Greece should leave the Euro


           The more I read about the economic disaster in Greece, the more I wish they would let them out of the currency straight jacket that is part of the problem.

           Greece has five main economic troubles. Its government has borrowed too much in the past, and wishes to carry on borrowing too much. The economy is declining year after year, as austerity bites with no currency depreciation or easier money to offer some relief. The balance of payments remain out of balance and difficult to finance, as Greece is not competitive with the more successful north of the Euro zone. Greece is mired in high unemployment, increasing its deficit and depressing its tax revenues. The banking system is weak. People afraid of the future are taking money out of Greece to put it into safer havens, doing more damage to activity in Greece.

           The official answer to all this is to raise taxes and cut public spending.  The aim is to cut the deficit, hoping  that the debt and deficit can be financed in the normal way. So far this has neither succeeded in cutting the deficit by an encouraging amount, nor has it impressed the bond markets. Greece remains miles off being able to finance itself in the usual way.

            The EU and IMF make heavy weather each time of lending more to Greece. The endless public arguments over how much more austerity Greece has to enforce to justify more borrowing undermines confidence more and leads to further money flight from the blighted country. An IMF programme for an indepenndent state with its own currency usually entails a devaluation  to price the country back into export markets and to cut the value of outstanding debts, and a sensible domestic money policy to allow private sector led expansion. Greece is denied both these features of a normal IMF programme by being in the Euro.

           The EU, IMF and Greece should make private decisions to move rapdily to a Greek exit from the Euro. There will be one off effects on debts, banks and the economy, followed by a real chance of econ0mic recovery. Greece needs growth. It needs more tax revenue to come in from more profit and income to tax. It needs more rich Greeks to keep their money at home or bring it back home. Only a new currency sensibly valued can  bring forward that confidence.

           Tomorrow we will look at how this could be done politcally and legally. It would be a much better option than doubling up the austerity as the economy continues to fall over the cliff. I do not accept that this would cause economic disaster. The price of Greek government bonds has already collapsed, Greek banks are already weak reflecting that and Euro area banks have already written down their positions in Greece. I do not see how Greece returns to decent growth on current policies, and growth is what it needs to give hope amongst the cuts. A devaluation, properly organised, merely acknowledges losses already recorded by investors in Greece, whilst starting the process of adjustment necessary to rebuild the economy.



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  1. lifelogic
    Posted February 7, 2012 at 6:27 am | Permalink

    Indeed, as you say, growth is what is needed, devaluation is virtually essential to start the process of adjustment necessary to rebuild the economy.

    Doubtless, a John Major type of leader, would say “if it isn’t hurting it isn’t working” the truth is (rather like the ERM in the UK) – it is pointlessly damaging Greece and will not work anyway. Perhaps, unlike Major, the Greek politicians might at least apologise after the self inflicted disaster it is finally over with.

    • lifelogic
      Posted February 7, 2012 at 8:58 am | Permalink

      I see that Torbay council, clearly having too much money to waste and lots of expensive people lacking useful things to do, has decided to value all its trees.

      Anyone who owns trees will know they may be beautiful but (other than as forestry timber) they are a huge financial liability with maintenance, tree surgery, root damage the like. Will this liability then be turned by “carbon religion magic” into a positive balance sheet value and then included in Torbay councils balance sheet?

      Perhaps Greece could try this to massage their figures? I do not think many will be fooled outside the Cameron/Huhne gullible greens.

      • Acorn
        Posted February 7, 2012 at 7:06 pm | Permalink

        LL. You will be pleased to know that after the snow had fallen this last week end; and the temperature dropped on Monday freezing the country, Huhne’s wind turbines across the land were doing absolutely bugger all. The four thousand odd Megawatts of NGC metered wind farms averaged for all of Monday, about one hundred Megawatts.

        • lifelogic
          Posted February 7, 2012 at 8:25 pm | Permalink

          Perhaps under £50,000 of electricity for the day, at true commercial value for, not on demand, electricity. Looks like throwing money down the drain without the absurd tax subsidy – it makes the 1/2% the banks give you (less tax) look quite attractive.

          I wonder if there is more energy to be found in the oils/meat of the dead birds and bats to be found around the bases of them?

    • Stewart Knight
      Posted February 7, 2012 at 9:15 am | Permalink

      Oh dear….Labour trolls are out in force already. This is about Greece, not some alleged and historical slight you and your ilk feel. The election is some time off yet…wait for that.

      BTW: Greece should be let go pout of the Euro, but will Germany allow it? And France will not want a weakening of the Euro.

      • lifelogic
        Posted February 7, 2012 at 10:26 am | Permalink

        I have never been called a Labour Troll before nor ever voted Labour, SDP, Liberal or Lib/Dem even as a callow youth I was not that daft.

      • lifelogic
        Posted February 7, 2012 at 12:26 pm | Permalink

        Also the election is not that far off. It is about time Cameron did something to get a recovery going instead of more and more pointless regulations and activity in government – such as silly tree valuations by conservative councils in Torbay.

        Also has he scrapped his silly “happiness” index yet?

    • Disaffected
      Posted February 7, 2012 at 10:35 am | Permalink

      Greece will not be allowed to leave the clutches of the Euro to become competitive and grow its economy. If there were independent currencies in Europe Germany’s products would increase in price and people would buy elsewhere and this would release the all consuming grip of Germany on Europe. Germany will not allow this. They have performed the coup detat on Greece, Italy and Ireland. They are certainly not going to change course. The UK and France will not stand up against Germany as we recently saw with Cameron’s veto that never was. He is implementing and supporting Germany’s will by throwing away taxpayers money on bail outs and is prepared to throw away more. Still no repatriation of powers that he crowed about or would negotiate for letting the the others use EU institutions. No, he cowered and withdrew with his tail behind his legs. The German finance minister (Shauble) said Cameron would get nothing from the EU and he was right.

      John, you and the other Eurosceptic MPs need to focus your efforts on getting rid of Cameron to prevent the EU takeover of the UK while a Tory party is in government.

      Unless there is radical change from the current position I predict Labour will increase their vote from the last election, Tories will lose seats and the Lib Dems will be virtually wiped out. Those supporters who disaffect from the LibDems will go to Labour. The LibDems will join the Labour party as a coalition and the Tories will be in opposition, once more, for a very long time.

