The EU: Still crazy after all these years

Riots in the cradle of European democracy

We all know, of course, that the EU is barking.  But sometimes, just sometimes, we come across some odd fact or snippet or report so extreme, so bizarre, that it still has the power to shock.  Something so absurd, so preposterous, so outrageous, that we want to send for the men in white coats.

There was just such a piece in Monday’s Telegraph, improbably entitled “Greece can only survive in the €uro” — as if the news every day were not demonstrating the exact opposite.

The paragraph that caught my eye read as follows: “Last week Greece completed its largest debt sale in two years, ensuring that it has sufficient funds to repay €3.1bn in bonds held by the ECB which mature today, and avoiding a default. The Greek Public Debt Management Agency sold €4.1 of Treasury bills. However, buyers were mainly Greek banks, which essentially borrowed from the ECB at one window, through the Greek central bank, to repay it through another”.

This is pure Alice in Wonderland.  Lewis Carroll would be proud of them.  It’s like taking a £10 note from your left-hand-trouser-pocket, putting it in your right-hand-trouser-pocket, and feeling better off.  Or pulling yourself up by your own boot-straps.  On a more prosaic economist’s level, it’s difficult to see how this differs from quantitative easing.  The Greek liability transfers to the ECB, and therefore, ultimately and in the last resort, to German tax-payers.

We had a senior German CDU politician on the BBC World at One the same day saying that the German public had had enough, and wouldn’t pay any more.  In Christopher Booker’s memorable phrase, German tax-payers have “lost the will to give”.  Asked how Greece could recover competitiveness, our CDU man offered two solutions: massive internal deflation; or default, devaluation and €uro exit.  But he was clear that Option One was impractical.  The only way is out.

So it’s rather sad that Greek Finance Minister Yannis Stournaras, in the same piece, reportedly says that Greece “can only survive in the €uro”.  If current conditions constitute “survival”, no wonder Greeks are in despair, and taking to the streets.  Experience suggests that the opposite is true.  When Argentina broke the unsustainable dollar peg, economic growth soon resumed.  When Britain left the ERM in 1992, growth resumed almost immediately, and continued until the current crisis.  When Greece leaves the €uro, recovery becomes possible as they price themselves back into global markets.

My old colleague Chris Heaton-Harris wrote at the weekend that the undoubted upheaval that a Greek exit would cause could hardly be worse than the present situation.  He’s right.  A Greek exit is in fact the solution, because recovery is possible when Greece leaves.  If it stays in the €uro straitjacket, things can only get worse.

Meantime the redoubtable Ambrose Evans-Pritchard argues that the Germans themselves would like to leave the €uro, but are constrained by post-Holocaust guilt.  They don’t want to be the first EU country to call time on this disastrous monetary experiment.  But (says Ambrose) they are hoping that Finland (where the eurosceptic True Finns are doing such a fine job) may move first, and give Berlin a fig-leaf.  Bail-out fatigue is as strong in Helsinki as in Berlin.  And Finland’s fiscal position is strong.  It too, like Greece (but for diametrically opposite reasons), could profit from leaving the €uro.  Only fear of Russian expansionism is keeping the Finns on-side.

Will Greece leave?  Will Finland and Germany leave?  I wish I knew.  But we can be sure of one thing: the eurozone (if it still exists) will look very different in five years’ time.

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6 Responses to The EU: Still crazy after all these years

  1. harrybeckhough says:

    Germany’s Elite will only leave euro when it suits them, having thereby reduced all members to near bankruptcy whilst profiteering themselves; maybe reversing to D-Mark and ‘allowing’ others to join as subservients thereby achieving their long-planned United States of Europe, as I forecast previously

  2. Greece will not leave the Euro becuase the undemocratic, totalitarian masters in Brussels are willing to inflict decades of economic misery upon the people of Europe to keep their federalist dream alive.

  3. Wilfred Aspinall says:


    You know that I keep my ears to the ground on the Brussels scene – let me share with you a few incidents.

    A few months ago I found myself at some evening event in the European Parliament and as one does I circulated about. Interesting the main language spoken was English.

