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The bitter taste of a Greek bail-out

Stephanie Flanders | 08:01 UK time, Tuesday, 27 April 2010

"Time is of the essence": this was the comment of almost every policy maker in Washington at the weekend on the subject of Greece. Guess what? It really was.

Euro and Greek banknotesThanks to another day of mixed signals from the rulers of the eurozone, the cost of fixing the Greek problem just went up again. If it can be fixed at all.

On Monday, Greek sovereign debt had its worst day yet: the interest rate on two-year government borrowing ended the day at an eye-popping 13.5%. It is now considered rather safer to lend money to Iraq or Venezuela than to Greece.

Strikes and demonstrations in Athens don't help. But angry Greeks don't spook the markets half as much as angry Germans: especially if the Germans who are angry about the Greek situation include the chancellor, Angela Merkel.

You can feel her pain. The German public was lukewarm about the euro from day one; the wider the membership, the less keen they were. They were especially iffy about Greece. For good reason, as it turned out.

I have been taking a look at some of the European statistical agency's reports on Greece over the past few years. Any German who wants their D-marks back after just over a decade of the Euro will not find them a happy read.

You'll remember that Greece was left out of the first wave of euro members and only got in by the skin of its teeth in January 2001. Well, in September 2004, Eurostat decided - in effect - they were false teeth.

It revised the Greek government debt and deficit data for the entire period from 1997 to 2003, with the deficits for 2000-2002 all revised up by more than two percentage points of GDP. The numbers for 2003 went up even further.There have been a string of revisions since then.

Take just one example: the deficit for 2001, the year they entered the single currency. Until 2004, everyone thought the Greek government had borrowed 1.4% of GDP that year, in line with the drastic austerity programme which Brussels (and Berlin) had been promised. By September 2005, that number had been revised up to 6.1% of GDP - more than twice the 3% Maastricht threshold. There were similar revisions to later years.

You might say: well, doesn't every government end up revising its borrowing numbers? After all, Gordon Brown usually did. That is clearly right. But, to state the obvious, chancellors tend to revise their forecasts of the future, or perhaps the financial year that's just ended (as happened last week). In the Greek case, the changes to the forecasts were the least of it. It's the past that kept getting revised.

Many reports later, Eurostat is still worried. Last week it sounded yet another warning about the quality of Greek data.

As we know, the agency revised its estimate of the Greek deficit in 2009 from 12.7% of GDP to 13.6%. But it thinks that it could yet turn out to be higher. That was one of the reasons that Greece's problems came to a(nother) head on Friday. Only a year ago, the Greek authorities promised Brussels that borrowing in 2009 would be 3.7% of GDP.

Yes, this is now spilt milk. Greece is under new management, and the eurozone has a crisis to contain. But for the average German - and probably many others in the eurozone's "hard core" - it rankles more than a little that this is the country that is getting bailed out. Few, if any, countries in the EU have seen revisions of this magnitude in the past 10 years. In Greece it has happened on a regular basis.

So, of course Chancellor Merkel wants to delay signing on the dotted line for Greece for as long as possible - ideally until after those state elections in North Rhine-Westphalia on 9 May. And of course she will use every opportunity she can to talk about "defending the stability of the euro" at all costs (the language that so irked bond investors yesterday - and apparently the French finance minister). If and when she does sign up, the chances are that she will be taken to the German constitutional court for failing to do just that.

As I've said, the months of delay in coming to terms with the Greek problem have been enormously costly - for Greece and for the rest of the eurozone. Just ask Portugal and Ireland. Their cost of borrowing shot up yesterday as well. It may yet bring on the event that even the Germans claim to want to avoid: a messy restructuring of Greek sovereign debt. Maybe not now, but sooner than anyone would like.

However, in their exasperation at German mixed messages and foot-dragging, investors and policy makers should perhaps spare a thought for all those Germans who never wanted to share a currency with Greece in the first place. As far as they are concerned, they woz robbed.

Comments

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  • Comment number 1.

    I hope politicians in the UK are taking note about what happens when a country fails to quickly address a fiscal deficit.

  • Comment number 2.

    Nick Clegg take note - this is what we're signing up to if we join the Euro. Mind you, given the state of the public finances I doubt if France, Germany et al would want us anyway

  • Comment number 3.

    We have abolished boom and bust - now! We have shown that no catastrophy nomatter how can great can undermine the world economy owing to modern economic techniques developed with the help from historical data.
    Greece will not default. There will and can be no economic meltdown.
    Politicians now have all the economic tools necessary to obviate financial armageddon!

  • Comment number 4.

    As Bob Rocket pointed out a long time ago, 'it's definitely a train, not a light'.

  • Comment number 5.

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

  • Comment number 6.

    Quite right Stephanie, time is of the essence when dealing with this sort of problem, so it is hugely worrying that both Labour and the Libdems want to delay in sorting out our problems. Employ common sense, if you has lent someone money and they continued to spend even though they couldn't afford it would you want to lend them more money? Contrast that with the situation where the person "fessed up" to their problems and began sorting themselves out right now, I'd be much more likely to want to help. It's a shame the majority always votes for the candidate promising the most benefits.

    Yesterday the yield on the 10-year Greek government bond rose to 9.39pc so at current projections Greece will be paying 6pc to 8pc of GDP to foreign creditors for ever. Do you think that's going to happen, i don't. It's going to be a long hot summer or is that an iceberg dead ahead?

  • Comment number 7.

    Stephanie, just glad I have not wasted time watching the leaders debates, your blogs are much more interesting and relevant. Greece today UK in 2 years time. We have been blessed with North Sea oil and gas over the last 30 years, thats what helped us avoid the worst of the last IMF bail out however as leading politician said then, the party`s over, well it is now or soon will be. We have little industry, little agriculture and financial services are on the way down. So thanks for explaining the position re Greece and look forward to your blog on the UK`s financial position in 2 years time

  • Comment number 8.

    The more I research these matters, the more aware I am that Greece has been in deficit for many years. I recently read reports about the attitudes of President Lyndon Johnson to Greece: in his book, Greece had to protect the interests of the USA! In the 20/21century,Greece has spent more money than it earns...... to fight the Turks[1920's],to cope with Nazi occupation, to cooperate with the US against the USSR, to operate a military dictatorship, to finance the Olympics,a new Metro,new motorways. This is a small, poor country with an army, navy, airforce, conscription, which is expected to monitor the Balkans and act as a member of Nato and protect the interests of the USA!
    Who has been paying for all these commitments in the past? and why is everybody so surprised now?
    Perhaps Greece should look towards Russia or China for economic support and trade: being a member of the Euro club has not done it much good!

  • Comment number 9.

    I love the way you've skirted around saying the obvious:

    the Greeks fiddled the books!


  • Comment number 10.

    Interesting post from kelvinjkr. If Greece has been the local policeman in the Balkans, they need all our support. The fact remains that they should not have joined the euro, based on false figures. I understand that they were assisted in this 'creative accounting' by that pillar of capitalism, Goldman Sachs. Speaks volumes doesn't it.

  • Comment number 11.

    How anyone ever thought a single currency could work across countries as different as Greece and Germany remains a mystery.

    Obviously, a single currency could only work if there was a single government.

    That, I believe, was the real plan. Unfortunately (for the Euro supporters) the whole thing has started to come apart at the seams, before a political union could be foisted upon the citizens of Europe.

    But it's a worry that people like Clegg still want to join the Euro. (Page 67, Lib Dem Manifesto 2010)

  • Comment number 12.


    This is just another example of things going catastrophically wrong because they were based on a single point in time rather than converging trends.

    To get a national economy to meet a specific target for a moment is easy - there are all sorts of financial tricks that can be pulled to massage figures on a temporary basis. So allowing a country to join the eurozone based on a single point test means that some entrants will have tweaked the figures to look good.

    If a condition for entry was that the economy of the would-be member had to align with the eurozone, stay in alignment for some period (12 months at a minimum) and only then join up and adopt the euro, this problem would be avoided. But since the euro was always more about politics than economics doing it properly would mean that different people would take all the credit, so a quick fix was sought.

    So, in other words, the people who got the euro going took the credit for it while those coming later get to pick up the pieces. When bankers do that everybody screams blue murder about them, when politicians do it people still end up blaming bankers.

  • Comment number 13.

    There is little if any appetite for supporting the Greeks in the majority of the Euro countries. All they are currently concerned about is saving their own necks and currency. If and when one of the other PIIGS fall, as they surely will, then this will change the complexity even further. It may well force them into taking some action, action that should ave been taken some time ago. If, when it became apparent that Greece had fudged the entry requirement they should have been sanctioned or even expelled and the Euro would not now be in such a vulnerable position. But as is the norm for the EU difficult decisions were put off. Now their hand is being forced and still they resist in making the difficult call. So they have to put up and shut up. But for how long?

