How should we account for loans to Ireland and Portugal?


             Readers will know I am against the UK lending any money to Euro member states in trouble. We kept out of the Euro thanks to some of us arguing that case. Some of us  forecast the likely problems and do not see why the UK should pick up any of the bill for the failures of a badly executed currency scheme..

                The Coalition government  has rightly taken the UK out of any future bail outs of Euro states in the new regime after 2013. That leaves the issue of bail outs under the current system, where the UK was opted in during the transition post election in May 2010.

                    Mr Darling tells us he did accept the need for the UK to be part of the rescue parties. He also says he told Mr Osborne and Dr Cable, and they allowed him to make the decision. Mr Osborne implies  he did not feel he could override Mr Darling but agrees he did let him make the decision. The Coalition government  de facto underwrote the arrangement when they got into office and did not resile from Mr Darling’s consent. Some of us wanted them to notify our EU partners that we do not agree with  what they are doing or the way they are doing it, but we lost that argument.

                The case against the bail outs is this. Countries that have borrowed too much are not necessarily helped by lending them more. It is true the new loans come with policy conditions attached. They include requirements for the member state to increase taxes and cut spending in an effort to reduce future borrowing needs. Where the problem is mainly one of bank solvency and lossees, they include requirements to put more capital into the banks. It might however be better to sell assets and bring in new finance from outside, not on the state to state model.

                        Few think that Greece or Ireland can pay all the interest and repay all the debt they and their banks have incurred in recent years. Market rates for their debt imply that at some point they will have to delay repayment, cut the interest paid or cut the capital owing. Greece has already rescheduled its Spring 2010 loan.

                     The Uk has lent to Ireland at 5.8%. It may lend to Portugal at  a similar rate. Market rates for Ireland are around 9% and for Portugal around 8%. The loan to Ireland should appear as both an asset on the Uk balance sheet at a sensible value, and as a liability through the debt we have taken on in order to make the advance. If you valued the loan to Ireland at market rates it would have a value of around 75% of its face value today. This could rise if the market thinks Ireland is fixing its economic problems, or fall if things get worse.

                      What the Irish, Greek and Portuguese economies need is stronger economic growth. That would help raise asset values, which would make default on bank loans less likely. It would mean more incomes and better incomes from more jobs, whcih would also make default on loans less likely. It would mean more tax income to pay the interest on state debt.

                           Instead, locked into the Euro and not fully competitive at current Euro exchange rates, these economies will struggle to grow. The combination of spending cuts, higher taxes and a high exchange rate make it difficult to see how they can quickly resume a happy outcome.

Getting overseas interests to take on bank liabilities and refinance the banks would be a better answer than nationalisation and state to state loans on the EU and IMF model. There is a price for everything, and the private sector may have a better answer than the top down state model they are following.


  1. lifelogic
    April 3, 2011

    ” If you valued the loan to Ireland at market rates it would have a value of around 75% of its face value today”

    Good investment – well done Osbourne 25% down already in just a few months and that does not allow for the fact that all these bailouts push up UK borrowing rates on the huge UK debt too. Economic insanity for all involved.

    Not quite as bad and destructive as Major’s ERM farce though. Do you think Major Clarke and the rest will ever apologise or admit to their huge errors? It seems Cameron and Osbourne just wants a repetition.

    1. waramess
      April 3, 2011

      I wonder where you arrive at a figure of 75 percent. That looks rather high to me.

      The main criteria of lending is assessing the capacity to repay and for a sovereign borrower that will include looking at resources, including people, the country has at its disposal. In the case of Ireland it has few natural resources, a population of under 4 million and at the present time an indebtedness of 515,671 dollars per capita.

      That sounds to me as though it is heavily overborrowed and unrefinanceable, and anybody offering 75 percent for Irish debt is clearly in need of psychiatric attention .

      The Germans and French are clearly trying to protect their own banks from an Irish bank default by making it sovereign and I suppose George Osborne thinks it might be a cheap way of preventing a nasty accident for our own banks.

      They are however, as you say clearly throwing money down the proverbial drain and the Irish politicians render themselves guilty of treason by their actions against their own people.

      Reply: I have multiplied the loan by a factor reflecting the rough market interest rate level on Irish sovereign debt.

      1. waramess
        April 3, 2011

        The Irish debt quoted, btw, is just external debt:

  2. alan jutson
    April 3, 2011

    The fact of the matter is Darling should never have been allowed to go to this meeting and agree to anything, given the fluid state of negotiations for a UK government at the time.

    It would appearDouglas Carswell has raised this issue, and has asked questions under the freedom of information act. As I understand it he still awaits a proper answer as to exactly what transpired between Osbourne, Cable and Darling. However any pre meeting discussion can never anticipate everything which may be discussed, and Darling should have said we (the UK) will take no part in any agreement until a UK government has been formed and approved.

    Should we be bailing out feckless countries, by borrowing money to lend them at below market rates, when we are in debt ourselves ?

    Absolutely No.

    1. norman
      April 3, 2011

      The bailout fund was actually voted through under qualified voting, so even if George Osborne had been Chancellor, and we take the very fanciful view that he would stand up and say ‘No’ (breaking the habit that this government has so far shown) then it would still go through. Our choice would either be to acquiesce to the bailout fund, or leave the EU, and Dave has said that will never happen so it wouldn’t make a whit of difference who attended the meeting, or no one, and what their remit was.

      The Germans and French had already decided the fund had to be set up and we were always going to be paying our ‘fair share’ that is so beloved of politicians nowadays.

      Details here:

      (article is dated from before the bailout fund meeting actually took place)

      Reply: Some of us recommended witholding our support for a change of Treaty to legalise future bail outs against the need to avoid participation in present bail outs. There is also the issue of the use of 122 for bail outs anyway.

  3. norman
    April 3, 2011

    You’re looking at this the wrong way. This is a great opportunity for Britain. George Osborne confidently told us that we stand to make a £3bn profit from our Irish loan (I did briefly look at the figures at the time and they don’t add up, not nearly, but let’s leave that aside).

    We can invest that £3bn profit (via a current loan but the profit’s as good as in the bank) to loan to Portugal, make another £3bn, ad infinitum.

    These series of bailouts could actually be the silver lining that saves Britain!

    Off to take my bonkazapem, just woke up so haven’t had a chance yet.

    1. APL
      April 4, 2011

      norman: “George Osborne confidently told us that we stand to make a £3bn profit from our Irish loan”

      Goodness me, I never knew making money was so easy, the nationalisation of Northern Rock was going to make us money, the nationalisation of HBOS was going to make us money. Now bailing out bankrupt countries is going to make us money.

      Who knew lending money to people who can’t ever pay one back could be so lucrative?

  4. forthurst
    April 3, 2011

    It beggars belief that a Conservative Minister would have allowed an ex-Member of the Trotskyist Fourth International to take important decisions on our behalf affecting the financial future of this country. The Labour Party is riddled with those whose youthful associations demonstrate a rejection of the Capitalist system but unless the government gets to grips with the banks and puts them firmly in their places so that they can never ever again destroy our economy, that sentiment may become mainstream and we may, sooner rather than later, have another ex-Trot in power “Saving the World”. In particular, we need to quarantine our sytem from the contagion of the Wall Street crooks who appear to control the US Administration through their honestly acquired subventions.

  5. Electro-Kevin
    April 3, 2011

    This bail out money should be put in stark terms. What it means in terms of jobs: police constables, nurses, librarians, lollipop ladies …

    What the EU is costing us in real and personal terms.

    Let the proponents of continued EU membership put their case. Because right now I can’t see one.

    Why are we getting an AV referendum and not an EU one ?

    1. lifelogic
      April 3, 2011

      The pro EU lot actually don’t have a case and so never really put one and certainly never put by the pro EU Tories. The nearest I have seen, from Shirley Williams types is :- that the EU has prevented wars in Europe since the end of world war two, has brought the eastern block into democracy with the EU fold and is fighting the climate change disaster.

      In reality it has done nothing much to prevent wars, is destroying democracy across the union. Climate change is not a real problem and anyway the EU cure is certainly far more damaging than any imagined problem. Agriculture, fishing, the EURO, over regulation, the multi level courts and multi level government system have all been a disaster. This for all save the bureaucrats and MEPs who are, in effect, being bribed with tax payers money to ram this agenda down the mouths of the very same European tax payers.

    2. Paul H
      April 3, 2011

      Because the answer will not be the one that “cast iron” Dave wants. And yet politicians wonder why so many people regard them with contempt …

    3. Alan
      April 4, 2011

      The case for continued membership of the EU (in my opinion; I’m sure others could do better):

      We are in the EU to provide a better market for our exporters, to be able to influence one of the most important trading groups in the world to the advantage of ourselves and our industries, and to improve standards of living in western Europe to ensure a more stable political environment for ourselves and increase the market for our industries.

