The European Debt Crisis and the Euro - Page 51

On November 03 2011 01:03 topoulo wrote:
Greece is just a scapegoat .

Whoever thinks is just a greek problem , is just ignorant . The whole south plus smaller countries have serious problems , including italy , spain , portugal , ireland and if england was in euro they should have big time problems as well.

Greek non domestic debt atm doesnt surpass 50 billion , the whole other debt is domestic one.

The whole problem started with leehman brothers and the general real estate and banking problem u.s faced couple of years ago.

Is that u.s has a solid monetary policy ( plus dollars as oil reserves) thats allow them to cut money whenever they way without facing inflation.

Something that Europian union cannot , because it lacks the system and will create immerse inflation ( although some argue that bancrapt economies dont create inflation )

The probelm isnt greece or portugal or italy , its mainly Germany and the inability of European union to find true solotuions.

Thing is that germany get hygely benefit from a low valuated euro due to her exports. A euro germany based will have been around 1.8 - 2.0 terms of dollars which is now 1.35. Also germany benefits greatly from secondary bond market let alone the huge interest rates that take from Greece ( 15.8 %) .

Also Greece doesnt have much of a choice. Fact is that china and russia both try to lend Greece money with 1.5% interest rate , but both Germany and esp u.s declined. Thet last prime minister left early due to cia pressures and all russia - china projectss got cancelled.

Greeks lost billions of dollars and then led to imf without the ppl to know.

Furthermore twice china try lend greeks but european union refuse.

As for tanks , greece used to buy 40% of germanys weaponry arsenal and billions of dollars to u.s wepaons industries , each year.

Have they not theres the usuall Turkey pressure which goes away when Greeks buy weapons.

I can understand that most of you arent familiar with behind the table politics but at least try to read some economics like kurgman etc and see that the fundamendal problem isnt greece or ireland but rather the whole European unions bank sector and the lack of comperative advantages for he north and smaller countries compare with Germany and the north.

Having said all those i can admit that Greece has serious internal problems wich starts with bad politicians , problematic laws , tax frauds , big public sector and soo many other smaller ones.


Last the real reason why Greece wasnt thrown away from the E.e are the cds . Leeman brothers owned u.s 60 billion , when the goverment left them to basnkrapt they had to pay 700-800 billions in cds > it also requires 750 empolyees to work for 15 years to find who owns who.

Same with Greece , theier outside debt 50-60 billion outside debt the cds could be a trillion that none wants to pay if they go off the e.e.

On November 09 2011 18:09 Robinsa wrote:
I dont want to be racist but I realise I might come off as it when I say that I think the problem is based in the greek culture.

On November 09 2011 17:51 sleepingdog wrote:


No love for us

On a more serious matter: a northern "EU" (better: Euro) WOULD HAVE been the best solution, nevertheless I'm of the opinion that there's no way to throw the south out of it without inflicting very serious damage to the whole financial industry. Don't forget that all of the banks are "linked" very closely by interbank trading.



You didn't name the most important reason, even though those you've mentioned are also significant: Italy can no longer devalue their currency now that they have the Euro. Italy was/is probably even worse suited for the Euro than Greece, their whole economic system has always been pretty dependend on constant devaluation. Which - let's be clear about that - isn't a bad thing in itself if everybody is aware of that. If somebody wants to export more than import (say Germany) it needs someone to import more than export (say Italy), that's a very basic logic.

But since Italy joined the Euro it would've had to severely restructure their whole approach, which - obviously - they didn't.

On November 09 2011 17:58 Sufficiency wrote:


I feel that the Northern Europe, that is, UK, France, Germany, and a few countries around them, have been historically and currently rich. The rest are honestly not doing that great comparably for the last 100 years. Perhaps the whole Euro thing was a bit too optimistic.

This is good news for the US and a lesser extend for Canada though. A weak Euro implies that most countries will still prefer USD as foreign currency investment.

On November 09 2011 18:18 Maenander wrote:

Italy exports roughly as much as it imports, there is no significant trade imbalance. Which is why they needed the devaluation, because they actually have significant exports. Constant devaluation IS a bad thing in and of itself, however, which is why Italy desperately wanted to join the Euro-Zone.

One could argue that Italy should have reduced government debt before entering the Euro-Zone by devaluing their currency, and that could have saved them from the current trouble. They did not do that, however, and other Euro-Zone members didn't demand it, because it would have significantly delayed their entry. A crucial mistake in hindsight.

On November 09 2011 18:50 Palmar wrote:
Btw, for those who are wondering about the power of devaluation, notice that the Icelandic collapse was much larger compared to the size of the economy than Ireland or Greece, by a ridiculous amount.

Devalue, cut your losses, save the infrastructure and move on. We're basically back on track now.

On November 09 2011 18:50 Palmar wrote:
Btw, for those who are wondering about the power of devaluation, notice that the Icelandic collapse was much larger compared to the size of the economy than Ireland or Greece, by a ridiculous amount.

Devalue, cut your losses, save the infrastructure and move on. We're basically back on track now.

On November 09 2011 19:18 MiraMax wrote:


While the Icelandic recovery is certainly remarkable, "back on track" is maybe a bit too optimistic given that the relative debt more than tripled as an effect. This recovery is thus "bought" at the expense of all young icelanders who will need to repay this debt. You might further want to add that Icelands balance of trade was almost 0 before the crisis, with a healthy industry for the size of the country, so the devaluation helps exports and thus supports the economy.

