Education, Politics and Economics, Religion

How can we tackle Islamic terrorism?

Islam came out of the xenophobic and violent Arab / Bedu culture of Saudi Arabia. It was then spread violently by conquest throughout the Middle East, Far East, North Africa and into Southern Europe.   The sword on Saudi Arabia’s flag celebrates this fact.

We used to say that there was nothing more dangerous than a fool with a cause. But a fool with a cause who believes they are carrying out God’s will is literally capable of anything. Any genocide, any atrocity, any sacrifice.

In Britain we have three pillars of the State – The Monarchy, The Church and Parliament and they are all largely independent.  The Church and Monarchy have been suitable neutered and liberal parliamentary democracy rules supreme.

Islam is not just a religion. In Islamic countries it is not part of the state, it is the state. It is also an ideology that seeks total control over its citizens in their personal life, their economic life and their political life.  In Saudi Arabia, Iran, Qatar, Yemen, Sudan, Pakistan Somalia and Afghanistan Sharia is the only source of legal decisions. Stoning to death, beheading and amputation of limbs remain a legal form of punishment for such crimes as apostasy, blasphemy, adultery, theft and homosexuality.

In the West we value rational, evidence-based debate, democracy and the rule of law.  Much of Islam values only irrational religious doctrine written down over 1000 years ago for goat herders living in a different age.

The problems of the Middle East can be summarised into a series of failed nation states.  The only stable Middle East countries have autocratic leaders and they quickly dissolve into chaos if they are deposed (Iraq, Syria, Libya, Egypt…).  The national borders are contrived and their populations have more loyalty to their tribe and their Islamic religious sect (Sunni, Shia, Wahibists, Aliists…) than they do to their nation state.

The same will be true of many Muslims in the UK.  Some would rather fight and die for their fellow religious sects in Syria and Iraq than their own country.  There is also a deafening silence from the many moderate Muslims who will not criticise their religion’s extremists. A few meager conciliatory words from a couple of media contrived Muslim “leaders” but where are the marches and mass participation campaigns on social media – either in the West or the war ravaged Middle East?  Again they have more loyalty to their religion than their community.

Clearly these values are incompatible with liberal Western values and our idea of the Nation State.

Worse still, these poisonous views have now infested our Western cities where they are passionately held by legitimate Western citizens.

So what is our solution?

Western liberal values and the fear of further provoking these evil extremist groups prevents us from isolating Islam for particular attention. We are a society that is comfortable making “The Life of Brian” but would recoil from considering making the Islamic equivalent.

However we have a long history of neutering the power of religion in order to achieve peace and build our Western democracies.  By religion we meant Christianity, but from now on it must mean all religion.  i.e. any form of irrational, unsubstantiated, superstitious belief.

We can criticise and defeat the generic ideas behind Islam without inflaming and offending one particular religious group.

All religions must pay the price for peaceably neutering the power of extremist Islam, because if we accept the philosophy of one religion we must accept them all.

Firstly we must protect our children from this evil.  Any religious indoctrination should be seen as a form of child abuse.

We do not have ”Conservative children” or “Labour children” or “Socialist Workers children”.  We accept that a child does not have the maturity and knowledge to give their consent to a political ideology.  We do not allow political activity in our schools, do not allow children to join a political party and we do not allow them to vote in a general election.

We believe the same is true of sexual activity.  We do not have “gay children” or “heterosexual children”.  Children cannot give consent to sexual activity until 16.

Restrictions on political and sexual activity is intended to protect naïve impressionable minds from the sinister manipulation of predatory adults.

We should have similar policies towards religion.

How can we have a “Jewish child”, a “Muslim child” or a “Christian child”?  Have they made an informed choice? Given their consent?  The sinister power of indoctrination over young and impressionable minds has been known to Catholics for centuries.  Their priests claiming, “if you give me a child, I will give you the man”.

No child should be forced to adopt any form of religious activity in schools until they are old enough to give their informed consent.  This would eliminate faith schools and the form of religious apartheid that exists in Northern Ireland and Glasgow.  It would starve extreme religions of their future brainwashed, indoctrinated disciples.  All Jewish and Muslim schools would be banned and all forms of religious clothing and adornment could not be worn in schools until the child is old enough to give informed consent.

