The moral implications of bail outs and austerity

Morally bankrupt.

Bankrupt?

How little we have seen of the human impact of the ongoing financial crisis in the Europe.

Of course we have seen reportage of the human reaction, be they stern faced Ministers assembling around large oak tables, shooing away the clucking throngs of news journalists awaiting any shred of carrion to be tossed from the wreckage, or the gathering crowds of unhappy protestors, waving banners before being strewn with rubber bullets by an equally unhappy, yet duty bound police.

And yet then, when we read on, we learn that Greece has asked for that, despite being reprehensible for having committed such and such an oversight, while doom laden Spain is sure to encounter this in their fate leaving it to Germany to propose that, and so forth.

As such the anthropomorphic labelling of whole countries is enabling both journalist and reader to be removed from what should be the real news story of the unfolding Eurozone disaster, the true cost to the everyday citizen. The people angle.

But it has suited the European Union to convey this image and the largely national-leaning print press to extenuate it. Define the problem as an entire country’s fiscal profligacy and then the only tool for debt solution is the EU's favoured austerity that must be shouldered by all. In Brussels it allows for a convenient bypass of democratic wont in order to transact further powers within their scope, while for national governments and newspapers, it conjures a sense of national unity  by lauding an "all-in-this-together" sermon that allows the weakest in society to be most heavily burdened, despite being the furthest removed from the causes of the crisis. What is so ironic is that while in Brussels, Barroso readily condemns the very notion of nationalistic, populist barriers to deepening European integration, he relies upon it implicitly to sell the Troika imposed programme of cuts to a nation. Everyone must do their bit.

Mr Barroso, it was your fiscal policy and foolhardy adherence to a single currency, placing political will before economic sense, that both caused the problem and continues to prolong it, so why must Senor Garcia be forced to work until his joints are ground to dust while his children will be taxed for the ills committed by their predecessors? I am sure when the concept of a single currency without unified fiscal policy was being drawn up he wasn't consulted.

Every country that found itself in the same position as the Eurozone after the credit crunch in 2008 was able to find a solution. In Iceland, the economy hit such a wall that the country defaulted and devalued the Krona. Iceland is now recovering very quickly and is borrowing again on the world markets as a creditworthy entity.

You see the debate that has raged in newspapers across Europe about what to do with a problem like Greece depends heavily on viewing each and every man, woman and child on an Athenian controlled island as both part of the problem and therefore responsible for its solution.

If a person borrows money, they receive the amount directly and must pay it back according to the terms and conditions. If a country borrows money, the citizens are unlikely to be informed of the loan, its purpose and certainly not its terms and conditions. How then does central government, let alone the government of a third country, morally justify imposed austerity?

Yet the personification of Greece as the naughty member of the Eurozone allows the EU to paint the picture of the reckless neighbour who, finding themselves unable to pay for their mortgage, appeals to the bank for help to keep their house. They are relucantly granted a reprieve on condition of some very stern, and of course wholly warranted, terms and conditions. Therefore if Greece gets a bail out at the cost of imposed spending cuts and strict austerity measures, then Spain would have to subscribe to the same punitive conditions if their economy is also to be rescued. Of course Senor Garcia cannot see why his benefits are being stripped when he has done nothing but work hard all his life. Meanwhile Germany, who does not find herself in such a financial mess, can bang the fist on the table and make demands which will affect the retirement age of Kirios Papadopoulos. Of course when I say Germany I mean Merkel and her cronies and their Brussels-based counterparts.

In 1995 Germany strongly opposed an IMF bail out of Mexico arguing moral hazard in giving a €17.8 billion loan as it essentially worked out as a rescue package for the American investors who had shored up so much Mexican short-term debt. Now the boot is on the other foot and it is German banks facing losses if Greece is allowed to go under, with as much as €22 billion of Greek public debt held by German investors. Suddenly Frau Merkel repeats the tune of solidarity for Greek and EU ears, but will happily pour scorn on Athens as and when it will placate her own people.

It may suit Brussels, political leaders, newspapers and ministers to talk about Greece, Spain, Germany, Portugal and Ireland as if they are characters in philosophical problem. But the real moral debate is not who should be paying the debt, but how.

A knock on your door from Barosso can mean only one thing...

