Europe’s debt mountains, Osborne’s Plan B and turning Greece into a debtors’ prison

Vicky Pryce on UKIP's respectable friends and Prisonomics.

Ukip’s respectable friends

 
Debates on whether the UK should leave the European Union are a growth industry. Of course we shouldn’t – and there shouldn’t be a referendum either, unless other like-minded countries ask to have powers given back to them, too, so that a new treaty would then need to be voted on.
 
Withdrawal makes no economic sense, given our trade and other ties with 500 million fellow Europeans and the EU’s £11trn market. That didn’t stop more than a thousand people meeting at the Guildhall for the in/out debate co-hosted by the Evening Standardand the Centre for London on 9 September. On the pro-Europe side were Vince Cable, Martin Sorrell of the advertising company WPP and me. The antis were the Labour MP Gisela Stuart, the businessman Luke Johnson and Jesse Norman, the last of these recently sacked as a government adviser by David Cameron for showing independence on the Syria vote.
 
I was shocked at the number of people who declared they were pro-Ukip. Still, I think the majority wanted us to stay in.

 

Choppy waters ahead

 
On the subject of the eurozone, I recently attended a conference organised by Professors Richard Portes and Hélène Rey at the London Business School to discuss how sustainable current debt levels are. Yes, a number of the periphery countries of Europe have managed to improve their current account balances and to move to primary surpluses in their public finances. However, the reason is mainly that they have stopped spending. Growth is minimal and debts of 120 per centplus of GDP are unsustainable.
 
The crisis has not gone away – many of the banks are in deep trouble and the latest data suggests that lending has been declining in most countries. There are some tentative signs of a pick-up but the debt overhang is bound to bring in more crises soon.
 
Steering the eurozone through the continuing turbulence will require a master helmsman or helmswoman. 

 

Ignoring our neighbours

 
The most important political event of the year is coming later this month. Yet if you read most newspapers, you would not know that there will be an election in Germany. Compare this to the year-long, day-by-day coverage of any US election and our indifference to politics across the Channel seems almost 1930s-esque in its frivolousness.
 
The only story here seems to be whether Angela Merkel will back the Prime Minister’s wish for a massive renegotiation and repatriation deal with the EU. My German friends say Keine Chance – “no way”. At the Guildhall debate, Cable said that the Lib Dems would support a referendum if it was warranted by a substantial change in our relationship with Europe. It didn’t sound like backing for a referendum come what may.

 

Balancing act

 
George Osborne has proclaimed that the UK’s cuts strategy was right after all and that he has been vindicated. In my view, the reason for any success is not austerity – the government has already implemented Plan B, as it has acknowledged some growth is better than none. Target dates for fiscal consolidation have been pushed back. The governor of the Bank of England, Mark Carney, indicates interest rates will stay low as long as possible. A huge injection of cash into the banking system through what is known as “Funding for Lending” and the additional increase in taxpayer-funded mortgage availability are boosting demand and construction. Growth is sustained by consumers borrowing more and more government spending. Nothing wrong with that – but where’s the rebalancing?
 

Greek encounter

 
Great relief. My forthcoming book, Prisonomics, looking at the costs and benefits of the prison system in England and Wales, has just gone through the last of its many edits with my editors and will be out in a few weeks’ time. Iain Dale of Biteback has revolutionised political publishing by cutting the year-long delays between writing and publication. I have also been updating Greekonomics, my book from last year on the eurozone crisis.
 
My research included a wonderful fish dinner near Athens recently with, among others, Mark Lowen, the BBC correspondent there. His lineage is amazing. One grandmother was a Jewish concert pianist in wartime Poland who played for Nazi brutes and lived for another day. His grandfather George Lowen was a young Jewish left-wing barrister in Berlin who worked in the defence team in the Reichstag trial in 1933. He fled to South Africa, where he had to learn English. He requalified and became a well-known QC and defended anti-apartheid militants at the Rivonia trial, in which Nelson Mandela was imprisoned. The Reichstag and Rivonia trials were two of the 20th century’s greatest court cases. The grandson is now reporting on extremist right-wingers in Athens.
 
Greece remains weak, if resilient, and urgently needs more of its debt written off. Unemployment is at record levels and tensions are high. Yet we prefer to keep entire nations in a kind of debtors’ prison. It’s not so much 1930s politics but the return of 19thcentury economics that is worrying.
 

Milk moustache

 
Back from my parents’ home near Athens to chilly Clapham. I spent most of my holiday in front of a computer at the wonderfully named Everyday Café in Varkiza, a seaside suburb outside Athens. My chief writing aids were countless café frappés – a glamorous name given to Nescafé mixed with cold water from the fridge and ice cubes, shaken like a cocktail until a thick layer of froth comes out on top and then poured into a tall glass.
 
It looks like a pint of Guinness but it’s spoiled by how you have to drink it through a straw – unless you don’t mind the ignominy of having a thick layer of froth settling around your mouth like a moustache.
 