Britain would still have complete religious freedom of expression, exactly the same as we have political freedom of expression and sexual freedom of expression.  But only when the person is old enough to give informed consent.

Secondly all religious activity must be viewed with suspicion and prevented from spreading its ideas using the machinery of State. No State sponsorship or tax breaks for religious activity.No special treatment for religious groups in our democracy (e.g. no automatic right to bishops in the House of Lords). Furthermore religious belief should have no privileges when drafting laws. No automatic right to Halal or Kosher food and no special exemptions from employment law based purely on religious doctrine. No pandering to religious belief when setting our national curriculum. No politesses when teaching our children the realities of evolution. No laws that hinder free speech for fear of causing offence.

Finally there must be more education and open debate about the dangers of irrational, illogical, superstitious belief.  We should be free to criticise these generic religious beliefs and ridicule and hopefully dissuade all those people that follow them.

This is very unfair on the moderate religions. It is also not a perfect solution but the best available solution.  But we let this evil into our societies and extreme measures must now be taken to keep it under control whilst protecting our liberal Western ideals.

Islam cannot be tackled head on without provoking more violence. But its fundamental tenets can be demolished with allegory, analogy, comedy and satire.  This should be further backed up with an insistence on logical, evidence based debate, democracy and the rule of law.

Politics and Economics

A Greek exit from the Euro is now the best possible outcome for Greece and the Eurozone.

The Eurozone nations would be foolish to bail out the Greek Economy without insisting on the structural reforms necessary to stop a repeat performance in a year or two.

And why should only Greece get special access to no-strings-attached free money?  Why should Germans be forced to retire at 67 so Greeks can retire at 55? A Greek bailout at Germany’s expense would cause a landslide of further left-wing governments in Portugal, Spain, Italy and elsewhere with hands outstretched and beaks wide open. The Greek debt is barely manageable by the Eurozone but an emergency bail out of any of the other larger economies would cause a pan-European economic catastrophe.

Greece’s existing deal with its creditors is very lenient.  Its private debts have already been largely forgiven and the remaining €243 billion of debt is to be repaid with outrageously low interest rates over a very long repayment period.  Its interest payments are currently less than 3% of GDP, which is manageable even for Greece.

The sad irony for the Greek people is that their economic fortunes had finally started to recover when Syriza came to power.  For the first time since the first Greek bail out five years ago the Greek Economy showed modest growth and a small budget surplus (excluding interest payment) in 2014.

Syriza should have used this firmer economic base to confront the pervasive tax evasion, abysmal public administration, inflexible markets and rampant corruption to drive further economic gains for the Greek people.  Instead it has embarked on a shambolic campaign to disprove the laws of arithmetic by insisting on implementing fantasy socialist economics without the cash to fund it.  This includes reversals to labour-market reforms and promises to raise the minimum wage to pre-crisis levels, both of which are madness in country with 50% youth unemployment.  They also plan the restoration of pension increases when they should slash early retirement rights to prevent more people switching from employment to dependency.  Their planned rehiring of thousands of public sector workers and the scrapping of privatisation projects is unaffordable and if they cannot collect income tax there is no choice but to raise more VAT, which they also oppose.   Their proposals would both breach Greece’s agreed bail-out terms and wreck the economy.  Since Syriza came to power the economy started shrinking sharply and the small budget surplus has once again descended to a massive shortfall.   This is despite increasingly desperate measures such as raiding the funds of municipalities and delaying payments to suppliers.

In 2001 Greece used some opaque and creative accounting to fool the EU’s auditors into believing it had a budget deficit of only 1.5% of GDP.  It subsequently emerged that the true deficit at the time was more than 8%, which is well above the 3% limit set out in the Maastricht treaty and would have prevented it joining the Euro.   If the Euro is to endure its rules must be enforceable. Mr. Tsipras is still ignoring those rules and he has torn up the legal agreement made by the previous Greek Government with its creditors .

So Syriza have done nothing to rebuild trust and economic credibility and many doubt that Greece would honour any future promises it makes.  Creditors are likely to demand more onerous terms than before and a rigorous inspection process to ensure the terms are honoured.  This is unlikely to be acceptable to the Greek people let alone Syriza.

Syriza’s adolescently amateurish diplomacy has alienated many of the Eurozone countries previously sympathetic to Greece’s plight. Mr. Tsipras’s courting of the sabre rattling Russian regime currently annexing parts of Ukraine, hysterical allegations of criminality against the IMF and revisiting claims of war crimes and demands of reparations from Germany are hardly going to win sympathy and influence with its allies.

Syriza’s conduct sets a poor precedent and if successful would open the door for other states to behave similarly in order to get access to free money from its partners.

Astoundingly these acrimonious economic and political disputes relate to the relatively trivial issue of how to conclude Greece’s second bail-out. Even if a deal is patched-up the funds will be immediately swallowed up.  Greece will still need to negotiate a third bail-out of about €50 billion. And unless Greece makes the much needed but much hated structural reforms this would still not be the end of it.

Compared to the last Greek economic crisis in 2012 the Eurozone is better prepared to manage a Greek exit. Its banks are well capitalised and have virtually no exposure to Greece; a large bail-out fund is established; quantitative easing is supporting bond and equity markets; and the weak euro is boosting exports.  A Greek exit would also dissuade other vulnerable Eurozone countries from dragging their feet on structural reforms and drain support from their extreme populist political parties.

So Syriza’s almost comical diplomatic and economic ineptitude has precipitated a situation where a Greek exit from the Euro and a re-launch of its own currency (the Drachma) is now the only realistic solution for any sort of independent long-term economic recovery.

By restoring the Drachma, Greece could have the flexibility to continually adjust its value on international currency markets to levels that cushion it from the shocks that are currently devastating its economy.

This is how it works:

Suppose on international money markets 100 Greek Drachmas is worth 1 Euro.  So a product that Greece was producing for 200 Drachmas costs 2 Euro in Germany. During a crisis the Drachma can be revalued to 200 Greek Drachmas to 1 Euro. Now when Greece exports its products to Germany its prices are much lower.  A product that costs 200 Drachmas to make is now selling for only 1 Euro, instead of 2 Euros.  This increases exports of Greek products to Germany, which supports Greek businesses and creates employment.  The Greek government gets more tax from successful domestic businesses and has lower costs because there is less unemployment and associated welfare costs.

Of course this also makes Greek imports more expensive.  Now if Greece wants to buy products and raw materials from Germany it has to pay twice as much.  To import a product from Germany which cost 1 Euro is now costing Greek businesses 200 Drachmas instead of 100 Drachmas.  This has the effect of causing Greek consumers and businesses to buy their products and raw materials from within Greece, which further boosts their economy.  It reduces imports and boosts domestic trade.

Furthermore Greek workers are still on the same salaries, which have the same buying power within Greece.  They will not notice a difference to their living standards unless they go on holiday in Germany where they will find prices very high.  This will encourage them to holiday at home further boosting the Greek Economy.  Also Germans will find being on holiday in Greece very cheap, so they will come in larger numbers, further boosting the Greek tourist trade.

So the ability to devalue a currency helps to smooth the problems of an economic crisis in poorly managed economies.

Now let’s consider the options for the Greeks if they share the same currency as Germany.

The Government cannot afford the interest payments on its loans and cannot borrow more so it must reduce Government spending and pay off some of the loans.  It must pay its public sector workers less salary and reduce government spending.  Greek industries are uncompetitive so they must reduce their costs too.  They must pay lower salaries and find further cost saving in its production.  This is not easy and lower salaries in Greece means lower spending by consumers causing the economy to slow further.  Germany has no incentive to buy Greek products or visit Greece on holiday, because it is just as expensive for them.  Unemployment stays high, which increases the costs to the Greek Government in unemployment benefit.  This means less money for investing in Greek infrastructure and industry that is essential to make them more competitive.

The situation is made worse for Greece if the German economy starts booming.  The value of the Euro will rise causing Greek exports to be even more expensive on international markets, which will cause their economy to slow even more.  This is because exchange rates are set at a level appropriate for the larger German Economy, not the smaller Greek economy.

To ensure that countries like Greece do not continue to mismanage their economies and cause future crisis within the single currency it is essential that their tax and spending policies are aligned with countries like Germany. Greece likes the economic security of the Eurozone and the financial protection it offers, but it seems they also do not want to to have their economic policies influenced by larger states.  They cannot have both.

This bailout is no longer working and a Greek exit from the Euro is now the best possible outcome for the Eurozone and Greece.   It will restore to Greece control of its economic destiny and restrict the consequences of its economic policies mainly to Greece.  It will also restrict an economic catastrophe to a mere disaster.

Politics and Economics

The Problem with the Greek Government’s Economic Policies.

Mr. Tsipras and his government are socialists. The basic philosophy of socialism is a strong sense of entitlement to other people’s wealth.

His logic will be the same as any other socialist, who has a strong social agenda but rarely a credible economic one:

i.e. “I need a certain amount of income to live a decent life therefore I am entitled to have it.

If I’m unable to earn this much myself then somebody else must make up the difference:

1.   My employer must pay me more for my efforts (minimum wage)….or……

2.…. my next-door neighbour (who earns more than me) must give me some of their income (intra-generational redistribution of wealth)….or

3.…The Government must borrow more money, give some to me and get my children and grandchildren to pay back the debt (inter-generational redistribution of wealth)…..or…..

4.….a combination of 1,2 and 3.”

As a country Greece cannot demand a salary increase from its employer, although this would doubtless appeal to Mr. Tsipras if it could.  So he is resorting to 2. Expecting his rich European neighbours, such as Germany, to give him money by writing off debt and 3. Taking on more Government debt and expecting his country’s current and future children to pay it back.

Socialism is often merely self-interest justified by ideology and in a normal socialist economy the sense of entitlement to other people’s wealth is legitimised by democracy.  i.e. to claim that most people in the country voted for redistribution of wealth so it is legitimate to implement it.  Mr. Tsipras is using democracy as justification for his current stand.  But he has forgotten that whilst Greece has democratically voted itself the right to more free money, that Germany, as a separate country, is equally democratically entitled to refuse to give it.

It reminds me of the worse days of the trade union excesses of the 1970s when they would decisively vote themselves a 40% wage increase and then were scandalised when their “democratic will” was not fulfilled by “management” or the prevailing government. They failed to understand that voting for something didn’t automatically mean it was practical or affordable.  All the Greeks have done in electing Syriza is to vote for an end to austerity. As did the French in 2012.  Look where it got them.

The concept of earning the money you want to spend does not compute in the socialist psyche.  So Greece has now reached the inevitable fatal flaw with socialism:  Eventually you run out of somebody else’s money to spend.

Politics and Economics

The UK would benefit by leaving the EU

The EU is trying to reconcile the differing social and political aspirations of its diverse 28 member states. The UK has a long, proud and independent history in these areas. It created the model for modern democracy. It initiated and developed common law that protects all and is a model for the rest of the world. It has bravely fought for social justice including establishing trial by jury, abolishing slavery and fighting the Nazis. It is rightly suspicious of delegating these responsibilities to largely unelected and unrepresentative European bureaucracies that do not share its cultural and social heritage.

The UK joined the Common Market when it was primarily a free trade zone. This was for predominantly economic reasons and at a time when it was “the sick man of Europe”. Undemocratic militant unions, the troubles in Northern Ireland and run-away profligate socialism were devastating its economy. These problems have since been solved and it is Europe that is in an economic malaise. The UK’s recovery from the last great recession has been hampered by the poor economic performance of its European partners.

It is right that the people of the UK should be given a choice on whether to continue membership in a referendum. Since it joined the Common Market in 1973 it has morphed from a trading zone to the EU super state, with ambition to dictate social, political, economic and foreign policy. A new democratic mandate is required for this massive change of circumstance.

