Ever since she conceded over setting up the Euro to France, Germany has been a semi detached member. Germany has willed the end, a common currency. She has refused the means, a political, monetary and banking union. Germany has wanted a relatively weak currency which helps her export and build up large surpluses. She has not wanted to share her wealth with the other members of the zone who are struggling financially.
Germany has been adamant that she will not pay for any weak country’s balance of payments deficit. They need to export more and import less. She has refused to prop up weak banks in other countries, saying that they need to lend less and raise more share capital. She has refused to grant or lend money to weak states that spend too much and need to borrow. She has told them to cut spending and raise taxes. All this has been called Germany’s austerity policy for the Euro. Most people think it has been followed, that Germany is in charge, and Greece will have to submit again.
It is true that all these approaches are formally Germany’s policy. It is also true that other countries in the Euro have been forced to cut spending, cut wages, recapitalise banks and do other prudent but deflationary things to try to live within the Euro. These policies will not allow the Euro to be backed by a successful, growing and prosperous area. In some co0untries they had led to mass unemployment, big cuts in wages, and a generation of young people unable to join the workforce.
However, it has not gone all Germany’s way. If Germany had kept them all on these policies all the time the Euro would have broken up by now. Just as Germany requires more cuts and more austerity, so behind the scenes step by step the rest force Germany to accept more responsibility for the communal debts, and to offer more money to the laggard economies. Germany has lost a series of crucial battles for prudence. In 2011 when the currency was near collapse Germany accepted large lines of credit being granted by the ECB to commercial banks in the zone. In 2014 Germany was forced to accept quantitative easing to bid up the bond prices of other states in the union and create more Euro cash.
Today Germany has to accept that the ECB will finance the Greek commercial banks, offering them as much cash as they need. These banks in turn can finance the Greek state.
Germany- and others – have also had to accept major debt write offs by both Greece and Cyprus in their respective past bankruptcies. Both were allowed to stay in the Euro despite their poor financial conduct.
The battle between Greece and Germany will prove once again that Germany has to lose if she wants to keep the Euro. Germany has to turn a blind eye to some new fix, some extend and pretend approach to Greek debt and continued cash supply to Greek banks. Alternatively Germans along with others will have to accept a major write down of Greek debt from another bankruptcy of the state along with possible losses in commercial banks if Germany prevents further ECB support. This morning the Greek Prime Minister has made a fighting speech implying he either wins or he declares bankruptcy and leaves the Euro. Germany and other states will take a big hit on Greek bonds if that happens.
Germany needs to wake up to the shocking reality. All the time she stays in the Euro she will be forced one way or an other to pay more of its bills. She has but a minority share of the votes (18%) and decision making, in a zone now dominated by states who believe they should be able to spend more of Germany’s money for her. So it will be, unless Germany has decided to move from semi detached to outside the zone. If she stays in she will discover she is in a terrace with shared walls she needs to pay to repair.
February 9, 2015
You last paragraph sums it up rather well.
It will end doubtless result in more yet more “extend and pretend” with no proper solution. Italy, Spain, Portugal and France will join the queue.
February 9, 2015
Its a really excellent summary by JR. It demonstrates in clear language that if you are in a currency union you have shared liabilities. The practical reality, which is now becoming horribly clear, is that no set of tough paper agreements can cap that liability because in the end the political and social pressure to cave in is too much. The only way to be insulated from direct responsibility for the liabilities of spendthrift bankrupt states like Greece, is to be politically independent from them.
Lets again remind ourselves that its high spending socialism which got Greece into its mess. Anyone who wonders whether Miliband’s Labour would be good or bad for business should look at how attractive it is today to invest in Greece – or France
February 9, 2015
Germany is getting it’s just desserts.
We should fall to our knees and pray that the common sense of the British public through their suppport for the Referendum Party and later UKIP, frightened the life out of the establishment and the political parties. We are not outside the EU because of Lib/Lab/Con poliltical judgement, we are outside because of their fear of the electorate.
Germany more than most with its hegemony over the project is getting exactly what it deserves. It was brain dead for thinking it would work, yet has ruthlessly exploited it for its own narrow ends. When it all eventually comes crashing to earth, perhaps they will put whatever grey cells they have into gear next time they come up with cunning plan No 3 of for monetary integration without political integration.
February 9, 2015
The argument was that adoption of a common currency would promote economic convergence of the participating countries, and after a short period they would all be able to live comfortably with the shared currency. In fact after the launch of the euro it quickly became apparent that the opposite was happening and some of the economies were tending to diverge rather than converge.
It is conceivable that it would have worked if the single currency had been tightly restricted to countries which were already closely aligned economically, politically and culturally, but even then one would have to ask whether it could have been extended from Germany and the Benelux countries – which in many respects might just as well completely surrender their national sovereignty and become new Lander, subjects of the German federation – to France, and as of course it was the French politicians who had pressed hardest for a single currency as a condition for agreeing to the reunification of Germany it would have not have been possible to exclude France.
However German and Dutch negotiators did try to get the Maastricht Treaty framed in such a way that for the foreseeable future Italy, and also Spain and Portugal, would not qualify for membership of the single currency. It was the German Chancellor Kohl who rejected the advice given to him and insisted that Italy must be included, which opened the door wider and allowed Spain and Portugal to also join in the first wave, and then later Greek politicians were knowingly allowed to blag their country into the euro as well with the idea of making use of Germany’s credit rating to facilitate their borrowing.
I have said before that I have little sympathy for either the Greeks or the Germans in the present debacle. I would not go as far as saying that I have no sympathy at all, because I know that while these are notionally democratic countries it is very difficult for the ordinary people to keep their political elite under proper control, just as in the UK and indeed in the US and other notional democracies.
You have the mass of the people whose time and energy is largely taken up with non-political matters, getting a living and looking after their families and so on, and who have to mainly rely on whatever information and explanations may be provided by the mass media, and then you have a small number of professional politicians and various hangers-on including lobbyists and journalists who have wangled themselves into positions where they can make a good living by working full-time to manipulate and deceive the rest for their own purposes.
February 9, 2015
Meanwhile all those who were in favour of the ERM, ever more EU and joining the EURO will be endlessly invited on to the BBC to give us they current “words of wisdom” without any sensible questioning of them.
February 9, 2015
@Raddiy; “We should fall to our knees and pray that the common sense of the British public through their suppport for the Referendum Party and later UKIP, frightened the life out of the establishment [..//..] we are outside [of the EZ] because of their fear of the electorate.”