      Mr Osborne is a poor political strategist that is why the Tory party did not have an outright win at the last election. No one knew what they stood for- Ashcroft was right about the poor campaign. Mr Osborne ought to concentrate his efforts on the awful budget and finances of the country. When I saw Andrew Neil’s interview of a Tory Treasury minister (Justine Green ) after the Tory conference it made me cringe with embarrassment. As a treasury minister, she did not have a clue how to answer his questions about the finances of the country, she was even trying to grab on to some of the things Nick Robinson said to provide an answer. No wonder the civil servants continue with the course they want to pursue rather than what the minister wants. I suggest you watch it on youtube. Like me, you may want to cover your eyes now and again. Perhaps this is why Germany wants to put their own finance minister in place in Greece.

  2. Bill
    Posted February 7, 2012 at 7:15 am | Permalink

    Yes, agree that Greece should be allowed financial freedom. The trouble is that political inertia in Europe and fixation on the whole Euro project prevent the right decisions being made, or being made easily.

    Even so, getting out will be difficult since the rate at which the drachma will float and the eventual value of Greek debt will create uncertainty in the Eurozone.

  3. Boudicca
    Posted February 7, 2012 at 7:20 am | Permalink

    Greece should never have been allowed in the Eurozone in the first place but the Euro was always a political project as much as, if not more than, an economic one.

    The EU will do any and everything it can to keep Greece inside – including destroying the lives of millions of Greek people – because if even one wheel is allowed to come of the ricketty Euro-waggon, then others will follow. And that will be the end of their dream of a United States of Europe.

    The UK should not do anything which is intended to keep Greece inside the Euro. We should lend no more money to the IMF, so it can prop up the Euro in contravention of its purpose. The only circumstances where we should provide assistance is if Greece leaves the Euro and needs assistance to re-establish its own currency.

    • Sue
      Posted February 7, 2012 at 10:02 am | Permalink

      @Boudicca : totally agree

      Additionally, things would no doubt be very rough for a while if they returned to the Drachma, but then they would begin to recover…… and that’s one thing that the EU can’t risk everyone witnessing.

    • APL
      Posted February 7, 2012 at 10:19 am | Permalink

      Boudicca: “We should lend no more money to the IMF, so it can prop up the Euro in contravention of its purpose. ”

      Not least because we are in no position to lend money.

      Nor is it wise to lend money to a borrower who clearly will never pay it back.

      So, we could start saving money by not paying ‘aid’ to India, who are on record as saying they do not want it.

      We should cut back on ‘aid’ to Pakistan (AKA supporting the Taliban) and let the two regional powers come to an understanding between themselves.

      It is an interesting side note, the reluctance of the Cameron administration to cut aid to India despite the Indian government saying they do not need the money, as an indication of governmental capture by the NGOs.

      If the British government stopped financing their operations overseas, they would all have to packup and come home. Perhaps we are better off if they are continually meddling in another countries affairs, just imagine the ‘carnage’ they could all create if they were let loose in the UK.

    • sm
      Posted February 7, 2012 at 3:03 pm | Permalink

      Why would Greece want our printed paper if they are allowed to print there own?

  4. Pete the Bike
    Posted February 7, 2012 at 7:40 am | Permalink

    Lets refocus on Britain. We has it’s own economic troubles. Our government has borrowed too much in the past, and wishes to carry on borrowing too much. The economy is declining year after year as currency devaluation steals from us. The balance of payments remain out of balance and will soon become difficult to finance without more money printing. Britain is mired in high unemployment, increasing its deficit and depressing its tax revenues. The banking system is weak. People are largely unaware of just how bad the economy and particularly government finances are. We have no strong leadership to cut debt and remove us from the EU.

  5. ian wragg
    Posted February 7, 2012 at 7:57 am | Permalink

    I’m sure Greece will leave the Euro. Perhaps they are playing for time to get Drachma’s printed.
    Romania has just kicked off due to austerity measures and the Greeks are in an explosive mood.
    Just had a holiday in Tenerife and the Spaniards are predicting the Peso within 2 years.

    • zorro
      Posted February 7, 2012 at 9:08 am | Permalink

      I think that they would prefer the ‘peseta’……peso is too latin american and not castillian enough.


      • Christopher Ekstrom
        Posted February 7, 2012 at 5:27 pm | Permalink

        Chevy Chase was once funny & in his bit as a newsreader he would intone the news “General Francisco Franco is still dead”. Is he? We are going to find out…

  6. Brian Tomkinson
    Posted February 7, 2012 at 7:58 am | Permalink

    JR: “Greece should leave the Euro”
    This has seemed obvious and desirable for a long time except to the dictators in the EU who will allow nothing to stand in the way of their sacred “project”.

  7. john w
    Posted February 7, 2012 at 8:06 am | Permalink

    John,i hear that mr farage asked mrs merkel why greece could not leave the eu.Other countries would also want to leave was her response.I hope that greece tell them where to go.

  8. James Reade
    Posted February 7, 2012 at 8:08 am | Permalink

    How about thinking again about doing it economically before steamrollering ahead to the politics and legality of it?

    Greece has problems that are essentially nothing to do with its involvement in the eurozone – it is uncompetitive. It was uncompetitive, and will remain so, unless its real wages fall. Sure, one possible way is a currency devaluation/depreciation, but that is not a panacea – its debt will increase in size and probably quite dramatically (hardly a good thing right now), and if it imports inputs in the productive process, they become more expensive and hence its exports don’t necessarily become all that much cheaper. A point I keep pointing out is that those countries that had large devaluations in 2007-08 are still not rebounding, even 4 years later.

    Furthermore, either you have and you’re disingenuous, or you haven’t and don’t really care, but letting someone leave the eurozone essentially signals the end of the eurozone. After one leaves, then any other country getting into trouble will be expected to leave, and will find the markets stacked against them as people bet on their withdrawal, just like the markets bet on the UK withdrawing from the ERM. The eurozone only survives based on the idea it’s irrevocable, and once that’s gone, so is the euro. Now I know that wouldn’t disappoint you so much John, but it would be nice for you to simply be open and transparent that that’s why you suggest Greece should leave, rather than giving off the idea it’s out of some compassion you may have for those poor Greeks.

    But then if you think the euro needs to be broken up, what about the poundzone (not the pound store!)? We have fiscal transfers to poorer areas to mitigate the impact of their uncompetitiveness, but is it really working? Isn’t the North still poor, after all these years? (I’m a Northerner before the abuse piles in from your loyal henchmen) Are fiscal transfers really the answer in the eurozone, and in the poundzone? Why not let the North have Northern Pounds so that it can devalue too, if you think that’s really the answer?