Few in the debate believe that Britain cannot manage its political, social and foreign policy at least as well as the EU. Sovereignty of its own Parliament can ensure it can tailor these issues to better match the specific will and needs of its electorate, without interference from unrepresentative politicians from other independent states.

It is the UK’s economic future that is driving many to consider staying in the EU. However the UK is still a large economy and one with which many countries would want to trade. As a newly Independent state the UK could set up a new free trading zones and agreements with its more affluent northern European partners – Germany, Netherlands, Scandinavia, Ireland – and any other countries who were competitive enough to join.

The Common Market was set up in an age when geographical proximity was essential for the trading of goods and services.  In the modern, online, connected world physical borders and geographical proximity are irrelevant for much of the world’s trade. The UK’s free trading agreements could therefore be extended to include countries with which the UK has strong language and cultural links but no geographical proximity: Australia, New Zealand, Canada, South Africa and and India. It could further cement its “special relationship” with the world’s biggest market – the USA.

Many of the services in which the UK excels (financial and legal services for example) can be done largely online. Meetings can be held by videoconference. Ideas can be shared online with collaborative software. As can scientific and industrial research. So we can also add digital technologies into the mix: telecommunications, media; advertising; marketing and market research. The UK has unique world-class skills in the production of films, television programmes and computer games. Professional sport is a very affluent and growing industry. Cultural and language links will allow particular benefits in the free trading of all these industries and services – more than could be achieved within the language and culturally diverse European market. The ease with which physical goods are currently circulating between these countries would naturally ensure they were also included in these free trade agreements.

The UK would be further benefited by not being tied to countries creating an economic drag on the EU and consequently the UK: Greece, Spain, Portugal and Italy.  Their expensive social policies and the strait jacket of the Euro will ensure their economic woes will not be quickly or easily be remedied.  Without the EU the UK would be free to open up better opportunities with more diverse economies such as China and Japan.

These new trading blocks and agreements would be based solely on economic free trade. This would eliminate most of the social and political tensions and the subsequent market distortions and bureaucracy created by the EU super state structure and ambition.

Leaving the EU would be a short-term economic risk but with time and ambition the lost economic benefits could be mitigated and then massively exceeded. Over-and-above the long-term economic benefits the UK would also regain the freedom to follow its own unique democratic, political, cultural and social destiny.


Politics and Economics

The Labour Party has missed the real trend acting against them – the colossal rise of Individualism

Labour has missed the real trend which is acting against them.  It is not the anti-austerity yearning of Scotland, or the anti-immigrant sentiments of the working classes in the North of England.  It is not even the rising aspiration in the Midlands and South of England.  What Labour has failed to see through their statist, collectivist eyes is the colossal rise of individualism.

Society has moved on from Henry Ford’s “you can have any colour you like so long as it’s black” philosophy   We are the internet generation and do not need to identify with mass movements in order to express ourselves.  We can define ourselves very precisely on social media and advertise and revel in our many similarities and differences with people across the globe.  We believe that what we buy is a reflection of who we are and there is a mesmerising diversity on the market.  Just look at the car market.  Choose your colours, body styles, interior designs, mood lighting, car audio, Sat Navs, engine size and type, gear box…define it on the web and the manufacturer will make it – just for you.  No need to buy an LP record anymore, create your own playlist on iTunes from a whole world of music.  No need to buy your clothes from the store on the high street but go online and find exactly what you think projects precisely who you are and how you feel.  We are less likely than our elders to consider ourselves part of any particular religion and less likely to join a political party or a trade union.  We can tailor our world to exactly fit who and what we believe we are.  A highly individual, tailored personality.

Part of this tailored identity resides in where we are from.  There is now more identity with local geography i.e. North and South, Yorkshire, Welsh, Cornish, English and Scottish, rather than British. The rise of nationalism in Scotland should not be a surprise.  Many Scots don’t identify with the English and Labour’s campaigning with The Tories (“The English Party”) against Scottish Independence lost many voters.  After all, 45% of Scots wanted independence.   The English, London based, Middle Class personalities running the Labour Party alienated even more Scots. This was not an argument about austerity and extent of left-leaning political positioning. It was an argument about the desire for a tailored personal identity expressed as a localised, geographical belonging.  The UK’s disaffection with the EU is following a similar trend.

