Monday, 31 May 2010

More LibDem sleaze and rain in Spain

The moral standards in public life in the UK are now lower than in any other G7 country. Ordinary decent in the UK people are scared to speak out against what they perceive as wrong for fear of being labelled a homophobe, a racist, an Islamophobe, anti-immigrant etc by the many special interest organisations who speak for these minority groups. How are such organisations financed? If they are run on public money why is there not a register of how much they receive from the public purse and where the rest of their funding comes from?

A married Canadian Brigadier General with two children, Daniel Menard, due to lead the forthcoming offensive in Kandahar, Afghanistan, has been fired following 'inappropriate conduct' involving a female soldier. He was sacked for conduct unbecoming an officer and a loss of confidence in his 'capacity to command'. Compare that with the blind eye turned by UK police authorities on the serial infidelities of the married Chief Constable of Manchester found dead on a Welsh hillside some years ago. He was well known before his appointment as Chief Constable as a serial philanderer with female police officers under his command. No one spoke out about this as they would have been told by the PC Home Office it did not affect his performance. Clearly the Canadians expect higher standards of behaviour of senior officers than we do in the UK. We only found out about this Chief Constable's conduct after his unusual death in Wales.

It is the same siren voices that seek to exonerate David Laws my local MP. Forget about his minor financial transgressions that might be called fraud theft or embezzlement in the non-political elite. What would have happened to a benefit claimant who claimed £40000 in clear breach of the rules for their partner?

He was a brilliant Chief Secretary to the Treasury they say. How on earth can they say that? He only did the job for 18 days! A brilliant political talent wasted. I would have thought that knowing right from wrong was a pretty fundamental political requirement for any minister of the crown. Am I the only one who sees Laws behaviour in opposition of hosting a dinner in Parliament for his lover's lobbying firm as a conflict of interest or is it just political brilliance that is way above my head.

Note how his homosexuality has been brought in to confuse the issue of his fundamental dishonesty in this matter. Mr Integrity was how my neighbour Paddy Ashdown described him during the election campaign! Note also how the LibDem spin has changed since Friday, when the story broke, from Laws was an intensely private man whom nobody knew was a homosexual, to today's version, it was common knowledge Laws was a homosexual. Just as I said in this blog on Friday.

Cameron's troubles are now coming in battalions. It seems his replacement as Chief Secretary, Lib Dem Danny Alexander, (it had to be a LibDem under the coalition deal) flipped his second home just like little squirrel Nutkin Hazel Blears, to avoid capital gains tax. Nothing illegal but not open to us ordinary mortals. Alexander may repay the tax but of course is still left with a nice tax payer funded gain. Cameron better be careful or he will soon run out of LibDems!

It is the failure of our leaders to apply ordinary common sense checking and vetting procedures to the political class that is the root of this problem, shades of Blunt, Burgess, Philby and McLean, Cambridge men all like Laws and Clegg. I remember when I was appointed to the Bank of England I had to wait 6 weeks for security and vetting checks to be completed on me. Obviously there is an exemption for our political elite.

In Spain the rain is now becoming a financial blizzard with ratings downgrades and mortgage banks being nationalised. As AEP writes in today's DT the Spanish government is now in deep trouble and will not be able to get its crucial legislation through. What they have passed will worsen their problems.

Interesting that Pierre Lellbouche, Frances Europe minister has compare Sarkozy and Merkel's bailout fund to the NATO mutual defence clause. Well one is a military treaty and Lisbon is a political economic treaty but to the French its immaterial. As he told the FT the bailout is against Maastricht, has created an EU debt union on the sly and defacto we have changed the treaty.

Greece will limp on for up to one year and then default, or as it will be spun its debt will be restructured. If it then wants to get back some economic growth it will have to leave the Euro. If this happens, Spain and Portugal with something like 750 bn € debt needing to be rolled over in the next two years will be the IMF's next customers that is unless wee George and ginger Danny don't barge the UK into the queue first.

It is heart breaking what the outlawing of common sense by political correctness and the EU have done to our country but they could not have done it without the supine assent of our sordid political class. As a former German girl friend of mine used to tell me the UK's problem is that its officer class is now corrupt and decadent.

Oh would some power the gift to gie us,
To see ourselves as ithers see us.

R Burns

Sunday, 30 May 2010

Van Rumpoy annoys Liam Halligan in todays Sunday Telegraph

I was pleased to see Liam Halligan picked up in his ST piece today on the same van Rumpy comment I highlighted in my blog earlier this week.

"We are clearly confronted with a tension within the system. The dilemma of being a monetary union and not a fully fledged economic and political union. The tension has been there since the single currency was created. However, the general public was not really made aware of it"

In plain English we conned the public and now they are starting to realise they have been conned.

The fault lines in the Euro was apparent from its ill starred conception. It was a political project presented as delivering great economic benefits to the people just as our entry negotiations in 1972 was presented as giving us economic benefits. A con but the gullible British public swallowed it hook, line and sinker. They are suffering a bit of indigestion now however.

Anybody who pointed out the Euro's faults, Dennis Healey, Milton Friedman etc were smeared as 'alarmist' and anti-European', just as happened in 1972 to those in the UK who warned about the catastrophic loss of sovereignty we would endure if we entered the then Common Market. (First pointed out by MacMillans law officer Lord Kilmuir in the abortive 1962 negotiations headed by one E Heath.) Friedman also said that rather than the Euro leading to the mythical United States of Europe it would achieve exactly the opposite.

Halligan also points out as I did the horrendous flaws in the EU's bank levy. It will simply create an even bigger Moral Hazard than the present systems. We simply need a re-enactment of the Glass-Steagal Act. If some one would like to finance me I would like to make a film about the EU entitled 'Carry on Cocking it up'. I need a good script. D Bannerman please do not apply.

Saturday, 29 May 2010

David Laws homosexuality was known in Somerset

David Laws is my MP in Yeovil. That he is a homosexual was known in Somerset. We cared not a jot. I find however his excuses for his breach of expense claim rules repugnant. His claims that the man he had lived with since 2001 was not his partner or spouse because they did not have a joint bank account is laughable. It shows the lengths to which our sordid politicians will go to try and wriggle out of the truth. Worse for us Mr Laws used this type of argument to deny us the LibDem promised referendum on Lisbon. It shows Laws arrogance. He thinks we are inconsequential fools that can be safely ignored for the next 5 years by our self serving political elite. Clearly he is not going to write cheques on a D Laws and James Lundie account if he wished to keep his homosexual lover secret. My wife and I have been married for many years and we still have separate bank accounts!

