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Greece debt: EU agrees bailout deal
Mar 12th
Exclusive: Germany plays pivotal role in potential eurozone rescue package for Greek debts
The eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.
Senior sources in Brussels said that Berlin had bowed to the bailout agreement despite huge resistance in Germany and that the finance ministers of the “eurozone” – the 16 member states including Greece who use the euro – are to finalise the rescue package on Monday. The single currency’s rulebook will also be rewritten to enforce greater fiscal discipline among members.
The member states have agreed on “co-ordinated bilateral contributions” in the form of loans or loan guarantees to Greece if Athens finds itself unable to refinance its soaring debt and requests help from the EU, a senior European Commission official said.
Other sources said the aid could rise to €25bn (£22.6bn), although it is estimated in European capitals that Greece could need up to €55bn by the end of the year.
Germany, the EU’s traditional paymaster, but the most reluctant to come to the rescue of a fiscal delinquent in the current crisis, has played the pivotal role in organising the rescue package, the sources added.
“There have been quite intensive preparations under the eurogroup. We have the ways and means to do it,” said the senior official, asking not to be named because of the subject’s sensitivity.
“It will be a co-ordinated approach of bilateral contributions [between EU governments] … A bilateral contribution can be a loan or a loan guarantee. The guarantees will facilitate the kind of funds potentially needed in this context.”
The rules governing the operation of the single currency proscribe a bailout for a country on the brink of insolvency. Berlin, in particular, has been worried that any bailout of Greece could be challenged in its constitutional court.
The senior official said the agreement – which will not involve any contribution from the UK taxpayer – had been tailored to respect the bailout ban and avoid a supreme court challenge in Germany.
Alongside the financial relief package for Greece, the European Commission is rushing through tougher rules for the eurozone, using powers conferred by the recently enacted Lisbon Treaty to try to establish a system of rigorous “budgetary surveillance” of all 16 participating countries. The aim is a new regime of “reinforced economic policy co-ordination” in the EU.
“This is the essential lesson that has to be learned from the Greek case,” Olli Rehn of Finland, the new commissioner for economic and monetary affairs, told the Guardian (and four other European papers).
“The Greek case is a potential turning point for the eurozone,” said Rehn in the interview. “If Greece fails and we fail, this will do serious and maybe permanent damage to the credibility of the European Union. The euro is not only a monetary arrangement, but a core political project of the European Union … In that sense, we are at a crossroads.”
While ready to bail out the Greeks if only on terms of “rigorous conditionality”, European leaders are hoping that the rescue will not be needed, that the draconian package of austerity measures announced by Prime Minister George Papandreou will be enough to calm the markets and stabilise the euro.
EU leaders are to rule next week on whether Papandreou is doing enough to slash the 12.7% budget deficit by four percentage points this year, part of his ambition to cut the deficit by 10 points over three years.
Rehn said he would unveil new proposals next month enshrining a new single currency regime of “rigorous surveillance of national budgets” and that Eurostat, the EU’s statistical agency, would need to be given formidable new auditing powers over the books of eurozone member states, a demand that may be resisted by EU governments.
“That’s the hard core of our proposal. [The surveillance] should be automatic,” said Rehn. “We have an immediate corrective instrument for the Greek case, plus another framework to prevent new Greek crises.”
Inside the commission, officials are confident that Wolfgang Schäuble, the German finance minister, supports the tough new regime being plotted. Schäuble is wheelchair-bound and currently in hospital and will not attend key meetings in Brussels on Monday and Tuesday.
Schäuble enjoys a longstanding reputation as a European integrationist and is said to have played a central role in shaping the Greek bailout plans despite widespread hostility to any such moves in Germany.
Over the past week he has sparked a major debate by calling for a European Monetary Fund to underpin the currency and yesterday stoked more controversy by proposing that serial sinners in the eurozone could be expelled from the single currency club.
The EMF concept is for the long-term and a new rule enabling expulsion from the euro club would require the Lisbon Treaty to be re-opened, a nightmare for most after labouring over it for almost nine years.
While senior figures in Brussels believe that Chancellor Angela Merkel and Schäuble are intensely serious about establishing an EMF, they also suspect they are using the idea to assuage hostile public opinion in Germany and “prepare a short-term fire brigade operation for Greece.”
