Author: johnredwood

The Greek government is discovering quickly how imprisoned they are by all the accumulated debts and the Euro they inherit. Being part of the iron discipline of the Eurozone makes things worse. Argentina, Venezuela and others show that whilst having you own currency can help  with devaluation  staving off disaster for longer, you can also come badly unstuck as a country if the state spends and borrows too much even with its own currency. If you devalue too much overseas debt becomes very expensive, and imports too become much less affordable.

There are some who think it is always caring for the state to spend more. There is always more poverty to relieve, more good works the government might like to undertake, more public service to increase and improve. The problem is if you overdo it, far from being more caring, the government ends up making brutal cuts at the insistence of its creditors. I doubt Greece wanted to cut public sector wages and make large cash reductions in what they spend on their health service, but they were driven to that by poor financial management.

There are others who think that it is always good for an economy for the state sector to run large deficits. They argue that the private sector or the overseas sector can easily lend a surplus to the state, so isn’t it better if the state deliberately overspends so there is more spending and activity in the economy? Unfortunately this doesn’t work out either. Greece has just shown you can have a recession which loses you 25% of output whilst continuing throughout that period to run much larger deficits than more successful countries. If running up large state debts produced good growth and wealth increases, then we should expect countries like Greece, Argentina and Venezuela to be amongst the richest in the world.

I hope the UK is reminded of the lessons of prudence by the parlous Greek state. Borrow too much and you reach the point where no-one wishes to lend you any more. Borrow too much and you have to spend more and more of your income on interest charges, leaving less for what you need. Borrow too much and you end up having to cut drastically as your creditors insist.

In each case there is also all the spending which is not as advertised. Governments spend too much on themselves very often, and are commonly inefficient and badly managed. In a country like Greece tax collection is very difficult, as so many people scorn the state they live in, regarding the taxes as unfair or avoidable.

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.