It's getting rather tiring talking about the same topics, week in week out.
But they simply cannot be ignored.
As soon as they disappear from newspapers, they are simply simmering under the surface of a fast-track primordial swamp waiting to evolve and re-emerge a more fearful beast.
More than £30billion of value of British companies was obliterated  by news that Spain, as predicted, will likely need a national, as well as the already agreed, banking bail out. And if the Eurozone's fourth largest economy is sucked into the mire, well, I've said it before and will say it again. The EU is screwed.
In fact the Global economy is going to be up the creek without a paddle. World stock markets fell by 2% in the wake of the news.
British banks with billions tied up in Spanish loans are now in a precarious position while the credit ratings of the Netherlands, Luxembourg and Germany are all set for a downgrade, which ultimately will compound the problem, making the powerhouse economies of the single currency face higher rates of borrowing.
Italy is also heading towards a bail out with public debt totalling almost £1trillion.Ten Italian cities are on the verge of bankruptcy.
Currently Spain has been granted a bail out of up to £80 billion to shore up its banks, which are sitting on £122 of dodgy loans. But the latest news that the state also need an urgent cash injection adds an eyewatering £250billion onto that amount. Throw Italy into the mix and in total the Eurozone looks like it may need the previously predicted €2 trillion to get through to the end of the year. The bail out fund that took months to agree has only €700billion to it's name.
Let's see what that looks like as a number...

€2,000,000,000,000,000,000

Yikes!

Meanwhile the Troika, (IMF, ECB and EU) are about to arrive in Greece to turn the knife a little more and make sure their hugely unpopular and unsuccessful austerity measures are being obeyed to the letter.
Greece is likely to suffer much deeper recession that previously thought, with expectations that the economy will shrink by 7% ratehr than the forecast 5% demonstrating the swingeing cuts are driving the economy into the ground. But without progress, Greece is being threatened with not receiving the final part of its bail out of €31.5billion. Reports suggest the IMF will now refuse any further calls for aid.
I was surprised to learn that despite his pontificating from Brussels, Commission President Jose Manuel Barosso hasn't even set foot in Greece, the country he has overseen being brought to its knees, since 2009.

I'm not one for conspiracy theories but...

Today the European Commission will announce a 6.8% increase in budget - equivalent to €138 billion extra.

This is truly extraordinary when the majority of member states (25 out of 27, excluding the Czech Repubic and the UK who refused to sign up to the latest 'non-EU treaty' financial pact) are under mandate to enforce austerity measures imposed by Brussels. How then can the EU defend such an enormous hike in its own budget?

The swingeing austerity measures laid out by Brussels are crippling European economies, not saving them, with the constant cutting and adherence to the single currency project proving disastrous for the EU and global economy as a whole.

Today the ONS announced that the British economy shrunk over the last two quarters, plunging us back into recession, with the ongoing Eurozone crisis to blame.

Add to that the news that the UK will pay another £10 billion to the IMF ["It won't prop up the single currency, honest!"] and you've got to begin to wonder, what is going on?

It would appear that Brussels are the very deliberate architects of economic freefall in Europe. 

It cannot be simply a mistake that the financial crisis is continuing. Perhaps by creating financial disaster in Europe, while copious amounts of money fill up the EU coffers,  fiscal control is able to be diverted to the EU. Where there's money, there's power.

At one point commentators suggested the Eurozone crisis could spell the end for the EU. Far from it. 

If anything, the incredible transfer of power and money to Brussels over recent years as the crisis has taken hold has actually increased the dependence of the majority of member states upon the European Union and its associate bodies, such as the European Central Bank, European Investment Bank and so forth.

Which brings me on to the IMF.

It is shocking to witness the supposedly independent International Monetary Fund supporting the EU programme.

I do not only mean the financial impetus, including the recent call for an extra $430bn (£247bn), to which British taxpayers will contribute an extra £10 billion. 

There is the very tricky matter of the IMF, the EU and the ECB, forming a so-called Troika to effectively run the economies of disaster stricken member states. 

Part of the rules and regulations laid down by the Troika include setting up separate accounts for incoming bail out funds to ensure money is used only to save the Euro through debt repayment and is not spent structurally, in effect, helping the suffering population by a real injection of cash into the national economy.

