The economic crisis in Greece has many ironies, one of which is that an appalling fiscal mess, left by a very right wing government, is the responsibility of a left wing government to clear up. It is the same Augean task (to stick with Greek cultural heritage) as will face whoever takes over from this very right wing government in the UK.
Being nothing but a lowly party member, I cannot pretend that the Mervyn King scenario had not occurred to me too. I had considered that a Cameron administration, with a tiny majority, propped up by some Northern Irish bigots, would inflict such pain on the majority of our society that, before falling after a few years, they would put the Tories out for a generation at least.
In so doing, they would greatly enhance the cause of Scottish and Welsh independence, and with the Lib Dems the second most popular party and the challenger in the large majority of Tory seats, the Tory demise would sweep in a radical change in more promising circumstances. All that had occurred to me.
But it was of course the Thatcher scenario. She was the least popular Prime Minister ever. But then she engineered into a massively popular war the crass Argentinian invasion of the Falklands , and never looked back. The Tories could pull such a trick again. Accompanying another war, they might crank up still further the appalling reduction of our civil liberties.
On top of which we need to pin down electoral reform now, while there is the best ever chance. PR and a 100% elected House of Lords will transform the political landscape of the UK for ever. Let’s look for an outcome that secures that – it is more important than the pleasant prospect of watching Cameron fall on his arse. So I am out again today campaigning for the Lib Dems. This is the first chance to change the two party system for a generation.
Back to Greece. The European ideal – which at its internationalist core I regard as a good thing – is suffering from overreach. The Eurocracy have always been expansionist, and taken the view that to secure expansion is more important than the detail. Thus Greece and Portugal in particular were admitted to the Euro when everyone knew that it was a fudge, and that their dim relationship with the convergence criteria was based on fake statistics.
The same is true with the accession criteria, which in areas like corruption, transparency and the rule of law Bulgaria and Romania were deemed to meet, when plainly they did not. On human rights, dreadful treatment of their Roma was ignored. All that too will come back to haunt the Eu.
The problem with faking the convergence criteria, and the fundamental flaw in the Euro, is that there is no real mechanism to enforce a broadly similar fiscal policy across the single currency. The system of peer review relies on the (in this case Greek) government’s own falsified statistics, and has few teeth even if it had good information. The result in effect is that individual countries can practice free quantitive easing – just print themselves money. This devalues the money everyone else has in their pocket, as the Eurozone is now noticing rather sharply.
We are already lending Greece more money through the IMF than the amount we would need to give if we were part of the Eurozone rescue package. I do not think these loans will halt the markets, who have identified the fundamental weakness in the Euro’s structure and will go for it mercilessly.
There is much speculation that Europe should boot Greece out of the Euro and we should see a return of the drachma. I think broadly that should happen. But there is an alternative to the return of the drachma – which Greece would simply create far too much of, and would soon have toilet paper status. Greece could be kicked out of the Euro, but still use the Euro as its currency, merely losing the ability to create it, with the government having to raise the money by bonds and import cash physically from another European state. That is on a more institutionalised and thorough scale the way the dollar works in countries with junk economies. Once Greece has really reformed it can rejoin the Euro properly.
Humiliating, but it is actually a very Greek idea. King Croesus’ Lydia was the first state whose currency was so sound it was used internationally. It remains a famously good idea over millennia.