    Reply: I have explained the economics before – probelms with balance of payments, transfer payments, competitiveness, unemployment and government debts. The UK currency union does cause economic tensions for parts of the union, but most people accept these as the price of being one country, and the state sends very large transfer payments to assist. The reluctance of the successful parts of Euroland to send large transfers to the weaker parts is part of the problem, which means they need to take the weaker – or the stronger – parts out of the currency union if they do not want to pay the bills.

    • APL
      Posted February 7, 2012 at 10:28 am | Permalink

      James Reade: ” Greece has problems that are essentially nothing to do with its involvement in the eurozone – it is uncompetitive. ”

      Its competitiveness has not been enhanced by being in the Euro, in fact it has been made worse. It has been able to borrow at rates that rightly should be the preserve of a more competitive economy for example, Germany. Consequently it has borrowed more than it would otherwise have been able.

      James Reade: “A point I keep pointing out is that those countries that had large devaluations in 2007-08 are still not rebounding, even 4 years later.”

      Do you mean the UK? The UK cannot rebound for similar reasons that Greece will not recover, excessive government spending, over regulation of the market and a hugely disproportionate Public sector.

      • James Reade
        Posted February 7, 2012 at 5:24 pm | Permalink

        Greece’s lack of competitiveness would be evidence inside or outside the eurozone, and arguably worse outside because it would just resort to devaluation outside – and as said, devaluation doesn’t cure the problems, particularly in open economies that import many inputs.

        I mean the UK and Iceland. Now you see, I’m quite intrigued by this statement that the UK can’t rebound because of excessive government spending. Have you looked recently back at the size of deficits being run in the early 1990s after the ERM fiasco? 1993, 8%, 1994, 7%, 1995, 6%, 1996, 4%. Economic growth was 4% in 1994 and 3% in 1995, 1996 and 1997.

        So the economy back then managed to grow just nicely despite the government continuing to run deficits. Please do explain to me just how the current deficit, at just a few percentage points more, is having such a dramatically greater downward impact on growth?

        • APL
          Posted February 7, 2012 at 9:13 pm | Permalink

          James Reade: “Have you looked recently back at the size of deficits being run in the early 1990s after the ERM fiasco? 1993, 8%, 1994, 7%, 1995, 6%, 1996, 4%. Economic growth was 4% in 1994 and 3% in 1995, 1996 and 1997.”

          What was the size of the Public Sector as a proportion of GDP then and now?

          Another significant factor, then the world economy was still in an expansionary phase, we are now in a deflationary period.

          Add too, the UK (European) population demographic is unfavorable as well.

          Excessive public sector consumption of wealth, collapsing world trade, unfavorable demographics. Any one by itself would be a problem, all at once does not augur well.

          Reply: They also expanded the money supply post the ERM, as the banks were stronger and capable of lending more.

          • APL
            Posted February 8, 2012 at 10:40 am | Permalink

            JR: “They also expanded the money supply post the ERM, as the banks were stronger and capable of lending more.”

            Yes agreed.

            But as we are in a deflationary phase now, and credit is the most significant fraction of the economy, it is credit that is collapsing. So there is plenty of scope to expand the money supply(1) without there being any increase in available credit.

            1. If by money supply you mean cash and notes. Pretty much anything else is credit. And I maintain availability of credit is collapsing.

            The banks could be stuffed to the gunnels with cash, but if there is no appetite to borrow, then they simply cannot lend, it is analogous to pushing on a piece of string.

          • James Reade
            Posted February 9, 2012 at 2:39 pm | Permalink

            APL – I don’t have the data to hand on that. My guess is it was about 35% or so given we were emerging from a recession then, and it’s now something nearer alas to 50%. But you still haven’t established, other than by assertion, that this actually matters. Do provide me with the evidence on crowding out.

            But in making all these other excuses (world in expansionary phase, banks in better state, demographics, etc), you’re conceding the point to me – i.e. that the level of the deficit is next to meaningless here. Happy to accept that now?

          • APL
            Posted February 10, 2012 at 8:59 am | Permalink

            James Reade: “I don’t have the data to hand on that. My guess is it was about 35% ”

            Assuming you are answering my question about size of the public sector. Your figure implies two things:

            1. Since we were as you say emerging from a recession. 35% GDP = public spending was probably high since the government always use recessions to justify an expansion in public spending.

            Since 1997 UK government spending has expanded to around 50% of GDP. That is a huge expansion.

            From first principles: 1. take an extra 15% of income from party A and spend it on party B. Leaves party A worse off.

            Given that party B does not produce any wealth, but is solely concerned with consuming wealth. Clearly party B is a drag on the economic activity of party A. It must be so, even if party B makes some minor positive contribution to the economic activity of party A.

            Level of deficit is a measure of the excessive spending that the public sector undertakes on the credit of party A (the private sector), paid for by the future productive activity of the private sector.

            James Reade: “that the level of the deficit is next to meaningless here.”

            No, the level of deficit is a measure of the drag the public sector *will* have on future economic activity (wealth creation) of the private sector.

            James Reade: “Do provide me with the evidence on crowding out.”

            Show me one non government funded lending library.

        • zorro
          Posted February 8, 2012 at 2:10 am | Permalink

          We were not in ‘liquidity trap’ mode though in the 1990s in the UK. Interest levels were at sensible rates which were encouraging private investment. The trajectory of public spending was clearly going down. It is not going down at the moment but is actually rising in cash terms. In 2015, Cast Iron Dave will be sitting on a 1.5 Trillion pound debt. There is no encouragement to invest at the moment, hence the inactivity…….unless of course you are a bank which gets free money to lend on to the feckless at usurious rates.
          So, in the meantime, I’d rather have a few cocktails….


          • James Reade
            Posted February 9, 2012 at 2:42 pm | Permalink

            Check the data. Because of the recession, public spending was not on a negative trajectory. It never is in a recession – something everybody forgot in 2008 when they sought to blame Labour for everything.

            Interest rates encouraging investment – really? They weren’t too much below 10% back then, yet they are 0.5% right now. If 0.5% isn’t encouraging investment, I don’t know what is!

            But you do go on to a more important point – why is there no incentive to invest? Why aren’t firms investing? Is it really the banks, as we keep hearing? How can it be given the money being ploughed into the banking system?

