Author: johnredwood

I read that European Commission President Jean-Claude Juncker believes there’s no question of writing down Greek debt. The other Eurozone countries will not agree to that.He reasons that there can be no democratic choice against the European treaties. One cannot exit the euro without leaving the EU.

These brutal statements do at least have the virtue of honesty – assuming they stick to this no bail out position. I quite understand why they have to say there can be no bail out just because Greece has voted for less austerity. Had Mr Juncker said “Greek voters can change the Greek government and its policies, but they cannot make the rest of the EU send them more money” then I would have thought that a tough but understandable stance.

Mr Juncker goes wider, and simply asserts “there can be no democratic choice against the European treaties”. That does not just mean they cannot vote themselves another country’s money or change of policy, but they cannot vote for their own change of policy if the custodians of the treaties disagree with them. That is much more worrying and is why some of us do not like the current treaties and think they go too far in controlling countries and throttling democracy.

It is also interesting that the Commission now asserts that continued membership of the Euro is part of the deal, and any country leaving the Euro would also have to quit the EU itself. I am not sure where he can find that explicitly stated in the treaties, though again I see the logic of it. Clearly he thinks it is another threat to Greece that might worry them. We do know, however, that the EU does think it possible for a country to be in the EU but not in the Euro, as the UK and Denmark legally do and as the candidate members of the Euro do.

Mr Juncker’s harsh words imply a growing impatience with all who want special deals or who stand in the way of a uniform policy and discipline for the Euro area. Greek democracy is worryingly unruly and at variance with the Brussels view. The EU has now hit out and told the Greek voters they are wrong and have to think again.

As we watch the collapse of many of the traditional governing parties of the centre left and centre right in the Euro area we can expect more of these conflicts between countries struggling to be democratic again and a Commission telling them they can have any policy they like as long as it is the EU one. The irony is that in a way Mr Juncker is right. For the Euro to work they all have to accept its cruel discipline and live under its rules. That is why some of us said in the years before its launch they should first create a democratic government of Euroland so the public could have their say and have a choice. To have a single currency people and governments of the founder states have to accept financial and moral obligations to each other. Leaving democracy at the level of the Euro states, but taking much of the power to the centre denies effective democratic change, busts open the old party system, leaves many feeling very dissatisfied with politics, and may in the Greek case do considerable damage to the economy and banking system of the Euro area.

Last week my Conservative Parliamentary colleague Andrew Bridgen tabled a 10 Minute Rule Bill to abolish subsidies for future windfarms. I supported him. We won the vote 59-57 in favour of the abolition.

Ten Minute rule bills do not usually become Acts of Parliament. They are backbench initiatives. Government does not make time available to enable them to become laws, though the better ideas are sometimes taken up by government and incorporated into one of their bills or future executive action.

The advantage of the format is the short debate takes place in prime time after questions, can attract publicity, and may highlight an important issue to government for their consideration.

This bill meets all those requirements. It highlights the hugely expensive cost  of renewable electricity, at a time when plunging gas and oil prices are making power generated from fossil fuels so much cheaper. The advocates of windfarms have often told us the large subsidies they attract will vanish in future years as the price of fossil fuel energy surges. They did not usually explain just how much dearer renewable power will become in conditions when fossil fuel prices plummet.

The presence of large windfarms in Scotland will be a burden with escalating subsidy levels to keep them turning. Conservatives wish to call a halt to expensive onshore wind, and many of us wish to eliminate all new subsidies altogether.

It is high time we made affordable energy our priority, and used more methods to generate power that keep the lights on even when the wind is not blowing. Total subsidies to renewables are around £2bn a year already, paid by electricity consumers. The burden gets bigger the more they build, and the cheaper the alternative way of generating power becomes.

Greece and Germany have two different visions of their shared currency zone and common government.

Greece, the debtor, claims that Germany must write off substantial sums which Greece owes her. In the name of solidarity within the zone, the rich country should come to the financial aid of the poorer country. In the name of common humanity Germany should allow Greece to spend more, offering free energy and food to the poor by increasing public spending. The extra spending will need to be borrowed.

If there are further troubles with people withdrawing money from Greek banks,. the European Central Bank should provide the money the Greek commercial banks need to pay out their departing depositors. Greece cannot cover the interest charges on her large debts out of tax revenue, so she thinks Germany should accept a lower interest rate or deferral of the charge on that part of the debt which is to remain.

The Greeks point out Germany has run a large trade surplus within the Eurozone since its birth. Germany has sold many cars and other products to Greece. She has had to lend Greece the money to cover the deficit. The gap cannot be closed by devaluing the Greek currency, as would happen if they still had their own money systems. So say the Greeks the gap has to be closed by writing off debt.

Germany says the opposite. When she joined the Euro she made it clear that Germany had no wish to stand behind foreign banks and foreign states within the zone. They all had to show similar discipline in their finances to Germany’s. They all had to cut their costs and raise their productivity so they could compete with Germany at the locked in effective exchange rate when they joined the Euro. Germany explained it would be a tough discipline with no bail outs.

German public opinion is against money printing by the ECB. The German economy does not need it, and Germany sees it as a soft option to help weaker countries borrow  more at low interest rates, to finance deficits which Germany thinks are too high. German public opinion is also against a Greek debt write off, as this time it will be the main creditor countries like Germany which will lose out. Last time it was the private sector that took the cuts, with states protected.