Yet the majority of the electorate, between 1992 and 2010, voted for parties that were broadly in favour of ERM, the EZ, if not favour of joining as soon as possible, or indeed yesterday – so your suggestion that the Referendum Party or UKIP did anything that prevented the UK from joining the EZ is rather over-inflated, in fact it could be argued that the split those two parties caused in the Conservative party allowed a very pro-Euro PM into Downing Street from 1997. The fact is, shock-horror, we should all fall to our knees and pray for the common sense shown by one Mr G. Brown who -at the time employed within No. 11 Downing Street- had the forethought to keep stalling his bosses attempt to join the Euro!
“When it all eventually comes crashing to earth, perhaps they will put whatever grey cells they have into gear next time they come up with cunning plan No 3 of for monetary integration without political integration.”
Are we talking about Germany or some other EU member country, I seem to recall Germany being quite keen on the idea of that EU Constitution, which would have been the basis of the federal political integration of the EU that is needed to have an effective EZ.
February 10, 2015
I totally disagree !
You can no more say that voting for three parties that supported the ERM, Euro and EU, than voting for Labour post 1997 meant you supported all their little wars, or the Coalition in 2010 for Libya. People tend to vote for the party that they ‘feel’ best suits their needs at the time. To assert that voting for any of the three main parties supports ‘Europhillia’ is quite frankly, absurd !
The Conservative Party was split over Maastricht. Concessions were won from the, Major government which helped to keep the UK out of the Euro. Our experience with the ERM and the pressure brought on by the late, Jimmy Goldsmith (RIP) obtained an assurance that the UK would never enter the Euro without a referendum first.
Gordon Brown MP chose not to enter the Euro because it did not meet the five (?) criteria he set before entering. Again effectively blocking any attempt by, Tony Blair to railroad us into it. Both men had ambitions. One wanted to be PM, and the other, the President of some (control freak ed) superstate. To join the Euro, it meant that Gordon Brown MP would have had to cut spending. Something that would have serious damaged both his reputation and his chances of becoming PM. Ergo, Gordon Brown did the right thing, but for the wrong reasons.
I do not know where you got your history of events, but I seem to remember things a little differently.
February 10, 2015
Well said. The the LibLabcon cartel did not openly advertise their deceitful intentions about ceding control of the country to the EU. They all make it sound trivial and of no importance to the “main” issues- as Heseltine tries all the time. The people are gradually waking up to the fact that the EU is actually co trolling all the “main” issues with the LiblabCon cartel conivance.
February 10, 2015
@Mark B; “People tend to vote for the party that they ‘feel’ best suits their needs at the time”
Indeed they do, now remind us how many voted for either the Referendum Party or UKIP between 1992 and 2010, surely if the electorate were significantly anti EU they would have voted for the party that “they ‘feel’ best suits their needs at the time” (even more so had any bothered to read the manifestos)?…
As for your comments regarding Blair/Brown, I was merely pointing out that it was Brown who keep the UK out of the Euro, rather than any of the then protest grouping. Sorry if my irony on that point achieved nothing more than the dead cat bounce…
@Hope; “The the LibLabcon cartel did not openly advertise their deceitful intentions about ceding control of the country to the EU.”
Well that depends on if you bothered to read the manifestos or not, Labour made it pretty clear, even back in 1992, talking about opting into the Social Chapter, joining the ERM, they even wanted the ECB to be located in the UK and remember that Labour very nearly won that election, cutting Major’s majority to just 21… Perhaps the electorate were not and are still not significantly bothered about an “EU super-state”, even with the rise of UKIP (that has a whole swath of policies, not just that of leaving the EU, so voter support for leaving the EU can’t be assumed [1]), it is still touch and go if an In/Out referendum would achieve the required 51% majority for leaving the EU.
[1] I know one company owner who broadly supports UKIP policies but does not want to leave the EU!
February 11, 2015
Not at all, read the FCO paper which makes it clear that it was the intention of the main parties to deceive the public about the EU influence. Drivel again Jerry.
February 11, 2015
@Hope; More drivel indeed, but from you “Hope”. Perhaps if you stopped trying to see conspiracy in everything you hate, I quoted from the Labours 1992 manifesto for goodness sake!
February 9, 2015
I wonder how many postings you will get like this one saying that Greenspan’s comments yesterday made all the sense in the world
February 9, 2015
Postscript–I have now decided that I don’t know what a bridging loan is though I must say I thought I did. Does one not need in advance at least an identifiable chance that any such loan will be repaid and in any event bridging finance does not usually come cheap.
February 9, 2015
This is a good point. in the commercial world a bridging loan has a defined take-out. an agreement to agree about such a take-out would not do.
February 9, 2015
Good morning.
Personally, I think all the Nation States lose, with only winner being the EU and Europhiles.
The salami slicing of integration at work. Just enough to move forward, but not so much that people will begin to notice what is happening to them. ie A full Federal EU.
Just like certain parts of the UK, there will always be poorer parts that will always drain money away. It is why, although I still want to keep our union, as other parts of the UK seem to want to go their own way, I want to be able to go our own.
If those that are part of the Euro want to stay, then they are all have to accept that it is what it is, and make the necessary ‘adjustments’.
February 9, 2015
Good morning John,
Has the €38 billion “loan” that Juncker was “requesting” recently from UK taxpayers been approved?
If I recall correctly, it was the one he was “acquiring” for the EU slush fund to relaunch the European economy.
Will this further tranche of UK taxpayer debt be going towards helping out the Germans in their hour of “need”?
February 9, 2015
Germany became an export powerhouse for nearly 40 years after the war using the strongest currency in the world, the D-Mark. Germany had the Weimar hyperinflation fresh in their mind and never wanted to repeat that.
It is a myth that weakening your currency is the path to riches through exports. It provides a short term pricing edge and a long term quality decline.
If Germany now wants a weak Euro then they have truly lost their memory. It proves that even a collective IQ of 107 is no guarantee against stupidity.
February 9, 2015
Re Germany, it rebuilt itself post WW2 on the Erhard reforms and a weak currency. That lasted until c1971 when fixed gold convertibility ended the era of fixed fx rates. Fx rates then adjusted very rapidly through the 1970s; the DM strengthened from c9DM:£1 in 1970 to c4DM:£1 by 1980. (The Japanese Yen experienced a similar rapid revaluation during the 1970s). The huge German achievement through the 1970s was to keep inflation under much stronger control than any other major economy so that could live with its now strong currency. This, as you say, was aided by the absolute desire in the minds of the German public to avoid another Weimar type hyperinflation.
What we witness today in the EZ is a replay of economic distortion caused by a fixed rate regime – in this instance the euro zone regime with no compensating adjustments via redistribution. Sooner or later, something will have to give.
