Bill Emmott - International Author & Adviser


Don´t slam the door on Greeks or their money
The Times - May 28th 2012

Is there nothing our government will not stoop to in order to make Britain look bad? Fresh from David Cameron’s lecturing of European leaders and the European Central Bank president about how to save the euro and promote growth, which was pretty rich coming from a country in recession, now Theresa May says she is working out “contingency plans” to stop a lot of Greeks withdrawing their money from banks and coming with it to London as and when  their country leaves the euro.

            Alright, that is not quite what Mrs May said, but it was just as ridiculous. What she said was that “work was ongoing” on whether Britain might impose emergency immigration controls if too many Greeks (or Irish, Portuguese, Spanish or Italians)  show signs of coming to live and work in Britain.

            This is scaremongering, since it conveys the impression that these countries, our close friends and allies, might soon be the source of floods of refugees, without any evidence that this is likely. Coming from someone who in the past 18 months has tried her best to make Heathrow airport feel like the crueller sort of refugee-processing centre, this should not perhaps be surprising.

            Worse than that, however, this whole idea is damaging, to our reputation and to  our interests. It says that if our friends and allies were in trouble, we would slam the door in their faces. It says, arrogantly, that we are assuming that London would be the only or main place such European Union citizens might try to move to, rather than simply sharing any influx with Paris, Berlin and others and so starting by working out in co-operation with them how to manage things.

            Finally it says, incredibly, that our Tory-led government of a country “open for business” would anyway rather not have an influx of mostly well-educated people, many of whom really would be fleeing with their money. This idea shares the brilliance of the Tory policies before and after the Tiananmen Square atrocity of 1989 in China that sought to persuade the world’s most entrepreneurial people, namely Hong Kong citizens, either to stay put or to take themselves and their money to Canada instead—anywhere but Britain.

            Admittedly, this is a troubling month for everyone, waiting to see which way the Irish vote in their referendum on the EU’s (minus Britain and the Czech Republic) fiscal treaty on Thursday, how the French vote in their parliamentary elections on June 10th and, most of all, how the Greeks vote in their re-run general elections on June 17th. To have watched, last week, the Spanish government have to do for one of its banks what Britain did for Northern Rock,  Royal Bank of Scotland and Lloyds in 2008 was unnerving, even if it might have been expected to encourage a little fellow-feeling.

            Troubled times do require contingency planning. From Britain, however, such planning should surely demonstrate not only our supposed British values of openness, warm welcomes and cosmopolitanism, but also our traditional desire to help ensure that any ructions on the continent do not become dangerous and unstable. Instead, both Mr Cameron’s lecture and Mrs May’s statements did the opposite—just when their government is telling us incessantly and smugly that the eyes of the world are on Britain.

            In truth, the eyes of the world are on Greece, with a slightly worried glance around other parts of the Mediterranean. The signs are that Germany is preparing for a quick negotiation with a new Greek government, if it is led by the rebellious Syriza party, following which Greece will decide to leave the euro. We should all hope, and advise, that this negotiation will take about ten minutes, during the evening after the new Greek government has been formed.

            The reason for saying this is that the news-weekly Der Spiegel has reported that the German government’s new plan for Greece will be to propose it be treated rather as West Germany handled East Germany after unification in 1990—though without the bucketloads of Western taxpayers’ cash. The German lesson would come in the form of an external, presumably EU agency set up to take over the privatization programme that the Greeks have so far stalled on.

            This looks designed to be a non-starter: for a government that comes in to office demanding that Greeks keep control of their own destiny, it would surely be impossible to hand over privatization of state assets to foreigners, even in return for some easing of other bail-out conditions. So, if true, this plan’s aim would be to make Germany look fair but tough, and in the end to see Greece do what everyone is expecting, namely leave the euro.

            The contingency plan that matters most concerns what happens then. Mr Cameron told the European Central Bank’s President Mario Draghi that he should flood the eurozone with money, exactly what the Bank of England is not doing at present for our stagnant economy because of Britain’s stubbornly high inflation rate. If, but only if, Greece does leave, this recommendation will finally be right, and it is almost certainly what Mr Draghi will do.

            Two other things will then be important. One will be to ensure that neither Spain’s nor anyone else’s banks will collapse if the eurozone recession deepens, as is likely. If Greece has gone, and if the Spanish government cannot afford this alone, then this would be a collective problem that Germany ought to be willing to help solve, perhaps through some sort of collective EU equity stake in Spanish banks.

            The second will be the launch, straight after the Greek exit, of a plausible, not just token, programme to reflate Europe’s depressed economies. That is needed for its own sake, of course, but also because financial markets will otherwise have no choice but to price in—and then bring about—doom if they see countries’ tax revenues declining remorselessly.

            Such a programme needs a dash of Italy’s Mario Monti—a big drive to liberalise service markets, which make up 65-75% of all EU economies, so as to motivate business investment, which he proposed in February in a letter to EU governments also signed by Mr Cameron—along with a dash of France’s Francois Hollande, in the form of jointly financed infrastructure programmes, both digital and physical.

            Indeed, if Mr Cameron were sensible enough to give his strong support to both, participating in a bank recapitalization move (isn’t London Europe’s top financial centre?) and supplementing the eurozone public works plans with a capital investment push in Britain too, he might even make his country look constructive, competent and good. For once.


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