Supporters of Syriza wave party flags. Photo: Oli Scarff/Getty Images
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I agree with Syriza: the way back to prosperity is not austerity but debt relief

This is Europe’s choice.

Syriza’s victory has injected a ray of clarity into the eurozone’s fog. The Greek people have said “enough is enough”. So, we have a new situation – and an opportunity to do things differently.

The Greek election confirmed what everyone knew but wouldn’t say: most of the Greek government’s external debt of €317bn will never be repaid. It would be best if Europe’s leaders openly acknowledged this and stopped trying to “pretend and extend”. They should convene a European debt relief conference, as Syriza has suggested. This would agree to cancel a percentage of the external debt of all heavily indebted eurozone countries. Italy, Spain, Portugal and possibly Ireland would qualify. The percentage would vary with the amount of the outstanding debt and the economic plight of the different debtors. For Greece, a debt write-off of about 50 per cent, leaving it with a debt/GDP ratio of close to 90 per cent, would give a real chance of a fresh start.

Angela Merkel and the Swabian housewife she claims to represent will be appalled at any such open “breach of contract”. But provided the substance of the breach is accepted, it can be dressed up to look as if no breach has occurred. Bankers are experts in devising suitable instruments for deception. 'Here is a chance for them to earn their keep. Bonds of varying types can be issued. Some of them will be fictional – ie, give rise to no claims for, say, 20 years. This is as good as cancellation.

The morality of debt forgiveness can be endlessly debated. It will be claimed that it is unjust to the creditor, that it will remove the incentives for the debtor to reform; in the case of Greece, to tackle corruption and non-payment of taxes. This is reasonable. That is why there should not be complete cancellation: enough debtor discomfort should continue to keep up pressure to maintain fiscal discipline.

Yet the outcome will not be decided by such fine apportionment of moral blame. In practice, whether debts are paid in full, paid in part or repudiated depends not just on the size of the debts but on the political clout of the creditor and debtor forces.

Decisive creditor victories have been increasingly rare since military conquest and slavery ceased to be acceptable ways of extracting tribute. Successful debtor revolts have become the norm. Germany, itself the beneficiary of big debt write-offs after the two world wars, would be wise to remember this.

Morality and politics aside, there is a compelling economic argument for debt forgiveness. The huge external debts of countries such as Greece menace the recovery of the eurozone from the Great Recession. They can only be repaid by transferring resources from the debtor to the creditor countries. To do this, the heavily indebted countries will have to run export surpluses of up to 10 per cent or more over several years. (Greece’s current account surplus is under 1 per cent.) No one supposes that they will achieve productivity gains sufficient to make this possible. This means that further large cuts in their living standards will be required to generate the necessary exports.

While foreign creditors can spend the repaid money in the debtor countries, there is no need for them to do so, or even spend it at all. Repaid debts can be used to buy goods from east Asia or to pay down bank debt. Such uses represent a net subtraction from eurozone GDP.

So, any honest attempt to “pay back the debt” will almost certainly create a Europe-wide depression. To avoid this, the IMF and ECB will have to lend the debtor countries more money on condition of more austerity and “structural reform”; and so the debts will pile up, accompanied by ruinous political, economic and financial turmoil, as Europe spirals downwards. What a mad way to run our affairs!

Aren’t we forgetting the benefits promised by quantitative easing (QE)? Mario Draghi of the ECB has just announced a €1.1trn programme of government bond purchases, to be phased over a year and a half, starting in March. But it is naive to see this as a magic bullet.

As John Maynard Keynes warned in 1936: “If . . . we are tempted to assert that money is the drink which stimulates the system to activity, we must remind ourselves that there may be several slips between the cup and the lip.” The recent experiences of monetary infusions in the US and the UK confirm this. Much of the money received from the sale of bonds never got into circulation at all: it went straight into bank reserves. A lot of what was spent went not into GDP-related purchases but into the “financial circulation” – bidding up the prices of existing assets (stock-market securities and houses). As a result, the “bang per buck” delivered by QE was relatively meagre. There is no reason for Draghi to expect anything better – and some reason to expect worse.

A securer form of monetary stimulus would be to give time-limited spending vouchers to the households of all those eurozone countries whose national economies are still below their 2008 level. First proposed by the 19th-century economist Silvio Gesell and endorsed by the American economist Irving Fisher, the “stamped money” experiment has never been tried and is not about to be tested.

So, we are thrown back on public investment. The Juncker plan, about to be approved by the European Parliament, would provide €21bn of European Investment Bank and EU Structural Funds money for approved investment projects, chiefly infrastructure. Its supporters claim that this will leverage €315bn of private investment over three years. As well as increasing aggregate demand, such a supply-side measure would also enhance future growth.

I agree with Syriza: the way back to prosperity and solvency is not debt collection and austerity but debt relief and public investment. This is Europe’s choice.

Robert Skidelsky is a cross-bench peer and a leading biographer of J M Keynes. His most recent book is “Britain Since 1900: a Success Story?” (Vintage)

This article first appeared in the 06 February 2015 issue of the New Statesman, An empire that speaks English

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A Fox among the chickens: why chlorinated poultry is about more than what's on your plate

The trade minister thinks we're obsessed with chicken, but it's emblematic of bigger Brexit challenges.