      And people like me (retired, and living off pensions and savings) would be better off if we had joined the euro as well.

      We have never had a referendum on the voting system; we have had a referendum on the EU.

      1. Lindsay McDougall
        April 4, 2011

        We had a referendum ONCE in 1975. I have since then talked to many people since then who said that they voted ‘yes’ do a trade agreement and would have voted ‘no’ had they known that the UK was commiting to ‘ever closer Union’. That phrase is in the 1957 Treaty of Rome; people should have known about it, but the Prime Minister and the Leader of the Opposition chose not to remind them. We are a very deferential nation – and it costs us dearly.

        Another fact conveniently forgotton is that HM Government wrote a message in its 1975 Referendum pamphlet: “Our continuing membership will depend on the continuing assent of Parliament”. So nothing is for ever and nothing is irreversible.

        1. Alan
          April 5, 2011

          I agree.

          I voted ‘yes’ in the EU referendum, and I don’t regret it. I can remember how dismal the 70s and the early 80s were from the economic point of view: it was only the Single European Act that got the economy going.

          I’m happy with Parliament deciding on our continuing membership of the EU, and any negotiations with it. I’m not so happy with a referendum where difficult decisions are taken by people who don’t understand the implications. Sometimes it may be necessary, but they should be kept to a minimum.

          Reply: It was not the single market that led to the UK’s economic revivial in the period 1981-2007. It was the growth of services and a large non EU business with the English speaking business world.

      2. Electro-Kevin
        April 4, 2011

        Alan – I’m genuinely sorry about your pension. However your retirement is likely to be a lot better than mine at this rate and through no fault of my own.

        You mention nothing of our democracy in your argument. That’s a pretty important thing to have left out of your reasoning if I may say.

        ‘Influencing European markets’ was sold to us as the original plan. That’s all we were told it was going to be and it’s changed into something rather different now.

        Define Western Europe.

        No. I don’t recall the new member states in that plan (and those being considered) either.

        Define stable political environment.

        Hitler offered that but it didn’t mean that our people accepted it.

        So in view of these dramatic changes don’t you think that there ought to be a referendum ? Regardless of whether or not you happen to like the EU ?

        1. Alan
          April 5, 2011

          I left democracy out of my explanation because there seems to be difficulties in making democracy useful at the international level. Our MEPs seem a rather strange bunch, the ones representing me being largely nonentities or clowns. I suspect that, for the present, international democracy has to consist of the UK Government representing our interests. Attempts at direct election have not so far worked in my view. But we should keep on trying.

          I don’t think the EU has really moved that far from ‘influencing European markets’. There has always been a tension between those who think a western European superstate is desirable and could work and those who think it is undesirable or unrealistic. I rather thought that recent events had shown that each nation wants to act in its own interests and that support for a superstate is falling, even in nations that are ‘pro-European’. (You can be pro-European like me, without wanting a superstate.) In practice there is quite a wide spectrum of possibilities between completely separate nation states and a wholly integrated Europe.

          By stable political environment I meant democratic nations which settle their disagreements by discussion and compromise, and I think the EU facilitates that. A long way from what Hitler believed.

  6. FaustiesBlog
    April 3, 2011

    Some of us wanted them to notify our EU partners that we do not agree with what they are doing or the way they are doing it, but we lost that argument.

    No, you didn’t lose the argument. You lost the war. The argument against was powerfully put, by the usual handful of patriotic MPs and MEPs. The argument against was evasive and scurrilous. The coalition did what it wanted to do.

    The question is, what do they believe they are gaining? What are they not telling us?

    This is evidently a coup for the bankers, which the taxpayers are funding with disposable income-depleted inflation. What payback do the politicians get from it? How many revolving-door jobs and directorships have been agreed behind the scenes?

    What collateral attaches to the loan agreements, and which countries/organisations exactly will be the beneficiaries of such collateral if (when) Ireland, Portugal, Greece, …, default, and in what proportion(s)?

    1. waramess
      April 3, 2011

      Rest assured that anything they know that they are not telling us is not worth knowing.

  7. Lindsay McDougall
    April 3, 2011

    It was a deriliction of duty by Messrs Osborne and Cable to allow Mr Darling to make the decision. Post election, Labour and Mr Darling no longer had a mandate. Osborne & Cable should have told the EU “We will let you know our decision in a month’s time.”

