Greece is George Osborne’s new economic scapegoat

Britain is vulnerable but Greece will only damage the global economy if Athens is forced into a disorderly exit of the eurozone

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George Osborne, right, and Greece’s new finance minister, Yanis Varoufakis, after their meeting in London. Photograph: Anadolu Agency/Getty
by Larry Elliott, economics editor The Guardian
Monday 2 February 2015 21.46 GMT

This is where we came in. Almost five years ago, when George Osborne arrived at the Treasury, there were concerns about Greece. They have never really gone away, but now they are back with a vengeance. After his meeting on Monday with Greece’s new finance minister, Yanis Varoufakis, the chancellor was blunt: Greece is a threat to the global economy, and a big one at that.

Osborne’s concerns are understandable, if a tad exaggerated for now. Greece certainly has the potential to damage the global economy, but only if it leaves the eurozone in a disorderly manner, with knock-on consequences first for the single currency area and then the wider world. But the position is not so critical yet, and currently Greece is no more likely than a sharp downturn in China or a worsening of the conflict in Ukraine to blow up the global economy.

Indeed, the eurozone looks better able to cope with a protracted battle between Greece’s prime minister, Alexis Tsipras, and Germany’s chancellor, Angela Merkel, than it was a couple of years back. The Syriza victory in the Greek election has been followed by an increase in the interest rates Athens pays to service government debt, but there has been no similar rise for other countries seen as vulnerable to contagion effects, such as Italy and Spain.

It would, of course, be a different story if Greece left the euro, either because it had decided to leave or because it was shown the door by the other members of the club. There would, though, need to be a trigger for this to happen, perhaps a decision by the Greeks to repudiate their debts, or cutting off financial support to Greek banks by the European Central Bank. Is a doomsday scenario feasible? Certainly. Is it probable any time soon? No. It is little more than a week since the Greek election and both sides are still sabre-rattling.

That said, the eurozone could do with the row being sorted out quickly, because uncertainty will stifle recovery in an economy where growth is sluggish, unemployment is high and prices are falling. The boost to sentiment provided by the ECB’s decision to start its own bond-buying programme has proved short-lived.

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Osborne is right to point out the vulnerability of the UK if it all kicks off again in the eurozone, the destination for almost half of Britain’s exports. Growth in Britain slowed from 0.7% to 0.5% in the final three months of 2014 and the next set of GDP data will be released in late April, when the election campaign will be in full swing. The chancellor would prefer not to have to explain away a further cooling in activity.

But on balance, Osborne probably won’t be that unhappy about events in Greece. Why? Firstly, they provide a convenient scapegoat if growth does weaken in the UK in coming months. Secondly, they allow him to have a dig at Labour by saying the choice everywhere is between stability and chaos. Finally, he knows any seriously malign effects from Greece, should they occur, won’t be detectable until after polling day.

2 responses to “Greece is George Osborne’s new economic scapegoat

  1. George Osborne making comments on economy to a Professor of Economy Mr Varoufakis. You could not make it up.

    George Osborne living in a feudal nation that has never been a western democracy, as UK still has the entirely feudal non-elected upper house of parliament, the House of Lords, that was abolished by the inventor of the people’s parliament, Cromwell. Now with around 900 Peers on expenses.

    When Mr Varoufakis comes from the nation, Greece, that invented western democracy and my old Greece Greek mother could vote, long before UK women could.

    My old mother lost her university course due to the war, and was studying law. In 1950s, UK women could attend universities, but could not sit the degree to gain the qualification.

    The UK is not cooling because of Greece. Most of the new jobs since 2008 in the UK have been part time jobs below the income tax level.

    And there is something else, the Truck System has sneaked back and now called the salary sacrifice system, where low wages are made not even a couple of quid by using umbrella firms, to pretend staff are apprentices, not to their knowledge. The expenses that make up the rest of the wages, have admin costs deducted.

    This means huge numbers of UK poor part time workers are no longer in the welfare state, as not getting either credits or paying contributions to National Insurance.

    SYRIZA granted back the 10,000 jobs lost to public sector by command of the Troika who arrived one day, and the jobs lost immediately.

    Over 2 million public sector jobs will be lost under a false austerity, because benefit is being reduced, by the welfare admin is rising by the billions so is the bulk of the £220 billion cost.

    The average early retired public sector worker is on a works pension not even 4 per cent lowest income in the UK.

    SYRIZA granted back the lost pension to the poorest pensioners.

    The UK is about the abolish the state pension to those retiring from 2016.
    When the state pension is the sole food and fuel money for huge numbers of men and women.

    The flat rate abolishes the pensioner benefit of Pension credit (savings) and make immensely harder to get Pension Credit (guarantee credit) to both new and current pensioners however old.

    And just to add more suffering, even second world war disabled veterans are to be re-assessed if disabled, which means, as it has done for huge numbers of younger people, the loss of that benefit.

    For what?

    So that UK MPs can get a rise of £74,000 a rise to their salary, on top of the share between 650 mostly millionaire MPs in parliament of £100 million in expenses each year.

    Even the rich man’s newspaper The Times, is berating Tory welfare and pension reform aka abolition, calling it entirely preventable impoverishment.

  2. The Greens have not the funding to have a properly staffed office, manned by a small number of volunteers.

    So The Greens have not been able to properly cost the Citizen Income policy of automatic and universal £72 per week, instead of the cruel benefits regime causing starvation to people of all ages.

    The Tories say that the welfare bill has remained since 2010 at £220 billion a year, but the money to the starving has been reducing by the billions each year as shown by Jobcentres directly referring claimants to foodbanks. That are not the daily free cafes as in Europe.

    The Tories say they have a £30 billion surplus from some saved interest payments (?)

    The House of Lords Library informs that the National Insurance Fund is £30 billion in surplus since 2013.

    As the Citizen Income could not be costed through lack of funding to The Greens, it is presumed that the sole party offering huge numbers of men and women a state pension from 2016, with The Greens’ policy of:

    – Full Citizen State Pension, without conditionality of National Insurance record

    has also been kicked into the long grass.

    The state pension today is £113.10.
    The mis-sold opting out from the State Earnings Related Pension Scheme, that topped jup the state pension (believe it or not I am not the only one who did not know that that was today)
    that began on 6 April 1978
    could have given a further top up to the basic state pension of around £165 (or what the full rate of SERPs is today?)

    So could have given £278.10 per week state pension, which is far above the £155 flat rate pension, which has now proved not to be the case for anything like all new pensioners from 2016, with official government personal forecasts as low as £55 with no top ups and with the Pension Credit abolished or made complex conditionality.

    So is there some smart Greek or SYRIZA liking professor of economics out there, who can cost:

    – the end of ALL welfare admin, (potentially 78,000 saved jobs?)
    – shutting all 750 Jobcentres (little redundancy costs as go digital in March 2015),
    – ending all state and private work programme contracts (workfare),
    – all the IT saved especially the around £20 billion (?) of Universal Credit’s ever failing IT project, and
    – ending all assessments for fit for work?
    – making disabled and chronic sick benefits non-means tested, universal and automatic (once diagnosed by a senior medical consultant?)

    And then give this information to Ms Caroline Lucas MP (Greens) in parliament and Leader of The Green Party, Ms Natalie Bennett.

    Because if The Greens want my vote and around 15 million and more others, then we will only vote Greens with the Citizen Income and Full Citizen State Pension.

    We need to eat, sorry.

    Anybody?

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