Monetary stimulus is much more fun when it buys you a holiday

Why not use QE to give holiday vouchers to northern Europe? No, really, why not?

It's always nice to read a proposal that could simultaneously ease the euro crisis and get you a free holiday to Barcelona. It's even more fun seeing the idea gestate from a slightly boozy tweet to a full-blown plan, set in motion by the disability blogger and campaigner Sue Marsh:

After a while, I had a thought. All of the countries in trouble were holiday destinations - Greece, Spain, Italy, Portugal even Ireland. The ones weathering the storm were the colder, northern countries. Would it not make sense to encourage and incentivise holidays? [...] Hell, was fun automatically not an option just because it was fun?

A few weeks ago, there were rumours of another 700 billion bailout for Eurozone banks. I had just watched Spanish banks get a bailout of more billions and the markets ate the extra money mercilessly in about 48 hours. With the press of a few buttons, the banks or markets appeared to have eaten the very money they had just created! [...]

I asked more seriously on twitter if any economists could explain to me why my holiday idea wouldn't be a better stimulus to the Eurozone than another bank bailout.

Marsh's idea was picked up by NIESR's Jonathan Portes, who wrote it up with Declan Gaffney, another prolific blogger on disability and welfare issues. Their plan sounds a lot like it would work, cost no more than a bank bailout, and as Sue says, be fun:

Our proposal is that they should issue vouchers to their citizens, redeemable only on spending in goods and services in those countries suffering financing difficulties (Spain, Ireland, Portugal, Greece, Cyprus and Italy). Holiday vouchers, in other words. So German holidaymakers could pay for their drinks in Cretan bars (and their flights, hotel bills, souvenirs, ferry tickets and the like) with "money" created by the ECB and distributed to them by their own government. The Greek businesses would in turn be able to trade in the vouchers for euros from the German government (via the banking system and the ECB).

This solves a number of problems. It would loosen monetary policy across the eurozone and ease the financing problems of the periphery countries. But most importantly, as Martin Wolf has long argued, the fundamental problem of the eurozone is not fiscal profligacy in periphery countries, but internal current account imbalances. Consumers in the periphery countries have been spending on goods and services from Germany and the Northern countries, but not vice versa, financed directly or indirectly by capital flows from those same countries. Now those flows have dried up; so one way or another, the current account balances must be corrected.

Both posts are well worth a read, and serve to drive home an important point: there are far more options to deal with crises than those that most policy makers think they actually have. When all you have is a hammer, everything looks like a nail; but European governments have far more than just hammers in their toolbox.

Greeks sunbathe on a beach in Athens. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Ukip's Nigel Farage and Paul Nuttall. Photo: Getty
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Is the general election 2017 the end of Ukip?

Ukip led the way to Brexit, but now the party is on less than 10 per cent in the polls. 

Ukip could be finished. Ukip has only ever had two MPs, but it held an outside influence on politics: without it, we’d probably never have had the EU referendum. But Brexit has turned Ukip into a single-issue party without an issue. Ukip’s sole remaining MP, Douglas Carswell, left the party in March 2017, and told Sky News’ Adam Boulton that there was “no point” to the party anymore. 

Not everyone in Ukip has given up, though: Nigel Farage told Peston on Sunday that Ukip “will survive”, and current leader Paul Nuttall will be contesting a seat this year. But Ukip is standing in fewer constituencies than last time thanks to a shortage of both money and people. Who benefits if Ukip is finished? It’s likely to be the Tories. 

Is Ukip finished? 

What are Ukip's poll ratings?

Ukip’s poll ratings peaked in June 2016 at 16 per cent. Since the leave campaign’s success, that has steadily declined so that Ukip is going into the 2017 general election on 4 per cent, according to the latest polls. If the polls can be trusted, that’s a serious collapse.

Can Ukip get anymore MPs?

In the 2015 general election Ukip contested nearly every seat and got 13 per cent of the vote, making it the third biggest party (although is only returned one MP). Now Ukip is reportedly struggling to find candidates and could stand in as few as 100 seats. Ukip leader Paul Nuttall will stand in Boston and Skegness, but both ex-leader Nigel Farage and donor Arron Banks have ruled themselves out of running this time.

How many members does Ukip have?

Ukip’s membership declined from 45,994 at the 2015 general election to 39,000 in 2016. That’s a worrying sign for any political party, which relies on grassroots memberships to put in the campaigning legwork.

What does Ukip's decline mean for Labour and the Conservatives? 

The rise of Ukip took votes from both the Conservatives and Labour, with a nationalist message that appealed to disaffected voters from both right and left. But the decline of Ukip only seems to be helping the Conservatives. Stephen Bush has written about how in Wales voting Ukip seems to have been a gateway drug for traditional Labour voters who are now backing the mainstream right; so the voters Ukip took from the Conservatives are reverting to the Conservatives, and the ones they took from Labour are transferring to the Conservatives too.

Ukip might be finished as an electoral force, but its influence on the rest of British politics will be felt for many years yet. 

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