February 9, 2015
Don’t forget it was the “London Dept Agreement” that actually bailed-out Germany. As Bill Mitchell wrote “Germany has a convenient but flawed collective memory”
February 9, 2015
Of all the stuff I have read since the Greek election, the following gives the best layman’s guide as to how the EU or “Greater Germany” as my Italian contacts now call it; got itself into its current, hopefully terminal, malaise. http://bilbo.economicoutlook.net/blog/?p=30048
The thing is, if the Eurozone implodes, what happens to the Euro currency? Something has to give a FIAT currency value, otherwise nobody would use it. The Pound Sterling is given value by the fact that we can only pay UK taxes in Pounds Sterling, so you have to get some. The Euro has a similar “tax driven” value. So what if EU member states decided to have their own currencies that you had to use to pay each state’s taxes. Does the Euro become a “Bitcoin” equivalent, with no final redeemer of the value of that currency? Even when Zimbabwe’s’s currency crashed, you could still use it to pay your Zimbabwe taxes. Answers on a postcard to John Redwood MP.
February 9, 2015
The London Debt Agreement certainly contributed to Germany`s recovery – but on its own it was not enough. It also needed the sustained effort that rebuilt and sustained a shattered economy. For that Germany deserves credit.
February 9, 2015
A very fair analysis, Germany is between a rock and a hard place. It is a big political question for the German people who must decide whether they wish to continue to be head prefect in an increasingly unruly school or move on. As part of an essentially undemocratic organisation, the big question is whether they will ever be allowed to express their opinion. If the German people are not allowed to express their view and are bulldozed into accepting the view of Brussels then I fear that parties will arise in Germany to force the issue as in Deja-vu. We all know where that can lead.
February 9, 2015
Is anyone running a book on which is going to be the next country to default/refuse to pay? My money’s obviously on Spain. How much is the UK going to donate in order to ensure Germany’s political ambitions don’t get derailed? And if Ireland needs a load of extra cash, how much will the UK give to them under the counter?
I can’t help thinking that Germany would be content to take a pay cut in order to stay at the head of the company – after all, it’s not as if the Germans are incapable of digging themselves out of even the deepest holes is it? And when they’ve done that the rest of the Eurozone will be in its pocket. Just what they’ve wanted for centuries! The only problem Merkel and her cronies might have is that the 80 million-odd people who make all the money might get fed up soon. Especially if the Germans start having to bail out Slavic countries.
February 9, 2015
@DaveM; Spain likely doesn’t need another loan, but I wonder if anyone has started a book on Spain being the second country to leave the EZ should Greece do so. Of course the second country to leave the EZ might be Germany herself!..
February 9, 2015
The eventual inevitable denouement is hinted at in the introduction to your final paragraph. The Germany you’ve discussed in the main piece is ‘this’ Germany. The contemporary Germany, Merkel’s current Germany.
The German electorate will eventually have something to say about it if it becomes clear to them they are to be the generous donors to the Euro charity project for all foreseeable eternity. It would be interesting to see if there was a polling correlation between current events and increasing support for AfD?
Off-topic but possibly relevant to a small degree, it’s touching to see Martin Sorrell’s comments in today’s Guardian with regard to any future EU referendum. ‘Certainty’ is what he wants. If he thinks businesses have some form of right to ‘certainty’ then I’m not convinced he understands the concept of business and competition. ‘Certainty’ is being in a special-status club in which you are presented with the winning lottery numbers in advance and in secret. At that point, that isn’t ‘a lottery’, it’s a fix. A cartel. Neither a fix nor a cartel is a healthy business. I would hope somebody senior and influential might soon choose to advise Mr. Sorrell to butt out or attach himself fully to an openly pro-EU political party, of which there is one he might support in the UK.
That party was in receipt of the votes of 1.9% of the entire qualified UK electorate in May 2014. I understand the leadership post of that party may be empty quite soon?
Reply The certainty argument is absurd – if you believed we have to deliver certainty to business you would abolish General elections!
February 9, 2015
Forgive me but don’t wind farm developers have certainty?? The amount of subsidies received means that they earn more for NOT operating than they do when they are on!! It would be more lucrative for them to not operate than to connect to the grid and produce energy on occasions. Their businesses cannot fail all the time the British public is propping them up. I am sure all businesses would like this kind of certainty and then half of us wouldn’t have to get our sorry butts out of bed in the mornings!!
February 9, 2015
To big to fail was a pretty big certainty and still exists today with banks carrying out high risk strategies with state money and their bonuses are a dead cert with Osbourne spending millions defended them.
February 10, 2015
@JR Reply; “The certainty argument is absurd – if you believed we have to deliver certainty to business you would abolish General elections!”
I think we are seriously at risk of getting into Donald Rumsfeld territory here with his “known unknowns” and “unknown, unknowns”, in some respects General elections do cause uncertainties but because we know that they are going to happen roughly every four to five years there is a element certainty, only weak government and/or snap elections cause real uncertainty.
I see that the BCofC are calling for an early EU referendum (before the end of next year), so that is another group who do not think the certainty argument is absurd
February 9, 2015
It will always be possible for the ‘weaker states’ to spend more than Germany provides. If that goes on Germany joins the rest in deep debt, for which the solution will be to devalue the Euro.
February 9, 2015
It should never for one moment be forgotten that the euro is primarily a political – indeed, a geopolitical – project, and economic considerations have always been very much of secondary importance. That was true from the very start with the abortive Werner Plan which was initiated in 1969:
http://en.wikipedia.org/wiki/Werner_Plan
as Heath was well aware when he started the negotiations to bounce us into the EEC; and it was still true in 1989 when Thatcher put her name to the Strasbourg Declaration, and it was still true in 1991 when Major agreed to the Maastricht Treaty, and it is still just as true now that Cameron has forgotten about Keep the Pound and instead signed us up to the Save the Euro campaign.
I wonder if anyone can spot something about those four Prime Ministers?
February 9, 2015
Uhm , I’m struggling .
Can you give us a clue please ?
February 9, 2015
CONservative. Which is a bit of political misnomer. Which why I now refer to them as, Tory’s.
February 9, 2015
@ADS (@Denis Cooper); Indeed, so am I…
Having just been re-reading a cabinet document (national archive ref CAB/129/128) from 16th March, 1967 that clearly shows that EEC membership was being considered long before Heath became Prime Minister in 1970, but that membership bnefore 1970 was unlikely. So perhaps Denis is suggesting that the four Prime Ministers he mentions became as confused about the time-line of the UK’s pre and entry negotiations for joining the full EEC?! 🙂
February 10, 2015
As you will no doubt know EEC membership had been more than considered by Macmillan, another Tory Prime Minister; in 1962 he had sent Heath to try to negotiate it and that was only prevented by de Gaulle’s veto.
