that his chat with those in the EU was not legally enforceable. Only recently he conceded that treaty change will not happen for his alleged renegotiation, when he previously claimed it was required. Hands up who trust him?

      What has Cameron allowed the EU to behave like this? Why has he not used the situation to the country’s benefit as Lawson demonstrated? No, he is more interests in fox hunting for his friends, and curtailing the Freedom of Information Act. Hardly a balanced panel to review the subject. Based on Cameron’s record this does not bode well for the public. Namely, curtail press freedom of speech, raid personal bank accounts without proper judicial process, EAW so every citizen of this country can be arrested without proper evidence or process and carted off to an eastern back water, read personal emails, hike taxes to waste on overseas aid and EU. He wastes so much of our taxes on foreign causes and now breaks a promise on capping care home fees until at least 2020 while giving away social housing! Cameron makes Gordon Brown look positively good. Come back Gordon, at least we know what you believed in even if we disagreed.

      • dave roderick
        Posted July 19, 2015 at 10:37 pm | Permalink

        well said could not agree more.
        one other point all this dosh that has been given to greece is a sham as all that happens is they press a few buttons and the money goes into one bank then goes back to the lending bank as profit the greeks see very little of it it is just a ponzi scheme to make rich people richer

  2. Lifelogic
    Posted July 19, 2015 at 5:40 am | Permalink

    Exactly, why on earth is this not obvious to all the “experts” at the EU and the other EURO countries? When will they finally face reality and stop the repeated extend and pretend nonsense?

    • Lifelogic
      Posted July 19, 2015 at 6:10 am | Permalink

      Simon Heffer in the Sunday Telegraph today says: Germany has set itself against restructuring Greek debt …….. so the rest of Europe can pretend the euro project sails on.

      C Booker also has a good article:- What a ruin the EU has made of the Greece I loved.

    • oldtimer
      Posted July 19, 2015 at 10:20 am | Permalink

      It probably is obvious to several of the finance ministers of EZ member countries. According a recent SpiegelOnline article, that is one of the reasons for the harsh terms offered to Tsipras in the recent negotiations coupled with the idea of a five year absence from the EZ while Greece attempted to get its house in order – a package they thought he could not and would not refuse. But Tsipras surprised them all. He performed another double somersault, while looping the loop, and accepted the deal offered – doubtless to the chagrin and dismay of said finance ministers.

      Why would he do this? I suggest three reasons. First it seems that the majority of Greeks still want to keep the euro and stay in the EZ; this provides him with the necessary domestic support. Secondly, as a man of the Left, he wants to force the rest of the EU play his game and provide transfers of other countries taxpayers cash to Greece – as well as to his like minded friends in Spain (Podemos); this after all is the ultimate logic of political and monetary union. Thirdly, he knows that he has other friends, eg Hollande in France and others in the EU parliament who are determined to do all they can to preserve the euro, the EZ and to further the cause of monetary and political union. Once out, Greece will never get back in. He knows that, the Greek public knows that. Seemingly, it is willing to accept extraordinary levels of hardship to cling on to the EZ. Greece will play as long a game as it can, namely as long as it has ECB cash to play it.

      I conclude that Greece will not voluntarily accept Grexit. Grexit will only happen if the other EZ countries can bring themselves to insist on it and push Greece out. Politics continues to trump the economics of the case.

    • Chris
      Posted July 19, 2015 at 11:19 am | Permalink

      By keeping Greece in this indebted state, they have control of the country. It is all about power, holding on to that power, and extending the EU superstate.

