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Greece: "The PIGS fight back"

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Paul Mason | 13:43 UK time, Wednesday, 10 February 2010

"We're the national version of Enron," says Liana Kanelli, a Greek communist MP, as we shelter under the portico of the parliament building from the rain. In the background tannoys blare out speeches and songs from the workers' demonstration that has surrounded the place. "They took our money, gambled it on the markets and now its gone."

"Can you stop the austerity plan?" I ask.

"You call it austerity, I call it war," she says. "And we refuse to be the collateral damage for the bomb dropped by Lehman Brothers."

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For the Greek labour movement today was supposed to be day one of a campaign to stop the austerity measures imposed by the Pasok (social-democratic) government. The public sector strikes have been large: some ferries have been stopped, the airports are quiet and customs officers at the docks are absent.

But this is nowhere near, yet, a movement that could derail the Greek government's deficit reduction plan. As I've written before, some of the hyperventilating about this in the financial press has been misplaced. There is a serious chance of social unrest in Greece, but it depends how much further the government is forced down the route of attacking its own voting base.

I meet George Papaconstantinou, the Greek finance minister, in the economics ministry: for a while, his team have been unable to gain access to their own offices today but now, with the reception staffed only by security guards, and ringed by riot cops, they're busy with a string of interviews designed to bolster confidence.

The question of the day is: will Germany and maybe France step forward to guarantee Greece's future loans, allowing the cost of borrowing to fall and greater certainty that it will roll-over the debts in a couple of months time.

"I will evade the question," Mr Papaconstantinou warns me, before we begin, adding "tomorrow will be crucial". Right now, in Paris, the Greek PM, Mr Papandreou, is meeting President Sarkozy. At tomorrow's informal summit of EU leaders in Brussels, ringfencing the Greek crisis will be high on the agenda. Already the spreads on Greek debt - the geiger counter of instability - have fallen back in expectation of a deal.

Yesterday Greece announced new tax laws designed to recoup the equivalent of 2% GDP. The 40% tax bracket will begin at E60k, and there's the traditional promise to crack down on evasion.

But that leaves another 8% of GDP to find if the Greek deficit reduction plan is to work - and Mr Papaconstantinou believes he can do it without attacking essential services. Though painful, the 10% wage cuts, 12 year rise in the pension age and other measures, he says, can and will be borne by the people the trade unions represent. The markets have, for some two weeks now, begged to differ, and placed a massive $8bn bet on the Euro's collapse against other currencies.

Mr Papaconstantinou told me the EU countries needed "solidarity" against such speculative attacks. When I reminded him that no national government had ever been able to resist such attacks before, he said that there were fairly simple financial reforms that could be brought in, including "a ban on short selling". He rowed back from the idea of an outright ban on short selling the Euro, but said there were a number of options under discussion.

So what happens next?

There are several crucial stages to Greece avoiding a fiscal meltdown that could trigger a full-blown Euro-crisis. First, they will have to execute the measures they have announced. Though today's strikes were big, it's yet to be seen whether they will grow into a strike wave big enough to crack the parliamentary coalition Pasok has assembled around the cuts package. To me it looks unlikely.

Second, there is the question of transparency: the EU team currently going through the books, Mr Papaconstantinou insisted, would not find any new big nasties: the 13% budget deficit that emerged after Pasok took power was bad, and has given Greece a "credibility problem" he admitted, but they need to get over the hurdle of the Ecofin meeting next week, to ratify their plans and their published information.

Third, however, is what the markets see as over-optimism in the budget plans: there are no significant service cuts, there is rhetoric and some demonstrated intent to crack down on high earners, but this is not the austerity package Wall Street or London or Frankfurt would have designed. It includes fewer overt service cuts, for example, than Alistair Darling's current budget plans. Since Greece is the worst-case example among developed countries, many commentators believe the budget - even if executed - will simply fail to stem Greece's fiscal losses. Add to that they believe Pasok has over-estimated future growth.

I expect, in the next few days, possibly even tomorrow, a deal to be put together that does staunch the Euro crisis. Whoever it was that invented the acronym "PIGS" - for Portugal, Italy, Greece and Spain - was prescient, as over the past few days there has been the real possibility of contagion and a sovereign debt crisis across Southern Europe.

But then the EU leaders have to get their act together and defend their currency: further speculative attacks are inevitable given the structural weakness in the Eurozone arrangements this crisis has revealed.

For here's the paradox: If Germany sponsors a bailout that looks in any way soft on the structural problems that have got Greece into this mess, it will weaken the credibility of the Eurozone. The Maastricht Treaty rules - 3% deficits, 60% debt - will look like a dead letter.

Yet, having looked Mr Papaconstantinou in the eye it seems to me that Pasok's whole strategy is to achieve such a deal. They can just about implement an austerity programme that raises tax but does not slash services and infrastructure spend. But if the EU ends up sending plenipotentiaries in to demand much tougher cuts, then the cuts themselves - and the factor of outside interference - will enrage people like the public sector workers I met on the demo today, whose anti-Euro rhetoric was matched only by their dislike for Britain and the BBC.

The wildcard remains how the less organised, much more disparate urban youth will react to all this. The Greek government knows this too and is watching the streets, not the workplaces, for signs of discontent. Trade unions they understand - probably much better than those hedge fund traders who had staked money on some kind of union-led upheaval. The youth they have little traction with - and it's the young who will get hit strategically: their working lives will be 12 years longer than their parents' generation, their wages will be lower, the economy they live in will feel less vibrant, their access to the shambolic education system will be constrained.

And - as the youths wearing pig's head masks on the demo today were keen to point out - there are young people like them all across Southern Europe. Longer term it's a contagious youth unrest from Thessaloniki to Lisbon that Europe's leaders may have to watch out for: "The PIGS fight back," said the banners today.

Instead of a straight class divide this crisis has fuelled a more complicated generational one: older workers have been poor before and, some of them will privately admit, can survive being poor again. But for those in their early 20s to see all the aspirations fostered during the noughties cancelled indefinitely is a pretty hard pill to swallow.

Comments

  • Comment number 1.

    if we were in a strong financial position we could stand around and laugh at the Greeks but we are in Carey Street too so are we glad we are not in the Euro? Isn't it better to be in a strong club that can protect fellow members? Look at Ireland, they have buckled down with austerity measures that must be painful and I don't think we would accept but the Irish have had to, it is all too confusing. After the American civil war the confederate dollar was replaced with the dollar and all the states merged and the currency was universal. What is the difference between a state and say Greece? They are all part of the same club so why the turmoil? So many questions....does anybody know?

  • Comment number 2.

    What is "the market" and who really controls it?
    If trade in currencies is intentionally directed to make profit by deliberate speculative manipulation of poor economies then is this terrorism? Surely domestic traders within taking part in this activity with their own currency are guilty of treason. Those working from other countries are at economic war. Where are the arrests?
    Where is the fightback. Where is the rule of international law to control the aggressors?

  • Comment number 3.

    We know Merkel and Sarkosy are not in love with hedge funds. If the hedgies mange to bust Greece and induce a Euro crisis how long do the hedgies expect to last in Europe?

    Did not the odious Lenin once remark that the capitalist would sell you the rope you use to hang him.

    Might I suggest that there is an awful lot at stake at the moment: perhaps people in the taxpayer subsidised markets need to calm down a bit.

  • Comment number 4.

    What is the difference between Greece and us - a matter of degree? Many economies have become 'successful' by accumulating oceans of private and public debt. Short term solutions based on the balance sheet mentality of managing a modern economy will simply make matters worse. Is there not a collective willingness now to cooperate on strategic debt management. The 'sound' money people will simply drive the first world into a prolonged depression or continued stagnation at best. Social unrest will easily lead to political instability and extremism. The EU should bail out Greece and if it is necessary the UK should seek an IMF loan

  • Comment number 5.

    there is a point that if politicians were competent to run the economy they would have no fear of who was trading the markets?

    so the only check on politicians messing things up more is 'the fear of the markets'? its the only counterbalance the public have to the institutional incompetence of democracy?

    rather than listen to the money jangling in the market's pockets they listened to what was best for all the people [ie regulation] then they would not have been hypnotised into doing nothing and creating a credit crunch.

    the euro is only 1000pts ish away from reaching the double dip of march lows of last year. its nearly march again now. which follows the same pattern as 1930s?


    much of this unrest is organised by those shinning eyed ones who have the Battleship Potempkin film running in their heads?

  • Comment number 6.

    GREECE TO GIVE GERMANS PRIORITY SUNLOUNGERS IN ALL GREEK RESORTS - GERMAN OFFICIAL SAYS

  • Comment number 7.

    "...refuse to be the collateral damage for the bomb dropped by Lehman Brothers." - ah, if only the British had such resolve.

    It would be nice to think that what is happening in Greece begins a European, or even Global, backlash against the bankers and the politicians who, it can be argued, are now robbing the poor to pay the rich. Alas, if it even begins to look like starting in Greece no doubt enough funds will be found to silence the angry mob and balance the Greek economy. By being the first into crisis Greece might actually be best placed to wrangle a good deal from the French, Germans and, presuambly, us.

    We have the same issues with the young and old here in the UK - many of us who went through the 1980s can remember how miserable, depressing and poverty-stricken large areas of the UK were back then. Our young have grown up in an era of plenty, of ipods and xboxes and never being short of cash/credit/debt - they are in for a huge shock in the coming decade of austerity. Likewise, millions of public sector workers about to be made redundant are in for a sharpe wake-up call once the public sector gravy train comes to a stop and the cuts begin.

    Thank goodness our economy has the firm foundation of ever-rising house prices though. If we all keep pumping up house prices higher and higher then the 800 billion QE will be paid back in no time at all. You know it makes madness... I mean, sense!

  • Comment number 8.

    #2 Kit Green

    "What is "the market" and who really controls it?"

    In game theory the circumstances mean that participants behave in ways that are collectively suboptimal.

    The market is where capitalists sell commodities to realise an incerase in the initial capital that went into production.

    The trouble is the market extends beyond productive commodities to trade in assets & their future valuations, in otherwords, finance results in Ponzi schemes.

    Hence a lot of the recorded profit in the last 30 to 40 years has been based upon increases in asset prices, e.g. shares, property, raw materials, fuelled by the printing of US dollars that have no connection to the amount of gold in Fort Knox.

    Money is being debased - the dollar, the euro, sterling, etc.

    Whilst the reduction in real wages can go some way to restoring the true productive rate of profit, but at the end of the day capital accumulation requires new unpaid for inputs in the form of peasant labour & the looting of non-renewable raw materials, e.g. oil & destruction of renewable resources, e.g. timber, fresh water, soil.

    Rosa Luxemburg wrote all about this a century ago.

  • Comment number 9.

    Paul wrote "12 year rise in the pension age"

    Holy cow!....that's not 'work till you drop'...that's 'work from the grave!'

  • Comment number 10.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 11.

    "We're the national version of Enron," says Liana Kanelli, a Greek communist MP'

    What sort of 'communist' is she then?

    It's actually very difficult to tell, looking through Greece's history of the KKE, Eurocommunism etc.

    I'm not interested in what they believe etc, just what they'd really do vis a vis the free-maketeers vs state ownership of means of production, exchange, communication etc.

    Do any of them have any clear, simple, socialist policies anymore, or is she all dramatic talk and no skirt?

  • Comment number 12.

    "....the public sector workers I met on the demo today, whose anti-Euro rhetoric was matched only by their dislike for Britain and the BBC."

    Would Paul care to explain the reasons for the Greeks' "dislike for Britain and the BBC"?

  • Comment number 13.

    #13 Chris there is a statue of George Canning in the square outside my hotel, because of his support for Greek independence. They like Lord Byron also. But there is also a big legacy of annoyance with the British for their role in the events of December 1944, after which the anti-fascist resistance was disarmed. Lots of people here believe the entire economic crisis is a plot by Britain and America. They identify the BBC as the state broadcaster (I believe wrongly!).

  • Comment number 14.

    12 goldchrisevans : -

    'Would Paul care to explain the reasons for the Greeks' "dislike for Britain and the BBC"?'

    Perhaps it is because we keep using middle-aged bored housewives to corrupt their young men? Or because the BBC has begun showing 'The One Show' in Athens?

  • Comment number 15.

    The dislike for Britain is limited to its role as a global power - flattery indeed, but also to its role during the Greek Civil War and the Cyprus question. There is also much ignorance about Britain. Greater knowledge might enable Greeks to target their likes and dislikes more pertinently.
    As for the dislike of the BBC... that is curable when we explain to them how impenetrable BBC expenses and salaries are: they take comfort from such financial penumbra.

  • Comment number 16.

    I thought it was PIIGS not PIGS to icclude Italy and Ireland. But that presumably brings it too close to home.
    The BBC is not the 'state broadcaster' per se, but it played that role at times during its history and it was/is the voice of the Oxbridge establishment.

  • Comment number 17.

    12. goldchrisevans 'Would Paul care to explain the reasons for the Greeks' "dislike for Britain and the BBC"?'

    It goes way back - Churchill and Stalin agreed to carve up Europe into spheres of influence at the end of WWII and Britain got Greece. The Greek communist party (KKE) was effectively sacrificed by Stalin in the process (complicated by the Tito-Stalin split) even though it was largely the KKE as resistance which had fought the Germans. The Greeks ended up with a right wing military dictatorship (think S America etc). Just think of it as an still unresolved battle despite the alleged end of the Cold War. British and USA Neocons (Satanists to some) are anti-statists, pro free-marketeer, hence the current public sector outrage in Greece. Think how our public sector is being culled/cut thanks to our 'indebtedness' to bankers.

    It's a microcosm of what would perhaps be happening here if we really had a Labour Party instead of this faux New Labour.

  • Comment number 18.

    is it not funny that the uk is one of the biggest holders of greek debt?

  • Comment number 19.

    18. jauntycyclist - interesting, is it the case that HMG engineered Greece's profligate public spending to prop up its liberal government, whilst China engineered profligate private indebtedness of the USA and UK in order to sabotage their Faustian ways?

  • Comment number 20.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 21.

    #13 Paul Mason wrote:

    "They identify the BBC as the state broadcaster (I believe wrongly!)."

    Pual the other one!

  • Comment number 22.

    Just putting a few themes together from our crisis, presumably Greek sovereign debt credit downgrades have impacted Greek bank debt costs,eroding the Greek bank capital buffers and hitting their share prices.ECB liquidity lifeboats to Greek banks will need to be increased,not withdrawn as planned,presumably. How much are Greek banks exposed to Southern Europe, Turkey, Romania etc. Are there any Southern European black credit holes which the bail-outers will get sucked into?Anything on this,Paul?