          • zorro
            Posted February 10, 2012 at 1:55 am | Permalink

            ERM exit 1992 – by your own figures 1993 – 1996, deficit spending went from 8% to 4%%. It halved quickly. By 1997, the debt had been reduced significantly. Significant payments were made to cut the debt. If that trajectory had been carried on over the next five/ten years our finances would have been a lot healthier and there would have been less taxation.

            Interest rates are 0.5%….Why put money in the bank or invest in an uncertain economy? No, I will buy shiny things.

            If interest rates were 5 – 10%, I would put some real money in a bank and they could lend/invest the money as well, or I would invest it myself.

            What can a normal person do with their savings now. There are few options…buy a house?….risky, I suspect that prices are still falling in real terms.

            So, the government does some jiggery pokery with QE so that the banks can supposedly restore their balance sheets. They are not investing. They are parking the money risk free at B of E. If they had any confidence in the system, they would be investing/loaning it to businesses. At the moment, all the banks want to do is to build up their balances. The government is assisting them by printing free money and debasing the currency and robbing savers. Unfortunately very little of this free money is finding any use in the real economy.


          • zorro
            Posted February 10, 2012 at 1:57 am | Permalink

            look up ‘pushing on a string’


    • James Reade
      Posted February 7, 2012 at 12:42 pm | Permalink

      You may have tried to explain the economics before, but you haven’t convinced me – the bottom line is what I said to you – it’s a competitiveness problem. All the things you list are symptoms of that root cause. Leaving the eurozone won’t change any of that, Greece will remain uncompetitive until it accepts lower real wages – and a depreciated currency won’t necessarily achieve that as already mentioned.

      Yes, here in the UK we have these large fiscal transfers – although I believe if your man Eric Pickles had his way there’d be an end to them suggesting some aren’t all that keen on carrying on with the status quo – but have they solved the problems of uncompetitive regions of the UK? I’m yet to be convinced.

      Reply: Deavaluation is one of the main ways used to cut real wages quickly

      • James Reade
        Posted February 7, 2012 at 5:26 pm | Permalink

        But it doesn’t have any impact on competitiveness if the country imports many of its inputs – for the nth time! And despite our real wage falls, we’re not rebounding strongly any time soon, and the Greek economy is a damn sight weaker than ours.

        Maybe it’s time I gave up. Politicians decide what they believe before looking at the evidence, and distort all facts to support that.

        • sm
          Posted February 10, 2012 at 12:03 pm | Permalink

          Volume of cars assembled for export seems to be increasing. Aero engines?

          Surely the devaluation would be positive for those that can maintain an overall domestic cost advantage whilst exposed to a not falling export market or export orientated customers.

          This should hopefully enable opportunity to some companies to readjust and to exploit. If the government can manage not to stifle them with EU rules, particularly if they are small and mostly trade in the UK or outside the EU.

      • lifelogic
        Posted February 7, 2012 at 5:33 pm | Permalink

        Indeed devaluation is one of the main ways used to cut real wages quickly. Rather easier than halving everyone’s wages directly and rather less likely to produce riots and civil unrest.

        • zorro
          Posted February 8, 2012 at 2:16 am | Permalink

          Yes, this is why the Eurozone was targeted. They were fighting with one arm tied behind their back. Even these stubborn people have realised that they need to do QE euro style to buy some time.


        • James Reade
          Posted February 8, 2012 at 8:25 am | Permalink

          Additionally, can you remind me about just how well devaluation worked for the UK post-war when in Bretton Woods?

          It disguises the fact that the economy remains uncompetitive because no actual change has happened.

          It makes imported goods more expensive contributing to inflation domestically (and potentially a response to that in monetary policy – John is always quick on the draw for keeping inflation down by one means or another), and as said, if some of those imports are inputs in the productive process (highly likely in this day and age), then it won’t make exports cheaper and more competitive necessarily.

          It won’t cure Greece’s problems just like it didn’t cure the UK’s problems.

          • APL
            Posted February 8, 2012 at 2:05 pm | Permalink

            James Reade: “It disguises the fact that the economy remains uncompetitive because no actual change has happened.”

            Perhaps. But Greece went in to the Euro at an already artificially unrealistic exchange rate, the Euro – Drachma exchange rate entrenched Greece’s uncompetitiveness for the last decade or so.

            If a country has a floating exchange rate, theoretically the rate of the countries currency should reflect the relative competitiveness of that country, however in the case of the Euro zone and Greece, the Euro fixed exchange rate reflected more German competitiveness rather than Greek uncompetitiveness.

            Yes Greece is uncompetitive but the Euro exaggerated her uncompetitiveness.

            In the case of Sterling, the uk devalued

            1. because the government started QE.

            2. Because the financial sector, which is a large fraction of UK GDP is under severe stress, in our case the devaluation reflected a worsening financial position.

            By the way, I am interested in the sort of change you would like to see to make the UK more competitive?

            I assert that it is difficult to make the changes we need to while 50% of GDP is required to pay for the Public Sector.

          • James Reade
            Posted February 9, 2012 at 5:59 pm | Permalink

            APL – I don’t doubt most of those things, but the point is regardless of what you’re doing with your exchange rate, you remain uncompetitive unless relative prices within the economy change.

            What changes would I like to see in the UK economy to improve competitiveness? Good question. One thing I do think though is that making arbitrary distinctions about what is the right and wrong level of government intervention at particular points in the business cycle isn’t particularly helpful. I’ll have a ponder though and be a little more constructive later when I have a moment or two…

    • Brian A
      Posted February 7, 2012 at 12:52 pm | Permalink

      Yes, the Greek economy is uncompetitive. However, the present mess is made much worse by its membership of the eurozone, since it has been able to massively overborrow at German style interest rates. Can anyone believe that if Greece had not joined the eurozone, interest rates on the drachma would not have been considerably higher, thus largely preventing an unproductive spending binge on cheap money?

      • James Reade
        Posted February 7, 2012 at 5:27 pm | Permalink

        They would still have enjoyed low rates since global rates were low in the 2000s, and they’d have borrowed in foreign currency, and hence would have been completely screwed when they depreciated when the crisis hit.

        Keep trying to convince yourself that your pet hate, the euro, is the root of all evil. I’ll keep pointing out where you’re wrong.

        Greece’s problems are a lack of competitiveness just like the North West of England has the same problems.

        • Electro-Kevin
          Posted February 7, 2012 at 7:57 pm | Permalink

          James Read – What made them continue to be uncompetitive ?

          Subsidies from other regions ?

          • James Reade
            Posted February 9, 2012 at 6:00 pm | Permalink

            Yes, and so fiscal transfers won’t help, just as they don’t here in the UK!

            Only real wage declines are ever going to, in the long term, solve the problems…

        • zorro
          Posted February 8, 2012 at 2:18 am | Permalink

          Dream on…


          • James Reade
            Posted February 9, 2012 at 6:00 pm | Permalink

            Thanks for that constructive response. I’ll take it then you don’t have any actual response, and you’re conceding the point because you don’t at any point argue against any of the logical points I’ve made.

          • zorro
            Posted February 10, 2012 at 2:01 am | Permalink

            They wouldn’t have borrowed so recklessly if there had been a ‘moral hazard’ involved i.e the interest rate would have been higher than the Eurozone rate which is why other countries outside the Eurozone with weaker credit ratings wouldn’t have borrowed so much.


  9. A.Sedgwick
    Posted February 7, 2012 at 8:26 am | Permalink

    It is the only sane economic option, but the Euro has little to do with economics just political dreams. Greece with a low value currency has the opportunity to rebuild its economy within two years through tourism and related inward investment.

    • uanime5
      Posted February 7, 2012 at 6:31 pm | Permalink

      No country has ever built up their economy through tourism. The returns from tourism are only high when there is a massive difference between the spending capacity of tourists and the local people, such as £5 being able to purchase a months food shopping. So unless Greece devalues so that 50 drachma equal 1 Euro tourism will not be profitable.

      • zorro
        Posted February 8, 2012 at 2:21 am | Permalink

        Don’t be silly, Malaysia makes lots of money from foreign tourism at reasonable prices. Greece would also make more as it is ideally located and has good services. Tourism provides good employment for local people too so that they don’t always have to migrate to cities.


      • A.Sedgwick
        Posted February 8, 2012 at 8:44 am | Permalink

        This is nonsense. Towns and villages in this country only prosper through tourism and this also applies to countries blessed with sun, sand, islands, mountains and coastlines.

  10. Robert K
    Posted February 7, 2012 at 8:29 am | Permalink

    A perfectly logical argument that is hard to fault. However, I stick to the view that for Europe to recover what really needs to happen is for Germany to leave the euro.

  11. Richard1
    Posted February 7, 2012 at 8:32 am | Permalink

    The last para is the key bit – the argument used against Greece leaving the Euro is it would precipitate a global financial crash. This argument is repeated uncritically – as if it were a fact – eg on the BBC. I think you must be right that the effective losses are already priced in. A clean sheet is what Greece (and other countries) need. In reality its probably about political loss of face, but the key economic argument to confront is the notion that if countries leave the Euro it will precipitate a crash.

  12. alan jutson
    Posted February 7, 2012 at 8:39 am | Permalink

    One thing is for sure, if Greece does not leave the Euro, imposing higher tax rates will mean a greater black/alternative/barter economy.

    Its the politicians who have got them into the mess, its the politicians who should come up with the answer, and its the politicians who should pay the price, but eventually (as always) it is the population who will pay, one way or another, and the politicians will get away with it again.

    What I simply cannot understand is why given this Country is in such a mess, further lending does not trigger a request for something substantial as a guarantee against any further loan.

    If Greece were a Company, it would have had its loan finance withdrawn ages ago, and Directors would have lost their houses.

    • uanime5
      Posted February 7, 2012 at 6:34 pm | Permalink

      If Greece were a company it would have gone bankrupt, the shareholders would have lost everything, and the directors would have retired with golden parachutes.

      The directors are not financially liable for a company as they don’t own the company, they run it on behalf of the shareholders.

      • alan jutson
        Posted February 8, 2012 at 7:15 pm | Permalink


        Most small businesses have owner Directors, and to secure a loan, very often they have to pledge their own house to the Bank should they default.

        Many owner Directors contrary to popular belief, actually choose to reduce their own salary, rather than sack loyal staff.

        Clearly you have not had much discussion with many small business owners, who happen to be in the majority.

        I would happily agree that large PLC Directors, usually leave with a golden purse.

    • Bazman
      Posted February 7, 2012 at 7:16 pm | Permalink

      Lost their houses and gained mansions more like.

  13. Andy H
    Posted February 7, 2012 at 8:42 am | Permalink

    The big question is why has Greece not been allowed to exit the Euro and devalue as you describe.

    It is clear that the European Project has been deemed more important then the welfare of the Greeks.

    In turn the question arises of for whose benefit is this European Project anyhow?

  14. javelin
    Posted February 7, 2012 at 8:56 am | Permalink

    This is true for Portugal, Spain and Italy too.

    Every week we are hearing that the deal is ‘almost’ done – well it isnt. We were told yesterday was a the ‘last day’ – well it wasnt.

    Simply put the Western Model of borrowing money to fawn services on tax payers is broken. Cameron doesnt get it. The Conservatives are playing political games – spending just less that the Labour party would – but still staying in trouble. The markets will turn on the UK eventually. Cornering the Labour party to win the next election is not what is best for the UK. Perhaps they are playing the long game to be shot of the Lib Dems. However there is nothing like success. Failing less quickly than Labour is not what is best for the nation.

  15. Gary
    Posted February 7, 2012 at 9:00 am | Permalink

    They should never have been allowed to join. Without a large investment bank using derivatives to push down Greek rates, they would never have qualified.

  16. Bill (Scotland)
    Posted February 7, 2012 at 9:09 am | Permalink

    Greece should of course leave the Euro, as should some of the other weaker economies, as this would allow it/them to re-boot their economies with devalued currencies. However, apart from the EU-integrationist dimension politically, I think that whilst the German and some other economies operate much more efficiently, their success in export markets in recent years has been artificially-boosted since the Euro was launched because its value has been held down by the drag-effect of places like Greece. Germany had a few other countries have had lowish interest rates for many years (long before the Euro existed), but had high-value currencies which made importing from them expensive – now with the Euro, importing from Germany has become relatively cheap. I agree with those that it might be less disruptive for Germany and perhaps a few others (Netherlands and Finland?) to leave the Euro – the remaining Euro would undoubtedly fall in value significantly, making exports rather more competitive, but the interest rate regime really does need to rise to more realistic levels in the longer term to prevent future credit bubbles developing.

