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Greece: Default is no soft option

Stephanie Flanders | 16:58 UK time, Thursday, 6 May 2010

The head of the European Central Bank once again said today that a Greek default "would not happen". Every G20 official - in or outside the eurozone - will tell you the same thing: with markets as fragile as they are, it is unthinkable that a sovereign government would be allowed to default. Investors and experts are thinking about it all the same.

AcropolisIn fact, looking at the economic programme the Greek government has signed up to, many veterans of past debt crises would say a debt restructuring was only a matter of time. But it's worth asking how - and when - it is done. And how it would help.

As you'd expect, there's no rule book for countries seeking to default on their debt. It's not something the international system likes to encourage. But it's not as if it has never happened. There have been 40 defaults by sovereign governments in the past 20 years alone, and more than 70 since 1980.

Many of those governments were able to borrow again quite soon after - sometimes in a matter of months. But only when they were able to do a deal with all - or nearly all - the bond-holders on how much of the debt would get repaid - and over how long.

Russia took less than two years to restructure its foreign debt after declaring a moratorium in August 1998. Creditors lost about half of the value of the principal. A similar deal was done over the same period for Ukraine and its debt. But as we know, Argentina in January 2002 was different: messier and much more drawn-out. Offered only 30 cents on the dollar, some bond-holders are still holding out, eight years later. Only now is the country able to talk about borrowing again on international capital markets.

Research by IMF economists (The Costs of Sovereign Default, Working Paper October 2008) suggests the long-term cost of default for countries can be quite low: after a few years, governments don't even pay much of a premium on world markets. But the short-term cost to the economy can be huge. That would certainly apply to Greece today.

Imagine the Greek government stopped paying interest on its debt tomorrow. It would still have a primary deficit - excluding interest payments - of more than 8% of national income, and it might not have anyone to borrow that money from. That could mean more austerity, not less, especially if the country remained in the euro.

There would also be the collapse of the domestic banking system to consider, Greek banks being the largest holders of Greek sovereign debt. And that's before you get even to the costs of contagion for other countries, as investors wondered who would be next.

Many investors now think a Greek default - or debt restructuring - is inevitable at some point. They may be right. But it's no soft option. There are good reasons why European officials will keep saying it is unthinkable for as long as they possibly can.

Comments

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  • Comment number 1.

    I'm struggling with the statistics/numbers in this. A few days ago you wrote:

    "But our (UK) borrowing from the rest of the world is nothing like the level of these other countries - Portugal's current account deficit is expected to be 10% of GDP in 2010 and 2011 - even higher than for Greece. Britain's will be around 1.6%."

    but later in that same piece you wrote:

    "According to the Commission, Britain will have the largest budget deficit in the European Union in 2010 - at 12 % of GDP."

    So is our "debt" 1.6% (v.low) or 12% (v.high)? Is there some way in which deficits are not "funded" that accounts for this discrepancy?

  • Comment number 2.

    Again bolting the door after its bolted.
    Did not anyone point out that after all it was spending/lending/borrowing to much? I know Greece does attract foreign cash inwards by the tourists but with it being now expensive to go there and for use with the pound having a lot less in our pockets, let alone the rest of Europe, how will it go about paying off its debts?

    Selling off the islands once more I reckon.

  • Comment number 3.

    Seems like everything I read says Greek default is inevitable and that the current bailout package will delay it long enough to/is simply wasting everyone’s (i.e. EU taxpayers - the ultimate pickers-up of the bill) money to pave the way for the exit of private investors… without removing the risk of contagion.

    …but they’re all going along with it because of the fear of what default might mean/potential consequences (even though they know that default will eventually happen - which seems a bit crazy to me, a bit ‘headless chicken’).

    Have I missed something? That seems to be it in a nutshell to me.

    When is someone going to shout “the Emporer has no clothes on”??

    Once again, we are seeing a massive heist of money from public purses (this time, European-wide, not just in Ireland) to the private sector. This Greece deal is about bailing out bondholders. As their debts become due over the next year or two, the EU/IMF money will be used to pay them off - then the debt becomes 'ours' (the various EU taxpayers). Once the key bondholders are paid off, Greece will default. Sorry, I mean 'restructure'.

    The other thing I am trying to find out is whether the EU/IMF 'loans' are actually junior to existing bondholders (so should there be repayment problems before they all get bailed out, it's the bondholders who get first dibs on picking the bones of what money is left in Greece while the various EU taxpayers - such as ourselves - are at the back of the queue and will get nothing). I believe it is junior but that is buried deeply in some small print in an IMF/EU loan document that I don't have access to. We should be told but it is being cleverly hidden.

  • Comment number 4.

    Default may not be a soft option but it is a realistic option. Austerity measures are standard from the IMF but are normally accompanied by a devaluation of the currency to allow, in theory, competitive growth. Greece is in the Euro, they cannot devalue, so competitiveness has to be by reducing wages; it cannot work.

    As Keynes pointed out countries in surplus are a greater risk to global financial stability than countries in deficit. He proposed a tax on countries running a surplus and, maybe, the solution is for Germany to be taxed and that tax to be used to pay some of the Greek debts.

  • Comment number 5.

    If we're outside the Euro Zone we should be relatively unaffected so why do so many right-wing newspapers and alarmist economic "experts" - the same ones that have been wrong throughout the recession - now suddenly try and spook us by suggesting the UK economy will go the same way as Greece ? It's sad when the only way they can try to get a Tory majority is to attempt to spook the voters with lying nonsense. Caledonian Comment

  • Comment number 6.

    The similarities between Greece and Portsmouth FC are interesting and the best option for both is outward investment. Open up Greece to private investment, The Apple Acropolis (or iCropolis) or The Google Parthenon anyone?
    Continuing to borrow against future income (Season tickets or GDP) is not sustainable with volatile global markets and the debtors need to pay in real terms. Portsmouth will have to sell players, even below market rates and Greese should realise it's assets.

  • Comment number 7.

    talven -

    Good question - the difference is that:
    - The current account deficit it what the whole UK economy (government, companies, the general public) borrows from the rest of the world: this is currently 1.6%
    - The fisal deficit (12%) is what the government borrows from any other organisation.

    The reason for the difference is a number of major factors the biggest are:
    - Quantitative easing: the Bank of England buys the debt (and print money) so nothing is needed from outside
    - UK pension funds/companies buy the debt (so the government borrows from the public) and nothing comes from outside the UK

    I hope that makes some sense

  • Comment number 8.

    No. 1. talven

    Britain has a relatively small balance of payments current account deficit, because we have a surplus in investement income and a surplus in the trade of services which largely offsets our deficit in the trade of goods. The balance of payments current account measures a country's import/export flow. We are a net importer and therefore have a current account deficit, but it is relatively small at only 1.6% of GDP.

