Greece’s painful and irresponsible bail out

Mr Tsipras has changed from firebrand advocate of change in the Euro and opponent of austerity into EU establishment poster boy accepting every term of a bad deal. His willingness to sign up for everything he once opposed is a far from reassuring sight. He says he is taking a painful but responsible approach. I see nothing responsible in what he is visiting on both Greece and the Eurozone.

Whilst Mr Tsipras and the zone have been at war over the deal the Greek economy must have suffered further substantial damage from bank closures, loss of tourist revenue, and the inability of Greek companies to pay overseas suppliers. The creditors will probably discover the Greek accounts are in a worse shape today than they have forecast for the new loan.

Germany says the IMF must be part of the new deal, but the IMF says there has to be Greek debt retirement or easing of terms which Germany thinks undesirable and unnecessary. Let us assume this is another gulf which can be bridged by compromise and ambiguous words. It still leaves Greece with more debt than it can repay anytime soon, and still leaves Greece struggling to get its fiscal deficit down. It will also leave a very unhappy German electorate blaming Mrs Merkel for giving ground.

The truth is the responsible course would be for the zone to admit now that if Greece is to continue in the Euro Germany and the other richer parts of the zone have to send grants to Greece to assist it. If they do not wish to do that, it would be best for Greece to leave the zone in a planned and orderly way, creating her own currency again and writing off some of the debt she owes to the EU, Euro area and IMF. For Germany an exit settlement might be cheaper now than at the end of another failed bail out plan.

The probability that Greece will hit the privatisation and deficit reduction targets, resume good growth and get back to her pre crisis levels of income is very low. This Greek saga is unfortunately far from over. This country is suffering from too little demand, too little money in circulation, badly damaged banks and a poorly managed and expensive public sector that has to make cuts. It now has the problem that the public voted for a different policy when they voted for Syriza, then voted again for it in the referendum, and have ended up with a worse version of what they opposed. They are in part the architects of their own crisis, because they want to stay in the Euro but don’t accept its rules, disciplines and lack of transfers from the richer areas.

93 Comments

  1. Richard1
    August 15, 2015

    One part of this plan which seems very unrealistic is the €50bn of proposed privatisations. With Greeces economy in the state it is, with its stock market crashing and with a govt actively opposed to privatisation, what sort of valuations are investors and acquirers likely to place on the assets planned for privatisation? As you point out its a world of make believe. Best by far for all would be Greece leaves the euro, creditors take the losses on the nose – better now than later, it can only get worse – and Greece again stands on her own feet economically. Eventually a sensible Thatcher-style reforming govt will be elected and Greece will recover. It’s either that or Greece becomes an EU version of the Italian South – requiring decades of subsidy from the rest.

    1. Denis Cooper
      August 15, 2015

      The present EU treaties deliberately have no provisions for an EU member state to make an orderly withdrawal from the eurozone once it has joined, neither of its own accord because it has had second thoughts about the wisdom of euro membership or is not prepared to go along with further federalising measures, nor through expulsion because the other eurozone states have had enough of it as a perennially troublesome member, and so far I have not heard Cameron proposing that this should be changed as part of his supposed fundamental reform of the EU. In fact I have not even heard him say that the non-euro EU member states which are under a treaty obligation to join the euro should be relieved of that legal obligation and given opt-outs like the UK and Denmark, or that new EU member states should not have that legal obligation imposed upon them under the terms of their accession to the EU.

      Reply Nor should he – the UK does not wish or need to use whatever negotiating capital it may have on improvements for the Eurozone which we do not belong to. The UK suggesting changes to the Eurozone would wind them up more. We must concentrate on getting ourselves out from the consequences of this ill developed currency.

      1. Denis Cooper
        August 15, 2015

        Cameron has said that he wants fundamental reform of the EU as a whole, not just changes to the UK’s own position in the EU, and how on earth can he hope to achieve any kind of fundamental reform of the EU as a whole if his starting point is that he will say nothing at all about a bloc of countries which now comprises 19 out of 28 EU member states, and which under the present treaties is legally required to eventually comprise all but two of whatever number of EU member states there may eventually be?

        In any case he and Osborne have not been silent on the eurozone, they have been urging greater federalisation without any concern that whatever they urge upon the present eurozone states would apply to all other countries when they fulfilled their treaty obligations to join the eurozone, and would also apply to us when we were eventually pressured into it despite having no legal obligation to join it.

        If you want fundamental reform of the EU then it is inevitable that some of your proposals will “wind up” some other people. However a proposal that a country should be able to make an orderly withdrawal from the euro will certainly not “wind up” the Dutch Prime Minister, who has already made that proposal, and a proposal that all the non-euro member states should be given euro opt-outs like those of the UK and Denmark will certainly not “wind up” the people in those countries who have asked for just that, which includes the Tories’ own ODS allies in the Czech Republic.

        1. Iain Gill
          August 15, 2015

          Cameron doesn’t believe a word he utters. He is just a PR man with no real vision or substance. He will just say whatever he thinks will get him the most brownie points.

          1. Denis Cooper
            August 16, 2015

            And I guess that his successor will be no better.

      2. Denis Cooper
        August 15, 2015

        I’m reminded here of what happened back in 1975, when civil servants and in particular those in the Foreign Office persuaded Wilson not to ask for much in his “renegotiation” in case that antagonised the other governments. So he did what they wanted and asked for, and got, nothing of any substance, certainly nothing of any permanent substance.

