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LeapRate has closely followed the economic woes that surround the Eurozone and have centered on Greece’s unsustainable debt to the European Central Bank and International Monetary Fund.
Recently in a TV interview, the potential and very likely fall-out from Greece’s financial delinquency was highlighted, drawing a conclusion that London’s financial center is the only real producer in the entire European Union, and that nations including Spain, Italy, France and Portugal, all with very high debt to GDP ratios and low productivity, are likely to fall off the fiscal precipice that has been created by a vast European central government which has fueled the desire of many mainland European countries to live via the umbilical cord of the government.
Four months on, with Greece having predictably defaulted on its installment of 1.6 billion euros toward repaying the 394 billion euros owed, nation’s led by firebrand Alexis Tsipras is adamant, despite being a nation of only 11 million population, not to go down the austerity route, and not to repay the debt.
British politicians are now echoing the predictions by LeapRate which were made in February.
In a complete change of direction, Britain voted a conservative government into office at the General Election, which after 18 years of socialism which began with Labour’s rule, followed by a coalition between David Cameron’s conservative party and the Liberal Democrats, who stifled any true fiscally conservative policies.
Contrary to the majority of mainland Europe, Britain’s economy is now growing at its highest rate for several years, and effective fiscal reforms are in place, which has raised the incompatibility between Britain and southern Europe at parliamentary level.
With the public and business community looking forward to prosperity in Britain, conservative figures state that the Greek debt crisis and the debt that the European Central Bank and IMF will be left with are only precursors to a far greater economic catastrophe across the continent.
Former Foreign Secretary William Hague, who was Leader of the House of Commons until May this year, stated “”Greece had no chance of turning its economy around within the single currency unless Germany agreed to hand over big subsidies forever.”
During the early stages of Britain’s socialist Labour government, Mr. Hague had been vocal with regard to the potential dangers. In May 1998 Mr Hague used a speech to warn that some countries in the Euro would find themselves “trapped in a burning building with no exits.” He predicted at the time that”wage cuts, tax hikes, and the creation of vicious unemployment blackspots” would occur.
Warning of potential crises eminating from other nations in Southern Europe, Mr. Hague said this week
“Across southern Europe, governments such as those in Italy and Spain are making brave efforts to enact long overdue reforms. They might not achieve enough, however, for their people to prosper when required to compete equally with their northern neighbours.”
“There is a clear risk that the economic performance of the south will diverge from, not converge with, the north. Unless this is averted in the coming years, it will bring problems to Europe for which Greece has only been a minor rehearsal.”
Mr. Hague concluded that “In future decades, I believe students will sit down to study the folly of extending a single currency too far. ‘Sad though it will be to see it, their textbook is likely to say that the Greek debacle of 2015 was not the end of the euro crisis, but its real beginning.”
Mr. Hague’s perspective is that it is no good now expecting Greeks to sit quietly in what he considers to be a burnt out room of the burning building that he described seventeen years ago.
He urged European leaders to accept that the problem in Greece “is not a short term crisis, but a permanent one”.
He said the Greeks will not be able to turn round their economy in a ‘lifetime’ within the Eurozone, and that this is not because there is something wrong with them, but rather that it is because they live in a different economic environment from Germany, and one that is not suited to being in the same currency.
“In such circumstances, it is better to be able to leave sooner, with some generous support, than leave later with even greater resentment and failure” stated Mr. Hague.
The euro has continued its downward direction, currently trading at 1.100 against the US dollar, its buoyancy largely bolstered by Germany, and strangely Britain even though Britain does not use the Euro. Britain’s membership of the European Union and high productivity plus massive subsidies paid into the European Union are a silent bolster, which if removed should Britain go independent, would likely have a severe effect on the economy of the Eurozone and the single currency itself.
Chart courtesy of Google Finance, Photograph of William Hague courtesy of The Telegraph