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The new eurobillions lottery

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Stephanie Flanders | 13:01 UK time, Tuesday, 9 February 2010

Others may rush headlong into their financial crises, but on the Continent they like to give them time to mature. There are those who've been betting on a eurozone chapter to this financial crisis ever since Lehmans. Others started betting on a euro showdown the day the single currency began.

People walk past Greek parliament buildingNow the nay-sayers think they've hit the jackpot. Read the headlines, and you'd think that the problems of Greece were about to bring the eurozone to its knees. But it doesn't have to be that way.

To crack this, European officials and governments just need to do something they find very difficult. They need to get ahead of the curve.

More specifically: they need to show they have a solution not only to the short-term problem of Greece but also to the long-term structural problem for the eurozone that the PIIGS have come to represent.

We should remember one thing: Greece is a special case. The chart below (from Goldman Sachs) tells the story. Other countries have a double-digit public deficit as a share of GDP, or a stock of public debt over 100% of GDP, or debt-financing costs that are also over 10% of GDP. But Greece is the only one to have all three red marks.

Greece is also the only country that's been forced to admit that its tax revenue and spending figures in recent years had been more or less fictional. And its public servants seem uniquely adept at the politics of denial. According to the New York Times, the Greek parliament more than doubled its administrative staff last year, from 700 to 1,500. And the finance ministry says that in 2009 alone, 29,000 public-sector workers were hired to replace 14,000 who retired. This, even as the country was slipping deeper and deeper into the red.

eurozone periphery chart

So, it's a special case. And it's small - responsible for perhaps 3% of eurozone GDP. That's why many have said Greece was a good first test case for the eurozone. The stakes seem smaller; the amounts more manageable. But that's only true if ministers and officials get it right. If they get it wrong - a crisis that did involve 3% of the eurozone suddenly involves more than 30%.

The challenge is to fix it - and contain it. But how?

I'm not in the business of prescribing solutions. But I would say that any solution to the Greece problem has to send two powerful messages to the financial markets.

The first is that - all appearances to the contrary - Europe can do crisis management.

The second message is that they "get" the broader structural problem afflicting the euro area and they're committed to fixing it.

This last challenge merits a post in its own right. I'll say more about it later in the week.

But here's what I would say about message number one.

One reason why so many predicted a European "round" of the financial crisis a year ago was that people looked at the mish-mash of European institutions - the ECB, the commission, the council of ministers, all the national financial regulators (not to mention the web of treaty clauses that did or did not bind them together) and wondered: "how is this lot going to respond if a Lehmans explodes on their patch?"

Henry Kissinger famously asked: "when I want to call Europe, who do I call?" Investors' version of this question is: "who's going to pay?"

And when it comes to Greece, the answer has been far from clear.

Every time the markets think they have an idea how Greece could be bailed out - for example, through a loan from the European Investment Bank - the institution in question releases a statement ruling it out. This morning the EIB said it could "only finance economically viable projects" and that its rules would not allow it help an EU nation cover a budget deficit.

A similar thing happened two weeks ago, when President Barroso appeared to tell journalists that EU support could be there for Greece. Hours later the UK Chancellor, Alistair Darling, made clear that he and other non-euro members of the EU would expect the eurozone to solve its problems first.

As it happens, I don't think EIB involvement is ruled out. The EIB did participate in a broader IMF loan package for Latvia last year (though, crucially, Latvia is not in the euro). What the EIB doesn't want to do is take the lead.

The problem is that nobody does. It's that lack of clarity - more than their details of their particular financial situations - which is driving investors to punish other Pigs (Portugal, Italy, Ireland, Greece and Spain) as well as Greece.

It doesn't help that personal rivalries - and institutional pride - seem to be getting in the way of a deal.

Almost everyone - including the Greek government - thinks an IMF programme would provide the cleanest, most credible, solution. That could be the IMF acting alone, or alongside the EU. However, key European officials are dead against the idea. This is mainly because they can't bear the symbolism of the IMF coming in to bail out the euro. But there are also suggestions that President Sarkozy is fighting an IMF deal for domestic political reasons.

If it were held today, French polls suggest that the IMF Managing Director, Dominique Strauss-Kahn would handsomely beat Sarkozy in a presidential election. Strauss-Kahn has made no secret of wanting to come back to French politics (he hinted as much in a radio interview earlier this week). The word is that Sarkozy can't bear the idea of his rival coming in on a white charger to save the euro.

This may or may not be a fair depiction of President Sarkozy's motivation. Only he can say authoritatively one way or another. But we do know that such speculation does no good for the euro, or for Greece.

At their summit on Thursday, investors - and the rest of the Pigs - need Europe's leaders to show they can rise above all this. And that they can indeed do 21st-Century financial crisis management after all.

Update 16:10: Dempster (Comment 5) takes exception to my use of the term Pigs - the rather unfriendly acronym for the eurozone's problematic periphery (Portugal, Italy, Ireland, Greece and Spain). True, it is disrespectful. But you have to let economists have some fun.

Maybe you would feel better if I told you the new term that some are using for the economies in trouble if Greece should fall is Stupid (that's Spain, Turkey, UK, Portugal Italy and Dubai). Then again, maybe not.


Page 1 of 2

  • Comment number 1.

    "I'm not in the business of prescribing solutions."
    Stephanie this really is disappointing - why not? a Harvard educated economist - if you haven't got the ideas, who of the rest of us will have?
    We don't expect detailed prescription, just a few economic policy ideas and the likely political impact. How can Greece improve its tax take how can Greece end its public sector pension generosity. These ideas may be relevant to the UK eventually, as the speculators round on Sterling, after finishing [with] the Euro.

  • Comment number 2.

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

  • Comment number 3.

    Greece has to get its deficit under control.

    Buffering the problem externally just provides a get out, the problem remains.

    However - Buffer Greece and they all line up so the probem spreads.

    A liberal is somebody who wants to spend somebody elses money. As money is ont available there will be less liberals about.

    Democracy is the mechanism that the majority use to ask for what they want. If the majority insist on asking for what is not there then democracy will fail. Hence Greece has to cut its own body.

  • Comment number 4.

    #1 tonyparksrun,

    Tony, what do you expect? When certain posters see bias in every sentance you write, you too would be unwilling to post solutions. If I were her I would merely suggest areas that might be considered.

    However, in the piece that she has presented, Stephanie has highlighted a major flaw in European institutions. Put very simply there is no one person with either the authority or the standing to actually lead any form of viable rescue plan. Each country will view the performance of the others from its own perspective. From a purely UK stance and given our present predicament, I believe Darling was right to indicate that this was firstly an ECB problem.

    I do disagree with her however about France's stand. I don't see this as essentially a Sarkosy driven political response. France has its own economic problems. How do you feel the French public would react to a proposal to divert billions to Greece when they have both high tax and high unemployment. The same problem faces Merkle in Germany. The same problm would also face Brown if he proposed/supported a rscue plan (after all we didn't do it for Eire).

    This is a testin time for both the Euro and the EU. In the short term, heat on the Euro could be beneficial as it means the £ may get some repite. The pressure on the Euro may also mean that idividual EU countries may find more elbow room to order their own affairs.

    I am certainly a supporter of an integrated Europe. However,the present institutions are more of a stopper to integration than an enabler.

  • Comment number 5.

    Ms Flanders wrote
    'The problem is that nobody does. It's that lack of clarity - more than their details of their particular financial situations - which is driving investors to punish other Pigs as well as Greece'

    Portugal, Ireland, Greece and Spain, should not be referred to as 'Pigs'.
    It is both offensive, and wantonly disrespectful to those people whose countries are in a difficult financial position.

  • Comment number 6.