February 10, 2015
@Denis Cooper; “[a 1962 EEC entry was] only prevented by de Gaulle’s veto.”
But by 1967 it was felt that the reasons for de Gaulle’s previous veto could be overcome, my point was that had Wilson won a third term in 1970 the UK would have likely still entered the EEC early that decade – that is why I’m honestly struggling to spot that “something” about those four Prime Ministers you list, unless you’re ignoring the fact that Labour were also planning for the UK to join – of course there would still have been some doubt, just how far would Labours left-wing block such a policy, but then those same doubts were present in the Conservative party with their ‘troublesome’ right-wing.
February 10, 2015
It was nothing at all to do with “the reasons for de Gaulle’s previous veto could be overcome”, it was the simple fact that that he would not be there forever to exercise his veto and that would give the Tories the opportunity to finally do what they had wanted to do right back to 1962. The Tories took us in then and the Tories are utterly determined to keep us in now, and it is futile for you to try to pretend otherwise.
February 10, 2015
@Denis Cooper; “it was the simple fact that that he would not be there forever”
That is not what was said nor implied in the document I cited, the FACT is that Labour wanted the UK to join the EEC too (as did the Liberals) so please stop trying to reinvent political history to suit your apparent anti EU/Conservative party agenda.
So what was that “something” Denis, after all it wasn’t the fact that it was only Heath, Thatcher, Major and Cameron who wanted the UK to either join the EEC or remain within the EEC/EC/EU. Oh I know, the “something” is the fact that each of their surnames has the letter “a” in it!… 🙂
February 9, 2015
“Grexit” is almost a certainty and Germany must lick its wounds . Cultures in the end count for more than economics .
February 9, 2015
I find it amazing that a live within your means policy, is now regarded and accepted by almost everybody, as austerity.
It just shows how far down the line the Socialists have managed to rebrand borrowing, debt and living beyond your means.
Germany has other Countries sucking on its teat.
Our Government has the same problem with our present Benefits system.
The simple fact is that all Governments are spending far too much on far too many, and are asking far too few to pay for it, so they simply borrow to meet promises made, because they are running out of ideas on how to raise more tax.
Thus we have stupid policies, like the Global warming type tax fiasco, which does absolutely nothing to cure/stop global warming, should it ever be the case.
The simple fact is, far too many have been living way above their means to pay for it for far too long, but refuse give it up, or even acknowledge that the time of reckoning is fast approaching.
February 9, 2015
@alan jutson; “It just shows how far down the line the Socialists have managed to rebrand borrowing, debt and living beyond your means.”
I seem to recall it was the Tory (and following Tory-Lite) government, at least here in the UK, who were offering credit like it was going out of fashion, most socialists were more than happy to rent their housing and were also happy to save up for that what ever rather than take a loan out for the what ever – in many a thinking capitalist was happy to do them both too. I understand house rental is still very popular in Germany, if not regarded as a norm…
It’s been the capitalists who have pushed consumerism and need to use credit and worse due to modern business accounting practices that hold low stock levels, have short production runs, and thus the “Buy it now, when it’s gone it’s gone” or those ever lasting sales that must end Monday (but which Monday) type marketing etc. Much of the international banking crisis was built upon that unsustainable consumer debt, that in turn was fuelling unsustainable economic growth (much of which was only ever within a spreadsheet anyway), remember the times not so long ago when banks were all but ‘giving away’ loans with the breakfast cornflakes or that is how it seemed when yet another load of loan/CC application forms dropped through the letter box, never mind those many-times over proven income mortgages etc.
“Germany has other Countries sucking on its teat”
It will have, after all the EZ is a federal zone in all but name, their debt is your debt, your growth will be their growth… There have been bankrupt States (or indeed just Cities) in the USA but neither the federal government nor any of the other 49 States would ever consider allowing a State or City to become what Greece has become since the EU/ECB/IMF Troika took over the effective economic running of Greece.
If Greece defaults as I suspect she will in the end, unless someone in the EU/Germany sees sense, then Germany, the EU, ECB and IMF will have only themselves to blame.
February 10, 2015
Jerry
Understand your comments, but just because you are offered credit, it does not mean you have to take it.
Decades ago my own Company was offered very many thousands of pounds as a facility by the Bank, who suggested that I could expand the business faster if I used it.
I read the small print which said re-payment could be demanded at any time, question this further.
Was told that repayment would never be requested on demand, so I asked them to delete that clause.
No surprise that they refused, so never did take up the option.
Likewise they offered a few years later a similar deal if I just signed a simple form.
That form was for my family home as a guarantee.
I simply said, what Alan Has Alan keeps, and refused the offer again.
If you are offered money it comes at a price, and that price is not always simply interest, its also a loss of control over how you manage your own affairs.
Perhaps we should educate our children in school with regards to the mathematics and the whole business of borrowing, if parents cannot be seen to do the job.
People have to realise there are no free lunches.
February 10, 2015
@alan jutson; “Perhaps we should educate our children in school with regards to the mathematics and the whole business of borrowing, if parents cannot be seen to do the job.”
I think it is getting better but do remember parents and their own parents went on a very steep learning curve themselves, that before the 1980s many peoples one and only encounter with credit or loans was when taking out a mortgage, and they often only did that after years of saving deposit with a mutual building society who also carefully guided the applicant. When you consider that within 20 years consumer purchasing practises in the UK went from a cash orientated based transaction to one based mainly on Credit Cards is it any wonder that there was such problems…
February 10, 2015
I never agreed with selling council, social housing to tenants at such low amounts, but I know a lot of people that benefited from it, sold the properties for profit and now live back in rental spending that money in their retirement.
You say it was just capitalists that pushed consumerism but wasn’t it also Clinton followed quickly by the Blair government that opened up unsecured bank loans to buy properties and none interest repayment mortgages to people who couldn’t afford them that created the first of the bank crashes in America causing a ripple effect in the UK banking system because these loan books for bought up without due diligence?
February 10, 2015
@a-tracy; Neither Clinton nor Blair were “Socialists” (hence why I called Blair’s term “Tory-Lite”)!..
February 9, 2015
Rather depend on austerity for who allan? Certainly not the one who caused the crash or anyone else wealthy. Name any hardships they have felt? None zilch. Everyone else has taken a hit especially those at the bottom painted as scroungers by the biggest scroungers of all always looking for something free as Dave Cameron is doing as I write helping these genius of finance feather their own nests.