Vicky Pryce is a former joint head of the Government Economic Service. Her books “Prisonomics” (£16.99) and an updated edition of “Greekonomics” (£12.99) will be published by Biteback later this month 
UKIP party posters for a local election. Image: Getty

This article first appeared in the 16 September 2013 issue of the New Statesman, Syria: The deadly stalemate

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Lord Empey: Northern Ireland likely to be without government for a year

The former UUP leader says Gerry Adams is now in "complete control" of Sinn Fein and no longer wants to be "trapped" by the Good Friday Agreement

The death of Martin McGuinness has made a devolution settlement in Northern Ireland even more unlikely and has left Gerry Adams in "complete control" of Sinn Fein, the former Ulster Unionist leader Reg Empey has said.

In a wide-ranging interview with the New Statesman on the day of McGuinness’ death, the UUP peer claimed his absence would leave a vacuum that would allow Adams, the Sinn Fein president, to consolidate his hold over the party and dictate the trajectory of the crucial negotiations to come. Sinn Fein have since pulled out of power-sharing talks, leaving Northern Ireland facing the prospect of direct rule from Westminster or a third election in the space of a year. 

Empey, who led the UUP between and 2005 and 2010 and was briefly acting first minister in 2001, went on to suggest that, “as things stand”, Northern Ireland is unlikely to see a return to fully devolved government before the inquiry into the Renewable Heat Incentive scheme is complete -  a process which could take up to a year to complete.

“Adams is now in complete control of Sinn Fein,” he said, adding that it remained unclear whether McGuinness’ successor Michelle O’Neill would be “allowed to plough an independent furrow”. “He has no equal within the organisation. He is in total command of Sinn Fein, and that is the way it is. I think he’s even more powerful today than he was before Martin died – by virtue of there just being nobody there.”

Asked what impact the passing of McGuinness, the former deputy first minister and leader of Sinn Fein in the north, would have on the chances of a devolution settlement, Empey, a member of the UUP’s Good Friday Agreement negotiating delegation, said: “I don’t think it’ll be positive – because, for all his faults, Martin was committed to making the institutions work. I don’t think Gerry Adams is as committed.

Empey added that he believed Adams did not want to work within the constitutional framework of the Good Friday Agreement. In a rebuke to nationalist claims that neither Northern Ireland secretary James Brokenshire nor Theresa May can act as honest or neutral brokers in power-sharing negotiations given their reliance on the DUP’s eight MPs, he said: “They’re not neutral. And they’re not supposed to be neutral.

“I don’t expect a prime minister or a secretary of state to be neutral. Brokenshire isn’t sitting wearing a hat with ostrich feathers – he’s not a governor, he’s a party politician who believes in the union. The language Sinn Fein uses makes it sound like they’re running a UN mandate... Gerry can go and shout at the British government all he likes. He doesn’t want to be trapped in the constitutional framework of the Belfast Agreement. He wants to move the debate outside those parameters, and he sees Brexit as a chance to mobilise opinion in the republic, and to be seen standing up for Irish interests.”

Empey went on to suggest that Adams, who he suggested exerted a “disruptive” influence on power-sharing talks, “might very well say” Sinn Fein were “’[taking a hard line] for Martin’s memory’” and added that he had been “hypocritical” in his approach.

“He’ll use all of that,” he said. “Republicans have always used people’s deaths to move the cause forward. The hunger strikers are the obvious example. They were effectively sacrificed to build up the base and energise people. But he still has to come to terms with the rest of us.”

Empey’s frank assessment of Sinn Fein’s likely approach to negotiations will cast yet more doubt on the prospect that devolved government might be salvaged before Monday’s deadline. Though he admitted Adams had demanded nothing unionists “should die in a ditch for”, he suggested neither party was likely to cede ground. “If Sinn Fein were to back down they would get hammered,” he said. “If Foster backs down the DUP would get hammered. So I think we’ve got ourselves a catch 22: they’ve both painted themselves into their respective corners.”

In addition, Empey accused DUP leader Arlene Foster of squandering the “dream scenario” unionist parties won at last year’s assembly election with a “disastrous” campaign, but added he did not believe she would resign despite repeated Sinn Fein demands for her to do so.

 “It’s very difficult to see how she’s turned that from being at the top of Mount Everest to being under five miles of water – because that’s where she is,” he said. “She no longer controls the institutions. Martin McGuinness effectively wrote her resignation letter for her. And it’s very difficult to see a way forward. The idea that she could stand down as first minister candidate and stay on as party leader is one option. But she could’ve done that for a few weeks before Christmas and we wouldn’t be here! She’s basically taken unionism from the top to the bottom – in less than a year”.

Though Foster has expressed regret over the tone of the DUP’s much-criticised election campaign and has been widely praised for her decision to attend Martin McGuinness’ funeral yesterday, she remains unlikely to step down, despite coded invitations for her to do so from several members of her own party.

The historically poor result for unionism she oversaw has led to calls from leading loyalists for the DUP and UUP – who lost 10 and eight seats respectively – to pursue a merger or electoral alliance, which Empey dismissed outright.

“The idea that you can weld all unionists together into a solid mass under a single leadership – I would struggle to see how that would actually work in practice. Can you cooperate at a certain level? I don’t doubt that that’s possible, especially with seats here. Trying to amalgamate everybody? I remain to be convinced that that should be the case.”

Accusing the DUP of having “led unionism into a valley”, and of “lashing out”, he added: “They’ll never absorb all of our votes. They can try as hard as they like, but they’d end up with fewer than they have now.”

Patrick Maguire writes about politics and is the 2016 winner of the Anthony Howard Award.