    • bigneil
      Posted July 19, 2015 at 2:47 pm | Permalink

      If the “experts” stop the lending, won’t that be an admission that they were wrong in the first place? With criticism coming from all angles I think the EU are desperately trying to “save face”. If it all collapses, and I hope it does very soon, (some? ed) in Brussels in their unelected positions will still have made sure that they will be very wealthy indeed. What they are trying to do now is desperately keep growing the dictatorship to its ultimate aim. etc ed

  3. CHRISTOPHER HOUSTON
    Posted July 19, 2015 at 6:02 am | Permalink

    All economists are cocksure Greece can have no meaningful impact on anyone’s economy save her own. Yet the airwaves are stuck on the subject from Washington to China.
    French though not British TV reminded viewers throughout the negotiations that America was in “Hourly contact …with the EU negotiating team. ”
    Such massive attention on the 11 million people of Greece who American economics pundits call a “nothing-burger” country.
    How and why does a Nothing Burger take priority over a Tunisian massacre and other terrorist attacks? It did and still does.
    I’m guessing but I figure Greece has an ace up her sleeve, somehow. Perhaps there is a fear in parts of the world that the Contagion from Greece might not be economic but social and political. Greece and her neighbours are what Churchill called the “Soft underbelly of Europe”. Why he did not call it the Western world’s Achilles heel is possibly because he was also a professional writer and would have hated hackneyed phrases.

    So, we have a Soft Underbelly and a Nothing Burger aside the Mediterranean. And the risk to economic contagion is… Small Beer ( I couldn’t resist it )

  4. Davem
    Posted July 19, 2015 at 6:27 am | Permalink

    Mr R,

    With a possible regional mayor being considered in the NE, can you tell us what the plans are for the rest of England please?

    And also any updates on the English votes piece? Is it going to get done properly, and be genuine EVEL now that the SNP has hijacked the English vote on hunting laws?

    Once Labour have got a new left-wing leader, are they going to oppose EVERY government bill for the sake of it do you think? Or are they going to act in the interests of the country rather than their party? (Thinking particularly about foreign policy here.)

    Sorry – bored with the Greece crisis now, and thought I’d ask some questions about things that haven’t been mentioned here for a while.

    Reply I have written a lot about English votes, and will do so again in September when it should get settled in the Commons

  5. agricola
    Posted July 19, 2015 at 6:30 am | Permalink

    You are saying, backed with more factual information, what many of your contributors have already said based on instinct.

    In Greece the time has come to suspend politics, an irrelevant luxury when the economy is dead in the water. Time for a hard headed business administration with the military looking after internal and external security. I do not mean the sort of business administration the EU might provide because it would be more of the same depressing austerity that I imagine the Greeks are growing to hate.

    That the process needs to be conducted outside the Euro is a must, because inside there is a lack of flexibility that works against the desirable end result. At this stage I think the Greek people would accept any solution that looked as if it might work and offer them a future. In such a situation the economic expertise within the free enterprise elements in NATO could be offered, if for no other reason than to let the Greeks know that they are not alone.

  6. alan jutson
    Posted July 19, 2015 at 6:40 am | Permalink

    Politicians may think very differently if it was actually their money that was at risk.

    I suggest a pay cut for every financial decision that goes wrong.

    Politicians are very quick (and correct) to suggest a claw back of bonus from bankers when deals unwind, how about a similar scheme for politicians.
    Projects which overrun on budget.
    Budgets which fail to balance.
    Extended borrowing.

    I have to say I have not seen much publicity about the previous write downs.
    Are the Greek people aware of such.

    Who in their right mind would lend more money to such a basket case with such a poor track record.

  7. fedupsoutherner
    Posted July 19, 2015 at 7:57 am | Permalink

    How much will other countries outside the Euro Zone be expected to pay to keep Greece in a failed institution? How long before we hear some of our prominent MP’s shouting in the House of Commons that we should leave? Does anyone in charge of the asylum really know what they are doing whether in or out? Seems to me Joe Public knows more!

  8. Dame Rita Webb
    Posted July 19, 2015 at 8:01 am | Permalink

    With respect John we would not be in this situation if the Anglo American political class told the banks where to stick their bad debts. If they like to be known as “masters of the universe” they should have been clever enough to know what the risk was in lending to Greece. In the meantime the taxpayer should not be expected to clean up the mess. The respective banks share/bond holders should pursue their directors through the courts to get their money back.

    The last time we were in such a situation in the ’80s “junk bond kings” and those who looted the US savings and loans ended up in jail. However since 2007/8 we have seen certain Wall St bankers turn themselves into billionaires through taxpayer support. As soon as they needed the TARP money it was evident their banks were insolvent. Until you deal with the root cause of the problem you are going to be writing articles on this theme for a long time, if the banks have not managed to bring society to a state of collapse first.

