Well, yes, before the euro that’s what we did do

But the point remains that what is left is unserviceable without radical reform of the Greek economy that permits it to grow again, and that reform is not possible unless existing debt is written off. That’s because without that write off all the money needed to invest for growth will instead go in debt servicing.

Long ago the reality of this type of crisis was recognised in the commercial insolvency world. What Greece is in is best described as a classic receivership situation where there is a surviving activity well worth preserving (it’s a country, after all) but where any chance of it prospering is prevented by debt burdens that are the consequence of past mistakes. In the commercial and personal world, and even for some forms of local government, we pragmatically allow such restructuring because whilst no one wants to see non-payment of debt we prefer that to no payment at all and the continuation of a struggling entity always tottering on the brink of potential failure.

We need to recognise than that if Greece was a company a pre-packaged insolvency would probably solve most of its problems, in days. It is time we did the same for countries. But don’t hold your breath because bankers object to this, largely because the guarantee that countries won’t fail is what they think underpins their own risk, and the last thing they want to do is accept responsibility for that.

So Greece must suffer when glaringly obviously a better solution can be and should be found. In the commercial world you might call that professional incompetence. Internationally it’s just callous. But no one is listening.

That’s always been the standard IMF solution. Debt writedown, internal reforms and devaluation. This has been the standard wisdom for many decades. It’s only the euro itself that prevented the same thing being done in Greece.

Let’s put the blame where it belongs here. We’ve always known what to do. It’s only that European Union project that prevented us doing what we all knew how to do in the first place.

But then with Ritchie obviously angling for an EU contract he’s not going to say that, is he?

13 thoughts on “Well, yes, before the euro that’s what we did do”

  1. Of course, in the commercial world the entity whose debt was written off would have a fairly ruthless change of personnel at the top and a quite noticeable hardening of outlook.

    Whereas what the Left want is for the debt to disappear and things to carry on just as before. The Magic Money Tree has withered – they want a magic potion to wake it up again.

  2. Another post where he boasts of his meeting in Brussels might indicate why the EU is in the position it is in. Unless it’s a consultation on Flat Earth theory or Tin Foil hats Murphy shouldn’t be allowed within 50 miles of any EU building.

    More terrifyingly he is ‘hitting the keyboard hard’ working on his entirely non-satirical piece ‘the joy of tax’ – truly in a league of his own as the most sanctimonious, self-absorbed priggish cretin in contemporary British politics. Truly appalling.

  3. because bankers object to this, largely because the guarantee that countries won’t fail is what they think underpins their own risk,

    Hmm, its entirely possible that it underpins their own risk because of government capital regulations that say that government debt is one of the few sources that are allowed to be valued at the full value of the debt.

    So bankers disproportionately pick up government debt because the government encourages it.

  4. the guarantee that countries won’t fail is what they think underpins their own risk

    Murphy has this knack for skirting around the edges of reality without ever really brushing against it.

    Wasn’t it Walter Wriston at Citibank around 40 years ago who maintained that countries don’t go bust, whereupon Argentina promptly and disobligingly proved him wrong?

    Banks have an uncanny capacity for forgetting past experience but perhaps not to the extent Murphy believes.

  5. Bloke in Costa Rica

    If Greece goes completely tits up, who is left holding the can? I don’t mean which financial or governmental entity, I mean which set of physical human beings, with names and children and bills to pay. They seem to have been rather overlooked in all this.

  6. Taxpayers of other eurozone countries. ECB losses will mean smaller ECB profits in future (making your own money is profitable) and thus lower payments to governments from the ECB. EFSF where a lot of it is, governments will have to cough up, eventually, to cover losses. IMF is nony a small part of it but that will fall on all shareholding governments in hte IMF. ie, everyone.

