Greece And The Eu

[Malcolm Robinson]

Any Euroland pundits out there who have an opinion on Greece and the EU?

[Monsta®]

Any Euroland pundits out there who have an opinion on Greece and the EU?

who cares thankfully we turned down the euro so it's got nowt to do with us! ofcourse think !*!@# at 10 downystreet will nen doubt send them a couple of billion to help them out!

[Merlin]

and import a couple of million Geeks oops I mean Greeks to further burden our economic system! there can't be many top notch properties left in London to house them at our expense.... can there?

[threegee]

It's a good thing that the euro is getting a bit of a bashing. Cheaper holidays, and it gives Gordo something to point to when he, and the grey-haired Edinburgh solicitor who pretends he knows something about economics, (falsely) claim that it's a global problem.

Countries that go bankrupt because they hold Olympic Games they can't afford deserve all they get. They're only slightly less dumb than countries that are already bankrupt, and yet still intend to hold Olympic Games they can't afford!

[Malcolm Robinson]

I would have thought we had learnt something about the interconnectivity at play these days in economic terms. If a fly farts in China someone in Newcastle looses their job!

Greece looks set to destabilise the Euro at least in the short term, it has already destabilised Maastricht as the EU hurriedly breaks its own rules for members, that impacts onto our exchange rate which in turn influences our exporters (one area where we could actually have a positive effect being outside the euro). So yes cheaper holidays but goods made here and exported (I know!) are less attractive compared to euro priced ones. Given our biggest market is euroland will we see the BoE devalue further or increase the recessionary effects of large scale unemployment?

The story has always been there in Gov bond yields and still is.

[threegee]

Heavyweight economist Prof. Niall Ferguson has just published an article in the FT titled A Greek crisis is coming to America - the title of which might say it all, except that the article goes on to conclude:

On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic

I'm convinced that his lecture last year in Westminster Hall has a something to do with the unprecedented numbers of MP's who are standing down at the election.

In his Westminster lecture he called the present state of affairs "a repressed depression".

An end to the recession, says Mr Darling! To borrow the famous words of W.C.: "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

[wonky]

all i can say about this topic at the moment is that theyre kebabs are good.!!

[Merlin]

all i can say about this topic at the moment is that theyre kebabs are good.!!

Wonky good to see that we are finally getting down to the nitty gritty :lol:

[Malcolm Robinson]

I like Ferguson, anyone who says the indebted western economies are like crack addicts hooked on cheap credit which they can't repay for their daily fix is a sensible economist in my book. Having said that fancy a yank thinking America is the 'the last bastion of western power'...........

I kinda think the MP's are jumping ship cos they know they are about to get bashed at the next election and going now they get to pick up about 65K each relocation allowance! Bit like the great and good at county, they are jumping ship to get their enhanced redundancies this year, next year with the changes being brought in they won't get anything like the figures on offer now! Now who picks up the tabs for all this stuff?????

I have been though recessions before and they are not a 5 minute thing which slots nicely into a TV news break. We seem to have bankrupted the county in a Keynesian style attack but because the people in charge don't have the stoicism to see it through fully we are left in an even worse position? The next lot will probably try to get back to neo liberal style economics which will have a devastating effect on jobs given the global nature of such things now.

[Malcolm Robinson]

all i can say about this topic at the moment is that theyre kebabs are good.!!

Didn't they pinch them off the Persians????

[threegee]

...I have been though recessions before and they are not a 5 minute thing which slots nicely into a TV news break.

... The next lot will probably try to get back to neo liberal style economics which will have a devastating effect on jobs given the global nature of such things now.

Thing is this isn't a recession of the type any of us has been through. Those are a bit painful, but things inevitably bounce back in a year or two or three. It's actually a 21st century style depression.

We got in this mess through constantly failing to face up to the consequences of overspending. This doesn't need explaining to anyone who has run a real business or even balanced a household budget. But when you attempt to write your own rules, as GB has (even though we've never been favoured with a set-in-stone explanation as to what those five rules actually are) and know no real restraints, then the result is inevitable. More inevitable than the final result of the MPs determining their own allowable expenses.

Blunder one was spend-spend-spend through boom; blunder two was simply refusing to recognise it was a boom and extending "the economic cycle" to whatever fitted the convenience of the day. Blunder three was interventionism - remember that of-no-account building society with incompetent management that should have been allowed to fail. Rescuing NR sent all the wrong messages to the big boys. A huge mistake to throw tax payers money at it. And worse: Darling still pats himself on the back that it was the right thing to do!

