On Sunday the Greek people rejected the terms of the latest proposed international bailout by a large margin.
There was jubilation on the streets of Athens as the result came in, but the outcome is far from settled. There remains enormous uncertainty about whether a new deal can be struck or if Sunday’s vote will have been the biggest step yet towards a Greek exit from the Euro.
The Greek people have already undergone far greater austerity than we in Britain have and so, in that sense, their rejection of the promise of more pain is understandable. Yet that doesn’t mean that they will be able to avoid more in the long run if they are to stay in the Euro and go some way to paying off the country’s enormous debts.
Britain is not immune from the danger of financial contagion, but is now in a more protected state following the Prime Minister and Chancellor’s refusal to include Britain in the Eurozone bailout programme in 2011.
It was a decision that looks more financially responsible by the day – Britain is indirectly owed roughly £1 billion by the Greeks through our contributions to the International Monetary Fund. Germany, on the other hand, is owed upwards of £40 billion through its Eurozone bailout contributions.
The financial and philosophical stand-off between Germany and Greece is better understood in this context.
Nevertheless, the British economy is not isolated from the impact of the Greek debt crisis. Although Greece represents only 1.2% of UK exports, volatility in Europe will certainly affect Britain should the Greek crisis continue and worsen.
All this underlines, yet again, how wrong it was for some British politicians to argue that we should have joined the Euro at its inception at the turn of the millennium. In 1998 William Hague, as Conservative Leader, described the currency as ‘a burning building with no exits’, and that judgement looks more and more prescient as the Greeks find themselves caught in limbo between not wanting to leave the Euro but not being willing to shoulder the heavy burdens required to allow that to happen.
In the shadow of the Greek crisis, the Chancellor’s first post-election budget will have been delivered on Wednesday. As I write at the start of the week, the details contained within it are yet to be announced, but at its core will be maintaining the hard-won stability of the last five years and allowing the British economy to strengthen and protect itself from whatever international volatility may looming.
This will be the first Conservative-only Budget since 1996. For the first time since then we now have a mandate to implement much more fully the manifesto on which we stood for election, not having to trade away policies to assist a coalition.
The stability and unity of purpose that will come from that and underpin this and future Budgets will be crucial to protecting the hard-won economic gains of the past five years.