    • |Andrew Johnson
      Posted February 7, 2012 at 10:24 pm | Permalink

      I agree with your comments and would add that I view with increasing dismay, the manner in which Germany is asserting itself in Europe, especially with regard to smaller weaker countries. This does not bode well for the future of Euroland and its smaller “sovereign” states.

  17. zorro
    Posted February 7, 2012 at 9:20 am | Permalink

    Unfortunately, this is becoming a totemic issue for the EU and they will NOT countenance failure which is allowing Greece to exit. Germany still has a few cards to play to allow the Greeks to stay in,but it is relying on the acquiescence of their political elite.

    As many of us have said on this site, giving the current downward MAD spiral course on which Greece is headed, the only sane way out would be to leave the currency, devalue and start afresh (Argentina style). Greece has good land and natural tourist advantages which would bring in a lot of revenue. They may even accept Euros for payment or have some dual currency arrangement. There are options available to find a way out of their mess. In any case, a thousand times better than the slow Germanically inspired garrotting of their economic power/ability to grow.

    Which brings one to the point you mention about wanting to make Greece grow more successfully. Does the current policy of the EU towards Greece suggest that this is their real policy objective?


  18. Roger Farmer
    Posted February 7, 2012 at 9:38 am | Permalink

    The logic of the argument for the return of Greece to the Drachma is irrefutable. Spain, Portugal, Southern Ireland, and possibly Italy should give serious consideration to the same course of action. I have no knowledge of the situation within the eastern european members. Politics created the Euro against all financial criteria for a common currency, and politics are the only factor preventing a reversion to national currencies. The above countries need their own currencies to enable them to set their paths to national recovery. Let the europhiles of similar financial proberty gather in a smaller grouping and enjoy their marriage.

  19. HJBbradders
    Posted February 7, 2012 at 9:42 am | Permalink

    Let’s make a start by all nations agreeing that, in future, the Olympic Games will be permanently located in Greece. Since we are told it is doing such wonderful things for the UK, that should surely boost their economy!

  20. oldtimer
    Posted February 7, 2012 at 9:56 am | Permalink

    One difficulty is that many Greeks want to stay with the euro – at least those interviewed last year invariably said so to camera. If the strong balance of Greek public opinion is to want to stay in the EZ then they will have to pay the price of doing so. I suspect that many are hoping against hope that something will turn up, that Germany`s opposition to transfer payments will crack and will take comfort from the fact that there is no mechanism, to expel them from the EZ. Somehow they will muddle along with the cash/barter transactions taking over a greater share of economic activity. No doubt the ECB`s version of QE will filter through the system to help keep the Greek state sector ticking over. I think the politics are at least as complicated as the economic. If or rather when they default, what then?

    • sm
      Posted February 7, 2012 at 3:11 pm | Permalink

      So let them vote? Alexander to the rescue!

  21. formula57
    Posted February 7, 2012 at 10:09 am | Permalink

    There is a view that it is accepted (by Merkozy, the ECB, and EU) that Greece must leave the Euro but to avoid responsibility for such a move, a sham rescue with impossible-to-meet conditions is made available whilst everyone gets used to the idea and Greek politicians realise that the exit is less costly than aiming to implement the impossible.

  22. Martin C
    Posted February 7, 2012 at 10:22 am | Permalink

    Are you sure all European banks have written down their positions on Greece? I really dont think so. The French merchant banking system still holds much of the Greek debt rated at full face value, I believe. They have to hold it at face value otherwise they would be bankrupt.
    Therefore they have to offload that debt somehow, and as nobody with two braincells to rub together is going to buy Greek debt that means the taxpayer, in the form of the ECB and/or IMF, must buy it, before Greece goes pop, which it will. And that is what is happening in the form of these “bailouts”. Mark my words, they will find some excuse to ram the next “bailout” through, and the one after that. The French banking system has not finished offloading its Greek debt yet.

  23. Denis Cooper
    Posted February 7, 2012 at 10:30 am | Permalink

    Greece should leave the euro, and Cameron should have said that to Merkel in the autumn of 2010 when she first demanded EU treaty change to allow the eurozone to set up the ESM, and potentially do much more besides.

    “European leaders have given way to German demands for a change to the European treaties, but the procedure for the change and its size has been calculated explicitly to avoid the danger that it could provoke referendums in some EU states.

    In a significant victory for German Chancellor Angela Merkel, early on Friday (29 October), EU prime ministers and presidents backed “a limited treaty change” to deliver tighter fiscal discipline and allow for the creation of a permanent bail-out fund for members of the eurozone.”

    An accompanying EU treaty change to create a mechanism for a country to make an orderly withdrawal from the euro should have been one of a series of demands tabled by Cameron in exchange for that treaty change demanded by Merkel.

    Both the ESM, and that EU treaty change which is necessary before the eurozone states can legally put the ESM into operation, were mentioned in a Lords Written Answer of January 30th at Column WA289 here:

    “Treaty change has been proposed to provide that euro area member states may set up the ESM. Although the provisions in the relevant article do not apply to the UK, any changes to the EU treaties must be ratified by the UK and all other EU member states before they can enter into force. This treaty change will be approved under the provisions of the EU Act 2011.

    In line with the provisions of that Act, the Foreign Secretary laid a Statement before Parliament on 13 October 2011 setting out that, in his opinion, this EU treaty change decision does not fall within Section 4 of the EU Act and so no referendum is required. An Act of Parliament will be introduced to ratify the treaty change decision as soon as practicable.”

    The Statement from Hague is here:

    and the EU treaty change agreed by EU leaders on March 25th 2011, through European Council Decision 2011/199/EU, is appended to that Statement.

    I hope that if/when MPs debate the Bill to approve it, to be introduced “as soon as practicable”, they will consider the nature of the ESM treaty and now the associated “fiscal pact”, and ask themselves whether they want something approaching a dictatorship to be set up on our doorstep.

    As well as thinking about the potential future misuse of such a loosely worded treaty amendment, and bearing in mind that the government could have demanded a substantive quid pro quo to protect and advance our long term national interests but signally failed to do so.

    Although in my view it would be much better if Cameron announced that he no longer intended to proceed with ratification of that EU treaty change, pending further negotiations.

    Surely he should have learnt by now that if he tamely gives Merkel whatever she wants then she will just come back for more.

  24. Iain Gill
    Posted February 7, 2012 at 10:36 am | Permalink

    I love Greece and the Greek people. So sad to see them in this situation.

