Monday, 10 May 2010
British Taxpayers Now Liable for £2 Billion of Greek Debt
The proposed British share of the International Monetary Fund’s (IMF) bailout of Greece has risen to nearly £2 billion, despite Britain being buried in debt due to decades of Tory and Labour mismanagement.The £2 billion annual fee could be Britain’s pro-rata share of the International Monetary Fund’s (IMF) bailout of Greece, a nation which has a deficit almost identical to that of Britain.
Originally the IMF had planned on contributing €15 billion, which would have made the UK’s share £650 million. That number was then raised to €20 billion, pushing the UK’s share up to £1 billion, and now has been raised again to €40 billion, of which the UK will have to pay £2 billion.
The collapsing 11-year-old euro fell 4.3 percent last week. In addition, spreads on Greek, Spanish and Portuguese bonds widened, further indicating a lack of confidence in the EU. European banks have suffered big losses, especially those with exposure to Greece, Portugal and Spain.
The fundamental flaw in the EU superstate is the notion that all members are economically comparable in terms of productivity, development, employment, inflation and other factors which determine overall economic performance.
Simon Tilford, chief economist at the Center for European Reform in London, said that the southern countries, meaning Greece, Portugal, Spain and Italy, are so uncompetitive compared with the others, especially Germany, that there are permanent trade imbalances that will destroy the euro.
“The myth of European integration and solidarity has been exposed as wishful thinking,” said Mr Tilford.
According to researchers at Morgan Stanley, “[A] stabilisation fund is just buying time for distressed borrowers. The fiscal policy action taken in these countries during this ‘extra time’ is essential. If yet another rescue mechanism isn't followed by aggressive austerity measures, the problem just continues to fester — and could eventually spread even wider."
Professor of Economics and International Affairs at Princeton University and New York Times columnist, Paul Krugman, explained it thus:
“During the years of easy money, wages and prices in the crisis countries rose much faster than in the rest of Europe. Now that the money is no longer rolling in, those countries need to get costs back in line.
“But that’s a much harder thing to do now than it was when each European nation had its own currency. Back then, costs could be brought in line by adjusting exchange rates — e.g., Greece could cut its wages relative to German wages simply by reducing the value of the drachma in terms of Deutsche marks. Now that Greece and Germany share the same currency, however, the only way to reduce Greek relative costs is through some combination of German inflation and Greek deflation. And since Germany won’t accept inflation, deflation it is.
“The problem is that deflation — falling wages and prices — is always and everywhere a deeply painful process. It invariably involves a prolonged slump with high unemployment. And it also aggravates debt problems, both public and private, because incomes fall while the debt burden doesn’t.
“Hence the crisis. Greece’s fiscal woes would be serious but probably manageable if the Greek economy’s prospects for the next few years looked even moderately favorable. But they don’t. Earlier this week, when it downgraded Greek debt, Standard & Poor’s suggested that the euro value of Greek G.D.P. may not return to its 2008 level until 2017, meaning that Greece has no hope of growing out of its troubles.”
Today is the 60th anniversary of the Schuman Declaration, the proposal by France’s foreign minister, Robert Schuman, to create a supranational organization of states in war-ravaged Europe, which is now celebrated as Europe Day.
While the early pact between France and Germany led to the free-trade zone known as the European Economic Community, the European Union still lacks serious economic cohesion, due to the disparity between the individual member countries.
The British National Party resolutely opposes the single European currency, supports the overwhelming majority of the British people in their desire to keep the pound and our traditional weights and measures, and would withdraw from the European Union.
British tax money should be used to rescue Britain first, and not to bail out other nations.
read more from kevin http://kevinnmoore.blogspot.com/
