EU austerity polices risk civil war in Greece, warns top German economist Dr Sinn

“Greece would have been bankrupt without the rescue measures. All the alternatives are terrible but the least terrible is for the country to get out of the eurozone, even if this kills the Greek banks,” he said.
Dr Sinn said Greece is an entirely different case from Spain and Portugal, which still have manageable public debts and can bring their public finances back into line with higher taxes.
“Greece would have defaulted in the period between April 28 and May 7, had the money not been promised by the European Union,” he said, describing the failure of the EU’s bail-out strategy to include a haircut for the banks as an invitation to moral hazard.
“There should be a quasi-insolvency procedure for countries. Creditors have to accept a haircut before any money flows for rescue plans, otherwise we’ll never have debt discipline in the eurozone,” he said.
Greek society has so far held together well, despite a wave of strikes and street violence in the early months of the crisis. However, unemployment is rising fast and political fatigue with such austerity policies typically sets in the second year.
Under the rescue deal, the eurozone pledged €80bn of new loans at 5pc interest and the International Monetary Fund offered a further €30bn.
The joint bail-out was hoped to safeguard Greece against the pressure from global capital markets for two and half years, but the relief rally proved short. Spreads on longer-term Greek government debt have surged back to crisis levels of about 800 basis points, implying a high risk of default.
“We are in the second Greek crisis right now, today,” said Dr Sinn.
Greece is undergoing what amounts to an IMF austerity package but without the IMF cure of debt restructuring or devaluation that usual for a country with a spiralling public debt and a chronic loss of competitiveness.
The IMF says Greece’s debt will rise to 150pc by 2013-2014 even if Athens complies fully, a strategy viewed as self-defeating by several ex-IMF officials. There is a strong suspicion that the real objective is to bail-out North European banks with heavy exposure to Southern Europe, rather help Greece.
Dr Sinn said the Germany is now was super-competitive after clawing back 18pc in competitiveness during its long slump. “We’re in a new phase of history. The toggle switch has turned and we are going to see a mirror image of the last 15 years. This time it is Germany that will have an internal boom,” he said.
Germans will not recyle their savings in the Club Med region. They will invest at home.
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Wetherspoons in an alcohol-induced rage over Diageo’s tax stance

You may think that Tim Martin, head landlord at JD Wetherspoon, was more polite than that with his threat to evict Diageo from his 750 boozers. Luckily he wasn’t. He’s up for a bar-room brawl.

The reason? Diageo boss Walsh has had the temerity to suggest that every unit of alcohol should have the same tax rate. It’s the sort of self-serving stuff you often hear in a pub around closing time – given that, with the exception of Guinness, Diageo’s top brands are spirits. They include Smirnoff, Johnnie Walker and Baileys.

Spirits attract 1.4 times as much duty per unit as beer. So Walsh’s suggestion would have the neat effect of jacking up the tax rate of Diageo’s brewing competitors. This could add 17p to the price of a pint, hurting Martin’s business. The brewers are equally incensed, with SABMiller and Molson Coors backing Martin. The beer boys are now threatening to chuck Diageo out of the trade association.
Walsh might have right on his side. The tax differential goes back even longer than the old boy at the bar – to the Gin Laws of 1751. And there’s a case for saying that all units of alcohol are equally harmful (or tasty, depending on your perspective).
Martin’s threat to bar Diageo looks empty too. Can you imagine a Wetherspoon’s without Guinness? Even so, with 2,300 pubs closing last year, Walsh has a fight on. Stand back and watch the furniture fly.
alistair.osborne@telegraph.co.uk
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Can Burger King rediscover its sizzle?

