Crippling austerity and a euro break-up won’t help Europe recover

Oliver Kamm

Political speculation and newspaper commentary this year have concerned the possibility and consequences of a Greek exit from the euro. I have long been sceptical that this would happen, owing to its immense costs. But I felt that the austerity programme required of Greece was so unyielding that it was counterproductive. While living standards have been collapsing, the debt burden threatens to become overwhelming without credible plans to restructure it. (See here an Intelligence Squared/Google debate on austerity – which I argue is not the answer for Europe – a few months ago where I discuss the problem with, among others, George Papaconstantinou, former Greek Minister of Finance.)

Recent Greek developments have thus been modestly encouraging: a successful debt buyback, an improvement in the country’s credit rating, and a decline in government bond yields after the European Central Bank said it would again accept Greek sovereign debt as collateral. If the eurozone is to get out of this mess, it will do so this way: not by fantasies of a purportedly orderly break-up of the euro, but by structural reforms in the debtor countries that are acknowledged, rewarded and made easier.

Greece is an extreme case, and the conjunction of variables in each of the problem countries is different. In Greece, the banks were relatively strong but were undermined by a catastrophic fiscal position (in 2009, the Greek Government admitted that its budget deficit of 12.7 per cent of GDP had been vastly understated in an earlier estimate of 3.7 per cent). In Ireland, the weakness ran the other way: a banking crisis born of excessive bank lending, rather than a crisis of public debt, that then became a fiscal crisis owing to the need to nationalise the stricken banks.

What the countries have in common, despite these differing histories, is extreme stresses that turn private debt into potential public debt. And the only route out of this is to build the fiscal dimensions of the euro that were lacking at its launch, make structural reforms and adopt a more rational approach to the economics of austerity.


Greeks: not fans of Angela Merkel

The only thing bailouts achieve is to take the problem away from the banks and place it squarely on taxpayers’ shoulders. As in any market economy, the only viable solution is the freedom to fail.

Timo Soini, chairman of the Finns Party, has a blast against the bureaucrats in Brussels

Myth: The EU stops hardworking Britons working longer hours than feckless continentals. Fact: The average Pole works 40.5 hours a week. The average Spaniard 38.1. The average for all the EU is 37.2. The average for the UK? 36.2.

Radek Sikorski, the Foreign Minister of Poland, dispels seven myths about the European Union

In Europe, 60 per cent of university students are women yet fewer women go to work than men. Only a tenth of board members and a mere 24 per cent of parliamentarians are women. The pay gap between the sexes is still 18 per cent. Europe is squandering the intelligence of women – yet research shows that if as many women worked as men, the EU’s wealth could climb by 27 per cent.

Birgitta Ohlsson, Sweden’s Minister for EU Affairs, thinks Europe cannot afford to have the world’s best-educated housewives.

Dutch boy’s plan to avert eurogeddon

The man behind the Wolfson Economics Prize is writing for us today about eurogeddon…which gives us the perfect excuse to revisit Jurre Hermans’ entry to the £250,000 competition, challenging entrants to prepare a contingency plan for a break-up of the eurozone.

Hermans, who was 11 at the time, explained:

All Greek people should bring their Euro to the bank. They put it in an exchange machine. The Greek man gets back Greek Drachme from the bank, their old currency. The Bank gives all these euro’s to the Greek Government. All these euros together form a pancake or a pizza. Now the Greek government can start to pay back all their debts, everyone who has a debt gets a slice of the pizza.

Entirely sensible. Although the Greek chap doesn’t look too excited.

Twitter: @jamesdean_lives

Read more: Simon Wolfson - We’ll survive eurogeddon if we are prepared

Times Opinion today | Diamond Bob, Islam and human rights, the beautiful game

Goodbye, Diamond Bob

Bankers who spent £44,000 on wine at the Michelin-starred Pétrus restaurant broke Bob Diamond’s “no jerks” rule. This rule can be extended to all walks of life, says Rachel Sylvester

And the £291 million fine for Barclays pales in comparison to its £3 billion profits. The bank should have been fined no less than £1 billion, says David Davis, the chair of the 20120 Future of Banking Commission

“It is hard to overstate the scandalousness of the bank’s behaviour or its significance for the wider economy,” says The Times


“This would effectively be in/out/shake-it-all-about,” says a confused Hugo Rifkind of a three-part referendum on EU membership

Middle East

Islam and human rights are not mutually exclusive,” says Mustafa Akyol, a Turkish journalist, praising Turkey’s aggressive stance on Assad’s Syria


Football “is not merely a tribal experience but an aesthetic one, too,” says Matthew Syed, in praise of Spain

The Times has been investigating the “export” of damaged children from care homes in London and the South East to cheaper homes in the North West and West Midlands. The Times says this is an “outrage”

Nasa’s new Orion spacecraft brings back memories from the race to the moon

(Times Opinion, Tuesday July 3, 2012)