  25. Anoneumouse
    Posted February 7, 2012 at 10:38 am | Permalink

    I tell you the truth, it is hard for the EU Commission to enter the world of reality. Again I tell you, it is easier for a Trojan Horse to go through the eye of a needle than for the EU Commission to enter the world of reality.

  26. Denis Cooper
    Posted February 7, 2012 at 11:12 am | Permalink

    Today is the twentieth anniversary of the signature of the Maastricht Treaty, which like the Lisbon Treaty still exists as a separate, identifiable legal document on the EU’s website:

    “Done at Maastricht this seventh day of February in the year one thousand nine hundred and ninety-two.”

    And, yes, we have been done every day since.

  27. Sarah
    Posted February 7, 2012 at 11:51 am | Permalink

    It seems to me that the powers that be know that Greece will default and are completely up for it. What they are doing at the moment are dragging out the process so that the markets have as much time as possible to adjust to that fact and that banks can carry out the necessary write downs over the longest possible period. When this has been done then lo and behold Greece will “default” . The fact that this causes the maximum possible pain to a sovereign people is of no consequence to those running the European project who only wish to ensure their own economic survival.

  28. John B
    Posted February 7, 2012 at 12:33 pm | Permalink

    Britain is supposedly “cutting” its deficit, but actually is increasing it. Even cutting the deficit does not reduce the debt, just stops it from growing as much.

    So if the UK, in many ways much better placed than Greece, with its own currency, BoE printing press, AAA rating, austerity and tax increases cannot reduce its deficit, and is still growing its debt, what chance Greece?

    Am I missing something?

    Why do the politicians and technocrats not see this; or if they do why are they persisting in imagining a bit more austerity, a few more taxes, some more debt will produce a miracle?

  29. Martyn
    Posted February 7, 2012 at 1:02 pm | Permalink

    Just as the banks that were ‘too big to be allowed to fail’ (and we all saw what then happened to rescue them), the Euro is too big to be allowed to fail and if Greece is forced out of the Euro EU control of the situation is lost.

    So I think that a way will be found to rescue Greece, probably by imposing EU financial regulators onto its government, as has indeed already been suggested and rejected. But, one way or another Greece will be rescued to preserve the Euro and the drive towards establishing the United States of Europe which, after all, is what all this is all really about.

    Of course, an EU smoke-screen will have to be erected to preserve an appearance of Greek democracy, if for no other reason than to avoid the people taking to the streets again and maybe bringing down their government.

  30. javelin
    Posted February 7, 2012 at 1:29 pm | Permalink

    The general consensus in the market is that the ECB is masking a catastrophic problem in the economies of Europe. They are trying to deflate a potential catastrophic collapse.

    Billions – if not trillions – is being help back awaiting the correction before reinvestment. Perhaps a better perspective is to view the 3 year LTRO as a 3 year discount window from the central bank – that banks normally take when they are near bankruptcy. Over 500 banks applied for it – to boost themselves through the carry trade – almost none of the LTRO got to the market to act as QE.

    Why 3 years from the ECB ?? We all asked that question – when the ECB was supposed to be just dealing with liquidity – 3 years is clearly solvency. From this perspective the EZ banking system will be at deaths door for 3 years. And the ECB has judged it will be 3 years of wage deflation in the PIIGS to balance the EZs books again. Simple 101 economics tells you wage deflation is the only way out for the EZ. So follow the simple logic. The EZ banks need support for 3 more years.

    For me the key strategic position is that the PIIGS will be going through 3 years of deflation. The ECB will manage it.

  31. Lindsay McDougall
    Posted February 7, 2012 at 1:49 pm | Permalink

    Agreed. What took you so long? Once the new drachma is established, Greece should be allowed to convert all its euro debts to new drachmas and inflate the new drachma at an agreed rate, say 5% per annum. This would be a back door partial default but a lot simpler and better than ‘haircuts’ and preferential creditors.

    The UK ran a Public Sector Debt Repayment in 1989 and 1990, repaying a lot of our debt in what turned out to be clipped coinage (the inflation came later), so there is a precedent of sorts.

    Reply I have called for a Greek exit before.

  32. peter
    Posted February 7, 2012 at 1:53 pm | Permalink

    You know yourself JR you can preach as much as you like – this isn’t about whats best for Greece or its people its about the ambitions of those who want a superstate.

    Those in Greece who signed up for this should hang their heads in shame, as should the Eurocrats who knew they massaged their figures to get in.

    This is a nightmare!

  33. BobE
    Posted February 7, 2012 at 1:59 pm | Permalink

    I agree that the Olympic Games should be pernamently based in Greece.

  34. Brian
    Posted February 7, 2012 at 2:51 pm | Permalink

    We have problems but nothing like the Greek Voter who can only see a lifetime of austerity stretching on forever.
    How much better to devalue now and thus give the German workers discounted holidays.
    Sun beds for Drachma.
    We used to base our foreign policy on trading with the world,remaining allied to USA and holding the balance of power in Europe.
    Is it not time to back the underdogs in southern Europe and support those who wish to have an independent future within the EC.
    We could build much goodwill that way rather than parroting the EU line of ever closer integration.
    My daughter’s in the FCO .Unfortunately -‘dream on Dad ‘ would be her view !

  35. Tad Davison
    Posted February 7, 2012 at 3:23 pm | Permalink

    I imagine the two main protagonists, France and Germany, are getting worried that their ideological pipedream is finally turning into the highly-predicatble nightmare, the rest of us said it would.

    The only way the Greek economy will get out of this mess, is to de-value. That much is pretty clear, but to do that, it needs to be removed from the crippling and undemocratically prescriptive yoke of the EU. That, too, is pretty clear.

    Once one country is allowed to leave the Euro, and then be master of it’s own destiny, other countries will also see the advantages of getting out. The trickle could soon become a flood.

    (Mrs Merkel and Mr Sarkozy-ed), , will never allow such a thing, and will pull every devious string they can to stop it happening.

    The most frustrating thing about the entire EU debate, is the reluctance of those who still cling to it, to enter into a meaningful debate, so they can tell us all about it’s advantages. Even my own MP, the pro-EU Lib Dem Julian Huppert, will not engage me, because he knows he has already lost the intellectual argument – and this bloke promotes himself as a scientist! If only they would come down from their ivory towers and get with the real world. Perhaps then we could all make proper progress.

