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An ever-closer Union?

Stephanie Flanders | 15:34 UK time, Monday, 10 May 2010

It's official: the future of the eurozone is more important than Nick Clegg. Along with other markets, the FTSE has soared on the back of the deal agreed by European officials early this morning, and for good reason.

Euro notes and coinsIf we are to take this package at face value, the rules of European Monetary Union have been fundamentally re-written. For governments, being in the eurozone means something very different today than it did just a few weeks ago.

As we have seen, the role and responsibilities of the European Central Bank (ECB) have changed radically as well.

If this deal is what it is cracked up to be, countries like Germany may have to fundamentally change the way they think about monetary union - and, ultimately, the way they think about economic growth as well.

However, it is not clear that the tired officials who came up with this deal early this morning have really thought that far ahead.

It has all the hallmarks of what American football fans would call a "Hail Mary pass". It looks impressive, and it buys the Europeans some crucial time. But they may not like where the ball eventually ends up.

Looking across European markets - it's clear that last night's 750bn euros package to shore up the euro has already done something important: it's changed the narrative of the crisis.

The story for months has been that the eurozone governments were behind the markets. Shortly after 0100 BST, they finally got out in front - and, crucially, so did the ECB.

But there are some important questions still to be answered: especially about the 440bn euros "Special Purpose Vehicle" for eurozone countries in trouble which is really the only novel part of the programme.

The 250bn euros from the IMF has been there all along: the IMF Managing Director, Dominique Strauss-Kahn, merely did the Europeans the favour, this weekend, of reminding them that it could be re-described in the interests of some market "shock and awe".

We don't know much about how the Eurozone special vehicle would work. Truth be told, eurozone officials don't either. After all, yesterday morning, it wasn't even a thought in their heads - let alone a plan.

When eurozone officials went to bed on Saturday, the 60bn euros souped-up European Commission lending facility was the only concrete proposal on the table.

Only after a lot of urgent re-education by American, British and Japanese officials did the eurozone reluctantly come to the view that they needed more. A lot more.

So, yes, the lack of fine print is understandable. But if there's any lesson of the past few months is they need to sort it out, fast. Investors are going to have plenty of questions about how the vehicle would work, what kind of seniority it would have with regard to other debt, and so on and so on.

If officials can't answer these questions fairly soon, with a clear timetable for how each parliament will do its part, the honeymoon in the markets will be short indeed.

Of course, the biggest short-term question is how the Germans will square this with their Constitutional Court - not to mention German voters.

On the face of it, this agreement is at odds with the Court's 1993 judgment on the Maastricht Treaty, which said that stability is an "unalienable basis for Germany's participation in a monetary union".

Any violation of this principle would undermine the legal basis for Germany joining the euro in the first place. Arguably, the No Bail-Out clause of the Lisbon Treaty was one of the key pillars of the system.

Over the weekend, the Court refused to issue an injunction against the German piece of the Greek support programme, endorsing Chancellor Merkel's view that delaying the deal now would be too costly.

But it could still find the Greek package unconstitutional, on the basis of a legal challenge that has been brought by five German academics. On the face of it, the creation of a gigantic new vehicle for bailout out governments looks even more problematic.

Here's the obvious Catch 22 for Chancellor Merkel: if this commitment to safeguard the euro is real, then the eurozone countries - including Germany - now stand behind a significant part of eurozone government debt.

The Court might well judge that to be inconsistent with the terms on which Germany entered EMU. But if Chancellor Merkel insists that it doesn't mean that, that Germany's fiscal sovereignty has been retained - then clearly investors will ask what that 440bn euros really means.

As I suggested last week - one test of all this will be what happens to bond market spreads within the eurozone over the next few weeks and months.

If the core countries have now taken on a collective commitment to stand by a good chunk of eurozone sovereign debt, you would expect, not just Greek yields to go down, but German yields to go up. We shall see.

Clearly, there is plenty that could go wrong in the next few days and weeks. Investors will also need to hear more from Spain and Portugal about how they are going to further squeeze their budgets. Both governments fought against it over the weekend, but there will be announcements in the next few days.

But assume (and it is a brave assumption) that the package survives the scrutiny of the markets over the next few weeks. There is an even bigger question hanging over the package.

Put simply: it tackles the symptom of the problem, by making it easier for the high borrowing countries in the eurozone to pay their bills.

By itself, the deal doesn't materially change the amount that eurozone governments will have to borrow over the next few years. And it doesn't even begin to talk about addressing the reasons why countries like Portugal are borrowing so much in the first place.

Indeed, by promising more fiscal action, across the zone, it actually makes it worse, by making their growth prospects even weaker than they were before.

I will have more to say on that, and on the ECB piece of the package, in a later post.

Update, 16:50: A few numbers to throw light on my earlier comments. The new 440bn euros firewall for eurozone governments would amount to about 6% of outstanding eurozone government debt, which was just over seven trillion euros in 2009. Throw in the 80bn euros promised separately to Greece, and you're talking about 7.5%.

So, the Germans could reasonably argue that this special vehicle is far from a blanket guarantee of the eurozone's debt. But, arguably, on this occasion, the flow matters more than the stock. And the principle matters most of all.

Collectively the eurozone countries borrowed 565bn euros last year. So, in a few short weeks, these government have collectively agreed potentially to underwrite nearly a full year's borrowing. The implicit guarantee for the countries that are likely to be affected by the deal is much bigger: after all, the entire Portuguese deficit last year was 15bn euros. Spain's was 118bn.

That is getting very close to a fiscal union, at least in terms of the implicit liability for core members like Germany over the next few years. Whether they will be getting a more stable eurozone economy in return for that new liability is still today an open question.

Comments

Page 1 of 2

  • Comment number 1.

    Can you enlighten us as to what it means for the UK Taxpayer please? I ehard we have been signed up to a further £13 Billion of liabilities under this scheme?

  • Comment number 2.

    The EU debt problem cannot be solved without fully integrated taxation and spending policies and about a decade to get them to bear fruit.
    The real fundamental is too much state spending against too little tax income.
    "Simples" as the Meercat says; Nations need to set realistic budgets, and live within their means.
    The UK is overspending by at least £200 BILLION a year without all the PFI and State pension costs.

  • Comment number 3.

    Yes, eurozone is more important than Nick Clegg but, PR is more important to Nick Clegg.

  • Comment number 4.

    Since purchase of one government's bonds by the ECB must be matched by sale of another's, no new money will be created. Therefore it can be argued that the arrangement is not a threat to the stability of the euro.

    Many Germans might feel that there is something wrong with money that they have saved essentially being lent to profligate southern europeans. But they should realise that it is only possible for them to save if there is someone else ready to borrow. In the current economic climate, with demand depressed, they should be grateful that someone is prepared to spend and perhaps buy their products, so that they can continue to save.

  • Comment number 5.

    A "Hail Mary pass" how apt, this often refers to a last minute gamble by the losing side who have no other chance of winning and therefore can accept the long odds. Is this where the euro is at?

    The fundamental issues are that most countries have regular trade deficits, there is too much debt (spending exceeds income) often caused by unsustainable government spending to bribe the voters and the proposed solution is to borrow more rather than to fix the underlying problems!