    2. acorn
      August 15, 2015

      The Euro was invented in New York, New York, at Columbia University. Professor Mundell invented both the Euro and the guiding light of Thatcher-Reagan government: “Supply Side Economics” or, as George Bush Sr. accurately called it, “Voodoo Economics.” Reagan-Thatcher voodoo and the Euro are two sides of the same coin. (Ouch! Some puns hurt.)

      The last thing Greece wants is a Reagan / Thatcher reincarnation!!!

      Reply This is one of more absurd efforts to blame Mrs Thatcher for everything that does harm! I can assure you she opposed the Euro/monetary union for the best of reasons as it could not work for Uk democracy or prosperity.

      1. Lifelogic
        August 15, 2015

        Thatcher made many mistakes was often pushed into them by the wet fools (such as the ERM disaster), but she was clearly hugely preferable to Heath, Major, Bliar, Brown or Cameron. Reagan looks pretty good too in historical context, certainly in relative terms.

      2. Richard1
        August 15, 2015

        I really don’t know where you get your information from. The euro was a political conception. Mrs Thatcher advanced the much more sensible hard ECU as an alternative. Supply side reforms under the Thatcher-Major govts transformed the UK economy and have been widely followed around the world, including to wonderful effect in former communist countries. Greece needs either such reforms so it can be competitive or unlimited transfers from wealthier EZ countries.

        1. Iain Gill
          August 15, 2015

          If only we could have supply side reforms of our healthcare sector.

          1. Richard1
            August 15, 2015

            Indeed that would save a lot of lives and misery. I can recommend the memories of Henry Marsh, a neurosurgeon, on the subject of the NHS.

          2. Lifelogic
            August 16, 2015

            Indeed and the main barriers are the “free” virtual monopoly NHS and the power of the medical professions.

        2. acorn
          August 16, 2015

          The kernel link in the post has been edited out with no indication to the reader I.e. [link removed]. Hence further debate is rendered pointless.

      3. Timaction
        August 15, 2015

        ……………..it could not work for UK democracy or prosperity. What democracy? When over 65% of our laws are made by unelected foreign dictators with NO control over who can come here from the 500,000,000 people of the Countries who make up the EU. That is not a sovereign democracy. We do not have control over the EU budget (surcharge anyone) or the alleged freedom from Greek bailouts (ÂŁ1 billion please!).
        I saw Mr Cameron on the news this morning being questioned by a foolish reporter getting the facts mixed up. He is happy with freedom of movement as we Brits apparently exercise our right to free movement. So disingenuous. He knows full well we have millions here whilst only a few go in the opposite direction. How many Brits are there in the A8 accession nations, couple of thousand at most. We English are being abused by the legacy parties with no effective representation.
        So how are the Government doing with removing the 2 million illegal immigrants or are they still picking them up in the Med for onward movement to Calais/Dunkirk?

    3. Richard
      August 15, 2015

      “With Greeces economy in the state it is, with its stock market crashing and with a govt actively opposed to privatisation, what sort of valuations are investors and acquirers likely to place on the assets planned for privatisation?”

      I presume you are expecting the valuations to be very low ?

      This is of course just what the Germans are planning.

      By not allowing Greece any debt forgiveness the Germans are intending to use the opportunity to buy Greece’s assets very cheaply.

      1. Richard1
        August 15, 2015

        Who are ‘the Germans’ in this context? I have not heard that the German govt – which is the party to these negotiations – has any intention of buying industrial and property assets in Greece, have you?

        1. Richard
          August 15, 2015

          Just wait.

  2. Peter van Leeuwen
    August 15, 2015

    Greece could have opted at various stages to leave to euro. In reality most of Greek democracy wants to stay in the euro in spite of the high cost and has just voted again to do so. Other democracies still have hurdles to take. In the Netherlands, a vote of no-confidence against Mr. Rutte has already been announced / threatened by Geert Wilders’ anti EU / anti Islam PVV. In a democracy like the Netherlands, such a party is not reduced to 1 seat in parliament like UKIP in the UK. It holds 10% of all seats in parliament and might be joined by other parties. The current government coalition only has a very slim majority in our “H.o.C” and a minority in our (elected!) “H.o.L.”. The Dutch government itself demands the IMF to participate in the new scheme, which will likely happen in October, when debt-restructuring will to be discussed in the eurozone as planned previously.

    1. agricola
      August 15, 2015

      Not surprised at the growing resistance to the EU in Holland. Their referendum NO to the EU Constitution was ignored, as it was in France, and neither were allowed an opinion on the Lisbon Treaty. Same dog with a different name.

      I am led to believe that it is illegal for the IMF to bail out anything other than nation states. Greece as part of the EU and Euro is not a nation state. Not that this will deter the IMF with a French socialist in charge. For debt re-structuring read kicking the can further down the road. A thumb in bum and mind out of gear reaction.

      1. acorn
        August 15, 2015

        Greece is a UN nation state and a member of the IMF. The EU is not a nation state, nor is it a member of the IMF.

      2. Peter van Leeuwen
        August 15, 2015

        @agricola: the referendum “no” was not ignored but led to changes in the later Lisbon treaty. Change my DNA for 1% and I’d be a different species. Similarly, not many changes in the EU DNA (its rule book) were necessary.
        The Dutch gave their opinion on the Lisbon treaty through their duly elected ‘people-representatives’ (MPs you call them), after the highest Dutch court had advised the government that enough constitutional elements had been removed from the draft treaty, not to warrant another referendum. Considering the very large Dutch support for the EU, right through the years 2000 to 2010, a question mark of the 2005 referendum result has always remained. Research showed that only 31% of the people were motivated by the constitutional treaty for their “no” vote, while many just protested an unpopular national government with its lack-luster campaign.
        At the time of ratification of the Lisbon treaty (2008), the UK government was based on 35.2% popular support at the ballot box, something not possible in the Netherlands. The Dutch government held 51.7% but the ratification votes in both chambers were 74% and 80%, quite large majorities.
        (I’ll save this on my hard disk, just in case British friends want to revisit this decade old story another 10 times).