    I yesterday questioned the IMF's financial footing. It was correctly pointed out that the amount required to be a member was in proportion to the voting rites. Hence Greece and the other PIIGS are being asked for more. We all would like to be at the high table but if you cant afford the fee sorry you should be asked to leave. It is apparent that Greece cant afford to be there yet they are still being asked to pay up. If a bank was to do this, as was the case in the sub prime fiasco there would be a public outcry about miss selling. Is this not the case for the IMF with regards to Greece and the other PIIGS. They are on the verge yet they are being asked to pay up increased membership fees. Fees that will be paid for out of loans given by the IMF. If this is not unethical I do not know what is.

  • Comment number 14.

    #5
    "putting our ability to shape our future economic policy into the hands of every Fritz and Pierre who fancies taking an interest in our affairs"

    ======================================================================

    And could they do a worse job ?

  • Comment number 15.

    The Greek case will go down in history as the trigger of the domino effect, that is very soon to follow. There's nothing the EC can do to stop it.

    Economies based on ever increasing consumption tends to overheat the money supply and we should not blame the Greeks for having absorbed some of it. At least they used it to improve their out-dated infrastructure and create somewhat fairer society in terms of salaries.

    Their mistake was/is to believe that fair society can be sustained within the monetary system.

    In contrast, in the UK, the ever increasing money supply goes in the pockets of the super-rich as the recent survey showed.
    http://news.bbc.co.uk/1/hi/business/8642021.stm

    The third richest person is the Duke of Westminster whose wealth comes from properties. Meaning here we still live in a feudal system where the landlords parasite over the lower classes.

  • Comment number 16.

    Isn't there a story about Greeks bearing gifts - or have I mixed things up?
    Yes and there a parallels here. Like post 6 ... there comes a point when pouring money into a black hole becomes pointless. Boom & bust, economic cycles and moving goal posts comes to mind. Now just what percentage of the electorate understands these issues? Who invented democracy?

  • Comment number 17.

    Comparing Greece with the UK is pointless. Our debt has been due to a few clever clogs in a few big banks. Prior to 2008, our national debt was rising towards 40% of GDP. I am surprised that more politicians do not make some capital out of this, even though it may reflect on the regulatory system in place. It is the banks that have caused our current crisis, not profligate public spending.

    Having to effectively nationlise one of the world's largest banks plus another big one and take completely into public ownership two large building societies at a total cost of £100bn's, all of whom were playing the market and caught with their trousers down is completely different to overspending for many generations. But as Lloyds showed today, there is a real prospect of the taxpayer getting their money back.

    There are problems - some £300bn emergency liquidity owed to the BoE has to be rolled over or repaid by the banks in the next few years if it isn't to be taken on to the public balance sheet. And it will also take time for the banks to be fully in private hands once more but it will happen and the pain we need to experience now will be repaid to future generations.

    I have sympathy with the German point of view - after all it was Oscar LaFontaine who let the cat out of the bag in 1999 I think it was talking about common fiscal policy across the Eurozone. This is the only sensible and eventual outcome because ultimately for the Euro to work properly, common accountability and taxation is needed. Greece was never going to meet accountability standards. But it does point to the ideological issues behind the Euro - in all previous common currencies there has been political union before monetory union even if it was at the point of a gun... Think Roman Cisterces, the Sterling area and the US dollar.

    Greece has to be careful to avoid civil strife - a common habit - because not even forest fires will destroy their tourism as easily as strikes and not knowing whether you can get home on time. And tourism is their major foreign currency earner, as it is in Portugal.

    Ireland is a different issue - again it was the banks and while they have not had the luxury of devaluation, they are tackling the problems themselves at considerable pain.

    So let's not think that all countries are the same and measured on the simple one-dimensional debt:GDP ratio. They are not and it is futile to make that comparison.

  • Comment number 18.

    The Euro is dead on it's feet

    Thank goodness we weren't stupid enough to join

    Shame the Lib Dems still want to......

    This is going to be one horrible outcome for Greece, with Portugal sitting in the Pavillion with the pads on

    Unless we wake up, we are in after Spain

  • Comment number 19.

    The other members of the eurozone are taking a very foolish attitude to the problems of Greece. They are teaching the speculators that they are not prepared to intervene to help one of their colleagues. They may well regret having done so, when it becomes their turn to be attacked in this way.

    As soon as it became clear that Greek bonds were being shorted, the European Central Bank should have been ordered to punish the speculators by buying up these bonds to force the prices up. This is what the BoE would surely have done if British bonds were attacked in the same way.

    This action might have caused a dip in the value of the euro. This could even have been regarded as welcome, since the euro is rather overpriced, after the increases in its exchange value in USD and GBP over recent years. In any case, if serious speculation against the euro had started, telephone calls to colleagues in the Fed and the BoE asking for help, would have quickly put a stop to it, since all central bankers hate currency speculators.

    Speculation in sovereign debt and currency, serves no useful purpose and does considerable damage. It could be stopped by collaboration between the major currency zones. It is high time that this were done.

  • Comment number 20.

    If the Greeks have "fiddled" their books and we are told the EEC books have never been capable of being signed off should we be "part of it" at whatever distance?

    Yet we have NO mainstream party even suggesting our escape--not surprising as none dare even state the austerity we really need to balance our own books.

    Wake up Britain!

  • Comment number 21.

    The object lesson for Greece and Germany is that entering Eurozone is a one-way street. UK take note please.

  • Comment number 22.

    Well with the Libdems wanting to put off dealing with our debt (and in fact spend more), give everyone in the world a free ticket into and right to stay in the UK (increasing benefits and other resources budgetary drains), and join the Euro (I'm not convinced the Euro would have us either)....... perhaps Greece's situation might not look so bad to the UK in a couple of years time.

    Or we could have Brown, the man that got us neck deep into the mire in the first place.






    The problem with the Euro is that you're never going to marry countries like Germany with countries like Greece (or Portugal or even Ireland) under a single currency.

    It's like tying two cruise-liners together and then having them motor off at full speed in two completely different directions.... in the end something HAS to give.

  • Comment number 23.

    Maybe Greece should start signing over their assets to help ease the process. After all how much land, how many businesses and parks etc are owned by the Greek government. Sign them away to other European countries, to be kept until their debts can be paid off. Would be interesting.

  • Comment number 24.

    #1 Scott:

    "I hope politicians in the UK are taking note about what happens when a country fails to quickly address a fiscal deficit."

    Haven't you heard? We don't have a fiscal deficit, let alone a enormous/expanding national debt problem. At least not one worth mentioning in respectable political circles.

    Bit like expenses. Less said the better. Sweep it under the carpet and bring it out for a rainy day.

  • Comment number 25.

    Meanwhile the proportion of UK GDP accounted for by the public sector has risen from 43.4% to 48.4% - more than Italy, Spain, Portugal or Greece. So nearly half our income is financed by punishing the other half.

    Sounds sustainable...

  • Comment number 26.

    Why should we spare a thought for the Germans?

    Either they want the EU an Euro to work or they don't. Merkel has dithered for domestic political reasons when she should have signed up immediately. All for one and one for all - it is time Germany took a lead and bore the burden a bit bit more for it's friends and signed up members of the Euro club.

    I just hope they are more proactive when the markets turn to Portugal and Spain ....

  • Comment number 27.

    Here's the ironic thing...

    The EU-IMF bailout of Greece is meant to: 'prevent a "full-blown and contagious sovereign debt crisis"'

    But the cost is being shared amongst countries in the EU with debt problems of their own: e.g Portugal has to raise €774m towards the initial €30bn EU package. Ireland must find €491m, Spain €3.7bn

    So deeply indebted countries are having to borrow money just to lend to Greece: e.g. Portugal is borrowing at 4.94% in order to lend to Greece at 5%. Until Portugal's rates rise too...

    This increases the risk of these countries defaulting and consequently the interest rates for lending to these countries are rising. Which in turn increases the risk of them defaulting.

    Not surprisingly: "Greece is unlikely to be the last euro nation to need an International Monetary Fund bailout, with Ireland, Spain and Portugal “conspicuously vulnerable,” said Harvard Professor Kenneth Rogoff. "

    http://www.bloomberg.com/apps/news?pid=20601068&sid=aNRALsDsKiKc

  • Comment number 28.

    Individuals can be allowed to fail, companies to, but not nations.

    The ECB will have to print more money and give it Greece, and then print some more and give it Spain and Portugal. The Irish won’t be happy though having already bit the austerity bullet.

    It ceases to be a European Union if they let member states fail, it just becomes a European nonsense.

    No Bailout = No Union
    No Union = No need for Euro Politicians

    What the ECB need is Magical Merlin King. That wily old goat can find a way round just about anything monetarily speaking.

    Mr King’s proved that a country that can print its own money can negotiate its way round a debt crisis.

    Mr Mugabe on the other hand, proved you can destroy a currency’s value if you become over zealous.

    I wonder how zealous Mr King’s planning to be this year?

  • Comment number 29.

    Bankers have been blamed for the last recession because they gambled with their customer's money on risky assets, and leant money to buy houses to people who could not afford to pay it back. Now it seems that the politicians of Europe have saddled the continent with a currency that makes life miserable for those who had to lie to get in to it, and brings distress to those countries which then have to use their good money to bale out the bad to prevent their once sound money (or Mark) from being debased. If the politicians now feel they must regulate the bankers, who will now regulate the politicians, since it was they above all who constructed the euro, and gambled with the futures of their countries in doing so. Thank heaven for the Maastrict opt out! UK may be in a deep mire but at least we can let our currency devalue! See you on the Greek beaches in summer 2011 on a value deal and paying for my retsina with drachmas!

  • Comment number 30.

    So greese has peaked at borrowing at 13+%

    A lot of the PFI deals that brown has signed are already costing us over 10% PA.

    And remember the vast majority of this goverments capital expenditure (new roads, schools, hospitals, helicopters etc) were NOT paid for out of current expenditure but were paid for under PFI.

    One 90 million hospital upgrade will cost over the 25 years its PFI contract runs for just over 1Billion when the double digit interest is taken into account. Very prudant of the goverment buy now so but sign up for eye wartering off bok rates for the kids to pay later.

  • Comment number 31.

    17. At 10:08am on 27 Apr 2010, JohnL wrote:
    Comparing Greece with the UK is pointless. Our debt has been due to a few clever clogs in a few big banks. Prior to 2008, our national debt was rising towards 40% of GDP. I am surprised that more politicians do not make some capital out of this, even though it may reflect on the regulatory system in place. It is the banks that have caused our current crisis, not profligate public spending.

    =========================================================================

    I am sorry but can you explain how you can make such a statement. Our Government since 2000 / 2001 went on an unprecedented spending spree. Our national debt rose consistently throughout this period. Even though we were going through a period of plenty and receipts into the exchequer were at their highest. The banks did not come into play until much later.

    Let us face facts, yes the banks have had a contributory factor on our current financial position but they are not overall responsible for our currents debts. That must lay at the feet of the government. We voted them in so it is us who now must suffer the consequences.

    Just keeping your head in the sand will not make it go away. Just as saying it is untrue will not effect the reality of the situation. We are where we are due to over spending and poor financial management. Unfortunately Prudence left the building in the early 2000's and Nu Labour reverted back to Old Labour and taxed and spent. They just spent too much and it is now us who will have to pick up the bill, if not "here comes the IMF"......


  • Comment number 32.

    14. At 10:03am on 27 Apr 2010, Richard Dingle wrote:
    #5
    "putting our ability to shape our future economic policy into the hands of every Fritz and Pierre who fancies taking an interest in our affairs"

    ======================================================================

    And could they do a worse job ?

    No worse than Brown that's for sure!

  • Comment number 33.

    Steph, there is a bigger problem that is brewing at the moment; a full blown bond crisis. The sheer numbers that we are talking about here are mind boggling. Just to put it into perspective the Sovereign debt and corporate debt that need to be raised in the West over these next two years is more than the debt raised over the entire last decade. Unfortunately the Middle-east countries are close to broke themselves having got burnt in the last crisis. The BRICs, well they are sitting on too much of this stuff and are already diversifying. That leaves us with Latin America & Africa, well less said the better. Where is the demand for this debt going to come from?

  • Comment number 34.

    Of course its safer to lend to Iraq than Greece.... Iraq has shed loads of oil so therefore a guaranteed cash flow to pay the bills.

    As to most of the rest of the posters on this forum: if the UK is so bad please leave and move to one of these far better countries that much exist elsewhere. I get sick of the hysterical screaming about our economy. As a proportion of GDP our national debt is actually slightly smaller than Germanys. Unlike Greece our accounts are accurate and every prediction for growth, borrowing etc Darling has made (and which has been abused as wildly optimistic) has been virtually spot on. The fact that we went into and out of recession at almost the same time as every other european nation suggests it doesn't matter who's in power because our MP's have very little control of the economy anyway.

  • Comment number 35.

    As each step of this unfolding catastrophe takes place it becomes ever clearer that the end game for Greece is to drop out of the Euro and then to devalue their currency. The end game for the Euro will be fewer countries using it as the PIIGS realise why the UK stayed out of it and also drop out one by one, encouraged to do so by Germany. Hopefully it will warn Iceland that their salvation does not lie in the Euro solution. Unfortunately Clegg is still dreaming of his European fantasy as, like most of his policies, it has nothing to do with harsh economic reality.

  • Comment number 36.

    Are we better for listening to Gordon on his stance on joining the Euro? He should have had more belief in his ideas about the banks then we might not be so deep in this mess here
    As for the greeks, what have they to offer in the modern age other than sun and sea? I bet the prices will rocket this year so much less foreign income to count on.

  • Comment number 37.

    I neglected to mention - the proportion of UK GDP accounted for by the public sector has risen from 43.4% to 48.4% IN THE LAST YEAR.

    Hmmmm... wonder how much that has to do with GDP 'growth' of 0.6%...?

    True Keynsian economics!

    Excluding the bit about paying down debt in the good times obviously...

  • Comment number 38.

    28. At 10:29am on 27 Apr 2010, Dempster wrote:
    Individuals can be allowed to fail, companies to, but not nations.

    The ECB will have to print more money and give it Greece, and then print some more and give it Spain and Portugal. The Irish won’t be happy though having already bit the austerity bullet.

    =========================================================================

    Just one quick point, The Irish have yet to deliver, they have talked the talk but have a long way to go and are far from out of the woods. Their biggest problem was that their economy was built on EU money and a property boom. Non of which are likely to return for some time. So the begging bowl is still at the ready.

  • Comment number 39.

    Pity we have an american prime minister. The word in Greek does have implicit meanings for the IQ of the person.

    Pity the Germans have elections ahead and think they own most of Europe. They have allowed the situation to escalate. For every weak action of the Eurozone the greedy betters strike back by selling more positions.

    I am glad that at last there is an opportunity to sort out the corruption and lack of accountability in Greece. Pity it will make it even harder for young Greeks to innovate. But they will do so abroad, as always.

    Since Germany pushed the situation that far, they deserve a default that will be painful for their banks while at the same time make the greedy bastards who have bet for a default richer.

    Well done Greek PM for trying to be "brave". Unfortunately his "american" background means that he was late in asking for help, he is now late to accept that a threat of default unless Germany sends money tomorrow is necessary. If anything,

    Any comments re: giving up Greek assets is an act of war. Pity noone has balls any more. Pity the sell-out has already started and will continue.

    But as a final note, for all hypocrites who claim Greece is the only corrupt place in the world: British politicians have not been much better, remember and the USA-Goldmans Sachs Country (interesting to see the child-former fighting agains the financial daddy-latter) even worse. The main thing is to have a system in place to prevent the politicians from eating the money (UK) and/or a public that eventually votes for new people who may or may not change things (Obama, Clegg) despite the efforts to stop them.

  • Comment number 40.

    Viva the United States of Europe and all their citizens, come the revolution we will all eat schnitzel and drink a nice glass of red.....

    Doesn't sound too bad, pity about the economy and the currency.

  • Comment number 41.

    It's over folks.

    Even if they manage to get the finance in place before the first May auction - assuming the Germans are able to ride roughshod all over their parliment, and assuming the other countries are not taken to EU court as this is against Maastricht - they don't have enough.

    I think the Greeks need 55 Billion Euros by the end of this year just to cover maturing debt, they are only being lent 45 Bilion - and with rates at a whopping 10% for 10 yr - they simpy can't afford it.

    Even if you remove the strong possibility of deficit control failing, or the strikes affecting GDP, or the possibility of complete social collapse in Greece - the numbers don't add up.

    I hear investors are already working out the Brady bond formula for Greece - such is their confidence.

    If a man is going bankrupt because he clearly doesn't earn what he spends - then lending him money won't help.

    I don't understand why everyone can't see that - oh yes, I remember now - because the meeeeja are helping keep the lie going with their inaccurate presentation of the facts.

