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Greece: political fragmentation shatters the euro dream

In the second part of his special report on the eurozone crisis, Robert Kyprianou looks at the wider political fallout from the Greek election.

Greece: political fragmentation shatters the euro dream

This is the second part of Robert Kyprianou's special report on the eurozone crisis. Read the first part here.

Last week I went to Athens to witness the Greek tragedy playing out and take measure of the changing political forces that emerged from the 6 May election.

What I found was evidence of a political fragmentation that may be playing out across Europe right at the time when it needs coordinated leadership.

The economic costs of Greece’s crisis are well documented. The human costs are also clearly visible, and not just in the begging and the cardboard-box homes that litter the streets around Constitution Square. Suicides in Greece have risen 22% between 2009 and 2011.

Pharmacists have stopped dispensing medicines as they have not been paid for months. As part of the austerity programme, the state has cut already cut its spending on medicines by a third, and wants to reduce it by a further 75% this year.

The mood on the street

If there is one thing that unites Greeks it's the feeling that austerity isn’t working. Those less well off also believe it is aggravated by the fact that the pain is not being shared equally. So it perhaps should not have been a surprise that the Radical Left Coalition (Syriza for short) was the main winner of the May elections.

So what is Syriza and who is Tsipras, its boyish 37-year-old leader?

Syriza is a coalition of left-wing and far-left political groups from democratic socialists and green left groups to Maoist, Trotskyist and eurocommunist organisations. Confirming that its election success was a surprise even to itself, Syriza has belatedly applied to the Supreme Court to be recognised as a party and not a coalition. This would mean that they would be eligible for 50 bonus seats that go to the party that wins the election.

And what of Syriza’s leader? Tsipras is a former Communist student leader. He represents the old school left, and has asked the interior minister to suspend all measures that reduce wages, to allow collective contracts to continue to apply, and to set the minimum salary at €1,300 a month. Thrown into the international limelight, he is enjoying himself, missing no opportunity to engage in rhetoric. Here are some of his quotes:

  • He describes the €130 billion bailout austerity programme as 'barbaric and inhuman', driving Greece to 'suicide'. 'It is an experiment – a neoliberal shock that is driving my country into a humanitarian crisis'. It is the 'road to hell' and 'consigned to history by the vote in June'.
  • 'The war in Europe is not between peoples or countries but between the forces of work and invisible forces which are finance and the banks.'
  • He accuses foreign creditors of trying to 'terrorise the Greek people'.
  • He wants to reject not renegotiate the bailout pact. 'The memorandum cannot be negotiated because hell cannot be renegotiated.' 
  • He believes he is not only Greece’s saviour but Europe’s too. 'We are fighting to save social cohesion in Europe. We are maybe the most pro-European force in Europe'. 'In Greece, we are fighting on behalf of Germans, French and all European people.'
  • He believes that Europe’s threats if Greece backs out of the bailout programme are a bluff. 'The eurozone is like a chain of 17 links – if one is broken, the whole thing is destroyed, so it is absurd to think Greece can be destroyed and the “eurozone saved”.'

There is some embarrassment in the establishment that Tsipras has risen to the status he is now clearly relishing. Some are angry at Samaras for miscalculating so badly when he insisted on an early election in return for his support for the bailout programme. Instead of a clear majority for his New Democracy conservatives, he has heralded the political fragmentation of Greek politics, with many non-mainstream winners from across the political spectrum, and in particular the rise of Syriza and Tsipras.

Austerity isn't working

If there is one clear result of the election it is that the Greeks have found their anti-austerity voice. Austerity is not working, with the budget deficit rising and revenues trailing target. In the first four months of the year revenues are €500 million behind target, attributed to tax evasion and lower consumer spending. VAT revenues were €800 million below the same period last year. Social security spending in the first four months came to half their yearly allocation.

Public investment is taking a hit, with the public investment programme sacrificed. The budget is for €7.3 billion to be spent this year, yet in the first four months less than €1 billion was spent. And there is more bad news for growth – tourism, one of Greece’s few growth engines, is so far down around 15% from last year. Year-on-year the budget deficit has risen by €1.77 billion, or 24%, in the first four months of the year.

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53 comments so far. Why not have your say?

Rob Walker

May 29, 2012 at 07:23

Thanks Rob. This begs the question 'What other crises could afflict the European Union and how would they be dealt with?'. On behalf of the people of Europe the EEC should identify the potential conflicts (whether in Finance, defence, state laws, political movements,whatever) and define the scenarios that the EEC would need to manage and tell us all how they would undertake to resolve such issues. Clearly the Greece didn't expect recent direction from Brussels, who will be the next country to blindly stumble into a national tragedy? This seems to be the only way that the European peoples will really know what they are all part of.

It's not just the If more than half the EEC countries had communist governments how would the EEC change?

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Fransis Chiang

May 29, 2012 at 08:01

Is just doesn't sound fair when the people of Germany or France working until age of 65 and soon until 67 need to bailout the people of Greece to pay their pension on the age of 50. And they paying higher tax than the greece people.

It is in every economical foundation on every level that says, 'when you don't have the money don't spend'. . clear and simple...

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james horton

May 29, 2012 at 08:50

What we need to remember is that the Greeks enjoyed a lifestyle for about ten years that was very artificial. They enjoyed the borrowed money at very low rates of interest, until the bubble burst. Did they think it was a party that would go on ad infinitum? The situation they are in is sad but if they had paid their taxes and lived within their means they would not be in this situation now.

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Austen Brown

May 29, 2012 at 09:24

Yes Rob,,

I think that there were a few concepts in your article which summed up the situation nicely:

Tax revenues down (more avoidance/ less efficiency?)

Tax Arbitration committee disinterested in meeting

The Greeks want to stay in the Euro, but don't want to reform (Dependency Culture).

The Greeks can thump their chests in indignation all they like, but they ultimately require to come into the 'real world' and accept that grassroots reform is required, not only in their system of government but in their national and personal attitudes. If that means a lot of pain and suffering to get the message on board, then so be it. The rest of the world is not going to continue to drip feed that nation into eternity.

The ongoing uncertainty is proving to be a drain on the rest of Europe and undemining confidence in world markets. That won't change with an indecisive general election vote and further clamours for renegotiation.

There is only one true answer for the basket cases of the Mediterranean. ....

With luck they will come back fitter and stronger in the longer term.

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May 29, 2012 at 09:28

Who is 'they', James? The Greeks I know work hard, pay their taxes (as most work in the public sector, they have never had any choice about that), did not borrow excessively (or, in most cases, at all), and lived within their means. Yes, they lived quite comfortably, though never as comfortably as their peers in Germany or Britain, but now they are under the cosh because of the actions of others: greedy 'professionals' and entrepreneurs who evaded tax on a grand scale and salted money away in foreign banks, and imprudent (and very probably incompetent) governments that presided over the 'development' bubble based on cheap credit. The bitter irony is that if Greece is forced out of the Euro, it is my blameless friends who will be (further) impoverished, while the plutocrats who have been hoarding their cash in foreign banks will swan back in and buy up property and other assets at distress prices.

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May 29, 2012 at 10:28

What the Greeks need is a strong government that can fight the tax evaders and get revenue in. Then they should look at taxes, pensions, retirement, benefits etc and explain to their people that from now on everyone will work harder like the rest of the world.

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May 29, 2012 at 10:29

The penny might just be starting to drop - the more the rich are allowed to avoid or evade taxes, the greater the burden that falls on the poor and middle classes.

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May 29, 2012 at 10:36

Well said Chazza. And you'll be able to see those well-off Greeks fairly soon, on a street near you (especially if you live in Kensington). It's a tragedy for ordinary Greeks and the European press refuses to make any distinction. The well-off Greeks should be hounded for every penny of tax they have evaded for years, but who is running Greece? Yes, the well-off Greeks.

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May 29, 2012 at 10:54

As I look at Greece I see parallels with the UK: despite the cuts Government expenditure is increasing; the lower and middle earners are suffering whilst MPs, bankers and the top levels of the public sector appear to be thriving; companies avoid tax by transferring business to tax havens (given the directors responsibility to their shareholders this is not unreasonable though morally questionable) and large numbers of the public service think they are entitled to pay, benefits and pensions that the rest of us pay for and can never achieve ourselves. How long before our own revolution?

A basic principal of project management (the Euro project) is contingency planning and exit planning. We are again lead by clowns who have believe success is predetermined and any contingency planning is planning for failure.

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William Phillips

May 29, 2012 at 13:22

"Political fragmentation across Europe is now a clear consequence of the crisis, compounding the institutional fragmentation that lies at the heart of the euro’s fundamental flaw. "

What this means is that Kyprianou thinks the survival of an artificial fiscal union and currency is so important that the ancient identities, rights and preferences of 300,000,000 people must be trampled under foot-- all because the sacred euro is 'too big to fail'. What he calls 'the political leadership vacuum' is the anger of real Europeans, real victims, finally protesting against all the times they were never consulted or were fed referenda till they gave the Europolitically correct answer.

Above all, the Germans were railroaded into this union on the promise that they would dominate it. Now they find what a poisoned chalice they gained by failing to insist on being able to say explicitly whether they wanted to surrender a rock-solid currency-- the accomplishment of their toil and sacrifice since the 'year zero' of 1945-- for the right to be the eternal bottom-wiper of Mediterranean deadbeats.

Eighty million Germans know the euro needs them, not vice versa. The 27 discrete, highly intelligent, moderately industrious and variably honest populations which were yoked together in the EUSSR, often without ever being asked directly if they wished to sacrifice their sovereignty, can get along very well without it. Believe it or not, work, ingenuity, co-operativeness, willingness to bargain and readiness to acknowledge the soundness or otherwise of different currencies are qualities that lifted this continent out of the slime long before M. Monnet and M. Schuman began dreaming their power-maniac dreams,

Spontaneous order among civilised human beings reasserts itself pretty quickly, even in societies of subliterates relying on barter, when artificial and grossly unjust arrangements such as the euro blow up-- as it assuredly will, as the finance ministers and Brussels bureaucrats fear it will, and as the commonsense observer has known for months that it was bound to do.

Greece is doomed to suffer, and provide a warning about the dead end of living on tick, whatever happens. At least its penance may shock others straight. But the health, wealth and happiness of European people are not crucially contingent on bailing out banksters who have made a wrong bet with other people's fiat money, however overawed financial engineers such as Kyprianou are by their mystique.

So let's get back to deutschemarks, francs, lira, pesetas and drachma as soon as humanly possible. Let us British strike off the fetters that bind our labour market, cripple our fishing and agriculture, condemn us to accept illegal immigrants by the thousand at the diktat of foreign judges.

Let's cut the EU back to what it should always have been at the most, and which traitororous British politicians told us it would always be when they conned us into it: a free trade area, EFTA writ large.

Take the ghastly federal politicking, the hopeless attempts to dragoon tax and spending policies among members, the ridiculous pretence of a co-ordinated foreign policy and the the pathetic penis envy of the USA, Russia and China... take the swindling Eurocrats, their Brussels-Strasbourg gravy train, the accounts the auditors never sign off, the banknotes with imaginary bridges on them, the jargon ('subsidiarity', 'conferral', 'social cohesion') and the misappropriation of Beethoven as their supranational-anthem composer, and chuck the whole mess on the ashpile of history.

Thank God it won't take a third European war to get shot of the most misbegotten and evil 'project' since Hitler failed to correct the 'fragmentation' Mr Kyprianou so deplores with his Neues Ordnung Europa. If the French and Germans need to shackle their economies together to stop them cutting each others' throats on the battlefield, that is their problem, not Britain's.

Referendum now- better off out!

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May 29, 2012 at 14:10


As soon as someone starts talking about the EUSSR, it is clear that his / her utterances derive from functions visceral rather than cerebral. But start 'thinking' with your brain instead of your spleen, make some proper and necessary distinctions, and you will recognise that the dreams of Monnet and Schuman were not 'power-maniac' but were the antidote to the recurring nightmare that twice in their lifetimes had launched Europeans into murderous assaults upon other Europeans. The real USSR was another thing whose embrace they hoped to escape.

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May 29, 2012 at 16:09

What's gonig to happen when the Greeks find out that Christine Lagarde, who was happily lecturing them on the importance of paying taxes in an interview at the weekend, pays no tax whatsoever herself.

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Secret CEO

May 29, 2012 at 16:49

No, William Phillips, I do not believe and did not say that " the survival of an artificial fiscal union and currency is so important that the ancient identities, rights and preferences of 300,000,000 people must be trampled under foot". I merely stated a fact - that Europe is fragmenting politically. The rest is your interpretation. I have no love or hatred for the Euro project - I am only looking at it as an investor. I will leave pejorative judgements on the Euro project to others.

And yes I do believe that the health, wealth and happiness of European people ARE crucially contingent on bailing out the banks, not because I feel sorry for bankers, but for the unemployed young, the repossesed homeowner, the struggling pensioner. This will be true whether we have a euro or not.

And as for "Eighty million Germans know the euro needs them, not vice versa", how do you explain that the Germans have been the BIG winners out of the Euro? They have gained a tremendous competitive advantage over their Euro neighbours and non Euro competitors, partly because they are more productive inherently and partly because the mitigating impact this would normally have had on the DMK has been diluted by the Euro. Either Germany will have to pay to keep this advantage by funding other member countries and keeping the euro intact, or it will have to accept that some German jobs will be lost to other countries if the Euro breaks up.

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J Thomas

May 29, 2012 at 17:25

' The problem with Socialism is that eventually you run out of other peoples money'

Margaret Thatcher

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Martin Drew

May 29, 2012 at 17:52

Chazza, I sympathise with ordinairy Greeks whjo are in a bad place, but as I argued with one a couple of weeks ago surely they knew that retiring on 80% salary at 50 was just not sustainable - and now they know what everyone else in Europoe has to do to get a smaller pension why are they protesting rather than saying we were duped, but we can now see the reality?

Why did the "blind" of Zante throw eggs at the Mayor for exposing their fiddle? (For those unaware there were 650 people on Zante claiming to be blind, but less than 50 were genuine and those claiming to be blind included taxi drivers, shop keepers, waiters). Ordinary people who when the scam was exposed instead accepting it was wrong complained that the mayor had blown the whistle on the scam.

I accept that it was not the ordinairy man in the street who took the EU money for building the Corinth Pirgos expressway and then failed to build it, but that is not really the problem - it is the culture of fiddling here and fiddling there which is practised by almost everyone that has caused this crises, and until they face up to that then the country has not a hope of getting its economy in shape.

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May 29, 2012 at 17:54

Is it true that the E.E.C.'s bloated labour force enjoy tax-free salaries and non-contributable pensions? Do the salary levels reflect such perks, and if not, why?Lairdie

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Robert Hutchins

May 29, 2012 at 18:30

Arguments about whether or not austerity is the right programme in Greece - and other countries - rarely seem to address the problem of where the money would come from for an alternative programme. It could, of course, only come from the European central bank printing money and/or from other member states. We all know, the Germans best of all, what printing money leads to - and why other states should spend billions of their citizens´ money on bailing out countries that have brought the problems on themselves is not obvious. In any case, the basic problem of different competitiveness across the EU will arise again at regular intervals in the future. I have lived in three of the four southern European countries with problems and in those countries, at least, the EU was and is looked on as an inexhaustible pot of gold that sends them billions whenever they ask for it, under the name of "cohesion", "structural projects" or some other euphemism. They will certainly soon get some more billions, probably called "solidarity".

I think Greece would do well to leave the euro. Chaos for a while, but then it would experience a boom as a result of a depreciated currency. It would also recover its self-respect. I suspect that the reluctance to let Greece go stems, in part, from the fear that this is exactly what happens.

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Trevor Bunn

May 29, 2012 at 19:37

Having just returned from Greece only yesterday there is a palpable sense of unease at what will happen on June 17th. The Greeks I spoke to about the current crisis accept they have to apportion some part of the blame for the situation to themselves. However if you think about it, offer anyone cheap money to buy a Mercedes for their taxi business and they would be daft to turn it down. The money for backing up the banks for these loans comes from high output economies like Germany, and the benefits of these extranious sales goes to... guess where?

Give 'em back the Drachma and a sense of proportion along with it, they may thank you in time as they focus on what we all should: the happiness of the people!

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Richard Neilson

May 29, 2012 at 19:45

What would help the Greeks I think is if justice was seen to be done. i.e. if the tax dodging rich were seen to be jailed and their ill gotten gains confiscated.

Come to think of it, that should apply to the rest of the rotten system in Europe. But what chance of that?

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May 29, 2012 at 19:55

EU supporters tried to tell us the the EU is democratic - it's not - nobody elects the commision. The E Parliament has no power.

They tried to tell us it's cost effective - it's not - it pours billions down the drain

They try to say it's not corrupt - they were shown to be wrong - the EU cannot even approve it's own accounts.

Try try to say that we depend on the EU for trade - they are wrong - we used to run a surplus before we joined.

Having lost all the arguments people like Chazza now try to tell us the EU saved us from the 3rd world war. - The biggest lie yet, pull the other one - If we were saved from WW3 it was by NATO - the Common Market was a trading block.

The EU is at the cross roads. Monetry union is really only possible in a single state with the same taxes, benefits, banking rules and standards throughout. If Greece leaves others will follow. The EU has to move towards a single state and save the Euro or step back. Germany France and Holland will have to support Greece Italy Spain and Portugal if they want to save the Euro.

