It’s party hats all round at TaxPayers’ Alliance HQ this week as we celebrate EU Week, kicking off yesterday with EU Day. To help us get in a suitably joyous mood, all but one of the Union Flags on Parliament Square have been replaced by the flags of our various European partners and, of course, the EU’s own yellow-starred blue number. Sadly, the euphoria has been tempered by news that Greece is likely to default on the EU bailout agreed just over a year ago while Portugal is negotiating the interest rate on its own EU bailout.
The bail outs are unpopular. In December last year 62 per cent opposed giving loans to Portugal, even if they are “in the national interest”, according to a Populus poll. It didn’t say how many opposed the loans if they were against the nation interest. And it’s not just in Britain where they’re unpopular. The True Finns party in Finland jumped from 4 to 19 per cent in the recent election, largely on the back of opposition to bail outs. As Tony Barber said in the Financial Times, reported in this Irwin Stelzer article:
“Finns are angry because, like the Austrians, Dutch, and Germans, they dislike rushing to the aid of countries that in their eyes have cheated, idled, lied, lived beyond their means, and let reckless bankers run amok.”
In a thoughtful piece for the Irish Times, Morgan Kelly explains why Ireland’s bailout is of little use to the Irish. Rather, it exists to prop up confidence in the Euro currency. Quite why this should be of much concern to German taxpayers is unclear, let alone the British. Why should taxpayers in Germany, Britain and other EU countries’ pay for so-called ‘loans’ to fund public spending in Portugal that the Portuguese aren’t willing to pay for themselves? Calling the bailouts ‘loans’ is being pretty polite, too. The very reason a bailout is required is because professional money-lenders don’t believe Portugal will pay the money back. If they don’t believe it, why should taxpayers?
Right now the EU is negotiating with the Portuguese government on the rate of interest, in other words just how much of a hand out it will get from taxpayers in the form of subsidised loans to make repayments less unrealistic and more affordable. But this is treating the symptoms rather than the cause. The cause is unrealistic, unaffordable spending and the answer for Greece, Portugal, Ireland and, indeed, Britain too is to cut spending down to an affordable level, not least by resisting the pressure to carry on bailing out irresponsible banks, a policy which has caused so much of Ireland’s current mess. We’re not far behind (less debt now but a greater deficit) but at least Britain appears to be starting to get a grip on its fast-growing debt mountain with the planned freeze on spending (it’s still growing fast, despite the ‘cuts’ rhetoric).
The ugly fate of the PIGs (Portugal, Ireland, Greece) will pale in comparison to what would await Britain if markets lose confidence in the Government’s willingness to make tough decisions on spending. While small economies on the European periphery can be bailed out, who could bail us out if we carried on spending recklessly? We’re several times bigger than the combined size of the PIG economies. And that’s why the Rally Against Debt this Saturday is such a good idea. Come along and join us to show your opposition to irresponsibly piling up debt for the next generation. You needn’t worry about our party hats, we’re not really wearing them at the TPA. So if you’re on Facebook, register here for the event. If not, just turn up at Old Palace Yard at 11am on Saturday 14th May. Have a look at the Rally Against Debt website for more details.