    Reply The main creditors of Greece are the ECB, the EFSF and the IMF, not the commercial banks!

    • Dame Rita Webb
      Posted July 20, 2015 at 5:46 am | Permalink

      Balls so you are telling me the banks were not relieved of their bad Greek debts without public money via the IMF etc?

  9. Pete
    Posted July 19, 2015 at 8:09 am | Permalink

    Anyone stupid enough to lend to the Greek government is asking for trouble. Everyone understood that when they had the Drachma but for some reason forgot it as soon as they got the Euro. Now there will be no real repayment of the debt. Extend and pretend doesn’t pay it back, it just shifts the problem to the next bunch of crooks that lie their way into power.

  10. Peter van Leeuwen
    Posted July 19, 2015 at 8:20 am | Permalink

    To me there is another, obvious reason that Greece hasn’t found the way to prosperity, unrelated to euro or drachma, and that is that the need for many absolutely needed reforms.

    Due to the current lack of trust, the other 18 EZ governments now demand guarantees on the implementation of many difficult measures. In fact, the Greek government now utilises this external pressure to force through reforms against vested Greek interests. Some aspects of life will even become much cheaper, like medicines, now the most expensive in the EU due to pharmacists’ privileges. More Debt relief or debt restructuring will be needed, but again a way has to be found to sell this to the other 18 parliaments.

    • libertarian
      Posted July 19, 2015 at 10:01 pm | Permalink

      Peter v L

      You mean that once the EU forces Greece to sell out to big corporate interests?

      You do know that Germany operates very similar laws to Greece on pharmacists privileges. In Germany you can’t own more than 3 pharmacies .

      So what other reforms have the Greeks chosen not to implement that the rest of the EZ has ?

    • petermartin2001
      Posted July 20, 2015 at 4:39 am | Permalink

      Peter Van Leeuwen,

      Probably British Railways are, arguably, the most expensive and badly run in the EU. Do they need fixing? Yes. Do they make the UK economy a basket case? No of course not.

      Similarly with Greek pharmaceuticals. They are probably still a good deal cheaper than US pharmaceuticals. Incidentally don’t ever get sick in the US unless you’ve got the best of insurance! But is the US economy a basket case because of their price? Of course not.

      There’s just so many excuses given by the Troika for their failure to revive the Greek economy. And it is their failure. Not Greece’s who have done pretty much everything they’ve been asked to do. Except they can’t of course reduce their deficit. The more the Greek Govt cut back, as demanded, the lower their tax revenues fall and the more they have to pay out in welfare payments to the unemployed.

      The theory says austerity economics doesn’t work. The practical results show it doesn’t work. But what do the Troika demand in ever greater quantities? It’s sheer mindless stupidity.

  11. Denis Cooper
    Posted July 19, 2015 at 8:31 am | Permalink

    The private investors have already had their massive haircut, and incidentally as I recall the new bonds issued to them are written under English not Greek law in an attempt to reassure them that the Greek parliament cannot decide to change their terms. I’m not quite sure how that works, presumably in the event of default the investors would take their case to the High Court in London? But that court would have no means to enforce a decision in their favour, so can anyone explain the point of using English law?

    As for the “official” creditors who now hold about 85% of the bonds issued by the Greek government, they have repeatedly said that they can not and will not accept any losses, but eventually they may come round to the view that there is no alternative.

    • acorn
      Posted July 20, 2015 at 7:06 am | Permalink

      Norton Rose Fulbright (big law firm) say the following. “Lex monetae is a legal principle recognised by most developed jurisdictions to the effect that the currency of a debt expressed in a foreign currency is determined by the law of the country in whose currency the obligation is expressed.

      Where it applies, this principle applies irrespective of the law governing the contract in question. In practice this means that if a German borrower takes out a US dollar loan facility which is governed by English law, only US law can determine what a “US dollar” is for the purpose of payment obligations by the German borrower under such loan facility.”