On November 09 2011 19:18 MiraMax wrote:


While the Icelandic recovery is certainly remarkable, "back on track" is maybe a bit too optimistic given that the relative debt more than tripled as an effect. This recovery is thus "bought" at the expense of all young icelanders who will need to repay this debt. You might further want to add that Icelands balance of trade was almost 0 before the crisis, with a healthy industry for the size of the country, so the devaluation helps exports and thus supports the economy.

In vast contrast to that Greece spends 3 times as much on imports as they earn with exports and has no industry worth mentioning. A strong devaluation for such an economy could be devastating and would hardly help with the structural problems Greece is facing. So it is at least questionable if the situation would be so much better for Greece.

On November 09 2011 21:11 Palmar wrote:


While not relevant to the current discussion, remember that I AM a young Icelander living in exactly the situations we're talking about. The recovery was "bought" with a sharp decrease in spending, much more than anything else. There are two sides to the devaluation coin. On one side is the obvious effect that by lowering production costs you can make your economy more competitive (ie: lowering salary), which is the most common argument for devaluation. But not only does devaluation help boosting exports, it also puts strains on imports by raising the price of imported products relative to the spending power of the people living in the country.

The reason Iceland's balance of trade is so favorable now is not only increased exports, but probably more importantly much less consumer spending, which results in less imports.

I think Greece should leave the Euro, default (restructure) it's debts and re-build it's economy with the flexibility that their own currency allows. It's a tough cookie to swallow, but it's probably better to take the fall and start building up, because the problem with the current situation is is that it stagnates the economy through uncertainty.

On November 09 2011 21:53 MiraMax wrote:


Hmmm ... I am not sure where you got your information from, but government expenditures massively increased in 2008 (to 986,000 mio. ISK) and were still considerably higher in 2009 and 2010 than before the crisis. Debt relative to the GDP skyrocketed (I mean seriously) from 28% to over 90%. At the same time there was only a very moderate decrease in houshold consumption between 2008 and 2009 from 789,000 to 764,000 while consumption in 2010 is at the same level as 2008 again (787,000).

So, no, whatever you were told, the crisis was not at all overcome by a significant cut in spending. It might feel like this to you because the government spends less on things which benefited/ affected you, but it has to spend much more on other things to support the economy. Household consumption rather stagnated or at best mildly decreased.

(You can check all that yourself at http://www.statice.is/)

On November 09 2011 22:14 Palmar wrote:


You are clearly better at this than me, but I think there are a few things you have missed.

Debt has increased, that's not a question, and we all know it. I'm not saying "nothing was lost" because a lot of things were lost, and I know things were better here before the collapse.

Government spending is ridiculously high in 2008 because the government bought out one of the biggest banks during the collapse, or that's what I think must be going on there. It's a huge investment.

Regarding household consumption, you're comparing the spending in ISK before and after the crisis, a period where the Icelandic Krona lost a significant portition of it's value. The numbers you're pulling are from "current prices" but to understand how much spending has been cut, you have to compare it to "constant prices". Correct me if I'm wrong, but looking at the period here, you can see spending drop from 667,666 mio. to 521,440 mio in the period 2007 - 2010, which is a pretty significant drop. In the same period the spending in "current prices" has gone from 751,611 mio to 787,724 mio.

Correct me if I'm wrong, but if I understand the statistics correctly, we're spending the same amount of ISK, but what we get for each ISK is far less than it used to be. ie: We have devalued our currency, and thus cut spending.

Edit: I should clarify, when I'm talking about spending, I mean household spending. I am fully aware the government has not done as much to cut spending.

On November 09 2011 23:12 MiraMax wrote:


Sorry about that! You are perfectly right about household consumption. I seemed to have misclicked. It remains to be argued however, how this decline in houshold expenditures did anything to "improve the situation" rather than creating more problems for Iceland's economy. According to classical economic theory this should have made the situation worse (as local vendors suffer from the drop in demand). It suggests to me that the government intervened to soften the blow (by government consumption for instance). Suspiciously enough 'Statice' does not provide government consumption past 2007. Do you happen to know why?

My point about government expenditures stands though (or at least here I double-checked the graph). Surely, the expenditures were so high because the economy (especially the financial sector) needed saving. Nonetheless the more money you pump into the economy, the less impressive a quick recovery is.

I do not mean to diminish Iceland's success in dealing with the crisis, but surely the "full price" has not been paid by far.

On November 09 2011 12:25 HellRoxYa wrote:


Wrong.

http://en.wikipedia.org/wiki/European_Coal_and_Steel_Community
http://en.wikipedia.org/wiki/History_of_the_European_Union

You are only indirectly correct, see below quote:




Edit: And just to clarify, I'm not saying that the current goal of the EU is to avoid war. The current goal of the EU is common policymaking and the development of efficient trade and effective economics (doing real good at that last part) between memberstates.

On November 10 2011 02:20 {CC}StealthBlue wrote:
So how does the EU, Germany and France, plan to prevent the same thing happening in Greece from happening in Italy. Austerity measures aren't enough, Italians already pissed off etc.