February 9, 2015
Wrong as usual.
Tens of thousands of well paid bank sector top staff and City of London people lost their jobs in the great Labour recession after 2008.
Similar fall out in the insurance world.
Its the jobs for life, gold plated pensions, golden hellos and huge pay offs new rich in the public sector that have yet to see any austerity.
A new public sector elite on six figure salaries heading up charities quangos, NHS trusts etc.
But I these new rich never cause you any bother Baz
Strange that.
February 10, 2015
@Edward2; “in the great Labour recession after 2008”
Not that often repeated nonsense again, otherwise care to explain how they caused the recession on Wall Street, which started in 2007 with the Sub-prime mortgage crisis in the USA and the collapse of Lehman Brothers in September 2008?…
So indeed Edward2, you were wrong again “as usual”!
February 10, 2015
Care to explain Jerry why other nations did not suffer as much and bounced back quicker than the UK
Its a nonsense to claim a world recession happened and just blame bankers Jerry.
Governments in the USA and the UK over spent, over borrowed and under regulated their financial sector for years before the crash in 2008.
You can trace the USA crash back to Clinton’s “mortgages for all” policies, pressurising the now failed two main USA mortgage companies to give loans to less credit worthy customers.
Overspending at the top of a trade cycle by Labour left us exposed.
February 10, 2015
@Edward2; “Overspending at the top of a trade cycle by Labour left us exposed.”
No, it was the international banking crisis that left the UK and many other nations exposed (and some were still exposed), without that banking crisis there would not have been a problem, and who says we were at the top of the cycle, unless you are suggesting that the banks knew that they were in trouble, if so why didn’t the banks do something about their problems rather than carnying on regardless until the point they were drowning in their own and others debt?
Clinton made a policy, the US banks enacted it (because it allowed them to show enormous paper profits), and carried on doing so during seven or so years of a republican administration, at any point during those seven or so years the banks could have suggested the policy be changed or scrapped.
Activists on the political right can carry on bleating out the same nonsense about “Labour’s recession”, just as the political far left can carry on bleating about those oh so wonderful Tractor production figures of the old USSR, but for the majority of people the verified facts are available within ten seconds of doing a internet search…
February 11, 2015
No reply to my question I note Jerry.
Light regulation by Brown and huge overspending by him left us with no reserves to avoid a recession when the crash happened.
Of course Banks were to blame.
But Brown’s rush to nationalise them at huge cost was a mistake.
Strong banks were waiting to take the useless failed banks over but Brown’s political desire to nationalise was his fatal weakness.
Just a few banks had got into trouble, not the vast majority.
I find it odd how the left were in favour of the bail out.
It was Labour’s recession. They were in power.
They were responsible for overseeing the conduct of the financial sector and plainly failed.
February 13, 2015
@Edward2; “No reply to my question I note Jerry.”
Wrong again Edward, I did answer, unfortunately I can’t help if you are unwilling to accept real-world facts.
“It was Labour’s recession.”
Oh right, so how did they cause the problems with Freddie Mac and Fannie Mae of late 2007, and how did they cause the collapse of Lehman Brothers in 2008 for example – when will people like you Edward simply accept that the recession was international in both cause and effect?
No doubt, based on your rational, the UK phone hacking crisis has been all the fault of the current Con/Lib coalition simply because the music stopped on their watch! No one would accept that for a moment yet you expect us to believe that problems with banking and financial regulations in any number of countries, going back the last three decades at least, was all the fault of the UK Labour government between 1997-2007/8.
“Strong banks were waiting to take the useless failed banks over but Brown’s political desire to nationalise was his fatal weakness.”
Care to name any of these, at the time, “strong banks”?
Edward, could your ‘revisionist ideas’ stem from annoyance that free market principles were not allowed to rip through and decimate the UK retail banking sector and thus allow an “opportunity” for some to financially gain from the many retail customers who would have been in real financial distress…
February 16, 2015
Probably would have ended with repossession of even those who kept up their mortgage payments with a fire sale to the Chinese soon after. A run on cash at the machines would have led to civil unrest.
I will not be getting another mortgage thats for sure or running up debts of cars that can be turned into secured debt.
The title deeds for my house are in a fire proof box in the loft and thats where it ends for the banks.
February 10, 2015
The super rich just keep on getting richer in their communist utopia paid for by the rest.
There is also an elite band of managers as you say and an ever larger band of private consultants doing their jobs for them. Giving deadbeat financial advice on PFI funding of hospitals and then giving more presumably deadbeat advice on how to fix the previous advice. All milking the taxpayer.
February 9, 2015
Bazman
Agree, those who caused the financial meltdown very rarely pay the price.
So include some Bankers, some Politicians some Regulators, etc etc.
Certainly was not the masses of the General Pubic, they are only responsible for their own debts, but they are the ones who will pay for it all in the end.
The problem I have is that living within your means, is now called austerity for no other reason but for political gain, because they are bankrupt of any other idea.
February 9, 2015
All for one and one for all has its down side as the one is made up of many ones
February 9, 2015
Germany may be failing to adopt a proper “communautaire” attitude but we in the UK must not emulate it, rather be good Europeans. The UK must not miss out on the forthcoming German largesse. Should we not now be issuing debt denominated in Euros so that it might become eligible in due course for repayment by German and other solvent (for now) Eurozone taxpayers?
February 9, 2015
You sum up the German dilemma. It is becoming ever more difficult for Angela Merkel to kick the can down the road. And within Germany itself, it appears to many to be more and more obvious that this is is an unsatisfactory and unsustainable policy choice. If recent past public statements are to be believed Merkel is ready to accept the implications (ie losses) of Grexit. Almost certainly that would be the less costly option for Germany.
The new Greek government can be expected to stick to its course; I imagine that if it does not get its bridging finance and loan deferments it will simply blame Germany. In short I doubt that the Greek government will blink first because that would be inevitable political suicide.
On this analysis, Gexit beckons.
February 9, 2015
For Gexit read Grexit.
February 9, 2015
@oldtimer; “For Gexit read Grexit.”
Freudian slip perhaps, many have said the EZ crisis could be dealt with by a German exit!…
February 9, 2015
Indeed!
February 9, 2015
Everybody seems to be assuming that Merkel will blink first.
Personally I think Tsipras will fold. This will be another can kicking exercise of course but I do not expect to see Grexit or Gexit any time soon.