You're right about "neo liberal style economics". The solution to the failure of regulation is apparently more regulation. No mention that the regulation which failed was at heart the self-regulation of the politicians themselves. And the solution to being massively over-borrowed is more borrowing: http://news.bbc.co.u...ess/8513650.stm Today the solution to unemployment is less employment - I though I must have misheard that on the BBC, but no a 21 hour week is being seriously advocated by one quango or another!

As Ferguson has pointed out roaring inflation is now locked in to the system. When it does break out you'd better not be on a fixed income, or indeed live in a community that is near dependant on fixed government handouts. There's a cruel symmetry built into this, in that many of those who put this bunch of self-serving incompetents into power are going to be the hardest hit. Who will they blame? Well, certainly not themselves!

[sizsells]

I like Ferguson, anyone who says the indebted western economies are like crack addicts hooked on cheap credit which they can't repay for their daily fix is a sensible economist in my book. Having said that fancy a yank thinking America is the 'the last bastion of western power'...........

I kinda think the MP's are jumping ship cos they know they are about to get bashed at the next election and going now they get to pick up about 65K each relocation allowance! Bit like the great and good at county, they are jumping ship to get their enhanced redundancies this year, next year with the changes being brought in they won't get anything like the figures on offer now! Now who picks up the tabs for all this stuff?????

I have been though recessions before and they are not a 5 minute thing which slots nicely into a TV news break. We seem to have bankrupted the county in a Keynesian style attack but because the people in charge don't have the stoicism to see it through fully we are left in an even worse position? The next lot will probably try to get back to neo liberal style economics which will have a devastating effect on jobs given the global nature of such things now.

M.Ps are only doing what Blair/Bush did but they had inside information (NOT FORETHOUGHT) take us to WAR leave us in the u no what and because their not in power its not their fault

BOLLOKS It never ceases to amaze me we can afford to waste billions of pounds not to mention innocent men and women on the front line getting killed on a daily basis who are worth MORE than money .... The country wastes billions on the Olympic Games when our national health service is on its !*!@# as is the education system our infrastructure is at breaking point, poor innocent folks are being put out of work, we subsides all and sundry, the ones who are working are getting stealth taxed right left and centre. I fear the worst as you may have deduced, people I have talked to are saying we need a change of government I,m not convinced that any party can sort this mess out.

I,m no economist, however in my simplistic term if your running a business ie UK.plc if you can,t afford it you don,t do it until you can afford it. you save up for it. or you only borrow what you can afford to payback without upsetting your lenders ie YOU AND ME.

We at one time led the world in producing all sorts, its all gone now and consecutive governments have stood bye and watched it all go.

But as the song goes "THINGS CAN ONLY GET BETTER" I sincerly hope so

[Malcolm Robinson]

GGG,

I wasn't really suggesting that this economic quagmire we are in is the same as what has gone before only that we now seem to have the attention span of a gnat! Maybe it's the celebrity culture which now so pervades our society but unless something is on the front pages or at the top of the news it is almost ignored by the majority of people. Perhaps Cowell is right, trivialise it even further and people might take it seriously?

I think you are right about the whole overspend scenario and there is one glaring fact above all others, GB was the man in charge of the nation's wallet! I didn't think he was a particularly good chancellor but as a PM everything he touches seems to turn to *$%@!

I don't mind the interventionism; in fact I think Gov's should be proactive, but doing so because of a knee jerk reaction to events rather than a reasoned strategy shows just how willing our current crop of top politicians are to swap their allegiance and conviction for a quick fix, however flawed it is.

As for inflation the gov of the BoE should be going to the chancellor now to explain what he is going to do about the figure as it is above Gov budget projections. With 3% inflation and 0.5% base rates the only people suffering at the moment are the ones who didn't live beyond their means and tried to provide for themselves and their families.

Sizsells,

I think your post epitomises the way most people are thinking that's why I think sitting and main party candidates will get thumped at the next election. If you don't think any have the answers why vote for any of them? Trouble is we may see Monsta's favourite party gain more influence and that isn't the way to go.

You are right about your economic theory however there is a good case to be made for governments borrowing to invest, especially in times of economic crisis, but that investment has to be cost effective and produce a tangible return, even if it isn't in the short term. Seeing all that 'public' money disappear into the coffers of the banks, where they still sit on it, and calling it recapitalisation is criminal, as is the whole QE exercise which is only going into buying government debt because no one else will buy it. The whole thing would be thought much too far fetched to be a Brian Rix farce!