  • Comment number 23.

    21. freemarketanarchy - Paul's remark reveals what's deeply problematic with idioms such as 'I believe wrongly'.

    Perhaps he hasn't been following coverage of Iran's 'disturbances' by the BBC or doesn't fully 'see' how a public service like the BBC represents its culture/state. One only has to watch Newsnight/BBC presenters and/or newsreaders to 'see' how heated they sometimes get when interviewing some people (e.g. Nick Griffin). It isn't neutral, that's for sure.

  • Comment number 24.

    #3 stanilic wrote:

    "Did not the odious Lenin once remark that the capitalist would sell you the rope you use to hang him."

    ------------------------------

    Strange sentence!

    - Was what he said...odious?
    - Was he personally odious...if so, how do you know this for a fact?
    - Can an odious man make a statement that is commendable and worthy of repetition?
    -Did the 'odious man' actually make an odious remark?

    Please explain.

    Your posts are are normally very lucid and cogent....why this strange sentence???

  • Comment number 25.

    "For the Greek labour movement today was supposed to be day one of a campaign to stop the austerity measures imposed by the Pasok (social-democratic) government."

    Can anyone explain what sequence of events the Greek labour movement are expecting in place of the austerity measures? Greece is deeply in debt, and that debt is growing very rapidly. They will need to keep borrowing large sums (relative to their economy) even after the austerity package is implemented, so, what are they expecting in its absence?

    Do they want the Greek government to just default on repayment of its existing debt? If so, where do they think they will be able to borrow in future?

    Do they expect some generous third party (Germany? the IMF? "Europe"?) to pay for a life style that they cannot fund through their own efforts? Why? Why shouldn't they pay for someone else's life style instead?

    It makes no sense to me. Do they really believe that it is someone else's responsibility to pay for the things they want and demonstrably cannot afford?

  • Comment number 26.

    It makes no sense to me. Do they really believe that it is someone else's responsibility to pay for the things they want and demonstrably cannot afford?

    To be fair, it's not a unique mindset to Greek pols.

  • Comment number 27.

    25. hants_gw 'Greece is deeply in debt, and that debt is growing very rapidly. They will need to keep borrowing large sums (relative to their economy) even after the austerity package is implemented, so, what are they expecting in its absence?'

    People don't behave very rationally when they think they discover they've been cheated/conned etc. Think of the massive debt in the USA. Think of the people induced to get themselves into enormous debt by banks and brokers over the years. Maybe you watched 'Freefall' last year? Yes, they know they are in debt, and yes, the smarter ones may be saying they should have known there's no such thing a sa free lunch etc, but if they feel they were misled by people they were led to trust? Think Iraq, think MPs ACAs, think...well lost of examples. You're apparent incomprehension could be misunderstood by some to be solidarity with predatory lenders - i.e it was all just a case of buyer beware and people should have known better. But what if lots of people don't have the ability to see through predators' charms? IN fact, what if the predators don't even see it as predatory?

  • Comment number 28.

    25. hants_gw 'Greece is deeply in debt, and that debt is growing very rapidly. They will need to keep borrowing large sums (relative to their economy) even after the austerity package is implemented, so, what are they expecting in its absence?'

    People don't behave very rationally when they think they discover they've been cheated/conned etc. Think of the massive debt in the USA. Think of the people induced to get themselves into enormous debt by banks and brokers over the years. Maybe you watched 'Freefall' last year? Yes, they know they are in debt, and yes, the smarter ones may be saying they should have known there's no such thing as a free lunch etc, but if they feel they were misled by people they were led to trust? Think Iraq, think MPs ACAs, think...well lost of examples. Your apparent incomprehension could be misunderstood by some to be solidarity with predatory lenders - i.e it was all just a case of buyer beware and people should have known better. But what if lots of people don't have the ability to see through predators' charms? In fact, what if the predators don't even see it as predatory, just 'doing their job' etc.

  • Comment number 29.

    The EU's policies of supporting the Franco-German industries and agriculture brought Greece to the brink of bankruptcy. Taking into account war reparations were never paid by Germany to Greece to now present Germany as the saviour of Greece is deeply ironic. In the last 3 decades de-industrialisation and privatisation became the only show in town alongside EU caps on agricultural production. From an exporter of agricultural products Greece via Brussels became an importer. The EU was created not for national development or social justice for the more backward economic regions of Europe-the so-called PIGS-but for the strenghtening of the big corporate and financial interests. The joke is that whilst Brown called for bank bailouts he has proposed the bankruptcy of Greece and the collapse of the Euro...

  • Comment number 30.

    China offerred loans to Greece with a 1% interest. Papandreou refused. We belong to the Euro he said. The Euro brought Greece to the brink of bankruptcy and the extremely high interest rates will tip it over. Either which way Maastricht was buried in Greece...

  • Comment number 31.

    @costas68 wrote: "The Euro brought Greece to the brink of bankruptcy". LOL!
    The Euro is an inanimate entity; it was Greek political corruption, Greek greed and, paradoxically, good old laziness, that animated it and led the country in the mess it finds itself in. Greece deserves to go under as a warning to the rest of us.

  • Comment number 32.

    How long will it be before the people in Germany get very angry at the idea of working, paying taxes, living and dying in order to prop up the Greek way of life - a way of life which appears centred on paying no taxes, on milking EU grants and chatting up bored middle-aged holidaying housewives?

    With France, and indeed the UK, in the frame to bail out Greece how long will it be before the populations of those countries get on board with the Germans? Looking around the EU Portugal, Eire, Spain, Italy and Beglium have similar debt problems.

    Are we supposed to bail them all out as well?

    Are British, French and German workers meant to work in order to subsidise the lifestyles of these failing states?

    Looking at the lifestyles of the PIIGS and Belgium all those states appear to have longer, happier lives, less stressful working conditions, shorter working hours, better healthcare and better pensions. In fact, their entire way of life looks healthier and happier than us miserable Anglo-Saxon types toiling away in the northern European states - and yet it looks as if we are being lined up to bail them out.

    I hope the Germans get angry over this. I hope they refuse to bail out the Greeks or anyone else. Perhaps then we in the UK will wake up and do likewise.

  • Comment number 33.

    Crisis over - German has annexed Greece. No doubt the Greeks will blame the British.

    LOL - Andrew Neil on 'The Daily Politics' just stated that the Greeks have a very nice lifestyle and questioned why we should be bailing them out?

    A very good point.

  • Comment number 34.

    Who benefits from the EU and the common currency?
    This question isn't answered. Its as if the 1 million unemployed Greeks and the 20% below the poverty line are benefiting when for the average minimum wage one has to work in Greece to live not claim it from welfare. Greece cross-subsidises the north via cheap agricultural exports, its best products are in German supermarkets, it had a free airport and not it has one which it has to pay to Germany. Every previously state-owned company has been taken over by larger north european corporations and the single currency has meant prices for basic goods higher than in Brussels but average wages pegged to the floor. The 'unity' of Europe has meant the thirworldisation of Greece for anyone who dares to take a walk in the centre of Athens. This is the EU in practice not on paper or GDP figures. They broke it, they clearly wont be able to fix it. The only option for Greece is to leave the EU and the Euro.

  • Comment number 35.