Further agony for all South European economies of course and especially among the young, but the brunt of these Europe-wide catastrophes has always been borne by the young…
February 9, 2015
So the German chickens are coming home to roost. As Hague said in one of his better moments ” you will find yourself in a burning building with no exits”. This precisely what has happened to Greece. Regardless of how it happened, Greece is bankrupt and cannot under any circumstance pay back its creditors.
The Drachma is the only solution.
See was that the Martin Sorrel who upped sticks and moved his office to Dublin before finding it was a backwater and returning to England.
February 9, 2015
Perhaps Sir Martin Sorrell should follow up his Guardian piece with one explaining to us all how the eurozone has given any of us any certainty.
February 9, 2015
All the time she stays in the Euro she will be forced one way or an other to pay more of its bills.
Is that really true? Germany should see to it that it is Greece, Spain and the other Euro countries which pays the bills. The Germans need to be smarter in their approach by running an economy more along the lines of the UK or USA. That means they should start to import slightly more than they export.
Instead of running a surplus in euros which does not raise German living standards, it runs a surplus in real goods and services which does. Greece and Spain become the net exporters , and their surplus in euros is used to repay and service their debts. It’s just a matter of Germany doing for the Euro zone peripheral countries what the USA and UK for them in the post war period.
So, ironically, the solution for Germany is to not pay but instead be paid! The Greeks pay in real goods and services. The sad thing is that the Germans are probably too set in their ways to be able to see this though.
February 9, 2015
Just a “small” point. The UK was not a financial contributor to the European Recovery Plan (a.k.a. Marshall Plan). Out of the 1947 13 billions from the Plan, 26% went to the UK, 18% to France, 11% to West Germany. And after WWII, if anything, the UK was with France trying to dismantle Germany’s heavy industry, and from 1950, it was prevented from doing so by the USA.
So maybe it could be fair to stop peddling this rosy picture of the UK.
February 9, 2015
If what you say is true, regarding the UK dismantling German industry, someone forgot to tell the British Army. Because thanks to them, we now have VW cars.
http://en.wikipedia.org/wiki/Volkswagen#1945-1948:_British_Army_intervention.2C_unclear_future
February 9, 2015
One apocryphal story that comes from the immediate post WW2 period concerns Lord Roots then heading a car company in Coventry. He supposedly visited what was left of VW as part of the control commission and reported back that he could not see any future for VW in the re-birth of the motor industry. How far sighted were our barons of industry in those days.
February 9, 2015
@Hefner,
You’re missing the point. Yes you are correct in saying that Germany received less money than the UK.
But, what Germany needed wasn’t huge amounts of money. That would have put Germany into a debt trap – just as Greece is in a debt trap now. German industry needed access to world markets. The USA ensured there were no tariff barriers to German exports as many in France and the UK would no doubt have wished for.
As Mark B writes, the British Army played a part in rescuing the VW company which went on to build millions of cars and export them worldwide.
There are no overt tariff barriers in Greece. But, its use of the Euro has led it to be trapped in an uncompetitive situation. A holiday in Greece is much more expensive than a holiday in Turkey, for example. Internal devaluation isn’t possible except very painfully and very slowly.
Unless Germany co-operates in ensuring that the Greek economy is restored to what it was in 2008, and beyond, Greece is better off out of the Euro. I can’t see that happening any time soon. Germany thinks it can extract blood from a stone. The sooner Greece switches to the New Drachma the better.
February 9, 2015
Alas, there is a limit to the amount of olives and Retsina the Germans can consume!
February 9, 2015
@petermartin2001; “Is that really true? Germany should see to it that it is Greece, Spain and the other Euro countries which pays the bills.”
With what?! That old saying comes to mind, owe a bank £2m and you have a problem, owe a bank £200m and they have a problem, owe the State or another country £2bn and we all have problems.
Germany built her post WW2 economic, and social, successes on the fact that West Germany had her debts cancelled in the early 1950s – all Greece has been asking is for some restructuring, now it’s looking ever more likely that Greece will now be looking towards a similar cancellation or unilateral default…
February 9, 2015
You ask ‘With what?!”
The answer is by exporting goods and services. Not all German debts were cancelled. BTW. They were largely irrelevant anyway. West Germany and Japan both built their post war success by exporting to America! The repayment was in VW and Honda cars – if you like.
Just as Greece has no euros. Neither did Germany nor Japan have US dollars. They effectively acquired them by exporting. Whether they paid the dollars back as war reparations, or just stored them as US treasury bonds didn’t really matter in the overall scheme of things. The USA had other fish to fry at the time.
February 10, 2015
@petermartin2001; Yeah, I suppose they could export their Olives for the next 500 years…
February 9, 2015
OK, that’s a way to look at it, but two things:
Greece’s weight in the European trade and overall money exchange is of the order of 2%.
Can’t Germany and the other northern European countries afford “sacrifices” for what is at the end of the day a relatively small amount of money. The main thing is certainly to deal with Greece in a way to avoid contagion to much bigger countries. I would think this can be done. Otherwise, looking at the present state of the UK’s and Germany’s economies
http://www.ecb.europa.eu/stats/acc/html/index.en.html
(from where a lot of interesting statistics are available, in particular the “Annual scoreboard for the surveillance of macroeconomic imbalances”).
http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=338.BP6.Q.N.GB.W1.S1.S1.T.B.CA._Z._Z._Z.EUR._T._X.N
for the UK
http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=338.BP6.Q.N.DE.W1.S1.S1.T.B.CA._Z._Z._Z.EUR._T._X.N
for Germany
It is one thing to hope that Germany gets out of the Eurozone or even the EU. It is quite clear that a new Deutschmark would appreciate versus the euro by, say, 20% (cf. recent Switzerland delinking from the euro), but maybe less or even much less. Would our honourable host dare say how the balance of trade between this new Germany and the UK would be improving? Given the state of the overall UK industry (not only financial services), I am not convinced that the impact on the UK would be positive.
The problem, to me at least, is that there are facts and opinions, and often these do not match.
February 10, 2015
Hef you are missing the point. Of course Germany can afford to give Greece the money.
The problem is she can’t afford to give Italy the money, Spain the moeny, Portugal the money or France.
That is why Merkel can’t and won’t blink.
The moment she does that will set in motion the inevitable breakup of the Euro as the German Constitutional court, which seemingly unlike every other court in Europe, seems to know and respect the law, will never allow this.
February 9, 2015
If the EU wants to keep the Euro, the best thing would certainly be for Germany to pull out. The German people don’t like it, and without Germany, all the rest would follow their pre- Euro policies – letting the Euro slowly depreciate and introducing the “New Euro” worth a thousand of the old Euro every ten years or so. They were happy like this and it suited us with cheap holidays!
