Another way of looking at the Greek problem

So, if we all pile in, as taxpayers, and cough up for the Greek debt.

Hmm, so, what can we use as an anaology for this?

How about Liverpool under Hatton?

One, junior level, of government, borrowing and borrowing, going bust and needing to be bailed out by the taxpayers of the next higher level of government.

Those in Liverpool got the benefits (however scanty) of the spending, those all over the UK had to cough up for them.

Greece got the benefits of the borrowing, all EU peeps will have to pay for it.

And the solution, once the mess had been cleared up? To limit what Liverpool, or anyone at that level of government, could borrow.

So, at what point does the ECB, the EU Commission, or some suh, get to tell all eurozone governments how much they can borrow and on what terms?

No, not advise, cajole, hint, but actually tell? Insist?

And, err, where does democray go when that happens?

19 thoughts on “Another way of looking at the Greek problem”

  1. I don’t get your point.

    Let’s say the potential lenders were a bank outside the EU. They would surely insist on how much they (the Greeks) can borrow and on what terms.

    The problem of Derek Hatton wasn’t that he was able or unable to borrow money, it was the lack of moral hazard.

  2. @TDK What’s to stop the greeks taking the money from this lender then going to another bank and borrowing even more? What Tim’s suggesting is that the EU may need to try and put absolute limits on the borrowing if it wants to stop this happening again, and that can’t happen if the nation remains sovereign.

  3. OK but the reality is that by now, no one would lend any money to the Greeks unless the lenders had good cause to think the rest of the EU would bail them out. At that point either the EU bails out with no conditions or it imposes certain conditions which might include limiting future borrowing. (Or Greece leaves the Euro).

    I don’t really see a problem with any of this. I guess my real problem is that I can’t see where democracy comes into it. The idea that electors should be able to vote continued spending way beyond income seems a very un-Tim like suggestion.

  4. Ultimately, this is where the whole EU project has to lead and succeed or fail. This has been known for a long while, but perhaps not realized. The only way that the EU can move to the next stage of the federalization of Europe is to have control of the finances.

    The first incarnation of this centralized control of national budgets only applied to the Eurozone and set the fiscal requirements for entry (not continued membership), countries like Germany, Holland and France were able to meet these requirements from day one. Countries like Italy were able to either meet the requirements for a long enough period (or have enough off balance sheet liabilities) to be able to get into the Eurozone. The remainder like Greece, just got an enterprising wunch of bankers to cook the books to allow them to appear to meet the criteria at least temporarily.

    Now it has been demonstrated that to survive in the Eurozone requires each of the ‘less Germanic’ countries to become ‘more Germanic’, then the price for bailing out the Eurozone will be greater transparency of each member countries liabilities and also some form of clearance or veto of national budgets by a centralized Eurozone authority (possibly the ECB, possibly the EU court of auditors, possibly a new EU institution).

    There will be attempts to have non-Eurozone members subject to these new strictures, Barroso especially has already tried to establish an oversight or veto mechanism over the UK budget and been firmly rejected.

    Once the Eurozone countries give up control of their budgets (which is what a veto does), then they have effectively become EU protectorates anyway, so it’s all a bit moot really.

  5. I hope people realise that there will come a point where the only way to get the EU out of our lives will be to seceed.

    There have been relatively few secessions which have not been either the settlement of a civil war or the cause of a civil war, the US civil war of 1861-1865 being probably the best illustration of this (ignoring the red herring of slavery for the time being).

    I’m not sure the EU federalists realise that the EU project, whose stated aim is to reduce the likelihood of future wars in Europe is more likely to actually cause future wars than anything else.

    Despite the current debt crisis, the fuse will truly be lit when either Serbia or Turkey are granted EU membership.

  6. I don’t understand how this has got so complicated. If you continually spend more than you earn, once the bailiffs have had the Flat Screen, the Beemer, and the three piece suite, you either declare yourself bankrupt and start again, or your creditors get to dictate what happens to most of your future earnings.

    Believing you were getting something for nothing eventually bites you on the ass, and this applies equally to the Germans as it does the Greeks or the Irish or the Portugese.

  7. @John Galt:

    “There have been relatively few secessions which have not been either the settlement of a civil war or the cause of a civil war”

    For some values of “relatively”, a wonderfully flexible term

    Secession of Norway from Sweden, Slovakia from the Czechs?

    Separation of Canada, Australia, New Zealand, many African, Pacific and Caribbean states from British Empire? And in latter cases, from French ditto?

    Even, extraordinarily, secession of Baltic states, Ukraine, Georgia, Armenia, Azerbaijan, numerous ‘stans from Soviet empire?

    There are counter-examples of course: but pessimistic to suppose civil war most likely.

  8. Democracy benefits if government borrowing is controlled, because government borrowing is, by its very nature, undemocratic. A spendthrift administration is able to force the following prudent administration to pick up the tab for its generosity. So, basically, I would absolutely love for some external power to stop my government borrowing a single centime and balance the effing books.

  9. I don’t really see a problem with any of this. I guess my real problem is that I can’t see where democracy comes into it. The idea that electors should be able to vote continued spending way beyond income seems a very un-Tim like suggestion.

    I don’t think Tim is suggesting that. But that seems in effect what some on the Left are saying; that democracy is flouted by people demands for limits on spending and creditors demands for repayment, while electors call for no cuts in spending.

  10. @Stephen – 7:
    Separation of Canada, Australia, New Zealand, many African, Pacific and Caribbean states from British Empire? And in latter cases, from French

    I think we need to look at it in different terms. If you exclude colonial (i.e. overseas) expansion and contraction and think of only the circumstances where a single state has been forced to divide itself into two or more (i.e. Yugoslavia) independent states then these are much more likely to tend to violence.

    Examples of secession that seem to fit this definition are:
    – Belgium (with the Netherlands) 1830
    – Brazil (failed secession) 1835
    – Congo (failed secession) 1960
    – China (secession of Taiwan) 1949
    – Cyprus (secession of North) 1974
    – Malaysia (secession of Singapore) 1965
    – Mexico (secession of Texas) 1836
    – Nigeria (secession of Biafra) 1967
    – Pakistan (secession of Bangladesh) 1970
    – Switzerland (secession of Catholic cantons) 1847
    – USA (secession of Southern states) 1861
    – Yugoslavia (gradual secession) 1991

    In all of the above secession’s the only ones which were preceded or succeeded by civil war. The only exception being Malaysia/Singapore.

  11. Surely this is a good idea though?

    Clearly this time round we need some more competent crisis management. Greece needs either a real bailout or a real default, and needs to weigh up the costs and benefits of being in the euro. I suspect they will default, Merkel will demand they are kicked out, but will back down under pressure from the EU.

    Whatever. It can’t be allowed to happen repeatedly, and surely it’s better for government borrowing to hit a politically-imposed brick wall before it hits the real brick wall and brings down the financial system with it. Again.

    The eurozone needs one of two things – either an acknowledgement that defaults are inevitable (actually much more likely within a currency union than outside one) and a mechanism for dealing with them, or a mechanism to prevent them from becoming a realistic possibility. How about a legal limit on government debts of 60% of GDP for starters? What a wild and radical idea!

  12. @John Gault-10

    You could I suppose add to your list:
    Panama (secession from Colombia) 1903
    Pakistan (secession from India) 1947
    arguably Armenia and Azerbaijan (secession from USSR) 1991, since war between them followed
    Chechnya (secession from and reabsorption by Russia) 1991 and thereafter
    Eritrea (secession from Ethiopia) 1993
    South Sudan (secession from Sudan) 2011

    On the other hand, the list of non-violent secessions by your definition, excluding overseas expansion and contraction, would have to include:

    Colombia, Venezuela and Ecuador (dissolution of Gran Colombia) 1831
    Norway (secession from Sweden) 1905
    Kuwait, Qatar, Bahrein (secession from Turkish empire) 1913
    Syria (secession from United Arab Republic) 1961
    Singapore (secession from Malaysia) 1965, as you note
    Lithuania (secession from USSR) 1990: not absolutely non-violent but hardly civil war)
    Armenia, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan [answer to a demented Scrabble-player’s dream], Latvia, Moldovia, Tajikstan, Turkmenistan, Ukraine, Uzbekistan (secession from SSSR) 1991
    Slovakia (secession from Czechia, or possibly vice versa) 1993
    Montenegro (secession from Serbia) 2006

    I find it reassuring that as time goes on, non-violent non-overseas secession seems to have become more likely. And I would submit that secessions from the EU are much more likely to resemble the disintegration of the USSR than that of Jugoslavia.

    Incidentally, wouldn’t the secession of the UK from the EU be an overseas matter, and so by your definition exceptional?

  13. Stephen & John
    Interesting historical examples, but most of the secessions mentioned are from empires, states in decline. EU’s very much in an expansionary phase. American War of Independence might be a rare example of a nation seceding from an expansionary power but the Civil War’s closer to what you’d expect. You need to be looking through history for rebellions that have failed. Boer War, Russian Civil War in the 20’s, yes to Biafra, Cyprus in the Eoka period.
    With the EU depends on the country seceding. Don’t supposed it’d be bothered about Eire just now. Maybe some of the other small fringe states. Absorb them again later. UK?. Shouldn’t think we’d be allowed to elect a secessionist government. Look what happens to referenda decisions. You want UK out of the EU you need to be studying the IRA, ETA &be prepared for a long, bloody battle on British streets.

  14. Giving up your democracy is the price of joining a common currency. Your neighbours now have a stake in what you do and the right to tell you what to do.

  15. Anyone who thinks the response to the UK deciding to leave the EU would be anything other than “ok, fuck off then” (at worst, combined with the EU sticking up the biggest trade barriers it’s allowed to under WTO rules and making EU travel and residency a pain the arse for British citizens. Tim’d have to come home…) is delusionally insane.

    More generally, how is this giving up democracy? The people of Europe still vote on what happens; the decisions are still taken by democratically elected politicians. Giving up independence, yes.

  16. @bloke in spain:

    Hadn’t thought of secession of US as good example, but now you mention it, excellent parallel: people across the water standing up for traditional rights and liberties of Englishmen against expanding, overweening, Germanised ruler.

    Hmm. Don’t think we can expect marauding Hessians, though. John B is right: you only get fighting if both parties are prepared to fight, and who seriously thinks the EU is?

    Reckon Tim would be all right in Portugal though, they’d have a great deal to gain from secession.

  17. @John B, we don’t get to vote for the EU commissioners who wield more power than the MEPs. If I don’t like an EU directive, how do I vote against it?

  18. “John B is right: you only get fighting if both parties are prepared to fight,”

    Heard of Prague ’68 & tanks in the streets? Czechs weren’t looking for a fight either. Just elected the wrong government.

    Or Hungary the previous decade?

  19. ChrisM – You don’t get to vote for government ministers or for Acts of Parliament, either. Commissioners, like government ministers, are chosen by elected politicians.

    BiS – are you seriously equating a democratically-overseen bureaucracy with no enforcement powers whatsoever to a totalitarian military superpower? This is what I meant when I referred to “delusionally insane” above.

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