    Some say that this is a diversion by those who have interests in the USA

    you say "Greece is also the only country that's been forced to admit that its tax revenue and spending figures in recent years had been more or less fictional."

    look at the sate of California , look at most of the states , look at the figures for the US, its eye watering and unpayable.

    The flight to safety is giving the dollar boost, as the rigged stock market bubble in the US starts to flounder , Greece is a pimple in the great scheme of things, IMF BIS , all designed to give the people that make Presidents and Prime Ministers the reason to have a one world currency and the starting point for a new bubble.

  • Comment number 7.

    I'd like to politely object to the use of a derogatory acronym such as PIGS.

    According to agenciafinanceira.iol, the Swiss investment bank UBS says Greece is the worst country risk in Europe, followed by (note the ranking) Portugal, Ireland, UK, Spain, France and Italy. GIPSIUK?

  • Comment number 8.

    @tonyparksrun #1
    "I'm not in the business of prescribing solutions."
    Stephanie this really is disappointing - why not?

    The solutions are fairly straightforward - it's implementation where the difficulties lie.

  • Comment number 9.

    The Growth and Stability Pact regulating excessive deficits in the eurozone is not going to work under the pressures of recession especially when countries cant devalue. Ecofin can criticise - but who supports the euro's credibility if a member goes awol?Do you trun off the subsidies? Its a weakness in the EU single-currency project, isnt it?

  • Comment number 10.

    #1 tonyparksrun. Maybe one reason that no solutions are proposed is because despite all the words the writer recognises that there is no solution.

    What ya going to do? Clamp down hard on Greece and watch Athens burn. When the flames die down watch every Greek with 2 legs up sticks and move to the north. Not much of a solution really.

    Who, apart from the BBC and the EU, would believe Spanish statistics? The power of delusion can only take you so far.

    Consider: The Spanish housing bubble was of world class proportions. Spain is about 10% of the EU economy and yet accounted for 30% of EU construction. There are 1 million empty houses in Spain and yet property prices have only declined about 10% from peak. There is a proliferation of zombie construction companies supported by zombie banks. Spanish banks directly control about 50% of all property valuations - guess what kind of values they are ascribing to the property to which they have exposure?

    There is no way out. Either the south will be expelled from the eurozone or te euro will collapse. As always it is simple. The only complexity is the futile struggle of ego to subvert reality.

  • Comment number 11.


    Where is the EU president in all this leading from the front to avert a potential crisis? Where are his quotes and analysis in the media and calming voice of authority?

    Herman Von Rumpey where are you?

    The EU and the Euro needs your leadership!!!

    The bottom line will keep on getting tested by events. The bottom line being, you can not have monetary union exclusive of genuine political union, real events on the ground will continually test that disparagy.

    Will the tax payers of France and Germany mind bankrolling irreponsible greek economic management?

    Will the people of greece accept a decree from Herman Von runpey that they must tighten their belts for the good of the EU...think of the greater good people of greece. Perhaps he could invoke EU common heritage 'all for one and one for all'' as his europe wide rallying call.

    It just does not stack up,sooner or later a crisis will emerge big enough to crack the euro, maybe not this time but the world is a volatile place.

    I am all for the euro but a more flexible version should be developed, a version that allows for this kind of eventuality and is more reflective of what the EU is and can only ever be (for a couple of centuries anyway)..that is a broad alliance and economic free trade area of similar minded governments.

    this federalist fantasy distraction and red tape money wasting journey should end. The people of europe do not want it nor does it serve our best interests, it only seems to serve a professional political class.

  • Comment number 12.

    Why not the PIGS? It would appear to be an excellent acronym, descriptive of how their economies should be viewed. Better still are members of the STUPID economies; Spain, Turkey, UK, Portugal, Italy and Dubai who are also in the potential line up for investor interests. This crisis is far from over and it will be interesting to see if Germany will come to the aid of the PIGS (or even the PIIGS) considering it has managed it's own economy so well whilst the erstwhile porkers have squandered, borrowed, begged and spent spent spent!

  • Comment number 13.

    I had my post removed from Stephanie's blog dated 29th January which also related to the crisis in Greece. The only basis for its removal that I can see is that I used a certain acronym which someone has considered offensive (presumably Dempster from the post at 5). It was not intended to offend the people of the countries of Portugal, Ireland, Greece or Spain but was intended to save me a few key strokes. Perhaps SPIG or GIPS might be acceptable. In any case, for the sake of consistency, I assume that the moderators will remove Stephanie's blog for using the same acronym - or is there one rule for some and another rule for the others....? A response from Stephanie or the BBC or the moderators would be most welcome

  • Comment number 14.

    ming the merciless has come up with the solution when he says the greeks have to cut their deficit.
    QE does not comes as easily to their government as to ours!
    Will our government as part of the EU 'crash team' be rushing to Greece to follow this sensible path?
    When has this government ever taken ANY NOTICE of IMF strictures. Why should Greece?
    People in glass houses shouldn't throw stones.

  • Comment number 15.

    5. At 2:02pm on 09 Feb 2010, Dempster wrote:
    Portugal, Ireland, Greece and Spain, should not be referred to as 'Pigs'.
    It is both offensive, and wantonly disrespectful to those people whose countries are in a difficult financial position.

    Spot on again, Dempster! But you know people take pleasure of seeing that somebody else might be worse off than them!

    Whatever happened to the European UNION? Or is it very much like marriage union?

  • Comment number 16.

    There must be a better word than PIGS to designate my country and others. I urge the BBC to please stop using this term.

  • Comment number 17.

    Yes Stephanie

    I'm just reading (from the FT) that 'traders in record bet'. There's around $7.6 billion bet against the euro (a record) so somebody thinks Greece is serious enough to bet against the Euro in numbers.

    Not only that but Spain have now entered the 'doth protest too much' at hedge funds because they're targeted so it seems as though the contagion is spreading.

    When will they ever learn? Hedge funds are messengers of transparency and the EU doesn't do transparency to its and its taxpayers cost.

    Given the US' current precarious position both sterling and the Euro should really be in the ascendancy. But what do we find - the complete opposite.

    What's happening at the moment is similar to when bets were taken against RBS and HBOS. The official line wasn't believed. You can't buck the markets. As the great yogi berra said: 'its deja vu all over again'.........

    Not quite sure of the relevance of the Sarkozy/Strauss-Kahn sideshow. Interesting you mention IMF in today's blog but still nothing on Johnson his ex-colleague whose comments were more useful to debate given the context?

    It would appear that whatever happens from a solution perspective the feeling of vacillation over Greece will undermine the Euro for some time one suspects as its all a bit too late.

    The whole point about the Euro was that the Greek/Spain/Italy/Ireland problem shouldn't occur given the Euro and the economic parameters set.

    The fact that it has and why is the real question we should be asking......

  • Comment number 18.

    12. At 2:29pm on 09 Feb 2010, Dr Prod wrote:
    'Why not the PIGS?'

    Because it's wantonly disrespectful, bloggers can be and often are disrespectful, but BBC journalists should know better.

  • Comment number 19.

    I understand that Goldman Sachs are now closely advising the Greek Government on ways forward.

    With the fox in charge of the chicken coop, expect blood on the floor!

  • Comment number 20.

    Just shows you what kind of a society we have built in Europe! There is more comment/complaint about a piece of terminology than there is about the issues themselves. There truly is no hope.

  • Comment number 21.

    Nice pitch Stephanie and thank goodness some of the comments are relevant. "Mon equipage est bonne" (My crew are good) especially to the fore! [I look forward to the French lessons ;-)]
    Could you also include the Northern Europeans in your table and then we may get some perspective on how all the countries are doing? I would appreciate if someone could give me a true picture of the UK figures as a lot of New Labour activities appear to have been removed from the Balance Sheet. PFI, QE et al.

