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Building shield

Vote UKIP, get communists.

At least you do in Greece, where ANEL – a eurosceptic breakaway party of the centre-right – has entered into a coalition with the hard left SYRIZA.

This was something of a surprise, as the latter could have found a junior partner among other parties of the Greek left. The pairing of eurosceptic left and right indicates that a confrontation with the masters of the Eurozone is the new government’s top priority.

Assuming that the Greeks won’t cave-in, this can only end in two ways: with the renegotiation of the country’s sovereign debt or its ejection from the single currency. Both options carry the risk of contagion, but while there’s no disguising the second option, the first can be fudged.

Europe’s best confectioners are already on the case, according to Tim Fernholz for Quartz:

“The coming face-off between Greece’s European creditors and the country’s new left-wing government is painted as an epic struggle between intractable foes, but it’s better to think of them as sharing a common goal: Reducing Greece’s daunting debt without admitting it to the rest of Europe…

“As Greece’s new finance minister, Yanis Varoufakis of the Syriza party, put it, ‘we must offer Mrs. Merkel a way of packaging the new deal that she can then sell to her parliamentarians.’”

There are all sorts of conveniently complex ways of dressing up the truth of the matter:

“If adopted, such policies will not be called haircuts or debt reduction, even if that’s more or less what they are. Analysts expect they will be preceded by an agreement on Greek fiscal reforms that will include Syriza’s prized relaxation on spending limits for social programs in return for it taking a tough line on the country’s lax approach to taxation.”

This may be enough for the German Chancellor to work with, but how long before populist parties in other indebted European countries call for a similar deal?

In Britain, the opponents of austerity can’t blame it on the Germans. Having stayed out of the single currency, we have the constraints of fiscal reality to cope with, but not the demands of Mrs Merkel’s backbenchers. Furthermore, unlike the Greeks, the burden of debt we carry is heavy, but not insupportable. This country has what it takes to honour its obligations and we’ll be the stronger for it.

However, there’s one form of public debt which the British government should renegotiate. Consider the following from Chris Skidmore MP in the Telegraph:

“103 PFI deals were struck by Labour for the NHS with a combined value of £11.4 billion. By the time that they are paid off, they will have cost more than £65 billion. These are the same schemes that Andy Burnham said in 2007 were ‘the right schemes and offer value for money.’ This profligacy with taxpayers’ money was condemned as ‘staggering’ by Labour MP Margaret Hodge, the chairwoman of the Public Accounts Committee, when it was revealed last year as part of a report on Government use of PFI. These PFI contracts constitute a vast drain on the public finances.”

Also staggering is the chutzpah of Mr Burnham, who never misses a chance to accuse the Conservatives of privatising the NHS. PFI deals are a form of privatisation, albeit one that leaves something very important in public hands:

“Health Select Committee Chairman Stephen Dorrell suggests that the main problem is that all the risk is borne by the public sector, not the private companies lending the money.”

Privatise the profit and nationalise the risk: it’s a rotten deal and Skidmore rightly diagnoses the need for “drastic surgery.”

The ConservativeHome manifesto recommends the following measures:

“An independently audited register of all long-term public liabilities (and assets) – with each annual update subject to a full debate and vote of both Houses of Parliament.

“The introduction of a legal duty of care to taxpayers on the part of all signatories to new PFI deals and similar agreements.

“A squeeze should be placed on existing PFI deals through a systematic investigation of compliance with the original terms of the contract and the law – where breaches are found compensation must be sought and terms renegotiated in the taxpayer interest.”

Of course, any crackdown might scare-off new investment in PFI and other schemes for borrowing money off the balance sheet. This would have the devastating consequence of denying governments the ability to run up debts without anyone noticing.

25 comments for: Heresy of the week: Here’s one kind of public debt on which Britain should go Greek

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