    Tad Davison


  36. Damien
    Posted February 7, 2012 at 3:45 pm | Permalink

    The World Bank -‘Ease of doing business index’ 2010 rates Greece 101 (1=’Most business-friendly regulations’). They say its easier to do business in Guatemala, Mongolia , Namabia and even the Yemen. Rep.

    Greece has shown repeatedly that it is incapable and unwilling to reform in the certainty that the EU would give in rather than face the risk of a default of a EZ member. The Greeks feel that they should not give up their 13th and 14th month bonus salary and expect that the rest of the EU should continue to subsidise the country while EU businessses are hindered from trading there because of the closed practices and regulatory obstacles put in place by the Greek administrators.

    Greece should have to leave the EZ or agree to austerity measures that are actually binding. Either way they are living beyond their means and cannot expect their neighbours to continue bailing them out.

  37. Bob
    Posted February 7, 2012 at 3:51 pm | Permalink

    Nigel Farage wrote a article in the Feb issue of “Independence”, where he draws parallels between the Eurozone fiasco and “The Italian job” with Angela Merkle as the Michael Caine character, and as the gold is sliding towards the back of the bus, she says “Hang on lads; I’ve got a great idea…”. Roll the theme tune…

  38. uanime5
    Posted February 7, 2012 at 5:42 pm | Permalink

    Will Greece leaving the Euro will solve some of their problems, such as making their exports more competitive, it will create others.

    1) All the Greeks will send their money out of Greece because they don’t want to replace their Euros with a currency that will rapidly devalue against the Euro. So the rich Greeks won’t keep their money in Greece.

    2) If Greek debts remain in Euros then devaluing won’t reduce these debts. So Greece will not be able to inflate their debts away and high inflation may make the problem worse.

    • Mark
      Posted February 7, 2012 at 9:15 pm | Permalink

      The Greeks will simply default – and the Euro institutions will have to swallow the consequences, rather than hoping to privatise all the losses.

  39. Barbara Stevens
    Posted February 7, 2012 at 5:59 pm | Permalink

    We worry about Greece, yet, the USA as reached 14 trillion of debt, and that’s even more scarey. I’ve watched three economists from the USA, who predicted the 2008 crash, and now predict a deperession by 2013, as their debt lengthens. They call this ‘after shocks’, and do not appreciate QE, at all, printing money. Is this what the Bank of England has been doing? They say it’s only staying the outcome, which eventually will hit. I’d like your views on this John, it’s very worrying. The world looks to the USA and China, who now own nine and half per cent of the USA’s debts; they are not happy about it at all.
    Obama is spending money he does not have, on health care which is very expensive at a time of unemployment and lack of funds. They do not have a welfare system like ours where we contribute via NI, it seems to me they are trying to do things far to quickly. Yet, we have printed money, and I’m confused, will their analysis mean the same for us?
    Greece should like you say come out of the Euro, but of course she enjoys other help while in besides the loans that would cease if she left. I cannot see her succeeding much unless she’s free to do so, and will default and come out, she will have no choice in the end. Portugal too, is in dire straights, it’s just a matter of time. Germany cannot fund all of them and letting themselves loose is the only option they may have. While they are in the corset of the euro all of them cannot breath, and eventually all will want to be free.

  40. Phil Richmond
    Posted February 7, 2012 at 6:03 pm | Permalink

    A Conservative PM & a Chancellor who understood economics would be advocating the above.
    Shame we have a Lib-Dem Europhile in No.10.

  41. Jon
    Posted February 7, 2012 at 6:51 pm | Permalink

    The euro has meant high labour costs for countries like Greece which has led them to import feta cheese, olive oil and lemons. Its interesting that Alex Salmond sees this scenario as his big idea for the future of Scotland.

    • Mark
      Posted February 7, 2012 at 9:12 pm | Permalink

      Is he hoping they’ll serve haggis in Greek restaurants?

  42. stuart
    Posted February 7, 2012 at 7:07 pm | Permalink

    Perhaps a more interesting question to ask, is why no action has been taken against Goldman Sacks for ‘helping’ the Greeks meet the entry criteria to join the Euro, and pass through the eye of the needle.

    I cannot believe the staff at Golden Sacks did not know (the problems with the Greek statistics-ed) Greek government statistics when they saw them, after all the head of the Greek statistical service was known as the ‘Magician’, but instead they said nothing, closed their eyes, held their noses, swallowed hard, and collected their fees.

    In the light of current events, that must surely count on the part of Golden Sachs, as (unhelpful conduct-ed)

    Perhaps Mr Redwood would care to ask some questions about that, and why so many people involved in the crisis are ex Goldman Sachs employees…

    Reply: It is not a matter for the UK government, as the UK is not a Euro member, so there would be no basis for asking questions of Ministers on this contractual matter from within Greece and the Eurozone. I myself regard Greek Ministers as primarily responsible for the figures they tabled. Advisers advise, and Ministers decide.

    • Andy
      Posted February 7, 2012 at 9:46 pm | Permalink

      A more pertinent question would be what the then Grosvenor of the Bank of Greece knew. After all this gentleman is now Prime Minister of Greece. As he was Chief Economist, Deputy Governor and then Governor I find it improbably that he did not know that the figures used for Greece to enter the Euro were a fraud.

      But this doesn’t help the Greek People who are seeing their economy being destroyed on the alter of political egos and stupidity.

  43. Martin
    Posted February 7, 2012 at 7:33 pm | Permalink

    1) Would not Greece’s debt holders have to agree to their debts being converted from Euros to Drachmas?

    2) Won’t Greece be expecting extras social fund handouts from all soon as it is even poorer? Which begs the question should Greece even be in the EU? Indeed I often wonder why the Foreign Office is so keen to add another very poor country – Turkey to the EU.

  44. lojolondon
    Posted February 7, 2012 at 8:16 pm | Permalink

    If you want to know why the people who are running Greece are acting as they do, look at who they are – they are not elected, they have no constituents. They are placed there by the EU to ensure that Greece will remain part of the Euro, so they are dancing to the piper’s tune.

    Democracy in the Fourth Reich.

  45. Mark
    Posted February 7, 2012 at 9:11 pm | Permalink

    Cecily, you will read your Political Economy in my absence. The chapter on the Fall of the Rupee Euro you may omit. It is somewhat too sensational. Even these metallic Hellenic problems have their melodramatic side.

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    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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