EPTThe European Debt Crisis and the Euro - Page 67
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pachakamakk
France12 Posts
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Serelitz
Netherlands2895 Posts
On February 16 2012 06:27 pachakamakk wrote: I can't understand how things fucked that fast. I mean, banks would have to erase some of the greek debt in order to save the situation but what next? Can europe still exist with countries like greece? I think EU is just too big, we just can't live knowing there could be another greece making all countries fall one by one. edit: prefacing this by saying this is a largely uneducated opinion (though I have done a bit of research on it). If Greece leaves the euro it sets a precedent for other weak countries like portugal, spain and Italy. I'm not extremely well versed in economics but I'd imagine that isn't exactly good for the world if those collapse as well, much less for the euro. Things got 'fucked that fast' because around the turn of the century everyone got a little TOO optimistic. Bush' tax cuts and increased expenses (which is supposedly pretty much the opposite of what you're supposed to do during a prospering cycle from what little I know), in addition to a lot of countries covering up their flaws to join the euro (Greece being the prime example). In retrospect, it's easy to say how we should've known. The problem is that as long as the system gives more incentive to personal short term gain over long term economic or even ecological loss, this'll keep happening. And really, there's no solution if you consider how countries themselves have become competing markets. | ||
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Hider
Denmark9390 Posts
On February 16 2012 05:40 Voldron wrote: My problem is with selling islands like Merkel asked. No problem with german people no problem with anyone but since you want to talkhistory. You had much more to unite and rebuild than east germany my friend. You ruined pretty much every EU country with your shitty war and hitler and you want to rebuild East germany? Try rebuilding the other countries wich you ruined also and see how that feels. I cannot blame german people now for what happened 60-70 years ago. But rebuilding east germany is something you created. And to get something straight. Nobody is helping us. The money we get we have to pay with interest later. For all i care i'd rather get the fuck out of the EU. Its Called European Union. But its not a union at all. Well Greece is getting "helped" (though I dont think its a long-term help). The interest you are paying are artifically low (government instiutions buying your debt), and your debt has received haircuts. But yeh you should just default now and get out of the euro. On February 16 2012 08:19 Serelitz wrote: edit: prefacing this by saying this is a largely uneducated opinion (though I have done a bit of research on it). If Greece leaves the euro it sets a precedent for other weak countries like portugal, spain and Italy. I'm not extremely well versed in economics but I'd imagine that isn't exactly good for the world if those collapse as well, much less for the euro. Things got 'fucked that fast' because around the turn of the century everyone got a little TOO optimistic. Bush' tax cuts and increased expenses (which is supposedly pretty much the opposite of what you're supposed to do during a prospering cycle from what little I know), in addition to a lot of countries covering up their flaws to join the euro (Greece being the prime example). In retrospect, it's easy to say how we should've known. The problem is that as long as the system gives more incentive to personal short term gain over long term economic or even ecological loss, this'll keep happening. And really, there's no solution if you consider how countries themselves have become competing markets. I think a lot of politicans view Greece leaving the euro and/or greece defaulting as a political failure. ANd they want to avoid this, and since they don't really care about long-term sustainability, they dont want greece to leave the euro. | ||
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Yongwang
United States196 Posts
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Vain
Netherlands1115 Posts
On February 16 2012 09:04 Yongwang wrote: This right here pretty much sums up the entire European debt crisis and the entire European Union: http://www.youtube.com/watch?v=Wb-MWoZKYmg This right here sums up about some man screaming that the euro is going to fail. To be fair his points about greece are true but everyone knows the euro isn't going anywhere anytime soon. Yeah maybe greece will go bankrupt but i just don't see any way how every other country is going back to its own currency. It is politically just not viable to give it up. He is also right that the euro right now is a political clusterfuck. Again its every country for its own good. I still believe that a common coin is the way to go for europe but the european union has to really look at itself to organise its stuff better. | ||
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topoulo
253 Posts
Its systemic and banking crisis which start with the 2008 us crisis. its pretty obvious by now that european politics dont understand shit from economics cause every major economist in this world warn about the austerity measures not working and only create recession. Heck this is known since 1920 and keynes which talk bout the terms germany had from first world war which led to second etc etc. but i wont stay in history lessons or economic ones. The mistakes that have been made so far is an examble to avoid for future generations and they still continue with it. Fact is that Greece is bankrupt so is portugal , ireland , Italy and spain and this will spread to whole europe soon. Even if they could remove Greece and portugal and potentially ?Ireland from the equation the next Greece and portugal will be Italy and spain and so on. Unless they change the way euro works , recycle profits and create a eurobond this wont change. It seems Germans are subborn once again and they dont understand whats happening . I wont bother with details there all over net read some serious economists to see why and how it could have work Ill end up with a Fact. Germany after world war 2 had far and fewer austerity measures both social and economic than Greece or ireland and portugal has. furthemore Germany never paid Greeks any sum of money which was 168 billion dollars back at 1950 around 500 billion in 2011 cause americans demand it and Greek politicians are freaking awfull to begin with to even bother ask. In fact Germany didnt pay much in everyone else part u.s and jews . Helmut kohl said in the past that if they ask Germany to pay what we own we will go bankrupt in the future nuff said | ||