What we are witnessing is mass unemployment spreading across Europe and a number of economies falling apart, led by an institution designed to "promote high employment and sustainable economic growth, and reduce poverty."

Instead of actually providing financial aid to Greece, Italy, Portugal and so on, the IMF is instead driving funding into bank accounts set up to support the Euro, and thus EU ideology in Europe, while co-authoring regulations which perpetuate the ongoing crisis.

Even the USA has now refused to contribute any more to the IMF, saying they no longer supported the failing efforts to sustain the Eurozone.

What on earth is going on?

It is increasingly apparent that the IMF, led by the former French Finance Minister Christine Lagarde is by no means independent. Of course Lagarde came in after the rather inglorious departure of Dominique Strauss Kahn. It is by no means implausible that his downfall and thus removal from power was all too easy to set up, given the man's penchant for promiscuity. Perhaps that is one conspiracy theory too many - but there are many out there who claim that what happened in that New York hotel room was a deliberate trap.  

Strauss Kahn may just have been a dirty dog who met his inevitable end. Or perhaps he needed to be removed in order to parachute in Lagarde, who would get the job done.

Despite calls from across the global financial sector to dismantle the single currency, instead the IMF have come out and warned against any member state leaving the Euro. It is interesting to point out that France is next in line to enter economic turmoil if the single currency crisis is not tempered. Perhaps the IMF and Christine Lagarde want to evade French financial freefall. But if that was the case, why is the IMF authoring and imposing the austerity measures that are keeping the crisis alive?

It is interesting that while the UK Government publicly vetoed the pact for financial regulation (again, not an EU treaty-despite the 'pact' involving the European Commission, 25 member states, the ECB...- as an EU treaty would have meant referenda across the continent, whose results would likely have seen the democratic obstruction of the pact's political intentions evident to the world stage). However the UK have recently agreed to pay an extra £10 billion to the IMF while our own economy has fallen back into recession, with the single currency to blame for contraction over the last two quarters.

Perhaps my imagination is too creative.

Has Britain, behind closed doors, agreed to support the federal unification of Europe by continuing to fund the bizarre operation being carried out by the EU and the IMF - as long as we can remain on the outskirts?

After all, the money being poured into the Eurozone from the IMF is helping Brussels to actuate these intentions, by breaking down the economies of  member states through destructive austerity measures, and then sweeping to their rescue by promising bail outs in return for  fiscal control by the EU and its related bodies. 

The Eurozone financial crisis is, in effect, enabling the final push for federalism to be made.

Of course in order to achieve this, Brussels needs money to uphold bogus bail outs in exchange for obeisance to their own fiscal mandate. Thus they contrinue to increase the EU budget, but that would not be enough.Brussels needs the IMF to extract money from the global economy to support the operation. After all, financially ruining economies in order to swoop in and take control by offering a golden handshake is an expensive business. So how is the IMF managing to continually pass the collection plate and get other countries to pour money in? Well the ongoing Eurozone crisis is not only a threat to the member states involved. In this hugely interlinked global marketplace, ongoing crisis in the Eurozone is a threat to economies across the world. Perhaps other countries are party to some sort of plan - or perhaps they simply have no choice, as a financial collapse in Europe would mean a heavy toll upon many countries' economic security. Now America has managed to get back on its feet, incidentally by doing the direct opposite of what is being carried out in Europe by providing stimulus rather than imposing austerity, they no longer want to be a part of what is going on in Europe. Although Obama has always championed a more deeply integrated EU, so it may just be that America is turning a blind eye but is unwilling to co-finance the operation any more.

I am sure many readers will be thinking 'what on earth is he on about?'

I am merely playing Devil's advocate -  asking the unanswered questions.

Why is the world allowing this mess to continue?

How is what the EU and IMF are doing not being condemned by the international community - and by this I mean what is overtly taking place, not my conspiratorial postulations.

The formation and fiscal controls of the Troika are perpetuating economic crisis, while 25,000 people in Greece are begging for food, yet no one on the world stage is saying anything.

Europe is not the developing world. It is not an impoverished continent with (manifestly) corrupt governance and (manifestly) tyrannical rule. It is a first world group of countries who should by now be well in the clear after the credit crunch that hit almost five years ago.

