Wednesday, 28 January 2015

Greece's economic problems are, I fear, only just beginning

William Hague was the one who described the Euro "as a burning building with no exits."

He said this when the Europeans decided to create a financial union, crucially without also sharing decisions on taxes and spending; it does not work. For complete solutions to current and potential future problems the sharing of fiscal risks is clearly required.

Currently, EU members share the euro currency, but decisions on spending are made at a national level. Hence why Germany and others in the Euro are so reluctant to bail out Greece again - or waive their debt. They are struggling to trust the Greeks. This is not helped by the new Greek leadership.

Greek markets were thrown into deeper chaos today as investors feared that the new, anti-bailout government would jeopardise the country’s future in the eurozone. The Athens Stock Exchange tumbled more than 9pc, led by a 27pc fall in bank stocks, amid concerns that the Syriza-led coalition could take direct control of the country’s lenders and write off billions of euros in household loans.
Greek PM Alexis Tsipras has vowed never to bow to European creditors as the government took steps to wind back austerity.

Now the Bank of England Governor has made his case pretty clear: