Tuesday, 28 June 2011

Back again - by Richard... Tuesday, June 28, 2011


Governments across the single currency bloc are pushing the banks, pension funds and insurance firms that hold Greek sovereign debt to play a role in a second rescue package for the heavily indebted euro zone nation. Josef Ackermann cautioned against any steps that could spread the crisis to other vulnerable countries in the 12-year old currency bloc.

"If it is Greece alone, that's already big. But if other countries are drawn in through contagion, it could be bigger than Lehman," the Deutsche Bank chief said at a Reuters banking event on Monday.

The Swiss banker, who is also chairman of the Institute of International Finance, an international bank lobbying group set up to deal with international debt crisis, cautioned politicians against rushing a deal with the private sector.

But how does all that rate against this where leading economist Stefan Homburg tells Der Spiegel that ANY EU bank involvement in sovereign bailout – voluntary or otherwise – would be illegal?

(EU) Banks cannot participate (even) voluntarily. An executive board is committed to its company’s welfare, and not the public interest. If it waives outstanding debts at the expense of its own company, this is a breach of trust and punishable by law ...


Never mind, though, the British are rushing to help, as per the headline above. But then that was October 1940, after the Italians had invaded Greece. Chamberlain had given a guarantee on 13 April 1939. We were back again in December 1944, staving off a civil war.

And now ... we're back again, pouring extra billions into propping up the Greek economy "by the back door" through a massively increased contribution to the International Monetary Fund. The irony is, of course, that we're having to borrow the money to do it ... just like 1940 and 1944.

COMMENT THREAD

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Tory backlash as UK is 'bailing out Greece by back door' through extra IMF contributions


By TIM SHIPMAN


27.6.2011


Britain will be forced to pour extra billions into propping up the Greek economy ‘by the back door’ through a massively increased contribution to the International Monetary Fund, senior Tories warned yesterday.

Because of an agreement signed under Labour, the UK is about to double its IMF payment from just over £10billion a year to almost £20billion, a significant proportion of which will be used to service Greek debt.

So even though David Cameron last week managed to exempt Britain from contributing to the separate European Union bailout fund for Greece, any savings could be cancelled out by our IMF commitment.

Unrest: Greek riot police officers confront protesters in front of the Greek parliament during a recent general strike against government austerity plans

Unrest: Greek riot police officers confront protesters in front of the Greek parliament during a recent general strike against government austerity plans

Britain is expected to pay more than £1billion to Greece through the IMF – in addition to the £1.2billion we have already committed.

More...

The increase in the UK’s IMF contribution is higher than that of Germany, Switzerland, Canada or the Netherlands – although India and China are paying much more to reflect their growing share of the world economy.

Former Tory Cabinet minister John Redwood said yesterday: ‘The UK government is about to ask Parliament’s permission to subscribe for £9.2billion of new capital to the IMF. I expect we will be told we have to do this, there is no alternative, it’s part of the price of our membership of this international club.

‘What I would like us to do is to argue against the IMF making more money available for a second Greek bailout when the first does not work. I also think we could offer a lower additional subscription than the one currently proposed.’

Opposition: John Redwood has argued against a second Greek bailout

Opposition: John Redwood has argued against a second Greek bailout

The UK contribution is rising from £10.5billion a year to £19.7billion. Mr Redwood pointed out that the 88 per cent increase in British contributions dwarfs the extra cash put in by oil-rich countries such as Kuwait, which is offering only a 40 per cent increase, and Saudi Arabia, which is paying 43 per cent extra. Germany’s contribution has risen by 83 per cent.

Mr Redwood said: ‘If the UK matched Belgium and Saudi our new subscription would be £4.3billion. In our financial position that would be a lot more comfortable.’

Fellow Tory Douglas Carswell said: ‘Think of the tax cuts we could afford with that £9.2billion or the guarantees we could give to maintain public services.’

Greece is expected to get a second £100billion handout from the EU and the IMF later this week if it approves £28billion of deeply unpopular austerity measures.

Eurozone sources yesterday revealed that the EU is working on emergency contingency plans in the event that the Greek parliament votes down the measures tomorrow, which would almost certainly plunge Greece into default on its £304billion debt mountain.

In a statement to Parliament on last week’s summit in Brussels, Mr Cameron said he had succeeded in keeping Britain out of a second bailout to Greece through ‘real negotiating effort’. But former Labour foreign secretary David Miliband said that a Greek default on its debts is ‘inevitable’. If that does happen it would be likely to lead to future cash bailouts.

A government source rejected Mr Redwood’s criticism, saying: ‘The quotas are the result of a multi-year negotiation that has just concluded and would be impossible to reopen without leaving the IMF.’

People:
David Miliband,
John Redwood,
David Cameron
Places:
Brussels,
Canada,
Greece,
The Netherlands,
Germany,
China,
Kuwait,
United Kingdom,
India,
Switzerland,
Belgium
Organisations:
International Monetary Fund


Posted by Britannia Radio at 08:10