The chain’s new Brazilian-backed owner, 3G Capital, may need a reminder of that heady era in the weeks and months ahead. For Brazilian billionaire Jorge Paulo Lemann and his fellow investors have paid $4bn (£2.6bn) for a burger business that has lost some of its sizzle in the downturn. Profits were down 17pc to $49m in the three months to the end of June; they fell 7pc to $186.8m in the last financial year, and total sales in North America – still its biggest market – slipped 3pc to $1.69bn.
John Chidsey, the chief executive who will become co-chairman under the new owners, admitted that the chain is suffering when he delivered the latest set of financial results last week.
“The most sluggish parts of the world for us would be the US and Western Europe. Both of those areas have unemployment and underemployment that weighs heavily on the environment there,” he said.
It’s a sentiment that Burger King’s shareholders have become all too familiar with. Before Thursday’s 25pc surge on news of the deal, the shares had endured a steady decline in 2010.
As ugly as America’s economic woes are, analysts say they can’t shoulder all the blame. You only have to look at McDonald’s. No, it’s not a completely fair fight: McDonald’s has 32,000 outlets across the world, compared with 12,174 for Burger King, something that hands the bigger rival greater economies of scale when it comes to buying and advertising.
But McDonald’s has still impressed. Profits rose to $1.23bn from $1.09bn in the three months to June 30, capping 18 quarters in a row of growth for the Golden Arches.
Tom Forte, an analyst at Telsey Advisory Group in New York, says Burger King hasn’t been as smart as it could be over discounting, a key skill when chasing cash-strapped consumers.
In October 2009, for example, the company cut the price of its Double Cheese Burger in half, hoping the $1 price tag would prove tempting. It did so and sales jumped, but not enough, according to Mr Forte, to compensate for the smaller amount of money made from each burger sold.
McDonalds has also been sharper, at least of late, in the potentially treacherous business of changing the menu. Some of the growth in sales that McDonald’s enjoyed in the second quarter was thanks to its introduction of the frappe in May and smoothies in June, drinks that analysts expect to have had a great past two months as temperatures soared.
However, Mr Forte is not as pessimistic as he says some of his peers are about Burger King, which remains the world’s second-biggest fast food chain.
There is room to improve relations with its franchisees, who individually run more than 9,000 of the outlets. There’s also the potential expansion of the Whopper Bar, a remodelled Burger King that allows customers to have a beer with their burger and has opened up so far only in tourist destinations such as Miami and New York.
If trendier restaurants offer some support on the domestic front, it’s beyond US shores that real hope, and the new owners’ ambitions, may lie. Mr Chidsey described Latin America and Asia as being “by far and away the brightest spot for us”. Sales in Latin America had the steepest rise of any region in the last quarter, rising 18pc to $28.9m.
But before 3G Capital gets too giddy should they watch Burger King’s pioneering television advertisement, they’ll be reminded that McDonald’s is competing there too. It has more than 8,000 restaurants in Asia and 1,800 in Latin America.
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Global markets rise despite mixed signals in US and UK

The gains were made despite a survey which showed slowing growth in UK services activity and signalled that recovery in the wider economy is on course to slow in the third quarter.
The closely watched Markit/CIPS services purchasing managers’ index slipped to 51.3 in August from 53.1 in July, which was the lowest level since April 2009 when the sector first returned to growth. Any number above 50 indicates expansion. It was a bigger fall than economists had predicted and reflected reports of reduced market confidence. It echoed the manufacturing and construction PMIs published earlier in the week, which also signalled a slowdown in recovery in those sectors.
Based on the three surveys combined, Markit said the UK economy was likely to grow by 0.5pc in the third quarter compared with the second, when gross domestic product increased by 1.2pc.
Chris Williamson, chief economist at Markit, said the services sector, which accounts for about three quarters of the UK economy, was struggling to sustain momentum after a buoyant second quarter.
“Confidence about the year ahead has failed to recover from June’s record drop, with public sector spending cuts and the looming VAT hike in January creating uncertainty over the future direction of the economy,” he said.
“While a double-dip recession remains unlikely, the survey suggests that the risk has increased and that growth looks set to be slow and choppy going forward.”
Meanwhile in New York, investors voiced relief that the keenly-anticipated jobs report for August was better than many had feared. While the world’s largest economy lost jobs overall, private employers actually hired 67,000 workers. And in another brighter note for markets that have endured a diet of poor economic news over the summer, the number of jobs created by the private sector in July was revised upwards to 107,000.
The recession cost 8.5m jobs in the US and the unemployment rate has remained stubbornly high, despite the economy having begun to grow again. “Double-dip fears will dissipate on the back of this result,” said Rob Carnell, an economist at ING.
The recovery’s loss of momentum over the summer has increased the pressure on President Barack Obama to do more to accelerate growth. With key Congressional elections just two months away, voters’ approval of his handling of the economy is at a record low.
He insisted yesterday that there’s “no quick fix” for the economy, but that he would be outlining a new set of measures next week that are designed to help. With unemployment the political flashpoint, they are reported to include a temporary suspension of a tax employers pay when hiring people.
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