[Stephen]

who cares thankfully we turned down the euro so it's got nowt to do with us!

If only that was true... but apparently our banks have invested an amount of money in Portugal, Ireland, Italy, Greece and Spain (the so-called PIIGS) equivalent to 16% of our GDP.

[Stephen]

Blunder three was interventionism - remember that of-no-account building society with incompetent management that should have been allowed to fail. Rescuing NR sent all the wrong messages to the big boys. A huge mistake to throw tax payers money at it. And worse: Darling still pats himself on the back that it was the right thing to do!

I disagree with this. The global financial crisis became a crisis when Lehman was allowed to fail. Now we have a similar situation with nation states... in theory Greece should be allowed to live with the consequences of its actions but we know that if Greece defaults, the markets will target Spain, Portugal and Italy next... and then the UK.

There's been a lot of talk about how you compensate for this distortion to the free market by big financial institutions, with the two proposals being the Obama plan (split them up so that no-one is 'too big to fail') and the Tobin tax idea (accept that Governments are providing this security to the banks, and tax them for the privilege). I'm not sure how applicable either of these is to nation states (split Greece back into city states?) but that's the problem the EU is trying to solve at the moment - how to bail out Greece without making it so easy on them that it encourages other Eurozone countries to overspend.

[Malcolm Robinson]

Greece would seem to have already defaulted, certainly in the stringent confines of monetary union. Of course the likes of Germany and to some extent France have to bail them out, they are using the same money and if it looks suspect......... This would seem to me to be the whole problem within the Euro member states, without political integration a moneyed integration will always be faced with problems arising from weaker sovereign economies. Course they now have to re-write the rules to allow this sort of intervention, or probably as is so often the case turn a blind eye when it doesn't suit!

[threegee]

Euro Area Headed for Break-Up, SocGen's Edwards Says

"according to Societe Generale SA's top-ranked strategist Albert Edwards.... Even if governments' could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.”

Not going to go down too well with the euro-at-any-price politicians that one then.

Lehman failed Stephen because the particularly nasty CEO rubbed too many people up the wrong way. Someone HAD to be thrown to the wolves, and the old boy network didn't need much prompting as to who. If NR had been allowed to go the UK situation wouldn't have got quite as bad, and the taxpayer wouldn't be in for quite such a staggering bill. No one would have missed a piddling little regional BS that had got above itself, was being run by idiots, and had near disconnected with its customer base. The small guys would have been fully protected at a tiny fraction of the cost - if any at all - to the taxpayer. And the big boys would have got their comeuppance. Instead the big boys were rewarded for their folly, and the small guys get to pick up the massive bill - though this will be well hidden, and spread over years if not decades.

In any form of capitalism companies have got to be allowed to fail. If there's a structural problem you don't paper over the cracks, you pull down and build afresh. The market is pretty good at this if left well alone, but politicians are allowed to meddle, so they do. Meanwhile the final tab just keeps on growing. Essentially what SocGen is saying there.

[Malcolm Robinson]

I find it interesting that the 'father of the euro' Robert Mundell has come out and said he believes Italy is really the one to watch as the intricacies within euroland unfold. I have thought that for a long time now.

Back to Greece and a couple of days ago saw the end of the Ecofin meeting where the euro zone finance leaders met and what did they come up with. Very little really, the head J-C Junker said Greece would be helped by individual governments offering bilateral loans or loan guarantees. This was probably to get around their own rule book! Greece will try to get 16 billion Euros worth of bonds away in the coming months, April & May, the markets might test that resolve! Greek 10 year bonds are now paying 3.21% more than German ones, in the same currency????? (This is the same reason I think Italy is suspect!) Might be interesting to see if Goldman Sachs is brought into the open to explain it's handling of debt issues for the Greek government.

Their last government oversaw a massive 20% rise in public sector jobs and with it a 30% rise in public sector wage bill and pension provision so there must have been large salary increases as well. Coupled with a black economy which is estimated at 30% of GDP and a decline in competitiveness estimated at 30-35% not hard to see why Greece has been hit hard by the current recession. Perming in labour market restrictions only exacerbates the position.

Some of the above rings bells with the way we have been going and funnily enough the Greek prime minster is in London now for talks with Brown. I wonder who is asking who for a loan?

[Malcolm Robinson]

In any form of capitalism companies have got to be allowed to fail. If there's a structural problem you don't paper over the cracks, you pull down and build afresh. The market is pretty good at this if left well alone, but politicians are allowed to meddle, so they do. Meanwhile the final tab just keeps on growing. Essentially what SocGen is saying there.