The efforts of his 'friend' from the neighbouring constituency of Taunton Deane, one Jeremy Browne, this morning on the pro LibDem BBC Radio 4 Today programme were even more cringe making. Browne's blatant attempts at red herrings and evading the issue that Laws clearly broke expense claim rules did him or Laws no favours. It merely confirmed public impression that these MPs think that rules are only for ordinary little people and do not apply to them, the political elite. Where was Paddy Ashdown, Laws predecessor as Yeovil MP and chief LibDem apologist?

The LibDems have had two leadership elections in the last two years. Laws stood in neither but nobody in the mainstream media asked why someone of his undoubted ability did not stand? Some people in Somerset knew the reason. If his private life came under the sort of scrutiny a leadership election generates his boy friend would be have been revealed and the illegality of his expenses claims exposed.

I simply don't believe Laws homosexuality was not known to many LibDem MPs. Why on earth could Laws not have been open about his sexuality with his constituents? It would have done him no harm if he had not been cheating the expenses system. Yes he is entitled to a private life but he chose to stand as an MP and therefore has to accept that where his private life impinges on his responsibilities as an MP it is of legitimate public interest especially to his constituents.

If he is as rich as is maintained by the LibDems spin machine why bother claiming parliamentary expenses at all? The answer must be he is just another greedy MP we would well be rid off.

Was Cameron so desperate for power that he did not look at the MI5 files on Laws before appointing him to the Cabinet? I feel sorry for Cameron. He has been badly let down by Laws and Clegg but really he is also culpable for not doing his due diligence, a bad failing in a Prime Minister. I hope he does not compound it by not sacking Laws.

As regards Laws performance as a constituency MP I sent him an email on 23rd May on how easy it is to get more equally sized constituencies, something that appeared in the Queen's speech later that week and something I regard as an excellent reform. I reproduce my email below.

Dear Mr Laws,

As one of your constituents congratulations on your election as MP for Yeovil and appointment as Chief Secretary of the Treasury.

I read the new government intends to push ahead quickly with the above topic and probably reduce the number of MPs as well something I thing that has been long overdue. I gather the aim will be to reduce the disparity in constituency sizes and hence make our votes more equally weighted. I used to set this as a difficult 3rd year problem to my undergraduate students on the Liverpool University Maths course. As such it was purely objective and not therefore open to accusations of political gerrymandering. The main points of my approach were:

It is a minimax problem ie the objective is to minimise the maximum difference between the smallest and largest constituency.

It is superbly suited to be handled by a Mixed Integer Programming model as this allows the incorporation of every sort of constraint one can imagine e.g. constituencies cannot cross county or national boundaries etc

There is ample scope for political input in that once the number of MPs has been agreed and hence the size of the average constituency established each political party can be asked to produce sets of possible constituencies near to this average size. The only restriction is that they should be composed of local authority county or district council wards. Once this is done it goes into the model. A result is produced which can then be reviewed or refined probaly by the addition of additional constraints in the model. The effect of these new constraints can be precisely ascertained.

My own personal view is that the number of MPs should be reduced to 435, the number set by US law as the number of members of their House of Representatives. This would make our average constituency size around 100,000+ but the model will work with any number of MPs.

The beauty is the results are entirely transparent in that the largest and smallest of resulting constituencies can be easily seen as can the effects of any constraints requested by political parties. The process is only understandable to those of a mathematical bent!

I know this will be handled by the Boundary Review Commission but I would be grateful if you could pass on to them my interest in this topic which I regard as key to our democracy. I would also be grateful for any comments you have on my proposal if you have any time left after cutting government expenditure. You are certainly better equipped than most MPs to do this.

Yours Sincerely

Eric Edmond

Well I did not even merit a reply from Mr laws. All I got was a standard bounce back from his office. I reproduce it below.

Dear Mr Edmond,

Thank you for your e-mail of 23rd May 2010 to David Laws MP.

We will be back in touch as soon as possible.

Kind regards,

Office of David Laws MP

Needless to say I have not heard from Mr Laws.

Nothing seems to have changed since the expenses scandal. MPs only refer themselves to the authorities after they are exposed in the Daily Telegraph. How many are still unexposed and fiddling the tax payer?

PS I have just read that Laws has resigned as Chief Secretary, We still are stuck with him as an MP. How many other ministers live with Lobbyist partners of either sex. Cameron's judgement seems questionable.

I am reminded of Warren Buffet's dictum, there is never just one cockroach in the kitchen. How many other MP fraudsters are in Cameron's new clean government?

Friday, 28 May 2010

Spanish practices may appear in Spanish bank balance sheets

The Spanish government yesterday pushed through an austerity package of €15 bn by a single vote and thanks to the Catalan nationalists abstention. Spanish conservative MPs voted against and were deemed un-European by the Spanish finance minister. Well he could not say they were being pro-Spanish which is the truth. Public sector unions have predictably called a strike in protest for 8th June. The worms, or as bankers call them non-performing loans, have yet to emerge from Spanish bank balance sheets. You only have to look at the meltdown in the Spanish property market and ask who was lending on all these houses to know where the bad debts are.

Not to be outdone in Italy the CGIL union is calling two strikes in June against the 'unjust and unsustainable' cuts announced by Berlusconi's government on Tuesday. Our trade union brothers will react in exactly the same way after wee George or the even more diminutive Lawsy announce our very own British austerity package in June.

On the markets UK debt is steady thanks to its long average maturity, around 14 years which means we do not have to test our credit in the markets nearly as often as the PIGS. Greek debt spreads are still 5.5% over bunds at ten years, unsustainable over any length of time in my view. Eurozone bonds have steadied thanks to the Chinese stated they had no plans to review their huge holdings of Eurozone bonds. Well they have to say that don't they. I would in their unenviable position be saying the same thing. It does not mean they will not be cutting their Eurozone exposure on the quiet.

Tim Congdon reckons in today's DT the US recover is stalling as US money supply is still shrinking. And what will the Merkel/Sarkozy proposals for further bank regulation do? Cut the growth in money even further as the banks reduce perceived risky lending even further. Nobody can do the wrong thing better or more often than EU politicians!

Thursday, 27 May 2010

Greeks suffer two plagues of frogs

The Greek tragedy is now assuming biblical dimensions. St Paul wrote many letters to Greek city states but even he never prophesied the plague of frogs reported yesterday in Thessaloniki that caused chaos on the roads there. This follows their recent problems from the three frogs, Trichet, Strauss Kahn and Sarkozy now becoming the three musketeers with the addition of M. Barnier, the EU trade commissioner. Where is our high representative Cathy Ashton?