    It is high time that this one size fits all Europe was ended. There are member states that genuinely want to share institutions of government and a common currency and there are those that do not. The UK government should announce this split as a desirable outcome right now. Conservatives and Libdems could amicably agree to differ on where the UK should be; that will be decided at the next election.

    Loans to Greece, Ireland and Portugal at below bond market rates carry a risk of losing out if there is a partial default. The mind boggles at how large that risk would become if big countries like Spain and Italy have to be bailed out. We should offer loans only to countries that are prepared to leave the Euro and grow their economies. That way, our risk would be that we would be repaid in full but in debased currencies. That is the lesser evil.

    1. lifelogic
      April 3, 2011

      Absolutely right on the “dereliction of duty by Messrs Osborne and Cable” they should have made it quite clear that the did not accept Darlings agreement to the bailouts (as he was without any democratic mandate at the time) and should still do so now.

      One can only assume they wanted him to do it and take the flack away from them – what other explanation is there in view of their silence at the time. Perhaps they could explain?

  8. Stuart Fairney
    April 3, 2011

    How should we account for the loans to Ireland and Portugal?

    Well at least the Portugese are ancient British allies, something we cannot say of the Irish, but to answer the question simply?

    Bad. Debt.

    Us lending to even more indebted countries is rather like becoming a guarantor on a loan agreement to your spendthrift teenage daughter and expecting her to stop buying unaffordable designer dresses. You know the money is never coming back, its pointless short-termism just delaying the day of reckoning and it helps no-one.

    1. Fred
      April 4, 2011

      Portugal, technically is our oldest ally, and that is nice. But the dismissiveness about Ireland is based on ignorance. There are still two Irish regiment sin the British Army, for instance. Can you tell me of any Portugese ones?

      History is not as simple…

      1. Stuart Fairney
        April 4, 2011

        You refer of course to the Irish Guards and the Royal Irish Regiment. They recruit in Northern Ireland and also Irish people based in the UK.

        From wikipedia

        “Restrictions in the Republic of Ireland’s Defence Act make it illegal to induce, procure or persuade enlistment of any citizen of the Republic of Ireland into the military of another state”

        Portugal is a current military ally and member of NATO, the Republic of Ireland is not. So it is absolutely the case that in the event of an attack on the UK, Portugese troops would fight alongside our army. The Southern Irish may well not. Finally I refer to the Southern government’s historic attitude towards the IRA and shall say no more.

        As the post was about a bailout to Southern Ireland it would seem that the ignorance you speak of can be found elsewhere.

  9. Anoneumouse
    April 3, 2011

    More Article 122 anyone?

  10. WitteringWitney
    April 3, 2011

    Sir, may I refer you to:

    (stated website) and ask for your comment? Thank you.

    Reply: I and some others have made public our opposition to these loans on several occasions, and voted accordingly in the Commons. The government sought Parliamentary authority for this action, and most MPs voted for it. Mr Darling gave authority originally, as the then Chancellor of the Exchequer. Ratification by Parliament followed under the Coalition government. I suggest you take down the innuendo on your site that I do not post items which criticise the government – any cursory reading shows that to be untrue. I do not post items which use abusive language or possible libels against people and institutions, including people and institutions with whom I disagree.

  11. Demetrius
    April 3, 2011

    It is all a terrible mess and what is worse is not one that we can get out of quickly or even certainly. The damage will not be short term, it may be permanent.

    1. Electro-Kevin
      April 3, 2011

      Demetrius – Yours is a serious comment delivered, I believe, with sincerity.

      Please forgive me. I can’t help howling with laughter at the thought of an ostrich saying it and with such a straight face.

  12. Bob
    April 3, 2011

    I do not understand why Labour think we should bail out other nations when we’re facing huge debt problems of our own. How long before Bob Geldof and Bonehead start campaigns to forgive the debt?

    I also do not understand why the Tories think it’s okay to spend millions of pounds for a referendum on replacing a flawed voting system with another flawed voting system, surely the referendum we need is about whether we want independence from the European Superstate?

    1. lifelogic
      April 3, 2011

      Agreed it is an outrage not to give an EU referendum when it was promised and to have one only on AV which was not. No one can really describe the UK as a democracy in any true, meaningful sense unless they are very dim indeed or just deluded.