This furore has gone beyond a catastrophic mess and incompetent governance.

It is now so absurd that there is a distinct smell of conspiracy about it.

If Britain Were Greece

Just watched an excellent comparitive piece on the BBC Website
If Britain were Greece.

The journalist has assimilated the facts and statistics of Greece's swinging austerity measures imposed by the Troika of the EU, IMF and ECB into a British context.

Here's a summary below:

Unemployment would have hit 7 million

Half of all young would be out of work

Minimum wage would be cut from £6.08 per hour to £4.74 per hour, or for under 18s, be reduced from £4.98 to £3.39 per hour.

100,000 public sector workers would be waiting redundancy with their salaries meanwhile cut by 40%

1 million public sector workers would be sacked by 2015

All public sector workers salaries would not just be frozen but cut sharply

VAT would go up 24%

Solidarity levy would account for 5% of income

Alcohol and tobacco prices would be increased by 1/3

Diesel and petrol would rise to around £2 per litre, meaning it would cost £120 to fill the tank of family saloon

State and public sector pensions above £800 a month would be cut by 20%

Anyone with a pension above that rate would see it cut by no less than 40%

The equivalent increase in retirement age would see many Brits working well into their 70s

All state benefits would be slashed and strictly means-tested

Defence budget would be slashed by a fifth, meaning the loss of many personel and the likely merge of the army, navy and air force

NHS spending would be cut bu a sixth, leading to tens of thousands of job losses for medical staff

There would also be the closure of numerous schools, meaning thousands of teachers unemployed.

The outlook for Greece is ghastly and is certainly not set to improve any time soon. And all to protect the common currency project that props up the European Union.

Horrifying, isn't it?

The Most Expensive Sticking Plaster in the World

It’s been labelled the most expensive sticking plaster in the world.

Greece has been granted the biggest bail out in history. An eye watering €130 billion Euros will be put into a separate piggy bank for Greece to spend on debt repayment.

But such an exorbitant gift comes at a high price.

The Eurogroup (Finance Ministers of member states of the single currency) announced that the second bail out would ensure debt sustainability and restore competitiveness. In short, the second bail out will pay for the loan repayment due on the first bail out. Come 20^th March Greece is due to pay back €14.4billion on a bond repayment, so one would hope the recent rescue package will ensure that Greece does not submit to a disorderly default and drag the entire Euro area into disarray.

But in order to save the Euro, Greece cannot be seen to be saving themselves. Taking one for the team is probably not the attitude of the Greek people, who have already seen a 22% reduction in salary bringing the minimum monthly wage down to €751 (£630), 150,000 cuts in public sector jobs and the country’s constitution rewritten to ensure that the top Government spending priority would be on debt repayment, not public services.

Imagine those same conditions being imposed here and you can start to feel a bit of empathy for the Greeks.

All of this will in theory (although unlikely in practise) achieve rewriting Greek debt down to 120% of GDP by 2020. So essentially, they will still be spending a load more on debt repayment than they will ever have in their coffers.

There will also be permanent monitors from the Troika of the IMF, EU and ECB to make sure these spending cuts are implemented, with suggestions that the upcoming elections be suspended to ensure former Deputy President of the European Central Bank retains his role as Prime Minister after he usurped the throne from the democratically elected former leader last year.

However the Greek economy will remain in freefall. The 120,000 soon to be unemployed won't exactly be contributing much to the economy (bearing in mind the total population of Greece is 11 million it's a large number to throw out of work) and neither will the once relatively affluent workers who are now not even making enough money to pay rent and buy food.

The rescue package merely buys the Eurozone more time to get their ducks in a row, at the cost of throwing real lives into the dustbin of economic despair.

By Summer the EU are hoping to have shored up €700 billion in their bail out fund to potentially rescue the economies of Spain and Italy if required.

Meanwhile the people of Greece are being squeezed again and again which does not create growth, merely sends a signal to lenders that the euro will be saved at any cost, even if that cost is a very human one.

Of the total costs for this latest crisis-stalling measure (for that is all it is - in time Greece will be back on the precipice of collapse once more) we can be proud that every family in the UK has effectively contributed £500. But don’t fancy that this money will be buying a few thousand cans of soup for the now destitute. It is simply being pumped into the blackhole of debt and stockpiled reserves for paying off debt that simply ensure the single currency is kept afloat.

