The latest entry in John Redwood’s Diary discusses the conflict between the democratic wishes of the Greek people and the desire of the Euro leaders for Greece to come to terms with its creditors.
The Greek government’s wish to put the latest Euro area/IMF offer to voters for decision is a game changer. It has left a wounded and surprised Euro area fulminating against the way Greece behaves.
The European Central Bank with the support of the Euro area has cut off all supply of Euro support to Greek commercial banks. As a result we now have our third Euro, the Greek Euro. Like the Cypriot Euro in their crisis, the Greek Euro is not freely convertible into the regular Euro as you cannot draw it out of a Greek bank when you want to. What kind of a currency is this European single currency, when the Central Bank does not stand properly behind all the banks in the system, and when in part of the zone they have to close the banks on a normal trading day?
I am on neither side in this damaging row. I think Greece should leave the Euro, devalue, write off debt preferably by agreement and have a fresh start.No-one with a powerful part in the crisis wants that answer.
My head is with the Euro area when they say Greece should honour her agreements, repay her debts, and seek to live within her means. The problem is their approach causes misery and mass unemployment,so my head also says they are wrong in the wider scheme of things.
My heart is with the Greeks, when they say current economic policy is not working, they cannot on present plans repay their debts, and their democracy opposes the bad medicine the Euro area is offering them. My heart loses sympathy if their responses plunge themselves and the wider economic world into danger by their inability to get on with their creditors.
Many UK people are with the Greeks in opposing a mindless austerity policy at a time when Greeks have already lost a quarter of their national income, have a quarter of their workforce unemployed, and lack demand and tax revenue to pay the bills. We are also with them when they say their democratic will and their elections should be able to change things for the better, and need to be recognised by the rest of the EU as important.
What a predictable tragedy the Euro has become. If you want a single currency to work you need a single government to back it, a single demos to decide who rules, and an economic policy which generates prosperity for the many. The Euro area still lacks all these features, so it is no wonder it limps from crisis to crisis.
Click here to read this piece in John Redwood’s Diary.