    This sounds just like Summer 2008 when the most heavily leverages stocks soared and how did that turn out?

    The public is not too happy with bailouts and austerity programs that are ultimately looting of the taxpayers by the state and competing corporate interests.

  • Comment number 6.

    Bringing this back to a UK context, I have always wondered how tax varying and budget setting powers of devolved Scottish, Welsh and N Irish assemblies are compatible with a single UK currency and Treasury.

  • Comment number 7.

    Why don't individual US states go the way of Greece, being picked off by the financial market and requiring huge subsidies to keep them solvent? In other words, how/why does the Dollar work better than the Euro?

  • Comment number 8.

    Something had to be done, if this works then fine. But will it keep those pesky American markets and credit agencies at bay? They seem to want their cake and eat it, well that what it seems to me. Invest in market, judge the market and then complain when they are not making money.

    I could be having a narrow view on this but really I don't think so

  • Comment number 9.

    Who on earth believes that this will work? (indeed as you say it makes the overall situation worse)

    Stephanie can you give us a bigger world picture view, beyond the clumsy after the event focus on local symptoms that our politicians and economists hold up for us as 'the answer' ? Because, frankly we don't believe them. This great world economic mess affects us all and the clearer we can see it the better.

    Perhaps there never was a more important time for fearless financial reporters?

  • Comment number 10.

    So the way to solve a sovereign debt crisis.... MORE SOVEREIGN DEBT.

    Genius (sarcasm).


    Who does this bail out exactly? The bond holders to sovereign nations i.e. the banks.

    This is nothing short of another banker bailout by the EU and eurozone taxpayers.


    WHEN DID WE VOTE FOR THIS?

    We didn't.

    Yet again, the competent (hard working european taxpayers) bailout the incompetent, the corrupt, the lazy, the fraudulent and those who exercise very bad judgement (i.e the bond holders - who in their right mind would lend money to Greece is beyond me, unless government came to a special arrangement with "special interests").

    Time to audit the EU accounts!

    Time to have a referendum on membership to this corrupt european superstate.

    Time to audit the Fed, the ECB, the BoE and lift a lid on this whole charade, this is just getting beyond ridiculous, and an apathetic and ignorant public and press does not help one bit.

    Please explain the economic morality to all of this Stephanie, and ask yourself, why does wealth always transfer from the hardworking poor to the rich elite?

    Bailout? Bailout for whom exactly? Not the hardworking tax paying poor that's for sure, they don't have the power to lobby government or obtain the bailout cash!

  • Comment number 11.

    Lab-LibDem coalition odds-on (with Brown stepping down)

    Wilderness years for Tory Boys everywhere

  • Comment number 12.

    For how long will politicans allow the banks to hold the nations hostage to this kind of extortion? Paying interest on money that was given to the banks from the taxpayers is as stupid as can be. The robber barrens will steal all they can and the governments keep handing IOU's to the banks with the signatures of taxpayers. Time for a new financial system and probably structure of governments as well. This is obscene and does nothing but make the banks rich and nothing more. A failed system both politically and financially.....someone have some new ideas, it is time for them to be implemented as the fools continue with their system of failure and abuse. This system has run its course and it has failed. They will continue with this until the people say no more.

  • Comment number 13.

    Stephanie, am I being a complete mug by working hard and saving for my pension? If governments are just going to tax-n-spend until they run out of their taxpayers' money, and now seem to be moving to a policy of living off the taxes of other countries, shouldn't I just throw in the towel now? I should just spend my money now, before someone else does it for me?

  • Comment number 14.

    There's only one way this can go if the fund does ever get called - long term direct fiscal control across the Eurozone. That's quite a big political step even if many have believed it inevitable since the formation of the Euro.

    At least it will make the Europhiles happy, although I do wonder whether the people of Southern Europe will like the result.

  • Comment number 15.

    This is a sort of common fiscal policy by the back door or put it better the path towards common fiscal policy by the back door. It will certainly cost the richest countries (including some billions to UK). However, there is no other solution. The alternative is catastrophe of Eurozone and this means dismantling of EU. Thus, it is certain the eurosceptic forces in UK and elsewhere will fight it in the beaches etc. etc. I predict monumental fights between UK and Eurozone. As I said many a time, if UK does not like it, can always leave. Of course, the same applies to Greece for different reasons. Otherwise stay inside and try to adapt concentrating on the benefits.

  • Comment number 16.

    "And it doesn't even begin to talk about addressing the reasons why countries like Portugal are borrowing so much in the first place"
    Let's address these reasons :
    Mr Da-Silva get paid Euro 2,000 per Month, with it he can make payments on his German Car, watch his Japanese TV and wear Chinese clothes.
    He can't be bothered buying Portuguese made shoes because they are too expensive - Nobody else, the English, French… can be much bothered buying Portuguese goods either outside of Tourism and Port for the same reason.
    So the Portuguese stopped making things - "According to International Trade theory they'd make something else" - but thanks to the Uni-Trade policy of China and the Strong Euro this "makes something else" part does not happen.
    This leaves the only jobs in town being Government jobs (paid for by Government borrowing) and house building (paid for by Government employees taking out mortgages backed by their Government borrowed salary). So the whole country lives on Debt – not just ‘government’ debt :
    a) Foreign debt due to the 'cheap' imports - thanks to the strong Euro (Cheap imports are no so 'cheap' when you include the Interest on the Interest you have to pay on the loan you took out to pay for them as well as the dole costs for those who are now un-employed)
    b) Government Debt - to pay Government workers and dole for those who lost their jobs to cheap imports
    c) Consumer Mortgage debt- due to their property boom
    - This is the USA Credit Crunch all over again.
    Solution :
    a) China to be taken to the WTO court and fined a few Trillion for the damage it's un-fair UNI-Trade practices have caused.
    b) Germany to pay - not loan - money to these countries because they got an excess Export boost from the Euro as it is lower than the Mark.
    c) Get rid of the Euro, it's clearly not working for Germany and Greece to share the same currency (or else Germany to pay an annual 'strong currency fee' to the Greeks etc as a compensation payment for them not being able to export anything much)
    d) Start using NEFS. You have to realise that the Financial system we use is not 'natural' - it's artificial ! man-made ! - it's a made up set of rules that should work much like a ticket office in a cinema i.e. - "Sorry sir, we've run out of tickets" should only happen when they've run out of seats. They tell Greece "Sorry we've run out of money" - this should happen when Greece has run out of food - a long way off. If you were at a cinema ticket office and they said "Sorry we've run out of tickets" and your friend inside the Cinema texted you to say there were plenty of seat left you'd say to the person in the ticket office - "you need to make more tickets - your ticket machine is wrong". Well NEFS says the same thing to the financial system - it's just plain wrong.

  • Comment number 17.

    "...... The implicit guarantee for the countries that are likely to be affected by the deal is much bigger: after all, the entire Portuguese deficit last year was 15bn euros. Spain's was 118bn."

    Stephanie, I believe you think that when it goes POP it will go POP in sequential order, Greece, Portugal, Spain ......etc

    However, it will not POP in order will it? and the deficits alone are not what will be counted it will be the banks as well (which is what this deal is designed for)

    This bailout will not actually bail any entity out - it is designed as a "DYKE", but once a country like Greece takes its finger out the dyke will of given way before the cheque could be signed

    Please get real?

  • Comment number 18.

    I love the way inter UK Politics sees £6 Billion as a VAST sum when the Tories want to cut to that extent, but a potential £13 Billion exposure to the European Road Crash is accepted without so much as a blink of an eye.

  • Comment number 19.

    Does the stabilisation of the bond markets mean that the short sellers recently vilified by the Greek government (and others) have lost a packet?

  • Comment number 20.

    USA is a single currency area which manages to exist without co-ordinated tax and spending plans between states but they have the advantage of much higher movement of labour (common language helps) and a clear understanding that each state (and city or county) is on their own financially so that states, cities and counties can go bust (New York has come close several times).

    The Euro does not require a single tax/spending policy but in practice has managed to come up with at least a single spending policy - the Med states will spend and the northern states will pick up the tab.

    The Euro model may be about to face difficulties that are unique but entirely predictable. The rise of the economic power of the BRIC countries will put a real strain on the Euro social model. The BRIC countries do not have the scale of social spending commitments and as a consequence will be a cheaper place to operate for many companies. In time as their wealth increases it is reasonable to expect that the BRIC countries will increase social spending because their populations will want it but that may take 30+ years. In meantime Euroland has a late 20 century left wing style social spending commitment that is trying to compete against the BRIC countries who, at best, have an early 20th century (or maybe Victorian) scale of social spending.

    Protectionism is not a plausible answer, nor can we make the BRIC countries increase their social spending, so something has to give in the Euro social model. Personally I would start with the CAP.

    In the UK we may be better suited to a world where social spending has to be reduced in the EU simply for the economy to stand a chance of competing with the BRIC countries. Our traditions are for much less social spending than much of the EU. Germany will manage as well because they understand that higher social spending can only be paid for by allowing high levels of productivity in high value goods. For much of the rest of the EU they are in for a rather large reality re-appraisal.

    Now I should state I am not advocating a reduction in social spending to poverty levels. Most of the BRICs are still weighed down by excessive govt bureaucracy which does offset the advantage of low social spending but I do think that the EU (UK included) does need to rethink what social spending is necessary and what is window dressing

  • Comment number 21.

    #14
    "There's only one way this can go if the fund does ever get called - long term direct fiscal control across the Eurozone."



    Excellent.

    Don't you love it when a cunning plan comes together.

    Are the Tory Boys on suicide watch.

    Cameron and Tories finished Euro marches on.


  • Comment number 22.

    Nick Clegg and his cohorts indescision induced by Mandy and his cohorts are going to destroy this country's cred, or should I say what's left of it. He cannot seriously think the is any mileage in a loser's coalition. A week is a long time in politics especially when there is no government and another election is already on the cards. Will the electorate vote for a hung parliamnet ad infinitum. I think the week we have experienced is a prime example of the working of proportional representation. Here lies an ever closer union!

  • Comment number 23.

    When you major customers are in crisis you are in crisis - I find it amazing that this simplest of economic reality is lost on so many people!

    On Coalitions...

    I'd like to see both the Tories and Labour in coalition - they are both conservative parties with a huge conservative pro-European majority. The loony wings would both become powerless and cease to have any influence.

  • Comment number 24.

    At home or abroad - has the electorate ever been more powerless and yet have to cough up more and more?

  • Comment number 25.

    Stephanie, a couple of questions for you:

    - the current problems within the eurozone highlight the problems of a group of sovereign states using the same currency, with the main issue being that the those who cannot compete in the marketplace get weaker and need supporting, so other than taxing the richer nations to support and develop the weaker nations (not lending them money but employing an active program of investment spending), is there any other way the eurozone can be made to work or is the eurozone only now just realising this and is slowly and painfully dragging itself towards its ultimate position.

    - and my other question is, will you have dinner with me tonight? :)

  • Comment number 26.

    Why are we being told that we are fiscally responsible for a Eurozone members debt and to shore up the Euro when we are not even part of it.
    Please, in simple terms, can someone explain this?

  • Comment number 27.

    #11 >> Lab-LibDem coalition odds-on (with Brown stepping down)

    >>Wilderness years for Tory Boys everywhere

    Hooray !! Just what I've been praying for !! Now, the LibLab pact will have the dubious "benefit" of trying to sort out the Deficit, the Debt and the falling confidence in Britain's economic future !!

    And if they can't, then Labour will have the dubious "distinction" of getting the IMF Stormtroopers in for the *SECOND* time; a distinction few nations have !!

    Better a lost parliament than a whole generation in the wilderness as had happened to Labour the last time !! And if the IMF (goose-)steps in, the Scottish budget will not be as generous as fron a national government !!

  • Comment number 28.

    #16 >>....… can be much bothered buying Portuguese goods either outside of Tourism and Port for the same reason.

    Be fair; the Portuguese also make excellent Peir-peri Chicken, egg tarts and sardines, to mention a few !! And I'll drink their health in Port anytime !!

  • Comment number 29.

    #18 >>I love the way inter UK Politics sees £6 Billion as a VAST sum when the Tories want to cut to that extent, but a potential £13 Billion exposure to the European Road Crash is accepted without so much as a blink of an eye.

    And both are as nothing when compared to the UK's Deficit this year of £165 billion (and the next ??) !!

  • Comment number 30.

    Anyone taking odds as to when:-

    1. Germany reverts to the DMark?
    2. The euro funny money collapses?

  • Comment number 31.

    #23 >>When you major customers are in crisis you are in crisis - I find it amazing that this simplest of economic reality is lost on so many people!

    When your *major* customers are in a crisis, then fire your sales and marketing strategist and his cohorts with extreme prejudice because they have didn't identify the failing markets *and* identigy new markets to switch to in order to ameliorate the damage (or "damage control", in Amerika-speak) !!

    Russia has the whip-hand in this game since they can turn off the oil and gas and turn Europe into an Ice-age theme park without much effort !! Once most of the population are gone, they can march their peasants in, take over and turn the oil and gas back on !! Much cheaper and more cost-efficient than using neutron bombs !! Visit Russia and see the Coliseum.

  • Comment number 32.

    Still think it is a storm in a tea cup Dingle?

  • Comment number 33.

    #23 >>I'd like to see both the Tories and Labour in coalition - they are both conservative parties with a huge conservative pro-European majority. The loony wings would both become powerless and cease to have any influence.

    This might be a possibility now that Our Glorious Leader is Our Glorious Leader no more !! It's a long and winding road from "abolisher of booms and busts by dictat" and "world saviour" to ex-Glorious Leader !!

  • Comment number 34.

    The political rules may have been rewritten to hide the gaps but the economic rules remain unchanged.

    No country has reduced its debt burden; in fact several countries including the UK have now increased theirs as part of the deal.

    No country has improved its balance of payments

    No country has increased private sector productivity or shrunk public sector costs.

    P.I.G.S. in dresses are still economic disasters.