    When Greece do default, will we see a loss of credibility for all those who predicted it wouldn't? - or will they run back under the sideboard like cockroaches when the lights come on.

  • Comment number 42.

    31. At 10:38am on 27 Apr 2010, Chris London

    Chris - you clearly need reminding of the facts again.


    Wages - mega
    Achievements - none
    Failures - near total economic collapse, mass unemployment, wasted resources.
    Cost to Britain - Astronomically high, so high we can't even calculate it properly. I thought billions were simply for star distances until 2 years ago!


    Wages - not mega
    Achievements - the delivery of health care, educaton, sanitary services etc. to the public and those who cannot afford it.
    Failures - have failed to reign in big chiefs salaries, employed too many private sector failed contracts, are inefficient in some areas.
    Cost to Britain - less than 40% of GDP - the Golden rule remember?

    You ideas that the problem was caused by the Government "not putting enough aside in case the banks decided to flop" - is really stretching it.

    Should all Governments work on the basis that we can't spend because we might need it to bailout the private sector later?

    It's not Governments responsibility to worry about the health of the private sector (it's supposed to be Capitalism - remember??) - but you imply it is. It seems to me you're simply advocating a 'private enterprise social security system' - adding further to the public sector spend you are incorrectly pointing to as the cause of our problems.

    Economics for dummies eh? - still trying to convince us that the problem is public spending (which actually achieves something) compared to banking (which doesn't).

  • Comment number 43.

    Let's have a look at economies of Greec and also Irland, Protugal and similar to those, through the prysm of Polish Central Bank recent actions.
    The death of Slawomir Skrzypek, the president of Poland's central bank, in a plane crash Saturday morning that also killed the country's president, could change the country's monetary policy.
    Skzrypek has been a key figure in steering Poland through the economic meltdown that has affected the USA and Europe.
    Skrzypek had been at the heart of a row with the finance ministry after he pushed for Poland not apply to extend a $20.5bn credit line from the International Monetary Fund.
    In addition, Skzrypek appears to have been a driving force in the decision to delay Poland’s entry into the eurozone, a currency area controlled by the globalist bankers.
    On Friday, one day before Skzrypek’s death thePolish central bank intervened in currency markets to weaken the appreciating Zloty in a move that will help keep Poland’s industry competitive by promoting exports.
    Also, Skzrypek was in favour of an increase in interest rates to halt the flow of cheap capital that has helped created property and other bubbles that have preceded busts.
    The monetary policies protecting the Polish economy that Skzrypek advocated could well have antagonised the global "elite", who appear to be eager to promote policies that weaken country’s economies, industry and export base, drive them deeper into debt before imposing IMF or EU economic governance.
    The Polish Central Bank Governor’s intervention to devalue the Zloty – which was backed by President Lech Kaczynski, who also died in the crash – may have worried the global "elite" because it could have set a precedent for other countries.
    Skrzypek recently called the zloty "a very good shock absorber,” according to the Wall Street Journal, recognising that a devaluation can insulate an economy from globalist engineered financial crises.
    http://online.wsj.com/article/SB10001424052748704486504575097481527079128.html?mod=WSJ_WSJ_US_World
    The WSJ reported in March that several countries are now questioning joining the euro including Czech Republic, Bulgaria, Hungary and Romania.
    Countries that join the euro straightjacket can no longer devalue their currencies; this means that their industry becomes increasingly uncompetitive, leading to lower exports, higher unemployment, growing debt and trade deficits.
    Countries outside the eurozone can use the instrument of devaluation to protect their industrial base and economies.
    Some ecoonomic experts have argued Greece should revert to the Drachma and devalue as soon as possible to escape economic meltdown within the eurozone due to debt implosion.
    The globalist Financial Times Friday suggested that Poland’s intervention in currency markets on Friday to weaken the Zloty could be followed by others in what would amount to a big blow to the globalist plans for gaining control of Europe's economies.
    Martin Blum at Ithuba Capital is quoted by the FT as saying that eastern European central banks were begin to ditch or at least revise their previous free-float currency policies in favour of a more Asian-style interventionist approach focussing on both export growth and stocking up forex reserves.
    Blum said Poland’s devaluation might spark “a broad-based move by the region’s central banks to slow currency appreciation.”
    “Such a sea-change in strategy would not only have significant implications for CEE currency markets, but also sovereign credit markets and would ramp up competitive pressure further on countries on the periphery of the eurozone,” said Mr Blum according to the FT.
    “In short, it shouldn’t be ruled out that this action by the National Bank of Poland is a game-changer, not only for Poland but for the region.”

  • Comment number 44.

    @ #19, stanblogger: that has to be the most sensible, insightful comment I've ever read in the comments on Steph's blog. Thank you.

  • Comment number 45.

    34. At 10:39am on 27 Apr 2010, Peter_Sym wrote:
    Unlike Greece our accounts are accurate and every prediction for growth, borrowing etc Darling has made (and which has been abused as wildly optimistic) has been virtually spot on.

    =========================================================================

    You must be reading the history according to Gordon. Their predictions have mostly been way off. I am not saying that they are better or worse than a number of others, but still you can not claim that they were anything other than wild guesses.

  • Comment number 46.

    36. At 10:44am on 27 Apr 2010, barry white wrote:
    Are we better for listening to Gordon on his stance on joining the Euro? He should have had more belief in his ideas about the banks then we might not be so deep in this mess here

    =========================================================================

    So in other words Gordon made one hell of a mistake in managing / regulating our finacail sector along with the economy.......

  • Comment number 47.

    Well the usual rule for corporates needing rescue funding is ask once, and ask large

    I wonder if this will apply at a national level? €30bn might seem like a lot but it's only a year's worth of deficit at the current rate of profligacy.

    Will they have access to more money after that? Not if they under-achieved on their deficit reduction. Queue lots of anger at investors, Germans, and everyone else for not providing a bottomless pit of funds

    As has been pointed out elsewhere, the human cost could be tragic.

  • Comment number 48.

    Hmmmm...this one just won't go away will it?

    Greece was always going to be a problem for the Euro since inception. For one thing it is probably the only European country left with with an old-style hard-left political group who believe strongly in redistribution. Of course that redistribution has largely been in the form of other peoples money hence their unwillingness to pump in any more!

    It seems hard to believe that the Euro can survive in its current form...although its demise is more of a dream of the arch Eurosceptics than a serious probability. Two things however are plain to see...Gordon Brown did the UK quite a good service by resisting Tony Blair over the Euro otherwise we would be in a quite unbelievable mess. The second is a clear example of the failure of political coalitions to make firm decisions. There could be a lesson for Nick Clegg in both of those!

  • Comment number 49.

    22. At 10:16am on 27 Apr 2010, D Dortman wrote:

    It's like tying two cruise-liners together and then having them motor off at full speed in two completely different directions.... in the end something HAS to give.

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

    I think you would find they would end up going round in circles, which is probably more apt.

    Probably ever decreasing circles until they disappeared up their own funnels.





  • Comment number 50.

    I would have thought that the Germans would be the last people entitled to complain about bailing out the Greeks, after all its within living memory of many of us that the Germans had to receive significant financial assistance themselves!

  • Comment number 51.

    @Peter_Sym "we went into and out of recession at almost the same time as every other European nation..."

    You are confusing GDP rise and fall figures with real recession. GDP alone is not a real measure of recession as borrowing and QE inflation can boost GDP artificially for a while but need repayment + interest later so the GDP blip is only short-lived.

    To get a true picture one has to net the increase in National debt / QE from any increase in GDP such policy creates. On that scale we had entered recession before Germany et al and have not left it yet.

    When austerity starts in order to repay the National debt and another 2 million or so jobs are lost as a result, it will seem more like the depression we have been avoiding. That has not started yet as we are still digging a deeper debt hole to hide the gap between our high living standards and our low global productivity.

    Greece is further down that path than we are but essentially for the same reason. The population lives beyond the means of the country and hides the gap with borrowing.

    As you mention, Iraq has oil and of course Germany has export production of useful goods, the UK has almost nothing left. We have finance, and coal we are discouraged from digging up, but little else of interest globally, so we need to shrink our living standards accordingly but what politicians in election month will tell that truth?

  • Comment number 52.

    It's frightening how quickly the Greek situation has deteriorated, and how quickly it could reach the point where state pensions etc aren't being paid.

    Those unwaged in the UK who want to vote the current government back in on the basis that the deficit is somebody else's problem take note - it may not be fair but it will be the poorest who suffer most if our politicians continue to emulate the Greeks

  • Comment number 53.

    #40
    "Doesn't sound too bad, pity about the economy and the currency."

