After Greece, where now for the eurozone?

Time to look at the deep mechanical flaws in the euro's design.

It is by no means the end of the modern Greek tragedy, but the conclusion of the second €130bn bailout for Greece must mark a line in the sand.

Will the latest bail-out deal work? It is possible, but as the EU/ECB/IMF Troika made clear, it will be a long and bumpy road. But there is not much alternative.

Greece is, to all intents and purposes, insolvent. Agreement on the bailout package had to be reached because €14.5bn of debt repayments need to be made next month and Greece didn't have the cash to do it.

There are some who cling to the idea that a default and a swift return to the drachma would solve all ills, making Greece's exports cheaper and attracting tourists. If it were that simple, then it would already have happened. Unfortunately, there is no economic magic potion for a country so deep in debt and recession.

Were Greece to go into a disorderly default it would be required to pay upfront in cash for all its imports -- impossible for a country with such an acute cash flow crisis. Drachma and devaluation would simply see the Greek banking sector collapse and the country saddled with a worthless currency. There is no silver bullet.

One thing which goes without saying is that the eurozone, and the EU as a whole, have been badly fractured by the Greek crisis. Just as there is fury on the streets in Athens, there is also fury among other EU governments, particularly among the northern member states, about the statistical frauds committed by Greece and their government's failure to live up to their promises to cut their budget deficit.

The result is a toxic mix of reform fatigue in the south, and support fatigue in the north. More perniciously, the nastiest and crudest national stereotypes have returned replete with lazy, corrupt Greeks and talk of a "Fourth Reich".

Indeed, very few actors come out of the Greek crisis well. Certainly not the Greek political class which presided over statistical fraud and a corrupt system of public administration, although it seems likely that the Greek people will take their revenge at the April general elections where the historically dominant centre-right and left parties are set to be routed. Not the north European countries, who spent two years pig-headedly insisting that eye-watering interest rates and savage spending cuts should be attached to any rescue package, and then wondered why it was that the Greek economy fell deeper into recession and the debt burden soared.

Two years ago, months after the scale of its budget deficit had been unmasked, Greece's debt to GDP ratio was 140 per cent. Even with the first bailout deal and billions of euros of assistance from the European Investment Bank, the debt pile has now risen to 160 per cent.

The dust has to be allowed to settle now. The Greeks need to get on with the austerity programme they have committed to, and the German and Dutch nay-sayers must allow them to get on with it without any further humiliation. The eurozone must stop obsessing about the Greek crisis and address the systemic problems which still face it.

In many respects, the Greek crisis has diverted attention from the deepest mechanical flaws in the euro's design. It has allowed the conservative politicians who currently dominate the EU to establish a narrative of the debt crisis that regards all problems as the result of feckless overspending governments and lazy workers in Club Med, and that "structural reforms" -- for which read liberalising labour markets and reducing social protection - are the only way forward. If every country can be like Germany or the Netherlands then voila: problem solved. This approach is embodied in the Merkozy-inspired "fiscal compact" treaty.

This is utterly misguided and self-defeating. For one thing, all the evidence, from Greece, to Ireland and Portugal, and the rest of the EU, indicates that austerity programmes are doing nothing to reduce government debt and balance budgets. The diet of economic bread and water has, in most cases, actually weakened the patient. The EU urgently needs a growth and jobs strategy.

More profoundly, politicians must acknowledge that while budgetary discipline and more productive labour markets are important, they will not prevent the gap between the eurozone's richest and poorest stretching beyond sustainability.

For the eurozone to work effectively there will need to be a formal system of credit transfers to redistribute a bit of wealth from north to south.

Talk of credit transfers is -- like joint liability Eurobonds -- an anathema to the north Europeans, but it is a reality that must be faced. In a currency union with a single market, it is neither desirable nor possible for all countries to be like the member states in the virtuous north, with their current account and export surpluses.

The truth is that the north Europeans need the Club Med countries, more than vice versa, to buy their goods.

Up until now, the debt crisis has been about emergency resolution. With Greece now brought away from the depths of the economic abyss, and the fear of contagion to other countries slightly reduced, the eurozone should move away from crisis management to taking steps to ensure that the current crisis does not repeat itself. EU leaders should not kid themselves or their domestic electorates that labour market reforms and rules on budgetary discipline are the magic cure.

Without a growth strategy and an acceptance that the north-south economic divide cannot be entirely bridged, the current crisis will repeat itself.

Ben Fox is chairman of GMB Brussels and political adviser to the Socialist vice-president of economic and monetary affairs.

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Inside a shaken city: "I just want to be anywhere that’s not Manchester”

The morning after the bombing of the Manchester Arena has left the city's residents jumpy.

On Tuesday morning, the streets in Manchester city centre were eerily silent.

The commuter hub of Victoria Station - which backs onto the arena - was closed as police combed the area for clues, and despite Mayor Andy Burnham’s line of "business as usual", it looked like people were staying away.

Manchester Arena is the second largest indoor concert venue in Europe. With a capacity crowd of 18,000, on Monday night the venue was packed with young people from around the country - at least 22 of whom will never come home. At around 10.33pm, a suicide bomber detonated his device near the exit. Among the dead was an eight-year-old girl. Many more victims remain in hospital. 

Those Mancunians who were not alerted by the sirens woke to the news of their city's worst terrorist attack. Still, as the day went on, the city’s hubbub soon returned and, by lunchtime, there were shoppers and workers milling around Exchange Square and the town hall.

Tourists snapped images of the Albert Square building in the sunshine, and some even asked police for photographs like any other day.

But throughout the morning there were rumours and speculation about further incidents - the Arndale Centre was closed for a period after 11.40am while swathes of police descended, shutting off the main city centre thoroughfare of Market Street.

Corporation Street - closed off at Exchange Square - was at the centre of the city’s IRA blast. A postbox which survived the 1996 bombing stood in the foreground while officers stood guard, police tape fluttering around cordoned-off spaces.

It’s true that the streets of Manchester have known horror before, but not like this.

I spoke to students Beth and Melissa who were in the bustling centre when they saw people running from two different directions.

They vanished and ducked into River Island, when an alert came over the tannoy, and a staff member herded them through the back door onto the street.

“There were so many police stood outside the Arndale, it was so frightening,” Melissa told me.

“We thought it will be fine, it’ll be safe after last night. There were police everywhere walking in, and we felt like it would be fine.”

Beth said that they had planned a day of shopping, and weren’t put off by the attack.

“We heard about the arena this morning but we decided to come into the city, we were watching it all these morning, but you can’t let this stop you.”

They remembered the 1996 Arndale bombing, but added: “we were too young to really understand”.

And even now they’re older, they still did not really understand what had happened to the city.

“Theres nowhere to go, where’s safe? I just want to go home,” Melissa said. “I just want to be anywhere that’s not Manchester.”

Manchester has seen this sort of thing before - but so long ago that the stunned city dwellers are at a loss. In a city which feels under siege, no one is quite sure how anyone can keep us safe from an unknown threat

“We saw armed police on the streets - there were loads just then," Melissa said. "I trust them to keep us safe.”

But other observers were less comforted by the sign of firearms.

Ben, who I encountered standing outside an office block on Corporation Street watching the police, was not too forthcoming, except to say “They don’t know what they’re looking for, do they?” as I passed.

The spirit of the city is often invoked, and ahead of a vigil tonight in Albert Square, there will be solidarity and strength from the capital of the North.

But the community values which Mancunians hold dear are shaken to the core by what has happened here.

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