    The spot EUR/USD rate, after a brief recovery this morning, has been falling again all afternoon and is a whole cent below where it opened this morning.

    So much for rescue plans?

  • Comment number 35.

    Evening Stephanie,
    I thought that I smelled a bit of bear-fur singeing this morning!
    However, they have re-grouped and are trying again.
    The most significant part of the EU announcement is that they are reversing and restarting their Quantitive Easing programme. So maybe, (after having woken up to the dangers here), they realise that this crisis could quickly become Credit Crunch Part II.
    It's a big package but I suspect it's still too little and too late to affect the inevitable outcome... the Euro is toast!

    Having stood politically firm, Mr Darling (who is STILL Chancellor) has announced that it will only cost the UK £15 Billion in contributions, (so that's alright then -stick it on the EU Credit card).
    I really do despair with this innumerate lot!

  • Comment number 36.

    re #18. Good point.

    Before Christmas '09, in Copenhagen for the environment and for other things, Gordon was throwing our cash around like confetti. I crossed swords with Anatole Kaletsky on this, before the end of '97 or early in '98 if I recall correctly, predicting Gordon would be profligate.

    Prudence? ... hah!

  • Comment number 37.

    Oh dear have they learnt nothing? They have just provided the speculators with a 750 Billion no lose target to aim at. Surely they must realise that underwriting losses is not the thing to do? How much more agony will be piled onto European taxpayers before their patience finally gives way to be replaced by something more extreme. You really could not make this level of incompetence up !

  • Comment number 38.

    There must be a new economic theory here.

    Risk free bonuses makes ridiculous mortgages and sovereign debt sustainable, ending recessions, ending depressions, it's a marvel.

    Am I the only one who is scared.

  • Comment number 39.

    " Looking across European markets - it's clear that last night's 750bn euros package to shore up the euro has already done something important: it's changed the narrative of the crisis."

    EUpris: Who is the love interest?

  • Comment number 40.

    "Of course, the biggest short-term question is how the Germans will square this with their Constitutional Court - not to mention German voters."

    EUpris: All members of that court are political appointees. They go there on a CDU ticket or an SPD ticket etc.

    It has recently come out that certain Austrian politicians are receiving "subsidies" from the "EU".

    I wonder if any of the judges at the German constitutional court receive "subsidies."

  • Comment number 41.

    On the coalition, the Tories should forget it. The Lib-Dems have shown they have no honour. Let the benefit dependents, the unions and the fantasists try and hold together. They'll be paralysed and printing from day one.

  • Comment number 42.

    Unbelievable! Absolutely unbelievable!
    This is definitely a case of 'putting some lipstick on the PIIGS.'
    The Germans, the people who have saved and not been reckless are going to be carrying the can for all of Europe. It is not fair, and if I was a German I would be extremely annoyed.

  • Comment number 43.

    Maybe Stephanie and other cynics could spell out what else the EU should do. The deficits cannot be paid off over night. it will take years but the motivation is there. Like the traders who caused last week's nonsense in the markets you criticize unconstructively.
    Fact. All Western countries have high levels of debt. All, except the US and Japan, have had higher levels in the past.What is sustainable is debatable but we are not at Armageddon and Greece does not represent the norm.

  • Comment number 44.

    #32
    "Still think it is a storm in a tea cup Dingle?"


    Possibly many twists and turns to come.

    We shall see.

    If Tories fail to form a government PR will finish them once and for all. The reason being that they are (in present form) an extremist party and extremist parties get seats in a PR system but never form part of a government. Tories will split; some will join LibDems and the rump will join UKIP. Some will even join BNP.

    LibDem and Labour will eventually take us into the Euro.

    Anyway should you not be blogging on CBBC blog :)

  • Comment number 45.

    #26. At 6:21pm on 10 May 2010, Emzdad wrote:

    "Why are we being told that we are fiscally responsible for a Eurozone members debt and to shore up the Euro when we are not even part of it.
    Please, in simple terms, can someone explain this?"

    Very simple terms, two letters - E & U

  • Comment number 46.

    I can't help but think this is merely another form of QE - the prospect of sovereign debt deafult has got the eurozone so terrified that they've come up with this 'solution'. All this will really do is to give a little more time for the debts to rack up and, as has been noted by some posters, transfer sovereign debt from private investors to the good old taxpayer - hooray! (sigh).

    I suspect that next year the same suspects will be around with their begging bowl for another hand out.

    They should just bite the political bullet and chuck out the Euro members who are too weak, they'll default, have terrible inflation for a while but at least the chuckees have the option of currency devaluation.

  • Comment number 47.

    26. At 6:21pm on 10 May 2010, Emzdad wrote:
    'Why are we being told that we are fiscally responsible for a Eurozone members debt and to shore up the Euro when we are not even part of it.
    Please, in simple terms, can someone explain this?'

    It's not a 'Euro' issue, it's a European Union Issue.

    No bailout/s = No European Union
    No European Union = No need for Euro Politicians

    What would you vote for if you were a European Union politician?

    In any event it’s only more debt (promises to pay).
    It means little until such time as you actually have to pay it.

    The UK is hopelessly in debt anyway, so the chance of it ever being paid with real money is remote.

    In my view all this debt (promises to pay) shouldn’t be taken too seriously, because those making them don’t actually have the money to pay them with.

    They just hope they will have in the future, and if they don’t, then they’ll simply print it.

    QE-D

  • Comment number 48.

    #43
    "Maybe Stephanie and other cynics could spell out what else the EU should do. The deficits cannot be paid off over night. it will take years but the motivation is there. Like the traders who caused last week's nonsense in the markets you criticize unconstructively.
    Fact. All Western countries have high levels of debt. All, except the US and Japan, have had higher levels in the past.What is sustainable is debatable but we are not at Armageddon and Greece does not represent the norm.£


    Excellent and balanced post.

    Perhaps Ms Flanders is a Eurosceptic in all but name.

  • Comment number 49.

    An ever-closer Union? ... of debters? The EU is debt chasing debt and ... the ECB will print money by the truck load and compete with China... Hooray - EU QE to buy debt from who? I think its a good idea but I'm not so sure?

  • Comment number 50.

    I wouldn't get too excited over a fall of a cent, or a penny, in the currency markets in a day. It really needs several consistent falls of multiples - two, three, at a time to indicate real, big trouble, right here, right now. But over three months, four months to complete a leadership election, five months to the Party conference season - then the small falls can add up. Then it expresses investors more measured, slightly longer term view of our economy. The same is true for the Euro.

    I assume that Greece won't know (if their economy responds like ours) that the measures taken now are working (if not fudged or fiddled) and will be turning in the necessary corrections until the autumn at the very earliest.

    That could be unfortunate timing and coalescing for two ongoing crises ...

  • Comment number 51.

    I'm going to spoil the game. It's a CDS/option play. Whenever you see a market heading in a direction that doesn't make sense and is bonus driven, someone is on a CDS/option play. Only this time there are loads of them pushing the same way.

  • Comment number 52.

    "And it doesn't even begin to talk about addressing the reasons why countries like Portugal are borrowing so much in the first place."