    Our fiscal deficit is another thing entirely. The idea is that if we organise our economy better, we can reduce imports and grow our share of world trade which will pay for the large government debt, as the tax-take will increase as private sector profits increase.

    However, we are reliant on those countries with trade surpluses being willing to buy more British exports - ie we need Germany, China, Japan etc to buy more from Britain.

  • Comment number 9.


    Forgive me, but I'm not really getting a sense from all this as to why default is "no soft option". OK, it's pretty clear that the Greek government will find it difficult to borrow money from the international bond markets - but its not exactly easy right now is it?

    Imagining that the Greek Government stopped paying interest on its debt would, of course leave them with the need to pay off the principal. But what's to stop us imagining them defaulting on the principal? I imagine that is what happened when Argentina offered 30 cents to the dollar - and they're back in the markets now from what you say.

    The only other downside that's mentioned is the possible collapse of Greek Banks that are holding Greek Government bonds: but what's to stop the Government bailing them out (like we have) and then getting them to buy new bonds with the bail out money (like we're doing)?

    In any event, there is nothing in the article to suggest that a default would not be a softer option for Greek tax payers and workers than the measures being proposed.

  • Comment number 10.

    If I were a betting man, I'd put money on Greece not being in the Euro in, say, 2 years time ...

  • Comment number 11.

    @Caledonian Comment #5

    We may be outside the Euro currency but notice that the Euro is falling in value even against the pound. We do not want that, we need the opposite (to make our exports cheaper). If we can't export enough or create enough jobs to create the exports, that pay the tax, we won't be able to pay our interest either. Then we borrow more to pay the previous interest that costs us interest etc... and then we get downgraded by the ratings gods and down we go. Then there's our banks. They too are into Greek debt, not sure how much for (5 Bln?) but it will be more than we taxpayers (the now owners of the banks) will want to lose.

  • Comment number 12.

    "Imagine the Greek government stopped paying interest on its debt tomorrow. It would still have a primary deficit - excluding interest payments - of more than 8% of national income, and it might not have anyone to borrow that money from. That could mean more austerity, not less, especially if the country remained in the euro."

    Yes, that is true, but it fails to take into account the longer term consequences of borrowing more to service the debts of today.

    If Greece defaults and suffers by facing an 8% deficit in its public accounts, and it cannot borrow more, then in the longer term Greece will no longer have to pay interest on debts. Once it solves the 8% problem, it is in the clear.

    But if greece borrows more now in order to meet a 13% deficit, when that debt matures in one, two, five or ten years time then it will need to borrow again. And then again. And then again.

    In short, unless greece defaults it will be stuck in a never ending cycle of debt.

    And over time, the 5% difference between paying interest on that debt and not doing so adds up. Over ten years, it adds up to 50% of the GDP, or half the debt problem. Or put another way, it adds up to huge amounts of cash the Greek government can invest in its industry, infrastructure and people.

    Stephanie has fallen into believing the great myth of our times: that you can borrow your way out of debt.

    You can't. People can't, nations can't.

    Whatever the cost of default, the cost of debt is greater.

  • Comment number 13.

    #9 tFoth, read the article, man. The Greek government is spending more than it receives in taxes right now. They can do this only by borrowing in the markets. If they default, no more credit, so they have to find a 10% public spending reduction tomorrow. OK, it's a little less than that because some of that 10% will be interest, but the point remains.

    How much are they reliant on the €80bn bailout? That money is to prevent default, so would not be forthcoming if they default. That's a lot of cash to give up!

    Then they are to bail out their banks? How? They cannot simply print money to do this, as they're in the Euro. They can't borrow to do it, as they've defaulted and no-one will lend to them.

    Like I say, read the article!

  • Comment number 14.

    10 "If I were a betting man, I'd put money on Greece not being in the Euro in, say, 2 years time ..."

    If I was a betting man I'd put money on Germany not being in the Euro in two years time.



  • Comment number 15.

    I seem to recall a lot of debate over the suitability of the Greek economy for joining the Euro. Their budget deficits were way outside of that required, and I believe their debt was excessive also. So why the big surprise that it has all blown up as was predicted at the time. This is the result of political manoeuvring at the time. It has absolutely nothing to do with the banking crisis; it existed way before that recent event. Much the same way as Gordon Brown has been spending money we did not have for a good ten years before our banking problems.

  • Comment number 16.

    Eurozone countries had not envisaged how a national default could be arranged. Nor was Greece subjected to the 'due diligence' that should have been applied to Greece when it was a new entrant to the zone. More recent EU States are being subjected to that sort of review - and receiving appropriate development aid and advice.
    Unlike the USA, the Eurozone is not a federation with a central government that could assume the liabilities of an errant State. And that's not wanted either. But this problem ought to be resolved within the Eurozone states without the need for IMF interventions.
    The USA does have a range of useful tools for dealing with bankrupt firms. As the IMF has for near bankrupt nations. The USA method includes a 'Chapter 11' arrangement where a company that is potentially sound (as Greece undoubtedly is) can have a deal of extended time, and protection from creditors, to become viable once again. Maybe the Eurozone needs something with a similar principle?
    That supervision & protection would be somewhat humiliating for the defaulting government - and therefore to be avoided - and would allow the Eurozone to act as good neighbours as well as creditors of last resort. Creditors might need some protection. And maybe a haircut too, as a 'penalty' for their lack of diligence?
    British bankruptcy laws are too harsh on debtors and provide few useful analogies (maybe others could refute that view?)

  • Comment number 17.

    Greece is not being bailed out.... private bond holders are the ones being bailed out. Once they are paid off, Greece will no more be able to pay the EU back as it could its bond holders.

    Once again investors are being rescued at the expense of the population. The Greeks should throw out their government and default. Let the banking sector feel some pain for a change. The world will then begin its move from a credit to a reserve based economy.

    Sooooooo glad we are not in the Euro right now.

  • Comment number 18.

    Defaulting , institutions lend money with a rate of return in good faith that it will be paid back at the agreed time if large amounts are defaulted upon then the rates etc will start to go up.

    when you are maxed out you are maxed out, perhaps there should be stricker inforcement of budgetory rules with traffic light indicator of impemdign problems.

    As surly like the UK debt situation it will come upon the buffers quite soon.

    you cannot force people to lend money , or if you start printing it you will devalue and create inflation etc etc

    the idea that germany should be taxed for running a good house and then bailing out those than run a bad house is pure lunacy.

    all that will do is encourage germany and others to go the same way as greece so that they can party to as well as work hard,

    perhaps soneone should address the situation with china and it fixed currencies etc.