Her alter ego van Rumpy has been confessing that the good citizens of the EU were misled over the euro. He said the public was not fully apprised of the full implications of the currency union before it was created. We in the UK know all about EU Cons like that from 1972. Being part of Euroland he said means you are affected by events in other Eurozone countries. His intellect is overwhelming in its deep thinking but the motivation is to mollify the anger and political instability the crisis has produced in Germany, the heart of the Fourth Reich.

As Open Europe put it yesterday, "The Eurozone crisis is not simply about economic failure but also the breakdown in trust between the the political class and Eurozone citizens. The EU elite simply got it wrong on the Euro". Hear, hear but will they admit it? Unthinkable, but we will be deluged by a torrent of contradictory statements from the EU. Bernier's latest ideas on bank regulation/insurance/ anything else you want to make it is typical. No one, least of all Barnier has any idea how it will work or not work in practice.

Its slowly sinking in to the mighty minds of our political class that a sovereign debt problem and possible default is the end game for schemes like the EU. Bailing out imprudent bankers is easy compared to bailing out incompetent corrupt governments. All the IMF's money and all of its men wont put Monet together again. I expect the call for further Treaty powers will strengthen daily. Now how will the boy David and his friend Nick fudge that one?

Wednesday, 26 May 2010

Euro collapses, democracy recovers

Simon Heffer's regular Wednesday piece covers many of the points on the above I have been writing about for the last few months. The financial markets cannot take many more dramatic falls like yesterday without real action by governments not meaningless twaddle and flannel from van Rumpy, Barroso etc. The Euro now is kept going on a German drip of money into Club Med. We will no doubt be asked to subscribe as well and I hope Dave gives a similar answer to Laws on child trust funds i.e. there is no point in us borrowing money and lending it on when we will never get it back.

Merkel faces electoral wipe out if she continues subsidising the Greeks for the sake of the unattainable great EU super state project. Obama will face re-election in 2012 so increasingly US self interest will dominate his actions. The undemocratic self perpetuating Brussels bureaucracy is becoming increasingly exposed as what it is, a reincarnation of the failed Soviet system.

Greece can be kept going for a short time on temporary term injections of liquidity just like a business kept going by an overdraft from an indulgent bank manager. The truth is Greece is insolvent. It cannot hope to repay its debts. Speculators will be blamed but of course the real culprits are the self seeking politicians, our own included, who have not stood up for their own people as common sense demands and have conspired to subvert our democracy as in the Lisbon Treaty to the great Monet dream.

In the financial markets there is a huge flight to quality with German bond yields at record lows and Club Med bond yields steadily increasing. Euro dollar swaps are also becoming increasingly expensive. The main holders and buyers of last resort for these unwanted bonds are the principally Eurozone banks but UK, US and other non - eurozone banks also have large holdings of such dodgy paper as do the Chinese. The powder keg is there for another and bigger bank crisis. It just waits a spark.

As for more regulation, the EU and leftist's panacea for all things we can now see exposed the claims from people like Diane Abbott that Spanish tighter bank regulation kept Spanish banks out of trouble as complete baloney. Spanish banks are mired in what are euphemistically called non-performing property loans. Mark to market has been abandoned in Italy as this would show the huge amount of bad loans on their banks books and the giant hole in their balance sheet would be clear for all to see.

The public payroll has to be cut all over Europe including the UK. The LibCon's £6bn cuts will mainly hit private employers because it is easy to cancel or not award contracts but difficult and painful to reduce staff and cut benefits, ask Willie Walsh at BA! Only the Irish have done it but we and the whole of Europe have to follow their example. I would suggest one politically expedient remedy. Start at the top and restrict the highest earning person in any public funded body, quango or quasi governmental organisation, eg the BBC, to a salary no more than the Prime Ministers and just watch how quickly that cascades down through the ranks of assistant chief constables etc. You can impose also a Swedish style cap that the best paid can earn no more than ten times the least paid.

Chief executives of publicly funded bodies are paid far more for doing far less than in the US. Why is Mervyn King, governor of the Bank of England paid around twice the amount of Ben Bernanke, chairman of the US Federal Reserve and in charge of monetary policy of an economy ten times the size of the UK? Why is the head honcho of the BBC, Mark Thomson, paid £800k? If that is the market rate let him go out and get a job in the market and let us the licence/tax payer recruit someone else. I don't think there will be a shortage of applicants at £160k per year. Its the same for the BBC's high paid presenters. There are plenty of younger, and dare I say it better people, waiting for a chance to do these jobs at a fraction of these Paxoesque salaries. These great stars can then be paid their true worth in the private sector!

Tuesday, 25 May 2010

Euro's fate will be settled on the streets of Europe's capitals

Following yesterday's Spanish governments €550 bn bail out of regional bank Cajasur, the IMF issued a warning about the state of the Spanish economy and in particular what it described as Spain's dysfunctional labour market. Spanish unemployment is over 20% but more importantly, youth unemployment in Spain is 50%. That means a lot of young people with time on their hands, ready fuel for extremist agitators and trade union activists looking to organise street protests which inevitably turn into riots. The same is true of all the other PIGS all of which have strong and active communist parties and in the case of Italy the Neo-Nazi Liga Nord. The German populace is disconnected and disenchanted with its political class and has already publicly vented its views against Merkel's Greek profligacy with their hard earned cash.

Add in now the deflationary spiral that the ECB seems intent on imposing on its bad little PIGS or as Miss Lizzie Bennett said in Pride & Prejudice, how is half such a sum of debt going to be repaid. The EU is obsessed with imposing greater budgetary discipline on the little pigs but what about the big porkers? As the FT today reports on the latest van Rumpoy edict,

"Ministers agreed four broad objectives – namely, on the need for greater budgetary discipline; an effective crisis management system; stronger economic governance and means to reduce divergences in competitiveness between members of the 27-country bloc." but as the FT also reports, "they shied away from any immediate focus on a mechanism to handle state defaults." Very Augustinian, Lord give me chastity but don't give it to me yet!

Read the history of Germany in the early 1930s to understand how this explosive mixture can be exploited by extremist politicians. It is as I noted months ago the Brussels elite worship their EU state model spirit but the national flesh is weak so to speak. There will be much blood on the streets until the EU accepts as the markets have that the Euro is irretrievably flawed and broken.

Sunday, 23 May 2010

Bets stack up against the Euro

Hedgies are reported running big short Euro positions. Shorting anything denominated in Euros, equities, corporates or sovereigns is now the biggest game in town and some hedge funds have already reported large profits from this trade. Japanese funds have sold their entire holdings of Greek bonds but who were the buyers? There are now a net imbalance of 100000 contracts on the US futures markets betting the Euro will fall. Only the ECB seems to be a buyer. Its all like the 92 Sterling crisis.

The problem was encapsulated by a story in the press of an out of work Spanish marketing executive whose only work offers were from the black tax evading economy. That is the Club Med problem. Tax evasion is an accepted way of life. Is it any wonder that their government finances are in the red?

It now appears Merkel's ban on short selling in Germany was motivated by political necessity to get her aid package through the German lower house by 7 votes! If the Greeks start invoking the German guarantees the German electorate will bring Merkel's government down.

Everyman and his dog, Hannan, Booker etc, seems to have a piece in the weekend press dealing with the Euro's problems. The best by far was Chris Meyer, wearer of red socks and former UK ambassador to Bonn and Washington's essay in Saturday's Daily Mail entitled "Death of the Euro?". Meyer rightly points out what was widely known in UK government circles in 1972 that the driving force behind the ECC or EU as it became was European political uniion. Even I, a lowly oik in the Civil Service at that time knew that but of course we were all gagged by the Official Secrets Act.

Meyer then goes on to describe the care with which Kohl, the German Chancellor in the 90s took in selling the Euro to the German electorate. Kohl knew the Euro project could be blown apart by the profligacy of the Club Med countries. Meyer reports Kohl went wobbly on the whole Euro business for electoral reasons in 97, two years before the Euro launch in 99, and wanted a postponement. The German finance ministry knew that Euroland economies should be liberalised and reformed before the launch of the Euro and not as happened, propelled by the 'ever closer union' clause in the 1956 Treaty of Rome, launch the Euro and hope it would produce reform in Club Med. Cart before the horse springs to mind.

Meyer recalls going to a public meeting in the Rhineland where Kohl though he was speaking to an entirely German domestic audience where Kohl claimed the Euro was the best way for Germany to dominate Europe without reawakening fears of German domination.

Germany since Bismark in the last 1890s has always exported far more than it imports. The same is true today. Germany sells its desirable goods to Club Med and sucks the money out of these countries. These funds were being recycled into the Club Med property market but that has now hit the buffers. The unpalatable truth for Merkel as Kohl realised 15 years earlier was that Germany has no choice but to prop up Club Med in the Euro but how is this to be done without alienating the German voter?

After the Franco Prussian war of 1870 with the usual defeat of France European statesmen started to talk about the German problem. For my money it started a bit earlier in 1815 when the Prussians were the critical element at Waterloo in the defeat of Napoleon. Things then went on the back burner for the next 50 years whilst Bismark got on with unifying the German states under the Kaiser into modern Germany. The real politik of the European situation then emerged. Germany is a huge country with no natural boundaries in the East, a hard working industrious obedient people, and a manufacturing economy dominant in Europe.

Its the same German problem that Europe now faces. The French know they cannot handle it alone and soon they will be sucking up to us in the UK to provide a counter balance to German might in Europe. I say leave leave them to the Germans. My family and every other family in the UK in the first half of the 20th century lost far to many sons and wealth helping out France and Belgium against German might. Let us not make the same mistake in the 21st century and let us hope our government resists the siren calls to bail out the Euro as it is 'in our interest'. It is not in our interests as it was not in 1914 to send our army to help France.

Friday, 21 May 2010

Markets expect something nasty soon

Equity markets are again on the slide today with the FTSE down below 5000 at one point today. Merkel has got her Greek rescue package through the German lower house but at what cost to her government and authority? She demands tougher regulation of banks and markets but as this will inevitably mean reduce corporate profits its hardly surprising equity markets are falling. The Euro has improved today but Sterling continues to slide which is beneficial to the rebalancing of the UK economy.

The markets don't like the split at the heart of the Eurozone between France and Germany. The delectable French finance minister, Christine Lagarde, does not agree with Merkel on the way to reform the markets. I wish we had finance ministers as stunning and as able as Madame Lagarde. How does Sarkozy get all these women? The market view now is that the EU/IMF rescue package will not work and some countries will have to leave the Euro for their own good and the future health of their governing clique.

Over the pond the rise in US jobless claims also spooked the markets, fertile ground for spread of the Greek contagion. There simply a worldwide lack of investor confidence and appetite for risk. The US will certainly go back to the Glass Steagall Act splitting retail and investment banking but anything further is dangerous. What we are seeing is a flight to quality in the sovereign debt market. German 10 year yields are at an all time record low 2.68%.And Greece? Well their 10 year is at 8.28%. Says it all.

What our regulators and wee George should remember before signing up to Merkel's mad schemes is how much of the UK corporate tax take, around 25%, comes from the banks. Markets will start to focus on the UK sovereign debt situation more and more and I expect to see Sterling slide further against the dollar. Whatever wee George and our diminutive local LibDem MP Lawsy come up with it had better be good. As Byrne said in his one sentence billet doux to Laws, there is no money left.

Thursday, 20 May 2010

Merkel puts the jackboot in it

Back from my Greek idyll and things seem to have gotten worse in Euroland thanks to the Fuerher's cack handed attempt to ban short selling of Eurozone bonds, CDSs, bank and insurance shares in the Fatherland. Well there are other fatherlands and one is populated by Harold Wison's nemesis, the nasty gnomes in Zurich. So great was the flow out of the Euro precipitated by the Dr Frau's idiotic actions that the Swiss Central Bank had to intervene in the market to sell SF and buy Euro. One German banker, Hans Redeker, said "As a German citizen, I wish to apologise for the stupidity of my government". It's a cross we ordinary people all have to bear Herr Redeker! Markets are like squashy balloons. Squeeze them at one point and they pop out somewhere else, in this case Zurich.

Merkel is simply shooting the messenger and as politicians have done throughout the ages, blaming Johnny Foreigner speculators for her own incompetence. It does not work as Gord just found out. The Euro continues to fall as does Sterling, the FTSE, the Dax and all the Eurozone indices. Markets have long suspected German banks were not coming clean about their dodgy MBS and bond holdings but now they think they have written far too many CDS contracts on dodgy Eurozone sovereign bonds. They think the Dr Frau doth protest too much and there are some nasty skeletons in the German banks cupboards. The Landesbanks are already the walking dead. Meanwhile Merkel continues her campaign against the good burghers of Mayfair, Mr and Mrs Hedge Fund and continues to demand changes to the Lisbon Treaty so the master race can approve the budgets of the lesser states, including the UK.

Worse the US Senate passed a unanimous motion 94-0 on Tuesday banning the lending of US money to countries unlikely to ever be able to repay the loan , ie Greece. The United States is the IMF's largest contributor and has veto power to block decisions, although it has never used it.