    32. tawse57 'How long will it be before the people in Germany get very angry at the idea of working, paying taxes, living and dying in order to prop up the Greek way of life - a way of life which appears centred on paying no taxes, on milking EU grants and chatting up bored middle-aged holidaying housewives?'

    When the current generation of Germans stop feeling guilty for what their parents generation were made to feel bad about?

    The same guilt trip has been effectively extended to some other Europeans since. This is why there is that peculiar celebration/rememberance day every year, all those horrid (boring) films from Hollywood, SKY History Channel etc, and why everyone is made to feel sorry for/guilty about 'minorities' - all the time.

    The trick seems to be to make yourself a minority! Too bad if you aren't, somehow that makes you non special, i.e someone who should feel miserably guilty all the time and give all your money away to middle men/women.

    It's a big predatory scam which plays on conscience, and it is played by those who have little or none.

  • Comment number 36.

    We are not in the Euro Costa but we are going to discover that we face many similar problems. Brits are about to wake up to wage freezes and wage deflation whilst cost of living - fuel, food, etc - rises.

    The private sector, save the bankers, is seeing wage deflation already and the public sector - it will be a huge shock for millions of them - is about to see the same, job losses, etc. But the cost of eating, staying warm and getting from A to B in the UK is already rising. Many of our corporates are foreign-owned in part or full and the standard of healthcare, pensions is amongst the worst in the EU.

    The Markets are not impressed by the Greek bailout - the Euro is continuing to fall, Merkel has just said that 'we' will not desert Greece and Gordon Brown is still waiting for his luggage at the airport.

  • Comment number 37.

    RE: 26 and 27

    Thank you both for those responses. On second thoughts I shouldn't have framed my questions so broadly. Paul Mason quotes Liana Kanelli and I would really like to hear her responses. She is quoted as being against the austerity plan but what is her alternative? Perhaps she always opposed the Greek government's reckless borrowing - in which case I sympathise with her position - or perhaps not. Either way, what - in her view - happens now?

    JunkkMale: "To be fair, it's not a unique mindset to Greek pols."

    Yes, I was aware that my comments might apply to more than one country.

    Statist: "People don't behave very rationally when they think they discover they've been cheated/conned etc. Think of the massive debt in the USA. Think of the people induced to get themselves into enormous debt by banks and brokers over the years. ... Yes, they know they are in debt, and yes, the smarter ones may be saying they should have known there's no such thing a sa free lunch etc, but if they feel they were misled by people they were led to trust? ... You're apparent incomprehension could be misunderstood by some to be solidarity with predatory lenders - i.e it was all just a case of buyer beware and people should have known better. But what if lots of people don't have the ability to see through predators' charms?"

    There are two issues here.

    1. Predatory lending.

    This isn't applicable to Greece. Concerns about predatory lending are relevant to US sub-prime lending or some UK credit card debt and so on. Cases where people who did not (and perhaps could not) understand were tricked or pressured into borrowing money they couldn't afford to repay. Greece's problems derive from loans taken by the government who are, I assume, not gullible simpletons exploited by clever bankers. Greece also has problems related to corruption and falsification of accounts. You probably could use the word "predator" there but the predators are all locals and frequently part of the elected government.

    2. Solidarity with the (predatory) lenders

    Actually I do have some sympathy with the lenders in this case - especially when you consider that for all I know, "the lenders" might include UK pension funds - but that is because, as I said above, the use of the word "predatory" is inappropriate. The Greek government knew what they were doing and they were elected. Perhaps you could argue that the lenders deserve to take the pain of a default because they never should have believed the Greek government and never should have extended the loans in the first place. Of course if you do that, there won't be any more lenders will there? So where will the Greek government get the 13% of GDP that it needs to borrow this year?

    Paul's original piece indicates that he thinks the austerity package will, in the end, be implemented. I'd still like to know what alternative the opponents of the plan can offer. Partly that is simple curiosity, but it's also because I anticipate a similar argument in this country in the none too distant future.

  • Comment number 38.

    I just got back from a brief technical engineering workshop trip to Ireland. The growing sense of desperation was palpable among the great unwashed and confidence in the future very very low.

    The fact that they have little control of thier own destiny is a volatile subject for them also, the only scope the Govt has is to cut cut cut, devaluation and QE not being options within their control.

    They are starting to realise the predicament, they can not even get contracts in NI because there rates are not competitive with the devalued pound, hence a colleague had to take a 30% pay cut to compensate for it to become competitive. that is adynamic probably quite unique to Ireland.

    There is a sense that they are spirilling towards a depression over which they are, by virtue of the underlying economic structure, unable to moderate or control themselves, being at the mercy of the bigger european economies performance, articicially keeping their currency high and their competitiveness low.

    The situation in Ireland looked potentially really quite nasty to me.

  • Comment number 39.

    37. December 2008 - point three, and look elsewhere too.

    As to governments not being full of 'simpletons', well, think New Labour and the Bush administration presiding over banks and predatory lending.

    I suggest you may be thinking too much and chasing moonbeams, i.e not looking carefully enough at the real drivers, which is population makeup and change. This is about preying on the less able. Look at the PISA figures, and in the USA look at the NAEP too. Here, (UK) you can look at OECD PISA maths and/or our SATs.

    I try to keep it simple but that doesn't mean I'm being simplistic - just concise and accurate. People are poor because they're lowish in ability relative to those who take advantage of them (and those who do that try to hide this difference visa political correctness). You can't change that with money, but such people are easy to put in debt. Like kids, they'll take now, forget about later consequences, it's a feature of arrested development.

    Follow the lending, and note how the blowback (interest) cripples any socialist leanings (here, there, and everywhere). See what's happening here (e.g. Birmingham) and in the USA? Note how schools, GP surgeries etc are being privatised via PFI?

  • Comment number 40.

    @costas
    I take your concerns on how Greece has been sold to outsiders. Who sold it? Greek politicians sold it. What did they get out of it? Ask Siemens and the others. Where is the money? Ask the offshore companies. Costas, Greece is run on a feudal basis by a handfull of families: Papandreou, Mitsotakis, Pangalos... and new monsters also: Laliotis, Vardinoyannis, etc... Not forgeting Lambrakis Press Group. Why should I pay for their mistakes, especially when WE KNOW GREEK POLITICIANS WILL NOT POCKET MOST OF THE FINANCIAL AID.

    @hants_gw
    Brrr, I hope you are wrong mate. What the ding-dong hell is happening?

  • Comment number 41.

    38 Jericoa: -

    We have QE and are able to lower the Pound but the cut cut cut of jobs is already begining in the Public Sector. (Btw, it is a moot point whether we, i.e. the BOE, or the Markets have devalued the Pound.).

    Councils across the UK, almost daily, are announcing plans for hundreds of job cuts per council. The jobs have not yet gone but they are going in the coming 12 months.

    Your news from Eire is very interesting - the feeling of people on the ground is so important and oft missed in news reports. The truly massive bubble in both residential and commerical property in Eire was simply staggering. How exposed the UK is to these bubbles and, likewise, just how many Eire BTL landlords, property developers and banks helped create the UK bubble in commerical and residential property is still unknown.

    I think we should take little or no 'satisfaction' in what is happening in Greece, Eire or elsewhere. The blunt reality is that the UK banks run amok in the past decade, that millions of Brits jumped on board the credit/debt bubble, that we have massively inflated house prices here, that we have debt coming out of our ears and, well, it is not 'if' but 'when' the seriousness of the UK's economic malaise eventually hits home.