  • Comment number 19.

    #12 perhaps nations should manage there finance without debt.

    greece might default but then afterwards they might not be able to borrow again ever ?

  • Comment number 20.

    14 & 10

    If I were a betting man, I'd put money on the Euro not being around in 2 years time!

  • Comment number 21.

    Russia took less than two years to restructure its foreign debt after declaring a moratorium in August 1998. Creditors lost about half of the value of the principal.

    That took down LTCM, at the time the biggest hedge fund in the world and it nearly bought it all down bar a massive bail out.

    Can anyone tell me, I read about the nuclear option of the ECB buying eurozone bonds, exactly like the BOE have bought 200 billion of UK debt, and I wonder why if we can do it and no one blinks at it why is it considered so bad for the ECB too? Anyone....

  • Comment number 22.

    #17 those bond holders might be funds that are earning your pension pot,
    there are no free lunches.

    That is what many people/countries seem to have forgotton.

    when the GAIA runs out of food the feeders go hungary and die, what we need to do in manage expectation down about standard of living etc and manage the population down (not like stalin and company or course)
    as this is all just a symptom of greed etc

  • Comment number 23.

    This simply overlooks the fact that a common currency spread over several countries with governments pursuing different economic policies is doomed to failure.

    It's the 'emperor's new clothes', but the Eurozone countries won't admit it.

    The only way a single currency could ever work is if all participating countries 'merged' and adopted a single government, with one unifying economic policy.

    Undoubtedly, this was the real intention, but they put the cart before the horse. Now the whole thing is unravelling before they could put the real plan into action.

    For now, the only thing thy can do is offer a temporary sticking plaster and hope it hope it holds a while longer.

  • Comment number 24.

    #21 its playing pass the pascel with an exploding financial bomb,
    its a case of who is holding it when it goes off.

    why for example are greeks allowed to retire at 53 and in other countries it much higher ?

  • Comment number 25.

    #13 Tim. It is not necessarily the case that no-one will lend money to a country that has defaulted.

    Ms. Flanders references Argentina but presumably assumes that no-one is interested in the fact that they have been able to borrow money from Venezuela whilst simultaneously refusing to meet the demands of the holders of pre default bonds, who are in any case mostly Vulture Funds.

    ...and so to Greece. The EU and the IMF offer money to Greece, but for what purpose? For the purpose of their onward transmission of these funds to a number of banks, principally German and French banks. Why should the Greek people want to play that game.

    So Greece defaults, big wow, how would this make things worse for the Greek people?

    Would Greece hurtle back to the stone age unable to pay salaries to its public servants? Would Greece be treated as an international pariah? Or would the Russians step into the breach?

    The blood money men all know that the Russians are there, it is just that option is completely unacceptable to them irrespective of the carnage and destruction that may be wreaked in Greece itself.

  • Comment number 26.

    #16 >>The USA method includes a 'Chapter 11' arrangement where a company that is potentially sound (as Greece undoubtedly is) can have a deal of extended time, and protection from creditors, to become viable once again.

    >>British bankruptcy laws are too harsh on debtors and provide few useful analogies

    Unless I'm much mistaken, the US Chapter 11 bankrupcy is equivalent to the British "administration" (as in Pompey is in administration until someone/somehow it can be brought back to solvency) !! So British laws are much the same as what US laws are !!

  • Comment number 27.

    Sharing a currency between different counties was never going to work and the EU knew it. But the Euro is/was a political project designed to tie states in to a single European state. Any problems and Brussels steps in to take control and the sovereignty of the state in question (Greece) is compromised even further. But, I'm pleased to say, the Eurocrats are not having it all their own way. The speed and size of the crisis has taken them by surprise. But worse, they have got to put up with the pesky public who are already anoid by the recent bank bailouts. I've no doubt the EU will in time sweep this whole thing under the carpet, but there's no doubt this is a body blow (weakening, though not terminal) to the EU's plans for a superstate.

  • Comment number 28.

    IR35_SURVIVOR wrote:
    #12 perhaps nations should manage there finance without debt.
    "greece might default but then afterwards they might not be able to borrow again ever ?"

    If you read the article, it is made abundantly clear that this fear is a myth.

  • Comment number 29.

    Argentina and Russia were different cases. Russia has Gas which is vital for life in Europe but we can live without almost everything Argentina produces. So the creditors had to make deals with Russia, but not with Argentina - is that a reasonable explanation?

    Greece does not have a monopoly strangle hold on any life critical product so far as I know so my guess is that Greece, in default, would suffer the same fate as Argentina?

    The concern that I have is with the detail of the austerity measures being implement by Greece: How fair are they? As we have yet to see the details (or rather I haven't seen the details yet) I can't tell. But my gut reaction is that the Greek people will not take too kindly to unfair austerity. For it to work there must at least be the appearance of fairness.

  • Comment number 30.

    5 Caledonian Comment

    We should be concerned because we will be paying our sub, all be it diluted in the scheme of things, to the IMF. No man is an island. A low euro means its good to buy there but more difficult to sell there. Connection can also be via pension funds as has been pointed out elsewhere. The whole financial storm has become a travelling circus. The UK government books are going to make interesting reading, as is the probabilty of growth difficulties against forecast(s). The issue in the UK is PM Brown's strategy has delayed remedial action so many do not really believe there is a problem. Just like in Greece focus has apparently yet to be directed

  • Comment number 31.

    Interesting that the German papers were not keen on any bailout, and the idea muted that the German contribution should be part of "War Reparation" is unlikely to sit comfortably with Germany. How much longer till the German people feel they have had enough of bailing out Europe and leave the ship to sink?

  • Comment number 32.

    #30 What I object to is the irresponsible scaremongering in some news organs, suggesting a Greek-style crisis could happen here if we don't vote Conservative. And even today Hugh Pym of the BBC was doom-mongering, suggesting that UK banks might be losing about 8 billion if Greece was to default. Well I'd feel more anxious about THAT if these same banks hadn't just spent 8 billion on undeserved annual bonuses. Caledonian Comment

  • Comment number 33.

    10 "If I were a betting man, I'd put money on Greece not being in the Euro in, say, 2 years time ..."

    14 "If I was a betting man I'd put money on Germany not being in the Euro in two years time."

    If I was a betting man I'd put money on the Euro not being in existence in a few years time

  • Comment number 34.

    #27. GPWC wrote:

    "...EU's plans for a superstate"

    I think you will find that Europe is already a (quasi) federal state and has been for decades in most things, but name.