Germany lost the battle of Quantitative easing. It is gradually losing the battle to keep each country’s commercial banks apart, as the responsibility of the sponsor member state. Will it now also lose the battle over Greek debt? If so, will more Germans wish to leave the Euro? Many Germans remember just how dear the enforced merger of the Ostmark and the DM was to West Germany. They do not want the same again on the much larger scale of the Euro. The fundamental flaws in the Euro’s construction are becoming all too visible in the row between Greece and Germany. Germany has the money but it does not have many allies.

I do not see an obvious way of squaring this painful circle or reconciling these two very divergent views. Trying to resolve the two visions means deciding between a transfer union that might work, and a disciplined Euro which means more austerity and more bankruptcies.

In the late 1990s when Labour decided to offer considerable devolution to Scotland and a little devolution to Wales I wrote a book warning that such changes would fuel Scottish nationalism, not undermine it. “The death of Britain?” set out how Labour’s constitutional revolution would damage our democracy. I wrote it as a Unionist, wanting to keep our country together.

During the bruising referendum on Scottish independence last year I explained that my view now is I only support a Union of the willing. I wanted Scotland to have a good debate and make up their mind. Instead they had a huge debate, but have not really made up their mind. I fear the offer of more devolution powers has unsettled the Union further.

Labour and some others belong to the appeasement school. They believe that if they keep on offering new and greater powers to Scotland for more self government, they will keep the union together. I wanted the parties of the Union last year to say to Scotland ” We would like you to stay. You are most welcome as part of our joint country. We only want volunteers in our union, so of course you are free to leave on fair terms if that is your wish. You know what the union is like. We wish to keep it broadly the same”.

That would have prevented what happened – the outbreak of a bidding war to see who could offer more powers to Scotland. It would have told moderate SNP voters and politicians that they could not endlessly play the game of demanding independence, asking for a back up position of more home rule, and getting more powers from such a tactic. Offering more powers has reaffirmed that the Union is very fluid, that the parties of the Union lack confidence in it, and has given every reason to people in Scotland to keep seeing how far they can push it without leaving.

Appeasement has not worked as a political strategy. Far from making Labour the regular choice in Scotland, Labour’s devolution settlement created a platform for the SNP, who seized it and became the majority government in Edinburgh. Now Labour’s appeasement policy in the referendum campaign – led by Gordon Brown – has undermined support for Labour in Scotland even more. Instead of gratitude for Gordon’s Home Rule cocktail, there is a spirit abroad that too little too late was offered and there is more to be had by voting SNP.

When it comes to considering English votes for English issues, some think we should go for a watered down version for fear of upsetting the Scots. I find many Scots agree with English votes for English issues. They do not want their UK MPs to be spending time on English issues. They just want them to secure a better deal for Scotland. There is no need to appease Scotland by giving England a rotten deal. The looser federal union which Labour has brought on us has to be fair to both Scotland and England. Being unfair to England will not solve the problem of Scotland, nor win anyone any extra votes north of the border.

I understand why Greeks voted in large numbers for an anti austerity party. They did so out of desperation with the misery inflicted on their lives and living standards over the last five years. A fall of one quarter in national income, massive job losses, and pay cuts for those still in work should drive any electorate to want radical change. Both their old main parties offered more of the same – sticking with the cuts, the debt control packages, the large interest bills from past excess.

The problem for them is the cruel logic of the Euro, and the imprisoning austerity of their huge debts. If the voters had chosen a party which recommended leaving the Euro it would have been better, with more hope for the future. Instead they voted for a party which both says it will not accept Euro austerity, and that it plans to stay in the Euro. How will that be possible?

Syriza hopes that Germany and the others will willingly cancel some debt and grant easier terms on the rest in the name of preserving the Euro. But why should they? How could they refuse doing the same for Spain, Portugal, Italy, Ireland and the other countries that have played by the rules and have too much debt for comfort? If Syriza is determined to stay in the Euro there is no need to offer them anything to save the currency. If Syriza works out that leaving would be better then the rest of the Euro area should help them to the door.

The Euro area may I suppose realise that this political shockwave could happen elsewhere, and may think they need to show some modest understanding of the Greek feelings. It is unlikely, however, that they could cancel enough debt or cut the Greek interest rate sufficiently to resolve the problems. Any such move may destabilise other countries, rather than calming things down.

If Greece left the Euro, devalued in line with market movements, and had access to her own Central Bank to decide how much money to create and have in circulation, she would have more chance of rebalancing her economy and meeting her large obligations. If Greece stays in the Euro and threatens default on her debts, she helps undermine the very currency zone she wishes to belong to. Without the power to create Greek money, and in the bad books of the ECB and the major countries in the zone, it could mean an even worse future for Greece than sticking with the old austerity medicine.

The joy on people’s faces when they saw the victory of Syriza was understandable. They felt they had dealt a lethal blow to austerity. The problem is, by wanting to stay in the Euro they either have to carry on with the Euro austerity policies they do not like, or follow a lonely and defiant course which will damage the Euro. Voters may think once in the Euro they can have a genuine choice if they sweep aside the conventional parties that took them in and back the scheme. In practice the challenger parties too are imprisoned by the Euro unless they want to leave.