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Video: Greece hit by wave of nationwide strikes
Mar 11th
Thousands gather in Athens to protest against the government’s planned cuts imposed to alleviate the country’s debt crisis
Greece hit by new general strike over austerity plan
Mar 11th
Public and transport services grind to a halt as workers stage protest over spending cuts
Public and private sector workers in Greece began another general strike today to protest against spending cuts imposed to alleviate the country’s debt crisis.
The action once again disrupted public transport and closed public buildings, including hospitals.
Journalists, teachers, state hospital doctors and air traffic controllers are among those on strike, while officers from the police, fire service and coastguard plan to join protest rallies planned for later today.
Similar action in the past two weeks ended in violence when riot police clashed with demonstrators in central Athens. Some 1,500 riot police are due to patrol the centre of Athens today, according to Reuters.
The prime minister, George Papandreou, said in Washington last night: “Demonstrators have the right to demonstrate but the crisis is not this government’s fault.”
Under international and market pressure to reduce the deficit, the Greek government launched an austerity plan last week. It announced an additional €4.8bn (£4.3bn) of cuts that will hit public sector wages and pensions.
The EU-backed cuts follow moves to lower spending by €11.2bn (£10.1bn) to reduce the country’s budget deficit from 12.7% of annual output to 8.7% this year. The long-term target is to bring overspending below the EU ceiling of 3% of GDP by 2012.
The left-of-centre government says the cuts are the only way of escaping Greece’s crushing debt. The debts have hit the euro and alarmed international markets, which has inflated Greece’s borrowing costs.
Unions say ordinary Greeks are being called upon to pay a disproportionate price for past fiscal mismanagement.
“They are trying to make workers pay the price for this crisis,” Yiannis Panagopoulos, leader of Greece’s private sector union, the GSEE, told Associated Press.
Greece insists it does not need a bailout, and its European partners are reluctant to fund one. Athens has called for European and international support for its austerity programme, saying that unless it receives backing – and the cost for it to borrow on the market falls – it might appeal to the International Monetary Fund for help.
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The eurozone | Fright Club | Editorial
Mar 10th
Voters in many eurozone member countries can be forgiven for thinking that the single currency has only made things worse
The euro faced its first big challenge in this banking crisis – and it failed. That is not the assertion of a British newspaper but comes from Angela Merkel, the chancellor of Germany, who admitted this week that “the sanctions we have were not good enough”. She was referring to the Greek financial meltdown, but she could equally well have been talking about the fiscal crisis and violent demonstrations in Ireland in 2009 – or even the outbreak of the credit crunch over a year ago. As interconnected financial institutions across the continent tumbled like so many dominoes, the lack of a single eurozone banking watchdog (as opposed to a patchwork of national regulators from Austria to Malta to Slovenia) only made the crisis worse.
Indeed, voters in many eurozone member countries can be forgiven for thinking that the single currency has only made things worse. There has been the obvious problem inherent in a currency club that stretches across many nations in varying states of economic health, which means that Ireland, Greece and others in deep trouble can no longer devalue their punts or drachmas to make themselves more competitive but must rely instead on the more painful and certainly more unpopular task of driving down workers’ wages. That was the congenital defect of the euro, but matters have been made far worse by the reluctance of individual governments to group together.
Whether Ms Merkel and her colleagues like it or not, they now share a currency and an interest rate with George Papandreou and his ministers in Athens. And yet, throughout the weeks that Greece has teetered on the abyss of economic collapse or massive political convulsions, Berlin has been unable to come out and stand behind Athens. This has nothing to do with altruism or international brotherhood, and everything to do with enlightened national self-interest. Clubs that do not hang together end up with the members being hanged separately, and in investors’ minds Greece is not so different from Portugal, Italy or Spain: they all go on the target range marked Pigs. When he was Bill Clinton’s treasury secretary, Larry Summers once remarked that “when markets overreact … policy needs to overreact as well”. During this banking crisis, eurozone politicians have not overreacted – indeed, they have barely acted at all.
Which is why this week’s suggestion from Berlin that the eurozone ought to set up its own version of the International Monetary Fund has come as such a surprise – even to other European governments. As it stands at the moment, the proposal is vaguer than a pitch on Dragons’ Den, but it at least marks a recognition by Europe’s anchor economy that the currency club urgently needs some more institutions if it is not to repeat the mistakes and missteps of the past few years. Ideally, an EMF (as it has inevitably become known) would stand behind the common currency and intervene when member governments get into financial strife. In Greece’s case, such a body would have been able to give Athens some funds and a stamp of support that would have taken off some of the speculative pressure. The Washington-based IMF can already do this, but its intervention might dent European pride.
So much for the dream scenario: if an EMF is ever set up (a big if, given that it could force the renegotiation of the Lisbon treaty), it will probably not be so useful. It is more likely to go in for finger-wagging at governments that exceed their borrowing limits, and it is certainly hard to see German voters funding such an institution and its war chest. If that is what Ms Merkel has in mind, she should be warned: it will do nothing to glue together a eurozone that is slowly coming unstuck. If a 16-nation economic club is to grow up, it needs serious institutions and regulators – and for member governments to recognise that they are in it together.
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Viewpoint: Talk of an EMF sounds like euro-manoeuvring
Mar 9th
The scheme’s supporters are mostly German, other countries will be suspicious
The strangest part of all this talk about the creation of a European Monetary Fund is the timing.
Eurozone members are in the middle of dealing with the Greek debt crisis and are desperately trying to maintain the line that Greece’s problems can be fixed by the adoption of austerity measures. Yet here is a proposal seemingly designed to deal with cases where austerity is not enough and bailout cash is required.
Supporters might reply that an EMF would deal with the “next Greece,” rather than fix the current mess, but markets will inevitably see the message as weak and confused. No wonder speculators are salivating. No wonder Axel Weber, president of the Bundesbank, would prefer everybody to shut up. Discussions about “the institutionalisation of emergency help,” he declared , are “unhelpful”.
Weber has a point. Most of the voices arguing in favour of an EMF are German. Other European states – especially smaller countries – will be suspicious. They might, in theory, welcome the creation of a fund that could help in a crisis. In practice, they will view the manoeuvre as a way for Germany to impose fiscal restrictions on its neighbours while neglecting to get its consumers spending again.
If the creation of an EMF would require a new European treaty – which is German chancellor Angela Merkel’s view – it is hard to see how the idea will get off the ground in the near-term. In which case, concentrate on the immediate problem.
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Q&A: Credit default swaps
Mar 9th
It is not possible to take out an insurance policy on someone else’s house – because you would then have a financial interest in burning it down. But investors can do something similar with a CDS
What is a CDS?
Credit default swaps are derivative contracts. They were invented in the late 1990s and are a form of insurance on bonds issued by companies or countries that investors buy and sell. By 2007 the market was huge – about $50tn (£33tn) – unregulated and opaque.
If it looks like an issuer might have trouble paying, its CDS price rises because the bond is more risky and it will cost more to insure.
CDS contracts can be used by bond investors – as a hedge against potential defaults – or traded separately when they are called naked CDSs.
The current concern focuses on naked CDSs on sovereign debt.
What is the case for a ban?
The case against CDS contracts is usually explained using house insurance as an example: It is not possible to take out an insurance policy on someone else’s house – because you would then have a financial interest in burning it down.
Investors with no interest in the underlying bond can buy and sell CDSs – and profit from its demise.
The prime minister of Greece, George Papandreou, blames speculators trading in CDS contracts on Greek bonds for pushing up the cost his government has to pay to raise cash.
Regulators like the Financial Services Authority’s chairman Lord Turner and many European political leaders have pointed the finger at evil speculators and their trades in naked CDSs for exacerbating the problems faced by Greece and increasing the cost of the country’s borrowing. European commission president José Manuel Barroso believes speculative CDS trading has been an “aggravating factor” in the Greek debt crisis.
How might a CDS ban operate?
CDS contracts would not be banned – just naked CDS trading on sovereign debt.
It may be necessary to make all trades take place on a recognised exchange in order to monitor the CDS market.
What’s the case against?
CDS fans say the contracts do not move the market – they just reflect fears and allow risk to be more accurately priced.
A study released by German financial regulator Bafin suggests CDS trades had very little impact on the crisis faced by Greece.
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Brussels targets derivatives to help euro
Mar 9th
José Manuel Barroso says European commission considering ban on credit default swaps to ease market pressure on Greece
The European commission announced moves today to shore up the euro and ward off market pressure on Greece by considering a ban on complex derivatives allegedly being used to undermine the single currency.
The draconian move suggested by José Manuel Barroso, commission president, follows a joint campaign by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, for a prompt clampdown on credit default swaps (CDS).
George Papandreou, the embattled Greek prime minister, who has been arguing in Berlin, Paris, and Luxembourg for the past several days that unbridled speculation on the markets is driving his country towards national insolvency and sovereign debt default, was expected to lobby the White House last night to join the crackdown on the markets.
Papandreou was due to see Barack Obama in Washington last night following meetings in Berlin and Paris with Merkel and Sarkozy respectively.
In concerted criticism of the speculative attacks on the euro, Merkel was also joined by Jean-Claude Juncker, the Luxembourg leader and head of the eurozone of 16 countries using the single currency, in demanding swift action to rein in the markets.
Barroso said today it was “not justified” to buy CDSs “by unseen interventions on a risk, on a purely speculative basis … The commission will examine closely the relevance of banning purely speculative naked sales on credit default swaps of sovereign debt.”
The possible ban on CDSs – a form of insurance against the risk of default – would also be raised at the G20.
Following talks with Juncker in Luxembourg on the Greek crisis, the threat to the euro, and the talk across the EU of establishing a European Monetary Fund to bail out distressed eurozone countries, Merkel reserved her strongest criticism for the markets.
“We must discourage financial market speculation,” she said. “A fast implementation in the area of credit default swaps must follow. We know this will be done on the American side too, but we think that a step ahead from our side, from the European Union, would help.”
The commission announcement came in response to pressure from Merkel, Sarkozy, Juncker and Papandreou, who threatened to take national action against the markets if Brussels balked.
The European crackdown on CDS trading appeared to be the central result of Papandreou’s tour of key capitals, a strong political signal aimed at winning time for the Greeks. The apparent determination to regulate the traders as well as the concerted political signals sent today were aimed at relieving the pressure on Greece whose debt and deficit crisis could spiral out of control and undermine the euro.
For the first time Barroso said the eurozone countries were preparing some form of bailout for the Greeks which, nonetheless, would not breach the no-bailout clause in the single currency rulebook.
“The commission has been actively working with euro-area member states to design a mechanism which Greece could use in case of need,” he said. “It would include stringent conditionality. The commission is ready to propose a European framework for co-ordinated assistance, which would require the support of euro-area member states.”
Market speculation against the euro was “an aggravating factor” in the Greek crisis, Barroso added, but conceded that Greece’s problems “were not caused by speculation on the financial markets”.
Despite the criticism of the markets and the CDS crackdown led by Merkel, Germany’s financial services regulator said it had seen no evidence of speculation against Greek bonds and no growth in the use in effect of CDSs betting on the chances of a Greek default.
Following the weekend announcement from Wolfgang Schäuble, the German finance minister, that he favoured setting up a European Monetary Fund to safeguard the euro in future Greece-style crises, it was clear today that any such move will be slow and complex, tiptoeing gingerly through a legal minefield.
While supporting the idea, Juncker said there were “a thousand questions” to be answered. The Germans and the French are certain to scrap over the rules and functions of an EMF. Merkel reiterated that such a fund would mean reopening the Lisbon treaty, a nightmare scenario that could run into trouble with Germany’s supreme court.
While the fund would work for the single-currency countries, changing the Lisbon treaty would require the assent of all 27 EU countries. Gordon Brown has already pledged no more changes to European treaties for at least a decade, while a Conservative government in the UK would face major dilemmas over how to respond to changes in the Lisbon treaty.
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Greek PM to urge Barack Obama to crack down on speculators
Mar 9th
George Papandreou to meet US president in latest stage of his whirlwind campaign to drum up support for his debt-laden country
The prime minister of Greece will tonight urge Barack Obama to crack down on financial speculators when he visits the White House.
George Papandreou will meet the US president at 2pm EST (7pm GMT) in the latest stage of his whirlwind campaign to drum up support for his debt-laden country. Greek officials have indicated that Papandreou will ask Obama to impose stricter regulations on hedge funds and currency traders, who they blame for aggravating their problems and making it harder for Greece to borrow money.
He is also likely to warn that America will suffer unless the Greek debt crisis is resolved soon.
The concerted European campaign against financiers continued as German chancellor Angela Merkel said that a Brussels-led monetary fund to bail out eurozone nations in need would send a clear signal to markets speculating on the possible break-up of the single currency.
After meeting Jean-Claude Juncker, the head of the eurozone’s finance ministers, in Luxembourg this morning she said her proposal for a fund would not replace current loose rules that require EU economies to stick to debt and deficit limits.
She said more stringent conditions for a possible eurozone default would set a clearer “signal to markets that speculation cannot work”.
The euro has slid against the US dollar in recent months on worries over Greece’s soaring debt and its ability to make tough budget cuts.
Last night, Papandreou warned an audience in Washington that the value of the euro could fall sharply if Greece’s debt crisis escalates. He argued that a weak euro would make it harder for US manufacturers to sell goods in the eurozone, at a time when America is looking to exports to help drive its recovery from recession.
“An ongoing euro crisis could cause a domino effect, driving up borrowing costs for other countries with large deficits and causing volatility in bond and currency rates across the world,” he said, in a speech at Washington’s Brookings Institute.
Papandreou is attempting to persuade world leaders on both sides of the Atlantic to support Greece as it wrestles with debts of €300bn (£272bn), and a budget deficit that has swelled to 12.7% of GDP. Last weekend he won a crucial show of support from French president Nicolas Sarkozy.
The cost of insuring Greek debt has risen steadily since last September, when the country revealed the size of its budget deficit, and it has also had to pay significantly more to borrow on the financial markets.
Papandreou, whose austerity measures have prompted a wave of strikes across his country, claims Greece is being unfairly victimised.
“Unprincipled speculators are making billions every day by betting on a Greek default,” Papandreou told the Brookings Institute.
“That is why Europe and America must say ‘enough is enough’ to those speculators who only place value on immediate returns, with utter disregard for the consequences on the larger economic system – not to mention the human consequences of lost jobs, foreclosed homes, and decimated pensions,” he added.
Some analysts, though, argue that Greece is simply paying a fair price for its economic woes, with traders speculating on whether or not the country will default on its debts.
Papandreou also met with secretary of state Hillary Clinton last night.
Yesterday the head of the International Monetary Fund predicted that Greece will not require a bailout from the IMF.
Papandreou began his tour last week with a visit to Berlin. Today, Merkel indicated that she also believed Greece will not need a direct rescue.
“Greece has won some trust back through the steps taken by its government,” Merkel said. She added that the European commission may have to consider regulating the market for credit default swaps – the derivatives used by traders to speculate on whether European countries will repay their debts.
Papandreou said the CDS market needed reining in, claiming that some hedge funds had tried to destabilise the Greek economy after betting that the country would default.
“It is common sense, enforced by insurance regulators, that a person is not allowed to buy fire insurance on his neighbour’s house, and then burn it down to collect on that insurance,” he said.
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Europe bars Wall Street banks from government bond sales
Mar 8th
• Leading US banks blamed for triggering financial crisis
• Policymakers propose a rival European monetary fund
European countries are blocking Wall Street banks from lucrative deals to sell government debt worth hundreds of billions of euros in retaliation for their role in the credit crunch.
For the first time in five years, no big US investment bank appears among the top nine sovereign bond bookrunners in Europe, according to Dealogic data compiled for the Guardian. Only Morgan Stanley ranks at number 10.
Goldman Sachs doesn’t make the table. Goldman made it to number five last year and in 2006, and number eight in 2007, the data shows. JP Morgan was in the top ten last year and in 2007 and 2006 but doesn’t appear this year.
“Governments do not have the confidence that the excessive risk-taking culture of the big Wall Street banks has changed and they still cannot be trusted to put the stability of the financial system before profit,” said Arlene McCarthy, vice chair of the European parliament’s economic and monetary affairs committee. “It is no surprise therefore that governments are reluctant to do business with banks that have failed to learn the lesson of the crisis. The banks need to acknowledge the mistakes that were made and behave in an ethical way to regain the trust and confidence of governments.”
European sovereign bond league tables are now dominated by European banks such as Barclays Capital, Deutsche Bank, and Société Générale, the Dealogic table shows. Their business model is usually seen as more relationship-based, while US investment banks have traditionally been focused on immediate deal-making.
Being left out of government bond sales means missing out on one of the top fee-earning opportunities this year, given the relative drought in mergers and acquisitions and stock market flotations. Western European governments need to raise an estimated half a trillion dollars this year to refinance debts and pay for bank bailouts and rising unemployment.
Banks typically take a percentage of the total deal value for underwriting a bond issue, which could run into tens of millions given the ballooning sovereign debt sales this year. On a 1% fee, Barclays Capital would have pocketed $92m (£61m) from the $9.2bn European bonds it helped sell this year.
Barclays may have profited as a domestic anchor of UK debt sales, as a certain level of “nationalism” has surfaced according to Philip Augar, author of Chasing Alpha and other books about investment banking. “People have done as much as possible to take care of their own financial institutions,” Augar said.
The National Bank of Greece featured in the top 10 for the first time in at least five years, according to Dealogic. Greece left Goldman and Morgan Stanley out of its most recent bond sale, and also dropped hedge funds from its list.
Petros Christodoulou, the head of Greece’s debt management office, told the Guardian the bond issue had been directed to more “long-term” investors as they were seeking market stability. Greece has had tense relationships with Goldman recently after it emerged that the US bank had helped hide the real level of the country’s public debt with derivatives contracts. The country also denied reports about the bank selling a stake of its debt to the Chinese government fund.
Investment banks insist their business areas are separated by confidentiality walls, but countries have been furious about some of their trades appearing to conflict – either on their own books, or on behalf of clients.
Goldman Sachs said its overall position in the European sovereign bond market had improved this quarter once US dollar denominated deals were included. It said its own data showed it ranked fourth in European sovereign bond sales this year.
Greece, Spain, Germany and France are also pushing for changes in the credit default swap market, where investors can bet against the possible default of a country, ultimately bringing more instability.
Britain, Spain, Ireland and Belgium have not used Wall Street firms in the largest 10 deals of the year, according to Dealogic.
Britain used Barclays, Deutsche, RBS and Royal Bank of Canada in its $7bn issue last month, the data shows. Spain has also used Santander, as well as Barclays, Citi and SocGen in recent issues.
Goldman Sachs, JP Morgan and Morgan Stanley have exploded in wealth and power over the past decade. In their glass towers in Canary Wharf, or in Goldman Sachs’ European headquarters on Fleet Street, reception rooms regularly welcome prime ministers, world business leaders and multibillion-pound investors.
“The power of big investment banks was a factor in the banking crisis, and it’s up to regulators and customers to stand up to them, and not picking them is one of the ways,” Augar said.
But the power accumulated is too large to wane, the author said. “I doubt this will last,” he said. “The US investment banks will be back in Europe before too long because they are very powerful and they have a very big footprint in Europe.”
The EU is also trying to curb US financial power by creating its own monetary fund – a replica of the Washington-based IMF.The need of a European fund has emerged during the Greek crisis, as European politicians have insisted financial troubles should be resolved at home.
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Statistics, snow and sterling stir up a blizzard of vitriol
Mar 12th
Posted by Teena Lyons in Business
No comments
Readers were riled by everything from the Office for National Statistics to the price of Chateau Petrus
An unusually high count of reports and statistics dominated the week but, while facts and figures are always helpful, bloggers say it is the interpretation that counts.
SeanThorp, for example, vented forth with a heavy dose of sarcasm following the publication of a report into Lehman Brothers that criticised accounting “gimmicks”: “In all my born days I never thought a bank would try and pull a scam. Imagine if all along they’ve been offering to look after our savings and pensions and we’ve been giving them the money and instead of them keeping it safe they’ve been lending it out at huge risk and making obscenely vast amounts of money for themselves.”
While tomedinburgh, thought that the bank’s figures were not the only ones that deserved scrutiny: “I wonder what would be found if the forensic accountants and prosecutors were let loose on the millions of pages of documents at RBS, Bank of Scotland, Northern Rock from the bubble years?
“The bailout made sure we will never know – if they had been allowed to fail those records would have been gone through with a fine tooth comb just like at Lehman and Enron. This way they are in the safe hands of people who have no interest in stirring up trouble.”
Other reports, such as the OECD one which declared children from poor families in Britain were more likely to struggling on low incomes than their counterparts in the west’s other rich countries, got a massive cyber-shrug of the shoulders.
So sharkfinn responded: “And? No matter how many of these reports come out no one seems to care and nothing changes. Britons live, die and swear by the motto: If I am OK, all is good.”
Likewise iranda took figures from the Office for National Statistics with a large pinch of salt. The ONS said that Britain’s manufacturers suffered their biggest fall in production in January when snowfall brought parts of the country to a standstill.
“That snow must have been pretty potent stuff – reducing consumer spending, house prices and now industrial production! I presume it never snowed during 1998-2007 when we had continual economic growth? Perhaps we should do away with economic forecasters and extend the remit of the met office.”
And don’t get anyone started on the Forbes magazine rich list: independencia, like others, did not see a reason to celebrate the fact that Mexican telecoms tycoon Carlos Slim had edged Bill Gates off the top slot. In fact, this reader thought there shouldn’t such a list at all: “Obscene, every penny gained from either shafting the poor or ripping them off. Not so much a rich list, as a failure to tax list.”
And, talking of failed policies, notacommie, like many, was not convinced by European commission moves to shore up the euro by considering a ban on complex derivatives: “Erm, so speculators are driving Greece towards national bankruptcy? Stupid me! So nothing to do with the government running a 13% of GDP deficit or having government debt at 120% of GDP? Or fiddling their economic figures for years to get into a completely unsuitable fixed currency system.
“Banning CDS trades is the equivalent of putting your fingers in the air and singing ‘la la la’. It’s year-zero stuff from politicians who are looking to scapegoat others for their own failings.”
Chrish thought it was “treating the symptom not the disease.
Sadly for those flocking to the moral high ground, there was not much to crow about closer to home. Figures showed the UK’s trade deficit with the rest of the world widened in January to its highest level since August 2008, as exports suffered their sharpest drop in three years.
“A weak pound is supposed to be good for exports, if you have something to export to take advantage of that fact,” mused ChrisWoods. “And that also your largest trade partner, namely Europe, is buying anything from you, which they aren’t.
“To rebalance the economy will take decades. All this talk about getting industry to take the lead to pull the economy from recession is a pipe dream. Maybe now someone, somewhere in political power will see that you can’t drive the economy any more on asset bubbles: namely, housing and the stock market. A few make a lot of money, the rest get screwed and are asked to pay for it.”
“My company is an exporter and would like to take advantage of the 30% devaluation of sterling, but we can’t get the credit from the banks to invest to drive the gearing up we’d need to produce more,” said mugclass. “The staff are willing to work hard, the business wants to expand, the demand is there.”
CrimpleneAl was another reader moved to describe the human cost of the current economic dire straits, commenting in response to Simon Jenkins’s argument that the government had meekly and mistakenly accepted false promises from the financial industry when it gave the green light for the banking bailout. “Despite serious contributions over the years, my pension is worthless, my wife’s pension is worthless and I now face the possibility that inflation will destroy our remaining savings.
“But then, my friend Joe, a financial journalist, consoled me with the news that those City restaurants where Chateau Petrus sells for £5,000 a bottle are as full and raucous as ever, with the City boys living high on the billions that Brown and Darling has stuffed into their pockets. My money. The money that should have funded my endowment and pension.”
Perhaps we could all learn something from edgeofdrabness who quipped following the Lehman report: “Client to accountant: What’s two plus two? Accountant to client: Who wants to know?”
It’s the way you tell ‘em.