    The Greek financial difficulty will be overcome and the Euro will survive, but there will be many ups and downs along the way. I do hope that we can avoid an analogue of the American Civil War.

    Is the Californian problem not worse than the Greek problem, but because the ratings agencies are 'owned' by the USA they have not quite (dared) downgraded Californian GO debt to junk status - even through California ceased meeting it obligations a number of times in recent months something that Greece has not yet done - even through it is within two weeks of doing so.

    The existing ratings agencies need to sharpen up their act and treat foreign debt in the same way they treat US debt is they are not to suffer exclusion from World markets and strong competition at home.

  • Comment number 35.

    #29 >>....but we can live without almost everything Argentina produces.

    Actually, Britain buys a fair amount of burgers and corned beef from Argentina. I think quite a few kiddies will dispute that statement !! :-)

  • Comment number 36.

    #35. ishkandar wrote:

    "#29 >>....but we can live without almost everything Argentina produces.
    Actually, Britain buys a fair amount of burgers and corned beef from Argentina. I think quite a few kiddies will dispute that statement !! :-)"

    But substitute products are available, unlike Russian gas!!!

  • Comment number 37.

    Holy Moly,,did anyone just see that, the DOW was just down 1000 points at one stage

  • Comment number 38.

    Saw this link on another blog (thanks 'Velocity') and it is a real eye opener:

    http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html?ref=weekinreview

    The graphic shows how interconnected all the debts of the PIIGS are - and how one country's default inevitably heightens the likelihood of another. What a house of cards - no wonder the markets are jumpy.

    The associated article is very worth reading too.



  • Comment number 39.

    I would like to learn more about economics, business and finance, so that I can better understand these articles.

    Can anyone recommend any books that will help me?

  • Comment number 40.

    So when the debt restructuring happens who gets the 'haircut'? The banks...both European and British...or the taxpayer? Anyone like to hazard a guess?

  • Comment number 41.

    32 Caledonian Comment

    Wont make any odds who is in at 10 for the next few years, debt dictates. Cuts will be tapered, taxes can be raise quickly, if UK growth is low then cuts rise because the debt remains the problem and tax rises reach a digestable ceiling. In many cases natural wastage has the potential for a 3 percent reduction pa but that leaves youth employment problematic. The issue is not to forfeit independence which Greece has done, the IMF/EU is dictating and demanding things are sorted in 3 years. The next UK GE is the interesting one. Voters probably will be really brassed off by then. Rather than which party is the most attractive it is likely to be which party is the least unattractive, or are we there already ; )

  • Comment number 42.

    Stock markets are on the slide. Retail investors should prepare to gather up high dividend yield stocks at reduced prices......

  • Comment number 43.

    37. At 7:55pm on 06 May 2010, dudeHangingon wrote:
    Holy Moly,,did anyone just see that, the DOW was just down 1000 points at one stage

    Sure did dude - could be on for a big slide. Also, GBP down by 7% against JPY!!! And UK 100 looks like it will be 100 lower tomorrow - hold on to your hats.

  • Comment number 44.

    One way of understanding how economics really works in terms of history
    J.K Galbraith's The Crash 1929 it is interesting and very sardonic and relevant for today also Gillian Tett Fool's Gold about the present crisis these books give a flavour of what actually goes on in the real world something Economics as a study has a difficulty with : then just look for well some GCSE materials -economics can be fun and must be taken with a pinch of salt

  • Comment number 45.

    #31
    "How much longer till the German people feel they have had enough of bailing out Europe and leave the ship to sink?"


    No chance it's their ship.

    Never under estimate a woman.

    Angela Merkel versus the Global Markets. 'Poltics -v- Banking'.

    No contest.

    Seriously the Euro is at a crossroads and so is also the EU and the world economy.

    What happens in the next few months will define the future of Europe. The banks and speculators are holding the world to ransom and trashing the lives of 'normal people'.

    Time to deal with them. Not bail-outs. Control and regulation to the n'th degree.

    Banks should service commerce. They should be boring. Masters of The Unoverse My A***.

    We are back to 1997. This time we have to get it right.

  • Comment number 46.

    #39
    "Can anyone recommend any books that will help me?"


    Sh*ft*ng For Dummies.

  • Comment number 47.

    #38
    "The graphic shows how interconnected all the debts of the PIIGS are "


    Don't get too carried away. It is called international trade and capital flows.

    Any part of the world, good times or bad, will show similar relationships.

  • Comment number 48.

    39. At 7:59pm on 06 May 2010, ScotsSevensNutjob wrote:
    I would like to learn more about economics, business and finance, so that can better understand these articles.
    Can anyone recommend any books that will help me?
    --------------

    Try this video - http://www.youtube.com/watch?v=5NcgHx9xTRQ

  • Comment number 49.

    39 ScotsSevensNutjob:

    "I would like to learn more about economics, business and finance, so that I can better understand these articles. Can anyone recommend any books that will help me?"

    Couple of good/easy ones to get into the current issues would be:

    50 Economics Ideas You Really Need To Know - Edmund Conway (publisher: www.quercusbooks.co.uk)

    Wh00ps - Why Everyone Owes Everyone And No One Can Pay - John Lanchester (publisher: www.penguin.com)

  • Comment number 50.

    The Greek economy is not competitive enough, it´s too weak, they delivered wrong data to join the Euro zone and therefore the financial support is not justified - Goldman Sachs gave them the credit in 2000 to be a part
    of the Euro zone.
    The average citizen loses more and more confidence in our that false policy. Greece should have taken a time-out from the Euro zone with the option to come back if their financial situation has improved enough.

  • Comment number 51.

    #9
    "In any event, there is nothing in the article to suggest that a default would not be a softer option for Greek tax payers and workers than the measures being proposed."


    Default is the only realistic option for Greece and any other country in a similar position.

    The banks will collapse and this time governments must let them fail.

    The bank bailout of 2008 has only delayed the inevitable.

    This will cause a lot of pain for ordinary citizens but this is unavoidable anyway.

  • Comment number 52.

    ScotsSevensNutjob wrote:
    "I would like to learn more about economics, business and finance, so that I can better understand these articles.
    Can anyone recommend any books that will help me?"

    The "bible" for modern economics and business finance is generally accepted to be "Winnie the Pooh", by A.A. Milne.

    The current sovereign debt crisis is best understood with reference to chapters 2 ("In Which Pooh Goes Visiting and Gets Into a Tight Place") and 6 ("In Which Eeyore has a Birthday and Gets Two Presents").

  • Comment number 53.

    Despite the government decision to implement stringen cuts we can see Greek people out on the streets. In the end it will not be the government who make the ultimate decisions it will be the people. If they say NO then NO it is.