And what of Greece? Well I spoke to a small sample of the Greek people and the general consensus was to blame their corrupt politicians who had created through patronage a bloated and overpaid public sector. So no different from Brussels or the UK. The ordinary Greeks in the private tourist sector work very hard and very long hours. One waitress in our hotel was working 14 hours a day 7 days a week. Come on Barroso get down there and tell them about your working hours directive!

Greece and mosy of the other PIGs should never have been allowed to join the Euro. They have more in common with the developing countries than the developed core of Western Europe.

Wednesday, 12 May 2010

Sell in May and go away

This will be my last blog for a week. I am going on a fact finding mission to Corfu where I might just bump into Peter who has some time on his hands. Thank goodness his obnoxious little friend George will be otherwise engaged.

The Greeks intend to start drawing down their loans this week seeking 14.5 billion euros in three-year loans ahead of a May 19 repayment deadline for a 8.5 billion euro bond. I bet it comes from the IMF as the EU won't have got itself organised yet but where is the other 6bn € going? Well it as the conservative daily Die Welt said the fundamental problem was that the other euro zone countries did not share Germany's culture of financial stability or as their commentator Herr Eigendorf wrote, "The euro zone is dominated by countries for whom currency stability is not so important, and, "Nothing symbolises that more strongly than the loss of the central bank's independence."

Ben Bernanke, FED chairman, told US senators yesterday that the Greek debt crisis was a European problem but one that could have hurt U.S. banks if left unattended. Hence Obama's boot applied to the Sarky-Merkel bums.

Meanwhile one of our French EU partners, J-P Jouyet, chairman of the French FSA said only 'God would help" Britain after it snubbed its Eurozone neighbours by refusing to hand over lots more money to Brussels. Its a pity we had not said that in 1914 to the French. We would have been a richer and happier country.

It all arose because French, Swedish and Brussels officials have predicted it is only a matter of time before sterling suffers the same market turbulence that almost destroyed the Euro last weekend. What is French for schadenfreude? Anyway we have vast experience of Sterling crisis and we now have the boy David and his Buller friend wee George at the helm now so watch out you EU crats, boot boy Hague will soon be across to kick bums - I hope!

I opine that as the detail of the latest rescue package filters out Greek bond to Bund spreads will creep up, they are back over 6% this morning and the Euro slowly sink. The Greeks will continue to riot and the German press will flay Merkel especially as the whole deal is seen in the fatherland as a French triumph that turns the Eurozone into a transfer payments system using German money, a long held French aim.

Tuesday, 11 May 2010

German anger finds a voice

Quicker than I had thought possible the EU's gigantic Greek rescue package announced only in the early hours of yesterday morning is starting to fall apart. It seems the package was increased in size dramatically following the intervention of Obama who, worried about the effect on US banks, phoned Merkel and Sarky to say half measures wont do. I got it wrong yesterday crediting the EU with learning some sense on this. In the true Franco Prussian tradition they learn only when a bigger bully kicks their arse hard.

The Bundesbank representatives on the ECB broke ranks and accused Trichet of caving in to political pressure. Well he is French after all as is Sarky, the owner of the big boot this time applied to Trichet's bum. The German's objection is as I noted yesterday, to the ECB buying PIGS government bonds outright and hence effectively printing money and moving to a QE policy which the noble Trichet was castigating when the hated Anglo Saxons did it. Ah well, needs must when your next job depends on President Sarkozy. Jeremy Warner makes a good point in today's DT that the so called balancing sterilising bond sales was put in to assuage German fears of another Weimar or Third Reich inflationary spiral and may not actually happen.

As I have previously pointed out, the Bundesbank is the only central bank that acts free of political control. It has a long and jealously guarded tradition of doing so. Its head, Axel Weber told a German newspaper, "The purchase of government bonds poses significant stability risks and that's why I am critical of this part of the ECB's council decision even in this extraordinary situation". What really upset Herr Weber was the announcement of the buy back decision by the EU before the ECB had spoken clearing confirming the view that monetary policy is being dictated by politicians, mainly Sarkozy. A case of mai oui mon president from Trichet.

And what of Dr Frau Merkel? Well she has further problems on the home front following her party's trouncing in the Westphalia elections. Senior figures in her CDU are reported as saying they have lost confidence in her ability to lead and called for her to go after her Greek policy had 'failed its first democratic test'. The well named Willy Wimmer, a former CDU minister, has called for her 'immediate resignation'. World saviours are without honour in their own land as Gord, the man who saved the world two years ago, has just found out. Worse for Merkel was yesterday forced to publicly abandon tax cut plans to pay for the Greek problems and as she has lost control of the upper house cannot push her planned public expenditure cuts through, all reminiscent of the UK.

Spreads on PIGS debt have fallen. For Greek bonds it is now 467 bps. Figures released yesterday that Greek total debt of 224% of GDP is in fact less than that of Ireland, 331%, Spain, 272% and Portugal, 331%. No wonder the Germans are worried. I opine PIG spreads will soon be on the rise once more.

My take on feasibility of a LibLab coaltion. Click link below to view:


Monday, 10 May 2010

EU throw kitchen sink at Greek problem

The EU have learned that too little to late does not work with the markets. Yesterday they announced a total package of around 800bn€ in credit lines for Eurozone countries with 80bn coming from the whole EU and the 720bn solely from the Eurozone countries. As significant, a commitment by the ECB to buy Eurozone debt in a sterilized manner plus an agreement by the major central banks to reinstitute currency swaps to help banks with liquidity difficulties in particular currencies mainly the dollar. These had been brought in during the credit crisis and central banks have been trying to run them off for the last year. The devil as always is in the detail so I note a few possible problems below.

First the UK contribution will be 10bn € to a stabilisation fund, a sort of EU IMF. This is not necessarily a bad deal for the UK as we may well have need to draw on this fund shortly! Detail is woefully short on how the lion's share will come from the Eurozone countries and I suspect problems will materialise there.

The sterilized purchase of PIGS bonds by the EU will be targeted at particular parts of the yield curve eg 2 year Greeks where rates hit 40% last week and there was no market in these bonds. The ECB action will fix that. To sterlize the rise in the Euro supply caused by these purchases the ECB will sell other bonds it holds into the market and hence drain the excess Euro liquidity created by the purchase. I opine that it will be German, French and Dutch bonds that are sold and possibly not at the two sector of the curve. There is also the worry that if the Greeks are not good boys, or in economist speak tackle their structural deficit, the ECB will be left with a lot of expensive toilet paper in its loos.

