•Markets are already on the slide, after a brief surge following the Greek election results. New Democracy may have won 129 seats out of 300 but actually the majority of people did not vote for a pro-bailout party. The conservatives won only 29.7 per cent of the vote.
Pro- or anti-bailout, there is an illness affecting the Greek political class which they are in danger of passing onto the voters. For it is not just the MPs and parties who are suffering from Stockholm syndrome, yearning to be kept safe in the economic prison created by the EU. Even the anti-bailout parties are still saying that Greece must stay in the euro. It is a view I disagree with entirely.
Greek unemployment hit a record high this year, reaching 22.6 per cent in the first quarter, double the eurozone average. Among 15- to 24-year-olds, this soars to 57.3 per cent. It is thus not surprising that anti-bailout party Syriza saw most of its support coming from the youth vote. With the country still in recession, there’s no way they can pay back their debts. And with no actual solution to their problem, young people know they need dramatic action.
We saw the “lost decade of development” in Latin America in the 1980s, where the levels of debt were greater than countries’ GDP. Quite how Eurocrats and politicians think Greece will suddenly have a surge in growth and jobs because they have marginally elected a party which supports “more of the same” is beyond me.
What Greece needs is to return to the drachma, to get back to competitiveness. Who, politicians aside, would invest in Greece at the moment? And without foreign direct investment or credit, there are very limited opportunities for new businesses, or even assistance to keep current businesses afloat.
With the reintroduction of the drachma, imports would become more expensive and there would be demand domestically for more-affordable Greek-made products. There would be a huge surge in tourism as sun-seekers flocked to Greek beaches, delighting in the low prices. It would kick-start the economy: there would be job creation.
Yet David Cameron and George Osborne are determined that Greece must stay in the eurozone, shackled by the constraints of the bailout and a Eurozone-wide monetary policy. Perhaps if they received a fraction of the letters that I did on the subject, they might have a different opinion — and one not driven by a misguided belief that the EU has the answers.
Nor do I buy the argument about UK banks’ exposure to Greek debt. These banks have already lost billions with the “haircuts” agreed earlier in the year. As with all investments, these things can go wrong. As it is, the top two holders of Greek debt are Greek banks, followed by French and German ones. BNP Paribus has written down the value of its Greek debt by 75 per cent.
Osborne has shown during his period as Chancellor that he has little understanding that the euro is going to break up anyway. Perhaps it is time he admitted that the euro is, by any measure, a failure and that Greece’s future does not lie with more bailouts but with economic independence.