    I believe that what we are seeing with the Eurozone/IMF proposals are an attempt to buy time. If I think conspiratorilly then this time will be used for bond-holders and other monies to be spiritd out of Greece before default is finally admitted.

    We really have to ask some very basic but searching questions here:

    (1) What is the IMF attempting to do?

    (2) Is a State more than the sum of its finances?

    IMF

    I cannot see just how the stringent requirements are meant to help the people and day to day activities in Greece. All they seem to want to do is bring back Greece into line with the requirements of the global financial industry. Greece must be forced to come into line with market desires - this may not be in the best interest of the people of Greece but they are not the priority.

    STATES

    As far as I am concerned, the value of a nation is far far more than the monetry level attached to it. If we wish to rescue people/states in financial difficulties then it should be approached in the same way that we approach the rescue in the same way that we attempt to rescue a state that has suffered a major natural disaster.

    For me we should allow Greece to do a Portsmouth - write off debts at cents on the $/Euro. Tis will mean that Greece leaves the Euro but emerges with some dignity and some future.

  • Comment number 54.

    Who cares who wins the GE we need an economic war cabinet including cross party membership and the BoE/Treasury to guide us through this.

    We need instant action to shore up UK finances/GBP.

    1) Raise interest rates now to 0.75% and onward to 1.5% by the year end.
    2) VAT to 19%
    3) 20% levy on all bank profits.
    4) Public sector pay freeze for 2 years.
    5) £1 on a pack of fags

  • Comment number 55.

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

  • Comment number 56.

    John From Hendon
    Armageddion Times
    WOTW
    Rugby Prof

    You were right. All your predictions about Greece are coming true!

    HELPPPPP

  • Comment number 57.

    54 StartAgain

    "2) VAT to 19%"

    Thats a bit optimistic! I think 20% to start and rising...

  • Comment number 58.

    38.  ArnoldthePenquin. -  A picture is worth a thousand words. 
    32.  CaledonianC. - all you say is dogma. Open your eyes.
     
     Our Greek friends have only one way to go and it's going to be tough.  It's all about self determination.  If you remove peoples hopes and dreams then you remove the purpose of life. 
    Why suffer a long torture before death?
      I just hope that these events don't arrive here, but I fear "AMAGT" could be right. (previous blog) 

  • Comment number 59.

    #53
    "As far as I am concerned, the value of a nation is far far more than the monetry level attached to it. If we wish to rescue people/states in financial difficulties then it should be approached in the same way that we approach the rescue in the same way that we attempt to rescue a state that has suffered a major natural disaster."


    Interesting observation.

    So if an earthquake, instead of being an inanimate force of nature, has a pulse and a persona what would we do.

    Remove the pulse surely.



  • Comment number 60.

    Lets say there was no euro. Greece would default, currency would lose say 70% of value. Inflation would rocket as a result of which interest rates would rocket making it even more difficult for them to service their debt prolonging the bankruptcy. The devaluation would succeed in nothing as they don't make nor export anything.

    Now look at the industrial heartlands of Europe and imagine there is no euro. The currencies of countries like Germany, Holland and Switzerland would rocket. This would kill the possibility of growth there as their products become expensive.

    So you have a situation where the poor parts of Europe are pretty much bankrupt and the rich parts of Europe are completely not competitive, i.e. no growth in all of Europe - sounds familiar?

    Now look at Europe with the euro. Don't forget for every 1% the euro drops against the dollar imports from China and many other countries become 1% more expensive and exports to China become 1% cheaper. So you have a situation where the poor parts of Europe have a chance of being bailed out, i'm not saying it is easy, and the economies of the industrial parts of Europe will rocket.

    If the currency drops too much the drop can be stopped very easily, for example by banning shorting or banning exchange except by citizens or even by simply pegging it to another currency, f.e. the Swiss franc.

    As things stand Europe is doing what America cannot, it is regaining its competitiveness, and not just locally like before but finally in the whole of the world. Give it 3 to 5 years and Europe will be growing circa 3-5% annually and creating millions of jobs, something that before would be impossible and America will be thinking about how to best service its 17 trillion of debts.

  • Comment number 61.

    57. At 8:41pm on 06 May 2010, ArnoldThePenguin wrote:
    54 StartAgain

    "2) VAT to 19%"

    Thats a bit optimistic! I think 20% to start and rising...

    I agree 20%+ is probably where we are heading - just trying not to give the patient a heart attack just yet!

  • Comment number 62.

    Run away from the EU England! I hope whoever wins your election has sense enough to keep you away from the EU. It is a joke. One weak country has the effect of dragging stronger countries down the toilet. It's like becoming a member of a family bank account, and having some stupid relative who spends too much bring the whole thing down. You are better off keeping to yourself and staying independent.

  • Comment number 63.

    #59 RD

    As far as I know there is no way of removing the 'pulse' from a volcano.

    But, when we seek to rescue an economy the start point should not be securing the international financial markets but to work with that country to secure the wellbeing of the people who live there.

    This would mean that investors would inevitably lose-out. But what do they really lose - only money. Whereas we are now asking the people of Greece to bear more than just a little pain to save somebodyelese's pocket. Therefore the emphasis should be to maintain the State and improve its financial systems. I will never believe that banks are more important than people.

  • Comment number 64.

    Bankers are finally getting some sense of the anger and the possibility of actually being held accountable for their actions. They may be willing to provide better terms rather than face the outrage of the public in other countries. Their partner politicians are currently trying to save their own hides. Car thieves that are blaming the public for leaving the keys in the car.

  • Comment number 65.

    @39 I would like to learn more about economics, business and finance, so that I can better understand these articles.

    Can anyone recommend any books that will help me?


    Two very readable books: JK Galbraith: "A short History of Financial Euphoria"

    JM Keynes "Essays in Persuasion"

    Then, if you like his style, Galbraith again: "Money, Whence It Came, Where It Went".

    The latter book helps shed light on how banks conjure up money from thin air, by letting several people spend the same money at the same time. It's more smoke and mirrors than Quantative Easing, but amounts to the same thing - except the banks get a percentage.

    It might sound shocking, but most money in circulation these days is "credit", which doesn't really exist - except that you can spend it. Without it the economy would collapse. In a financial crisis, a lot of credit vanishes from the system. This is why QE was deemed necessary. Stephanie said that The BOE expected the other banks to increase credit by about three times the amount of money created by QE.

    Correct me if I'm wrong on the latter point Stephanie please - I don't want to misquote you from memory.




  • Comment number 66.

    It was only a few decades ago that Greece was ruled by the generals is their re appearance an impossibility?

