• 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.