    Isn't that a bit of a red herring question? To my understaning the Portugese have similar debt levels to our, for sure less the US, Japan, etc. What is so much?? Take away the speculators and then Portugal's debt looks like a normal every day debt, similar to what most developed countries have.

  • Comment number 53.

    Stephanie can you please explain why Greece has not been thrown out of the Euro as they have clearly broken the rules set out durings it's formation. This would stop the spread of the panic and the worst thing that would happen would be the "new drachma " devalueing which would be nothing like as bad for the Greeks.

  • Comment number 54.

    So the question is what is "too much debt" 10% of GDP? 20% of GDP? and what type od debt? i.e. 40% of GDP to buy weapons is it the same or better that 70% of GDP to build roads, bridges, ports, hospitals, research centers?

  • Comment number 55.

    #43 Colin Grant. A good start would be for the EU and its constituent members to collectively obey the law.

    It seems strange that an exhortation to obey the law should be described as cynical or unconstgructive - perhaps that is a measure of how far we have fallen.

    The deficits cannot be paid off - not overnight, not over centuries. That is just mathematical fact. There is absolutely no will to address the issue - that is why policy makers respond with ever greater bailouts.

  • Comment number 56.

    Think on this.

    The UK has just had an election campaign - a central policy difference between the 2 principal parties being whether the economy could withstand GBP 6 billion of cuts in the near term.

    Without debate, discussion or media analysis, on Sunday night the UK stumps up GBP 15 billion of near term funding for the EU.

    Does this sound rational?

  • Comment number 57.

    So the solid base of the euro model is fundamentally flawed, you have set rules that member states abide by and when one of the petulant upstarts declares themselves skint the goalposts are moved. What is the point of having the Euro floating within a free market economy if you impose communist diktats. The Greek bail out shows that not 'one size fits all' applies, I bet the Germans will soon vote Merkel out if they have to prop up Spain and Portugal in quick succession.

  • Comment number 58.

    Hmmm yes at least the problem in Greece has been solved.

    I look forward to the day when someone and we don't yet know whether it will be a Tory /Lib gov or a labour /Rainbow Aliance that will inevitably have to sort out the black hole in the finances.

  • Comment number 59.

    An ever closer Union ? Yes why not ?

  • Comment number 60.

    # 29 ishkandar Wrote : "And both are as nothing when compared to the UK's Deficit this year of £165 billion"
    - Blue Book 2009 says Gov Debt as at Dec 2008 was £478.6 Billion - this is online. The Monthly update, not online but in your local reference library, says that as of Sept 2009 is now at £566.9 Billion.
    Can I ask, where do you get your bargain basement figure £165 Billion from ?
    PS one of the best meals I ever ate was fresh Sword Fish in Portugal - I'd hate to see the owners of this restaurant, and the fishermen... go bust because of some dodgy out of date bookkeeping in Brussels I "cheers" your glass of Port.

  • Comment number 61.

    After all we might need rescuing too

  • Comment number 62.

    This really is unbelievable.
    Over a year ago, the potential problem of default on sovereign debt was being flagged in various financial and economic forecasts with particular reference to the PIGS and the Central and East European regions.
    Trichet has spent the past few months trying to bluff the markets that EuroTarp is not an option. But anyone at the centre of things must have realised that there was a very real risk of Greece defaulting, despite the overzealous protestations by the Greek president and Eurocrats.
    Last week things came to a head. However, this was a train whose whistle had been blowing for the past couple of months. One would have to be deaf not to have heard it.
    Yet over the weekend, our European Finance Ministers and the Eurocrats demonstrated a total absence of a contingency plan as illustrated by their 'panic' meetings, so that they could be in a position to make an announcement before Monday's markets opened in Asia. This is nothing short of pathetic.
    But of course, if they had the slightest clue as to what they are doing in this mess, the bankers would have a harder time fleecing them and us.

  • Comment number 63.

    re #54
    Good post, good question.

    That is what our politicians should be talking about before having a debate with us. We then need a concensus and concerted action.

    Unfortunately, it is not happening.

    Wonder why?

    And who is to blame?

    Oh dear, I'm now posting like kevinb.

    Back to the socks: returning to half-mast tomorrow unless there is an overnight miracle.

  • Comment number 64.

    I've just watched the piece on Gordon Brown's career on the BBC 10 o'clock news. Not a mention of the deficit.

    Whether you think it's a bold plan to keep the country out of recession, or an epic piece of irresponsibility, the £165bn is surely the defining feature of this man's career.

    Is the subject of government borrowing really so boring and irrelevant that it has to be demoted to a little corner of the BBC internet.

    If this level of interest is replicated across Europe it's hardly surprising that we're wondering whether €750bn rescue packages go far enough.

  • Comment number 65.

    # 26. At 6:21pm on 10 May 2010, Emzdad wrote:
    "Why are we being told that we are fiscally responsible for a Eurozone members debt and to shore up the Euro when we are not even part of it.
    Please, in simple terms, can someone explain this?"
    ---------------------------
    As Stephanie mentions, the deal is broken up into 3 parts.
    Part 1 - 440bn euros - Special Purpose Vehicle
    Part 2 - 250 bn euros - IMF Funds
    Part 3 - 60bn - European Commission Funds
    The largest part is made up of 440bn euros from the 16 member states that are part of the Eurozone (countries with the European Union which have adopted the Euro as their currency - as opposed to countries such as the UK which are part of the European Union, but have not adopted the euro - yet); this is the "Special Purpose Vehicle".
    The second part is funding from the IMF to the tune of 250bn euros; these funds are not new.
    The third part consists of 60bn euros from European Commission (EC) funding whose commissioners represent each of the 27 member states of the European Union of which the UK is a member state;
    The UK contributions which Alistair Darling agreed to over the weekend is around £8bn (approx. 9.3bn euros) and forms part of the UK commitment to the IMF and EC funds that form part of the overall package. According to my calculations, we are therefore contributing about 15.5% of the EC package and approximately 1.24% of the overall package.
    As a member of the European Union we are effectively bound by our participation within the European Commission. Also, as a contributor to the IMF (who bailed out the UK back in the late 70s) we are called upon to assist regardless of whether it is the Euro or any other IMF client state that is in trouble.
    Beyond the legal position, there are a host of other reasons, why the UK cannot wash its hands of the euro crisis. These include the exposure of UK companies trading with Eurozone member states (of which there are many). If the euro were to collapse relative to a basket of major currencies, then assuming sterling was not collapsing in tandem (due to the political uncertainties at home) then UK exporters to these countres would find their products and services more expensive and less competitive. Of course, the reverse is true for importers and for those wishing to holiday in Europe (assuming they can get there by air - given the ash clouds and BA strikes).
    There are also issues around the financial markets impact of a euro meltdown, that make it in this country's interests to ensure such a situaion is avoided.
    No doubt others on this site may suggest some additional reasons. But in the meantime, I hope this helps.

  • Comment number 66.

    The amount of exageration and misinformation in many of the posts above is unbelievable. First of all the only country bailed out at this point is Greece. The other more vulnerable countries, including some in the north, haven't yet asked for any money from any entity in europe or the IMF. Indeed these countries were being sucked into this death spiral, which was fed by a lot of the british media and blogs such as this and that's why they were forced to create this stabilization fund. That so many of you in Britain hate the euro so much is beyond me. I did not support the launch of the euro but that's history now. A breakup of the euro would be catastrophic now. We all have got to learn to live with it, and I must say that Portugal, where I come from, was beginning to return to healthy rates of economic growth before the huge subprime crisis that hit our shores in 2008 and do I have to remind you that it didn't begin in any club med country?
    Also I resent the atempts in the british media to drive a wedge between north and south, the northern people being thrifty and hardworking and southerners being lazy and spendthrift. That's outrageous and it will be a long time before I travel to London or do any business there for that matter. The greeks did screw up we all know that. They do have a history of polarised politics which forces politicians to buy social harmony sometimes at too high a cost. I'm very hopeful that this experience will be one of those events that change a nations history. Enough with humilliating the greek people.
    I also suggest that you reevaluate your petty stereotypes and look at the labor statists across the EU. You will learn that the problem in the some of the club med countries is not laziness at all since the number of hours worked is higher than in some northern countries. The problem is a legacy of very conservative dictartorships that neglected education, science, technology and the arts. We do need a bit more time to get up to speed. My regards

  • Comment number 67.

    Don't know much about economics but Germany's public debt (% of GPD) is 73.2, UK's 68.2, Spain's 53.2
    It seems to me that is not only lazy southern Europeans who like to borrow more than they can afford.

  • Comment number 68.

    Richard Dingle wrote:

    QUOTE: "If Tories fail to form a government PR will finish them once and for all. The reason being that they are (in present form) an extremist party and extremist parties get seats in a PR system but never form part of a government. Tories will split; some will join LibDems and the rump will join UKIP. Some will even join BNP." UNQUOTE
    ------------------------------------------------------------------------------

    Firstly, what makes you think the UK is about to implement full PR? It seems unlikely to me. Under AV (not PR), not a lot will change - and even implementing AV would require a referendum and a "yes" vote.

    Secondly, why do you say that the Tories are an extremist party? They've just won a decent slice of the vote; their right wing have moved to UKIP for the most part.

    Thirdly, big parties are coalitions themselves, a means by which various vested interests can get access to power. If the poltical landscape changes, so will the Conservative Party.

  • Comment number 69.

    Re the Euro bailoit.....What a load of old tosh.

    The French and German governments have saddled their economies with massive extra debt without even asking their people.

    It will soon unravel - Europeans are big on gestures, small on action (unless the Brits are paying for it, then they are all action).

    So the phrase "If this deal is what it is cracked up to be...", which of course it isn't, is very important. A massive political backlash is on its way, and my hunch is this "plan" will unravel.

    French and German pensioners have no stomach to bail out the latins.

    Re the markets - up and down like a yo-yo?! Its getting very boring - how can anyone take the financial markets seriously ? They are behaving like a South American footballer - diving the second they are touched, followed by inexplicable miraculous recovery. Personally I think they should be mostly ignored, as this idiotic lurch from disaster one second to triumph the next would get a human displaying the same symptoms sectioned. They clearly haven't got any direction, any insight or any serious intelligence - lets just have one market report a month and let the dealers just get on with it, they obviously can't be stopped and they keep panicking us every other second for absolutely no reason..... you know its like driving a car with a stupidly nervous passenger - eventually they distract you so much they cause the very crash they seek to avoid.

  • Comment number 70.

    so Stephanie... waking up time!

    The Greek PM Papandreou was right after all!.. he has been shouting from the roof tops since January that it's the Euro that's under attack.. and Merkel had her head in the sand!.. that the Greek debt was just a pretext for a run on the Euro and an attempt to destabilise it.. the proof is in the pudding: When the 110bE plan was announced last week, the (mainly US) currency markets did not even blink.. but when this large 750bE package was announced, they realised they are out of the game.. at least for now..

    By the way.. can you guess what the motive was all this time?.. it certainly was not the short-term gain - this was the little cherry on the cake..

    Let me help you.. do you know how far the (very quiet) Chinese off-loading of dollars has progressed?.. more than 25% of reserves! it's the continuous US markets' nightmare and they had to do something about it!..

    The long-term plan is to destabilise the Euro and show that it cannot be relied upon as a global reserve currency.. to the Chinese and the Arabs etc

    Mind you... the euro troubles are not over yet... the stakes are too high and the dollar-holding banks (and US bonds) have not said their last word... watch out for another installment.. after the summer..

    btw, don't worry about the pound.. it is the Euro they are after.. the dollar and the pound are all but lock-stepped..

  • Comment number 71.

    What our esteemed politicians don't seem to either appreciate or take into account is the adverse impact their actions have on the man on the street. Over the past two weeks I've watched my stock market linked pension funds decline in value both rapidly and significantly. I was pleased yesterday, therefore, to see that events over the weekend resulted in a bounce in the markets, but obviously not pleased to observe events later in the day that cast a shadow over the rise in the markets. As a result of the Lib Dems conducting a "Dutch auction" for their support and Brown's obvious tactic of protracted resignation to ensure that the Conservatives' chances of forming a Government were dented, the inevitable happened this morning - a correction in the markets which could see yesterday's gains wiped away!

    So, my thanks to the politicians and their procrastination as all this has done for me is to ensure that I will have to work longer and harder to recover the losses in my pensions whilst all they are interested in is their own personal power struggle and not the farcical ambition of creating a "strong and sustainable government".

  • Comment number 72.

    We have to get out of the EU now...

    It is repugnant that UK taxpayers have exposure to profligate Euozone defaulters.

    It is not clear to me where the 440bn "Special Vehicle" gets it s funds. Could you tell us that?



  • Comment number 73.

    #68
    "Thirdly, big parties are coalitions themselves, a means by which various vested interests can get access to power. If the poltical landscape changes, so will the Conservative Party."


    Agreed. This is why I believe the Conservative Party will split if there is any change in the voting system towards a PR system.

    A form of AV given the votes cast in the 2010 election would have resulted in fewer seats for both Labour and the Conservatives with the difference going to the smaller parties.

    A feature of PR is that you do get seats won by extremist parties (BNP, UKIP) but extrremist views tend to be excluded from government. Had there been a LibDem - Labour coalition in 2003 it is quite likely we would have had an election in 2003 rather than participating in a war in Iraq. Another example, had we had a LibDem - Conservative government in the 1980s it is highly unlikely that economic experiments based on the half-baked theories of the Chicago (Friedman) and Austrian (Hayek) schools would have been foisted on the British people.

    Incidentally Parliamentaary democracy would be reborn in a PR system. So much debating and close votes they would not have time to fiddle their expenses :)

    The Conservative Party. Extremist ?. The greater part of the Conservative is liberal and inclusive but there are still extremist views on welfare, the NHS, Europe and towards the Gay community.

    Incidentally there are extemist views held by some members of the Labour party. For example the elements who don't understand the importance of private enterprise in wealth generation.

    Finally all this nonsense on a change in leader being another unelected Labour PM. We elect Parliamentary parties in this country not leaders. The americans on the other hand elect not one but two presidents at the same time (the President and the Vice-President just in case the former dies in office).