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Yongwang
United States196 Posts
On February 16 2012 09:17 Vain wrote: This right here sums up about some man screaming that the euro is going to fail. To be fair his points about greece are true but everyone knows the euro isn't going anywhere anytime soon. Yeah maybe greece will go bankrupt but i just don't see any way how every other country is going back to its own currency. It is politically just not viable to give it up. He is also right that the euro right now is a political clusterfuck. Again its every country for its own good. I still believe that a common coin is the way to go for europe but the european union has to really look at itself to organise its stuff better. Being more organized can't save the EU, the only thing that can save the EU is democratic accountability to the peoples of Europe. | ||
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noname_
457 Posts
On February 16 2012 09:17 Vain wrote: This right here sums up about some man screaming that the euro is going to fail. To be fair his points about greece are true but everyone knows the euro isn't going anywhere anytime soon. Yeah maybe greece will go bankrupt but i just don't see any way how every other country is going back to its own currency. It is politically just not viable to give it up. He is also right that the euro right now is a political clusterfuck. Again its every country for its own good. I still believe that a common coin is the way to go for europe but the european union has to really look at itself to organise its stuff better. Maybe you just can not feel it right now, maybe you even won`t, but with a few excpetions (like Germany, France, UK) the EU basically "destroyed" all countries. Since we entered the EU the prices like doubled, the wages didn`t grew, or even were cut back, and in general it isn`t ANY better to be part of EU, in ANY aspect of daily, life became just worse. I think everyone who feels this in his own skin knows what I`m talking about. I`m not an economist expert or anything like that, but actually it is | ||
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Euronyme
Sweden3804 Posts
On February 16 2012 09:41 noname_ wrote: Maybe you just can not feel it right now, maybe you even won`t, but with a few excpetions (like Germany, France, UK) the EU basically "destroyed" all countries. Since we entered the EU the prices like doubled, the wages didn`t grew, or even were cut back, and in general it isn`t ANY better to be part of EU, in ANY aspect of daily, life became just worse. I think everyone who feels this in his own skin knows what I`m talking about. I`m not an economist expert or anything like that, but actually it is There's a difference between the EU and the Euro. | ||
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Yongwang
United States196 Posts
On February 16 2012 09:47 Euronyme wrote: There's a difference between the EU and the Euro. Though they do have several things in common. Both are failures, both are controlled by unelected bureaucrats, and both are collapsing. | ||
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Euronyme
Sweden3804 Posts
On February 16 2012 09:48 Yongwang wrote: Though they do have several things in common. Both are failures, both are controlled by unelected bureaucrats, and both are collapsing. Well we do choose our EU politicians after all... | ||
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Yongwang
United States196 Posts
On February 16 2012 10:11 Euronyme wrote: Well we do choose our EU politicians after all... You choose your MEPs and that's it. The lower house is the only elected body in the entire European Union. The European Parliament and it's upper house have no real power though, they can't even propose legislature. | ||
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Doublemint
Austria8540 Posts
On February 16 2012 10:13 Yongwang wrote: You choose your MEPs and that's it. The lower house is the only elected body in the entire European Union. The European Parliament and it's upper house have no real power though, they can't even propose legislature. They can veto it, and force an adaption if deemed necessary. The EU parliament is voted directy by the people of their respective member states. The Government body if you will who has got power to propose legislature - the EU commission - consists of who got the majority in this vote(or rather the party who got the majority, currently those are the conservatives). I don´t see ur point good sir. | ||
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Euronyme
Sweden3804 Posts
On February 16 2012 10:13 Yongwang wrote: You choose your MEPs and that's it. The lower house is the only elected body in the entire European Union. The European Parliament and it's upper house have no real power though, they can't even propose legislature. Well fuck. Honestly I don't know that much about the EU or how it works. The EU is far from failing though. There's nothing fundamentally wrong really with it. It's basically a trading union. It does have too much centralized power though. The Euro doesn't work because the same monetary system is imposed on countries with widely different economies, and it's too stiff to serve a purpose for smaller countries. | ||