Work has also become less collectivist.  The mass employment coal, steel and car industries are long dead.  Automation has taken manufacturing jobs.  We are more likely to start our own business than our forbears.  Starting a business online is easier than ever before.  We make our living designing web sites, apps and computer games.  Online we sell our marketing skills, our ability to write, entertain and solve problems.  We can advertise our spare room for B&B and our car as a part time taxi.  Our local bespoke businesses can now reach a global audience, be it in IT, local food and beverage or art and craft.  We make a living from millions of small industries.  We now get our employment protection through employment law and the EU, not from our politicians and trade unions.  Politicians are only important in creating an environment where these businesses can flourish.  They cannot control business as they did in the 20th Century. They cannot control the internet, let alone nationalise it.

So we are not collectivist.  There is no more tribal belonging.  Our individualism can be expressed in so many ways through commerce, in social social media and fashion.  We believe we have a right to express ourselves by what we consume and how we choose to live.

Organised Labour and Trade Unions don’t connect with this new reality.  The Labour Party are arguing there is no point offering “Tory Light” politics and that they should go back to their core vote and historic beliefs.  i.e. the traditional left position by offering classic statist, collectivist, trade union supported, high tax, high spend, nanny-knows-best politics.  The Tories, however inadvertently, stand for individualism and personal freedom.  They believe individuals should have the economic freedom to spend more of their own money themselves and they are increasingly advocating more social freedom with the passing of laws around gay marriage for example.  They believe in a small state that doesn’t interfere with our personal lives and doesn’t tell us how to think, what to buy and how to live.  They are the party of free enterprise, individualism and free expression.

In the modern, highly individualistic, personality tailored world who do you think will win?

Politics and Economics

Despite the scale of Labour’s electoral defeat its supporters are still in denial.

Labour’s denial of why they lost the 2015 General Election is symptomatic of a chronic mental condition called “idiopathic socialist ideology”. It seems that its sufferers have such an overwhelming delusion that their beliefs, logic and thought processes are right (and that everybody else is wrong) that they fail to detect, interpret and internalise opposing points of view.

Involuntary motor-neurone symptoms include inappropriately enthusiastic clapping on Question Time every time a left wing politician so much as farts and knee jerk reactions to perceived social and economic inequality. In extreme cases small groups of those afflicted can be seen shuffling along public streets holding placards and robotically shouting inane slogans.  Sufferers can also have paranoid delusions that the media is deliberately disseminating toxic opposing views and that non-sufferers are particularly stupid for believing them. Their delusions are further manifested by a ludicrous belief that they are the only ones immune to the media’s propaganda because they are intellectually and morally superior.

This condition further exhibits itself with impaired social interaction whereby its sufferers speak very loudly to people expressing contrary opinion (often even shouting) and hurling Tourette-like ad hominem insults in debates, on social media and in the press. Sometimes they are even deliberately offensive to people who don’t share their delusions.  This aggressive and anti-social behaviour is very cathartic for the sufferers but unfortunately it creates a downward spiral in their symptoms, as they are subsequently further angered when they inevitably fail to change the opinions of the people around them.  Sufferers are further deluded by thinking that this behaviour enhances their self-image as a virtuous individual.

Currently there is no cure for this serious mental condition. Fortunately, however, it is self-limiting.  The recommended treatment is a repeat subscription to The Guardian and to quarantine the sufferers into the Labour Party, where they will not interact with society at large.  Consequently their symptoms can be contained by only interacting with a shrinking number of sufferers with similar delusions.

Politics and Economics

Is Syriza the solution to Greece’s economic problems?

The root of the Greek economic crisis is that they have been living beyond their means.  They paid themselves too much for producing too little and made up the gap with excessive borrowing.

Greece is an extreme example of a problem that left-leaning economies in the West have failed to address for more than a generation.  There is a significant disparity in global labour costs.  The average worker in the West earns $135 per day; the average worker in urban China earns $12 per day.

