Why shouldn’t Britain go the same way as Greece? (and other musings)

Prevalent in the news today have been the riots in Greece. The country is now sufficiently unattractive to investors and ratings agencies that their bond markets have frozen, and due to this and their enormous deficit they are no longer able to service their debts.

Greek workers’ unions hold enormous sway, and thanks to their bloated public sector, have vast reserves and manpower to call upon when fostering civil unrest. The Mediterranean nations have something of a reputation for this, as in countries whose infrastructure is largely nationalised, general strikes are powerful bargaining chips in pay and condition disputes.

The Greek socialist government is caught between a rock and a hard place. Unlike Britain, they are not the sole creators of their undoing – they have only recently come to power, but have been left with the awful mess created by previous governments. They know that without the £95bn payout from the IMF and the EU, their country will be bankrupt. Job losses, superinflation and riots would rapidly become the norm as the government desperately tried to get its finances under control. This simply would not be possible, and would create a crisis of catastrophic proportions within the Eurozone. The Greeks would have no option but to devalue their currency, and that would not be possible while they were part of the Euro. The ramifications would be simply unimaginable for the Euro elite.

I just can’t see that happening. The Greek government know that the austerity measures being imposed by the Germans and others are going to happen either way, so having it imposed but with a £95bn sweetener is by far the better option.

It does beg the question, however, as to how long the £95bn would last? Their deficit is currently somewhere in the region of ours, so around £170-180bn per year. If the Greeks somehow manage to cut this by 30% in the next few months, and also somehow manage to convince long-term investors that their debt is ever going to be worth anything again, we can only realistically be looking at the £95bn lasting 12 months. Given that the Greeks look like they are going to be burning their streets for a pretty hefty percentage of that, it can only really be seen as an optimistic projection, barring an absolute miracle.

What happens then? Do the Greeks once again go cap-in-hand to the EU and IMF to get another £95bn? Can you see the Germans being willing to go through that again? I can’t. They back the Euro though, so it’s quite possible that they won’t have any choice. Their taxpayers will of course love that one. So maybe the Germans will at that point have little choice but behind closed doors to make it clear that Greece aren’t welcome in their little club any more? Nope, won’t happen either. So they’ll have to hand over the cash, or Europe will collapse in on itself.

What sort of message will that give out to the other nations, such as Portugal and Spain, who are also in danger of financial obliteration? They will hardly be impressed that a country can default and default again while they are having to impose similar or harsher measures of their own so as not to have to take the money from the EU/IMF. Ireland, incidentally, has dealt with the matter internally, with large austerity measures, and have been generally honest with their people. The public have bought in to it, and while it is painful, there have been successes and by no means are there riots on the streets. People do not like being lied to by politicians who have already been found to be liars themselves.

All becoming a bit messy, by that stage as I’m sure you realise. And all the while the German taxpayer gets more and more angry about where all their money is going. Having imposed austerity measures of their own for the last five years, driving up efficiency and down salaries, the Germans still have a competitive and functioning economy. The only good thing about a continually-weakening Euro is that their exports will become cheaper, so they’ll be ok, even if they have increasingly less cash to hand out to the sick men of Europe. This, of couse, is the same Euro that the one-trick-pony Nick Clegg is now so quiet about being so keen for us to join.

If this particular house of cards starts collapsing now, it won’t take a huge amount of time to come crashing down. That much is clear and is, to a small degree, being discussed in mainstream media.

What was totally absent from the news today, however, was any discussion of Britain’s position in this huge mess. We do at least retain control of our own interest rates and currency values, so have more options available to us than many. Our deficit is almost as big as Greece’s and will outstrip it this year – we are borrowing over £170bn this year, and there is no sign of it slowing. The main parties are insistent that the best route to recovery is to maintain approximately the same levels of spending – or at least so they say in public.

Why on earth should Britain be safe? Our history? Our world standing? Our high-ish GDP? None of those count for anything when the collectors come knocking. If we get downgraded, and the markets get frightened off by a hung parliament, why would we still be able to service our debts? There’s no reason. Granted, our sovereign debts are somewhat longer-term than the more risky countries, but we still need to turn them over, or they’ll become short-term faster than we might realise.

We of course, would struggle desperately to go to the EU for money, and they’d only lend it to us with the smuggest of grins and the most appalling of terms. Not necessarily financially, but politically and constitutionally. The IMF would undoubtedly help us out, but the austerity measures would not be grossly dissimilar to those of Greece. Massive public sector job, pay and pension cuts, swiftly followed by marching and rioting in the streets. Someone said to me today that the English aren’t the rioting types, but I reminded them that the Poll Tax riots (1990), the miners’ strikes (1984) and the Brixton riots (1985) were all in the last 25 years. We only haven’t rioted in the time since then because we’ve had no great reason to. Sadly now the party is over, and I’m not entirely sure how the next government is going to stop it, unless people start to realise just how much trouble we’re in. Apocalypse is avoidable, but needs to be explained to all and sundry so that the incoming leaders get a chance to try to sort it out without angry and surprised voters losing their jobs en masse.

Mervyn King may well have been right when he said that the new largest party would not get in to power for another generation. If people don’t realise what’s coming, they’re going to get absolutely crucified for not mentioning it, even if they’d never have got in to power if they did, and it was Gordon Brown who created it. Assuming we don’t get another 5 years of Labour tomorrow, of course.

A hung parliament, of course, doesn’t really bear thinking about, even if it did last only for the blink of an eye before being recalled. The markets would panic, undoubtedly, especially if Gordon Brown remained Prime Minister. Even if he were rapidly removed, the jittery markets would already be panicking. The ratings agencies must have their fingers very close to the downgrade button already.

The only way out I can see for an incoming Conservative government is to call in the IMF auditors, as I saw they were planning to do. The ultimate economic authority on the planet would be invited to come and inspect the UK finances and report their findings and recommendations. Clearly their response would be that the country is verging on bankruptcy and needs an immediate and severe response. The Tories would then be able to absolve a significant amount of responsibility and would have a cast-iron backing of what was needed to avoid bankruptcy. It would be extremely tough, but they’d have to do it, and perhaps it would work. I can’t really see many other options.

So between the three parties, in an economic sense, it would appear that we have Nick Clegg, who would like us to give up all economic sovereignty and join the Euro, Gordon Brown, who is largely responsible for the whole mess, and David Cameron who is simply not proposing large enough changes to the situation.

If I thought that if I were to vote Tory in my constituency might make the tiniest bit of difference, I might consider it. Thankfully the decision has been taken away from me by my peers, so mine would be little more than a protest vote vs Labour by voting Tory, or a protest vote against whoever by voting UKIP. As a result, UKIP will get my vote. I want as many people as possible to see that they get x% of the national total, and to ask why that might be. We need to get out of Europe, and we need to address the astonishing deficit. No other parties are even discussing it, let alone taking a stance on it, and I think that is going to do more damage than a lack of proportional representation ever will.