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Maenander
Germany4926 Posts
Germany had to make a lot of cuts to stay competitive, e.g. the number of civil servants fell from 5.371.000 in 1995 to 4.576.000 in 2006 and is still decreasing, unemployment benefits were cut short, and the pensions saw no real growth for many years. The public debt crisis in Greece, however, is an example of a long-standing systemic problem. "Greece is the only example known of a country living in complete bankruptcy since the day of its birth" is what Edmond About wrote in 1858(!) in his book "Greece and the Greeks of the present day", and his chapter about finance reads strangely familiar (available at google.books) Now what was the contribution of the Euro? Low interest rates. Ironically, that what the Southern European countries wanted the most out of the Euro led to their financial downfall. The Euro created a false sense of security in creditors and debtors alike, leading to irresponsible spending. Classical market failure if you ask me. The bond interest rates were not based on reality, but on false assumptions: ![[image loading]](http://voxeu.org/sites/default/files/image/FromMar2011/SinnFig2.gif) The market realized too late that not much had changed with the introduction of the Euro: there were no Euro-Bonds, just a guaranteed low inflation rate, which is no justification for identical bond rates across the Euro-Zone. What we are seeing now is that the rates go back to normal, but irresponsible spending has made the old rates unsustainable in the mean time, and the Euro makes it impossible to inflate out of it. What most people do not realize is that the situation in Southern Europe would be grave now even without the Euro, because there would have been constant inflation and the growth that has been seen in the past decade would have most likely been destroyed by that. The Spanish boom, for example. Note how the Spanish GDP per capita closed in on the German one from 1998 on: ![[image loading]](http://i.imgur.com/AQSlN.gif) However, the Southern European countries might be more competitive now without the Euro. I have more to say but that's enough for now. | ||
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clementdudu
France819 Posts
On February 16 2012 09:48 Yongwang wrote: Though they do have several things in common. Both are failures, both are controlled by unelected bureaucrats, and both are collapsing. Oh the European Union is collapsing?tell me more! the only good thing about this euro crisis is that it kept the english away,and thats invaluable to the growth of the eu. | ||
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Schnullerbacke13
Germany1199 Posts
On February 16 2012 16:35 Maenander wrote: There are multiple causes of the current crisis, first and foremost among them are the increasing globalization and the decreasing European competitiveness. In combination, wealth losses are inevitable. Germany had to make a lot of cuts to stay competitive, e.g. the number of civil servants fell from 5.371.000 in 1995 to 4.576.000 in 2006 and is still decreasing, unemployment benefits were cut short, and the pensions saw no real growth for many years. The public debt crisis in Greece, however, is an example of a long-standing systemic problem. "Greece is the only example known of a country living in complete bankruptcy since the day of its birth" is what Edmond About wrote in 1858(!) in his book "Greece and the Greeks of the present day", and his chapter about finance reads strangely familiar (available at google.books) Now what was the contribution of the Euro? Low interest rates. Ironically, that what the Southern European countries wanted the most out of the Euro led to their financial downfall. The Euro created a false sense of security in creditors and debtors alike, leading to irresponsible spending. Classical market failure if you ask me. The bond interest rates were not based on reality, but on false assumptions: The market realized too late that not much had changed with the introduction of the Euro: there were no Euro-Bonds, just a guaranteed low inflation rate, which is no justification for identical bond rates across the Euro-Zone. What we are seeing now is that the rates go back to normal, but irresponsible spending has made the old rates unsustainable in the mean time, and the Euro makes it impossible to inflate out of it. What most people do not realize is that the situation in Southern Europe would be grave now even without the Euro, because there would have been constant inflation and the growth that has been seen in the past decade would have most likely been destroyed by that. The Spanish boom, for example. Note how the Spanish GDP per capita closed in on the German one from 1998 on: However, the Southern European countries might be more competitive now without the Euro. I have more to say but that's enough for now. Very substantial analysis IMO. | ||
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Hider
Denmark9390 Posts
On February 16 2012 16:35 Maenander wrote: There are multiple causes of the current crisis, first and foremost among them are the increasing globalization and the decreasing European competitiveness. In combination, wealth losses are inevitable. Germany had to make a lot of cuts to stay competitive, e.g. the number of civil servants fell from 5.371.000 in 1995 to 4.576.000 in 2006 and is still decreasing, unemployment benefits were cut short, and the pensions saw no real growth for many years. The public debt crisis in Greece, however, is an example of a long-standing systemic problem. "Greece is the only example known of a country living in complete bankruptcy since the day of its birth" is what Edmond About wrote in 1858(!) in his book "Greece and the Greeks of the present day", and his chapter about finance reads strangely familiar (available at google.books) Now what was the contribution of the Euro? Low interest rates. Ironically, that what the Southern European