Delingpole on Friday – Why Merkel won’t punish the Greeks


On Thursday night I took part in a Spectator debate. The motion: Britain’s future lies outside Europe. You’ll not be surprised that I was speaking for (with Nigel Farage and economist Prof Patrick Minford) rather than against (with Valery Giscard D’Estaing; Richard Ottaway MP and Steve Richards, the Independent journalist).

The most interesting part of the evening was the dinner afterwards, when the unstoppable force of Farage met the immovable object of Giscard. Giscard – architect of the European Constitution, later renamed the Lisbon Treaty so as not to give the game away – was adamant that the Euro had been a huge success and poured scorn on all those of us, me included, who had imagined last year that the whole shebang was going to collapse in an Armageddon of rioting and capital controls and hyperinflation.

Give it time, was Farage’s response. He drew everyone’s attention to TARGET2– a glitch of which hardly anyone around the table, not even the well-informed Fraser Nelson and Andrew Neil, was aware but which does explain an awful lot.

Put very, very simply, it has to do with the clearing process within the Eurozone banking system. It’s complicated. I’m not even going to try to explain it here, not even after a conversation with John Whittaker, the former UKIP MEP turned Professor of Economics at Lancaster University, who’s the greatest expert on the subject. You’ll find an introduction to TARGET2 – plus links to his papers here.

Instead let’s just cut to the chase and explain why it matters. Under TARGET2, Germany is liable for many of the debts of the Eurozone periphery. If they actually leave the Eurozone, Germany will have to fork out billions. For Greece alone it is liable for 27 per cent of a debt of around Euros 100 billion. If you include Spain, Italy and Portugal follow Germany will be stung for getting on for Euros 1 trillion.

This is why you don’t hear Angela Merkel threatening very often these days that if Greece doesn’t behave itself she’ll chuck it out of the Eurozone. Germany would be the bigger loser.

So what’s going to happen, I asked Professor Whittaker. He didn’t particularly want to look into his crystal ball, but he reckoned that this whole wretched business is going to crawl along, unresolved, for much, much longer yet. Worse, he fears that such is the complacency which has arisen from the Eurozone’s surprise failure to implode last year, that there will be a certain loosening in the austerity programme in order to prevent civil unrest in countries like Greece and Spain.

Not only is the can being kicked further down the road, then. But more high explosives are being inserted into that can so that when it does finally go off it won’t just take the kicker’s leg off but emasculate, eviscerate and decapitate him, just like one of those Bouncing Betty mines they had in the ‘Nam.

Ah. Happy Days. Don’t you feel glad to be living in the here and now rather than in a more stable, peaceful, anxiety-free era, like maybe Europe in the 1340s  just as the Black Death was starting to make itself known…

11 comments on “Delingpole on Friday – Why Merkel won’t punish the Greeks

  1. Hugo Tillinghast
    March 15, 2013 at 4:21 pm #

    The TARGET2 link to Prof Whittaker’s papers doesn’t work

  2. dr
    March 15, 2013 at 4:37 pm #

    I agree with the statement that this depression and the debt problems will continue. I think that once politicians realise that they can prolong the economic malaise to beyond “their next election”, then they will see that “leave this mess for someone else to clear up” becomes a practical political choice. I think that Japan has now been in depression for about twenty years and we are only in our fifth year. So I think that we could have decades of stagnation ahead of us, whether we are shackled to the Eurozone or not.

    • Despairing Realist
      March 16, 2013 at 2:55 pm #

      Agree, but surely much worse if shackled to the Eurozone.

  3. Michael
    March 15, 2013 at 5:30 pm #

    I went with an Irish colleague who could be best described as a fence sitter on the EU debate – grateful for the investment funds that he views as helping pull Ireland up, but disgusted by the way they have been stitched up over the bank bailouts.

    We discussed the debate afterwards on the tube home and the conclusion we came to was that it that the Against motion was like a scene from Downfall. Social unrest and economic failure after failure staring them in the face whilst they direct non-existent Panzer units, discuss yogurt pricing and tell us how Europe is the future (by 2027 apparently). Your side’s cold hard facts were rebutted with platitudes (Britain needs a voice at the top table), whimsical declarations (the EU has given us peace in our time), sentiment (it was the founders dream of united Europe) & utterly discredited statements (over 50% of Britain’s trade relies on Europe).

    Particular highlights were the skewering that Farage dished out time and time again particularly on Ottway, the question from the businessman in the crowd on why we would want to ignore 80% of the world to focus on a inward looking organisation in decline and the absurdity that the EU was causing us to focus on trade with Ireland instead of Brazil, China and India. Also was Ottways comment on what Farage would do if UKIP won the general election in 2015 a Freudian slip – a portent of what the Conservatives think might be happening?

    Euroscepticism is on the rise across Europe as people start to see the current crop of politicians for the Charlatans they are. Dark economic times are ahead, and It’ll be tough road, but the peoples of Europe will be free again – this state of entropy won’t much longer in the Mediterranean countries and when it
    explodes, it’ll send shockwaves through the existing European political order.

  4. Brian the Rhetor
    March 15, 2013 at 6:12 pm #

    I would have pressed the ‘like’ button except that Target2 doesn’t seem to be a laugh a minute.

  5. jazz606
    March 16, 2013 at 12:10 pm #

    The title of this post should have been “Why Merkel cannot afford to punish the Greeks”

    • jazz606
      March 18, 2013 at 9:37 am #

      Oh well she decided to punish the Greek Cypriots instead.

  6. netcontributor1
    March 17, 2013 at 3:26 pm #

    Cant get the target2 link to work

  7. netcontributor1
    March 17, 2013 at 3:26 pm #

    The “target2” link doesnt work for me?

  8. jazz606
    March 18, 2013 at 10:21 am #


    It doesn’t work (now) for me either.

    Try here instead.

  9. Rods
    March 18, 2013 at 8:26 pm #

    Last year German Target 2 liabilities were going up at something like €60bn a month during the worst of the Spanish and Italian bond crisis, so it increased to the current around €1tn.

    If you think Germany has a Target 2 problem now, wait until all the capital flight has finished from Southern Europe as a result of this stupid legalized theft from Cypriot bank accounts. The destinations of choice will probably be Germany and Switzerland.

    The real fun will begin when Southern European Governments, refuse to honour the their Target 2 liabilities to the northern European countries especially Germany when the Eurozone breaks up. They will either refuse to pay anything or use Lex Monetae and pay back the money in their much depreciated currencies. Will Germany then take legal action or Panzer action?

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: