baldysblog.co.uk

Well there are now only three days left and then we all get to vote and what the public has probably decided already will shape our immediate futures. My hope is that we (a). Don’t have a Hung Parliament and (b). They we do get a Cameron Government with a working majority. Will I get my wish ?

Hard to say really, I suspect that the average elector is playing their cards close to their chests. On the surface, Labour is dead in the water, Clegg and the LibDems are deflating and Cameron is in the ascendant but what that will translate into on Friday, who knows ? However, one of the most crucial events that any new Government will be faced with is the Greek Financial Crisis with its impact on both the Eurozone and the whole EU.

The Greek Problem

For a very good article on the current state of play, rather than me rehash the key elements, go to the Economist and read the following article: http://www.economist.com/blogs/charlemagne/2010/05/eu_rescue_greece?source=features_box1

For those who don’t follow these things, the reality is that Greece has massively over spent in the Public Sector through a combination of being too generous with its citizens whilst at the same time, not collecting taxes and funding it all with borrowing on the Money Markets. To be fair to Gordon Brown, he has certainly done the first and third but certainly not the second. However, there are significant ‘pointers’ to emerge from the Greek Crisis that we in the UK need to heed and clearly understand.

The EU Bailout Plan

This has been both difficult and painful particularly for German which inevitably will be the biggest contributor under this plan and because of strong opposition inside Germany has led to a fairly lengthy delay in getting this all into place.

It is quite normal for National Governments to raise funds on the Money Markets as “Sovereign Debt” because tax revenues fluctuate during the course of the year. At its best, it should be very similar to an individual or business having a personal overdraft facility to even out its cash flow. At its worse as in the case of Greece and indeed this Country, it is a sign of an economy under stress and over borrowed with little chance of paying it back.

The Greek bailout which is jointly funded between the Eurozone countries and the IMF (International Monetary Fund) replaces the Money Markets with a rescue package giving the Greek Government about three years to cut spending, improve tax collection and generally get their house in order. In effect, the Greek economy has gone into “Administration”.

The PIIGS

Although the worst, Greece isn’t the only Country within the 16 member Eurozone to be in trouble, there are others and they are collectively described as the PIIGS which stands for Portugal, Ireland, Italy,Greece and Spain. Greece is in ‘Administration’, Spain has had it’s credit rating cut and Ireland, very bravely and honourably, has instituted stringent Budget limitations and cuts all round.

However, there are some crucial matters to take into account and rather than ‘compare economies’, let us just look at ‘populations’ which give an indication of things:

• Ireland has a population of 4.2 million.
• Greece has a population of 10.7 million.
• Spain has a population of 40.5 million.

Ireland would be ‘easy’ for the ECB (European Central Bank) to bail out, Greece a ‘big stretch’ it would seem and Spain, ‘impossible’ so that the UK with + 60 million is ‘well out of the Euro’ “protection zone” and therefore, would derive absolutely no benefit for British taxpayers from being within the Eurozone.

The Eurozone

Was always “questionable” but typical of the idea, “Build it and the crowds will come” plus we will sort it out later. Monetary Union without first having “Political Union” was always going to be a joke. Pooling your currency depends on all participants have and holding to the same “rules”, same tax rates at every level, same investigation of defaults, prosecution, principles, punishment and clearly this has not happened and therefore, the Eurozone is a nonsense.

In order to make the Euro function properly, more “Sovereignty” will have to be surrendered and is there the political will to do that, I wonder ?

The LibDems

Did well this election until people started looking at their policies in detail. They need to loosen up and abandon their supine love of all things EU before they are really in ‘contention’ for power within the UK.