The Corner

The Cost of Hesitation

German voters are already (and understandably) upset at the prospect of having to fund a Greek bailout. Their consent is by no means a done deal, and it will, I imagine, become even more difficult to achieve in the event that other members of the proposed rescue party back away.

That makes this FT story about Slovakia’s stance all the more interesting, and all the more ominous:

Slovakia, the newest and one of the smallest members of the eurozone, is having a very difficult time galvanizing political support for the idea of spending about €800m ($1bn, £680m) to prop up much wealthier Greece. Robert Fico, the prime minister, said earlier this week there would be “no blank cheque” for Greece.

“We can’t give Greece any loan before we see them doing their homework,” he said, and added that he doubted the Greek parliament had to fortitude to approve the huge cuts agreed by the government . . .

The distaste for helping Greece cuts across party lines, to an extent that is unusual in a political system that is normally riven by partisan tensions. Parties ranging from the nationalists of the SNS party, junior members of Mr Fico’s governing coalition, to the centre-right opposition SDKU party, are all opposed. “We call on the prime minister to make no commitments to Greece,” said Iveta Radicova, the leader of the SDKU.

The longer that uncertainty surrounds the Greek rescue package, the worse this mess will become.

Meanwhile, on a not unrelated topic, note this suggestion by Niall Ferguson (from the Spectator) about what an incoming Cameron government (fingers crossed) should do:

There is a very real danger that [things] could now spiral, Greek style, out of all control if foreign confidence in sterling slumps and long-term interest rates rise. Mr Cameron needs to do two things right away. He must instruct George Osborne to wield the axe ruthlessly with the aim of returning to a balanced budget over a credible eight- to ten-year timeframe. That means not only reversing Labour’s disastrous expansion of public sector spending, but also encouraging business growth with incentives to innovate, invest and work.

At the same time, he needs to initiate talks with the IMF in case external support proves to be necessary. In both cases, it is much better to act sooner than later. The mess we are in is the result of 13 squandered years in which an unprincipled government frittered away the achievements of the Thatcher era. We are back not just in 1979, but in 1976, the last time the IMF had to bail Britain out as a consequence of Labour¹s economic mismanagement.

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