Very dangerous times

So Greece has admitted what everyone thought, namely that they have not met the formal conditions for the release of a further unrepayable "loan" of €8bn, and they are in talks with the IMF, ECB and EU/EFSF.

We really are at crunch time here. It is conventional to blame Germany for being unwilling to take the steps necessary to underwrite Greek debts, either by way of eurobonds or by agreeing to borrowing being undertaken by the ECB secured against the EFSF at lower rates than Greece could ever manage, in order to enable further "loans" to Greece which can never be paid off but which would stave off default towards the private (banking) sector. The argument, probably correctly, is that German citizens will be far worse off if they allow Greece to default, with a domino effect on Italy and Spain; and since they have the economy to more or less stand it, why not have Germany underwrite Greek debt? However German citizens seem to want a bit of Bundesbank style rectitude established, and who can blame them. Whilst Germany holds the key to the puzzle, let it not be forgotten that Greek governments are at root to blame for the crisis. They deliberately, profligately and, in terms of the eurozone treaty, illegally incurred excessive indebtedness and cooked their books in order to hide it.

We have something of a smaller scale going on in the UK. The Tory party were only for a short time, during the Thatcher years, the party of the middle classes. They have gone back to 1950/60s-style "Toff Toryism", which is a brand of Eton Toryism which is generally content if they can keep their own money at the same time as more or less managing the country effectively. Their strategy for dealing with national and private debt in the UK is clearly to inflate it away: that means transferring funds from those in the middle classes responsible enough to save for their future (including their retirement) to irresponsible people who instead of saving have rung up very large debts, including the UK government itself. So in contrast to the stance of the German government, there is no moral high ground from the UK government here.

The Tories will do as little towards the middle classes as they can get away with without losing too many of their votes - their calculations are tactical rather than moral. From that point of view Ed Milliband's wooing of the aspiring middle classes at the Labour Party conference is an interesting and probably wise development. Probably he means it only slightly more than does, say, David Cameron, but at least it would be done with a warmer smile (or at least, would be should Ed Balls cease to be the shadow Chancellor.)