In essence, UK taxpayers money diverted to Greece via the IMF has been spent on saving the flagship single currency project which is the keystone of the European Supranational dream in which we decided long ago we were unwilling to take part.

It's about time we started sensibly looking at how to return Greece to its own currency, where it can control interest rates and stimulate growth and spend the €130billion on helping those most in need (it would work out as around €100,000 each) rather than throwing money at vacant ideology.

I would sooner support a charitable hand out from the UK to Greece rather than watch the government fund autocratic tyrannical rule in Athens by a group of Eurocrats with a penchant for continental domination while ordinary people suffer.

Cucumbers at Dawn

It’s all getting a bit nasty in the European Parliament these days. In fact, MEPs are getting so hot under the collar there will soon have to be weapons scanners on the entrance doors to the hemisphere with burly Belgian cops sweeping metal detectors up and down the trouser legs of infuriated MEPs.

Ok perhaps not, but Spanish MEP Francisco Sosa Wagner’s strong words about Cucumbergate were accompanied by a threatening wave of his mean green cucumber cudgel right in the middle of the chamber!

The EU has been caught in the crossfire between Spain and Germany over accusations that the recent deadly outbreak of E-coli all began with Spanish cucmbers. As a result thousands of farmers in Spain had to destroy millions of pounds worth of crop. The EU, as compensation, has proposed donating £134million in aid, yet the Spanish are threatening legal action unless Germany reimburses their loss 100 per cent. This is one cucumber sandwich that the British will not be having with their tea.

Meanwhile Europe are also getting tough on taxation. EU chiefs are demanding direct tax powers which could cost families up to £200 every year. That’s despite the cost of bailing out our neighbours costing the UK over £12.5 billion, far more than has been saved by savage government cuts.

Cuts which, incidentally, the European Commission approve. The fact that the European Commission has come out and demanded Westminster should stick with their “Plan A” for budget cuts and tax increases suggests that we probably are doing the wrong thing. What with protests in Madrid, Lisbon and Athens over EU and IMF enforced austerity measures, as well as three failed Eurozone economies and many more ailing governments in the single currency, the Commission seem increasingly out of touch with their people and decreasingly less likely to give a hoot anyway.

In fact over the next six months the European Commission are unrolling the “European Semester” where they will demand member state governments submit national budgets and reform programmes for EU approval. Jean Claude Trichet, the President of the European Central Bank, has described the new European Semester as the beginning of centralised fiscal policy.

We will watch and wait to see whether Osborne is happy to dance to the Brussels beat.

The one thing that is desperately missing from this dialogue is the fact that actually, Eurozone countries should be able to leave the common currency and return to independent fiscal governance. Currently the ECB in Germany controls interest rates across the Eurozone, to the detriment of weaker economies and in part responsible for the collapses in Ireland, Portugal and Greece. I put this forward to Barroso in the last President’s Question Time.

Notice how he fails to answer the question and instead talks about how the Euro was not responsible for the world recession (well duh? But really, it was a massive contributing factor to the so-called euro contagion) and that he is sure Greece wants to stay in the Euro. Frankly, they don’t really have much choice given how endebted they are now to the EU and IMF. No wonder Brussels is doing their utmost to make sure the next IMF President is a European, and, surprise surprise, from France.

I also challenged Parliament over a little and at first seemingly unobtrusive amendment to a directive on HGV charges that plans to add an EU carbon toll. It is basically the first indirect tax to be levied by the Commission. Although the UK does not partake in the Eurovignette scheme, the government has been discussing joining in 2015, yet before that the Commission reserves the right to make their little “experimental” carbon charge obligatory. We all know that such costs are never fronted by big business and always land in the consumer’s purse, but what is worse is the fact that taxation powers should be discussed and passed by unanimous vote at Council level with all 27 leaders of the member states agreeing to the proposals.

This matter however has been slipped through Parliament as it “only relates to transport” which is an EU competence under the provision of the Lisbon Treaty. A sneaky backdoor way to introduce an indirect tax, because frankly, the Commission know full well not all member states would agree to such a policy.

Sneaky sneaky Europe.