    I think a major recession, if not depression, is difficult to avoid now in the UK. Within 18 months I think there will be unemployment figures to rival the worst of the 1980s, that the housing market will collapse in ways that virtually all home owners and estate agents believe impossible, that retail spending will fall off a cliff and that the commercial property market debts will spark another UK banking crisis - and at the heart of it all is all the QE debt that you, me and everyone else has taken on in order to prop up the very banks who engineered this mess in the first place.

    In the meantime expect to see more of the PIIGS in crisis, expect to see Greece constantly in the news and, frankly, expect to see a truly global economic crisis that makes 1929 look like a rehearsal.

    I must get out in the sunlight and blue sky more often ;-)

  • Comment number 42.

    41. tawse57 'I must get out in the sunlight and blue sky more often ;-)'

    Maybe the good which will come of this is that of more people coming to appreciate that what once seemed grey and dull about the statist nations (including our own in the past) wasn't so much austerity, as social realism?

    What we have been immersed in for decades (cf. the media's ludicrous obsession with a suicide of one in the vanity industry), is ostentation, vanity and irrealism - the stuff which predators love, as it takes people's feet off the ground and into the clouds, enabling easy money to be made exploiting naive trust, and most of all, vanity. That cost family life, health, and stability for far more people than it ever helped. It's been a manic culture where not to be high or excitable all the time was taken as evidence that something must be wrong, when what was wrong was the mania. It's time to slow down.

    Some good will come of this.

  • Comment number 43.

    I hope you are right Statist - we live in the era of the Narcissist.

    I used to think that being a narcissist just meant that you were just a bit vain and loved yourself in the mirror for a tad too long. I was somewhat surprised to learn of the Narcissistic Personality Disorder and to read that it is considered at almost epidemic levels in the US and UK nowadays. Being successful is not enough as you have to 'be seen' to be successful so that you can get some perverse ego-kick by rubbing your success, your wealth and your celebrity in the faces of others.

    This is very much along the lines you describe. Hence we have the meeja obsessing about the wonderland that the US is whilst conveniently ignoring the bad bits - the crime, the jails, the death sentences, the unemployment, the lack of healthcare, the homeless, the aged and the aging ill.

    Yes, because of this love of all things USA, there has been a move in the UK towards getting us all more like them - longer working hours, less and less holidays, less and less job security and now there is a concerted move against the social foundations of our Society in healthcare for all and looking after our old.

    There is a wonderful book by the hospice pioneer Elisabeth Kubler-Ross, 'Life Lessons', that I urge all people to read - Ross being the person who is credited with defining the 5 stages of grief. In 'Life Lessons' she reminds us all that oneday we too will die and that we most likely will not come this way again. She points out that amongst the thousands of people that she has watched die none of them talked about how much they earnt or what car they drove. They talked about family, about love, about stars and about the important things.

    I do hope that a better more humane World will come out of this economic mess. I do hope that the World will come to realise that unbridled Capitalism is as evil and as destructive to the Human Spirit as Communism was. Alas, we live in an epidemic of Narcissists and, even worse, those with the disorder seem to be the ones running the planet - and millions more of us are gradually being infected.

    No, although I consider myself well-read and informed, I had never heard of this designer chap before the news channels went wall to wall coverage of his passing for the past 4 or 5 hours now. His Mum passed away last week and it appears he lost a very close friend last year - the grief must have been unbearable for him. I can only assume that he died, as is possible, of a broken heart.

    Let us hope that one day economists will realise the importance of our short-time here.

  • Comment number 44.

    43. tawse57 I suggest this reinforcement of vanity has been very good for merchandising, as human females (and gays) do most of the shopping. Liberating females and gays was a very good way to get more money out of people's pockets, hence the promotion of fashion gurus and media etc.

    I'm not sure 'communism' was such an evil as made out (see Yugoslavia under Tito, and China today). We have just been saturated with propaganda to keep the above edgy, shocking, culture alive and humming.

    Straight men have suffered greatly of course. I'll be glad to see the back of all this vanity as it's ephemeral, shallow and ultimately does far more harm than good, as you eloquently point out. For one, it hits the birth rate bigtime.

  • Comment number 45.

    #41

    I think I slightly mis-communicated my point.

    Of course I agree cuts are on the way here too, but Eire did not even have the choice to delay or soften or control the timing of the cuts, they could not call up the ECB and get policies introduced which are in their national interests. Their exchange rates is hitched to far larger and economically dominant nations. They can not do anything to get out of this mess except cuts, even if you consider we made a mistake with QE, they dont even have the freedom now to make their own mistakes!!!!.

    Even when they make the cuts they are still hitched to a disproportionatly powerful currency relative to their local situation in Ireland.

    It is a disaster for them, cuts and more cuts, with no national tangible positive effects from those cuts economically, they have not the power or influence to devalue the euro thereby stimulating exports and lowering imports. They can not compete with nations whom still have the freedom to influence the strength of their currency directly applicable to local economic conditions. They try to win contracts in NI, they cant because they are way too expensive due to the relative strength of the Euro, on the contrary, they find thier Ni colleagues are winning more work in the south....

    They are totally screwed and beginning to realise it as the measures bite and feed back into the private sector, hitched to someone else wagon with no way to effect their own national destiny...and they voted for it!!!.

    History tells us the Irish dont respond too well to that situation.

    I guess it was a sense that there was a creeping realisation of their situation, the above anlysis is not in the common Irish perception of their situation as yet, but i dont think it is far away.


    It is a tragedy.

  • Comment number 46.

    An historic globewreck: Spain -> Holland -> England -> New York -> Russia -> ??

  • Comment number 47.

    #'s 42, 43 and 44....great posts!

    BTW...I guess the next we hear the question: Does my bum look big in this?...we should just reply YES!...from now on!

  • Comment number 48.

    Statist

    I just watched the ITV news at 10 tonight (can't bear to watch BBC's propaganda news)....and with complete incredulity just witnessed the lead story, of about 5 mins, about the suicide of Alexander (Lee: this name was not showbiz enough) McQueen of the night.

    If it hadn't been for your posts over the last 18 months or so....I would not have any hair left tonight!

    BTW - I don't wish to speak ill of the dead. This is not a gripe about Mr McQueen.

  • Comment number 49.

    44. At 7:54pm on 11 Feb 2010, Statist

    As a female, I applaud you. I've never understood why so many women need so many torturous shoes and so many tubes of lippy. Life is just too short....IMHO And those models wearing his 'things' on the news, look like skeletons with skin grafts. Not healthy at all.

    47. At 9:26pm on 11 Feb 2010, freemarketanarchy
    The answer should be 'you look gorgeous...hope we are ot staying out too late'.
    You can reduce the spending on too many clothes by making sure she knows you like her in one outfit, and nothing else will do. Gets her off the hook with the fashion-nagging mates because she'll boast about why she wears the outfit so often.... Simples...

  • Comment number 50.

    40. Getlost

    Greek politicians may indeed have sold the country out to the lowest bidder and are now selling bankruptcy as a solution to the crisis.
    One doesn't solve the problems of collapse by collapsing the state, gutting the public services and engineering mass unemployment. You thus lay the foundations of the collapse of the whole EU project which attempted monetary union without political union in the place of the previous attempt which was military union in the place of political union.
    The nation states of Europe can only arrive at the United States of Europe in stages and in equal measures of development. Half the secondary schools in the Athens basin work on two shifts, morning and late afternoon as they dont have enough schools to go round. The EU was supposed to raise standards not collapse them.