  • Comment number 22.

    Given that the people of the E.U. have spent £100’s of billions bailing out the ‘financial system’, it seems rather unjust, that some of the people of the E.U. are now being crippled by the very same ‘financial system’.

    Many people have, or will suffer the loss of their job, their home, their business or their savings because of this financial debacle. If the ‘financial system’ is allowed to remain in its present form, their sacrifice will have been for nothing.

  • Comment number 23.

    The term "PIGS" is very offensive and am very surprised to see that BBC's economics editor uses it as if it were the most normal and natural thing in the world. Maybe I missed the press release announcing BBC's merger with or its acquisition by the News of the World.
    I had a look at Ms Flanders' bio and was stunned to see that she actually does have an education and has held good positions in the past.
    A blog should not mean that one should forget how to write.

  • Comment number 24.

    In 1997-98 the cost of servicing the UK's public debt was 5.2% of our GDP and we were heading for a financial Armageddon. But we coped, and quickly enjoyed the highest sustained rate-of-growth in our GDP and jobs in British economic history. So, rescue from disaster has a precedent.
    Now our prospective interest rate on UK government debts is 3.5% for this financial year, with a servicing cost this year of 2% of GDP and a bit more next year. Interest on £200bn of that debt is paid back to ourselves via the Bank of England and reducing our servicing cost in reality still further. So, it's possible to escape from a worldwide financial crash with only a drop in output overall of 6%. And a lot less unemployment than in previous recessions or in Euro-land.
    So Ireland, Spain and Portugal can surely cope with their indebtedness too.
    Greece is probably in a deeper mess but is only a very small proportion of the EU's economy. Provided Greece will support some political objectives (such as accepting the eventual EU membership of Turkey and all of Cyprus) the BIE could provide some cash to re-imbuse for the ludicrously expensive Olympic stadia and related investments Greece could never have paid for herself. Those steps might make the political moves that make a financial solution possible.
    As for the future, the Euro's financial governance is almost as chaotic as Japan's and the USA. They seem to manage OK, so why can't Europe find the will to manage its chaotic national economies?

  • Comment number 25.

    #14 "Will our government as part of the EU 'crash team' be rushing to Greece to follow this sensible path?"

    I expect our prime minister will rush to Greece and offer £5Bn of our money to help them out. Why should they not benefit from his generosity?

  • Comment number 26.

    If I were Horst Koehler or Angela Merkel I'd pull Germany out of the Euro tout suite, the tooter the sweeter. This biz is seriously weighing them down.

    There's nothing wrong with 4 major currencies: the deutschmark, the yen, the dollar and the euro.

  • Comment number 27.

    Unlike the UK, Greece's problems are really down to incompetence and corruption.
    That means they are fixable, my bet is that the EU will enforce some sort of direct control and steer them away from doom.
    Moreover, they entered the recession quite late, their problems can only be exagerrated by that.

    Having said that, I think that the PIGS term is not nice nor applicable. It implies something that is not really true and we all know it.

  • Comment number 28.

    sadly the corresponding figures for the UK are in entirely the same league as Spain, Italy, Greece, Portugal, Ireland, although FORTUNATELY UK public debt is not as bad as Italy and Greece but bad enough to include us very much as part of this group (good acronym, STUPID as given by Dr Prod) If Elduderino01 is right about GoldmanSachs advising the government of Greece, well all you trojans out there beware of GoldmanSachs bearing gifts.

  • Comment number 29.

    #17 Rugbyprof,

    Wake up at the back there!

    Now Prof, just ask yourself where the BIG players - individuals and intermmediaries - are located? Then ask yourself which crrency(s) they would least like to see suffering for their own comforts?

    Now you don't need to be financial wizard to see just why the US$ is far stronger than the US economic position can support. It's all about short-term positions and opportunity and has little to do with economic reality.

  • Comment number 30.

    @ tonyparksrun
    >>"I'm not in the business of prescribing solutions."
    > Stephanie this really is disappointing - why not? a Harvard educated economist - if you haven't got the ideas, who of the rest of us will have?

    I'm sure she has ideas, but is it the place of journalists to be proposing them? I think she feels it would compromise her professional role. Facilitate sure, but surely academics/researchers or politicians should be coming up with the brilliant ideas. Personally I don't think we even need any brilliant ideas to get us out of these crises, just some common sense and hard work (i.e. save more, spend less, work more (efficiently)). Unfortunately many farmyard animals prefer to riot when sticking their heads in the trough is no longer an option.

    @ Dempster
    > Portugal, Ireland, Greece and Spain, should not be referred to as 'Pigs'. It is both offensive, and wantonly disrespectful to those people whose countries are in a difficult financial position.

    I can understand some people taking offence, but on the other hand I can also understand the analogy. Have another look at the chart above; do those look like countries who are/have been living a lean and mean life?

  • Comment number 31.

    So why is this problem so difficult to solve? Mainly because the Eurozone shouldn't have let this happen in the first place, and it therefore can't do anything without showing what a farce its institutions such as the stability and growth pact really are. The rules and their application were clearly nonsense, since they were disregarded for the sake of political expediency even as the Eurozone was being formed. This was obviously going to cause problems. The only way the Eurozone can possibly save face from this is to expel Greece and cut them loose, since they should never have been adjudged to meet the entry requirements anyway.

    I'm glad that the UK isn't in the Eurozone. It's bad enough having to pay for the indiscretion of our own citizens, without having to pay for the indiscretions of other countries too.

  • Comment number 32.

    Dear phusg,
    "Have another look at the chart above; do those look like countries who are/have been living a lean and mean life?"

    have a look at the corresponding figures for the UK and ask yourself the same question about the UK.

  • Comment number 33.

    Ha! So the value of the Euro rises. The BBC reports:

    "Currency traders were particularly buoyed by the news that European Central Bank (ECB) president Jean-Claude Trichet would fly in from Australia to attend the meeting.

    "Mr Trichet has not always attended these meetings and so the market is taking his late change in schedule as an indicator that the ECB may be looking to work with the EU on a solution to Greece's"

    Now please tell me on what factual basis these 'brightest and best' traders have upgraded their valuation of the Euro? These are the people who control our financial services - a gang of spivs!!!!

  • Comment number 34.

    @ Dempster
    >> 'Why not the PIGS?'
    > Because it's wantonly disrespectful

    I think there's an argument to be made that ratcheting up debt levels in direct contradiction of the treaties they signed upon joining the currency union is wantonly disrespectful toward the other member countries. Not that tit-for-tat is always the best tactic.

    What is a shame is that now even the honest and prudent citizens of these countries will get tarred with the same brush.

    @ doctor bob
    > If I were Horst Koehler or Angela Merkel I'd pull Germany out of the Euro tout suite

    This has to be an option that's at least being considered. Although who would want to stay in the Euro if Germany left it?! I think a North-Euro and a South-Euro would be the most stable way forward. That way they can always devalue the South-Euro every decade or so.

  • Comment number 35.

    What it proves is that (sorry for jargon) but for Eurozone countries it is far more likely that any economic shock will be asymetrical, i.e. effect different countries differently. Countries in the Eurozone lack the ability to allow their exchange rate to float up or down to act as dampener on the economic effects so the inevitable result is that an asymetrical shock combatted using an interest rate which is the same across the Eurozone will inevitably drive the component economies further apart not closer together. Nothing new in that - Ireland and Spain ended up in an absurd boom for much the same reason.

    In the US they have a couple hundred years of experience of this and they know that the correct way of dealing with the imbalance is a combination of labour movement between states, different tax rates between states and an expectation that the govt of each state (and in the US this even goes down to county level) may pay very different interest rates on their borrowing.