        The discussion between eurozone governments and the IMF is felt needed as some EU countries argue that they have a higher debt-servicing burden than Greece, while Greece has a higher total debt compared to its GDP.

        1. Denis Cooper
          August 15, 2015

          Change your DNA by 1% and maybe you’d have noticed the many EU luminaries volunteering that the legal changes embodied in the Lisbon Treaty, originally Merkel’s “Reform Treaty”, were virtually identical to those which would have been made by the EU Constitution that your countrymen had rejected when asked directly in a referendum. That is why your politicians followed Merkel’s urging and agreed that the Dutch electorate would not given the chance to reject them again in another referendum. The same as in all other EU countries except for Ireland, where the government tried but failed to avoid a referendum and the people rejected the proposals, but were then made to vote again on exactly the same proposals and come up with the answer that she wanted.

          1. Peter van Leeuwen
            August 15, 2015

            @Denis: Dutch courts are independent from government. So is our highest court. Well informed Dutch lawyers may have tried to second guess what the constitutional elements were which would cause the Raad van State to advise a referendum, and then require them to be removed from the treaty. I’m not suggesting that the Dutch government itself was keen to have a second referendum, the CDA (christian democrats) even as a matter of principle being opposed to referendums in a parliamentary democracy.

          2. Denis Cooper
            August 16, 2015

            I don’t suppose that courts in the Netherlands are any more independent of government than courts in the UK.

            In any case even if a Dutch court advised that a referendum was not constitutionally necessary, on whatever grounds, that would not stop the Dutch government deciding that they still wanted to consult the people directly in a referendum, and asking the parliament to pass the necessary legislation.

            They didn’t do that in the case of Merkel’s “Reform Treaty”, later renamed the Lisbon Treaty, because she had said from the start that this time there should be no referendums to get in the way of what she wanted.

            As I’ve said before, the Netherlands might as well apply to become a subject part of the German federation as a new Land while its politicians are prepared to do whatever the German Chancellor wants.

        2. Peter van Leeuwen
          August 16, 2015

          @Denis Cooper: Hi Denis. I don’t think an application to become one of the German Länder would put us in a better position with regard to influence and or independence. Policies of small countries have to be different in that they have to realise their relative (un)importance. They can however serve their interest best by exploiting the differences between the largest countries, e.g. Germany, France, Italy, UK. The whole idea of the EU might be that we don’t have to become German Länder, French provinces or English counties, but that we have a hybrid structure (EU) in which we all have influence and work for both self interest and common interest. On some issues we’re more like the British, on some more like the Germans, etc.

      3. Martyn G
        August 15, 2015

        I also thought that the IMF should only aid a nation state but clearly, despite being a Eurozone member, Greece remains a nation state, albeit virtually bankrupt.
        However, I read that IMF Christine Lagarde has stated that the new accord “is a very important step forward but I remain firmly of the view that Greece’s debt has become unsustainable and that Greece cannot restore debt sustainability solely through actions on its own”.
        Serious stuff, that but she followed on by saying “it is equally critical for medium and long-term debt sustainability that Greece’s European partners make concrete commitments … to provide significant debt relief, well beyond what has been considered so far”. Wow, I thought – the IMF is finally getting cold feet over Greece but but since she ended by saying “Progress would allow the IMF to consider further support for Greece after a review of the programme, expected in October” I realised that nothing has in fact changed. Since the UK puts lots of money into the IMF, those who say that we are not a part of the Greece bailout affair are surely mistaken?

        1. matthu
          August 15, 2015

          The Telegraph is reporting that:

          Mrs Lagarde said the country would need more help from EU member states, “well beyond what has been considered so far”.

          Do you think that was a Freudian slip? Surely she meant Eurozone states? No, I guess not …

        2. Peter van Leeuwen
          August 15, 2015

          @Martyn G: What may have changed is whether the IMF will keep debt over GDP as the one parameter to judge debt sustanability

    2. Kenneth
      August 15, 2015

      Peter, I have been thinking for some time that the Netherlands could be the first Eurozone member to break free from the single currency.

      At least Germany and France have influence – as does the UK to some degree. The Netherlands pay a lot in but tend to be pulled along by the others. I’m not sure your countrymen and women will put up with that for much longer.

      What do you think?

      1. Peter van Leeuwen
        August 15, 2015

        @Kenneth: Perceptions based on misgivings and misinformation tend not to lead to very good predictions. The persistent UK-originating predictions of EU-breakup and/or euro-breakup since 2008 have still not materialised. How come? (I’ve given you a hint).
        No, I do not think that the Netherlands will break away from the euro. Even though the PVV is the most popular party in polls held (it is anti-islam), it is still a relatively small party. Together with the SP (Corbyn-like socialism) they still don’t form a majority. The major reason that the VVD (Rutte’s party) talks sceptical is not to lose votes to the populist PVV.
        Studies show that Germany has clearly benefited from the Greek crisis (some 100bn euros). Why would this be so different for the Netherlands, which also profits from an undervalued euro for its export and low interest rates when buying bonds. It will just have to be explained to the Dutch public before Greek debt restructuring or debt forgiveness becomes the issue in parliament.

      2. Denis Cooper
        August 15, 2015

        Whatever Peter may think, most of his compatriots have now had enough or more than enough of EU integration, enough of that inexorable drive to “ever closer union” which is prescribed by the EU treaties, and in fact the figures for the Netherlands found in a recent survey across seven EU member states are not dissimilar to those for the UK.

        http://ourinsight.opinium.co.uk/sites/ourinsight.opinium.co.uk/files/op5154_opinium_pr_european_union_-_tables.pdf

        Wanting more EU integration: NL 17%, UK 14%
        Wanting things to stay much the same as now: NL 23%, UK 23%
        Wanting powers to be repatriated to member states: NL 42%, UK 47%

        Of course both sets of 23% are deluded if they believe that things could or would stay much the same under the present EU treaties, which define an ongoing process rather than a final settlement.

        1. Peter van Leeuwen
          August 15, 2015

          @Denis: what you demonstrate is actually Dutch people following government policy, the government which came with 52 points of more subsidiarity, while the minister under who’s responsibility these points were raised is now an EU commissioner charged with steering the EU towards fewer and more effective regulations (Frans Timmermans). All quite different from “breaking free from the single currency” as Kenneth puts it.

          1. Denis Cooper
            August 16, 2015

            It’s nice to know that Dutch people follow their government’s policy, even if it is a policy which accepts that their country is no more than a subsidiary of the EU.

            However that is also beside the point that when it comes to “ever closer union” the views of citizens in the Netherlands are not that much different from those of citizens in the UK – apart from a small minority including dedicated eurofanatics like yourself they have already had enough, or more than enough, of it, but about a quarter of them do not understand that there is no way that things can just stay more or less as they are under present EU treaties.

          2. Peter van Leeuwen
            August 16, 2015

            @Denis Cooper: “subsidiary of the EU”. Your problem here is that you see the EU as some foreign power instead of something you are and take part in. I won’t join you in name calling, but I know many many British who are not of your particular mindset and much more like me.

          3. Denis Cooper
            August 17, 2015

            Very few are like you, Peter, here or in your own country.

    3. Richard1
      August 15, 2015

      Greek democracy may have voted for the euro but are EZ taxpayers in the Netherlands and elsewhere willing to send them grants so they can become solvent? If not what else would you suggest? Why should the IMF get involved? If Scotland ran short of money it would be up to the UK govt to fund it, not the IMF. Does the IMF find Puerto Rico or the U.S. Midwest states which are short of money? Why should it be different for Greece? EZ govts need to be honest with their taxpayers about the inexorable logic of a monetary union.

      1. Leslie Singleton
        August 15, 2015

        Merkel not too long ago was dismissive of possible IMF involvement, giving it as her opinion at the time that IMF help was not only very much not needed but almost an insult to the EU’s ability to look after its own, so would never be allowed. She’s forgotten that of course now. There are no hoops the EU will not go through for their ghastly failed cause. I wonder how many Greeks speak German and vice versa.

        1. Denis Cooper
          August 15, 2015

          Well, the IMF is still nagging on about the need for debt relief:

          http://www.cityam.com/222361/greek-crisis-imf-says-greece-needs-debt-relief-despite-new-bailout-deal

      2. Peter van Leeuwen
        August 15, 2015

        @Richard1: Imagine that a loan would only have to be paid back over a 100 year period with an extremely low interest rate, theoretically, it would still be a loan, not a grant. Such arguments might be used by politicians, apart from the evidence that the Greek crisis may have benefited the Netherlands like it has Germany, according to recent studies.
        The wish to have the IMF involved was originally a Dutch wish/demand dating from the first bailout.

        1. Richard1
          August 15, 2015

          Extending a loan and setting a sub-market rate of interest is a transfer of wealth. Its no different economically from writing down the principal. When the extent of such transfers are recognised by EZ taxpayers – who are making the gifts – we should expect a political backlash.

          1. Peter van Leeuwen
            August 15, 2015

            @Richard1: We are currently talking a bout 35 years and 1% interest I believe (eurozone press conference). I don’t expect a political backlash.

    4. petermartin2001
      August 15, 2015

      Peter Van Leeuwen,

      Greece isn’t like Egypt or Turkey which may require some assistance from an external source. Although I’d recommend they look at every other possible alternative before borrowing from the IMF- but that’s another story.

      The ECB has the capacity, in fact an infinite capacity, to create as many euros as are necessary to stabilise the Greek economy which is just a tiny percentage of the wealthy euro area economy. There is really no more need for the IMF to become involved in that lending than there is in the UK govt lending to Northern Ireland.

      Can you explain why the Dutch govt thinks it is necessary to have IMF involvement in the lending process?

      1. Peter van Leeuwen
        August 15, 2015

        @petermartin2001: I believe it is the IMF impartiality and better level of expertise and experience.

        1. petermartin2001
          August 17, 2015

          This answer makes no sense at all. No-one goes to the the IMF for “impartiality”. They go because they need money which in IMF terms is known as Special Drawing Rights (SDRs)

          Lending to Greece doesn’t require any expertise or experience! Just a large amount of stupidity though!

          Which is no-doubt why Holland wants someone else to lend the money!

  3. Ian wragg
    August 15, 2015

    The show must go on. Regardless that Greece is bankrupt and people are living a miserable existence.
    Greece is reduced to a German Colony and must be grateful for the scraps thrown from Berlin.
    When will it end
    when did you say CMD would let us the sheeple have an inkling into what he is negotiating.