      • Denis Cooper
        Posted July 20, 2015 at 9:22 am | Permalink

        Thanks for that.

        Of course these bonds issued by the Greek government are denominated in euro, a currency without a single country as its issuer, but subject to the law of a country which has not even adopted the euro. So it is a strange device, and as I understand the purpose of it was to reassure investors by putting the terms of the bonds beyond the reach of the Greek parliament.

  12. JJE
    Posted July 19, 2015 at 8:34 am | Permalink

    I blame the French.
    They forced Germany to accept the Euro as the price of German reunification. The Germans wanted to keep the DM.
    The French pushed for Greece to be allowed in to the Euro as “the cradle of civilisation” when everyone knew that they did not qualify on any economic grounds.
    The French are the ones pushing hardest to keep Greece in the Euro now when it is quite clear that Greece would be better off outside.
    The French know that if one country can be relegated from the Euro, then they are towards the bottom of the table and could be in a nasty scrap about which country could be next to follow.
    French IMF leaders have discredited their organisation by their involvement in this mess breaking their own organisations rules.

    So I think we need to tackle the central issue with the Euro, namely the French myth that politics can overcome economic reality. Political will can dominate for a long time – look at the history of the USSR – but the longer it goes on the more damage that is done.

  13. William Long
    Posted July 19, 2015 at 9:10 am | Permalink

    The difficulty we have is that so far, kicking the can full of fudge down the road has worked and presumably the various parties to the latest strike of the boot are congratulating themselves that they have got away with it again. So they may have if the IMF can forget what they have said about the sustainability of the Greek debt burden and the need for a write-off write off, or find some way round it. Sooner or later, though, ‘Austerity’ is going to have the same effect on the Greeks as the Versailles reparations, coupled with US and French refusal to allow transfer of their gold reserves had on the Germans. The latter of course is ironically similar to German reluctance for currency transfers today.
    The inevitable outcome at some stage if things continue on their present course, will be far worse than a few petrol bombs outside the Parliament buildings in Athens: there will be a full blown revolt with probably a communist result. Is that what the EU and Mrs Merkel want?

  14. Stephen Berry
    Posted July 19, 2015 at 9:14 am | Permalink

    JR: The problem is, the Greek economy has not recovered and Greece has not found a way to prosperity, despite this debt retirement and despite substantial new loans being offered.

    The Greek crisis of 2015 is beginning to look like the Stalingrad of the Euro. The Euro members are not merely refusing to retreat from an untenable position, they are actually reinforcing it. The Greek citizens are getting more cuts whilst the other Euros countries incur more debts that won’t be repaid. Both groups get precisely what they don’t want.

    Although John is too diplomatic to say, from the political point of view, this is precisely the outcome that Eurosceptics would have most desired. In the coming referendum in the UK, people on the margin will tip into the ‘out’ camp when they see the EU as a no growth area which is positively damaging to the economic prospects of its members.

    I think that the economy rather than national sovereignty should be the focus of the referendum campaign. That the UK should withdraw from the vale of austerity which is the EU and link itself to the growth areas of the world is a positive message that most people will understand.

  15. Kenneth
    Posted July 19, 2015 at 9:25 am | Permalink

    It is surely time for Eurozone members to hold their own referendums with the question being: “Should all Eurozone members integrate into one sovereign state?”

    Those countries that vote yes can be in the new construct and those who vote no will be outside the Eurozone.

    Bringing this to a head in a managed way is surely far better than allowing events to get out of control and eventually forcing the decision on Greece, Germany and other Eurozone members.

    • Leslie Singleton
      Posted July 19, 2015 at 7:50 pm | Permalink

      Dear Ken–How many languages will be involved and who will judge that the questions after translation all say exactly the same thing? That apart surely you cannot be imagining that Brussels would agree to any such thing. Think of all those excessive pay and pension packets that would be at stake.

  16. turbo terrier
    Posted July 19, 2015 at 9:30 am | Permalink

    Will we ever see full closure of this affair? Highly unlikely.

    The only people that can save Greece is the Greeks themselves.

    With 700 jobs going in the steel industry and the eventual cost on the state it is ever more important for the UK to stop throwing money around supporting lost causes. Greece is a lost cause.