  7. hell’s teeth, for all that he’s a chartered accountant and has presumably helped some of his clients through (or possibly into) insolvency he has no idea at all what this involves:

    “We need to recognise than that if Greece was a company a pre-packaged insolvency would probably solve most of its problems, in days”

    Yes, the actual pre-pack process can take as little as one day; the preparation for the pre-pack on something much smaller than a whole country can take months, including shadowing all major finance staff, negotiating with suppliers not to pull the plug, renegotiating with lenders and so on. He’s the kind of idiot who looks at someone pulling the trigger and says “Well, shooting’s really easy” without thinking of how hard it is to design and manufacture the gun and ammo in the first place

  8. Richie,does some selective memory and the usual brain dead analysis – subtext…….please save my precious euro and the Brussels slave Empire.

    Here’s my brain dead effort………………..

    Erm?…… didn’t the Wbankers diddle the figures so that Greece could be sneaked in to the great idiocy [single currency]!

    And then – GREECE in the EURO – those naughty bankers were so willing to lend to the Greeks….they fell over backwards to give credit where it shouldn’t have been due.

    All the while, Greeks bought ships, had a whale and military kit – they spent like only insane Greek politicians can.

    Thus, if they forgive Greek debt, what about the Spanish, Portuguese, Irish, Italians et bloody cetera?

    Financial calamity for a small economy but not – a global breakdown of the financial system – maybe. Perhaps, the push on the first domino will be only a small insignificant caress – even an accidental tap…

  9. Bloke in North Dorset

    Long ago the reality of this type of crisis was recognised in the commercial insolvency world. What Greece is in is best described as a classic receivership situation where there is a surviving activity well worth preserving (it’s a country, after all) but where any chance of it prospering is prevented by debt burdens that are the consequence of past mistakes. In the commercial and personal world, and even for some forms of local government, we pragmatically allow such restructuring because whilst no one wants to see non-payment of debt we prefer that to no payment at all and the continuation of a struggling entity always tottering on the brink of potential failure.
    Its like the last 5 months of the IMF and EZ telling Greece that they won’t get any funding while they continue on insisting that they don’t need to make changes to what got them in the shit in the first place just passed him by.

    As always he’s just pulled his head out of arse long enough to look round, completely miss the point, and then stick it back up again so he can lecture some of the brightest minds on the planet on their specialist subjects without bothering about the details.

  10. Ah, at last I understand.

    Sod austerity, keep borrowing money, when you can’t afford the repayments do a Houdini with the debt, then borrow more money. Ad infinititum.

    I really can’t believe I’ve been so blind all my life.

    No wonder The Dick lives in a big house: “hello mr mortgage lender – can’t be arsed with these repayments any more, write it off there’s a good fellow, then let me have a million”.

    I dunno why we’re not all billionaires, it’s so simple.

  11. Bloke in Costa Rica

    So, if it’s Eurozone taxpayers that are going to get the shaft rather than some cabal of portly bankers who sit around all day in their clubs slurping enormous balloons of Armagnac and conspiring against the proles, why has more not been made of this? Is it because if the fiscally prudent burghers of Germany, Holland and Denmark are fully apprised of how much of their dosh the unelected Euro-elites have lavished on people who are vanishingly unlikely ever to pay it back, there will be ructions?

  12. Bloke in North Dorset,
    Greece has made changes, more so than, for example, Germany and the UK. They’d also been more profligate, but the point still stands.

    The argument is that this is counter-productive beyond a certain point, that too much soon would actually reduce their ability to sort out the current mess. The US, UK and Germany applied the same logic, so it can’t be an entirely stupid idea.

    Whether Greece can function within the EZ regardless is another, and probably more urgent question.

    The bright side here is that, a) enthusiasm for the EU is one of the Seven Pillars of Rightonitude, and, b) the EU is the neo-librul oppressor of gorgeous, pouting Syriza. How’s Murph and his gaggle and square this circle? The obvious move is to go back to 1983 and campaign to leave the EU. But, horror of horrors, those ghastly UKIP people are already there.

  13. BiCR: I’m sure our genial host will correct me if I’m wrong, but I believe thecabal of portly bankers took their shafting in the ’13 edition of the bailout dance, to the tune of 53% of their loans.

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