February 9, 2015
The effect of all this on the real people in those southern states is truly awful. The streets of Florence are silent, as if nobody dare speak, even when a marathon runs past the heavy silence prevails. Families living in grinding poverty in unwashed clothes and worn out shoes. Something has got to change.
February 9, 2015
Tracking down stolen money would be a start.
February 9, 2015
I’m not sure we should be commenting at all on the internal affairs of other countries and offering opinions on what they should and shouldn’t do. Advice to Greece who we have lent money to via the IMF may be one thing but offering advice to Germany is another. We would take it amiss if a German MP started telling the UK government what to do. It is much akin to business leaders commenting on politics, it is all fine as long as you agree with what they are saying but when you don’t it is a problem. If the EU vote ever comes would we be happy about MPs from other European countries offering us advice along the lines that we need to “wake up to the shocking reality” and stay in ? We can ignore the advice for sure but my opinion is it should not be offered at all.
February 9, 2015
Where would American agriculture be without a steady trickle of cheap Mexican immigration? Where would the Apple company be without its entire products being built by dirt-cheap Chinese Labour abroad and half the profits going to the Chinese? Similarly where would Germany be with its massively high salaries and expectations of its population without cheap Greek immigration and even cheaper immigration via Greece from elsewhere? The greatest threat to Germany is not a poor economically sluggish Greece but a prosperous one.
Chances are Germany will refurbish Greece’s economic zimmer frame but prevent its walking alone unassisted.
February 9, 2015
Oh Dear. CHRISTOPHER HOUSTON!!! You have unwittingly defended immigrants to Britain working for low pay in sub-standard housing and their work for employers and their customers. Was that you intention?
February 9, 2015
Now racially stereotyping all immigrants as poor, low paid, living in multiple occupancy and being unskilled, tut tut Baz.
Still think all they do is pick fruit and veg for gangmasters I expect.
Here in the Midlands the new rich are recent immigrants running supermarkets, shops, restaurants, import businesses, warehouses, hotels and property development companies etc
Others work in the top jobs in the health and education services earning good salaries.
You need to get out more and have a look around in some bigger cities and see who are driving the big cars and buying the big houses.
February 10, 2015
@Edward2; “Here in the Midlands the new rich are recent immigrants running supermarkets, shops, restaurants, import businesses, warehouses, hotels and property development companies etc. Others work in the top jobs in the health and education services earning good salaries.”
You mean like the 1950 and 1970 waves of immigration did too, admittedly after a somewhat shaky start but that wasn’t so much of their doing, so perhaps the current wave of immigrants are finding it a little easier. The real question is, why can’t the UK’s own indigenous population be so successful, there is obviously a need and a market, but then perhaps they are all just dreaming of being the next big TV superstar…
February 11, 2015
I keep explaining to you Jerry why East Europeans are here and why most of the indigenous population find it hard to compete.
They are often young educated middle class single people and if not are driven and desperate living five to a room/car in cities away from their families.
The indigenous population are to compete with this and you believe they should?
Are you just telling the same nonsense and hoping it will stick like lielogic?
February 13, 2015
Bazman; “I keep explaining to you Jerry why East Europeans are here and why most of the indigenous population find it hard to compete.”
Yes, and I keep explaining why you are wrong!
If an eastern European migrant, according to those who make an issue out of excess immigration, can not only live in the UK, pay UK income tax etc, but then also -in some cases- send money back to their families why can’t the indigenous do just the first two of those if paid the same amount?..
February 16, 2015
Because Jerry all their deadbeats are in their own countries and you are trying to put middle class values on the working poor.
How could a shipyard worker just move to London and find a job with the weight of a family on him as an example?
You think that the indigenous population should be made as desperate as East Europeans in order to incentivise them to compete with these fleet footed, young, educated driven people.
Would it ever work?
Read my points again they will not go away.
February 10, 2015
Coming here taking jobs and getting rich, big cars and houses as well as scrounging and working for peanuts? It just gets worse!
The sooner we are out of Europe and they are not allowed in the sooner the economy will pick up and everyone will have a house UKIP tells me.
February 9, 2015
Unless they’ve become overly generous, Germany has little choice but drop the Euro.
It is apparent that it is they, not the ECB, who are the lender of last resort within the Eurozone.
However, should they leave, what will happen to the Euro when the lender of last resort drops out? Interesting times on the continent and so pleasing that the UK is no part of it.
February 9, 2015
The real desire for the euro driven by Mitterand’s fear of a dominant German economy post reunification with a willing accomplish in Helmut Kohl. This hegemony has happened anyway. Germany, unlike most other member countries of the EU or our Labour party, treat public finances seriously, not as a piggy bank for politicians to bribe voters. PASOC in Greece took this to extreme, hence Greece’s predicament. Keynsian spending does have a place and may be a good solution for Greece now but it is clear it will have to leave the euro to achieve this.
Germany has to choose between the integrity of the euro and bankrolling other countries. I suspect that a messy compromise as, JR suggests, will be the outcome. Like it or not, a single currency is a transfer system.
February 9, 2015
Everyone knows that what you are saying is 100% correct, it’s just that almost all the politicians running Eurozone countries, their MEPs and the Brussels elite are in denial.
There is simply no political concensus in any of the EZ countries for full political integration and budgetary control from Brussels and Merkel could not get debt sharing through the Bundestag without facing huge opposition from the public and her Constitutional court. Finland, Austria and the Netherlands would not wear it either.
Without all of these three pillars, the Euro is doomed to fail. It’s only a matter of time.
We can see it. Why can’t they ?
It’s as if they are just muddling along in the hope that something will turn up.
It won’t
February 9, 2015
Another hard hitting entry.
What you sow so you reap. Germany will have to accept that even the top side can lose to a minnow.
Shame.
The Germans should always never lose sight of the fact “that when in a bad card school you can always get out by paying!!”
February 9, 2015
Seeing John’s heading, I was irresistibly reminded of Lady Bracknell’s quip, “To lose one parent may be regarded as a misfortune; to lose both looks like carelessness.” The Germans may well be permitted to lose one country from the Eurozone, but to lose two would be game over.
The Euro would work if the constituent countries had flexible economies, limited government and entrepreneurial workforces which adjusted rapidly to labour market shocks. Such an economic system would also make these countries very rich, very quickly.
But it seems that free-market reforms are not on the agenda in much of Europe. If you won’t make your economy more efficient by structural reform, the sensible thing would be to let your currency take the strain – if you had your own currency. Doing nothing seems to be the worst of all possible options. I get the feeling that the Germans want this dealt with now, but the Greeks have an ally in Washington and a potential ally in Moscow. In the end, we have to remember that Greek Euro exit is a political decision.