    =======================================================================

    Not like you to be negative about the UK economy and sterling.

  • Comment number 54.

    27. At 10:29am on 27 Apr 2010, ArnoldThePenguin wrote:
    'Here's the ironic thing...
    The EU-IMF bailout of Greece is meant to: 'prevent a "full-blown and contagious sovereign debt crisis"'
    But the cost is being shared amongst countries in the EU with debt problems of their own: e.g Portugal has to raise €774m towards the initial €30bn EU package. Ireland must find €491m, Spain €3.7bn

    So deeply indebted countries are having to borrow money just to lend to Greece: e.g. Portugal is borrowing at 4.94% in order to lend to Greece at 5%. Until Portugal's rates rise too...'


    Absolutely spot on A.P.

    Perhaps we have finally reached the tipping point in all this.
    Based on the assumption you can't let a country fall apart, some bond holders are going to lose an awful lot of money in a very short space of time.

    And if Greece can get away with defaulting, so can others.

    I wonder if all this will bring about an end to the debt slavery system currently masquerading as fiscal policy.

  • Comment number 55.

    If I'm not much mistaken, the German and especially French level of public debt is little different from that of the UK. That for some of the other big Euro countries (e.g. Italy) is almost certainly worse. But let's keep beating ourselves up - it's shows we're British!

  • Comment number 56.

    Witingson the wall #42 - well said! Moreover, it's clear that whoever wins the election, it'll be people working in public sector who'll suffer with their pay & jobs (as they've already been suffering) for the greed of the bankers.

  • Comment number 57.

    "37. At 10:49am on 27 Apr 2010, ArnoldThePenguin wrote:
    I neglected to mention - the proportion of UK GDP accounted for by the public sector has risen from 43.4% to 48.4% IN THE LAST YEAR."

    Its all right because between sept 2007 and sept 2009 the pubsector wage bill went up 12% or 23Billion! and that does not include pension costs or the staff from nationalized banks.

  • Comment number 58.

    #18. Kevinb wrote:

    The Euro is dead on it's feet - WRONG

  • Comment number 59.

    Perhaps the EuroZone should demand the US Securities and exchange Commission should pass on evidence that Goldman Sachs shorted those it advised (and it did advise Greece) and sue Goldman through the US courts for recovery of the bailout money?

  • Comment number 60.

    I ttally agree with the Germans, the Greeks should be kicked out of the Euro. They lied to get in, lied consistantly over the last few years and to bail them out now will destroy any chance of reigning in contries who are fiscally irresponsible in the future.

  • Comment number 61.

    #55
    "If I'm not much mistaken, the German and especially French level of public debt is little different from that of the UK. That for some of the other big Euro countries (e.g. Italy) is almost certainly worse. But let's keep beating ourselves up - it's shows we're British!"

    =======================================================================

    German debt is high largely due to the costs of East Germany.

    Debt is not really the issue; the deficit is the issue (only 3.3% in Germany).

    Germany has a powerful economic engine that will make the difference when trade flows pick-up.

    Better to compare UK with Greece.

  • Comment number 62.

    This is frightening stuff indeed. One of the problems with Greece is to put it mildly, the somewhat laissez-faire attitude of it's citizens to paying taxes. A friend related a conversation she had with a Greek holiday villa owner re the possible danger of booking a villa holiday in a country on the verge of economic collapse. When asked his opinion the chalet owner replied "don't worry, the people here are all rich, but the government is broke because everybody fiddles their tax". With an attitude like that it's no wonder they are in such a mess.

  • Comment number 63.

    Greece has broken just about every rule around for 30 years.

    The EU did nothing about it.

    I am Greek and ashamed of this mess, but this is no news to me and to most of us. The EU must have taken action and European citizens should know better.

    Mind you, the UK has nothing to do with Greece. The only similarity is the deficit. Apart from that Greece has no clear purpose on this earth. We simply have nothing to do to produce growth or any markets to tap. This is where the stake is I think. This is the end of the notion that nations can simply provide services inside the country, have some exports and imports and manage to get cheap loans to survive. All nations need at least one real industry that scales. Greece needs (and actually that was the only meaningful reason for entering) the EU to force it implement austere restructuring of .... everything. Then we need a target.

  • Comment number 64.

    Stanblogger - Having recently completed an assignment in Germany, some 10 years, I believe that your wishes are misplaced. Most, if not all, of my German friends were not in favour of losing there Mark. and even today speak of the inflation caused to their purchases. I believe, given the choice, they would return to their Mark. today.
     Also, just think what value it would be !!! 

  • Comment number 65.

    #34. I think you need to adjust the published figure's on UK debt to account fot the unfunded public sector pensions, unfunded state pensions, and PFI. I am sure Stef could help on numbers but I have a feeling that the establishment consider this to be a state secret and I wouldn't want Stef locked up ....

  • Comment number 66.

    Not sure if anyone reads the back pages of "the Economist" here or not, but Britain's GDP % debt has been consistently higher than Greece's and Britain's debt as a percentage has been the worst in the world for a couple of years now.

    Why don't we forget Greece and concentrate on sorting out our own debt!

  • Comment number 67.

    "But it's a worry that people like Clegg still want to join the Euro."

    Actually, what this situation is proving is that economies are being bailed out by virtue of their Euro status. If Greece still had its own currency, it would have devalued massively. This is essentially defaulting on part of its debt, plus they'd be printing money, causing internal inflation. They would have been told "you're on your own", like Iceland. As part of the Euro, Greece's currency is stable (disproportionately to its actions), and the Eurozone currencies feel an (admittedly begrudging) obligation to help. If we get in trouble, Germany, Portugal, Ireland etc won't be there to support us.

  • Comment number 68.

    Ms Flanders

    Some moons ago Ma'am, I wrote on your blog that the Germans will reap what they SOW...with respect to the PIGS..

    The Euro was, primarily, a political objective without sufficient economic forethought.

    Playwrights ancient and modern would marvel at this rich vein of material

    The EURO : How to make a Drama out of a Drachma.

    And the Romans may have added: Res in cardine est. (Or the next twenty-four hours will tell a story ! )

    Forsooth ! I'm more on tenderhooks with your blog than with the current Eastenders' plot.



  • Comment number 69.

    All the Eurozone needs is authority to create and collect taxes. An elected federal government and common bonds. Then allow states to go bancrupt, as it happens, once in a while, in the US. Voters will take care of it.

  • Comment number 70.

    There seems to be an element of blame-the-banker creeping in to some of the comments regarding to the UK's position

    Whilst this may be tremendously satisfying, I do find it rather hard to blame them for the fact that our politicians are spending massively more on public services and benefits than they're raising in tax.

    The bail outs may have moved the brick wall a little bit closer but it's the politicians who have their foot firmly planted on the accelerator, and are only now contemplating the idea of easing off a little bit.

    It's just a shame the warning signs are written in Greek.

  • Comment number 71.

    A lot has been said about the Greeks and creative accounting. I think the UK is equally bad with the PFI being kept off the Balance Sheet. Not Sure of the total Debt thinks its around £800 Billion but what is the real Debt when PFI included. I think people will look back at this time and laugh at the notion we had a choice as to when to start cutting public spending. UK also produces more oil than Kuwait in a year which shows how poorly this govertment has run our finances.

  • Comment number 72.

    'especially if the Germans who are angry about the Greek situation include the chancellor, Angela Merkel'

    All Angela Merkel cares about is propping up the euro no matter how much damage it does to the people of Germany or Greece. She's like most polictical leaders (including Grodon Brown and Nick Clegg). They treat the people of their respective countries with contempt.

  • Comment number 73.

    'spare a thought for all those Germans who never wanted to share a currency with Greece in the first place. As far as they are concerned, they woz robbed.'

    If they voted for Angela Merkel then they are going to get what they deserve. Ditto the French who voted for Nicholas Sarkozy. This whole sorry fiasco will only come to an end when the people of Europe vote in policitians who don't treat them with contempt.

  • Comment number 74.

    As a citizen of one of the countries from the Eurozone that recently cheated its own way into this "club" (although we are small fish and nevertheless, our cheating was far below greek standards), I am totally surprised by the anti-EUR sentiment in the comments. I think you totally missed the point...

    Dear UK citizens ... you country is in deep trouble as well (as well as many of the EU countries, and especially the PIGS club) due to absurd levels of debt our governments are taking on their (ours) balance sheets.

    You say that UK would be in similar position if it joined the euro? I guess so. But this does not mean that you should not join EUR, this means that ****you should clean up your own fiscal/financial mess *** BEFORE joining eurozone. You should do it even if you don't join eurozone. What you own currency provide to your politicians is the easy way out of responsibility for the fiscal mess, but do you really think that this is a good alternative to fiscal responsibility?