Politicians can't help themselves from grandstanding; it's in the nature of the beast. They now seem to be falling over themselves to patronise the people affected by the Corus closure. Shows just how ineffective they are when faced with economic reality!

[Malcolm Robinson]

I disagree with this. The global financial crisis became a crisis when Lehman was allowed to fail. Now we have a similar situation with nation states... in theory Greece should be allowed to live with the consequences of its actions but we know that if Greece defaults, the markets will target Spain, Portugal and Italy next... and then the UK.

There's been a lot of talk about how you compensate for this distortion to the free market by big financial institutions, with the two proposals being the Obama plan (split them up so that no-one is 'too big to fail') and the Tobin tax idea (accept that Governments are providing this security to the banks, and tax them for the privilege). I'm not sure how applicable either of these is to nation states (split Greece back into city states?) but that's the problem the EU is trying to solve at the moment - how to bail out Greece without making it so easy on them that it encourages other Eurozone countries to overspend.

Actually Stephen we might be higher up your list than that! If we accept 10 year gov debt bond yields in comparison to German Bunds is indicative then the UK is in a worse position than Spain or Italy. UK 10 yr bond yields are .95% above German ones with Spanish ones .81% above and even Italian ones at .84%.

We have spent nearly £200,000 millions buying our own debt and we are now locked into either repaying it or defaulting on it, either option not very attractive in enticing normality back into the markets. If we add inflation, and yes the BoE have said they consider the latest figure to be a blip but really....., and also the latest public finance figures, (Jan which holds a lot of information about how much the self assessment workers are paying as tax or not as that figure fell by 11.8% compared with the previous Jan!) then we can see we are far from out of the woods and in fact probably only just entering the deepest part of them!

Until we see a clear plan and direction from our leaders to stabilise the situation and get back to some sort of sustainability we are living in La La Land!

As for the Obama and Tobin options you mention I would have thought the Obama one holds more water. The Tobin plan whilst appealing to nationalistic or even xenophobic tendencies probably couldn't work in the global context we now find ourselves in. The Obama one is probably the only way a capitalistic economy like the USA can resolve itself to the fact that if a section of the economy is so important it cannot be allowed to fail then it should be under state control. Keeping it in the private sector but splitting it up into much smaller units at least gives some form of governmental control.It would stop another Lahman imploding the market.

[threegee]

Lehman didn't implode the market Malc - the market did it for Lehman. As I explained earlier something had to go. All the merchant banks were under the same strain of circulating dodgy debt. A decision was taken to support other banks but not support Lehman Bros.

But we had pre-warning over here and it was ignored. Letting NR go would have provided the requisite bloodletting and moral hazard; it would also have done it earlier, and today's taxpayer debt mountain would not be quite so high.

As the crack slowly progressed and much bigger RBS failed, Darling did not act in the public interest as claimed. In publishing the then exchange of memos (why do these things always have to be leaked) between him and the BoE this week, the FT has done a public service. In these it is made very clear that the mandarins at the BoE foresaw major problems and risk in stepping in, and were effectively warning him not to. His reply illustrates that he didn't really understand what was going on. To me it also says that he put politics before prudence, and isn't a fit person to be in charge of our finances.

Gordon Brown's single still-standing claim to anything pretending to be economic competence is that he gave control of interest rates to the BoE to stop them being used as the former political lever. Yet here - when it really counted - the BoE's prudence has been undermined for political gain in a much more fundamental way.

[Malcolm Robinson]

GGG,

I don't think the market did perform the way you stated. I think the market always acts in ways to enhance its own validity, be that up or down. Left to its own devices the market will only react to strictly economic data, but that has to be as unbiased as the market's reaction. What seems to have happened is that a mature part decided to invent new income paths but they were fraudulent so therefore unsustainable. We then saw the politicos enter the frame and impose their own reasons. Had there been a President with a different political background we might well have seen Lehman's saved!

I can see the sense of letting NR go but for me there were two possibilities. Either that or nationalise the whole sector. Like I said if this sector is so intrinsic to the health of the nation then it should be under state control. Banks are in the business of money supply, the private sector as a whole doesn't mind where it gets its investment only that the terms are right. It has cost us billions of pounds to end up with some half hearted halfway house which isn't working for our benefit anyway!

