Reform in Our Time

The idea that Germany has been wearily but nobly ‘bailing out’ the feckless Greeks stubbornly refuses to go away. The Greeks, one must admit, have been feckless, but their real problem is not sloth but pride. They want to stay in the Euro from some misconceived notion of national prestige. They can’t pay their debts and the Euro is poisonous to them. They need to accept this and move on. Anyone urging them to do anything else has some other agenda and most certainly does not have Greek interests at heart. A currency is worth the value of the goods and services available within the jurisdiction issuing that currency divided by the number of units in circulation. If Germany had its own currency it would be worth vastly more than the Euro, if Greece had its own currency it would be worth vastly less. The consequence of their union is that, for anyone outside the Eurozone, Greek products are vastly more expensive than they should be and German products vastly cheaper. Greek misery weakens the Euro and stimulates German exports. This in turn stops the Euro falling too far and increases Greek misery, keeping the Euro down and helping the Germans further. No wonder the German government is keen to avoid Grexit. The weary but noble thrifty Germans pose is an act (although ordinary Germans doubles believe it). The Greeks needed to get out years and years ago. They obviously should never have gone in. Schadenfreude is nasty and pointless, this is very bad for Britain as well. Our main (albeit declining) export market (the Eurozone) is depressed and our competitor Germany is artificially stimulated at our expense. People forget we are still one of the world’s largest manufacturers. After the crash everyone was wisely taking about strengthening British manufacturing exports and rebalancing the economy. One of the key reasons why this has not happened is the dreadful situation in the Eurozone, a situation we subsidise. The one advantage for Britain of this nightmare for Greece is that it might cause Germany to decide it needs a new EU treaty which could give us the opportunity to obtain the kind of semi-detached status in the EU we need. On the other hand, it is not at all clear that Cameron is the man to win this. So he he might obtain far less than he could and than Britain needs from a new treaty and then use the botched deal to lend plausibility to his ‘Yes’ campaign in 2016/17. In that scenario, from a selfish perspective, the more chaos the better. That way it will be harder for the FCO, the BBC and CBI to con the British people into voting to stay in.