Given that Labour's main economic argument during the election campaign was that we couldn't put the economy at risk by taking £6 billion out of the economy during the current year. it would seem that the European Union have just done a deal to do that for us without our permission two days after the national vote.Even though the UK is not part of the eurozone, it would seem that deal is being agreed which will see all members of the European Union, not just those who have the euro as their currency, having to contribute to the loan package of £100 billion to be given to Greece.
According to reports, euro-zone leaders are attempting to get round objections from countries such as the UK by invoking Article 122 of the Lisbon Treaty, intended to enable a collective response to natural disasters. This is a decision that does not need unanimous agreement amongst the 27 members.
The loan to Greece would be £95 billion and it is estimated that the UK's exposure to liabilities created by a bail-out under the scheme would amount to around 10 per cent of the total loan.
One would expect, under normal financial rules, for such a loan to be ringfenced within the current financial budget i.e. the £10 billion will taken out of the UK's budget for the next few years.
Therefore, it would seem that at a time of real financial crisis within the UK, we are now being asked to take nearly £10 billion out of our economy by the European Union to support a currency which we do not possess.
Indeed, the following comment in the Telegraph succinctly captures the situation:
"Nicolas Sarkozy, the French president, has persuaded other members of the eurozone that they can interpret a clause in the Lisbon Treaty so as to force every country belonging to the EU to contribute unspecified, and potentially unlimited, sums to bailing out insolvent members of the eurozone. It means that to keep the single currency going, in the event of future Greek-style collapses, Britain will have to write a blank cheque.This cynical, underhand and anti-democratic move has been prompted by the stresses that the colossal budget deficits of the weaker members of the euro – Greece, Portugal, Ireland, Spain, Italy – have placed on the currency itself. Last week, France and Germany agreed that Greece should receive an emergency loan of 110 billion euros. The injection of cash is at most a stay of execution, not a solution to the problem, whose root cause is that Greece, being in the euro, cannot devalue its currency and so cannot make its exports competitive, and thereby earn the money it needs to repay its debts. The obvious solution is for Greece to leave the euro. But that would be a humiliation for Europe’s politicians and bureaucrats, for it would show that the fundamental objection to it – that it could not be viable across countries that are at such different levels of economic development – is correct".
Therefore, is this so-called "bailout" is more about saving the euro as a viable currency rather than the Greek economy?
Will the UK also be asked to do the same for Spain, Ireland and Portugal if the situation deteriorates in those countries?
I wonder what the reaction would have been if this had happened two days before the general election rather than two days after?
More importantly, Alistair Darling, who remains Chancellor of the Exchequer has, under the Hung parliament protocols, to consult with both George Osborne and Vince Cable over his negotiating position on this matter.
Given the differing views of the Conservative and Liberal Democrats on Europe, could this be the first test of how any future coalition could work to save the UK economy?
More importantly. will we finally have a government created, albeit a coalition or minority government, that puts the UK economy first?
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