  • Comment number 51.

    50. costas68 'Half the secondary schools in the Athens basin work on two shifts, morning and late afternoon as they dont have enough schools to go round. The EU was supposed to raise standards not collapse them.'

    That's the way much has been sold to the public, even in the UK vis a vis educational standards, but of course, looked at objectively, the reason there have been more As-Cs and university places is because standards have been lowered, not raised. When lowered (dumbed down) standards were looked into viz SATs, the clever investigators looked to Northern Ireland rather than to England for their data.

    Of course, whilst one can't bring lots of lower ability people into a country and skew the birth-rate towards the less able without adversely affecting the overall skill-base, one can by this policy increase the number of uncritical consumers (and voters) for those well placed to profit from this (as has been said in these pages many many times I believe, and over many years too).

    It doesn't matter whether this was done intentionally, by omission, by commission, whether the top people knew about it etc. What matters is the numbers. Those in high places would be responsible by this happening under their watch and their (party or party contributors etc) benefiting. It all comes down to what objectively happens, not who 'knows', 'wants' etc.... you can fruitlessly debate that till the cows come home, it is not a rational business, as logic does not apply in that area alas. True, and some of the miscreants know it.

  • Comment number 52.

    51.Statist

    Thats why presented with 1% interest rates from China, Papandreou chose the 7% of the western bond markets. The politicans believe there is only one show in town that of the EU. Brown has been dying literally to get in, but adverse conditions always mitigate against it. Instead of a policy of development the only policy they have is one of manufacturing and agricultural meltdown. All they ever talk about nowadays is whether salaries and pensions will be paid. The labour markets have been flooded with cheap labour both in agriculture and in manufacturing and the answer to the riddle is that if everyone lives on Bangladeshi wages whilst paying Brussels prices for goods and service there will be a way out of the crisis. The EU is a mess. The sooner countries get out, not join at all or avoid the EURO altogether the better...

  • Comment number 53.

    I also forgot to add about the financial speculators. Like the absentee landlords of old who had no problems in collapsing Ireland, the financial speculators of our time are absentee investors. They have no direct interest in corporations other than making a quick buck. Speculators hate stability. If the EURO is going down half will gamble it goes down even further the other half will gamble the other way. Athens apparently is awash with speculators ready to buy government bonds on the cheap. Speculators unregulated will bring the whole house down and no one will stop it or can stop it. The cost in peoples livelihoods will be enormous but at least some will end up with a massive pile of cash somewhere...

  • Comment number 54.

    I am glad that your Greek item has been posted on here. I just caught the end of it the other night.

    Very interesting indeed. I loved the woman who did not wish to be likened to a 'PIIG(S)' and it was fascinating to note the view of this global financial mess from a Greek perspective.

    I do wish we vocalised our anger to this mess in a similar way here.

  • Comment number 55.

    costas68 'Speculators unregulated will bring the whole house down and no one will stop it or can stop it. The cost in peoples livelihoods will be enormous but at least some will end up with a massive pile of cash somewhere...'

    I fear that's why Germany (in the 1920s and 1930s) took such a hard line in those infamous '25 Points'.

    It's interesting (to me) that the PIIGS are the traditionally family-orienated nations of old Catholic Europe, those which once put people before profit, and duties before rights.

  • Comment number 56.

    It wouldn't surprise me if Ireland (Eire) was the first one to ditch the Euro rather than Greece.

    Eire has benefitted enormously from infrastructure investment whilst in Europe and has now implemented austerity measures to reign in public expenditure, the cuts have been harsh, if they can keep it together for a couple of years (and the rest of the world doesn't go pop) then they could exit the Euro with a lean but modern economy.

    Greece on the other hand must still hang on to Euroland as without it they will be seen to be nakedly broke.

  • Comment number 57.

    Some sense needs to be made amid the "deficit-fetishism", about which Stiglitz has made some good points.

    Other points.

    Maybe the EU is not too unhappy about a little devaluation (apart from the profits that will be made by the speculators) as it will boost their export capability in order to leave recession.

    The chance of a real default inside the Eurozone is vanishingly small, as is the prospect of ejections from the Eurozone. This is ALL about speculation.

  • Comment number 58.

    "The Greek crisis has German roots," says Heiner Flassbeck, chief economist at the United Nations Conference on Trade and Development (UNCTAD), in Geneva. It was German wage dumping that got the country's European neighbors in trouble, he says.
    http://www.spiegel.de/international/business/0,1518,676507-2,00.html

  • Comment number 59.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 60.

    Paul,

    I usually like your blogs. You're one of the few who normally stands up to the politicians and shows healthy disrespect for the twaddle they peddle. This blog is doubly disappointing then.

    The first point to note is that an EUR8 billion short position in EUR is not "massive" in the context of the FX market. It is significant that there is any short position, given that EUR has been a one-way bet upwards for several years now, but it is certainly not massive.

    Secondly, the current crisis has not revealed anything about EUR's structural weaknesses. These were known, and well documented, at the time the EUR project was being developed. The biggest weakness, well documented and discussed at the time, was that Greece never met the convergence criteria for eligibility to join EUR in the first place. Its acceptance into the EUR bloc was a purely political decision, and it comes as no surprise that Greece is the weakest link now we have a crisis.

    The solution is very simple. Your colleague Stephanie Flanders spelt it out a couple of days ago. Greece needs to restructure its debt (essentially a negotiated default), and it needs to be allowed to run higher inflation rates than implied under the EUR zone overall target of up to 2%. The debt restructure provides fiscal loosening (less debt and less interest cost), higher inflation targets provide monetary loosening (lower interest rates for any given level of inflation).

    There are several ways to achieve the debt restructure: simple default; provision by France/Germany of money to repay maturing debt with such loans being on preferential terms; as per the previous point but with ECB as lender; as per previous point but with IMF as the lender. EUR zone pride (read: "French") appears to preclude any real role for IMF. At present ECB is precluded by its statutes from perfroming the role suggested, though a letter from Merkel/Sarkozy to Trichet telling them to do it would soon solve that problem. Ultimately, though, do France/Germany want a Greek fiscal crisis undermining the long-term credibility of EUR? I suspect not. Similarly, the only way Greece can run lower interest rates at any given level of inflation is if the EUR zone target is raised. I do not see any great appetite for that in Germany, given its experience with inflation and consequences thereof in the last big economic crisis.

    So we are left with one solution. Greece withdraws from EUR, meaning it can then restructure its debt with no direct impact on other EUR members, and can set whatever inflation target it likes. It would still need help in restructuring its debt, and this should be provided as part of any EUR withdrawal plan. However, it would then not have a direct EUR impact.

    This is the natural consequence of a crisis that has simply exposed why it was so important for EUR members to achieve a degree of economic convergence in the first place. Greece did not do that, has made no progress towards it over the 10 year life of the EUR, and should now leave in order to protect the interests of the wider EUR bloc.

    The Greek government simply cannot be allowed both to stay in EUR and backtrack on public sector cuts. Such a scenario will, almost certainly, cause a collapse in the entire EUR project. Remember that Ireland has already implemented cuts simialr to those in Greece (welfare benefit reductions; cuts of 5-15% in public sector pay). It will be hard to maintain these if Greece gets a handout to soften the blow. Spain is also introducing a budget along similar lines. What is currently a problem involving about 3% of EUR zone GDP could, quite quickly, become one involving 20%+. The former is containable, the latter would engulf the entire currency bloc. Therefore to preserve the wider EUR bloc, Greece must leave. It is a bit like cutting off a leg with gangrene in order to preserve the rest of the body.

  • Comment number 61.

    # 56

    Bob,

    Your analysis shows very little understanding of Ireland's economy. EUR has been generally good for Ireland, though politicians here have been shamefully weak at reining in the excesses caused by EUR membership. Had Ireland not been a EUR member in 2008, then we would have experienced a similar fate to Iceland. Of course, had Ireland never joined EUR, then it would not have expereinced the boom that would then turn to crash, but I will return to that later.

    Ireland's current problems are entirely self-inflicted. There was no exposure to sub-prime debt etc amongst the banks, just excessive lending to finance an unprecedented property boom. That, itself, was caused by the sudden drop in interest rates, as these "converged" to likely ECB rates, which were always going to look remarkably like those in France and (especially) Germany, given their domination of EUR zone GDP. Ireland did nothing to discourage the type of activity that thrives where interest rates are artificially low, and property speculation is an obvious one. Actually, it was encouraged. Taxation policy reinforced the very loose monetary policy in encouraging property development (both residential and commercial). Consequently, we ended up with construction representing 20% of Irish GDP at the height of the boom in 2006, and crashing in 2008. That swing in construction activity explains a big chunk of Ireland's 11% GDP fall in 2009.

    If that's the bad news, what is the good news? Of most importance, Ireland runs a trade surplus both intra-EU and outside it. The country has no need to devalue. EUR membership has resulted in much more balanced trade. Ireland is no longer in a bilateral trade bloc with the UK. This much-improved trading environment is reflected in the types of company that are based in Ireland. There are loads of new-economy giants that have their European bases in Ireland: Microsoft, Yahoo, Google, eBay etc. Currency stability (ie so much trade within the EUR zone) is a big plus in Ireland's favour (together with very low corporate tax rates).

    There is no chance of Ireland leaving EUR, and you can be pretty sure that Ireland will be one of the hawks when it comes to the Greek crisis. We have taken our pain here: tax hikes, pay cuts (private and public sector), unemployment. All exacerbated so as to revive our competitiveness in the absence of an ability to devalue relative to our main (EUR zone) trading partners.

    Nobody here is asking for an easy ride. Nor, however, will we support anyone else getting preferred treatment. Greece never met the EUR convergence rules. It was allowed into EUR for political reasons. The fact it cannot live within the rules suggests it should leave, and allow those of us who can and wish to abide by the rules to get on with sorting out our problems without political sideshows like Greece getting in the way.

  • Comment number 62.

    Maybe the extract posted in post 59 was a tad long? Here's a shorter, key extract (it's from the Spiegel article linked to in post in 58).

    Correct me if I'm wrong, but what the 'Credit Crunch' actually did was made the politics of statism, i.e Public Services, much harder for any nation (USA through EU states especially, but I bet this applies to neo-liberal Japan etc too) by effectively forcing public service cuts, and for a long time hence.

    As I see it, this all aided neo-liberalism aka fre-marketers did it not, as it made expenditure on public services inconceivable!.

    Is this what the Greek Communist MP was effectively saying by asserting this was a war?

    'Not until last fall's elections brought Greece's socialist opposition to power did new data arrive from Athens -- and new questions and accusations from Brussels.

    The Greek parliament and government are now virtually stripped of power. They're not allowed to decide on any new expenditures without EU approval. Finance Minister Giorgos Papakonstantinou is required to report every four weeks on progress made in budget restructuring.'


    Obama had the same mess dumped on him, and any UK government that even thought of promoting Old Labour like policies would be given a rough ride in the forthcoming election (who will pay they will say), just as the French Socialists did when up against Sarkozy.

  • Comment number 63.

    61. JayPee 'The Greek government simply cannot be allowed both to stay in EUR and backtrack on public sector cuts. Such a scenario will, almost certainly, cause a collapse in the entire EUR project.'

    Exactly, but what does that say about the EUR project (and what's been driving it since Morgenthau/Marshall)?

  • Comment number 64.

    #63 Statist,

    What it says is that Greece was a political, not an economic, entrant into EUR. Take away Greece and the problems are manageable. In at least one of the PIIGS states, Ireland, EUR has been of fantastic benefit. Our problems here are solely down to dreadful domestic economic mismanagement during the boom. Spain looks very similar to Ireland. Had both countries taken (political) steps to dampen property booms caused by EUR membership (ie sudden unwarranted fall in interest rates to German levels), then there would be no EUR crisis. There would be a Greek crisis. In which case the solution is simple: decouple Greece from EUR.

  • Comment number 65.

    64. JayPee 'Our problems here are solely down to dreadful domestic economic mismanagement during the boom. Spain looks very similar to Ireland. Had both countries taken (political) steps to dampen property booms caused by EUR membership (ie sudden unwarranted fall in interest rates to German levels), then there would be no EUR crisis.'

    An clever/intelligent analysis, but these are counterfactuals (which are treacherous) - the reality is that they were mismanaged in the times of easy credit. I am drawing attention to the fact that some would have known that this would have transpired, so I'm suggesting that this was all strategic, a form of tutelage, i.e neo-liberal serfdom.

    If it isn't obvious, I'm suggesting that it makes socialism (which brings regulation and statism) that much harder, if not impossible.

  • Comment number 66.

    64 JayPee: -

    The boom was not a real boom though - it was an illusion, it was a house of cards, it was a giant ponzi scheme and, in many cases, it was outright criminal fraud.

    What happened over the past decade was that the prudent, the saver, the risk-averse were penalised, and are now being punished by artificially low interest rates, and those who speculated on property, who ran up huge credit debts, who took out 'liar-loan' mortgages, etc, have effectively been rewarded.

    Yes, there was a boom but it was a boom built on no solid or realistic foundation. The result being that entire countries are now effectively bankrupt, that the populations of those countries are increasingly polarised between a small very rich elite and the rest - i.e. 10,000 British bank workers apparently getting a 1 million bonus each soon. How can you compete in buying a home when you are on even a decent salary and one of these people turn up to buy their third or fourth 'holiday investment' in your area?

    I do actually hope that in the remainder of 2010 we do see people in the EU getting angry.

    I do hope that we see hundreds of thousands out protesting in Anthens and other European capitals. In a way, I hope that Greece is not bailed out so that anger can rise, be shaped and take to the streets... so perhaps it will give millions of the rest of us a good kick up the back-side to wake-up and realise what is going on.

    Why was nothing done to stop this years ago? Why did no one step in to say that credit was too easy, that interest rates were too low or that too many people were buying homes they could not afford? Well, there is a long list of economists who were warning about Eire and Icelandic banks 4 and 5 years ago, warning about the 'liar-loan' mortgages, warning about the Credit Default Swaps, etc, etc, but, it seems, they were not part of the band-wagon. (Interestingly, many of these same Economists are now warning that the worst is yet to come - especially for the United Kingdom!)