Financial Crisis

I know, I know

It must seem every time an argument is put forward about anything to do with politics it all boils down to money. But this is surely a reasonable expectation, given that the job of most governments is to collect and then spend the money of the people they purportedly represent in a manner they see most universally suitable.

Do not think just because you personally do not pay a direct tax to Europe that it’s not your money being spent. It is. And a whopping estimated £48million a day goes to Brussels from the UK.

Yet in Europe, the state of their own finances is atrocious. While they chastise Greece and Ireland for running up enormous deficits and have in the case of the former turned the country into little more than an economic protectorate, their own fiscal record is far from unimpeachable.

Not only has the Commission failed to have its annual accounts signed off for the past 16 years (and let’s remember their former Chief Accountant turned whistle blower was so appalled by what she had witnessed she signed up as a UKIP MEP) but when there’s allegation of serious wrong doing, everything is brushed under the carpet. Meanwhile they are standing with their begging bowl insisting that non Eurozone member states contribute to a bail out fund to rescue their pet project currency that countries such as the UK were wise enough to never sign up to.

More recently a sting by The Sunday Times revealed three MEPs willing to take money from planted bogus lobbyists in return for introducing amendments to European Regulations. Out came OLAF from retirement (the European Commissions own Office of Fraud Busters) yet were then barred from the offices of the three accused MEPs by the Eropean Parliament in an utterly laughable twist to the plot, leaving everyone scratching their heads as to who has the legal entitlement to investigate bribery of this kind. Should the honour be bestowed on national authorities, or can the EU wade in and conduct their own investigation (whose credibility, I hasten to add, would probably be called into question anyway).

Yet Europe is keen to set up a financial services watchdog that will operate on a pan European basis and tell every financial institution in the 27 member states how to conduct their dealings. Whilst from the outside in the wake of a recession it may seem eminently sensible, let us not forget that this is the self same Union that insists on awarding itself a year on year budget increase despite openly acknowledging that purse strings need to be tightened. To quell the upset in The City, which effectively manages around three quarters of European and international financial transaction, former UK Financial Services Authority head honcho Verena Ross has been granted the title of Executive Director of the European Securities and Markets Authority, as if that is going to make the big banks less jittery about suddenly having a rule book thrown at them.

On top of these complaitns, Brussels just can't seem to stop spending their own money, so it begs the question how they will go about telling banks and member states how to spend theirs. £58 million is being thrown at a House of History Museum which is designed to show a fluffy and beautiful history of harmony and similarity across our beautiful 27 nation bloc. For this reason, the clock has only been turned back only as far as 1946 due to deep divisions in the interpretations of World War II. It has also been revealed that more than £80million has been paid by the Parliament to fnd spin doctors and the hugely popular EuroParlTV, which of the half a billion citizens it is designed to serve, attracts fewer than 850 per day.

And so that brings me to my final grumble. Ireland are needing yet more bail out cash and as predicted so does Portugal. The European Central Bank renewed its bond buying activites by purchasing €432millon government bonds, mainly from Portugal. Despite the huge spend, markets seem to have barely registered the bold move, meaning a full scale bail out is becoming increasingly inevitable. Germany, already the good Samaritan for Greece and Ireland, are likely to insist the IMF is approached, meaning, yes, you guessed it, the UK will be part funding the rescue of Lisbon. Not that we wont contribute to the European Bail Out fund, negotiations about which were plunged into despair as Lisbon fell off the bottom of the debt scale. However it has emerged that despite all of his tough talk, Cameron seems to have agreed for Britain to pay a whopping £7bn into the fund, on top of the £3bn we have already given to Ireland. It has also been suggested Greece may need to shake their tin towards the EU or IMF again in order to reach the targets laid down by the Commission, as will Ireland. And of course, as we’ve said all along, if Portugal falls, it’s only a matter of time before they drag Spain down too. Already Spanish regional banks have had to announce plans to be recpaitalised to the Spanish Central Bank. Three have already requested funding from the Spanish government’s own bail out scheme.

And then of course you have the straw that will break the camel's back as Italy shouldn’t hold her breath either. Another economy biting the dust could well plunge the whole Eurozone into a quagmire of inflation, deep division and signal the end to the common currency.

Just like centuries before, The Fall of Rome could be a massive turning point in European history.