    The EU struggles with the concept of mass movement of people (I know it is written in to the founding principles but that is not the same as accepting the consequences) and the idea that different states can charge radically different tax rates merely ends up with the French complaining about social dumping (and of course changing VAT rates is not allowed). As the Greeks show the concept of having to pay radically different interest rates on public debt now appears to be part of the problem not part of the solution.

    What this shows to me is that UK was correct to keep out of the Euro because it is a highly immature currency union.

  • Comment number 36.

    The Piigs are in trouble - at least Stephanie has the sense to accept she may not have the solutions. I look forward to the article on the Piggsuk problem, will her solution in part be vote Labour?

  • Comment number 37.

    Hi Stephanie

    I see that you feel that Greece is quite a minor problem being only 3% of Eurozone GDP. Surely that begs the question that a solution should have been relatively easy to find. And yet so far Europe has done very little. This tends to point away from your conclusion that Europe can do crisis management.
    As to solutions and suggestions for Greece I have seen quite a few on the excellent notayesmanseconomics blog. One thing he is calling for is decisive quick action by Europe for Greece. I for one hope she gets it.

  • Comment number 38.

    Funny thing is, the Euro has got a lot stronger this week which makes a Eurocrisis not v likely, maybe something has already been agreed for Greece,and with more money being borrowed, interest rates on the market will be rising ..... the markets have usually already priced in and then discounted anything that the rumour mongers publish, so given the Euro's recent fall, and media savvies predicting a crisis, I'd say we are in for an even bigger bounce this week then a fall and an 80p Euro by summertime ...... but remember there's a sucker born every minute and the one thing we know about currency markets is that we do not really know much about them at all except that sharks get fed and minnows get eaten.

  • Comment number 39.

    #35. Justin150 wrote:

    "What this shows to me is that UK was correct to keep out of the Euro because it is a highly immature currency union."

    I disagree. I would far prefer to be helped out by a group of my friends in the Euro-zone than the IMF whose help most often includes radical surgery! The problem for the UK is the rest of the EU within the Euro-zone would be mad to let us in at present! We are a liability rather than an asset as we are suffering from terrible policy drift and lack of bottle in doing what has to be done - we will be forced (quite probably by the IMF) to do that which we know we should do and for which we lack the courage.

  • Comment number 40.

    @ smartsmall
    > have a look at the corresponding figures for the UK and ask yourself the same question about the UK.

    Very true, the UK has also been behaving very porcinous the last decade. Big difference is that they are (un)fortunately able to print their own swill at will and devalue, which many economists think will help them out, at least in the short-term.

    Of course the big elephant in the national debt farmyard is the US. I also agree with romeplebian that all this focus on the PIIGS countries is in part to divert attention from the US/UK debt problems.

  • Comment number 41.

    Stephanie said
    "The second message is that they "get" the broader structural problem afflicting the euro area and they're committed to fixing it.

    This last challenge merits a post in its own right. I'll say more about it later in the week."

    Last week you promised a comparison between the economic situation and government debt in the UK and Greece. Be careful not to make promises you can't deliver on (like GB).

    As for the term PIIGS being offensive, lighten up a bit. You'll be complaining about the term BRIC next.

    The best thing about the Greek situation, is that we can look them and say at least our situation isn't that bad (yet?). The depression in the UK will probably last a few less years than in Greece.

  • Comment number 42.


    Prepared to put $7.6 billion dollars to back up your observation...?

    And thanks to other commenters who have sussed some of the false logic in Steph's observations.......

    BTW - I see sterling has still managed to go down though on the back of a 'surprising' (!) widening of the trade deficit (and this despite sterling depreciation). That's not good.

  • Comment number 43.

    @ Francesca Jones
    > I see that you feel that Greece is quite a minor problem being only 3% of Eurozone GDP. Surely that begs the question that a solution should have been relatively easy to find.

    Well it's a very easy short-term solution to give an alcoholic another drink. I think the sentiment in northern european countries is that it's time these countries kicked the credit habit in a structural manner. Not immediately rushing in with a bail-out is a good way to set that necessary process in motion.

  • Comment number 44.

    Greece does offer us a bigger question and that is, does the EU stand by its members or do they leave them hang out to dry? It surly is not just Greece that the EU are looking at but the rest of the struggling nations who would be lining up behind Greece with their hands out. There is also the question of the Euro and what action the central bank will take.

    If this was truly a united Europe other member states would have already stepped up to offer assistance. Rather you get the feeling that they look as these failed or failing economies as black holes.

    So let us look at the EU and ask if there is a recovery in sight for all or is it spasmodic? Can we really see France and Germany risking their own recovery to bail out these countries. In the years to come I feel that a number of countries will look back and question how close a union is the EU especially as I expect at least one if not more to leave the club in the not too distant future.

  • Comment number 45.

    Lottery is the right word, however, in and of itself a Greek bankruptcy or bond default should -in theory- not affect the Euro as such very much, Greece being maybe 3% of the total. However, just as a Californian bankruptcy would reflect badly on the "state of the Union" as a whole so would the default of on EU country, coupled with the rising interest rates and thus further destabilisation of the remaining over-leveraged member states, make investors wonder when sovereign default across the board is likely. Thus they wouldn't commit themseves to bonds of longer maturity and that's the beginning of the end.

  • Comment number 46.

    So far from what I have read (in these comments and poss. the blog) there is much that has been left out.

    This is not just an isollated Greek problem, nor one of the "Pigs" or "Stripids" (sorry but I like both acronyms :-) ), and nor one of the Euro. If all goes back to the base foundations of both Europe and also the Euro.

    In principle both institutions are (in my opinion) worth while, but within the EU there are too many differing measures, concerns, beliefs of self-importance and cultures. Whilst a countries culture should and must remain intact too often people - and a heavy weight on institutions - forget the culture of a.n. other. it even goes as far as many people try to impose their own culture on a.n.other.

    Yes Greece has it's problems - I live here and I know about them - but unlike any other country in the EU Greece consists of 2000 islands many inhabited, some with a few thousand inhabitants, others (like where we live) are larger islands - population 36,000.

    Generally Greek islands have little crime - it's an island where do the crininals go - communities where people look out for each other - very friendly & hospitable people - good schools & education. OK the modern educational is only just starting to enter the system with more educated Civil Servants etc. This is not a gripe, but fact, many economies were restructured after WW2, at which point Grece was in the grips of a civil war etc... Greece is not as mature as many of the other major "EU" countries, it has come a long way since 1968 (the last coup) but that was on 40 years ago.

    Not forgetting that the Greek economy has it's problems - it has - there are too many outsiders who want to pass comment and control a.n.others economic destiny when many of those have more serious underlying problems - crime, education, community to name but a few.

    My car is unlocked, my house is unlocked, the children are polite, I run out of some thing - or my Greek neighbours do ( well we'don't the community sees to that ). Over then next few decades people will see a big ressurgance in Greece, Greek and it's culture.

    As someone once said - people in glass houses ......

  • Comment number 47.

    If the Greek government goes bankrupt, its creditors will lose. Both sides knew the risk of loss was built into the interest rate. This transaction is between that government and its creditors. It is not about the currency in which they happened to deal. The euro will remain valuable as long as people use it as a medium of exchange. High inflation, which is not a problem at the moment, devalues a currency; careless borrowers do not. The euro does not need anybody to "rescue" it.

  • Comment number 48.

    #44 - Chris London

    Are you asking two contradictory questions? Are we talking about the EU or the Eurozone. I would argue that, if it is a question of friends and partners helping a fellow country fallen on hard times, then maybe it is a matter for the EU but if, as I suspect, the Eurozone members are far more concerned about propping up the currency, then bailing out the Greeks is of secondary importance. It may be necessary for pragmatic reasons but it it is a secondary consideration.