    1. bigneil
      August 15, 2015

      When will it end? – on the 30th February.

  4. agricola
    August 15, 2015

    A very accurate description of the Greek situation. I suspect their desire to keep the Euro is that of a dependent with little confidence in any government they may get to run a sensible fair economy with the Drachma.

    Germany would seem to want to be part of a USE, but is expecting all the other parts to be self financing and equal. To in fact have the same mindset as most in Germany. Looking across the EU and the Euro area this will not happen. As in the USA and UK the rich parts have to support the poor parts. Germany seems reluctant to accept this responsibility, and looking at the Greek situation who can blame the German people.

    If the Greek people continue to wish to stay in this straightjacket then I see serious civil unrest down the line, etc ed.

  5. Antisthenes
    August 15, 2015

    The EU and especially the euro-zone members have signed up to redistribution of wealth big time yet again. Economically competent nations have once again shown that they will underwrite corrupt, wasteful and incompetent countries and bail them out regardless.

    The consequences of course are that those countries with systemic economic problems will never address them and will just pay lip service to reforms(Greece signs up to reform to get the money then does not do them) and sit back and wait for better run countries to pay their bills and keep their citizens standard of living at the level they do not deserve. And of course this largess means that standards of living in the better run countries are not at the level they would be if they did not have to be taxed so much more to bung to others.

  6. Iain Gill
    August 15, 2015

    The chances of the UK paying back its national debt is non existent too.

    Reply Not so. It is quite possible for the UK to go into surplus and pay off some debt if it wishes. In the meantime there is no problem with repaying any part of the UK debt by borrowing replacement money to meet the bill.

    1. Hefner
      August 15, 2015

      “there is no problem with repaying any part of the UK debt by borrowing replacement money to meet the bill”.
      Wonga style? I hope nobody starting university in the coming weeks will read this answer.

      1. Richard1
        August 15, 2015

        You haven’t understood the point. Whilst a country is solvent and has access to capital markets it can refinance debt. The statement above that the UK won’t be able to repay its debts is clearly untrue and the UK would not be able to borrow if it were. Fortunately we now have a government – after the disaster of the Brown debt bonanza – which is bringing borrowing within sustainable limits.

      2. acorn
        August 15, 2015

        Ten out of ten Hefner. I think we have established that JR knows less about macroeconomics than Thatcher or Major did; and that’s saying something!

      3. Iain Gill
        August 15, 2015

        Yes house prices are going to go so high that we will be able to sell them all and pay off the national debt.

        John, you are a nice guy but you don’t half talk nonsense sometimes. The UK national debt will never get paid back, it is a permanent fixture. Western governments will do what they can to manipulate the world economy to keep us going regardless.

        Seemingly the plan is to flood the country with immigrants and turn us into a slave labour economy. Its the only thing that makes sense given what is going on.

        Reply I did not say it was about to be paid back, I said it could be in a future Parliament wanted to over a realistic time period

        1. Iain Gill
          August 15, 2015

          A realistic time period is roughly equal to never in this case. Its just not going to happen.

        2. turbo terrier
          August 15, 2015

          Reply to reply.

          Is it not that entering the problem/ solution argument is that especially with debt if we had not borrowed in the first place we wouldn’t need to pay back all the interest on the loans.

          When ÂŁtrillions are mentioned I get very worried.

          1. Iain Gill
            August 15, 2015

            that’s why politicians hardly ever mention the true size of the national debt, or how much it continues to increase every month. they like to talk about the deficit, and how much less the deficit is growing in their imaginations. like we are all idiots. no the wonder faith in politics is low.

    2. petermartin2001
      August 15, 2015

      There really is no problem repaying any part of the UK debt. Think of the UK as a giant bank -some customers want to put their money in and some want to take it out.

      The customers have confidence in the UK bank. At the present time there’s more wanting to put money in (buy gilts or treasury bonds ) than take it out (sell gilts). That means the UK as whole can afford to buy more imports than it it would if those imports had to be funded by only by the sales of exports.

      So what would happen if customers had less confidence and wanted to withdraw more money than they deposited? There’d be less money available for imports. We may even have to export more than we import to raise enough money to cover the desire of former depositors to withdraw their money.

      1. Iain Gill
        August 15, 2015

        Think of it like Northern Rock, the government is spending on the assumption it can lend money at rock bottom interest rates.

        1. petermartin2001
          August 15, 2015

          Iain,

          Unlike Northern Rock, or Greece, the UK has its own currency. It can never go bust or involuntarily default on any debt denominated in that currency. ie the ÂŁ.

          The government has two primary economic responsibilities:
          Firstly to protect the value of its currency against erosion due to inflation.
          Secondly to ensure that the economy is functioning at as close to full capacity as possible to provide the goods and services necessary for the well being of the poulation.

          These two requirements may sometimes be in conflict. A sensible middle way needs to be steered using fiscal and monetary policy to avoid the perils of inflation on the one hand and recession and high levels of unemployment on the other.

          1. Iain Gill
            August 15, 2015

            As sensible middle way, where is that then? not noticed it?

          2. petermartin2001
            August 17, 2015

            That’s a valid comment. In the 60’s and 70’s there was an expectation that unemployment should be kept below about 3%. It rarely went higher than 2% in the 60’s. That seems way too low now. It should have been a couple of percentage points higher IMO to prevent inflation getting out of control.

            In 1979 Mrs Thatcher won an election on the slogan “Britain isn’t working” when unemployment was about 5%. She put it up to 12% with her monetary policies. So, there was a lurch from one extreme to another.

            Its not been quite so bad since but no government seems happy to set an inflation target of about 2-3% and just stick at it. It’s either been too high, or as now, too low. If its too low we need a stimulus. If its too high, the brakes need to go on. Control should largely be by fiscal measures – not interest rate adjustments. They can’t get any lower anyway. Raising them would just create a new slump.

  7. Lifelogic
    August 15, 2015

    Indeed you make all the sensible points.

    Why on earth can Greece, Germany and the rest not see this, surely it is blindingly obvious to all.

  8. JJE
    August 15, 2015

    In addition to your analysis, with which I completely agree, I would add the impact of a failing Greek state on its ability to control the illegal immigration that is already overwhelming some islands and which will badly damage the tourist trade on which they depend.

  9. Mike Stallard
    August 15, 2015

    Six Questions:
    1. How much corruption (which is actually theft from the public purse) is going on in Greece? If there is a lot, then people will realise the truth and they will not pay their taxes. Why should they? That means the government will limp along with very little money. And now the immigrants are pushing into their beautiful and peaceful little islands, creating a terrible problem. And the Greeks are in debt too. They need a decent government.
    2. So how much tax avoidance is there in Greece?
    3. If I behaved like Greece in, say, a golf club; I mean going round begging for credit and drinks and pretending to be richer than I was. Guess what? So why isn’t the EU demanding that Greece leave “the Eurozone club”?
    4. How many other European countries are heading that way – to poverty and a sharp decline in living standards – no wonder the rich Greeks live in yachts away from the crime, poverty and rioting! (See the comment above).
    5. Why did the Socialist Greek government cave in?
    6. If I were a German I would be voting AfD. Wouldn’t you?

    1. alan jutson
      August 15, 2015

      Mike

      Yes they have a real and huge Immigration problem, but that will soon become ours as well, as soon as they give them all the necessary EU papers to roam free.

      Greece in common with many Countries, simply cannot support the numbers arriving.

      Another EU policy disaster, encouraging illegal immigration by rescue at sea instead of returning them back to Northern Africa, which in many cases is a shorter distance.

      Our border security is only as good as the weakest link in the chain overseas, as we can do nothing with immigrants that have EU papers, temporary or otherwise.

      1. Hefner
        August 15, 2015

        Sorry, but people coming to Kos (Greece) come from Turkey. There are only 13 miles/21 km between the two countries. Look at a map.
        And the majority of people getting to Kos are not Africans, Northern or otherwise, they are from the Middle East, or further East, not South.

        1. alan jutson
          August 15, 2015

          Hefner

          Who knows from where they originally came, most tend to destroy any paperwork !

          They may have gone to Turkey first/second or even third, then on to Greece.

          According to Press reports I see they are fighting each other to get on trains now, at the rate of 2-3,000 per day overland through Serbia.

      2. bigneil
        August 15, 2015

        I assume that a lot of those arriving in Greece have conveniently lost their papers, just like a lot at Calais. So when Greece “registers” them the true identity will never be known, and a few weeks down the line when they all arrive here, a new life for any criminal will be met by CMD’s generosity with our taxes and an invite to stay in a hotel as a reward for their criminality and deceit. As winter will soon be with us and English pensioners who have contributed for years will again be faced with the choice of “heat or eat”, our new imports will be sat warm and dry in hotels, will have no water/electricity/gas or council tax bills, no choice to make. They can both heat AND eat. Rooms cleaned, fresh bedding, clean towels etc. Nice hot bath everyday, food provided 3 times a day, and then they are given spending money as well. Yet after 45 yr of contribution – I get nothing. . . Cameron shows his clear contempt for the British people – he would rather have endless thousands of unknown foreign criminals and freeloaders than people who have contributed for years.

  10. alan jutson
    August 15, 2015

    Another bailout, another shambles of an agreement, the can kicked down the road again, how long to wait for the next one.

    The next Greek Election will be interesting !

  11. formula57
    August 15, 2015

    Greece has every appearance of a failed state and British policy should take that into account, particularly in manoeuvering to preserve us from any participation in the fourth bailout that is surely coming ere long. We might also plan on readying ourselves to repel migrants from there, should that prove possible.

    Meanwhile, let us congratulate the German and similar taxpayers from their generosity that has helped preserve the Eurocrats dreams pro tem.

    Reply The UK is well out of the third bail out and under the agreements will be out of any fourth bail out as well. It is not UK money at risk, and lots has already been lost by Germany and the others. It is just a question of how and when they recognise that.

    1. Denis Cooper
      August 15, 2015

      It is now being argued that Germany is secure as a net beneficiary of the euro crisis whatever happens, not just because it has depressed the external value of the euro and aided German exports but also because the flight to safety has depressed the interest rates at which the German government can borrow.

      http://www.bbc.co.uk/news/world-europe-33845836

      I have to say that I’m not entirely convinced about that, and I don’t expect German taxpayers are entirely convinced about it either.

      1. Margaret Brandreth-J
        August 16, 2015

        This is probably bluff .You know’ it doesn’t matter whether you pay your debts off or not as we are still in control and can borrow..if we want and when we want at lower cost.

    2. formula57
      August 15, 2015

      Yes, understood – I did not mean the inference to be taken that the UK had participated previously. I do recall deft and urgent action by George Osborne was needed though this last time to prevent Mr Juncker’s improper use of one or other EU funds to assist Greece from possibly resulting in liabilities being borne in due course by non-Eurozone members.