Times Opinion today | Cowboy bankers, stupid weather, Eurosceptics & in vitro fertilisation

Cowboy bankers

“We must stop buying the lie that because there is no gun in the boardroom, the occupants must be innocent,” says financial editor Patrick Hosking of the Barclays Libor rigging scandal

Before any public inquiry into Libor rigging is convened, criminal proceedings must be opened, The Times says

Stupid weather

The Met Office predicted that April-May-June would be dry. It was actually the wettest on record in England. Is this down to climate change? asks Matt Ridley

Getting out of Europe

“Smelling victory, the whole Eurosceptic movement is sensing vindication; but it is quite unprepared for its moment in the sun,” says Tim Montgomerie, who puts forward a campaigning “genius” to lead the Eurosceptic cause


In France, it’s now compulsory to carry two breathalysers in your car (as it will be as a tourist visiting France). Agnès Poirier thinks this is all about psychology


Mohammed Morsi, Egypt’s new President, must remember that he is responsible to all Egyptians, not just Muslim Brotherhood voters, says Alaa al-Aswany

It would be “absurd” to deliberately exclude the voice of chief constables in the elections for police commissioners, The Times says

The Times speaks in praise of in vitro fertilisation after the five millionth IVF baby is born

(Times Opinion, Monday July 2, 2012)

Magazine Rack | London, police informants, alternative energy & dusty library shelves

The Economist says London is Europe’s only global city

Ted Conover on what it’s like to be a police informant in The New York Times Magazine

Vaclav Smil is skeptical about alternative energy sources on IEEE Spectrum

In the Times Higher Education Supplement, John Sutherland doesn’t appreciate the democratisation of knowledge. He would rather a select few academics heroically dig it up from dusty library shelves

Compiled by @TomasRuta

Times Opinion today | Germany’s euro burden, Egypt’s President, Italy’s cocktail & Britain’s tax avoidance problem


Italy is “a dangerous cocktail of debt, politics, a comedian and Silvio Berlusconi,” says Bill Emmott – despite the stabilising hand of Mario Monti

Egypt has a new President – but he and the Muslim Brotherhood would do well to remember just how few people voted for him, says Amir Taheri

Germany, if it wants the euro to remain, must commit fully to shouldering the debts of eurozone nations, The Times says (as does Tony Blair)

Invest in Africa – the words that every Sunderland footballer will carry on their chests next year, thanks to Aidan Heavey, chief executive of Tullow Oil. He explains why


“If the wealthiest pay as little as 1 per cent tax, and corporations even less, that is an offence against the values and sense of fairness of ordinary people,” says Margaret Hodge, Chair of the Public Accounts Committee

Libby Purves takes Ed Miliband to task for his “cynical” about-turn on immigration

“It should not take an institution of this size the best part of a week to recover from a failed systems upgrade,” we say of NatWest

We also say that East London’s reputation has been lifted by the 50,000 who turned out for the Hackney Weekend festival

(Times Opinion, Monday 25 June, 2012)

European integration has done more good than harm | Oliver Kamm

Last week, at the Engelsberg Seminar in Sweden, I debated European integration with Lord Lawson. The former Chancellor argued that the euro made no economic sense, because dissimilar economies need an adjustment mechanism. It was instead a political project. European politicians cannot resolve the crisis: they need to declare the euro a failure and dissolve it.

I replied that the EU is an attempt to supersede historic conflicts and the errors of inter-war economic policy. Its record in microeconomics and politics is good: an internal market binding 500 million people with €12 trillion of output has enabled efficiency gains. In Cyprus, Ireland and the former dictatorships of southern Europe, the prospect of EU membership has spurred liberalism. Europe’s crisis is due to neglect of budget-making institutions and structural reforms, but there would probably have been disruption without the euro.

Twitter: @OliverKamm

Read more: The Times has from the outset criticised the notion of a single European currency “on economic and democratic grounds”.

It is an illusion to think that if Greece is expelled from the euro, let alone the EU, it will simply hang there, looking wistfully westwards. For months, financiers and western officials have described exploratory trips to Athens by Iranians keen to see how their relationship might improve further if Greece were pushed out of the euro — and shut out of world credit markets — at the same time as sanctions crack down on the export of Iranian oil.

Bronwen Maddox in The Times.

Twenty years ago to this day, The Times reported on a poll suggesting that the British public was most heavily in favour of having a referendum on the Maastricht Treaty – the treaty that laid the foundations for the euro, among other things – among all the countries not having one. Sixteen days earlier, the Danish public had voted against signing the treaty by a narrow margin.

A week ago, a Populus poll for The Times suggested that 82 per cent of voters want a say on whether or not Britain should stay in the EU.

Search the Times archive.

(Spotter: Alexander Godfrey)

Leaders and Thunderer | The Times, Monday June 18, 2012

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