The UK must stay out of it and press for the same status as Norway. This would protect our trade, save our contributions and release us from the bad legislation that came from Brussels.

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mark jukes

May 29, 2012 at 20:27

The Greek population, with a few exceptions, are not responsible for the mess they find themselves in.

When they were offered the early retirement, and the cheap loans should we really have expected them to turn it down? - would you?

Were many of them even slightly aware of what it was doing to their economy? - I doubt it.

Look at our country and you will see the same unsustainable early retirement that is greedily and selfishly demanded by the public sector. There isn't a person out there who would not buy that car at an artificially low interest rate if it meant that they could afford it.

As far as the "blind of Zante" are concerned we have probably 10 benefit cheats for every one Greek cheat - its just that they don't make such a good story.

So lets stop all this hypocritical rubbish

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May 29, 2012 at 20:55

Thank you Mr Kyprianou for your rational response to the post from William Phillips. His outburst gives us a helpful insight into the flaws human beings sometimes have. Mr Phillips is probably quite a nice person when talking about the weather or his favourite football team but he turns into something else when holding forth on a certain subject. A section of the British public seemed to have been whipped into a frenzy by their instincts and the British press, and, well, they are ridiculous and make me ashamed to be British.

There are obviously advantages and disadvantages with a common currency and I happen to think that the advantages are greater, but I might be wrong. I would happily debate the factors with someone having a different view, but I would not debate with Mr Phillips.

I feel very sorry for those in Greece who don’t deserve the hardships being imposed on them, but you could argue that the EU and Euro have made the unsatisfactory and unfair situation in Greece obvious to many people. Currently there is much talk about austerity or something else, whatever that might be. The media is making austerity into something you are either for or against. Rather like asking someone if he is in favour of poverty. The media likes to dumb down. Wouldn’t it be more helpful to portray the financial state of some countries as being like a family with excessive debt? On the other hand, if you owned a business that consisted of one factory and it was running at a loss would you sell the factory? Obviously you would make a plan, (less pay, more productivity) and take the plan to the bank manager and very politely ask him to continue to have faith and provide (more) money until you had worked your way into better times. That surely is a better analogy.

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May 29, 2012 at 22:04

I don't have time to deal with all the claims made by those keen to sink the boot into fallen Greeks, but I did ask around about the claims that Greeks could retire at 50 on 80% of salary.

A (recently retired) Greek journalist friend tells me:

"I don't know anyone who is that lucky. My pension fund (journalists') which is considered one of the better ones, was giving 80 percent salary on completion of 35 years - I took early retirement with 26 years (on 57 percent of my last 2 years average salary) but I had to have turned 58 for even early retirement. Now it's been changed to 60 and to 65 for those who started paying into the fund after 1993.

All the funds are different. The only one with such an early retirement that I know of is the seamen's fund and perhaps the pilot's fund... , and a number of other jobs classified as hazardous."

And, as reported on Wednesday December 28, 2011:

"As of January 1, 2012 civil servants and private sector workers will have to complete 37 years of full employment and be no younger than 59 in order to qualify for a full pension. Those working in professions officially classified as unhealthy and hazardous will have to complete 10,500 working days and be at least 56.5 years old to claim a full pension."

These pensions may seem relatively generous by comparison with UK pensions, but they are based on lower salaries than are paid in UK and are not topped up by state pensions as here, and Greeks typically secure pensionable employment later than in UK.

Needless to say that should Greece be forced to leave the Euro, the real value of such pensions would be slashed.

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May 30, 2012 at 00:31

William Phillips, once more I agree with your analysis but when you opine that 'Eighty million Germans know the euro needs them, not vice versa', I take the opportunity to disagree. Should the Euro disintegrate then the new Mark would doubtless soar against other currencies, halting its export success. In contrast, devaluation of the Lira, Drachma, Peseto would provide light at the end of the tunnel and give hope and dignity to those nations.

Remember that the Euro was the stealth route to a country called Europe, devoid of any popular legitimacy. The flaws hobling the Euro will not fundamentally change however many fixes are funded by Germany.

And why on earth would our government push for fiscal union, the very thing the decitful Eurocrats yearn for,and the principal purpose of Britain's foreign policy which has been so successful in thwarting over the centuries.

In a changing world we need to be self interested,quick on our feet and focused on what needs to be done to restore our economy to stability and to shake off the meddling, anti democratic dead hand of the EU.

Better off out.

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May 30, 2012 at 06:21

Greece is like a child recieving pocket mony. If the pocket money had been kept under control there would be no problem, but give a child £100 a week instead of £20, it wil be spent, and take it away, they won't understand, it is easy money.

The concept of investing this money to produce more money is lost on these people because this pocket money grows on European trees. Unfortunately, this case is made worse because the people dishing out the money have only ever been paid by governments, they too thought this money grew on trees. Hence, their more than generous payments!

To make things worse, the left wingers are now shouting the loudest! - "People of Greece, listen up! The rumors that the European leaders have cut down the money tree forrest is a lie! It is nearly summer and the forrest flourishes! Don't listen to this deliberate propaganda!" - And guess what? It's exactly what the victims want to hear!

Somebody above mentions cerebral v visceral, but money is emotive unfortunately, and is very very visceral! Internal common sense has long left the building! Hence the problem!!!

I may be wrong, but current developments have similarities with Germany not wishing to pay back its war dues after the first world war, leading to the rise of Hitler! Let me think, was he a socialist, my dear God, I do beleive he was!! Well, here we go again.................

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May 30, 2012 at 10:24

Agree with you, Rightcharlie, but I think it is possible to find some positives. It is obviously difficult to make a judgement on mankind and the big picture when looking at day by day events, but nevertheless I think 'ordinary people' are becoming very slowly more aware of what really goes on. There is still lots of fighting and killing and hatred in the world but I think it is getting much harder to be a ruthless dictator than it was. It has probably dawned on Assad that if he is not careful he is in danger of being grabbed as a war criminal sometime in the future. On a rather different level, after Greece's difficulties are resolved by some sort of compromise, future Greek leaders will have to take care to run the country in a more responsible way, and the concept of paying taxes will become more acceptable. And perhaps, one day, Brits will stop saying the Euro is bound to fail, but perhaps that's being a bit too optimistic!

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kenneth douglas

May 30, 2012 at 13:04

ICD, How any right minded person, even with just one living brain cell can still see, any merit in the EU dream beggers belief. " there is none so blind as those that have eyes that will not see". The EU It is a corrupt sleazy dictatorship, another path, to a militarist dream that failed in 1945. To those of you that still support the EU, please go, live in Europe, live the dream, but spare this freedom loving nation

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May 30, 2012 at 13:46

Kenneth Douglas

I appreciate getting a response from people who share your views, but I can never get any rational discussion or debate. Just using the extreme language as used by William Phillips and yourself doesn’t mean you are right, in fact rather the opposite. As your post is very general let me respond in an equally general way. I do live in Europe, in the south of England, in fact, and I like living here. I like being able to travel easily to anywhere in Europe. I think it is a wonderful continent, and I have often encountered friendly, smart and knowledgeable people who put us Brits to shame. If you look at league tables you will find that we are at or near the bottom of many. Didn’t I read somewhere recently that we are the fattest!

A simple political concept for you. The UK is pretty insignificant in world terms, and becoming more insignificant. On the other hand Europe is in the same league as USA and China and so it makes sense for me as an individual to be supportive of Europe, which, by and large represents my way of life.

Of course there are things to criticise about the EU but I am darn sure that such criticisms that you might come up with could be applied to the UK as well. If you want to raise any particular point that offends you I would be happy to attempt to respond constructively,

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Austen Brown

May 30, 2012 at 14:03


I can't say that I find Kenneth Douglas's language to be extreme. To the point yes! W Phillips on the other hand has masked a perfectly good argument by excessive vitriolic superlatives.

If ICD would care to construct two columns, each showing the Pro's and Cons of the Euro project and also the E U project and then ask himself whether the Pros or Cons win, then he might just care to change his mind. ..........

And I don't mean whether it happens to be 'convenient' to journey to continental Europe on holiday etc.

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Martin Drew

May 30, 2012 at 15:20

kenneth douglas, I can see merit in the EU dream, but accept that sadly it is just a dream, which has drifted well off course and in some ways morphed into a nightmare - but after the two wars in the first half of the last century I still think the dream had merit, and maybe if we and the Scandinavian countries had been involved and committed from the get go the dream would have become reality rather than a trainwreck.

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May 30, 2012 at 16:26

May I reply by choosing for convenience a slightly different format. The anti European has in my opinion simplistic headings or sound bites as objections. My response needs more explanation. So the pros and cons are contained in what follows:

Typical Objection by Anti European:

1. I don’t want to be ruled by Brussels or Berlin

2. I don’t want to lose the British pound.

3. I don’t want to be told what to do by foreigners

4. The EU should just be a trading market, and no more.

5. The EU It is a corrupt sleazy dictatorship

My responses:

1. Sounds good, but what does ‘ruled’ mean? If it means that after a democratic meeting of representatives from all EU countries it is decided that member counties must recycle their rubbish rather than just burying it in the ground, or that Tesco must say how much a kg the so-called special offer costs or that a beach for bathing must meet certain standards then I am in favour. If it means that I or my son must go and fight the Syrians or Afghans then I am against. Most of EU were against the Iraqi war. But we went to war because we exercised our right to make our own decision.

2. OK so you want to have politicians promise you everything you want and spend way too much money. Then to get out of trouble the currency loses it’s value. (The GBP has lost value throughout my fairly long life. Does that tell you anything?) Many would say QE, printing money, devaluing either at a stroke or just floating downwards is a useful tool. I say that it is rather tough on the holders (savers) of the currency who are being effectively robbed. It is basically unfair. This is a complicated subject and I acknowledge there is much more to it.

3. You are not. You are part of a club. If you feel strongly about something, take an interest, make your voice heard, but at least be aware of the views of those that disagree. It’s democratic!

4. Again, that sounds good, but human nature being what it is unfairness and protectionism soon creep in. Look at the fuss we made when Siemens got the train making contract. The EU argues again and again for a level playing field, so that any business can compete fairly for any work anywhere in the EU. It also makes rules of standardisation so that our companies can make stuff to a specification that is saleable anywhere in the EU.

5. There is a rather subtle point to think about here. Egged on by the media we have a low opinion of our own politicians, but I think we should have a lower opinion of our media, but either way the electorate or public get what they deserve. I wouldn’t use the words corrupt and sleazy because they are too simplistic but let me point out that there was (is) a very unhealthy relationship between British politicians and, for instance the Murdoch press and even the police, and it is easy to see how that grows up. The elite mingle with each other, become friends, have the opportunity to help each other in certain ways and have a common interest in only allowing us the public to see a sanitised version of what is going on. In my view the Brussels forum makes all that a lot less likely. Also we British are so reluctant to change that we benefit from the more forward looking attitude that prevails there.

The BBC put on a program called ‘The Record Europe’ at peculiar non peak times because they assume no one would want to watch it. If anyone is open-minded enough to hear what the rest of Europe think and what really goes on the next new program is on Sunday at 5pm on BBC Parliament.

A comment to Martin Drew. Surely a lot of lessons have been learnt? I know we human beings make the same mistakes again and again, but we inch slightly forward each time. I am hoping the train is not completely wrecked.

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May 30, 2012 at 20:03

Ha! Rational argument seems to have been met with a deafening silence!

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Trevor Bunn

May 30, 2012 at 21:13

No we're still here but some of us have to work late to earn a pension which in my case, currently 57, I think I will get a reduced (state) one by the age of 70 if I'm lucky. Yes, the age limit will be upped again as the years go by and the reality hits home.