    I ask simply because if it is a Eurozone problem, it is the ECB, not the EU that should be making the running. If you treat it as an EU problem, you may be able to spread the pain a little but asking members who are not yet in the Euro to shoulder some of the burden is a bit unreasonable.

  • Comment number 49.

    #39 John, whilst you and I disagree about many aspects of economics your comment about UK being a liability not an asset to EU at the moment is sadly true.

    Moving back to Greece. There problems are merely a helpful indication of what could happen in other countries including the UK unless we are prepared to get the budget back in balance.

    I have a problem with Greece - namely that the people and politician seem incapable of having the will to sort things out themselves. They have lived beyond their ability to pay for decades and now are complaining when we ask them to sort their own house out. Ireland has decided to take the pain and sort themselves out - they are therefore far more deserving of a small helping hand than the Greeks. Before any one accuses me of being anti-greek, if the UK gets into the same situation then we deserve no helping hand either.

  • Comment number 50.

    "but is it the place of journalists to be proposing them? I think she feels it would compromise her professional role."
    A professional journalist is entitled to comment on or even lead the debate. That shouldn't necessarily be reactive. In explaining potential solutions we would learn the difficulties in taking any particular course of action. For example in Greece dramatic cuts in public expenditure may lead to riots on the streets, it hasn't yet in Ireland. Solutions driven by EU institutions difficult perhaps even to explain to a layman, may be favoured as holding the bloc together, but may be unpalatable to those who will have to pay for that. The involvement of the IMF would be anathema to some, yet could be forced by the inertia in the EU. The aggressive speculation is applying pressure that may preclude certain solutions (worked painfully through bureaucratic EU institutions). I feel sure there is a matrix of possible solutions, each with upsides and downsides. What is clear that someone whether Greek pensioners, German/French taxapyers, or someone else will suffer grievous pain from all this. Maybe the fact that the EU can share the pain across the widest constituency points to EU institutions, however slow, (as against certain individual countries) being the sensible drivers of change.

  • Comment number 51.

    The counter-question to ask is if Greece was not in the EU at the moment what would be the likely actions?

    Given the parlous state of its budget (and particularly its black market) one would surnmise that its currency would be currently devaluing and interst rates would be higher than the current half percent. It would have also used QE like the UK and probably, like the UK, have seen little return.

    The fact that it can't devalue, do QE or raise interest rates means that it is straightjacketed and unless it ejects from the EU it will have to action economically over 3 years that would probably take 10 or more (like ours).

    That's tough.

    Can't really see how it can stay in the EU to the benefit of anybody bar currency traders who smell a UK-1992 scenario when they see one...............its just the euro taking the hit rather than the old drachma as was. But does the EU really want to eject a member and invoke the opposite of what it is supposed to stand for?

  • Comment number 52.

    "To crack this, European officials and governments just need to do something they find very difficult. They need to get ahead of the curve."

    That's kind of the problem with the EU. Getting them to act with coherence and consensus is a big ask. It's like turning around an oil tanker that's on fire.

  • Comment number 53.

    This is not much more than a storm in an ouzo glass. The Greeks will get through it as they have to.

    The broader issue is how is it that in western democracies that the government always feels it has to spend money that doesn't exist to please the people? All this does is create an illusion of prosperity that people are reluctant to surrender. So why create the illusion in the first place as all it does in the end is upset people? Whatever happened to integrity?

    Politics of the short term? Indeed: just like our economics really; borrow now and pay back tomorrow as we all know tomorrow never comes. Is this human nature or is it that western culture is fatally devoted to the short term?

    Let's just admit it, both we, the Greeks and the little oinky chaps that make bacon have an attitude problem. We need to adjust!

  • Comment number 54.

    startsmall thanks.
    Yet again I note Stephanie has triggered this part of the "Blogsphere" into life!
    I still think there are some serious pork pies lurking in our Balance Sheet perhaps they are fundamental to our definition or methods of deriving GDP. Or perhaps it's me missing the accounting trick of Gross v. Nett. I was always taught that it's the bottom line that matters. And to that I believe is what the protagonists of doom and gloom thrive on. It's contageous; I see other indicators like increasing personal insolvencies, rising un-employment (ignoring the government's fudges), paultry growth, sustained excessive public spending and a continual print / spend / borrow approach as a way out of this mess. Is this a truely volatile environment that places the speculators "ahead of the curve" and allows them to prey on the inertia and lack of restraint in individual governments? I'm beginning to get the feeling that the current financial crisis is beyond our elected representatives and civil servants. Goldman Sachs et al will do very nicely, thank you!?! This appears to be p-poor management and incompetence beyond...
    So Gordon wants me to vote him back in for more of this? Mind, I'm not getting that enthused about the alternatives either.

  • Comment number 55.

    I live in eurozone, so this "crisis" means a lot to me.
    It all started with two US hedge funds and one US- government-bailed-out Bank betting against the failure of Greece, and then the collapse of the Euro (info on Coulisses de Bruxelles blog). Other lemmings seem to have leapt over the cliff also.

    The EU can't let Greece fail - because there's Spain and Portugal and Italy and .... to follow.

    There are several options available to help Greece:
    Words of support - Yeh, Yeh.
    IMF - imagine California asking for an IMF loan?
    ECB - prevented by their Constitution
    Put Greece's 'home-grown' package under EU supervision - they've already agreed to an independent economic review body, apparently; we'll se how that goes
    An EC bond - possible, but not with the way public opinion is running at the moment
    Loans from other EU States - could be, could be .... why is Trichet going to the EU meeting???

    So, the "brightest and best" US traders may yet fall on their faces - again! Thrilling ain't it? Just wait til it hits the UK.

  • Comment number 56.

    Of course PIGS profligacy is not the only problem in the Eurozone, it is also the "virtuous" exporting BAFLNG countries who are too mean to buy anything from the PIGS or they already own the companies there.
    and there is only so much Mateus Rose, Guinness,Prosecco and Retsina you can sell in Frankfurt.
    There is a growing realisation that the real imbalance is that some countries like Germany,China and USA want trade to be a one-way affair In Europe,for PIGS and for the UK it's not much fun driving the wrong way down a one-way street:


    And if PIGS get slaughtered, who buys Mercs?
    Visit Greece....every taxi is a Merc .
    Now it used to be that taxes were so high that Mercedes had to make their taxis in Greece.
    Visit UK , every executive is in a Beamer or a Merc.
    The Americans saw to it that at least the Merc and Beamer SUVs were made in America.
    BMW and those horrid venture cannibalists saw to it that Rover were stuffed, and Mini are only a bit British, and Land Rover and Jag and Bentley and Rolls Royce ..... well we all know this.
    And why have we allowed Korea to triple its exports to UK in cars this year?
    GREEN TAXES ENCOURAGE IMPORTED CARS ......what is so green about making our workers unemployed?

    Could there be a solution?
    Step 1....let's have a balance of payments think tank from all political parties , public services, Quangos, unions and the CBI.
    Step 2: This will involve an analysis of public sector procurement practices in UK and Eurozone countries.
    Step 3 ....not a ban..... a tacit choice..... no MPs to have foreign cars from those countries with car export imbalances to the UK.
    Step three, a tacit choice for home made UK public service buses ambulances,police cars and trucks .
    Step four :tacit home produce procurement by public bodies while paying lip service to Euro agreements.
    Visit Germany, every German is in a Beamer or a VW or a Merc.
    Visit France, they are in Peugeots and Citroens.
    Visit Italy, and the Police are in Fiats.
    Any UK companies running government departments in Germany?
    Get the picture?
    Why are we so nice about importing when everyone else is rotten at buying our stuff?