The currency swaps are straightforward in principle but will come under closer legislative and regulatory scrutiny than happened 2 years ago. Politician have learned not to trust banks, even central banks.

Will it work? Well in the short term, less than 6 months, Yes. The markets have responded favourably this morning. The FTSE is up almost 4% and the Euro is up at 1.307 against the $. Far East equity markets are also up. Ten year bond spreads have shrunk to 7% + for Greeks. Still high, a 4% spread to Bunds, but has come in from the 15% plus when I wrote my first version this morning. The bond market takes a longer view and are more rational than speculative equity markets. I believe the bond markets. The Eurozone is nowhere near out of the woods. The PIGS structural deficits need to be tackled and that will take a long time and a lot of pain for national politicians and their electorate.

The real problems will come over the next 6 months on the political front. Greek civil unrest will continue at probably a reduced level over the tourist season but will ignite when the tourist jobs on the islands disappear in September and the unemployed return to the big Greek cities like Athens and Salonika.

Dr Frau Merkel will also be facing political problems in Germany. Her centre right coalition was heavily defeated in yesterday's Ruhr Westphalia local elections and Merkel lost control of the German upper house. German money going to idle Greeks was a big factor in her defeat. Portugal and Spain are in the same category as Greece, OK until the tourists go home and there will be fewer of them this year than last - Turkey is the Med destination of choice this year.

Most worrying for the UK is not the Cameron Clegg Brown fandango but the motion going through the European parliament today to increase regulation on hedge funds and private equity. Why don't they just ask them to go to Zurich, New York or the Caymans? That is how it will end up.

For my take on how to exploit a hung parliament to get out of the EU click below

EU hung

Sunday, 9 May 2010

UK must underwrite Eurozone loans

I, along with Alan Wood & Trevor Colman campaigned vigorously in the UK against the Lisbon Treaty. The UKIP leadership who are paid by the EU made no serious efforts to organise a UK campaign against this Treaty and indeed blocked other's efforts to do so. Our country will now literally have to pay for this as the EU invoke article 122.2 of the Treaty saying the council can help a member state of the 27-nation block in serious difficulties caused by circumstances beyond its control, EU ministers may grant it financial assistance. This clause was of course intended to deal with natural disasters, earthquakes etc. Greece's problems were not a natural disaster. They caused by their corrupt politicians and power crazed EU politicians like Barroso.

Barroso gave the real agenda away when he was quoted today as saying, "We will defend the Euro whatever it takes". He is terrified of what will happen to the Euro when the markets open tomorrow. That defence includes UK funds, credit rating etc and we are not even in the Euro! The decision will be made by QMV so the 16 Euro zone members can vote through a proposal to help themselves to British money and credit. And who agreed to QMV on these matters but Lord Pearson's Eurosceptic Tory political friends. The whole deal was cooked up by Merkel and Sarkozy yesterday who unsurprisingly agreed to help themselves to as much British money as they can. It will play well for Merkel in today's Westphalia elections where her government is under threat.

I never fail to be astounded at naivete of UK politicians and officials in their dealings with the EU. Their documents are all written in deliberately ambiguous language so that the real power lies with those who interpret the regulations. Thus we now have whole swathes of law made by the dubious politically motivated judges of the European Supreme Court. The whole approach was put most succinctly by an Italian EU official who said we like ambiguity that we can apply rigorously to our enemies and interpret helpfully for our friends. It is the EU way.

Meanwhile they continue to rip the goose that lays the golden eggs out of the City of London by Euro style fund regulation based in Paris and Frankfurt not London. All they will succeed in doing is impoverishing us, which Sarkozy approves of, and benefiting New York and Zurich. Funds will simply not accept being ruled by politically controlled courts interpreting ambiguous regulations littered with get out force majeure clauses.

So there you have it. Our hideously over-indebted nation will be forced to take on and underwrite yet more debt for the European dream. I doubt if the Cameron Highlanders, the Cleg clog dancers and the Gay Gordon Highlanders can square this further EU rip off of our impoverished country.

You can listen to my take on the current LibDem Con situation by clicking on the Youtube link below.


Saturday, 8 May 2010

Eurozone & UK problems mount

The ECB is coming under heavy pressure from Eurozone banks to start buying Eurozone sovereign debt particularly that of all the PIGS. You can give this fancy names like Quantitaive Easing, Debt monetisation but its just the Robert Mugabe solution of printing money.

Yesterday the 10 year bond spread in basis points to Bunds closed at:

Portugal 428, Italy 159, Greece 1038, Spain 181.

The Greek spread implies a significant market expectation of a default. If Greece defaults the pressure on Portugal will be irresistible and the ECB will try to hold the line at Spain. Almost the Peninsular War lines of Torres Verdas revisitited but Trichet is no Napoleon and who is the markets Wellington.

Who do you want to believe Barroso's hot air from yesterdays finance ministers meeting or the markets?

The Euro continues to sink against the US dollar. Its now at 1.28 below the psychological 1.30 and Sterling has dropped to 1.48 below the 1.50 level. Sterling has strengthened slightly to 1.16 against the Euro showing the market are currently focussed on Europe. They may switch to the UK on Monday if the markets don't like the Clegg Cameron Brown shenanigans. I am glad my former colleague from the BoE, Matthew Hancock has just been elected as a Tory MP. Matthew is behind most of the Tory finance reform ideas and unlike Wee George knows what he is doing.

World wide Equity markets have taken a big hit as fears of the Eurozone problems spreading to the US and Far East like the Lehmann's bank problems did two years ago. The FTSE dropped 2.6% yesterday, the S&P 1.5% and the Nikeii 3.1%.

UK 10 year yields have risen 34 bps in the last month and are set to blow out further. Gilts and Sterling are looking very vulnerable. Its all about political economics and I have little faith in our political leaders.

Friday, 7 May 2010

Eurozone Greek problems spark worldwide sell off: UK likely to have a Conservative minority Government

World wide equity markets fell by around 2.5% yesterday as worries about further sovereign debt crises in the Eurozone increases. It seems to have been sparked by the revelation that at yesterday's rate setting meeting the ECB did not even discuss Quantitative Easing, or in common parlance, printing money to buy up dodgy Eurozone sovereign debt. This is what the Bank of England did with Gordon's gilts to keep the UK government solvent. Its a short term remedy which the US have also used. It works, but if over-used quickly becomes the Robert Mugabe solution.