    Even more reason for Amber Rudd to bring forward the stopping of subsidies to the start of the next session, as it has been stated high energy costs had a big impact that bought about the cut backs and job losses. How many more jobs will go between now and April next year bought about by the “being green effect”?

    In all areas the country is paying too higher price for basic services in both domestic and industrail markets and with all these handouts to the EU it just compounds the problems.

    With our debt running at £1.5 trillion CMD should be applying all his energies to stop it rising and then to reduce it.

    • fedupsoutherner
      Posted July 19, 2015 at 8:12 pm | Permalink

      I see today that the EU are going to fund the cost of a sub sea cable in the North Sea to transfer renewable energy from the UK to other European countries at a phenomenal cost. The figure quoted is £230,000,000,000!!!!!!!!!!!!

      This is nothing short of a dream – there no way that this could be financially viable – for example, just think about the power losses associated with Scotland using pumped storage in Scandinavian countries – incredible!

      Then there is the issue about subsidies being curtailed in the UK (which still includes Scotland!) – ROCs have gone for new build and the money available for auction under the CfD system will be severely cut back – including for offshore wind!

      Just think of the cables and pylons this would require on land. Hopefully, it will be kicked into touch soon!

      One worry is that the EU will not even consider a financial viability assessment (they will see this as a further step towards further European integration!)

      What else can the EU think of to waste our money on? With all the job losses in industry now how can this be a feasible project?

  17. Tad Davison
    Posted July 19, 2015 at 9:36 am | Permalink

    ‘If Germany were simply a profit oriented bank manager she would conclude that this had so far proved to be very bad business, and would also conclude that lending more was unlikely to be more successful than past loans.’

    That’s the logical conclusion, but I don’t think we are dealing with logical minds, unless of course, there is some unspoken ulterior motive the EU leaders are reluctant to tell us about.

    Many any other contributors and I have already said that Greece should leave the Euro, devalue, and then claw her way out of debt by exporting cheaper goods, but for the moment, her economy rests largely on sunshine and olives. The manufacturing base simply isn’t there in sufficient quantity to make a significant difference, and even if it were, she’d be up against some stiff competition. I like to design radio-controlled model aircraft as a hobby, and some of the components I source from China are so cheap, no other nation could compete. I can get micro servos for less than £1 including postage, yet a similar product would have cost £25 20 years ago from a UK model shop (many of which have gone out of business, but that’s another story, and too big to expand upon for the moment).

    So it seems we are left with a situation such as exists in the US, where richer states give money to the poorer ones, more or less in perpetuity. And here’s the clue, the US is a political union.

    It is interesting to note how many people are now seemingly against the idea of the erosion of, and the eradication of the nation state, are not in favour of belonging to an all-powerful super-state, yet they still want others to pay for their way of life.

    The notion of an irresistible force meeting an irresistible object doesn’t exist in the physical context, so something has to give. I just hope it isn’t the UK tax-payer.

    Tad Davison

    Cambridge

  18. Richard1
    Posted July 19, 2015 at 10:07 am | Permalink

    Gifts through debt relief and bail outs on sub market terms will do nothing without fundamental market oriented reforms. This needs the buy in of the Greek population. As long as the nationalist- socialist policy of begging and borrowing is appearing to deliver results there will be no impetus for change. A Mrs Thatcher for Greece needs to emerge. It’s difficult to see how that can happen as long as Greece is a eurozone protectorate.

  19. acorn
    Posted July 19, 2015 at 10:27 am | Permalink

    If you were thinking of becoming an investor in the EU, the following is worth a read. You could end up with risks and obligations you didn’t know about http://ec.europa.eu/economy_finance/eu_borrower/documents/eu_investor_presentation_en.pdf

    Think how much cheaper and simpler it would have been if the EU had used its own currency issuing powers, to borrow from its own central bank. Like the BoE lent £375 billion to the Asset Purchase Facility. The APF didn’t have to go into a market and borrow back its own money it had previously spent. Alas, all those EU government bond and currency traders, would have had to go and find proper jobs.

    MMT followers (HT: Neil Wilson at 3spoken) told you previously that Quantitative Easing (QE), would be ineffective, particularly as Fiscal Austerity would negate any possible up-side in aggregate spending, which is what QE is supposed to achieve. Now QE is an official flop, unofficially. http://bankunderground.co.uk/ .

    That Mark Carney has certainly been a breath of fresh air at the BoE. It’s a pity he can’t be the fiscal supremo, as well as the monetary supremo at the same time; like Mario Draghi at the ECB.

  20. Margaret Brandreth-J
    Posted July 19, 2015 at 11:18 am | Permalink

    Why can’t they see this? Surely they can .They are not so obtuse, so what is the true ulterior motive?

  21. Shieldsman
    Posted July 19, 2015 at 11:56 am | Permalink

    Will closer political union of the Eurozone members leading to a more centralised (Brussels) Government solve the unbalanced economies of its member states?
    Individual countries can attempt to balance the standard of living of its poorer economic regions with grants.
    Making large loans to Greece has encouraged corruption and living beyond its means. Their economy will never be able to service the increasing debt burden.

    Richard North (EUReferedum.com) has made some interesting studies on the endemic corruption within Greek society and the Governments failure to collect taxes (an unlikely victim). He also looked at how German business has sold cars and equipment which Greece cannot afford, often bribing government officials and business owners (the elephant in the room).
    Looks as though if Germany has to take a write-down, the German taxpayer will have subsidized their exports. l

  22. Peter Stroud
    Posted July 19, 2015 at 12:04 pm | Permalink

    As regards the Greek crisis: the EU is only extinguishing the edge of the blaze and leaving the major fire to rage. Greece must be encouraged to leave the Euro,and establish its own currency. But, things cannot end there. Other weak countries, such as Spain and Portugal should also be encouraged to go their own way. Then countries that are content to give up fiscal sovereignty can form a union. Thereafter, any state outside the fiscal union, that is content to lose independence and join, or rejoin may do so.

  23. Peter van Leeuwen
    Posted July 19, 2015 at 12:19 pm | Permalink

    An interesting reaction by Jeroen Dijsselbloem when he was attacked last week by the “young socialists” from his own social democratic party, that he was being to harsh in the negotiations with the left-wing Greek government.
    Dijsselbloem: “A social democratic heart does not go into the elections with huge promises that you can not pay at all. A social democratic heart is not just accept corruption, nepotism and conflicts of interest. A social democratic heart is not propping up the established positions and monopolies, in which ordinary Greeks pay too much money for their bread, milk and medicines. And this IS the situation in Greece.”
    Dijsselbloem still has a lot of trust and respect in the Netherlands. However, Mark Rutte (prime-minister) has lost some popularity after he confessed that he had broken his 2012 election promise of “never to send anymore money to Greece”. This may illustrate that, even when politicians understand that more deb restructuring for Greece is necessary, they face the challenge of being honest to their own electorates. And this will be the case in all 18 countries.

    • petermartin2001
      Posted July 19, 2015 at 8:47 pm | Permalink

      Jeroen Dijsselbloem would have a point if there was any credible evidence that this package of austerity measures imposed on Greece was going to be any more effective than previous packages of austerity measures.

      I wouldn’t normally agree with Wolfgang Schäuble but he knows that this so-called bail out isn’t going to work any better. If this is bail-out #3, then there will be a need for bail-outs #4 , #5 and so on at sometime in the future. He favours removing Greece from the eurozone. The Dutch Left would probably favour a move to genuine political union complete with fiscal transfers, not pretened loans, within the union.

      Both, for perhaps different reasons, are right. It is those, like Jeroen Dijsselbloem, who have put together this “betwixt and between” system who have clearly got it wrong. Life would be much better for Greeks if they were in a genuine US style political and fiscal union or, alternatively, out of the eurozone completely.

      On the question of “corruption, nepotism and conflicts of interest”, there is no country free of all that. The usual claim is that is worse in Greece than other countries. That may be true, but how will seizing €50 billion of Greek assets help rectify that? Jeroen Dijsselbloem knows as well as anyone else that these problems pre-date the election of the Syriza government and that proposed actions to tackle the problems was not the reason for the breakdown of the 5 month talks. He’s being somewhat disingenuous if he is claiming otherwise.