    Greeks are not in trouble because they joined EUR, they are in trouble, since they cheated and spent money like drunken sailors. Their problem indeed stems from the fact that their government cannot simply devaluate the currency to HIDE the mess that they themselves gotten into!

    So what essentially all you eurosceptics claim is, "let's not get into eurozone, so we will be able to continuously devalue currency and thus hide that we spend waay much than we produce"??!

    Is that your line of thinking?

    As is the case for my country - slovenia - I am happy that we are in the eurozone. For too long (15 years) the incompetent politicians simply keep continously devaluing the currency instead forcing fiscal discipline, getting public spending into reasonable levels and dealing with the (especially public sector) unions with their unreasonable wage demands.

    Now, thanks to the EUR they cannot pull the devaluation joker any more and they will have to get our house in order. Or the germans will force us, after they are done with PIGS, which will be a good thing.

    I do think though that greece should temporarily be kicked outside EURozone, and be allowed to rejoin later with much more realistic exchange rate between EUR and "the new drachma" or whatever it will be called. But this is simply the last resort, not the long term solution.

    I am sure your politicians will happily invoke the "good we are not in the eurozone" card. What UK electorate obviously does not see is that this is allows them to have fiscal mess at home and not be called for responsibility - the latter is what happened to greeks after years of drunken sailor like spending.

  • Comment number 75.

    62. At 12:55pm on 27 Apr 2010, mightyblooze wrote:

    "A friend related a conversation she had with a Greek holiday villa owner re the possible danger of booking a villa holiday in a country on the verge of economic collapse. When asked his opinion the chalet owner replied "don't worry, the people here are all rich, but the government is broke because everybody fiddles their tax". With an attitude like that it's no wonder they are in such a mess."

    Do you mean like Non-doms in this country?

    Do Lords pay taxes? - what about the wealthy in this country? - do they pay their taxes?

    Naievity is no shelter from reality.

  • Comment number 76.

    18. At 10:10am on 27 Apr 2010, Kevinb wrote:
    The Euro is dead on it's feet

    =====================================================================

    What do you base this absurd sweeping statement on.

    Don't be shy enlighten us all. Walk us through it.

    The most likely outcome will be greater fiscal and political union.

    Greece has severe economic difficulties. It does however have a stable currency which has appreciated significantly against Sterling over the past 5 years.

    Greece's problems stem from fiscal indiscipline and a funding crisis exploited by the markets. The solution to Greece's problems is, granted, made more painful by Euro membership but it was not caused by the Euro.

    Had Greece not been in the Euro it would still have suffered the current crisis but it would be a lot worse as the devalued Drachma would have imported inflation plus the instable currency would have deterred inward investment.

    All the problems in the last paragraph will soon be coming to the UK.

    Still time for the nice Mr Clegg to take us into the Euro (if they will have us).


  • Comment number 77.

    Richard Dingle 61

    'Better to compare UK with Greece.'

    Yes, you're correct Mr Dingle. And why should we be comparing the UK with a country that is bankrupt and in economic melt down, rather than one which is economically stable with sound finances. Who could possibly be at fault for that I wonder ???



  • Comment number 78.

    There are two things that surprised me on reading these comments: I was always under the impression that the UK was asked to leave the pre-monetary union because of the run on Sterling occasioned by Mr Soro's bet against the pound, and the second thing is the Schadenfreude exhibited by some contributors concerning the Euro. Do they not realise that it is in the UK's interest that the Euro succeed whether they as Britons are in it or not? For London to remain a major centre of finance (if you want it to) then the UK will certainly have to join Euroland.

  • Comment number 79.

    #8:
    All those things you describe apparently now justify actively deceiving and cheating other nations? You must be of the "I was a poor kid that's why I'm a criminal now" variety. Most of what you describe doesn't make Greece a particularly disadvantaged society. But certainly one that is desperate for excuses!
    If you want to look towards China and Russia for money, go right ahead! Don't forget they don't like to be cheated either. Sorry! Also, could you remind me what good Greece has done for the EU? Because I can't remember anything other than giving cover to grandiose statements of some EUSSR bureaucrats.

  • Comment number 80.

    #19:
    Asking for higher returns reflects directly the higher risks assumed by investors lending money to Greece. That's not speculation, just financial common sense. And once again the market ("speculators" as you call it) has a much better grip on reality than the bobble-head politicians and bureaucrats in various governments. Greece's interest rates keep going up because its officials keep trying to hide the magnitude of the problem.

  • Comment number 81.

    Who sets the interest rate? Seems most could be resolved with a lower rate. The trading of money is a major problem. Bankers, IMF, national bailout schemes have placed everyone in a difficult situation. One would think that the bankers might be more accepting of helping nations out of financial crisis created by the banks, but like the jackels they are, they prey on the wounded and circle hoping to expedite death and a chance to pick the corpse.
    When a point has been reached where the banks are stronger than nations we have serious issues. Without a down-sizing of banks every nation will be in the position of extortion by the bankers and national well being will be in the hands of bankers in board rooms...government will be irrelevent..

  • Comment number 82.

    dandelionblue 67

    'As part of the Euro, Greece's currency is stable (disproportionately to its actions)'

    You seem to be confusing the cause of their problems with the solution. Devaluation might not be a magic bullet, but it would make it far easier to deal with their lack of competiteveness than the remedies currently being imposed.

  • Comment number 83.

    Simon H 66

    'Why don't we forget Greece and concentrate on sorting out our own debt!'

    I think you'll find that that process will only start post 6th May, and only if we elect a Tory government.

  • Comment number 84.

    #26:
    All for one and one for all! Always invoked by the One when he needs the All. Other way around not so much.

  • Comment number 85.

    Gheryando wrote:
    "All the Eurozone needs is authority to create and collect taxes."

    Me too. Why, if I could create and collect taxes I guess all my problems would be very nearly over. Rest assured, gheryando, you be first on my list of folks what need taxing, on account of you being so fired up for the prospect and therefore all in favour of paying taxes.

    Seriously though, this call to give more power to the people responsible for the problem borders on the insane. If the institutions of Eurozone were able to manage their (our) affairs properly, would we be in this mess now?

    Gheryando epitomizes the ratchet action of the EU advocates inevitable quest for power. If things are going well, it is because the EU is glorious and successful, and therefore more power should be handed over to the EU. If things are going badly, it is because not enough power has been granted to the EU, and therefore more power should be handed over to the EU.

    I think many on this blog could benefit by stepping back from the situation in Europe today, and casting their gaze backward in time. Go far, far back, back to the middle ages and despotic feudalism.

    What was society like, in the dark ages? Was it fair, just and bountiful? How did the economies of European "states" operate? Did ridiculously draconian laws create an environment where educated classes of nobles made war upon each other for the sake of increasing their families wealth and power? And did the church, as the major international institution of its day, support the feudal power structures and profit from the warfare and chaos?

    It seems to me that when we look far enough back in time, our vision clear. We begin to see the gross imbalances in the way society operated. We see and condemn grave injustice, and abhor the absence of a rule of law. Instead of disputing minor technical arguments, we look at broad social patterns and we make judgements on how "fairly" and how "humanely" the various classes and groups within the society behaved towards each other.

    I say this because despite all the hot air being thrown about by the current crop of professional party member politicians, and despite the media pretending that representative democracy responds to the will of the public rather than the will of the corporate elite, when people alive many years from now look back upon our society it will be fairly obvious what they will say about how we lived.

    Our modern "democracies" might have problems, but for the super rich they are a paradise. The super rich get even richer and more powerful. Banks make so much money they pay out bonuses calculated to make the ordinary workers forget that they are in the world. Politicians are entertainers, and party members have secure economic fortunes to collect from the system.

    And meanwhile, wages for ordinary people are being destroyed by inflation and taxation. Taxation in our time has become so pervasive that the only way it can be significantly increased is by implanting microchips in babies at birth and tracking them by GPS, and demanding money from individuals for every step they take.

    gheryando and his type demand more powers of taxation, as if income tax, VAT, CIS , NHS, sales tax, fuel tax, road tax, council tax, airport tax and the host of other taxes are not sufficient to sustain the glorious projects of party members. Now the party members want a whole new set of taxes at the european level, as well, so that the working wage can be once more blessed by the caring attentions of government oversight.

    Make no mistake, our society will not be hard to understand when people look back on it centuries from now.

    Our politicians have taxed working people into desperation and stressful poverty, until a caste system has evolved, with literally millions and millions of citizens living from state handouts to make ends meet. Meanwhile, at the top of the pile the super rich have become richer and more powerful than any class of people has ever been in history.