  12. Denis Cooper
    August 15, 2015

    As I have been saying for nearly six years now, the eurocrats will do whatever they possibly can, legal or illegal, ethical or unethical, to preserve the eurozone intact so that it can continue its expansion until it encompasses all EU member states, present and future, including eventually the UK.

    The Tory picture of a highly federalised “inner core” of eurozone states, surrounded by an “outer shell” populated by a significant number of non-euro EU member states, is no more than an illusion which is incompatible with the present EU treaties.

    1. Lindsay McDougall
      August 20, 2015

      That, Denis, is why I keep ‘banging on’ about unilateral repeal of our Acts of Accession to the Maastricht, Nice, Amsterdam and Lisbon treaties.

      If you don’t want to join a federation, don’t sign federalist treaties. If the EU chucks us out, so what? Come on out, the water is lovely, as Iceland, Switzerland and Norway would say.

  13. Denis Cooper
    August 15, 2015

    Apropos both this article and the last – where my principal comment, in reply to acorn, has not yet been published – if Greece had not been allowed into the euro then firstly the Greek government would have been less likely to have got itself into such a terrible financial predicament, and secondly if it had then it might have had a chance to extricate itself in the same way as the UK government did, by inducing the national central bank to create more of the national currency and use that money to buy up bonds issued by the government to fund its deficit.

    To conform with Article 123 TFEU in the EU treaties the Greek central bank would have had to buy up previously issued bonds in the secondary market, as the Bank of England did, rather than buying new bonds direct from the government, but the effect would have been to remove large volumes of Greek government bonds from circulation and make it much easier for the government to sell new bonds to normal bond investors.

    Instead the task of rigging the market in Greek government bonds fell to the EU’s central bank, the ECB, rather than the Greek central bank – which did not have the power to create the necessary euros without authorisation from the ECB – and likewise with the bonds issued by the governments of other distressed eurozone countries.

    I point out that a month before the Bank of England embarked upon its first, ÂŁ198 billion, programme of blatantly rigging the secondary market in UK government bonds, gilts, in March 2009, the Labour government had a statutory instrument passed to exempt its operations from normal regulation:

    http://www.legislation.gov.uk/uksi/2009/118/introduction/made

    “The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2009”

    “In Part 1 of the Schedule (persons exempt in respect of any regulated activity other than insurance business), after paragraph 15A insert –

    “15B. Bank of England Asset Purchase Facility Fund Limited”.”

    Which explains why the Financial Services Authority paid no attention to this very obvious rigging of the gilts market.

  14. acorn
    August 15, 2015

    BTW. The price of road Diesel fuel is topical at the moment hence the answer to the question is:-

    Diesel at factor cost 28.50 pence per litre + Vat on fuel 5.70 + Duty 57.95 + VAT on Duty 11.59 + Delivery and likely retail margin 6.67 + Vat on delivery and likely margin 1.33.
    Total 111.74 pence per litre, say 112 to 113 ish on a fore court

    1. Lifelogic
      August 15, 2015

      So about 75% is pure tax and you are buying it with money perhaps already taxed & NI ed at up to 47%. Plus of course collecting and administering all those taxes cost the companies even more.

      On average people are paying perhaps 6 times the true cost without tax. Then the government expect UK industries to compete and be competitive in the World markets.

      1. Iain Gill
        August 15, 2015

        Correct and then they issue tens of thousands of work visas in skills already in over supply. So much so that potential British students of those skills dessert en mass moving to other lines of work. Decimating whole lines of work.

        You’ve got to hand it to the political class they sure know how to destroy this country.

    2. Miami.mode
      August 15, 2015

      In Austria currently diesel is around €1.11. Based on an exchange rate of approximately 1.40 this equates to about 80p.

  15. DaveM
    August 15, 2015

    Limited sympathy for the Greeks in this case.

    They voted for a loony left party which claimed to be able to have their cake and eat it.

    The loony left party found out that once they stepped out of their own front door that their bravado wouldn’t cut any ice in the powerful north.

    From the very start of this business it’s been clear that you stay in the Euro on the Eurozone’s terms – ie, if you owe money you have to pay it back somehow.

    It surprises me that they are so desperate to stay in the Eurozone, and baffles me even more that they imagine they can tell the Eurozone that they want to keep the currency but have no intention of following the rules.

    What the hell did they expect? That a little Greek tantrum would make the Germans say “oh, OK then Spiros, we’ll let you off those gozillions you owe and give you a few more so you can continue to retire at 50 and spend it like water”?

    Ridiculous. We’re well out of it. Amazing that so many politicians in this country want to be part of this ludicrous circus.

  16. forthurst
    August 15, 2015

    “…too little money in circulation…”

    There is money in circulation, but not via the banking system which is no longer trusted and has been induced to disgorge substantial amounts of cash, leaving it chronically enervated.

    The IMF lent money to Greece in the first instance under the direction of Dominic Strass-Kahn after it changed its own rules which had rightly disqualified such an arrangement; this was helpful to the French banks with outstanding loans to Greek banks but was otherwise an invidious act; our government should threaten to withdraw from the IMF until the rule change has been reversed; offloading problems of and caused by the Eurozone on all IMF creditors should be opposed.