  • Comment number 67.

    I’ve been saying since the start of this sad affair that Greece would not default. It’s unthinkable that any foreign Government would bet against the sovereign wealth of any other nation – just as unthinakable that a sovereign government would be allowed to default.
    I’ve also been saying that the Greek debt must be audited and restructured, that repayment of the debt under the conditions which caused it to generate may not be the right think to do, or even legal to do.
    There's no rule book for countries seeking to default on their debt (especially when a foreign investment bank has bet against the soverign wealth of a nation), but I'm sure the EU is quickly initiating one.
    How much debt should get repaid when the debt is a result of credit default swaps that bet against the Greek sovereign wealth?
    This type of skuldudgery is new to the EU, in fact new to the world. So one cannot compare it with Russia, or any other country that defaulted before.
    Research by IMF economists (The Costs of Sovereign Default, Working Paper October 2008) suggests short-term cost to the economy can be huge. Why?
    Because of
    - the cuts to social spending,
    - the privitization of industries
    - depletion of a countries economic diversity
    - the conditions that prevent economic growth and thereby keep the country in debt forever.
    I’ve been saying that Greece should declare a five year moratorium to restructure its debt, to repay as much principle as possible – all of the principle if possible.
    Because the Greek banks are the largest holders of the Greek sovereign debt, these are the books that must be subjected to analytical scrutiny first and foremost in order to establish who bet against Greek soverien debt, when, how and why?
    I await the G-20 to see where the chips will fall (Pardon the association with gambling.).

  • Comment number 68.

    66.Huncher wrote:
    "It was only a few decades ago that Greece was ruled by the generals is their re appearance an impossibility?"

    I presume you are refering to Greek generals...

  • Comment number 69.

    If anyone wants a really taboo suggestion, how about a 25% asset tax on every company and trust in the UK who received a government contract over the past 12.5 years?

    It could be cumulative, at 2% for each year a company or trust received money from government contracts.

    Such a tax would hit precisely those private interests who profited from the increase in public debt.

    It would also target assets, and not business activity as a VAT does. Thus is it would spare the consumer wage further degradation, and allow those who work in small business to go about their lives unmolested.

    But most of all, it would strike at the wealth of those entities and private shareholders who sponsor the political system which created the debt.

    As such, it would hold those who selected the politicians the public get to choose from accountable for the behaviour of the politicians they selected.

    Now such an asset tax would create a massive, massive windfall for the government, no doubt enough to pay off the entire public debt and leave a huge pile of money to invest so that in future the public treasury earns money in interest instead of paying it.

    But it will never happen. Never in a million years. Not under the current system of representation for the elite in society, which we happily call "democracy".

    Why? Because government exists to farm the masses and to tax them for the benefit of those who own and control the system of representation.

    Those who profit from the system will never have their assets taxed for driving the entire edifice towards ruin. It will always be the retired workers, the old and the infirm, who will have their meager pensions cut. It will be those who do the dirty work, washing the hospital bed sheets and collecting the rubbish, who will see their pitiful wages slashed.

    Why?

    Because that is what representation by elites, for elites, makes government do. It is "how they do". It is the whole point of government. Take from the poor and the powerless, and give to the rich and powerful.

    That is what sovereign debt does. It is the business of representative government in the modern world.

    And despite this understanding of the system being held by a growing number of people, the media and the government still treat institutions like the IMF as though they are santa claus and jesus christ all rolled into one happy institution. A group of private bankers children, not elected by anybody, working to ensure that banking families profit from the sovereign debt of nations.

    And yet the idea that such people, who are ultra rich and getting richer, are in the game for themselves...... such an idea is beyond the pale.

    Of course the bankers and the IMF are in the game to help the poor. Of course they are.

    That is why they are so rich.

  • Comment number 70.

    Re: #29

    The measures are not seen as "fair" by any means, especially the cuts in pensions and such, or the fact that, following the new tax increase, Greece will SURELY have the most expensive petrol / gas in Europe. It was already aiming for the #1 spot, it will not definitely get there. VAT to 23% (from 19% just 2 months ago) will not help prices stay low, either.

    Most people in Greece know that sacrifices have to be made, but while politicians / MPs for instance blatantly keep all their perks and slash pensions / wages from the middle/working class...they will suffer in the end. Bitterness and resentment will catch up to them.

    Interestingly enough, former finance ministers such as G. Alogoskoufis (and other politicians, former Speakers of Parliament et al) are sput and cursed upon when they even dare to visit restaurants. I expect them to emigrate, or live isolated for quite sometime!

  • Comment number 71.

  • Comment number 72.

    No action or even discussion on the tax evading Greeks.

    Of course, blame the ratings agencies!

    I wonder how many people would have been MURDERED if they hadn't been given the bailout.

    Instead of rioting the Greeks should be thankful that they got a "breather" and have a chance to do some real hard work on fixing their broken system.

    It only took about 10 years for the truth about the Euro/fiat currency to become reality.

    You can't print more of it to make it more valuable.

  • Comment number 73.

    #66 Huncher. I believe they were Colonels, not Generals. Stll I guess inflation affects all things.

    Spain was once run by a General, and Spain remains the big European shoe to drop. We are getting closer.

  • Comment number 74.

    Unfortunately part of the problem that Greece has faced since its troubles started a few months ago is that various eurozone officials/politicians have been talking openly about Greece's debt being 'unsustainable', unless measures are taken. Which is code for attaching a non-zero probability for Greece defaulting (or restructuring) its debt. This has increased the risk premium on Greek bonds enormously and has meant that the package of 'support' itself is so expensive that it makes it more, not less likely, that Greece will default on its debt. Stephanie is quite right in saying it is a matter of time before Greece's debt will have to be re-structured. Meanwhile, Greece's creditors - primarily French and German banks - will try to reduce their exposure to Greece and will be the ones who will be bailed out of the current package of 'support', which is anything but supportive for Greece. All this from a family of nations that's meant to be part of an economic and monetary union.

    For more details see my latest post on Greece:
    http://givegoodeconomicsachance.blogspot.com/2010/05/tragic-day-for-greece-and-good-day-for.html

    Panicos Demetriades


  • Comment number 75.

    #29 John_from_Hendon. It was not so long ago that everyone was extolling the mantra of virtual assets.

    If you look at life from a virtual perspective Greece has an effective stranglehold. It can, for example, strangle French banks for something north of $70 billion, and German banks for over $40 billion.

    Neither economy can withstand such hits.

  • Comment number 76.

