What if Germany pulls the plug on Greece?

If the break-up of the euro threatens Britain with another recession, the Government’s economic and European policy could intersect again. As I said in my column for The Independent on Sunday yesterday, the last time that happened was over Britain’s joining the exchange rate mechanism and falling out of it, which did not go well for the two most recent Conservative prime ministers.

Which is why I was interested to see Gavyn Davies’s reading of the German press today, which is that Germany is moving towards cutting Greece off, rather than giving it more money. That seems to be the nub of the question.

David Cameron, in his interview with Al Jazeera on Friday, said: “I wouldn’t underestimate the political will there is amongst countries like France and Germany and Italy and Spain to make a success of the euro.”* The Coalition Government’s line is that Britain wants the euro to succeed, even though Britain is not part of it, and so far “wanting it to succeed” has been translated as “Germany giving Greece more money”.

If that translation changes, then things become fraught, and the Tory eurosceptics (that is, nearly all of them) are strengthened. William Hague was showing a bit of Ukip leg in his interview in The Times on Saturday, although one bit that I enjoyed was when he hit back at those critics who think him – as we now put it – “insipid“:

I don’t need lectures in mojo from people who wander in at 10 o’clock in the morning, write about something they’ve heard on the news and go out for a beer.

If Davies is right, it will embolden those Conservatives such as Nigel Lawson who say that Cameron should advise the Germans to pull the plug on Greece, Portugal and Ireland and use the crisis of the retreating euro to expunge the aspiration of “ever closer union” from EU treaties.

Privately, Cameron may agree with him. Certainly his big ideas adviser, Steve Hilton, can be quite obsessive about pushing back against European law, even if his practical admin adviser, Ed Llewellyn, belongs to the older pro-European wing of the party.

But publicly, the Prime Minister calculates that propping up the euro – especially as we don’t have to pay (much) for it – is the better part of diplomacy.

It should not be difficult for such a genius of u-turns to argue that retreating to a “hard” euro was what he wanted all along if the Germans decide that it is what they want. What will be more difficult will be handling the effect on his own party of all this, as they decide it is the chance to throw the federalist ratchet into reverse.

Because that is easier said than done. The interim report (pdf) of the Commission on a Bill of Rights calling for “a time-bound programme of fundamental reform” of the European Court of Human Rights, and the letter from its chairman (pdf) floating some ideas of what this might mean, make it pretty clear that nothing much is going to change there.

Nor, I suspect, will tonight’s meeting of Eurosceptic new intake Tories, organised by George Eustice, Chris Heaton-Harris and others, get much out of their demand for a political veto on the appointment of judges to the European Court of Justice, the EU’s highest court.

Europe looks like a problem waiting for a half-known unknown to come along and blow the Coalition apart.

*In that interview, incidentally, Cameron sounded ever more like Tony Blair. He said he would like Britain to “take a more forward position” on Syria. And he said: “I’m an optimist. I always believe that you can solve these problems if you apply yourself to them.”

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• stonedwolf

  Don’t be like that. Jody’s okay. He is a bit squiffy on some of the finer points (Apache Jets etc.) but at least his heart is in the right place… (and all of his mistakes are his own).

• alanpaul1

  Jody’s heart may be in the right place…..but where was his intelligence when he posted those crazy comments re rioting in August? It is a shame he is no longer on these pages if only because he exuded youthful ignorance over actual facts and evidence…..As to the question on Germany and the Euro it matters little whether Germany likes it or not….but if you are the powerhouse of Europe and you want to continue getting your BMW/Mercs/VW cars sold in mega numbers then you are going to prop up the Euro even if you do not like it…because otherwise the political cost in employment rates in GErmany becomes a mega internal issue.

• TarquinBroxted

  What you call a riot the resistance calls an uprising. Hogan-Howe may not have much time as Chief Plod. Oh well, off to Iran soon, gosh it is so hot there! 

• http://profiles.yahoo.com/u/CFEJCAKSPWSVTUUDRTXBWA2WVU reiner

  What blazers do the EDL wear?  Same as the BNP, but with football scarves?

• RuariJM

  Germany ‘pulling the plug on Greece’?

  You mean – the world’s greatest debt defaulter of the 20th Century passing on its experience of rising from the ashes of unpaid debts to become one of the world’s major economic powerhouses?

  I wonder if Greece has room to build all the factories it is going to need…

  …or if Germany will use the money it will save to pay off some of those o/s 60+-year-old debts…

• 1FrancisofAssissi1

  Greeks are now taxing all home owners via their electricity bills and Athens is expected to show a current account surplus next year.  What’s all the fuss about? If only other countries with huge deficits could produce a current account surplus next year …

• JohnTheBean

  Certain leader? Was it Hitler? It was Hitler, right? You were referring to Hitler? Hitler, Hitler, Hitler.

• http://epictrader.wordpress.com/ Peter Johnson

  Greece cannot repay its debt and its people are suffering. There is no urgency or leadership from the EU, only posturing.  The Greeks will default and leave the euro.  When they do, it will afford them the opportunity to begin the process of rebuilding their independence and dignity.  The Greeks will come to learn that they are responsible for their own destiny and can’t rely on the Bank of Dad forever.

  I wonder about the impact on Greece if the EU continues its attempts to fudge this issue with delays, half measures and indecision.  Don’t be surprised to smell a whiff of revolution in the air in Greece if 12 months from now their situation is as hopeless as it is today. 

• johnclever

  Interesting, I can see Cameron and Osbourne having to be pragmatic here and help the EU sort this, the Right will hate that, a re-run of the Nineties perhaps !