      1. Stuart Fairney
        April 3, 2011

        We need to be clear about something.

        The politicians do not care two hoots for our opinions and ‘democracy’ is simply a guise to legitimise power. We get referendums when they are hopelessly split (such as AV) but won’t get one, EVER, on issues like the EU where they all agree with each other, (but not us).

        We can expect no change until we vote for it and the two and a half major parties are kindred spirits. No substantive change comes from these clowns.

  13. BobE
    April 3, 2011

    “The question is, what do they believe they are gaining? What are they not telling us?”

    They are looking to gain high office rewards when the coalition is rejected in 4 years time. Those that have been seen to help the EU will be rewarded by it. Maybe Cameron will try for the presidency. President of the USE would be quite a coo. They cannot bite the EU hand that will be feeding them in the near future.

    April 3, 2011

    There’s no hope of proper accounting in my view.
    Some of us on this site queried at the time of last Autumn’s financial statement the whereabouts of the UK’s EU contribution in the published departmental breakdown.
    We are none the wiser today but now read that our contribution may in fact be £3bn higher on some estimates than the £14bn gross previously estimated, but nobody really knows…!
    Soon we could be talking serious money here…in fact serious enough to be properly assessed and included under an identified heading in the accounts that the public get to see!

  15. Iain Gill
    April 3, 2011

    how should we account for it?

    losses due to theft from the british people

  16. Neil Craig
    April 3, 2011

    If Ireland could continue its 7% growth rate it could certainly pay off the debt. To do that they would need to produce cheap nuclear, coal or shale gas power. I suspect they will not. They are almost the only developed country in the world with a worse electricity production to GNP ratio than the UK.

    With growth all economic problems are minor. Without it many are insoluble.

    1. Stuart Fairney
      April 3, 2011

      It never ceases to amaze me that no-one picks up on the pitiful growth projections of 2% os so. Why can we not grow at 10% as others do?

      Oh yes, the government. Like trying to swim tied to an anvil.

  17. John Ward
    April 3, 2011

    ‘How should we account for loans to Ireland and Portugal?’

    Write them off: it is the only sensible policy.

    Then get out of the EU.

  18. grahams
    April 3, 2011

    In answer to your question, may I refer back to this strange passage from the Chancellor’s Budget speech.
    After mentioning the Japanese earthquake, he said: “This is an opportunity for me to report that we had already decided to rebuild the UK’s foreign currency reserves, which are at a historically low level. We will purchase a range of high-quality assets…”
    I don’t think this was just a gesture to prop up the yen.

    It sounded like we are planning to print more pounds in order to speculate against sterling on the foreign exchanges. I assume this meant that if the MPC ever consented to raise Bank Rate, the Treasury would deliberately block off the main mechanism by which this would help to curb inflation. Thanks.

    Perhaps there is another interpretation. I wonder: would it be possible to shovel our loans to Ireland, Portugal into the Exchange Equalisation Account, finance them by creating pounds and keep the whole transactions off the Government’s books ?? High quality is, perhaps, in the eye of the beholder.

  19. BobE
    April 3, 2011

    Ive been in moderation since 2.52.

    1. acorn
      April 4, 2011

      Bob. After clicking “post comment” yesterday, I was hit with a spam filter page; (you have to copy a displayed word to prove you are not a robot spammer). My post contained a link, which may have up-set JR’s inbox.
      So JR, can you check your spam inbox on your control panel.

  20. Sue
    April 3, 2011

    This is all getting so ridiculously out of control. Where will it end? I can only assume they’re keeping everythng crossed hoping for a recovery which just isn’t going to happen.

    The more they are taxing us to help out these countries and the more services they cut, the less people will want to start companies, get work or even pay tax at all!

    You’re killing us with your bogus green taxes (the UK is so zealous, it’s leading the way here with its LibDem cabbage munching loonies) and our contribution to the EU is taking the proverbial mickey out of us.

    All this because they’re convinced if the Euro fails, they’re little bubble of Eurotopia will fail and the gravy train will end!

    I hope it does. I hope it comes crashing down around all you unpatriotic, treasonous, greedy, corrupt, undemocratic politicians and kicks you in the backsides!

    1. BobE
      April 3, 2011

      Well said

  21. david englehart
    April 3, 2011

    the main problem is nothing to do with the banking system.
    it is that for any political party to enjoy power they must pander to the whim’s of the voters the vast majority of whom have not the slightest idea of these matters.
    all they want is to have more for less work and somehow to be immune from the hardships necessary to account for years of profligate spending and borrowing.
    it makes sense as reagan both knew and proved that low taxes increase the revenue and create a vibrant economy.
    tell that however to what i term the pub and betting office non workers and they will howl for blood from those who may have worked all their lives whilst they drained the state.
    if JR thinks the message is going to get over to that section of society then i admire his optimism albeit i think he and like minded people must just keep plugging away.

  22. Bernie in Pipewell
    April 3, 2011

    @ Sue 6:15pm

    I wholeheartedly agree with you

    Well said.

  23. rose
    April 3, 2011

    I would account for it thus: we are still paying for German guilt over the two world wars. Only when the Germans get over this will the weaker economies will be allowed to support themselves.

  24. Susan
    April 4, 2011

    Britain is meant to be a democracy, yet in one of the most important areas which effects all our lives in the UK, the public have no say at all, which is the EU.

    Everyday more of the UKs powers to act as an Independent Country are handed over to what is effectively a large bureaucratic club, where no one is held accountable for the decisions that are made. Cameron has broken all his promises on this issue, and I fear a lot of the electorate will not forgive him for it. Being in bed with the Lib/Dems, in this Coalition, who are very pro EU, has further pushed Britain into the arms of this over expanded club.

    You can continue to fight against the EU John, but the truth is you are in the minority as far as the political elite are concerned. I personally would just like someone to explain, other than preventing war, exactly what the EU has done for Britain. This expensive club costs large amounts of money just to be a member, increasing regularly, and all we seem to get in return is endless red tape. Which each year makes the UK even more uncompetitive in the Global market. The UK justice system is in a mess, as in this area we can no longer decide our own policies. Voting rights for prisoners being a prime example. Then there is the immigration problem, which has seen the UK population continue to rise, to levels where it is doubtful whether Britain will ever see anything like full employment again.

    I understand we need to trade with the EU, but this would surely not stop, should Britain withdraw from the EU. Anyway the more lucrative markets are now well outside the EU borders in the new Global age.

    Of course the UK should not provide bail outs to other Countries, especially when they are not prepared to make the cuts to Government spending that are necessary. Economic growth will take years to come for these particular Countries that need rescue, even if they undergo the cuts to spending needed, which there is little sign of at the moment.

  25. Javelin
    April 4, 2011

    I’m going to write a very pessimistic view of the UK economy and this this why.

    First I’m going to make a simple assumption that the UK housing market is very important to optimism in the UK.

    In the last recession house prices fell from 1989-1993. House prices only dropped by 14%, but inflation meant in real terms they dropped by 40% in the same period. Last week HSBC published a document saying house prices are over inflated by 40%. House prices and the income/cost ratio is a fixed item. You cant get around this constraint on the economy.

    The difference this time is that low interest rates and (relatively low inflation) means that house prices will be flat for 8 years before the the housing market comes back to a reasonable income/cost ratio. So unless interest rates rise and push house prices down optimism will fall out the economy for the enxt 8 years. Which is interesting because that will be about the time that the public sector finances get under any sort of reasonable control.

  26. cosmic
    April 4, 2011

    “How should we account for loans to Ireland and Portugal?”

    The word “defalcation” used in accounting circles, comes to mind, as there appears to be an element of extreme and conscious recklessness.

  27. Javelin
    April 4, 2011

    What does Europe have planned for the PIGS?? Ok let’s assume that the PIGS can’t afford their debts. Alot of economists think it’s obvious they can’t. So it follows that those leading efforts to save them have a plan – a plan which involves them not being saved any time soon. I would place a fair bet that Eurocracts plan involves much closer integration in return for solvency. Currently their offers of help involve loans in return for a hand in fiscal planning. The next step is to start to have fiscal control. Fiscal integration will lead to fiscal dependency. The next “hard” goal will be to have a say in being able to default on debt. Once the PIGS can’t default on debt they can’t get out of debt. The PIGS are going to driven down the road of ever tighter integration. The prize is of course to rope Spain in or to rope all the PIGs together so that the rest of Europe could get dragged down with them. For the non-pigs integration will take place by coercing those countries to raise taxes for the pigs at the threat of pulling their economy down with them. The EU leaders want this state of crisis to go on for years and stay on the brink of collapse. After all they believe that a more integrated Europe is a better and a safer Europe. A slower economy is a price worth paying.

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