    Meanwhile those who have not been deterred by Greece’s economic woes from holidaying in the Aegean Islands, are able to observe an invasion force arriving from Turkey, refugees from the neocon warzone of the ME, who themselves, possibly observed European domiciled jihadists going in the opposite direction to join Dai’ish which Turkey, a NATO member, supports against Syria, a country which does not wish to repress its Kurdish minority unlike Turkey, does not want a Qatari pipeline and is opposed to encroachment by Israel on Lebanese and its own territory. In order not to directly support Assad, whose forces are the only effective ones opposing Da’ish, the US has introduced ‘moderate’ opposition fighters into Syria to reconnoitre potential Da’ish targets for aerial bombardment, and not, apparently, despite the White House spokesman’s statement, to engage Syrian forces. Meanwhile, the US, which has been supported by UK forces both in the air and on the ground without Parliamentary approval, has been informing Syria of sorties via the Kurdish YPG. So far, most of the latest ‘moderate’ force has been polished off by al Nusra, but these, as potentially, are British forces on the ground are considered acceptable collateral to avoid parleying with Assad.

  17. Tad Davison
    August 15, 2015

    He’s a leftie John, par for the course.

    Tad

  18. Atlas
    August 15, 2015

    Come the next elections I wonder who the Greek electorate will vote for? Since the left has failed them, perhaps they will swing to the other end of the political spectrum?

    We have been here before: with the reaction in Germany to the onerous Versailles treaty resulting in the rise of the National Socialists, so what may happen in Greece??

  19. CHRISTOPHER HOUSTON
    August 15, 2015

    Hard to know who and what is being bailed out in Greece. Her assets are partly owned by international institutions, foreign individuals, Greeks living abroad temporarily and permanently; two million, at least, of its 11 million people being migrants who are either passing through on their way to Dover, Frankfurt or back to where they originated.

    So are the Greeks and migrants who have passed through and working in Germany actually bailing out Deutschland which is so dummkopf-ish, so insanely disorganised that it cannot determine day by day or year by year the minimum/maximum and optimal number of workers and residents it needs? Why is Germany heralded as some economic eighth wonder of the world? Germany: a factory manager who cannot judge how many workers he has got, how many he will need,where they are coming from, where they are going to, where they are going to live that he is forced to set up fields to bivouac aspiring job applicants in Doberlug-Kirchhain, Brandenburg, and Halberstadt, Saxony-Anhalt, not to mention Hamburg, when he has not a clue if they are qualified or skilled in anything at all…. is a very poor manager indeed. This is Germany: this is the EU: a very poor manager indeed.

    We should stop trying to emulate Mrs Merkel and Germany. One in ten or now perhaps one in fifteen persons in Germany is foreign born: a country world famous for its tolerance of ethnic/cultural/economic and linguistic minorities ( while ever the economy is on a roll, that is ). And when the German economy fails, as it will through gross mismanagement of its working population, we can expect to see its unemployed migrants with German accents and vocabulary permanently camped in Ramsgate, Margate and Dover.

    Bailouts to Greece figuratively and literally is sending money into No Mans Land where any passer-by, any army deserter from anyone’s army can just help themselves to the money chucked at them.

  20. Bert Young
    August 15, 2015

    Greece cannot possibly repay its debts and ought to give up the quest to remain in the EZ . Keeping Greece alive is at the expense of many other countries in the EU and they are likely to demand more forms of assistance to keep them satisfied . The UK must stay out of this quagmire and not get drawn in any form of support .

  21. Margaret Brandreth-J
    August 15, 2015

    The dignified VJ ceremony today made me realise how much love we have for our nation and the peace it generated post war through other allied nations . I feel nurtured by my parents generation, despite all the threats we face today. Many years ago society was fragmented into class , but today everyone seems so near .We have been so lucky to share peace.

  22. Anonymous
    August 15, 2015

    Are they architects of their own crisis ?

    I’d put the blame firmly on the EU’s expansionist tendencies. Accepting unsuitable states into the club – with David Cameron telling us that he’d like the admission of more unsuitable states as far as the Urals.

    Would you blame a kid in a pub for drinking too much or the landlord ? We know which one would end up in court.

  23. turbo terrier
    August 15, 2015

    I do really hope and pray that Empress Nicola of La La land reads your entries.

    Shape of things to come for the Scottish people?

  24. matthu
    August 15, 2015

    With immigrants calculated to contribute positively to net GDP, it is a wonder that Greece’s GDP hasn’t shot through the roof!

    1. forthurst
      August 15, 2015

      matthu, only when they bestow their valuable skill sets on Northern Europe, which is why they regard ClubMed as a corridor not a destination.

  25. waramess
    August 16, 2015

    Their government refuses to reduce in size, preferring to adopt a policy of more taxation to sustain an already oversized government and a minimum wage, in the face of declining economic production.

    Have you ever heard of a more likely scenario to cause an economic depression, partcularly when the increased taxes will almost certainly be borne by those already in the tax system?

  26. Lindsay McDougall
    August 17, 2015

    Mr Tsipras had the choice of urging Greece to leave the Euro Zone. Indeed, Nigel Farage made a passionate speech in the European parliament advocating that he did precisely that. Mr Tsipras – on behalf of the Greek people (I think) – preferred to remain in the Euro Zone. His humiliating U-turn has been forced on him by his creditors.

    You can be sure that his creditors will be watching him every step of the way to ensure that continued bail out payments are matched by continuing actions to comply with the conditions imposed – including a shrinking of the bloated Greek public sector.

    Debt relief will eventually come but only once Greece has become fully compliant.

    I don’t believe that the IMF should be part of the new bailout. Christine Lagarde has already broken her remit from the IMF in the earlier bailouts; the sooner that she takes the IMF back to the straight and narrow, the better.

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