    There appeared to be quite a number of youngish (early to late 30’s ) German nationals, not all together but circulating like me. It was interesting that nearly all of them expressed grave concern about the Greek situation, even more concern that Spain and Italy could follow.

    Their view was that the bailout scenario was not sustainable, Greece need to leave the euro.

    Their doubts were even more compounded when they were asked what their parents were thinking. The response quite negative with the deep worry that their parents had over the value of their pensions and future standard of living

    I have expressed my views to one Greek MEP right from the beginning of the Greek crisis – that the only way for Greece to recover was to leave the euro zone, create their own currency, have control of their own monetary policy and, as you say devalue become more competitive. Do as their neighbours – Turkey – are doing in attracting spending tourists. That MEP said at the time that Greece had to remain in the euro.

    Just before the recess that same MEP indicated that I was right.

    Academics in Germany are making legal challenges in the Constitutional Court and at one lecture I even heard one senior retired businessman indicate that the price of German stability would be to leave the euro zone itself, that perhaps Finland, Netherlands, Luxembourg and a few others would do likewise. They would remain in some form of monetary union but not bailing out member states who were never going to be able to put their own house in order. This German businessman had originally supported the creation of the euro.

    Of course there is a solution that would have consequences. The differences in the economies of the member states in the euro zone is obvious but the monetary union strategy concentrates on the richest members yet the less well off economies cannot keep up with that strategy.

    So the whole euro zone could adopt an economic and monetary strategy working more in line with the poorest member states. The whole of the euro zone could devalue to give sustainable incentive to those member states.

    Of course not even a starter and certainly not one for the EU Institutions would even consider

    Wilfred Aspinall

    • I agree, Wilfred. No solution that would work is politically acceptable, while no solution that is politically acceptable will work. They can buy time. They can keep the €uro on life-support long past its sell-by date. But hubris only takes them so far. Nemesis will get them in the end.

  4. Anne Palmer says:

    Firstly, when the Conservative promised to hold a referendum in 2017* IF THEY WIN* in the General Election, remember- NO PARLIAMENT MAY BIND ANOTHER, plus, as a referendum is not binding, there is no need to act upon the outcome. (Stan also makes this point below too) It is just the people saying they would rather come out of the EU or remain in-whatever!

    This is why I have suggested using the General Election in 2015 as the REFERENDUM we have been denied since 1975, and-AS WE KNOW-WITHOUT DOUBT-ALL THREE MAJOR POLITICAL PARTIES WANT TO REMAIN IN THE EU FOREVER, ONLY VOTE FOR THOSE POLITICAL PARTIES OR ORGANISATIONS THAT WANT OUT OF THE EU-FOREVER. This may be the only chance we have to extract ourselves from the EU. It matters not if none have ever GOVERED before, for lets fact it, all our MP’s have done is obey the orders of foreigners. Having looked at some of what is to come from the EU after 2015, this may be the last chance we may have to set ourselves free. I wish with all my heart, that our Government also recognised that too.

    Also watch closely if there are ANY “opt in’s” this year to Justice and Home Affairs and POLICING, and/BUT remember also, if they get in again in 2015, they can “OPT IN” to all the rest *after the election ar any time afterwards. * Justice and Home Affairs and Policing are at the very HEART of our COMMON LAW CONSTITUTION, yet it is very doubtful any charges of TREASON could get a satisfactory outcome, for I believe all our Judges also have to be aware of the EU Treaties ratified which may well be in conflict with the Oaths of Allegiance they too make to the British Crown. I pray they would put their Oath to the British Crown before any EU Treaty Ratified. Anne Palmer. JP retired

  5. Anyoldiron says:

    Think the UK is, or may come out of the EU? If so, why have and are debating “delivering policy clarity—2030 framework, Evolution of carbon prices? An EU-wide renewable energy target beyond 2020 is desirable, and so we therefore support a renewable energy target up to 2030. The politics of a 2030 framework. Wind energy targets for 2020 and 2030 etc.

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