It’s not that the British don’t understand the implications, it’s that we do understand, and don’t want them. We can see where the EU must inevitably end up, if it is not to collapse, and we simply want no part of that.
That’s not lack of understanding. It’s a decision based on full understanding.
No – that’s not very well put on my behalf. I don’t actually think that Britons do understand the EU very well – but that’s not the issue here. Most British don’t accept what I have called the French position – but that is more because they are understand that it is right and don’t want to be a part of it (the Leave position), than they don’t accept it and are in denial (the position of many Remainers).
There seems a fair bit of Greece bashing still implicit in this discussion. True, the Greek Government ran a deficit prior to the 2008 crash. So did the UK and USA ! On the other hand countries like Spain and Ireland ran budget surpluses before the GFC. That really didn’t put them in any better position afterwards.
Having made the decision that they are going to have a common currency the EU has to move quickly to becoming a single country. It’s not just that the Greek debt needs to be forgiven – it needs to be forgotten about too. If we believe Yanis Varoufakis , Germans bailed out their own banks and then loaded the calculated Greek cost, which was mainly from bad debts to the Greek private sector, on to the Greek taxpayer. The Irish were wanting to let their banks go under after 2008 but were told by the Germans that this wasn’t going to be allowed.
The future EU will have to consider the level of Greek debt in exactly the same way as the USA considers the level of debt run up by the State of Georgia. Who has any idea what that might be? Who cares even?
The EU PTB, which really means the German government, have to stop whingeing and sort out the problems of the common currency themselves. For starters they need to tell the IMF they aren’t needed. The EU is a wealthy region and in no need of IMF loans! If Greece, or anywhere else, need finance then it really should be no problem at all.
But the mentality of the Germans is that it is a big problem. I’m not sure about the French. They don’t seem to be saying much in public. Maybe they’ll be more enlightened. I hope so. Someone will have to be otherwise the EU will have no future at all.
You seem to be substituting German bashing for Greece bashing. But I have to admit that I don’t really disagree. The Germans have learnt a little – about governments bailing out banks for example – but not nearly enough. I’m more optimistic about the French, mainly from a review in the Economist about the Franco-German clashes over running the Euro. But I do sympathise with German frustration with some EU countries that refuse to carry out substantive reforms to their economies.
And yes, I think the EU should adopt some form of resolution mechanism for renegotiating government debt, not unlike the US one, which currently Puerto Rico is being allowed to use (at least I think that was on track, though it requires Congress to pass a law to enable it). Puerto Rico’s case bears some ressemblance to Greece’s. The IMF was involved not because of the money, but because it was thought that the EU institutions lacked the clout, experience and credibility, whereas the IMF have a lot of form on resolving this sort of thing. They eventually came to suggest that Greek debt should be written off – no doubt much to the annoyance of the Germans, for whom this seems to be a red line.
The Greek crisis is quite different to Spain, Ireland, Portugal or Cyprus. In these it was the domestic banking systems that brought their countries low, while the budget balances were quite well managed. In Greece is was rotten government management – where the social contract seems to be worthless state jobs and generous pensions for the left, and rampant tax evasion for the right. Little progress seems to have been made on the latter, I hear, in spite of an allegedly left-wing government. It’s much easier to blame somebody else and do nothing, I suppose. I’m afraid I can’t quite get the Greek bashing out of my system – but most ordinary Greeks are hard-working and blameless. Which makes the whole thing really difficult as it they who are paying the price.
I’m not sure the Greek crisis was really that different.
In the eurozone, when everything is going well, Government revenues are high, they have more to spend and they feel that borrowing a bit extra isn’t going to cost that much. The size of the common currency zone protects them from inflation. They don’t have to bother about exchange rates. When things are going badly their revenue drops and no -one wants to lend them any extra except at high interest rates – which they don’t control.
When an economy is overheating the Government, in a sovereign currency issuing government, should spend less/tax more and maybe put up interest rates to cool things down. When it is overcooled it should do the opposite. But there’s no real incentive for any individual government, especially a small country government, in the EZ to want to cool anything down and when the economy needs warming up they don’t have the ability because they aren’t in control of the currency.
Now I’m not saying that there aren’t problems of tax evasion in Greece. It could well be that they are worse than in say Spain, Portugal and Ireland but when all four countries have similar problems after the GFC, perhaps we should think about treating them as separate problems rather than one being the cause of the other.
Actually a rather good explanation of why the Germans are so keen on the Stability and Growth Pact – something I’ve been rather sceptical of. But its objective is damage limitation rather than efficient macroeconomic management – and I think you are right that fiscal policy should play a much bigger role in this. I don’t think that the record of Ireland and Spain was so irresponsible on fiscal policy though (especially Spain) – the scale of the capital movements into their banking system overwhelmed them. But it was free movement of capital that did that – something similar happened in the UK and Iceland. The designers of the Euro hadn’t understood that risk at all. The banking union has changed the picture now.
Personally I think the differences between the four initial Eurozone bailouts are as revealing as the similarities. The most important similarity was that they all needed bailouts by other zone members – and the mechanisms to do so were woefully short.
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