    In my view too many people in too many sectors of society, the great and the good and the corrupt, were benefitting from this all. When you learn, for example, of politicians who have 3 or 4 homes or Economic Media Commentators who have huge interests in buy-to-let portfolios then no wonder few alarm bells were sounded.

    Tragically, the prudent and many of the aged, the poor and the sick are now going to have to pay for all this greed.

    And yet the bankers are still getting their millions! Obscene!

  • Comment number 67.

    #66 Tawse,

    If 10,000 UK workers are getting £1m each, that's good isn't it? That's £10 billion in total, just for that 10,000. Who knows how much more all the rest have got. And it's £4 billion in tax. It's a lot of people and a lot of tax. Unfortunately you're out by quite a big factor. Total bank bonuses in the UK are probably closer to £4.5 billion, and spread across rather more than 10,000 people.

    I accept your point on squeezing people out of the housing market to some extent. There is certainly evidence that London prices generally were pushed up by earnings in the City, to the detriment of some key service workers. And there's plenty of evidence of people from London buying second homes out of town and pushing up prices.

    However, the problems in Greece existed well before any property boom. The fact is, Greece never qualified to join the EUR, and should now be allowed (or pushed) out, as asking people there to make the sacrifice, effectively, to converge with the rest of the EUR zone at a time of extreme economic hardship, is both harsh and unrealistic. Much better to decouple from EUR and use the greater monetary freedom that brings to spread the reallocation of resouces a little bit. That means the Germans still end up paying, but in a much more politically saleable way.

  • Comment number 68.

    67. JayPee Look into a) how much national corporation tax is collected vs how much from Finanacial Services - the latter only provides 10% of the corporation tax, which is just 4.9 billion! b) how much the public is bailing out banks like RBS etc c) how much income tax avoidance there is through legal/venal accounting advice to those highly paid in the Financial Services sector d) how all sorts were roped into taking cheap money because it had been securitized - i.e. suited Financial Services.

    Now that's no longer available, what's going to happen to all those being made subject to 'austerity neasures' whilst also having to pay for all this via future rising taxes? In the UK, think of all the schools built under PFI/BSF and the polyclinics etc in the NHS. How is all that going to be paid for in the future other than by cuts in services/staff?

    The money lenders made their money long ago...

    Do you see 'the bite' (usury)? It counts on most decent/trusting people not being able to see through the scam i.e. not expecting it from bankers etc.

  • Comment number 69.

    The best way to rob a bank is to own one... or failing that, to work in one.

    The majority of people in the UK still have this concept of the banks acting in our best interests - admittedly, many may well have changed their minds in the past 18 months.

    In truth, the investment banks are nothing more than vast operations designed to manage the global ecnoomy for the super rich and those who work within them.

    Even being rich does not guarantee you membership of this club but merely earmarks you as a potential 'mark' from which to fleece your savings. The UK banking sector has more in common with the TV series 'Hustle' than it does with any concept of stability and probity.

    The bankers keep threatening to leave and set up elsewhere but, let's be blunt, if they had done to China, to several Middle Eastern countries or even to France what they have done to the UK then what measures do you think many of those nations would have taken against them? I am pretty certain bonuses would be the last thing on the bankers' minds right now.

    I bet our ancestors look down with disgust at us.

  • Comment number 70.

    'He said it was important that the financial services sector stayed competitive because it employs 1.3 million people, generates 15% of corporation tax contributed to the Treasury's coffers, and accounts for 10% of the total output of the UK economy.'

    BBC NEWS 18 Dec 2009

    Correction, Eric Varley said it was 15% of Corporation Tax and 10% of output of UK economy. The point remains though, how many saw through the Corporation Tax BS?

    Sat 13 Feb 2010 BBC NEWS Barclays bonuses 2 billion.

    Why do they do this? Because they can, they have no conscience and that's neoliberalism/no government for you?

  • Comment number 71.

    Here's a bold conjecture: At the time that the great Socialist International experiment of redistributing wealth via securitization and liar's loans etc was launched, it is just about conceivable that some of the protagonists might have genuinely once believed that in time, say a generation of so, the increased wealth that the initially disadvantaged acquired through the process would have helped some of them actualise their hitherto unactualised or even oppressed potentials. The problem is, even by the late 1960s, the research evidence (e.g Head Start) was already stacked against this idea ever working, and more and more people were coming around to the view that people are just born with or without certain abilities, that they are not acquired through good parenting, teaching, or better access to resources etc. Yet how often do we still see and hear apparently sincere politicians (and their 'experts') asserting that more inclusive education and greater opportunity is the panacea?

    It's this fostering of false expectations which is wrong, in fact, it's more than just false, given the lack of evdience for it, it should be called what it is, fraud! Just think of all the appeals to send money to Africa, Haiti, etc, never mind all the parents in the USA and UK etc who are daily misled into believing that if only they send their kids to 'university' their lives will be much better.

    Everywhere we look, we have cause and effect reversed today. Now, people on TV endorse things or ideas which they know nothing about simply because they are now famous. But why are they famous? Only because they have been marketed to be famous in most cases, certainly not because they say things worth listening to or because they do things which are worth emulating - most of them just pretend to do things after all. So why do so many people want to be like celebrities who just pretend? Why do so many people today treat education, qualifications etc like bling?

    It drives some of us nots.

  • Comment number 72.

    err rats....... I meant nuts!

  • Comment number 73.

    # 71 Statist

    The celebrity culture, the you-can-be-anything-you-want-to-be culture is surely a consequence of having a system whereby all 'values' are quantified by money.

    In the arena of exchange we all theoretically equal - just that some have a lot more money to spend than others.
    (Remember the pathetic Patricia Hewitt claiming that the market was democracy?)

    All the inequality arises from the arena of production.
    The vast majority sell their labour power to those who have millions/billions.

    But to disguise the unequal outcomes we are fed the lie that we could all be rich & successful if we tried.

    Not everyone is the same & any society doesn't want to encourage free-riders, but today's free-riders are those who don't have to sell their labour - the capitalists.

  • Comment number 74.

    73. duvinrouge 'The celebrity culture, the you-can-be-anything-you-want-to-be culture is surely a consequence of having a system whereby all 'values' are quantified by money.'

    Steady on, you may offend someone with that sort of talk - that's liberal-democratic blasphemy you're writing. Remember how the Medici started in Italy? Remember the Fuggers in Germany? The 'Dutch' East/West India Companies - it moved to these shores in 1688 effectively.

    Somehow, I think we've been here before - except now we call indulgences liars' loans etc.

    We never learn.

  • Comment number 75.

    #71 Statist: absolutely right. I am paraphrasing Steven Pinker here: IQ testing was initially a revelation to the political left, who saw it as an excellent way to release society from the grip of the idiotic aristocracy. If intelligence is inherited then equal opportunity legislation should be enough to ensure even distribution of wealth, power etc. BUT ergo some people are born less intelligent than others and ergo remain poor despite an economic system designed to help them. Acknowledging genetic differences means deliberately redistributing wealth but humans have evolved to live for the now because when we were hunter-gatherers dying tomorrow was a distinct possibility. Some are better at gathering than others (genetic) e.g. investment bankers, hedge fund people.

    But you can't have your cake and eat it - or rather you can but it will catch up with you one day (debt). Socialism primarily consists of wishful thinking and burying the head in the sand. The cracks have been there for 50 years or more but the wallpaper is peeling off now.

 

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