February 9, 2015
“The Euro would work if the constituent countries….”
And the practical evidence for that ? There isn’t any.
The concept of the euro is fundamentally flawed. Separate countries require separate currencies. Yes, there needs to be flexibility and that flexibility occurs naturally with freely floating currencies. Having the £ as a non-convertible freely floating currency works well for the UK. That’s what Greece needs too. The alternative is make Euroland into a single country.
February 10, 2015
In fact, the evidence is plentiful. In the forty or so years before the First World War, the major economies of the world linked their currencies to gold and prospered mightily. Many smaller countries have also tied their currencies to the currency of a respected major economic nation and prospered. But it’s difficult for this arrangement to work if a country’s institutional arrangements make it hard for its economy to adjust and develop.
The mercantilist outlook can see that a weaker currency temporarily benefits the producers of a country, but forgets about that country’s consumers. After all Peter, we only produce so that we can then consume and we want to consume the maximum for our production. A strong currency helps this.
Recently the Swiss made the mistake of pegging their currency to the Euro, a weaker currency, in order to ‘help their exports’. As we know, the peg became unsustainable on the recent decision to print more Euros to weaken that currency. It is now likely that the Swiss economy will go into recession this year. But Switzerland, unlike Greece, is a well run economy and country. It will adjust to this shock and the Swiss consumer will continue to benefit from the fact that the Swiss franc is one of the strongest currencies in the world.
February 10, 2015
In the forty or so years before the First World War, the major economies of the world linked their currencies to gold and prospered mightily
You might want to look up the Long Depression of 1873 -1896.
I’d say the Swiss decision to remove their peg to the Euro was a case of doing the right thing for the wrong reasons. There’s no need for the Swiss to run into recession as a result. They simply need to reduce taxes and increase spending. What’s the worst that can happen? The Swiss franc will reduce in value. But isn’t that what they wanted to achieve with their peg?
There’s better ways of cheapening your currency than giving away lots of goods and services to the rest of the world!
February 11, 2015
The ‘Long Depression of 1873-1896’ is controversial amongst economic historians, Peter. Prices may have fallen, but almost every other indicator of economic activity rose in this period. In any case, the UK was on the gold standard from 1821-1914 and this whole period can hardly be seen as a black period in British economic history.
But don’t misunderstand me, I think that economic growth is possible both with a floating currency and with a currency linked to a commodity or another hard currency. I prefer the second option if only because OAPs find that their cash deposits do not lose value and governments find it somewhat harder to run up debts.
There was absolutely no reason for the Swiss to want to weaken their currency by shadowing the Euro. They should have let the Swiss Franc drift up against the Euro. Around 50 years ago you could get four Swiss francs to the dollar. Now one Swiss franc is actually stronger than one dollar. What terrible thing has happened to Switzerland as her currency has dramatically appreciated against the most important currency in the whole world? Become the richest country in Europe – that’s all!
February 10, 2015
Couple of good posts.
February 10, 2015
The answer to all these problems in most of the world would be opening up free markets, rule of law, limited government.
Politicians would then be essentially redundant which is why we are unlikely ever achieve this nirvana.
February 10, 2015
We really need to look beyond Greece too.
Of course, the question is whether Germany would actually “let” Greece exit the eurozone. If German politicians and economists have any sense, which we can’t necessarily assume, they will do everything possible to prevent it.
Germany and Holland need Greece (and Italy and Spain) inside the euro to keep their exports competitive. The Eurozone is effectively nothing more than a form of currency manipulation by Germany. It needs the dupes. The dupes, who should be wiser by now, don’t need Germany.
If Greece were to leave the euro, Germany’s big carmakers would suddenly become uncompetitive, along with Germany’s other exporters, and have to leave as well.
If Greece left, then so too would Italy, Spain, Cyprus, and possibly France. As a result, Germany, the Netherlands, and Belgium would be left with one of the world’s strongest currencies and the near collapse of their export industries.
They will not want this to happen, which is why Mr Tsipras can be so defiant. He should drive a very hard bargain, if he knows his economics.
Joining the euro has done Greece and others a great deal of damage, so that there is a case for Greece, Spain and others leaving no matter what generous conditions are eventually offered to them to stay.
February 17, 2015
petermartin2001: “Of course, the question is whether Germany would actually “let” Greece exit the eurozone.”
I wonder how they are going to prevent Greece exit the eurozone?
February 10, 2015
I think simplistically Greek politicians need to start thinking about how their posturing will affect one of their biggest industries this summer ‘tourism’. They need to start to show their solidarity with the EU that THEY wanted to join and realise we’re all in this together and they’ve lived beyond their means. The EU should spend time pointing out where their lack of tax collection, high rolling public sector, early retirement ages are out of kilter with the rest of the EU who have also faced their own forms of austerity.
This political unrest certainly put me off booking a Greek holiday this year when my husband suggested it.
February 10, 2015
” we’re all in this together and they’ve lived beyond their means.”
For a country to “live beyond its means” requires that either the government or the citizens of the country try to consume real resources which they simply do not possess. Typically, that would happen in wartime. Governments call on every available scrap of available resources in support of that effort. The losing side is the one who runs out of resources first.
Its that the case with Greece now? Hardly. There’s close to 30% of the population hanging around doing nothing, ie unemployed and probably another 20% underemployed. That’s a big waste of available resources. The problem is that the Greeks are living below their means rather than above it.
PS You’ve no reason to fear any hostility when visiting Greece. It’s still a very safe place to visit. Just keep away from any demonstrations in the big cities. Its not the demonstrators themselves, its more the riot police that are the worry. 🙂
February 12, 2015
How can a Country pay retirement pensions at 61 now 63 if they can’t afford them and other EU states have had to accept 67?
How can a Country agree to borrow money on a certain set of terms then expect them to be written off because they don’t want to pay the money back?
What are the tax and national insurance collection rates and terms in Greece I’m curious but I remember reading they don’t have a PAYE system like ours and many workers don’t pay their fair share.
Then I read that their State sector pay over the odds wages in a country with low private sector wealth creation.
Thats what I meant by living above their means.
February 10, 2015
The only viable future for Greece is outside the Euro. That is a certainty because the country can never repay the vast amount it owes. While it remains a member it will continue to be strangled.
The crunch point will come when the markets and every other EZ government insists on full collectivisation of debt to keep the whole dreadful mess going.
The most likely outcome long term then would probably be for Germany, Austria and Finland to leave the current single currency leaving Club Med and others to manage a heavily depreciated Euro.