The Economy: why is Vote Leave so timid?

Last week, an important event happened that neither side in the EU Referendum campaign has decided to address.

An agreement was reached between “the Troika” (made up of the European Commission, the European Central Bank [ECB] and The International Monetary Fund [IMF]) and the Greek Government in its sovereign debt negotiations. What emerged from the agreement was another short term fix for what is a dangerous and pressing structural problem – namely, whether the Eurozone is viable without a substantial and costly restructuring of the entire sovereign debt of the peripheral Eurozone countries. This would, of course, have to be paid for by EU taxpayers.

For the last six years, “the Troika” and the Greek Government have been putting off the day of reckoning. The steps that have been taken over the years involve what economists call, “kicking the can down the street” – the short term financing of Greek sovereign debt as opposed to a fundamental restructuring of it. The latest agreement continues the same strategy, accomplishing the important additional goals of removing the issue from the UK Referendum campaign and allowing EU leaders to announce yet another end to the Greek sovereign debt crisis.

There is no basis for such optimism – kicking the can down the street is simply politically expedient, while being an extremely dangerous way to approach a critical supra-national economic and financial crisis. Leaked communication (see Wikileaks) between IMF officials makes clear that the European Commission’s double-dealing in this crisis should be an essential issue in the EU Referendum.

The IMF, led by Christine Lagarde, argues that the ECB must take an immediate “haircut” of Euro 52 Billion (i.e. writing off the debt) so that the Greek Government and the Greek people can make a new start with a viable future. Meanwhile, the ECB/European Commission position – enforced by Germany – has been to oppose the IMF in the sure knowledge that German tax payers (and no doubt others in the wider EU by indirect means) will have to take the hit and that is politically unpalatable. It was Chancellor Merkel who promised the German people that all loans would be paid back with interest – it was never going to happen, and many would say she knew it full well.

(And then of course, there is the fear that Spain and Portugal would seek to follow Greece’s lead in writing off some of their own sovereign debt burden as well.)

No one in the institutions of the EU has ever taken any responsibility for the naïve stupidity that led to the self-inflicted wound of the Euro crisis. So far, the debt burden has been quietly transferred from mainland European international banks (UK banks had very little exposure to Greek sovereign debt) to European taxpayers. But the problem remains – the question is not if there will be a debt “haircut” but when and who pays.

British taxpayers should be made aware that this profound problem exists, is unresolved, and has no prospect of a successful resolution by present means – and crucially when the day of reckoning comes, this is going to be incredibly expensive. The idea that the UK would be able to avoid contributing to this financial restructuring is beyond being credible.

So far, the Remain campaign has presented itself as the safe option, “Why take the risk of a Brexit?” Vote Leave can now answer that question without holding back.

I can well understand why the Remain campaign wants to bury this issue in a fog of half-baked economic analysis about the short term impact of Brexit on the British economy, but why has Vote Leave not pounced on this agreement to make clear to voters the very real and unchartered risks of remaining in the EU?

If Vote Leave wants to take on the Remain campaign on economic grounds then this is the issue and the time to do so is right now.