The Euro: Nearly the end of the beginning

It looks like we are nearing the end of the beginning of the Euro crisis. It is patently clear that the Eurozone governments are incapable of creating conditions in which Greece can remain, they also don't seem to be able to see that Greece will definitely leave.

The main players have had two meetings this week, the G8 and the EU leaders. Neither meeting came up with anything of note. There is even division at the top, between France and Germany. With every passing day it seems that they don't have a clue.

So, Greece leaving is the end of the beginning of the crisis, and without having a middle it will then be the beginning of the end.

A few weeks ago I would have thought that Greece leaving would be a good thing to enable the rest of the Eurozone to remain intact. The last few weeks has shown me not to be so sure. I'm now beginning to think that the contagion effect is now probable and that Greece leaving could precipitate a quick fall for some other countries. If that happens, then I'm not sure, now, that the Euro could survive. The example of other countries leaving the Euro, devaluing and then becoming more competitive could be the last nail in the coffin for the Euro.

Robert Peston's documentary detailing the launch of the Euro has shown that this project should have been strangled at birth - and was destined to fail. The Euro is dysfunctional, and it's now shown that the EU is dysfunctional too. So, if the Euro does not survive it is also likely that the EU will splinter. I can now foresee referenda happening across the EU, for leaving the Euro and some for leaving the EU. Certainly I think there is a 60% chance the UK will leave in the next 10 years. We may even re-found a new EEC on the original basis but without ever closer integration - certainly something that most people thought we were joining in the first place.

The next year is going to be fast paced, chaotic and dangerous. Let's hope we can come out of it ok, but I suspect there will be a lot of pain.

 Squiffy.

Why stimulus will not work

I watched the Sunday Politics today, and the head to head between the ideas of stimulus versus austerity. Stimulus will nearly always enable more economic growth, after all how could the pumping of money by the Government into the economy not feed into higher GDP figures.

The point was made that by putting money into projects to enable employment will give greater tax revenue. True, but at what cost? If you think about the money going into projects some will be spent on supplier companies, materials, and financing jobs which means that people have money to spend in the wider economy and then can pay tax back to the Government. It sounds great, but consider that some of the money will be lost in bureaucracy, some will be sent to foreign companies, some will be put into bank accounts by thrifty employees in difficult times. So not all the money spent can be recovered. It will only be recovered if it spurs confidence in the economy, so that private companies invest - only then can it be truly successful.

The last Labour Government did provide a stimulus, which created a burst of 2% growth, but when the stimulus was removed the growth disappeared. The key factor was that the Eurozone crisis occurred, and business confidence had vanished. The stimulus effect had been wiped out. That's the reason why spending more now will not help, the Eurozone crisis is still with us with a fresh bout of instability. Spending merely adds to the debt burden.

We have to stick to a programme of reducing the deficit. If the Eurozone problems are resolved, maybe a stimulus will be able to work within a framework of increasing business confidence. Until then, stimulus will only provide the mirage of growth and is really throwing good money after bad.

Squiffy.

Well done Pastor

Congratulations to Pastor Maldonado on his first F1 victory. I have been a big fan of the Williams team since I first became interested in the sport. As a big supporter of Nigel Mansell, the team enabled him to fight for titles and always allowed the two drivers to fight it out. Frank Williams is a true racer and so I could not be happier that the team has returned to the top step.

It was heart breaking to see the team at the back of the grid last year, but now that the alliance with Renault has been rekindled Williams may be turning the corner. It has been too long since Juan Pablo's victory at Brazil in 2004, and now 8 years of hurt can be put aside.

It was a shock, though, to see the fire in the Williams pit after the race. It seems that a member of the Williams team is in hospital and I hope that the injuries are not too serious, and that the team member recovers well. The fire will bring KERS into the spotlight and whether extra safety measures are needed.

Enjoy the victory Pastor, you drove brilliantly and surprised the hell out of me. I h0ope the fire will not take the shine off the fantastic victory today.

Squiffy

Well done Boris. Pull your socks up Cameron.

Now that the local elections are over, we can see that the Coalition got a drubbing and Boris' popularity/Ken's unpopularity gave the Tories their only real victory. I think Boris' victory is a good thing. I'd like him to have a few more ideas, but generally the ideas are better and more believable than Ken's. Mr Johnson is a different figure from 4 years ago. He is more serious now although still has the possibility to entertain. It was a shame that Mr Livingstone could not be gracious in defeat, but hopefully we have seen the last of him now! The overall local results were bad for the Coalition partners. I don't think it was a platform for Labour victory and the situation is recoverable for the Government. It certainly looks worse for the Lib Dems as their local base is becoming ever more diminished. I don't think they will be decimated though and can recover in future elections. The Tories don't look too bad on 31% of the projected national vote, given the austerity measures and the recent bad months. But, the Tories only succeed in Government if they look competent and the last few months has shown them wanting. I think, again, this is recoverable and they have not had another ERM moment. The Tories do need to get on top of the competence issue, though, and not make silly mistakes (such as the date of Abu Qatada's last possible appeal). A change of political weather can happen, Boris' election, a Hollande victory quickly turning to French economic disaster, the GDP figures being revised up and future growth can do it. At the moment, it has been raining too much on the Coalition but Labour does not have a decent rival offering and their progress is a sign of dissatisfaction. So Cameron, don't rush to the right but cut down the silly mistakes, and be seen to be straining everything for growth within your austerity plans and it could come good. Squiffy.

Local Elections live blog 2012

For as long as I stay awake...


Squiffy.

Will a Hollande victory be good for Cameron?

On Sunday France may get a new President. As I've said before, it would be better for France if Sarkozy gets re-elected. It looks, however, that François Hollande will win.

A socialist victory may be a marvellous fillip for the Prime Minister. Just as the Government here is looking a little shaky, with bad economic results spreading from the Euro-zone, could a left-wing victory in France show us what we may have experienced if Gordon Brown had won the 2010 election. High taxes subsidising extra spending, and along with more borrowing could give us an idea of the current Ed Balls plan too.

My hunch is that France will get a very quick shock from the ratings agencies, and and plunge the Euro-zone into more problems. Expect stock markets around the world to plummet on Monday and a large amount of lashing out.

It could get messy, but may be more so for the two Eds.

Squiffy.