On a marginally different note; someone mentioned earlier that post WW1 Germany was forced to pay reparations, they didn't say for how long though. It was up to 1984! After '29 and they were wallpapering the walls with a pluging currency, a chap called Hitler came along saying 'no more repayments'. He was quite popular at the time!

The soveriegn debt crisis means countries with debts like Greece's could end up with a similar burden. No wonder the politics are looking radical. This whole Euro thing was designed to prevent unneigbourly conduct within Europe as, historically, it can get quite nasty. What next I wonder?

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May 30, 2012 at 23:00

This is all terribly interesting, but....does it not affect YOU?

I'd be really interested to know (FTSE now 5293 and that's before the real panic sets in) what are you all planning to do to protect yourselves?



Going to bed?


Having a glass of claret?

Planning a holiday on Skiathos?

Thinking up something interesting/controversial to say on this blog?

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May 31, 2012 at 09:35

Be worried yes, panic no. Tomorrow my SIPP should receive the coupon from a so-called risky investment that will pay me 10.3% of its current sell value and about 15% of what it cost me originally. So with that I will buy some investment that pays me a minimum dividend of say 4.5% and doesn’t seem likely to go bust. I will not take the slightest notice of the American ratings agencies. You and I know more about businesses this side of the Atlantic than they do.

I was very worried back in 2008, and I still think that that was a time to be worried, because much of our world, and particularly USA had stumbled into a ludicrous and unsustainable situation, and I think the politicians had to do what they had to do. Currently, my impression is that British banks are pretty much OK even though 2 are sustained by the tax payer, (but we don’t mind, do we?) Maybe some European banks are pretty desperate, but I think this time there is more awareness amongst the professionals and politicians, who have a big incentive to keep things going. Whatever technicalities economists with an axe to grind try to blind us with Germany is very much in the driving seat because they run at a profit. They make good products that sell all over the world and they deserve to be well off, and they are entitled to say to those that don’t make anything and don’t do much work, in that case you will have to be poor. Blaming it all on the Euro is a smokescreen, in my view. I may be wrong, but no one has so far made out a case to convince me I am wrong.

Back in the worrying days of 2008 I ignorantly expressed sympathy to someone I knew was a trader. He laughed and said, “No problem, what we like is volatility. Market going up or down, its all the same to us”. I have heard that newspapers are losing revenue at an alarming rate. If you were a top wordsmith or journalist and worried you might not have a job if circulation keeps falling, wouldn’t you write scarier stories?

Getting back to your questionnaire:

Buying, yes, bad times are buying opportunities

Selling, no.

Going to bed? Only after I watched a strange film on TV and I had checked my investments.

Panicking? No, although I was relieved to see the FTSE rising today. (There’s that volatility!)

Cheap red wine is better.

Skiathos? Already booked to Portugal.

Last question: Yes. Being open-minded and engaging in courteous argument is the way to progress. I don’t need a classical education to figure that out.

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Jun 01, 2012 at 17:30

I don't see Germanies politicians surviving a Germany financed bailout their citizens did not on the whole gorge on the easy credit of the early part of the 21st century and so quite sensibly don't see why they should have to pay for other peoples credit orgies.

Unless Greece defaults and exits they have no way of re-basing their economy in a way that would suit their ordinary electorate (ie without severe poverty).

The only alternative I see is a massive once and for all property tax that would re-base property values and come through in dribs and drabs as owners default. Greek administration and political systems are too weak and corrupted to manage this, however in theory it would work and apply to those who gained in property value during the credit spree and would allow the country to stabilise to a point where inward investment would be enciouraged sufficiently enable renewed growth without someone else paying for it.

If I bet on red and the ball drops on black I expect to lose my money!

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Jun 02, 2012 at 09:32

Drake, in answer to your questions:

Buying? Nibbling (mostly to modestly good effect so far)

Selling? Selling non-dividend payers out of ISA and slowly replacing them with solid dividend payers. Bit by bit repurchasing the non-dividend payers in SIPP and share accounts (nibbling).

Going to bed? too late, as ever.

Panicking? Nah, I'm a good man in a REAL crisis and this is just getting interesting.

Having a glass of claret? Chilean Cabernet or Shiraz is more to my taste, or maybe chianti on the hot evenings.

Planning a holiday on Skiathos? Yup! In order to watch the election from a safe distance.. Bit worried about the food and fuel supplies though. Last year the ferry operator's strike left us without yoghurt and milk for a few days.

Thinking up something interesting/controversial to say on this blog? No, I'll wait until I'm provoked, as usual.

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Jun 02, 2012 at 10:30

Good man Chazza. I should answer my own questions.

Buying? Nibbling like you, and will buy seriously when the FTSE gets to 4700.

Selling? Sold all equities in September 2007 and again in August 2011. Might sell some gilts, though.

I'm into lucubration.

No panic. But I think the Germans will.

Nice bottle of Pedesclaux 2005 last night. Spain is my second choice - they should stick to making wine rather than holiday homes. If everything goes tits up I can go and live in my cellar.

Skiathos - would love to go, but my dissertation (on the Ancient Greeks) is taking up all my time. Lovely island, lovely people (why don't people get off the ordinary Greek's back?). I found some old drachma notes the other day. I wonder ....?

I only say what I believe.

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Jun 02, 2012 at 11:37

Dirty Harry

I suspect that the German electorate are a bit smarter and more open-minded than us, and they will know that the EU and Euro has benefited them by providing a ready market for them and preventing their currency from going unpleasantly high.

Greece has a serious problem whatever they do, and I expect they will realise there are no easy answers. Most serious commentators think they can best address their problems from within the Eurozone. The EU can provide capital for the Greeks to keep going in the near future, but understandably they are only willing to do that provided the Greeks start running their country in a reasonable way.