    • Edward2
      Posted July 19, 2015 at 9:20 pm | Permalink

      Nice to see the relationships between Euozone nations going so well.
      I’ve never heard USA states denigrating one another like your politicians comments when money is required by weaker states.
      Do you resent transferring money from richer areas of Holland to poorer areas of Holland too Peter?

  24. Johnnydub
    Posted July 19, 2015 at 12:26 pm | Permalink

    Re: LL

    “When will they finally face reality and stop the repeated extend and pretend nonsense?”

    Because that’s the economic not the political reality.

    For debt relief to occur Mrs Merkel’s promises to the German taxpayers would be shown up for the fiction they always were…

    And if Greece leaves the Euro and via a devaluation and return to the Drachma actually show some economic recovery, what’s the message for Spain and Italy?

    This is and always has been about Politics trying to trump economics…

  25. CHRISTOPHER HOUSTON
    Posted July 19, 2015 at 1:58 pm | Permalink

    Correction: My last comment on the fact that many American economics pundits refer to the 11 million Greek economy as a No Burger. The term they use is a “Nothingburger” and, “Only as big as Chicago”

    It is a sobering thought the UK in terms of population is only six times as big as a Nothing Burger/ Chicago.
    We must breed to edge ever closer to equal US quality.

    • James Matthews
      Posted July 19, 2015 at 8:50 pm | Permalink

      Judging by the social policies they introduce I don’t think our governing elite believe in increasing the population in the traditional way. They prefer to import people (so much less time consuming and messy). This of course will result in “we” meaning something entirely different in a generation or two.

  26. Hefner
    Posted July 19, 2015 at 2:07 pm | Permalink

    Is Julian Lewis one of the rare MPs with a properly functioning brain?

  27. Ian wragg
    Posted July 19, 2015 at 2:20 pm | Permalink

    I see today that a Swedish politician is saying that it will be decades i. e never. before Sweden will join the Euro as with Poland and others.
    They can see the absolute destruction the Euro is inflicting on Southern Europe and want no part of it.
    The German finance minister is spot on that Greece should leave the Euro but the brothers won’t countenance a setback to their cherished project.

  28. ChrisS
    Posted July 19, 2015 at 3:32 pm | Permalink

    It’s all about face saving. Those that promoted and sustain the Euro just can’t bring themselves to accept that the project is failing because those pesky voters simply won’t go along with full fiscal integration. How inconvenient ! Why can’t they see the full glory of a United States Of Europe run by Junckers and Co ?

    Problem is that they also can’t accept that ultimately it’s the markets that will decide the outcome, not some bunch of failed politicians and bureaucrats living the tax-free high life in Brussels.

    If the political will remains, and they can continue to get away with ignoring the wishes of Dutch, German and Finnish taxpayers, they can carry on throwing money in the direction of Athens as it’s a very small country. Unless, of course, enough Greeks get so fed up and angry that they take to the streets and law and order finally breaks down.

    Once one country leaves it will be obvious that the Euro isn’t for ever. The markets will target the next weakest country and so it will go on.

    The alternative ending will be if France’s acute economic problems catch up with Hollande before he’s thrown out in 2017. France is too big to bail out so they certainly won’t be able to stop a disorderly Frexit. Of course, if Hollande can keep the show on the road, Marine LePen could well take over in 2017 and she’s committed to returning to the Franc and even leaving the EU.

    Either way we know where this is all ultimately heading but the longer it goes on the worse the inevitable outcome will be.

  29. botogol
    Posted July 20, 2015 at 9:45 am | Permalink

    John, you will likely be interested in this from the FT –
    – why IMF loans technically are not loans, and
    – why, because Greece doesn’t have it’s own currency – at the end of the chain for repaying the IMF stands, not Greece, but – of course – the ECB.

    http://ftalphaville.ft.com/2015/07/16/2134539/why-you-cant-technically-default-on-the-imf/

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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