Boris Johnson is, as ever, talking utter nonsense out of a part of his anatomy I would rather not mention. He writes in today’s Daily Telegraph: “For years, European governments have been saying that it would be insane and inconceivable for a country to leave the euro. But this second option is all but inevitable and the sooner it happens the better.” Boris, just hang on a minute and think about this one.
For starters, it’s profoundly shocking that people in Greece feel the need to protest so vehemently in such large numbers. Deflationary austerity measures, still seen by the world’s financial authorities as the way to deal with economic crises, always impact on those who had nothing at all to do with creating the crisis in question. It’s Greece’s men and women in the street, now in protesting in large numbers in Syntagma Square, who are really suffering.
The citizens of Greece are going through this because of a massive failure of the international banking and financial system. This was not originally a crisis the euro but a crisis caused by transnational banks with a global reach. As Richard Woods and Philip Pangalos put it in the Sunday Times yesterday: “Three years ago after Lehman’s fall, governments bailed out other banks: now nations are teetering on the brink.” “Greece borrowed far too much, particularly from French and German banks…”
True, the low interest rates in the eurozone facilitated this borrowing. However, non-eurozone countries such as the UK, USA, Canada, Australia and, of course, Japan, also had, and still have, low interest rates. The current severe difficulties facing the eurozone are not, as Boris Johnson and his cronies would have us believe, purely a result of inherent problems with the single currency, but more to do with the global financial and economic situation.
True, as a member of the eurozone Greece cannot devalue its currency to make its exports more competitive. However, this strategy only works when a country has something worth exporting. Greece, as we all know, has few manufactured goods and its main exports – olive oil, marble and aluminium – are not exactly going to make the big time. Moreover, no-one would dispute that Greece’s economy is in a very bad way; it contracted by 4.5% last year and the official unemployment rate of 16% is probably a gross underestimate. However, most of this is not down to the euro and would not be solved if Greece were to leave the single currency.
Boris, a weak Greece with massive economic problems would impact on all of us whether not Greece was in the euro. The United States has sold credit default swaps, a form of insurance, on the Greek debts held by European banks which European banks facing losses may try to claim back from the American banks. This is surely a global issue if ever there was one.
Having underwritten any subsequent bail-outs for Greece, it is hard to argue anything other than that Britain was at the heart of the one we saw recently. More significantly, the UK has contributed £19.7 billion to the International Monetary Fund, which could well be used for another such bail-out. Given that half of Britain’s exports go to the EU, we obviously nave a huge interest in keeping the pan-European economy in reasonable working order.
The thing is, Boris, all those people in Greece who are unemployed, fear being unemployed or simply cannot make ends meet, do matter to us for our own reasons. They would buy our goods if they could afford it. They are therefore important for our own well-being. When they are poor, we become poorer, whether or not Greece, or indeed the UK, is or is not in the European single currency.