    AH, IF ONLY!
    We could try that, but we all know we won't, it won't work, we are a rotten little country at making things and a terrible country for buying things from abroad.And there would be a clampdown on the things we are actually good at doing ......look at BAE, it is happening already with the Americans.
    But it is time to tell BAFLNG the party is over.
    If they want UKPIGS to buy BAFLNG's stuff, UKPIGS should have the same BAFLNG cheap interest rates too.A universal Euroland public borrowing rate in exchange for tighter fiscal control.
    And for Britain, I am bound to say, we are finished as a sovereign power.

    Game over.

    Maybe it's a shame, but there it is.

    So what would be our price, what would we get for saying to Merkel, we give in?
    Our price,the main one, could be the evaporation of the QE government debt bonds ....quantitiative release, in exchange for continued access for EUROPE to UK's lucrative market, and full fiscal and wholehearted capitulation and integration into Euroland, with all the implications of reducing UK public annual deficit spending to German-like percentages of GDP , post-crunch , that this will imply.
    And the PIGS need something similar.
    And in return we'll have Angela Merkel as a new Mrs Thatcher.
    I do not fancy this either, but there is a certain finality about it.
    And it would get us out of Iraq and Afghanistan and avoid a nutty Iranian war, which is the last thing we need but which we seem to be sleepwalking towards.
    And it would get us out of our nauseating subservience to US and the phoney alliance which is the other one way street we have been walking the wrong way down for ninety years.Freeing UK from America is the great unspoken wish the British public would dearly love.

    And it would allow a concerted approach to China and the Middle East , and it would re-establish an equal partnership with the USA.








  • Comment number 57.

    @ tonyparksrun
    > A professional journalist is entitled to comment on or even lead the debate. That shouldn't necessarily be reactive.

    Not sure I agree with you there. Sure there are grey areas but isn't a journalist mainly in the business of /conveying/ news and opinion? /Making/ news and /giving/ opinions brings their desired objective status into question.

  • Comment number 58.

    I wrote in a forum the day the Euro was announced that this exact scenario, and yes I actually used Greece after strongly considering Portugal for the example, was going to be what showed the real world fallacy to the economists' models of the currency and it's structure and administration. It is simply not feasible for a currency to retain long term viability unless a single polity controls ALL legal and legislative aspects of how that currency is spent and taxed. Basically, a currency is tied in the minds of the populace with the government/people that the currency was created by. This must be a singular concept to function properly. Without the singularity is both the clear risk of one group knowingly 'tanking' on their numbers and the more controllable but still risky two groups unknowingly working against the common interest of the currency with what appear to be perfectly reasonable policies taken individually. In this case the former has happened. The USA had several currencies in it's time with the occasional plurality, but our prosperity was only achieved when our currency was recognized as part and parcel of America. The whole world knew who was in charge and who was making the decisions for good or ill. That knowledge led to ongoing stability in the dollar to the point it became the Planetary Reserve currency.

    Remember that a non real world goods backed currency (like all the modern currencies) instead is based upon the concept that the group in charge is at the very least working in their own self-interest if not a more global self-interest. Without the ability to 'devalue' the currency of Greece to correct for monetary policy decisions we open the door to any country in the Eurozone assuming it can do the same. At that point, bluntly, what is the Euro worth? Personally, I think the Euro will survive this test only in accordance with a federalization of the EU, or at the very least a strong move in that direction. I think the other members of the Euro should work with the Greek government and other 'at risk' governments and use this opportunity to put into place safeguards against 'cooking the books' via an audit process. I also think it's going to be very expensive for all concerned especially Greece and the other 'at risk' Eurozone members, but completely destabilizing the Greek economy via societal pressure is not a good solution in my opinion. Assuming some form of federalization this decade I figure the odds are 3-to-1 the Euro comes through this long term a real contender to become the world's de facto reserve currency. I cannot in all honestly see any other alternative that is feasible within the necessary time frame without doing serious and potentially permanent harm to the future of the Euro.

    I actually hope they do it and succeed. I think it would bring about as big a positive change for the USA as anything else that could happen, and since I'm an American I'm all for that. Also, quite bluntly, I would much prefer a world with more than two 'superpowers' in it unless we can finally create a world government with a world currency. Most of us in the USA are quite tired of being the world's police force. Most of us are quite tired of having large numbers of our men and women in uniform in other countries. All of us are tired of paying for all of it. It's time EU. Fight it tooth and nail if you want for local consumption, but if you really want to be a world player in the latter part of this century you need to be a single player.

  • Comment number 59.

    I need to add an important footnote to my earlier post #55:

    On the site today (09/02/10) there is a post from an "expert on the Euro", Charles Wyplosz "Eurozone debt crisis - Facts and Myths".

    It is worth a read. I had to swallow a couple of my own, apparently mythological - beliefs. Maybe a few others might find they need to do the same after reading this.

  • Comment number 60.

    #55 frenchderek,

    Now then how about a further option:

    The EU takes an executive responsibility for overseeing the use of the support given by (and paid for by) the Eurozone?

    Don't like that? Probably not but it would equate to the type of support that France for instance would offer the UK.

  • Comment number 61.

    Are you actually payed by the BBC or some secret Ministry for Propaganda? If you are not trivialising the UK's credit addiction and finance bubble so that the bankers can have their bonuses again and houses go to even sicker prices, you are busy trying to damage the European neigbours by once again predicting the Euro-Apocalypse.

  • Comment number 62.

    #58 Nom DePlume,

    "Most of us in the USA are quite tired of being the world's police force. Most of us are quite tired of having large numbers of our men and women in uniform in other countries. All of us are tired of paying for all of it. It's time EU. Fight it tooth and nail if you want for local consumption, but if you really want to be a world player in the latter part of this century you need to be a single player."

    That just shows how insular the average American understanding of history actually is. You should go back and look at international history and see how many European countries have bankrupted themselves and bled to death (in greater numbers than the US) in attempts to dominate the world, police the world and secure freedoms.

    The financial crisis we are all presently undergoing is a direct result of US fostered debt financing.

  • Comment number 63.

    #59 frenchderek. The fact is that the myth is the euro. Soon to be revealed to a wider audience.

  • Comment number 64.

    #53 stanilic. Maybe but the forces ranged against the Greeks are the same forces that demolished AIG and compelled the US Congress to bend their knee at the alter of their power.

  • Comment number 65.

    #61 markus_uk,

    Are you for real? or are you merely stupid?

  • Comment number 66.

    I read Stephs blog on a regular basis,and am always amazed at the level of knowledge about QE,Gilts and monetary policy that just about all the respondants show.We in Canada have been left out of all the fun.The main reason for this is, in Canada the only way to get a loan is to prove to the bank you dont need it.Very Conservative but it kept a lot of people out of trouble.Its very amusing to see the clever economists coming up with all the acronyms PIIGS and STUPID,lets hope that Norway and Ethiopia stay out of trouble,because the next acronym to come down the pike is INDIGENT.

  • Comment number 67.

    Would it be possible for some kind soul to post the equivalent statistics for the UK that are shown in Ms Flanders chart?

  • Comment number 68.

    Is it possible that if the EU (Germany) bails out Greece that the speculators would then move on to Spain, then Ireland, then Portugal and so on to the point where there just is not enough cash available to the ECB/EU to bail them out any more? Is it feasible to attack each weak country one by one until the Euro falls?

  • Comment number 69.

    #68 Dr Prod,

    The simple answer is YES THEY CAN

  • Comment number 70.

    Post 68 I agree with 69.

    The sad truth is that someone with a bigger wallet or a stronger will needs to stand up for the Greeks or to put it mildly they are toast.

    It is just like a real life version of Risk where the speculators are in the driving seat.

  • Comment number 71.