I cannot see the EU/IMF aid package working. The Greek people know their political class is nepotistic and corrupt and they do not trust them. The package is being spun by the EU as the IMF solution to try and deflect Greek anger onto the Anglo Saxon IMF. Greece holiday tourist bookings are reportedly well down but there will still be tourist related jobs on the islands for Greek workers this summer. I doubt whether the Greek government can survive the Autumn when these workers return to unemployment in the large Greek cities. I opine military rule will be the only option.

I have no doubt that given a free hand the IMF could sort Greece out. They are well used to dealing with corrupt regimes of all political persuasions. The EU will however not allow the IMF a free hand. Anglo Saxons solving Eurozone problems is unthinkable as is a Greek default and devaluation a sine que non for recovery.

What spooks the markets and breads contagion is the indecision at the heart of the Eurozone. Constructive ambiguity rules for the Eurocrats but the markets like clarity. Club Med bond to bund spreads will continue to blow out and investors will seek to withdraw capital from these areas.

Meanwhile back in the UK Clegg the king maker, has confirmed his electoral promise that the party with the largest share of the vote and seats, the Tories, should be allowed to form a minority government. This is a smart move by Mr Clegg. It is as Mervyn King said, whichever party forms the next government will be out of power for a generation because of the draconian austerity measures it will have to impose. The fate of the Greek government will be a salutary warning to our political class. Sterling will continue to fall and gilt yields rise until austerity commences in the UK.

Thursday, 6 May 2010

City fights for its survival as the European Financial Centre

Election day and I don't give a toss. I have just had Paddy Pantsdown sitting outside our polling station asking who I was when I tried to vote. I made the point to the great Lord Pomposity that I thought this was a secret ballot and I had the right to vote without being importuned by political appointees. I introduced myself at the golf club yesterday as the none of the above lying bastards parliamentary candidate and received 100% pledges of support. It won't make any difference who forms the next government. Hard times are coming and the EU noose is tightening on our countries throat.

The Greek crisis has scared the shit out of our Brussels rulers but of course it is not their fault for admitting a basket case economy to their Euro club and their solution as always is more regulations for banks and markets that must be based in Euroland where it can be properly, ie politically, supervised and controlled. The awkward fact that they did not do their due diligence on Greece before admitting it to the Euro club is conveniently forgotten.

The French, ever the ones to turn a crisis to their national advantage, want regulation and settlement systems and credit rating to be re-located to Paris. This plays well with these well known Anglophobes, Napoleon Sarkozy, Tricky Jean-Claude and M Barnier who runs industrial policy in the European Commission. Nothing is more important than French national interests!

To this end they are aided by two of the wisest fools in England, Adair Turner, head of the FSA and Mervyn King, Governor of the Bank of England. Turner has publicly challenged the 'social usefulness' of much finance whilst Mervyn has openly questioned whether it is desirable to have such a large financial centre in the midst of the British economy. Something like lions led by donkeys springs to mind. The French have no such scruples and are itching to impose their own code Napoleon Sarkozy on the errant financial markets.

Merkel demands the CDS clearing and trade repositories be located in the Eurozone, a mortal threat to London's OTC trade.

Merkel and Sarkozy want to control the markets and not be controlled by them as currently happens. King Canute had a similar ambition with the tide although some say he did it to show it could not be done. Brussels cannot accept that pragmatic view.

We have surrendered without a fight the golden heart of the UK. It was always the EU plan to seize this asset but even they must be staggered at how little resistance they met.

Wednesday, 5 May 2010

Markets give Greek bail out the thumbs down

As I wrote yesterday the market would be quick to deliver its verdict on the EU/IMF Greek aid package and it was a resounding raspberry. As I write Reuters report the death of three people in a petrol bombed bank today and riots in Athens. Who can forget the TV footage yesterday of a Greek riot policeman desperately trying to put out the flames engulfing his trousers. We are now in the second day of a Greek national strike. I expect more of the same in the coming weeks leading to a disintegration of the Greek government and probable military rule.

The Euro is now trading at 1.294 against the dollar, its lowest for more than a year. The FTSE, DAX and CAC40 are all down again as were the Asian markets. Bund interest rates are down, a flight to quality, and the spread of Portugese, Spanish and Irish bonds to bunds continues to widen. If I were trading I would certainly now be shorting Portugese bonds. Yields on the 10 year Greek bond are now over 9% showing the markets disregard for the rescue package.

Whilst it remains in the Eurozone Greece has no way out. Its only salvation is to default on its debt and leave the Eurozone. That would mean the end of EMU something Brussels cannot countenance. The ECB have already started to tear up their Maastricht rule book with Trichet's decision to accept Greek zombie bonds as repo collateral come what may. Next stop is Quantitative Easing also known as the Robert Mugabe money printing solution. It would finish the Euro as a reserve currency and with it the ambition of the EU to one day rival the mighty US dollar.

Dr Frau Merkel has heaped petrol on the flames by saying that banks and other creditors should be forced to share the pain if further rescues were ever needed. Pension funds, insurers etc with holdings of non Greek PIG bonds would be well advised to get some CDS quick. It was an insane thing to say and will lead to a huge flight of capital from Club Med.

Letting Greece default and leave the Euro will be far cheaper in the long run than this ill conceived Greek rescue.

Tuesday, 4 May 2010

Greece now awaits the markets judgement

Greece has been given the largest bail out ever at 110 bn€ to a single country. Reuters report, "whilst this eased fears of a near-term sovereign debt default, doubts lingered about whether the country will be able to carry out the tough austerity measures it has promised. Worries also persist about other heavily indebted countries in the euro zone". That says it all. Brussels is rightly worried about intra Eurozone contagion and has thrown a huge amount of money at Greece. I opine it will not work. Greek politics will scupper it.

The market is right to be worried over the 'implementation' risk. This morning BBC news reported a fresh 48 hour strike by public sector workers plus some irate teachers hijacking the Greek Education ministers TV broadcast last night over 17000 part time teacher redundancies already going ahead. They could only be bought off by putting out their own statement live warning of the dire consequences for the Greek education system. Twenty five percent of Greeks are employed in the public sector so there are a lot of potential strikers.

In Hong Kong this morning, 4th May, Reuters report, "U.S. Treasuries inched up on Tuesday on growing concerns about the political hurdles facing Europe's massive bailout plan for Greece".

Merkel has clearly been twisting German bankers arms to maitain their credit lines to Greek banks and their holdings of Greek debt. This strategy was tried in 1929 in the US and failed. It cannot work.

While writing this I went to take a phone call and saw a very interesting vox pop on Sky News from the streets of Athens. An out of work builder asked how on earth can this money be repaid given there is no work or only work at less wages. In the face of continued strikes Greek tourist bookings are reported as down 50%. No one wants to be caught in up a strike. The other factor to emerge was that surprise, surprise the Greek political class was not going to share the pain and the Greek people felt that much of the EU/IMF bail out would simply disappear into the pockets the politicians cronies.

The IMF has a lot of experience in dealing with corrupt regimes but will they be allowed to in Greece given the corruption and Spanish practices on pensions etc in Brussels itself. The IMF will find its hands tied by the EU which will put the EU in direct conflict with the US. There can only be one winner in that contest.

Monday, 3 May 2010

The Fourth Reich now rules in Greece

Under irresistible financial pressure from Dr Frau Merkel, yesterday the Greek PM announced draconian austerity for his people that will leave his people facing a falling standard of living for many years to come. There is now no doubt who rules the EU, the German Chancellor. The Eurozone is now her empire. It must be preserved at all costs and her will and rules must be enforced as ruthlessly as the Romans enforced their rule 2000 years ago.

The announced package of 110bn€ with 30bn€ coming from the IMF is no more than a sticking plaster which will see Greece financially through the tourist financed summer months. Politically the summer in Greece could be very difficult with strikes riots and general civic unrest.

But where will this 80bn€ EU contribution come from? Well Germany will have to raise at least 20bn€ on the markets on its own name. Easy for the Germans who are the best credit in Europe but what about Portugal, Spain and Italy? As the EU contribution is structured as a set of inter-governmental loans, to get round the Maastricht no bail out clause, each Eurozone government will end up issuing bonds in the market. The supply of these bonds will increase and their price go down and hence the interest rate these countries must pay to raise these loans must go up. Would you want to buy other PIGS paper in these circumstances? The only place you could use them is in ECB repo ops where Trichet has announced they will take Eurozone sovereign junk bonds just to show what they think of Anglo Saxon rating agencies. We will see how that plays out in the markets.

Liam Halligan pointed out yesterday that this deal will be sold as a one off, never to be repeated event subject to dire sanctions on Greece if the do not implement the conditions attached to the loan. Its all good publicity but the markets wont believe a word of it. It reminds me of sitting through Bank of England press conferences listening to Mervyn King saying it was not the job of the BoE to bail out imprudent banks. No one in the room including Mervyn believed this. One of the core jobs of a Central Bank is just that, to bail out banks in trouble. Darling Brown and the great British public found that out 2 years ago! And have the bailed out banks changed their behaviour? Well No!

It is the job of the ECB and the Eurozone to bail out imprudent states! I think the Dr Frau is a much tougher nut than MAK but what happens when the other little PIGS come along with their begging bowls crying why should we suffer more than the Greeks? As her Third Reich predecessor Adolf found out the more fronts you have to fight on the more casualties you take.

Liam Halligan recounted in his Sunday piece a 10 year old conversation he had with Donald McDougall, then 88, but who had been Churchill's principal economic advisor during the war and a contemporary of J M Keynes. McDougall derided the Maastricht system of fines for those Eurozone nations breeching the growth and stability pact rules as 'economic nonsense'. Such fines would never be enforced which made the threat of them meaningless. So it will be with Merkel's threats. They are for German domestic consumption only.

In 1977 McDougall led an official Brussels enquiry into the fiscal implications of monetary union which concluded monetary union could never succeed without EU wide taxation and a central budget and treasury i.e. a political union like the USA. Well you could never expect our self obsessed politicians to swallow that.

The eternal truth about politicians is that they are weak willed, vain, stupid, lying creatures, who care only about getting re-elected. They corrupt and befoul our language with their weasel words even Dr Frau Merkel.

Saturday, 1 May 2010

Who pays the ferryman to take Greece over the Styx?

In classical Greece coins were placed on the eyes of the deceased at burial to pay the ferryman for taking the departed over the river Styx to the underworld. So who will pay for the incredible exploding Greek rescue package of €120 bn. that requires as a quid pro quo Athens to raise sales taxes, scrap bonuses amounting to two extra months of pay in the public sector and accept a three-year pay freeze. Union officials also claim that by next year, the IMF and the EU want Greece to shed 10 percentage points from the public deficit that reached 13.6% of output in 2009. That's what we will be facing soon when the next UK government also calls in the IMF.

Economics does not exist on its own, its proper description is political economics and the political part will be played out on the hot streets of Greek cities this summer. The involvement of the IMF is also a political decision so some non-EU, Anglo Saxon, entity can be eventually be blamed for the inevitable ensuing problems and to cover up the unpalatable truth in Brussels that this is a clear failure of the Eurozone which their previous political fudges allowing Germany and France to breech the growth and stability rules of Maastricht setting up the Euro generated. Portugal was given a good kicking for breaching these same rules but they of course do not run the EU and Greece is getting the same treatment.

So returning to my thesis it is clear the Greek people will have to pay part of the price for this package. But will they? Today, Mayday, is a traditional day of marches in Athens. No prizes for guessing what the main theme will be. Already even the Cameroun dominated DT is carrying pictures of Greek riot police dealing with anti-EU/IMF protesters in Athens. Less parochial parts of the media like Reuters are carrying numerous pictures and stories on the same theme. Greek unions have called a strike for 5th May and one of the smaller Greek political parties are calling for a referendum on the whole deal. I hope they have better luck than we did on Lisbon.

One thing is certain. It won't be the Greek politicos and EU crats on their comfy salaries and incredibly generous pensions who pay. Unthinkable! That would be the end of the world as we know it! Ordinary Greeks will now have to work on to 67 from the previous 53 but not our hard working benefit fiddling politicians. Its pure Animal Farm.

There is a great vagueness of who will actually pay how much and when of this 120bn. The implied assumption is the Germans will cough up the lion's share. But has anyone asked the German people? Well they will have their say in Westphalia in the 9th May elections. Also some irritant German professors will take this to the German constitutional court claiming the whole deal is unconstitutional and in flagrant breech of the Maastricht Treaty. In UKIP Cabal speak these people are clearly malcontents to be drummed out of the party/club.

Meanwhile Spanish unemployment hits 20%. Are they next in line for the EU/IMF treatment? No, we will beat the Spanish to that dubious honour. It is on the streets of Athens and in the German courts this deal will disintegrate.

In the unlikely event the deal gets past these two obstacles I opine it will not work. It is too draconian. It will shift the crisis from a possible sovereign default to a certain private, deflation driven, default as business go bankrupt and home owners default on their mortgages. As our soon to be ex-supreme leader says, you cannot withdraw money from the economy until the recovery is established. I hear he will soon be coming on the job market so perhaps our loss will be Greece's loss as well.