    Does anyone believe that when the historians of the future look back on this scenario, that they will describe the social system as "democratic", "fair", or "just"?

    Or will they call it a kleptocracy, where the sham institutions of public power kept the common people in line whilst the private elite plundered the resources of the world?

  • Comment number 86.

    Stephanie I'm really enjoying your blog and I feel that everyone can learn by you. However, I'm just wondering why you underestimating your work by providing selective information concerned to Greece? Italy has higher debts but nobody talks about them. There are some particular facts in this case which have been omitted in my opinion:

    1. An estimation of the incomes earned by Parthenon's marbles in British museum.

    2. An estimation over the gold bricks' value which have been stolen by Germans during 2nd world-wire war and have never been returned as Greece should normally be entitled.

    3. An investigation over Greece's PM actions.

    Honestly I would want Greece to leave EU, but it would be more fair to state the real reasons:
    1. Some European countries have caused a shock to people who are now depressed.

    2. The European union instead of interpreting who really owes, is trying to force Greece to get a loan.

    3. Everybody has tried to target Greece as they do not have the appropriate courage to face wealthier countries.

    In my opinion power doesn't only mean profits. According to my culture power is responsibility as well.

    IF we will get a loan according to the rumours heard about its terms, I would really appreciate if you could kick us out of EU union and for exchange you could officially hire our PM as a supervisor. The only thing you can get by Greece is just some money. I just remind you that we have survived from 400 years of slavery and it doesn't matter if everybody is set as an obstacle for our development, at least I am sure that we will SURVIVE.

  • Comment number 87.

    42. At 11:11am on 27 Apr 2010, writingsonthewall wrote:
    31. At 10:38am on 27 Apr 2010, Chris London

    Chris - you clearly need reminding of the facts again.
    =========================================================================
    Some good points some bad please see below.....

    Bankers
    Wages - mega - Not all and many made billions hence contributed to our economy...
    Achievements - none - again not totally true that is why Labour courted them as they were contributing so much to the UK's economy.
    Failures - near total economic collapse, mass unemployment, wasted resources. - again some truths but not all. Not all banks suffered, there are a number that did not need and did not avail themselves of any assistance from our goverment. Lloyd's are probably the exception in as much they were forced to take on HBOS which was their only downfall again at the government's behest.
    Cost to Britain - Astronomically high, so high we can't even calculate it properly. I thought billions were simply for star distances until 2 years ago! - I agree but that has little to do with the bankers. Yes they contributed but it was our goverment who many years prior spent what we did not have. I am not saying that they should have seen the banking crisis what I am saying is that they spent in the good times way in excess to what was comming in. That is a fact a fact that has been stated by the treasury. The debt we now see is only in part caused by the global meltdown the bulk is and was caused by Labour. To qualify this please look at the state of the public finances at the end of 2000. Then you will see if you care to research the facts and figures that Labour spent and taxed the UK. Unfortunately they spent way above the receipts that the exchequer was enjoying through what was claimed a period of unprecedented growth - Gordon Brown.

    Public sector
    Wages - not mega - Again you must live on a different planet. I think you mean that individuals are not on mega deals, unless you call £200k plus not mega for a number of council CEO's. lower to Mid ranking civil servants on £50k plus, managers in the NHS on more than £40k. The point I would like to make is the shear numbers that have been brought into the public sector over the life of this goverment. Some are justified many are not. You can not use the public sector as a means of keeping unemployment down which is what this goverment have done.

    Achievements - the delivery of health care, education, sanitary services etc. to the public and those who cannot afford it. - As I have said earlier it is not the size of the budget it is what you do with it. The Government have simply thrown money at the public sector. This has not delivered in many cases services that are fit for purpose or giving us value for money. Yes I think spending on the NHS was and is a good idea but it needs to be controlled and thought out. We as a country have not got the public services we deserve or have paid for.

    Failures - have failed to reign in big chiefs salaries, employed too many private sector failed contracts, are inefficient in some areas.
    Cost to Britain - less than 40% of GDP - the Golden rule remember? - Gordon Brown admitted a long time ago to have dropped the golden rule. In fact it was before the banking crisis. Again a fact please see hansard. Failure to deliver the improvements in all our services any where near to the proportion on increases in spend. Throwing money at a problem does not make the problem go away. It just changes the problem. The Government can also be blamed for the high number of initiative that have failed along with the high profile programme failure and over runs.

    You ideas that the problem was caused by the Government "not putting enough aside in case the banks decided to flop" - is really stretching it. - No the idea that they had ended a boom and bust cycle is ridiculous. There again we are talking about the man who singly handed saved the global banking industry and economy. He just forgot to tell the rest of the world as they all have said that they believe Gordon contributed little if anything. Again fact as reported by the BBC and in a number of publications including the FT.

    Should all Governments work on the basis that we can't spend because we might need it to bailout the private sector later? - Again what I am saying along with so many commentators is that they should have just not ever spent. They got caught up in their own spin and believed that the good times would never end. If they had just stuck to Prudence instead of courting others then we would not be in the state we are at present even after propping up a number of banks.

    It's not Governments responsibility to worry about the health of the private sector (it's supposed to be Capitalism - remember??) - but you imply it is. It seems to me you're simply advocating a 'private enterprise social security system' - adding further to the public sector spend you are incorrectly pointing to as the cause of our problems. - It is the government's responsibility for the economy of this country and its stewardship. They are there to ensure that appropriate regulation is in place along with system that support the private sector. This has not been the case for this government. In fact they have on the one hand been irresponsible in the regulation of the banking / finacail industry because they were so reliant on the money they were making while paradox being over zealous on other areas of the private sector both in regulation and taxation.

    Economics for dummies eh? - still trying to convince us that the problem is public spending (which actually achieves something) compared to banking (which doesn't).

    Yes you are quite correct you do need lessons on economics if you believe that the premise that it is sound finacail management to spend more than you earn. Also that the banks offer nothing for if that was the case why would this goverment bother to step in and give them aid.

    The Public sector is there to support and serve us, it is a cost we all have to share, however we should demand that that service is fit for purpose and delivered in a cost effective way. Anything less is not doing justice for us as a nation.

  • Comment number 88.

    #68 Amused to Death

    Where have you been for weeks and weeks. I thought perhaps you had locked yourself away to pen a jacobian farce.

    You did say months ago that the "Germans would reap what they sow" I think we will too only its not harvest time quite yet.

    Perhaps the Romans might have said 'Hannibal ad portas' or reminded the Germans "dabit qui dedit" or had they read some of the contributions to this blog "quos Deus vult perdere prius dementot"

    I myself am on Tenterhooks too regarding Eastenders. Will the rough kids at Ben's school panty wedge him after games and hang him on a peg in the changing rooms as a punishment for talking street badly.

  • Comment number 89.

    All this user's posts have been removed.Why?

  • Comment number 90.

    #53 pename "This is the end of the notion that nations can simply provide services inside the country, have some exports and imports and manage to get cheap loans to survive. All nations need at least one real industry that scales."

    Well yes and no. This is all true if one always needs to compete with one's neighbours, but then quite a bit of the world is already doomed (think Albania, Togo and Georgia) and the rest will be when the rate of change accelerates beyond their endurance. In a sense perhaps India and China are lucky in that there is no other Indias and Chinas to undercut them, but then it is not the undercutting that is doing the West in, it is inflated expectations, and these will come to the developing nations once they developed enough. This is the yes bit.

    The no bit follows from the same line of reasoning: suppose we all lived on tinned food, did not travel unless necessary, ditched the car, had realistic expectations of health and longevity. Would not the system work (think Albania, etc.).

    So I think what you say is correct, unless people are ready to take a serious cut in the mechanical ease of life (which has nothing to do with quality of life).

    If Ancient Greece taught us anything, it is that one needs very little in life, apart from a sphere for honourable action.

  • Comment number 91.

    Ok, let's take things from the start. During high liquidity times reckless US banks gave out risky mortgages and then sold toxic derivatives construed on those mortgages. Likewise, during the same period, big financial institutions worked hand-in-hand with corrupt Greek administrations to cover up Greek sovereign debt and budget deficits. It now appears that despite the obvious conflict of interests these institutions marketed "toxic" Greek instruments for hefty profits but also overly exposed themselves to Greek default risk, thus harming their shareholders' interests. There can be little doubt that huge profits have been created either through legitimate financial activities or morally questionable speculation in connection with the Greek financial issue. These profits lie with German, French and American bankers. The only thing Greece doesn't need right now is bilateral loans at high (around 5%) rates added to its already unworkable outstanding debt. This will only protract economic malaise for Greece, financial uncertainty in the Eurozone and the single currency and turn a Greek fiscal shenanigan into a major destabilizing international-political nightmare for all parties involved. The EU would do itself and Greeks alike a huge favour if it simply urged for a co-ordinated and orderly debt restructuring followed by a closely watched reforms package for Greece. The so called bail-out, which has stirred such controversy in Germany, if it goes through, could kick off the so feared domino effect in Europe. If big EU economies bail out Greece so hesitantly and unwillingly, who wouldn't bet on a Portuguese and Spanish failure, just for the laughs of it? What will Germany and the EU do then?