    There are calls that the Euro zone members that violate the criteria for a long time should be dropped out until they fulfill the criteria. OK, the financial crisis is an extraordinary situation and every country gets a second chance. The Euro zone is nothing static and it doesnt make sense to put up rules that are violated in an extreme way. The rules of the Euro zones have to be overthought; if that rules don´t work it could be that some stronger members will leave the Euro zone - then the Euro zone only consists of the socalled "PIIGS" - a weak currency.
    It would be an injustice if some countries have an extreme debt and the others are supposed to pay for that failures: No!

  • Comment number 72.


    Timely and interesting piece - but would anyone question the view of a Nobel prize winning economist (other than myself, of course)?

    Here's the link with the article in today's Independent:

    What Stiglitz is saying is - 'Carry on troughing' and I don't think that he meant this in conversation 'over pigs'?

  • Comment number 73.

    You want clear messages sent to the financial markets...that opporunity passed when they weren't jailed for the global financial collapse they caused. One would think that the financial industry might play a better role in all this as it is of their making. Countries over-spend but that is a political issue as much as financial. The bankers made money creating the mess and standby to make money as governments struggle to recover...something very wrong with that process. Financial systems are operating with mathematical formulas that they do not understand and when they go wrong and companies and people suffer, the response is, oops. This is all becoming a real convidence builder for the EU....wonder why people aren't spending? Can't imagine why.

  • Comment number 74.


    I do agree with what you say but it is much more complicated than that I'm afraid.
    I tend to agree more with post 56, the bottom line is that those countries are Germany's clients. If Greece goes bust, it'll affect many more than just Greeks.
    Last time I visited Athens I was gobsmacked at the number of Cayennes around - they were more numerous than smart cars for pete's sake.
    Its not like this has not happened again with the specific coutry, I think they are used to it and will find their way out, especially with increased tourism and shipping that is forecast for this year.
    Its the speculation that drives this - lets hope that they won't drive the country to its knees, because they will certainly pick another target. My money is on Portugal, followed by Spain.
    To be honest, I cannot see how such a small economy can attract so much attention. It's not like the epic bubble that Dubai is nor it is a social timebomb that Spain is at the moment. Sometimes I wonder whether its just a lot of fuss to deflect attention from the real issues....

  • Comment number 75.


    I don't believe it shows anything of the sort. It is the frustration that many of 'us Europeans' equally feel about the European Union.

    You're using a distant period of history to justify the current mess that is the EU. Nobody is in charge, no sense of togetherness and a complete shambles with regards to International policy.

    With regards to the US, I understand they had a little 'fracas' that indicated quite how much they felt about being dominated by a country who were once quite happy with it's attempts to "dominate the world, police the world and secure freedoms.". Perhaps we should have learnt our lesson within the last few centuries ?

    There are several US commentators who justifiably think that the EU should sort it's act out and start to pull it's weight on the World stage rather than pontificating about which individual country is 'in charge'. They have a valid point.

    Back to the original post (#58), which I thought summed up the EU very well, this particular phrase stands out ....

    "It is simply not feasible for a currency to retain long term viability unless a single polity controls ALL legal and legislative aspects of how that currency is spent and taxed. Basically, a currency is tied in the minds of the populace with the government/people that the currency was created by. This must be a singular concept to function properly."

    I agree completely and it's why the EU is dysfunctional at the moment.

  • Comment number 76.

  • Comment number 77.

    #71 voice_germany,

    Now there's an interesting thought. Germany returns to the DM and leaves the rest in the mire. I wonder how that will go down with the French?

    After that, what does Germany do? It will then face many political problems vis-avis its EU membership. Follwing that it then has to face its own instability problems on its own.

    If we are honest, the whole world is in an economic depression. World trade is not likely to pick-up significantly anytime soon and the hole in German economic strategy grows exponentialy. If you care to look at the German figures you can see that this is already happening. So, is it really the right time to upset you friends?

  • Comment number 78.

    Always showing respect for other states - "PIGS".
    Is clear that England wants that UE fail, but remember : the other states know about that and UE will not fail !

  • Comment number 79.

    68. Dr Prod wrote:
    "Is it feasible to attack each weak country one by one until the Euro falls?"

    Yup, that's exactly what will happen. Capitalism (aka the market) has no compassion, no pity, no remorse. Just like The Terminator, in fact.

    Everyone talks about the global social and economic disaster that would have happened if the world's governments hadn't stepped in to 'save the banks'. That is true, but when they did, they removed 'moral hazard' from global capitalism and now nothing can, or will be able to, stop it. Nations are powerless in its path.

    Socially and economically, the inevitable (and it is now inevitable) global denouement will now be much, much worse.

  • Comment number 80.

    Two comments I'd like to make

    1. PIGS is a derogatory acronym, how many British people would enjoy it if their country is referred to as SWINE (Scotland Wales Ireland-North England) by the rest of the world? What... none of you? How surprising.

    2. Devaluation isn't some magical fix-it-all solution which always works as some people here seem to imply and it has failed plenty of times (see various currencies during the East Asian Crisis, Russian crisis of '98 and various South American countries)

  • Comment number 81.

    #75 Nick,

    There's a hell of a difference between the EU and the Eurozone and if the American's don't understand that then that is their problem. Neither should Europeans even attempt to fedralise merely to assist American economic interests.

    Now as for military interventions and losses then world leadership is a goal that they sought. You relly should also look more closely at the affiliations of the public both during and after the War of Independance. One of the big failings of the US has been to believe its own spin.

    That the EU is a 'work in progress' is an undoubted truth. There is a great difference between stitching together a union of 'young' states that have more than just a geographical relationship and uniting mature nation states with very differing cultures. With goodwill and much more time it MAY be able to take on some form of unitary control but not right now. That does not make it dysfunctional.

    If the US commentators spent more time critically analysing their own performance and the critical state of their economy then they may be wothwhile listening to.

  • Comment number 82.

    The giant squid (Goldmann Sachs) is behind this one too,1518,676634,00.html

    How much more damage this company has to cause before it's taken before the court? Can anyone enlighten me please?

    p.s. sorry if it's been mentioned in previous posts too many to check.

  • Comment number 83.

    I'm sure the daily mail brigade wants the EU to fail desperately, but in my eyes at least the EU countries are too much interdependent to let the Greeks, Portuguese etc fail. It just is not going to happen. What will happen is that the EU will sort out its procedures so that big decisions may be made centrally to avoid the confusion. In that sense the Greek debacle is probably a blessing in disguise, but who knows...

    PIGS it may be now but I'm sure we'll have plenty people talking about the STUPIDs very soon...

    I quite agree with post 62. Germany almost bled to death and GB got effectively bankrupt trying to achieve what the US is having a go at. And certainly it is not that distant.

  • Comment number 84.

    I think the hesitation of the EU is not because they don't have the means or will to bailout Greece but because they can't be sure that the underlying structural problems are resolved or even addressed. Moral hazard doesn't just apply to "evil" bankers but all greedy people (especially socialists). If the EU just wires the money, Greece's state bureaucrats and unions will gobble it up and gorge on it without any incentive to change. "Bailout of Greece" will become an annually recurring event on the EU's financial calendar.

  • Comment number 85.

    Ms Flanders wrote
    Update 16:10: Dempster (Comment 5) takes exception to my use of the term Pigs - the rather unfriendly acronym for the eurozone's problematic periphery (Portugal, Italy, Ireland, Greece and Spain). True, it is disrespectful. But you have to let economists have some fun.
    Maybe you would feel better if I told you the new term that some are using for the economies in trouble if Greece should fall is Stupid (that's Spain, Turkey, UK, Portugal Italy and Dubai). Then again, maybe not.

    Answer: Well, no not really.