countries wanted the most out of the Euro led to their financial downfall. The Euro created a false sense of security in creditors and debtors alike, leading to irresponsible spending. Classical market failure if you ask me. The bond interest rates were not based on reality, but on false assumptions: The market realized too late that not much had changed with the introduction of the Euro: there were no Euro-Bonds, just a guaranteed low inflation rate, which is no justification for identical bond rates across the Euro-Zone. What we are seeing now is that the rates go back to normal, but irresponsible spending has made the old rates unsustainable in the mean time, and the Euro makes it impossible to inflate out of it. What most people do not realize is that the situation in Southern Europe would be grave now even without the Euro, because there would have been constant inflation and the growth that has been seen in the past decade would have most likely been destroyed by that. The Spanish boom, for example. Note how the Spanish GDP per capita closed in on the German one from 1998 on: However, the Southern European countries might be more competitive now without the Euro. I have more to say but that's enough for now. Im not sure I fully agree with this analysis. If the interest rate of the bonds are determined as the expected inflation rate + risk premium (prob not an universal techincal correct way of measure, but w/e), then why wouldn't interest rate of greece bonds fall close to the average level of interest rates of other Euro countries. Risk premiums are supposed to get closer to each other, as the other euro countries are indirectly bailing out each. Hence healthy economies such as germany are losing money and this is benefiting greece borrowing costs. So obv. when investors throught the economy was fine (pre financial crisis bust), and they throught this level was sustainable forever, I guess it makes a lot of sense for them to valuate the risk of the bonds as the same level as other european countries. But obv. the boom wasn't sustainable, and they miscalculated the risk. So while I still think there should be a difference in rate of bonds of healthy economies with low unemployment, high growth, budget surplus and countries with a less healthye economy, the difference is supposed to be somewhat marginal if you assume the growth rate of 2001-2007 is sustaianble. And if say the correct spread between german bonds and greece bonds should be like 200 BPS (or something like that), then why would higher borrowing costs for Greece make the EURO work? | ||
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radiatoren
Denmark1907 Posts
On February 16 2012 09:48 Yongwang wrote: Though they do have several things in common. Both are failures, both are controlled by unelected bureaucrats, and both are collapsing. The bridge to hell is paved with half truths... The Commision is controlled by indirect indirect election and they have been banished a few times for their corruption and unaccountability. However, the EP is by large influenced by the people and are somewhat accountable because of the extreme openness about their meetings. The commision cannot do anything without the approval of the EP. What most people fail to realize is that a very significant part of EU is negotiated in the council which is based on the governments in the countries. Just because the commision is an abomination of unelected politicians does not make EU as a whole "controlled by unelected bureaucrats". The euro is by large controlled by a huge mathematical model based on each country in the euro and their market. Shoot the message not the messenger in that case since the bureaucrat is only enacting the results from the calculations. | ||
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Acrofales
Spain18004 Posts
There is, in truth, scant hope that this second bailout will work. The International Monetary Fund knows that, and virtually admitted as much in the briefing note it prepared for the Eurogroup meeting. The Greek politicians who pledged to support the deal before, during and after this spring's election know it also, but feel they had no choice but to agree to a programme they know will cause an even deeper recession, higher unemployment and, almost certainly, further civil unrest. The rest of the eurozone knows it too, deep down. While I understand completely why European politicians are desperately trying to cling to bailing Greece out, I feel that in the long run, Greece would be better off defaulting now and stepping out of the Euro. I am not sure the European markets have shored up enough to not cause this having a domino effect in the other PIIGS countries and banks would definitely take a heavy hit, but the current plan seems to be grasping at straws. Here is another item about the Greeks protesting: http://news.ph.msn.com/top-stories/article_old.aspx?cp-documentid=5916112 "The measures ... are another blow to the pensioners and the social security system in the country. Greeks are blackmailed and no one can tolerate it," the union said in a statement. This seems a bit farfetched. It is heavyhanded political rhetoric, imho. The Greek government is (and has been) overspending horribly and the only ways out are the European bailout or defaulting. Other people don't want to lend Greece money anymore and they are, imho, completely justified in that. If the country has screwed it up so badly that the only way anybody will loan it money is if it goes together with such extreme austerity deals, then that is still not blackmail: the other choice is still to default. The Greek government is hoping that the bailout is better than default, but I am getting a bit sick and tired of the protests. You're in the frying pan and can jump into the fire, but either way, you're gonna get burned. Whether the current Greek politicians are the best there are, is doubtful, but it is also irrelevant: there is no time to wait for elections. | ||
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