    Stephanie wrote:
    "Many investors now think a Greek default - or debt restructuring - is inevitable at some point. They may be right. But it's no soft option. There are good reasons why European officials will keep saying it is unthinkable for as long as they possibly can."
    Firstly, when it comes to these European officials we are all familiar with the tactics of politicians, technocrats and business leaders employing the weapon of heavy denial. Normally, it seems to be correlated with the likelihood of the said event being denied actually happening. Hence, the past week's performance by Eurocrats would suggest we are rapidly moving towards default.
    Secondly, surely, the problem is that the banks outside Greece, particularly in France, Germany and Switzerland are the ones desparate to see the European officials protect their investments.
    If Greece defaults, these are the ones who will feel pain. Sadly, the Greek people will get pain either way.
    Further, if Greece does default, the spectre of defaults in Portugal and even possibly Spain would plunge the markets into turmoil similar to the US experience around Lehmans.
    This afternoon, the DOW plunged 1000 points [HOD to LOD](apparently a trading error, but after bounce the market was still down 3.2% on the day. This suggests the equity markets (in addition to bond markets) are getting the jitters.
    As we saw in the US financial crisis, once the confidence blows, then the contagion can spread like wildfire. This would not be contained within the Euro States, but would draw in the banks worldwide. LIBOR-OIS (Overnight Interest Swap Index)has risen to its highest level for 5 months. This trend is not good for the banks and could rapidly worsen.
    In other words, the Greek situation could be very close to setting the dominoes in motion and 'soft options' versus 'hard options' may soon become somewhat academic for both banks and governments on both sides of the Atlantic.
    Whoever finds themselves in Number 10 tomorrow (or after the weekend) may find their first job will be to handle a financial crisis similar to 2008-2009, only this time, they may find themselves without much ammunition. If the BP/Transocean disaster illustrates anything, surely it is that humans are much less well equipped to control their environments than they like to believe; whether one is talking about safety valves in 5000 feet of water or imperfect political and economic systems, which are far less subject to control than most politicians and economists would like to admit.

  • Comment number 77.

    50 voice_germany It is difficult to disagree with your observations. The real question though is why German banks decided to lend Greece something in excess of Euros 40 billion seemingly without performing the most basic due diligence.

    The German bankers that did this are self evidently either more corrupt or more incompetent than any Greek.

  • Comment number 78.

    I wish people would listen to the real experts.

    It has been shown, repeatedly, that the problem is total debt, and that the only way to solve it is to write it off.

    It can be debated, but various models and examples make it plain that the above is the only way forward.

    The long term solution however is in our source of energy. Our economic framework for measuring value is too much rooted in oil and military defence of scarce resources.

  • Comment number 79.

    re #72
    Amazing! Stick a plaster on it when serious infection control is required. We could end up doing the same. It is interesting how bankers and bankers bonuses have become the whole problem for many people here including the media and politicians. [All the rating agencies do is make a measurement for the markets. It was interesting to hear a gent from Standard & Poors on R4 this am explaining that they had issued warnings four years ago.] It all helps to deflect attention away from the other underlying problems.

    Building future fiscal policy on higher petrol taxes doesn't seem too bright when oil supplies could be under threat, in the short term, and we could be moving very quickly, especially in smaller countries in Europe, to electric vehicles.

  • Comment number 80.

    54 StartAgain:

    6) Abolish the Upper Earnings Limit on NI
    7) Capital Gains Tax on profits on land values
    8) IHT to 40%, no exceptions

  • Comment number 81.

    Talven,

    The current account deficit is essentially the extent to which imports from the rest of the world exceed exports to the rest of the world this year (though there are some other components).
    The budget deficit is what the UK government needs to borrow this year in order to finance spending.

  • Comment number 82.

    re #61
    The idea behind a sales tax (VAT) is to use it to control demand and smooth out bumps in the internal economy of a country and then, in conjunction with the exchange rate relate that economy to those of other countries. We have a history in Britain of not doing too well with it. Bit too complicated for Chancellors to get their heads around! Whoa! Much too flippant. Sorry.

    In reality, I think it just gets forgotten or, more likely, 1) greedy Chancellors really love to keep the cash rolling in especially in a boom, never minding where it comes from, and 2) they are scared to use it as a serious tool for control in case they make a mistake. This is especially true where the climb to the perceived top, as PM, is their lifelong desire and only possible career destination. No names, no pack drill ...

  • Comment number 83.

    re #60
    Interesting post. Ah, the Swiss. Traditionally dismissed as boring and incapable of making anything except cuckoo clocks and chocolate.
    Hands up all who would love to be like Switzerland with their currency right now ... ?

  • Comment number 84.

    re #44
    Economics: an imprecise science

  • Comment number 85.

    #4 EnglishRepublican Wrote : "maybe, the solution is for Germany to be taxed and that tax to be used to pay some of the Greek debts"
    - This is actually a very good and 'fair' idea - Why ? - Well due to dead weights like Greece and Co, the Euro was not as strong as the old German Mark would have been - So Germany has made Excess Financial Profits from Exports from a using a currency that is artificially weak, at the same time Greece and Co have had a huge debt build up because they are using an artificially high currency relative to their old one. So the 'fair' solution is to use Germany's (and France and the Netherlands maybe) excess profits to pay off - not loan - the excess debt of Greece and co and then either get rid of the Euro because it is proved to be artificial or set up debt pay off from Germany to Greece and co to re-set the situation to what it would be if they both had separate currencies on an annual basis

  • Comment number 86.

    #39 ScotsSevensNutjob wrote : Can anyone recommend any books that will help me? -I suggest you start with some basic maths books, basic maths is above most economists so you'll be ahead of the game for starters. Then learn basic accountancy - economists usually haven't got a clue about double entry bookkeeping and say things like "The good news is profits were up but the bad news is Consumer debt has also risen" - If you understood accountancy you'd know that the double entry for Profit is Debt - i.e. they are essentially the same thing - this is explained on my NEFS site in the article on the Sisyphus Equation. In terms of books in the shops you will not have an opinion worth listening to unless you have read (several times) Hayek's Road to Serfdom and also his Constitution of Liberty - which I think should be compulsory school reading if you ask me – in general ignore ‘economics’ books – most didn’t spot any crisis coming and many spend most of the time praising the amount of ‘revenue’ raised by the “game theory” auction “designed by an economist” for the 3 G licences i.e. - massive amounts of Private debt created and high costs to the consumer for years to pay back this debt. If you meet an economist run far, run fast and keep tight hold of your wallet.

  • Comment number 87.

    The EU has demonstrated that they don't want to allow a member of the EuroZone to default.

    What happens when the EuroZone as a block defaults ?

  • Comment number 88.

    Greece cannot be allowed to default period. If Greece defaults the speculators win and contagion becomes the issue. Default should be avoided at all costs and if the ECB needs to buy greek bonds so be it. I know a lot of economists say this might result in inflation, but that would be true if the ECB was trying to rescue the german or french state as the amount of money involved would be much larger. The president of the ECB should be given all the financial tools necessary to defeat speculators, audit the budgets of eurozone countries and apply sanctions to countries who don't go by the rules. Only the president of the ECB can defend the euro. Politicians have been shown to be too incompetent to get the job done. Besides at this point we should be concerned about deflation not inflation.

  • Comment number 89.

    Up2snuff wrote:
    " Ah, the Swiss. Traditionally dismissed as boring and incapable of making anything except cuckoo clocks and chocolate.
    Hands up all who would love to be like Switzerland with their currency right now ... ?"

    Hands up all who would love to be like Switzerland with their direct democracy right now...?

    Happily, I live in Switzerland. My canton has a flat rate of tax at 15%, the best infrastructure in the world, the best universal health care in the world, unemployment that has never risen above 4% even during two world wars, and cities which have won "best places to live" awards every year for decades.

    It is all down to the practice of democracy: real democracy. The swiss have a saying that is well worth considering, especially given the massive hypocrisy of the EU elite who have engineered the current Euro crisis and who cannot shut up about how they are going to solve it. It is:

    "In Switzerland, the people do not trust the government. In Europe, the governments do not trust the people."

    As we watch the major parties vie for the opportunity to spend other people money enriching their sponsors with contracts purportedly designed to save everybody's babies from every conceivable harm, and as we accept that none of them take the concept of public debt seriously, can we really fault the Swiss system of direct democracy?

    For those who like conservative ideas and historical economic fundamentals, let me suggest some research.

    I submit that for over one hundred and years, the Canton of Bern has been lending money to English governments. In other words, the government of Bern, under the sovereign command of the citizens of Bern, have been running their state at a profit and investing that profit by lending to the governments of the UK.

    In other words, the people of the UK have been working and paying tax to the people of Bern, via the mechanism of public finance and public debt.

    Laugh about Switzerland and cuckoo clocks and chocolate all you want. They vote on the laws under which they live, and they live better than you. And you work to support them, and have done your whole lives.

    As gandhi said of western civilization, so I would say of western democracy. It is an excellent idea.

    Folks should try it sometime.

  • Comment number 90.

    We once had a suggestion here in Australia that all (or maybe it was most) taxes be replaced by 2 % transfers of all money going in and out of bank accounts. This would be low enough so people would probably not cheat. They claimed, it would generate enough revenue. Bank computers would transfer these taxes automatically and continuously.
    If I look at myself, I'd be happy with that so the country could keep functioning.

    Greece has porous borders and this will always be a problem, i.e. people just rocking up on some island and then claiming asylum and welfare. That needs changing urgently. Maybe the welfare payments for asylum seekers need to come from a central European fund, not from the country which is unfortunate enough to have unprotectable borders.

    The Papandreou family has ruled Greece, on and off, since the 1930s, and maybe here is some room for improvement, too.

  • Comment number 91.

    #90
    "We once had a suggestion here in Australia that all (or maybe it was most) taxes be replaced by 2 % transfers of all money going in and out of bank accounts."


    Brilliant idea.

    Should mean I get continous tax refunds :)

  • Comment number 92.

    If you'r going to default........default, don't restructure.

    Default is a very painful option short term, but in the long term the interest saved is certainly worth the pain.

    So far all discussion is about how to save 'the financial system'.

    When it is the current financial system which has caused the problem in the first place.

    The financial system is not more important than a nation, as the problems in Greece are now demonstrating.

  • Comment number 93.

    #87
    "What happens when the EuroZone as a block defaults ?"


    You lose your job, home and just about everything else.

  • Comment number 94.

    #39 >>I would like to learn more about economics, business and finance, so that I can better understand these articles.

    >>Can anyone recommend any books that will help me?

    The first rule of good economics management was stated by Charles Dickens through his character Mr. Micawber in his book "David Copperfield" !!

    "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

    Once this is clearly understood and practiced, we can go on to the more exoteric aspects of economics !! Unfortunately, there are still too many people like Mr. Micawber who thinks that "something will turn up" to save them from the mess they created !!

  • Comment number 95.

    re #89
    Great post and so true. When I was a lad, before the war, I wanted to live in Switzerland. I can think of one or two blots on their character, but overall, I admire them.

    Interesting that the Tories like to go off and study the Scandinavians and, occasionally, the French but not the Swiss.

    At the risk of getting the bricks really flying around on this blog, I do wonder whether the Swiss are blessed by God, for sticking with Him. Have we in the UK turned our backs on God and are having to do 'forty years in the wilderness' .. ?

  • Comment number 96.

    #63 >>Whereas we are now asking the people of Greece to bear more than just a little pain to save somebodyelese's pocket.

    Well, why ever not ?? After all, they have the excellent example of Our Glorious Leader (for a very, very short while more) bailing out the banks to the detriment of the British people !!

    From comments on TV this morning, it looks like the Labour Party is preparing themselves for a "Night of the Long Knives" !!

    Fun and Games for the week ahead !! There'll be bargaining that will put a Souk trader to shame !!

  • Comment number 97.

    #93
    'You lose your job, home and just about everything else.'

    What, just me, seems a little unfair but if it will save the economic world as we know it then in the words of Norman Lamont, 'That price is well worth paying.'

    Talking of Norman, he also said

    'There are going to be no devaluations, no leaving the ERM. We are absolutely committed to the ERM. It is at the centre of our policy. We are going to maintain sterling's parity and we will do whatever is necessary, and I hope there is no doubt about that at all.'

    When you put the head of the European Central Bank quote that a Greek default "would not happen" in that context, the situation in Greece and the EuroZone as a whole starts to look very shaky indeed.

  • Comment number 98.

    re #89
    Question for democracy threat re Swiss:
    Do you think that the compulsory military service, totally for purposes of self-defence, helps to engender a sense of discipline, community and selflessness amongst the Swiss?

  • Comment number 99.

    98. At 09:12am on 07 May 2010, Up2snuff wrote:
    re #89
    Question for democracy threat re Swiss:
    Do you think that the compulsory military service, totally for purposes of self-defence, helps to engender a sense of discipline, community and selflessness amongst the Swiss?

    Then the same thing should work as well in Greece, no?

  • Comment number 100.

    Well, Greece can't meet its debts as they fall due (without special help from transnational bodies) and that is, in effect, default with a different label on it. Do not be fooled - they (and many others) do not have the future cash flow to match the debts they have taken on over the years...

 

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