    Countries are simply names for those who reside in them.
    And those countries are predominantly filled with normal people who simply hope for a future for themselves and their children.

    What possible benefit is there to ridiculing them?

    There isn’t any really is there, none, none whatsoever.

    In any event you clearly didn’t mean anything by it.

  • Comment number 86.

    #84 andreasr,

    So by your definition then all non-socialits are merely selfish.

  • Comment number 87.

    For me the problem with the Euro as with the EU is that they want to move to fast. You have many countries that have just emerged from the yoke of military rule or Russian dictatorship and you expect them to magically democratise and play the game all within a generation.

    Added to which a standardised currency is set up to create harmony and a large common market without the set up required i.e. a central bank with large reserves to bail out problematic countries.

    It's no wonder the experiment is floundering. Not every country in the Euro has the discipline of Germany. The EU has to go back to the drawing board, establish a system with more teeth and create a Federal reserve or else this situation (if it is resolved) will happen again.

  • Comment number 88.

    For my sins I have just watched the debate on Greece's finance on Newsnight. If this is the best the pro EU and Euro can put forward God bless us.

    The markets and hedge funds in particular are going to have a field day.

    Greece at best will pay dearly in the form of interest rates at worst be banished to the dark side of Europe and out of the Club.

    Germany are already pulling away from the so called PIIGS. France is starting to question the viability of a union if Germany the biggest player is not prepared to support the party line. The ECB can not afford to bail out Greece let alone the others - Is the EU all it has been cracked up to be and how can the Euro succeed if there is not even political union let alone financial union.

    All I can say is the presidency is dead long let it stay dead.

    Do I believe in the EU - Yes, however the federal states of Europe - NO!
    And that is the problem, all too many members feel the same. And with the motto for the new members appearing to be "Give a little get a lot" who can blame the founding states for having grave concerns. However with the gravy train having now left the platform what is going to be the big draw of being a member of such an exclusive club that black balls it's members.

  • Comment number 89.

    This is exactly what WOTW predicted.

    Kraft to close Cadbury plant it offered to keep open

    It's also exactly what ALEXANDER CURZON and JadedJean predicted.

    Enough is enough!....we need to start doing something about this...and soon!

  • Comment number 90.

    @onward-ho, #56:

    > Visit Germany, every German is in a Beamer or a VW or a Merc.

    Huh? Must be another Germany than the one I know. Or very long time ago.
    On the street I see lots of Fiat, Citroen, Peugeot, Toyota, Hyundai, Ford, Mini, Lada, Saab... German-made cars, especially MB/BMW/Audi are too expensive for many Germans.

    P.S.: We drive a Mazda.

  • Comment number 91.


    You claim to wish to see a integrated europe.

    Perhaps you would like to see where Cadburys are going.

    There is no integrated europe. The idea these countries share the same situation is ridiculous.

    Greece has to sort its own problems. The California solution is heading towards nonpayment in whole or part to some members of their public sector. Consider the situation where - for example - some 40 percent of your debt is held by foreign interests and the percentage is rising. Do you have control.

    The problem is speculators. The answer is high interest rates.

    Greece will not sort the matter willingly or it would have been done already. As always happens when cuts are required those affected threaten strikes. It makes no difference when there is no money.

  • Comment number 92.

    #91 Ming,

    Let me make it clear, I truly believe that, in all of our best interest (socially, economically and for security) the countries of Europe are best served by acting in unison. At the moment that idea materialises itself in he European Union.

    As it has evolved the EU has a great number of problems. I said earlier that it was a work in progress. It will take many years for it to resolve a lot of the issues that presently bedevil it. However, it will ultimately be an exercise worth undertaking.

    As for Kraft/Cadbury, they are at least staying within the EU, many of our so called premier companies have upt and gone to the Far East.

  • Comment number 93.

    I have to say that I too have recently been finding the PIGS term (which is being used widely) quite real pigs!

    Pigs are amongst the smartest creatures on this planet. I'd humbly suggest that they are rather better at managing waste than the PIGS being discussed here are...which is probably why their economies are in such a mess.

  • Comment number 94.

    72. At 8:54pm on 09 Feb 2010, nautonier wrote:

    Timely and interesting piece - but would anyone question the view of a Nobel prize winning economist (other than myself, of course)?

    Here's the link with the article in today's Independent:

    What Stiglitz is saying is - 'Carry on troughing' and I don't think that he meant this in conversation 'over pigs'?

    Stiglitz, the Spanish Ambassador to the UK and a Financier (I think!) just been on Newsnight, I'm afraid that the Financier came out the more sensible, as he pointed out, bail out Greece and then Spain, Ireland and Portgal, might wonder why they should suffer. As was pointed out, if you want one currency, you need one leader, roll on the 4th Reich, and why not, if it got rid of the 600+ leeches in Westminster, the Euro MPs and the EU Commission it might be worth while. If we joined I might even get my bins emptied, they are all made in Germany anyway. The Banker laughed at Stiglitz and asked him to step into the real world! I'm afraid that had it been a job interview, the Banker would have got the job. Shock horror, apparently Governments lie about their debt. Well stone me, Gordon "Just-like-that" Brown not telling us as it is?

  • Comment number 95.

    #89 freemarketanarchy - Don´t you get it? Anyone could have predicted this. Meltdown is coming, a key reason that meltdown is coming is because no one will do anything about it.

    This is a paradigm shift - you gotta get on the streets and take the power back. But no-one is going to do that. Stop buying theit crappy chocolate and they will be gone within 3 months (6 at most). It is all so easy, it has virtually no consequences - no-one is asking anyone to jump in front of a racehorse or anything like that. Just stop buying their product -is that so hard?

    Well apparently it is -and so people are going to balloon to who knows how many kilos and then bemoan their sad fate. Who´s fault is it really?

  • Comment number 96.

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

  • Comment number 97.

    #85 Dempster - Who cares what you call a bunch of bankrupt nations? Will changing their names in any way impact upon the suffering of their populations? Did it matter that Kampuchea became Cambodia? Who got food that otherwise would not have got food? Who was not killed that otherwise would not have been killed?

    Did it make you feel better that by changing the name you could pretend that the horrors that occurred did not occur?

    Do you not see that political correctness is so much fog to allow you to pretend that what is happening is not happening? Look into the abyss and if you recoil in horror do something about it.

  • Comment number 98.

    #91 ming-the-merciless. Yes you can have control if you want it. Consider Rafael Correa in Ecuador. He has taken control. All you have to do is to take the jump and you will be surprised at how easy it all is.

    But you gotta want it first - really, really want it. The problem with so many in the UK is that they really don´t want to be responsible for themselves. If you sell out responsiblity for yourself - either collectively or individually there will be a heavy price to pay. Is that so difficult to understand?

  • Comment number 99.


    Exactly my point, socialists are no better than capitalists. I have this superpower that lets me see them for what they really are, their Mother-Theresa cloak doesn't work on me. Sorry, I guess.

    I was just waiting for this comment... By the way the acronym is really PIIGS, let's not forget Italy :) *tsk* *tsk*

  • Comment number 100.

    Although it would be crazy to consider the UK to be as unstable as Greece, I would expect Public sector workers here to respond more like the Greeks (i.e. instantly on strike) than like the Irish, who seem to have accepted 5%-15% pay cuts without all walking out.

    Anyone who considers these Euro countries to be basket cases needs to remember that over next year that in the UK all the money raised through corporation tax... that's ALL THE MONEY from CORPORATION TAX, from ALL OUR MID to LARGE BUSINESSES will be needed to pay the interest, yes the INTEREST on the government debt. And that is before its increased by about 70% over the next 5 years because of our yearly deficit. And that's before its increased by the "must happen" interest rate rises that will be needed to suck in Gilt purchasers.


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