I don't think it's fair to say Darling didn't know what was going to happen, given a certain course of action he took, I don't think anyone knew what was going to happen hours into the future never mind weeks, months or years. These are the times when a clear personal belief in a political course is needed; problem is that we now have career politicians with no real ethos.

As for the BoE I think that was more of a precursor to us going into the euro and even preparing the way for the dreaded federalism than anyone taking a sensible decision and withdrawing interfering rights from transient politicians!

[threegee]

I'm not sure I know what you mean by " the market always acts in ways to enhance its own validity, be that up or down." The fact is there were countless billions in "toxic debt" swilling around. That means that it had been through so many hands and so many transformations (all on margin) that no one knew where it actually came from, and at what point a default would ensue. When people finally woke up to the fact that a lot of the stuff was tied to people who had been mis-sold houses they couldn't afford, and worse fraudulent mortgage applications, the whole pack of cards started to collapse.

This was a massive failure of regulation, both by our FSA and the Fed in the US. The banks were only doing what they'd always done - making money by moving bits of paper around. It is not and never has been a global problem. Not even a European problem; theirs is tied to other factors touched on in the SocGen bit above; though we have undoubtedly contaminated them.

If you are arguing that no bank should ever be allowed to fail, then by all means nationalise them, because there's no point in them being limited companies. You've removed the moral hazard that makes capitalism work - and work well - for the benefit of everyone. But that's no guarantee that the same thing won't happen under state ownership, and it practically guarantees inefficiency and waste. If a problem of this scale were to happen under state ownership it would take the country down with it. And, through Brown/Darling's mismanagement it may yet do so to the UK.

Certainly one thing is clear - you can't increase the money supply on the scale that has already been done without roaring inflation breaking out. That's a very strange thing to say at a time of record low interest rates; it sounds counter intuitive. But this *is* going to happen before too long. Pity is that it looks like it's going to happen on another watch to that of the people who caused it!

[Malcolm Robinson]

That's my point GGG it wasn't a normalised market, it was fraudulently built. Like even the best Ponzi schemes it had to crash it wasn't being underpinned by sound economic fundamentals. The regulators were certainly to blame because they didn't act to stamp this out and return the market to its normal operating principles.

I am not really arguing to nationalise banks only that in this case it was certainly an option which I think should have been taken if we are to believe they are too important to the county to be allowed to fail. You can't argue that line then allow them to be in the hands of people without any consideration to the country as a whole. All that recapitalisation dosh sitting in bank vaults which is untouchable now could have been used to restart normal banking for the people and may well have negated the need for QE. If NR say came out with a savings rate of 5% it would attract most if not all savings which could be dished out at say 7%. Before you start on international capital etc have you seen credit card rates, the average now is 18.5%. I am not saying this is what should happen only generalising an option. There are no 'good' reasons why a nationalised institution shouldn't be run in as competent a manner as any in the private sector.

I think you are correct about inflation we have overcompensated for deflation and given our effect on a global scale we can't hope to influence even raw material prices, which by and large we have put up devaluing the pound, never mind anything else. Everything seems to have been done to get us back to an unattainable position and one which caused the problems in the first place?

[sizsells]

Hindsight is a wonderful thing. and we can all have opinions MYSELF included as to how and why this catestrophic global event took place, we can ALL point fingers and apportion blame. However the fact of the matter is there are folks and corporations in the world who have actually made money out of this I mean what other business (apart from football) would folks who fail get paid annual bonusus ammounting to decades of earnings for a normal person.

If I fail in my job i,m down the road as are are most of us... not these buggers they should be held accountable and I mean from the highest level it wont make a great deal of difference and it won,t FIX our problems however it might just make ammends to some of the poor innocent individuals who because of the greed of others are the ones who are REALLY affected.

And I will go back to an earlier post where I mentioned that folks were saying a change of government is whats needed the problem again in my opinion is there is,nt a LEADER among ANY of them.

I personally was livid when the labour party forced us to have a PRIMEMINISTER by default, we the public/voters had NO say in the matter whatsoever, irrispective of how we voted we had no say in this "DEMOCRACY" that we live in, it made me so annoyed I thought right I,m going to e.mail the opposition parties and ask them why they wer,nt SHOUTING FROM THE BLOODY ROOFTOPS about the way this was done and told them to get off there backsides and do something about it in the houses of parliment the ONLY reply I got was from the Conservatives and their answer was "quote" The days of PUNCH AND JUDY politics was over.......... Theres opposition for you I even offered to do it for them if they were scared and I got no reply.

I wonder why to this day.... why no-one had the guts to say anything and the answer is there is no LEADER......