  • Comment number 74.

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

  • Comment number 75.

    There is a strong possibility S&P and other rating agencies will downgrade the UK before the end of the year. The strength of whatever coalition government is established will play a part as this will dictate their ability to get to grips with the debt position.

    The rating agencies will probably wait until the likely budget in September, have a very close look at this with the spending plans and then move in late September or October. They have stated they will complete their review before the end of the year.


    S&P assigned the negative outlook to the UK's AAA rating in May 2009, based on their belief that, in the absence of the implementation of a strong fiscal strategy, the U.K.'s net general government debt burden may approach a level incompatible with a 'AAA' rating.



    S&P currently estimate the U.K.'s general government debt will rise to 77% of GDP in 2010 and to approach 100% by 2014 (compared with 44% in 2007), notwithstanding the Treasury's £11 billion (0.8% of GDP) downward revision to its borrowing estimate for 2009-2010, announced in March.

    "in rating agency speak" this suggests the current rating level is too high even after the £11 bn borrowing revision in March. You cannot get a very much clearer notice of a likely rating action than this.



  • Comment number 76.

    If you honestly think that creating more IOU's to fund IOU's is a sensible policy, then it's no wonder why we are doomed. Prepare for the collapse (the big one). It's coming very soon.

    Unfortionately I am not a member of any of the nepotistic groups that run everything despite them being crimminally incompetent. No one needs to listen!

    I hope these idiots are prosecuted. In reality of course, they'll all be made Lords!

  • Comment number 77.

    The ECB have obviously lost their Financial discipline and ,like the BoE, are printing money. No wonder German voters are angry.

  • Comment number 78.

    It’s difficult to envisage what the political implications will be. But there will certainly be implications for sovereignty that’ll unfold over the next couple of years.
    Just for a start, Eurostat may now be allowed to be fully responsible for auditing and compiling each Eurozone States’ financial and other economic information. Critical information that drives both their individual and collective economic policies. Arguably, that Eurostat auditing would diminish States’ sovereignty.
    That policy change may be conjoined with the EU’s Court of Auditors being able to audit each States’ spending of EU funds. That would have the consequence of enabling that Court to sign-off the EU’s accounts for the first time in many years. Which audits may reveal all sorts of national 'anomalies'.
    Whilst growth is the ultimate solution to the € crisis, it looks likely to be accompanied by much closer co-ordination of national economic policies – and, therefore, more pooling of national sovereignties.
    Which may alarm Britain’s Conservatives. And delight the Liberal-Democrats.

  • Comment number 79.

    #72
    "We have to get out of the EU now..."


    We are currently neither in nor out which is why we always end up being out manourvred.

    As we are paying for the Euro safeguards time to join.

  • Comment number 80.

    @66. At 02:06am on 11 May 2010, jose estevao
    Well said! I agree with everything and on the wise brief lines on Greek issues.

  • Comment number 81.

    #60 >>Can I ask, where do you get your bargain basement figure £165 Billion from ?

    From the fact that it is the *Deficit* and *NOT* the *Debt* you are talking about !! As an ex-bean-counter, I try my best to make a distinction between *deficit* and *debt* !!

    E.g. China proudly announced its first ever monthly Deficit in ages but it's a measly sum compared to its National Reserves and it is, therefore, *NOT* in Debt !! Business comes, business goes, and with sufficient reserves, a business can ride out the changes of fortune. Without reserves, any change of fortune feels like a financial Tsunami !! So it is for a business; so it is, too, for a country !!

    Swordfish, being a large pelargic fish, is best if marinated for a while, preferable in salt and pepper and large doses of Port !! It should then be gently fried until just done !! Over-cooking makes it taste like cardboard !!

  • Comment number 82.

    "It's official: the future of the eurozone is more important than Nick Clegg. Along with other markets, the FTSE has soared on the back of the deal agreed by European officials early this morning, and for good reason"

    This is now out of date - new piece please!

    It seems the volatility of markets and politics is making life hard for journalists

  • Comment number 83.

    #70 >>The long-term plan is to destabilise the Euro and show that it cannot be relied upon as a global reserve currency.. to the Chinese and the Arabs etc

    From all reports by the BBC and other media, the BRIC countries, in general, and China, in particular, want a *NEW* International Reserve Currency *devoid* of any country's or trading bloc's influence !! This means that they are going for the SDRs from the IMF rather than the dollar or the Euro !!

    Trying to destabilise the Euro for that purpose is not particularly strong reasoning !!

  • Comment number 84.

    Given the understandable fury of German voters at having to give/loan vast amounts of money to try and support the euro (ref. the election in North Rhine-Westphalia), and the unwillingness of southern eurozone countries to adopt the sort of fiscal discipline that kept the Deutschmark strong, how practical would it be for Germany (and The Netherlands, whose fiscal probity always maintained a virtually fixed rate for the Guilder to the Deutschmark) to get out of the euro and let the spendthrift countries sort out their own mess? Would this be in fact a plausible consequence of a ruling by the Constitutional Court that what Merkel is proposing would be illegal?

  • Comment number 85.

    #75
    "There is a strong possibility S&P and other rating agencies will downgrade the UK before the end of the year. The strength of whatever coalition government is established will play a part as this will dictate their ability to get to grips with the debt position. "


    The latest Gilts auction (a few hours ago) was heavily over-subscribed.

    Does this indicate that the market are cool about a Lab - LibDem tie-up or still think it won't happen.

  • Comment number 86.

    #73 >>So much debating and close votes they would not have time to fiddle their expenses :)

    It takes no time at all to book and pay for naughty movies and charge them to Parliamentary expenses !!

    >>The americans on the other hand elect not one but two presidents at the same time (the President and the Vice-President just in case the former dies in office).

    They also get an unelected Secretary of State who takes over if both of them croaks it at the same time !!

  • Comment number 87.

    RD: "Cameron and Tories finished Euro marches on."

    Like Ishkandar, I hope for a LibLab coalition, it will have unending enetertainment value and I do not understand why the Tories have to clean up Labour's mess, which anyway cannot be done, without an equivalent of a Black Death and starting all over.

    Certainly both minority government and ConDemNation (good pun that!) are forms of unnecessary political suicide.

    As to "Euro marching on": come to Portugal RD, have a look, don't forget to wear a steel hat. If this is marching on, I shudder to think what the opposite looks like.

    What irks me in the horse trading (edifying sight, RD, right?) is the PR insistence. Why? What is the existential problem it will solve? Can it not wait for Heavens' sake?

    Here is my important contribution. Let us rename the House of Lords the House of Commons, and the House of Commons the House of ... Where do you go once you are really "Common"? The House of the Vulgar? Dirt-Cheap Commons? Come and join the thinktank.

    As anticlimaxes go, this election is top rank.

  • Comment number 88.

    #76 >>In reality of course, they'll all be made Lords!

    And what better punishment than to be made to sit through long, boring and droning arguments, pro and con, of every issue, day in, day out in the House of Lords !! No time to swann off to part-time directorates with $1,000,000 p.a. fees !! Torture, I tell you !! Pure torture !!

  • Comment number 89.