What do EU nationals and chlorinated chickens have in common? Both have involuntarily been co-opted as bargaining chips in Britain’s exit from the European Union. And while their chances of being welcomed across our borders rely on vastly different factors, both are currently being dangled over the heads of those charged with negotiating a Brexit deal.

So how is it that hundreds of thousands of pimpled, plucked carcasses are the more attractive option? More so than a Polish national looking to work hard, pay their taxes and enjoy a life in Britain while contributing to the domestic economy?

Put simply, let the chickens cross the Atlantic, and get a better trade deal with the US – a country currently "led" by a protectionist president who has pledged huge tariffs on numerous imports including steel and cars, both of which are key exports from Britain to the States. However, alongside chickens the US could include the tempting carrot of passporting rights, so at least bankers will be safe. Thank. Goodness. 

British farmers won’t be, however, and that is one of the greatest risks from a flood of "Frankenfoods" washing across the Atlantic. 

For many individuals, the idea of chlorinated chicken is hard to stomach. Why is it done? To help prevent the spread of bacteria such as salmonella and campylobacter. Does it work? From 2006-2013 the Centers for Disease Control and Prevention reported an average of 15.2 cases of salmonella per 100,000 people in the US (0.015 per cent) – earlier figures showed 0.006 per cent of cases resulted in hospitalisation. In 2013, the EU reported the level at 20.4 cases per 100,000, but figures from the Food Standards Agency showed only 0.003 per cent of UK cases resulted in hospitalisation, half of the US proportion.

Opponents of the practice also argue that washing chickens in chlorine is a safety net for lower hygiene standards and poorer animal welfare earlier along the line, a catch-all cover-up to ensure cheaper production costs. This is strongly denied by governing bodies and farmers alike (and International Trade Secretary Liam Fox, who reignited the debate) but all in all, it paints an unpalatable picture for those unaccustomed to America’s "big ag" ways.

But for the British farmer, imports of chicken roughly one fifth cheaper than domestic products (coupled with potential tariffs on exports to the EU) will put further pressure on an industry already working to tight margins, in which many participants make more money from soon-to-be-extinct EU subsidies than from agricultural income.

So how can British farmers compete? While technically soon free of EU "red tape" when it comes to welfare, environmental and hygiene regulations, if British farmers want to continue exporting to the EU, they will likely have to continue to comply with its stringent codes of practice. Up to 90 per cent of British beef and lamb exports reportedly go to the EU, while the figure is 70 per cent for pork. 

British Poultry Council chief executive Richard Griffiths says that the UK poultry meat industry "stands committed to feeding the nation with nutritious food and any compromise on standards will not be tolerated", adding that it is a "matter of our reputation on the global stage.”

Brexiteer and former environment minister Andrea Leadsom has previously promised she would not lower animal welfare standards to secure new trade deals, but the present situation isn’t yet about moving forward, simply protecting what we already have.

One glimmer of hope may be the frozen food industry that, if exporting to the EU, would be unable to use imported US chicken in its products. This would ensure at least one market for British poultry farmers that wouldn't be at the mercy of depressed prices, resulting from a rushed trade deal cobbled together as an example of how well Britain can thrive outside the EU. 

An indication of quite how far outside the bloc some Brexiteers are aiming comes from Foreign Secretary Boris Johnson's current "charm" offensive in Australasia. While simultaneously managing to offend Glaswegians, BoJo reaffirmed trading links with the region. Exports to New Zealand are currently worth approximately £1.25bn, with motor vehicles topping the list. Making the return trip, lamb and wine are the biggest imports, so it’s unlikely a robust trade deal in the South Pacific is going to radically improve British farmers’ lives. The same is true of their neighbours – Australia’s imports from Britain are topped by machinery and transport equipment (59 per cent of the total) and manufactured goods (26 per cent). 

Clearly keeping those trade corridors open is important, but it is hard to believe Brexit will provide a much-needed boon for British agriculture through the creation of thus far blocked export channels. Australia and New Zealand don’t need our beef, dairy or poultry. We need theirs.

Long haul exports and imports themselves also pose a bigger, longer term threat to food security through their impact on the environment. While beef and dairy farming is a large contributor to greenhouse gases, good stock management can also help remove atmospheric carbon dioxide. Jet engines cannot, and Britain’s skies are already close to maximum occupancy, with careful planning required to ensure appropriate growth.

Read more: Stephen Bush on why the chlorine chicken row is only the beginning

The global food production genie is out of the bottle, it won’t go back in – nor should it. Global food security relies on diversity, and countries working and trading together. But this needs to be balanced with sustainability – both in terms of supply and the environment. We will never return to the days of all local produce and allotments, but there is a happy medium between freeganism and shipping food produce halfway around the world to prove a point to Michel Barnier. 

If shoppers want a dragon fruit, it will have to be flown in. If they want a chicken, it can be produced down the road. If they want a chlorinated chicken – well, who does?