What entitles the rich world’s 500 million workers to salaries ten times greater than the 1.1 billion workers in urban bits of the developing world?

(Full, brilliant article is here:    $135 – $12 = the pay gap the West can’t bridge.)

Greece has bigger problems because this issue is compounded by massive tax evasion, out-of-control corruption and a culture of taking Government hand-outs and public-sector salaries without giving anything in return.  Greeks can retire at 58 and some professions retire even earlier.  Clearly this has to end and the previous government was working hard to achieve this.

So now that Greece cannot borrow any more it must stop overpaying itself.

There are three ways to do this:

1. Devalue your currency.

Advantage:  A tried and trusted mechanism that would have lowered their wages on international markets.  This lowers domestic costs of production, which boosts exports and reduces imports whilst maintaining domestic living standards – so long as Greeks buy home grown goods and services.

Disadvantage:  Doesn’t address the main structural problems of the Greek economy.  It is just delaying much needed economic and structural reform required to address low productivity, tax evasion, corruption and a “something-for-nothing” culture.  Also devaluation only works if a few countries use it.

Greece cannot devalue its currency as it is in the Euro.  So it must choose from the other two options:

2. Cut Wages.

Advantage:  This quickly addresses the problem allowing Greece to regain competitiveness in international markets, boosting exports, attracting internal investment  and creating economic growth.

Disadvantage:  Causes an instant reduction in living standards, which creates hardship, which reduces consumer spending, which slows down the internal economy further.  i.e. the economy gets worse before it gets better.

This is painful solution but it is a shortcut to growth.  Ireland used this method and quickly returned to growth after initial hardship.  It concentrates the pain over a shorter time period than the only other alternative which is…..

3. Freeze Wages

This is a slower way to achieve a wage cut because it relies on inflation slowly eroding the wages compared to living costs –  i.e. eventually causing an effective pay cut.  The UK government has adopted this approach along with devaluation.

Advantage:  Less painful way of cutting wages but…

Disadvantage:  …delays the time it takes to regain competitiveness on international markets.

This is effectively the same solution as 2 but stretched over a longer time period.

The Greeks have suffered over the last few years but they required significant restructuring in order to develop a strong, sustainable economy.  The medicine was working as Greece has slowly returned to growth and even has a small budget surplus.

Now Syriza want to adopt the usual socialist solution to a budget deficit – that is to get somebody else to pay for it.  In this case they want Germany to write off their debt.

Many reference the 1953 London Debt Agreement that reduced Germany’s war debts by 50% and stretched the repayment of the remaining debt over a longer period.  This led to German economic growth so surely this could also work for Greece?  This may well be true, but at the time it was only Germany’s debt that was being written off.  Poor old Britain repaid all its war debts, with the last payment being made to the USA on 29th December 2006.  But this time we have France, Italy, Spain and Portugal waiting in the wings with beaks wide open and palms out-stretched.  Any hint of weakness towards the Greeks will cause a landslide of similar political extremism and a similar expectation that their debts will also be forgiven. Why should Greece have special treatment?

In any case the Greeks have already been given voluntary debt forgiveness by private creditors.  Banks have slashed billions from their debt.  Their remaining official debt has a 16-year maturity and an average coupon of 2.4%. So despite Greece’s extraordinarily high public debt (175% of GDP last year) successive concessions have already eased its debt-servicing charges so that annual cash interest payments are now only 3% of GDP.

And yet Syriza has pledged to go on yet another spending spree. They have promised to launch a welfare package worth €2 billion; to rehire 12,000 sacked civil servants; to give a massive increase in the minimum wage and to freeze privatisations. They have agreed to tackle tax-avoidance and cronyism but these are unlikely to do enough to pay for their profligate promises.  They will quickly return Greece to the mire from which it is slowly extricating itself.

The best compromise is for Syriza to jettison their ludicrous socialist economic policies and negotiate some further debt relief, perhaps by further pushing back the payment schedule (as did Britain in the 1950s), in return for further political and structural reforms.  Greek wages must be linked to productivity, they must retire later, reduce their public sector costs to an affordable level and clamp down on corruption and tax evasion.