I am retired and part of my income is from the British State. If I knew that in the near future my state pension might suddenly stop because the UK had run out of money I would feel very bitter and might vote for anyone out of sheer revenge. I certainly feel very sympathetic for the ordinary decent Greek

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Jun 02, 2012 at 19:47

ICD, I go to bed late, have my tipple when I fancy, but not too much, and as for buying, I have been, Lonrho and some RSA and a decent chunk of GSK. For the moment I am skint, well not exactly but for new buys. Now if the volatility continues for another 6 weeks I will have some more, for BG, NG, and adding to various other holdings, if the price is right, eg, more HSK, UU, maybe Aviva, RSA, Investec, Centrica, maybe Afren, if there is a serious fall - not out of the question etc, and perhaps more Lonrho, and possibly B T.

My focus is principally are on relatively safe income yielding shares, because if I am right nothing much is going to move for about 18-24 months, by which time our Dear Leaders might realise they cannot borrow their way out, nor continue to emulate Mugabe or the Weimar republic.

As for Greece, sorry Rob, the party (done on tick) is over, now they have to pay the bills and make do with hard tack and water and get used to the idea they cannot retire early or only work for part of a week, but will have to graft , really graft, for a lot longer.

The guff being spouted as to the way forward by the two Eds is just that, guff, and must be against all their degree reading, economics. They need to seriously look at the results of the borrowing by the Weimar Republic and Mugabe (and now Greece) etc. The more that is borrowed to "stimulate" an economy merely results in larger debts and more interest to be paid and eventually bankruptcy, If you are bankrupt, no cake and/or champagne, foreign holidays, if any holidays, etc, etc, and borrowing more has to be out of the question, if only because who will lend to serious money to a bankrupt, who doesn't want to work like other people.

If you are a farmer you need seed for next year's crop, but who will provide more seed if you have already eaten that which you should have set aside for the future crop and sold the equipment needed for planting and/or harvesting any crop? It is a dilemma.

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Jun 03, 2012 at 10:46

Interesting to read your post, Snoekie; I thought you were someone with whom I usually disagreed, but not this time! Many of the investments you mention I have but others I will investigate. I am whittling out investments that don’t pay a dividend, and I have a spreadsheet that works out the total annually generated and so I can then choose an appropriately smaller amount to pay myself. Because the dividends don’t come in evenly through the year I need the spreadsheet to ensure I don’t going into a negative balance at any time. I think long and hard about whether a business or organisation might go bust before investing. I notice the actual value of my investments swoop up and down by vast amounts but if you invest for the dividends this doesn’t matter so much. Of course when the market is down is a good time to buy.

On the political front it seems to me reasonable to apply the common sense principles that would be appropriate to running a family or business budget to running a country.

I heard Paul Krugman being interviewed on BBC Radio 2 recently. I don’t entirely approve of him but he made an interesting comment. PK was condemning the current austerity measures for the usual reasons, so Jeremy Vine not surprisingly said, “What about the debts?” and PK said that they should be paid off in the ‘good times’ and during the boom times was when we should be building up our reserves and putting money aside. Well, that sounds good, and Norway or Netherlands or Sweden might manage it but can you imagine our politicians managing to win over our electorate with such a policy?

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Jun 03, 2012 at 11:39

ICD, you say: 'it seems to me reasonable to apply the common sense principles that would be appropriate to running a family or business budget to running a country'. I fear that if we do that, we will be in depression for a very long time. Whereas a family may, by becoming over-indebted, become destitute, a country with tax-raising powers and a reputation for paying interest on its debts can borrow heavily (at very low rates of interest and for much longer periods of time than families can) in the bad times with reasonable expectation of still being solvent enough to pay down debt in good times (as Krugman, a classic Keynesian, suggests). Greece's problem is that it can neither raise sufficient revenue from taxes nor borrow long-term at low interest. Britain - fortunately - is a very long way from that desperate state.

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Jun 03, 2012 at 13:39

Yes, fair enough. I think my own contribution is only to say that it’s not a black and white issue. Our government needs to do a balancing act because our debts are already quite high, and if we spend too freely lenders may lose faith and our borrowing costs may start to rise. Also, perhaps the electorate should start to be conditioned to think that we need to ‘lower’ our standards of living. This needs to be presented in the right way, and in a sense has begun already by promoting the concept of ‘recycling’ and generally not being so wasteful. Having been both poor and well-off at different times in my life I know that there is a huge difference between being unemployed/very poor and employed and with enough to get by and save, whereas the difference between having ‘enough’ and being rich or even very rich is much smaller. In case I sound like a socialist or even a communist I must quickly emphasise that human beings need incentives and market forces with suitable regulation is obviously the best system.

As for Greece, surely the best bet is that we in Europe should help them through their difficulties, but only if they make a start on the adjustments they need. I am sure many thinking Greeks would agree with that. A crisis is needed to bring about change. I choose to take the optimistic line, but a friend whose views I respect is very pessimistic. We will see!

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Jun 03, 2012 at 14:13

ICD: then we are agreed! It is the crazed pursuit of economic growth (measured by increasing GDP) is what, with a little help from inventive banksters, got us into this mess, and we do indeed need to learn to live within our means, not least our ecological means, and that entails a reduction in what we are pleased to call our material standard of living, which is in many respects unsustainable. But we are now in a depression in which there is colossal waste of human capital in the form of high and fast rising youth and graduate unemployment. So we need to reflate the economy in order to reshape it, and that will require borrowing now to invest for the future.

The question then is what we should spend the cheaply borrowed money on. We need to invest in the infrastructure of a just and sustainable society. But the infrastructure we need is not glamour projects like airports and HS2, but a wholesale renewal of our water-supply and sewerage systems, the power distribution grids, renewable energy and energy efficiency, the crumbling urban streets and rural roads and pavements whose potholed state is a daily cause of damage to people and vehicles, and the many disgracefully shabby and rundown schools and hospitals. If we seriously tackled them, not only would we generate worthwhile employment, but we would also feel a whole lot better, and, I dare say, we would be more genuinely productive.