    Oh what a tangled web we weave when at first we practice to deceive. Just who is being bailed out here - Southern European economies, French banks or the bonuses of French bank FX traders?

    http://www.zerohedge.com/article/european-banks-now-feverishly-betting-against-euro-bailout-fails-gold-surges

    So... to make a few guys even richer we are expecting Spanish citizens (and others) to take a big hit with a big bat. Good trick if it works. If it doesn´t expect fighting in the streets.

  • Comment number 90.

    #76
    "Prepare for the collapse (the big one). It's coming very soon."


    Does Armegediontimes know you are stealing his clothes.

  • Comment number 91.

    After we bail out Greece, what would happen if the current Greek government is replaced or overthrown with a government which is not willing to comply with the conditions of the loan being made ?
    Could they just renage on the conditions agreed by the current government ?
    The unrest shown by the people worries me...

  • Comment number 92.

    79. At 10:39am on 11 May 2010, Richard Dingle wrote:

    " ...
    As we are paying for the Euro safeguards time to join."

    EUpris: As it stinks, it is time to leave.

  • Comment number 93.

    When will they learn you can't print money to bail out a country or a European union? All the IMF and EU are doing is delaying the day that we fix the problem. If you cut your wrist and put a plaster on it then when that leaks you put another one on it unless you treat the cause (the cut) then you bleed to death it just takes longer. When will the politicians realise the economy is no different unless you fix the massive overspending all the first aid in the world won’t help.

  • Comment number 94.

    59. At 10:27pm on 10 May 2010, neverwalkalone3 wrote:


    "An ever closer Union ? Yes why not ?"

    EUpris:

    1) Fascist continental policing.

    2) The continental tradition of corruption.

    3) The continental tendency to dictatorship consisting of

    3.1) A large number of people with dictatorial minds. These are the people who supported the Argentinian invasion of the Falklands. I was living in Germany at he time. There were many such people.

    3.2) A large number of people who are not themselves dictatorial but are not prepared to resist dictatorship. Again the Falklands war provides one of many possible examples. Many Germans said that the Argentinians should not have invaded but that we should not resist.

    4) The Catholic church. In Europe and even more glaringly obviously in the Americas it is the Catholic countries which tend to become fascist dictatorships. The imposition of the Lisbon Treaty is at least semi-fascist. Many who supported that were Catholics.

    5) The current state of the "EU" including the billions it cost us.

    6) The Eurovision Song Contest. It gave an example of a lack of fairness on the continent.

    7) "EU" megalomania which is likely to lead to war.

    That is enough to start with.

  • Comment number 95.

    Any idea when the next significant gilt sale is?

  • Comment number 96.

    I asked a Portuguese friend what were the benefits of the EU. Apart from the "obvious" (not having to change money oh big deal, I manage), he said something interesting: that certain things were so culturally ingrained in Portugal that they could only be changed from the outside. An example being a smoking ban. This, I guess is what passes for democracy nowadays. By "certain things" I am sure he meant "certain bad things", I wonder what will he be saying when it is "certain good things" that are being changed without proper accountability and debate. This seems to me sleepwalking, where is the requisite eternal vigilance...

    [I have a feeling here that many, esp. young, Portuguese feel that "they know better in Brussels/Berlin/Paris". This is a voluntary renunciation of responsibility.
    Sounds to me eerily familiar. But then we do live under fascism, the inextricable intertwining of (undemocratic) government and big business, so what do you expect of a generation that never knew anything else. A very benign sort of fascism, Voltaire would have approved perhaps. I don't: people don't disappear in the middle of the night, true, easier and more cost-efficient to ignore them.]



  • Comment number 97.

    #66 Jose Estevao. If you are representative then it would appear that the Portuguese are as intellectually captured as the British.

    Who has been bailed out? Has Greece been bailed out or have Greek oligarchs been bailed out? It is a funny kind of bailing out that causes riots in the streets, and leads to near daily announcements of "austerity measures"

    Look at the initial market reaction to the latest EU bailout - specifically look at the share price movements of French and German banks - that is suggestive that the Franco-German banking sector has been bailed out.

    So the British media is garbage, and lots of British people write rubbish. How does any of that translate into generating a euro death spiral. Maybe the euro death spiral has been created by FX traders (disproportionately those in French banks) shorting the euro. Would that appear a more plausible explanation to you?

    If you want to learn to live with the euro that is up to you - but an inevitable consequence is that Portugal will be driven back to the economic stone age. This will be as a consequence of the very reasons that you identify. Southern Europe lacks a deep industrial value added base. Therefore all that cheap money was diverted into non productive assets - that is why Spain has over 1 million empty houses, and why PlanE is disproportionately focused on yet more construction.

    Of course attempts will be made to drive a wedge between the peoples of the north and the south. That is an obvious way of diverting attention away from the oligarchs that have created this problem and continue to profit from it. What do you expect? Those that set the news agenda hold the mass of people in complete contempt.

    The more people identify erroneous reasons for this crisis then the greater the contempt of those in "power"

    Wise up, rise up. It is your only hope.

  • Comment number 98.

    More disastrous news today from Royal Institution of Chartered Surveyors - "House prices still picking up".

    When is there going to be recognition that the increase in debt has to be paid for and as we are getting poorer and poorer it will cost us more and more. Rising house prices in a time of deflation (probable) is completely economically unconscionable.

    Our National tragedy is that the population, the majority of economists and all politicians, staff at the Treasury and the Bank of England seem to equate inflation in house prices as some kind of growth and see it as good fro the economy. They are of course insane and are setting out through their manifest innumeracy to destroy the Nation's economy.

    We have already blown about 100,000 GBP per household on increases in debts or all sorts - that cannot be repaid - and the agents of doom want to see us digging ourselves into an even deeper hole for their private short term profit.

  • Comment number 99.

    Rubbish. You are allowing your journalistic detachment to be eclipsed by your own political agenda.

    The FTSE rose yesterday when it looked like the Liberals and Conservatives were about to strike a deal, and its dropped today when it looks like they may go with Labour.

    As for the Eurozone; You are forgetting we aren't in it and aren't funding the bail-out. No wonder UK stocks rose. Just because the equity markets are going Euro-crazy doesn't mean there is long term stability ahead, just a fast buck to be made today. Short termism in the financial sector has caused our problems, why assume their motives are any different today? You just see happy trippers on the good ship Euro, but they are just as likely to be wreckers, jumping onboard to strip it bare, and prepared to jump off again at the last minute just before it sinks.

    For heavens sake lets have some sense of perspective.

  • Comment number 100.

    85. At 11:21am on 11 May 2010, Richard Dingle wrote:

    "The latest Gilts auction (a few hours ago) was heavily over-subscribed.

    Does this indicate that the market are cool about a Lab - LibDem tie-up or still think it won't happen."

    I suspect it means there isn't much out there with a mandatable rating on it. Greece has gone emerging markets and Portugal and Spain are deteriorating.

    If you're running a fund and your mandate is 'stable Government bonds of AA+ ratings or above - what choices do you have?
    Remember you need to spread your risk across currencies, so buying US Treasuries isn't going to help diversity.

 

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