  • Comment number 92.

    Re62:62 mightyblooze, indeed it is more or less like that and Greeks are the first to admit. In fact "rich" does not mean on the overall richer than other Europeans but it means "not that much poorer on average than other Europeans". What distinguishes Greeks is that they have the higher % of landowners, i.e. the land is divided among more people and higher % of own propriety. As parents of a more populous generation pass on their properties to their kids of a less populated generation (due to demographics). An average appartment (most are appartments anyway) in Greece costs 250,000 euros (not cheap anyway...) thus if one has it already, then he can spare 50,000 to buy even a Porche Cayenne... of course that not meaning that average people buy them, average people will simply have to worry less about housing and more about their salaries and working conditions
    => Cayennes are bought typically by people who tax evaded or in general are into the illegal black market.

    Indeed the above reality is enervating Germans, British (less the French though, hehe!). Not only Greeks live in a country where half year has summer, in 1 hour driving distance from some of the best beaches in the world and a few hours by a pleasant ship ride to one of the most beautiful islands in the world, but they also have their houses and thus even if they earn less they have more to spend, given the loan-crazy spree they went on. So righfully they have to be punished.

    Well I am afraid this is simplistic. One has to realise the underlying realities behind the picture. There is much more to little insignificant Greece than meets the eyes and I am not refering to its ancient and byzantine civilisations and other such lovely stuff we started discussing on Mr. Hewitt's threds (we abstain from these here!)

    Just keep in mind that:

    1) Greeks don't do work and sit an earn money?
    Comparing the real net working hours of EU citizens, Greeks top the list and in fact they even surpass those of US and are in level only with Asiatic countries such as China. Among my own ones I have people (fortunately no kids yet!!!) that work per day 8hours (private institution, full time) + part-time 2-3hours (public institutoin, 9 months/year part time) + 1 to 2 hours per day + weekends! (own little business) and that makes easily near 80hours per week pure work. This case is still quite rare in Germany, Britain let alone France apart people receiving more than 200,000 euros per year. But in Greece is common practice, still these people earn overall less money than your first salary of most of you because "the market is not productive" (i.e. because simply money is being eaten by the few who pull the strings...). The idea that Greeks do not work and sit in cafes is simply the result of a widespread unemployment (in real % more than 20%) as many young men are simply housed and fed by their parents to survive. However, if anything that highly contrasts the idea that Greek working people do not work! When Greeks finally find a job, they will need to find a second too soon....

  • Comment number 93.

    Will someone at the BBC please enter this blog site and explain just why it is necessary to submit all thought processes to "moderation", an euphemism, I believe, for censorship. Surely it would be more efficient to collect the names of those people who continually offend the rules of good manners and submit such people to censorship? Why should the bulk of well mannered thoughtful contributors have to wait as I have for nearly an hour just to see what other people may think of my position, or I of theirs?

  • Comment number 94.

    It's always been a moot point whether the EU is the EUnited States of Europe or the 'Mighty' Hapsburg empire...a disgruntled family of nations looking for an excuse to knock it on the head and try something else---as the cost of 'empire' begins to exceed the benefits.

    It achieved what it set out to do...war between Germany and France is now unthinkable---so maybe it's time to move on...

  • Comment number 95.

    #69 - You make it sound so simple! But in reality I really can't see another way.

    Does anybody have an idea of how a country can default and then recover without its own currency?

    To my knowledge there are only 2 models for public entities that go bust - (1) If you are a sovereign country with you own currency, you devalue that currency and inflate your way out - painful, but you can yourself back on track (e.g. Argentina)
    (2) If you are a non-sovereign entity you have to roll your debt up into the sovereign entity of which you are a part (e.g. The City of New York, various US states)

    But what happens to sovereign entities without their own currency?

    Do they just have to keep shrinking their economy until it gets back to a state where it is self financing?
    My understanding is that devaluing means that when you start to shrink you don't actually hit the bottom as after a bit your exports become competitive. (Although if you don't have anything to export, of course, you end up like Zimbabwe and just keep falling).

    Is this right? Will Greece really have to the hit the absolute bottom, Zimbabwe style?

  • Comment number 96.

    #77
    "Who could possibly be at fault for that I wonder ???"

    ======================================================================

    The Tories.

    They left the mess in public services that Labour had to put right by borrowing.

  • Comment number 97.

    #78
    "Do they not realise that it is in the UK's interest that the Euro succeed whether they as Britons are in it or not? For London to remain a major centre of finance (if you want it to) then the UK will certainly have to join Euroland."

    ====================================================================

    CORRECT

  • Comment number 98.

    For the benefit of those who are unsure of the UK's current position:

    ==============
    NATIONAL DEBT: £848.5 billion as of 14 Feb 2010 rising to £1.4 trillion by 2014
    ==============

    This assumes consistent growth of > 3% from 2011; anything less and the debt will be higher but even at this level, 10.6% of tax revenue - £73.8bn - will go in interest payments alone. The UK already pays more in debt interest than it raises from fuel duty - which may explain why that tax keeps rising.

    As for income tax: In 2008/09, gross income tax receipts were £152.5 billion. In the same year, social security benefits cost the Exchequer £150.1 billion. The govt expects benefit payments to exceed income tax revenue in the current tax year.

    ==============
    PERSONAL DEBT: £1.5 trillion at Jan 2009
    ==============

    Roll on the retail and housing market recovery.

    ===============
    STATE PENSIONS: £2.2 trillion
    ===============

    These represent future liabilites spread over a number of years rather than the money the govt needs to pay immediately (i.e. debt). However, despite regular contributions from monthly pay-checks, these are entirely unfunded, meaning pensions are entirely dependent on future tax payers contributions - assuming there are enough. This may explain the open doors immigration policy - get in enough people of working age to finance the future unfunded pensions bill. However, it doesn't explain how the pensions of the new immigrant population will be met in the future.

    ================
    PFI LIABILITIES: £217 billion
    ================

    Payable over 25 years. At the peak, payments will amount to £10.8 billion per annum. Money that will be paid from future tax revenues, leaving less available for actually running the new schools, hospitals etc.



    =======================================
    = TOTAL UK LIABILITIES: £5.3 Trillion =
    =======================================



    ************************************************
    * TOTAL UK TAX REVENUE 2009/2010: £794 billion *
    ************************************************

    As per HM Revenue and Customs annual receipts [[Unsuitable/Broken URL removed by Moderator]]


    ================
    CURRENT DEFICIT: £163 billion
    ================

    The UK is spending £163 billion more than it earns each and every year - i.e. 20% over its £794 billion tax revenue.


    At present the three main parties are arguing about cutting this overspend by a mere £6 billion.
    Labour argues this will send the economy back into recession (a.k.a. depression) while the Conservatives argue £6 billion will make a difference.

    It will: we will only be increasing our indebtedness by a £157 billion a year - a mere £430 million every single day.

  • Comment number 99.

    #39:
    "Since Germany pushed the situations that far...". Yep, Germany pushed the snowball over the peak with its little finger while Greece made it at the bottom and spent the last years pushing it up the mountain, making it bigger along the way. Your blame-pointing finger must be huge, certainly bigger than your balls.

  • Comment number 100.

    76 - Richard Dingle

    I'm afraid my money's on Kevinb on this one.

    While at uni I was in a house share with four others. The electricity bill was put in all our names. In an attempt to keep my student debts to a minimum, I took a part time job - 15 hours a week- and to ensure my studies didn't suffer, I sutdied through the night on average once every week, then went to lectures as normal the following day.

    I think you can guess where this going. One of my housemates, in true student fashion, was more interested in p***ing his student loan up against the wall rather than studying or paying his share of the electricity bill. Along with my other housemates we bailed him out a couple of times (it was that or have our electricity cut off in the middle of winter) but the penny finally dropped. Why the hell should we make huge sacrifices just to support his profligacy? As he refused to move out, the rest of us left, moving into a new house together and leaving him to sort it out with the landlord and electricity company.

    I think German tax payers will reach the same conclusion soon enough.

 

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