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mark jukes

Jun 04, 2012 at 09:40


Thank god you are not running the country!!

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Jun 04, 2012 at 10:19

mark jukes

Presumably you think Chazza is wrong. Do you have any rational backing for your views or are you one of those people who just knows, and thinks that being rude to those with different views is good enough?

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mark jukes

Jun 04, 2012 at 17:16

To suggest borrowing even more money at this time would be suicidal for our economy. The very basis of this discussion is Greece' s economy and they borrowed "cheap money" heavily for years.

We need a balance between austerity and growth alright - the austerity has to come from a reduction in the public sector, which has been allowed to grow by 30% since 2000. The growth has to come from stimulating the private sector with tax cuts and other incentives - we should have the lowest corporation tax in Europe at the very least.

Are public services better than they were in 2000? - not really - it has been a huge waste of money, mostly at the expense of what should have been investment in our private sector.

Over 50% of the workforce work in the public sector now - that's over 50% of the workforce that are non productive and the other (under) 50% supporting them.

There needs to be a complete re-balancing of the economy in favour of the private sector if we are to get out of this mess.

Investment in infrastructure will produce a short term, artificial gain in growth over maybe the next ten years - then what?

It will be back to a flat lining economy (or worse) but with debts that will be even bigger, no change to the underlying economy, a reputation like the southern European countries and we will be struggling with interest rates on our loans like Greece or Spain.

The kind of growth that infrastructure spending would bring would not be sustainable - you pay your way in the world by earning not by borrowing.

There is no doubt that we face a decade of stagnation in this country. We can sort out this mess by re balancing our economy or we can borrow money and spend it now to produce short term growth.

If we borrow money as suggested we will survive for a few years then we will spends decades in decline.

We have spent years, just like Ireland, Spain, Italy and Greece, spending for growth (mostly in the public sector) and its like people are ignoring what we did and just how we got into this mess.

If we need to emulate other countries to survive lets follow the lead of Germany, China, the USA for example.

Lets not copy Greece.

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mark jukes

Jun 04, 2012 at 17:22

Chazza / ICD

I re read my previous comment and I apologize for being rude

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Jun 04, 2012 at 19:22

Mark Jukes

Thanks for yor comment. I was also somewhat provocative, because I wanted to hear your reasons, (if you had any). You have explained your views and they make sense to me. On the austerity or not issue I am somewhat undecided. You have to have some public sector but I am sure you are right in saying it has got too large. Trouble is it is quite difficult to cut back on people who have well paid jobs and think they are indispensable. When departments have their budgets cut they often nastily cut back on something that will annoy the public and draw attention to their situation. I heard some professor of economics (in the USA) on CNBC defending the spending out of a recession policy as follows; If you can borrow money for 30 years at an extremely low rate and use it wisely to get the economy going then you would be foolish not to. What the interviewer should have said, I think is that if you do that excessively you run the risk of pushing up your borrowing costs. That is a much greater risk for us rather than the USA because of our limited ability to export to the world.

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mark jukes

Jun 04, 2012 at 19:53

I think that the Professor of economics that you heard on CNBC was simply saying what other economists have said - stating the blindingly obvious.

The trouble is it would never be used wisely and as soon as we started to borrow this money the low rates would start to rise very quickly.

Some others have commented that you borrow during the slow times and pay back during the boom times - the trouble is when if at all will these boom times come?

I totally agree with you that people will use the cuts to deliberately infuriate the public for their own protection. What we don't need is a government that U turns whenever someone complains.

We need to re balance the economy so we become net exporters (and not to Europe!). To be honest, I think its the only chance we have.

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Jun 04, 2012 at 20:04


Apology accepted.

But the basis of your argument is wrong. The public sector does not now and never has employed 50% of the UK workforce.

According to the Chartered Institute for Personnel and Development (as reported in The Observer, 25 March 2012) observed that at its height, as Labour ploughed resources into health and education, the public sector accounted for one in five jobs in the economy. That will decline to just one in six by the end of the present government's deficit-cutting spree. "This will easily wipe out the net rise in public sector employment under the Labour government between 1999 and 2009 and take the public sector workforce to a record low."

Already, 270,000 public sector workers have lost their jobs since the coalition came to power, and since they are disproportionately women, the cuts have helped push female unemployment to a 25-year high. The private sector has not made up for that. Private businesses hired just 226,000 more people in 2011.

So slashing the public sector is not simply going to solve the problem. Borrowing money for investment in things that will increase productivity and reduce waste will not increase our long-term debt so much as it will produce the increased economic activity – and tax revenues – that will pay the interest and, in time, reduce the debt.

But I agree, that will not alone be enough. We will still have to restructure the economy so that human capital is not wasted as it is now by graduate unemployment, and so that our society is more just, and more economically and ecologically sustainable.

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mark jukes

Jun 04, 2012 at 22:05


In 2010 the public sector directly employed 23% of the UK workforce as an average. The rest are made up of employees who are indirectly employed through private companies.

These private companies will hold down the total rise in the private sector as requirements to service the public sector contracts lower and these people lose their jobs.

Investing borrowed money in infrastructure projects that will employ people who will pay taxes is just recycling part of the money you borrowed in the first place and will only work in the short term. It certainly does not address the issues and in fact will make things worse.

There will be a lot of pain but we have to wean ourselves off this culture of public sector investment it does nothing for us.

We need 2 million people out of the public sector and into the private sector where they can generate wealth and exports and importing investment is the key.

The government are a major player by making us an attractive place to invest.

The trouble is can we put up with the suffering this will cause? As you point out the losses in the public sector are much greater than the private sector can make up for and this will go on for years.

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Ron Sloane

Aug 09, 2012 at 10:29

Could we please have an update on this story by Rob Kyprianou published on May 29, 2012 at 05:01. Has anything changed and if so what is the impact.

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