Hard Light Productions Forums
Off-Topic Discussion => General Discussion => Topic started by: Unknown Target on October 07, 2012, 03:07:17 pm
-
I know we have at least one poster from Greece. I haven't seen it hit headlines recently, how bad is it over there for the average citizen?
-
what's up in Spain even?
-
Portugal here. It's pretty rad. We're gonna have a jump of like 30% in IRS taxes. Everyone's psyched.
-
People who want a tax hike? Awesome.
-
Could also have been sarcasm. :P
DO we even have any greek/close-to-greek members?
-
Hades and Rampage, IIRC.
-
Portugal here. It's pretty rad. We're gonna have a jump of like 30% in IRS taxes. Everyone's psyched.
Can you describe the situation more? Is Portugal just following everyone along and adopting austerity or is it doing anything different?
-
I'm in the UK but the news earlier was on about disturbances in Greece during a state visit from the German Chancellor, which is to be expected as they are one of the lead voices demanding that Greece cuts back on spending and reduces its debts before the Eurozone gives them any money. The headline stuff was about the Chancellor being compared to hitler by some protesters but even the reporters admitted that this was the minority and that most people that turned up were just fed up with the money saving measures.
-
Hades and Rampage, IIRC.
Rampage may be. I am not from Greece, though my father is.
-
Portugal here. It's pretty rad. We're gonna have a jump of like 30% in IRS taxes. Everyone's psyched.
Can you describe the situation more? Is Portugal just following everyone along and adopting austerity or is it doing anything different?
It's doing austerity full throtle. And it's killing us. Unemployment going through the roof (16%, an historical record) and the deficits not going down. Kinda hard to go down when the employed go down in numbers, when the market is free-falling.
Not much we can alternatively do though. We cannot do what we traditionally would have done in similar circumstances: devalue the local currency (which would empoverish everyone equally against the rest of the world, but would maintain employment and gain some productivity against other countries). We are stuck with an overvalued Euro, a situation that is being proven to be just as bad as being stuck with the Gold standard.
I can explain you the problem in a more developed manner. Rest assured, it's ghastly bad. The Euro experience proves the idea that you cannot have a common currency without a more shared tax policy (sharing bank bonds, sharing unemployment subsidies, and so on and so on). However, there is no political will to go an European Federation. So we are kinda stuck in an hesitation. And Greece is suffering pretty badly. Their best option would be to sever their usage of the Euro and return to the Drachma. Such a move would be disastrous in the first year or two however and so no politician is really going to porsue it.
So, unless the politicians start doing what they failed to do so far: have a vision and lead the events, rather than reacting to what should have been obvious disasters from the beggining, we will continuing the downward path we've been through so far.
-
It's doing austerity full throtle. And it's killing us. Unemployment going through the roof (16%, an historical record) and the deficits not going down. Kinda hard to go down when the employed go down in numbers, when the market is free-falling.
Not much we can alternatively do though. We cannot do what we traditionally would have done in similar circumstances: devalue the local currency (which would empoverish everyone equally against the rest of the world, but would maintain employment and gain some productivity against other countries). We are stuck with an overvalued Euro, a situation that is being proven to be just as bad as being stuck with the Gold standard.
I can explain you the problem in a more developed manner. Rest assured, it's ghastly bad. The Euro experience proves the idea that you cannot have a common currency without a more shared tax policy (sharing bank bonds, sharing unemployment subsidies, and so on and so on). However, there is no political will to go an European Federation. So we are kinda stuck in an hesitation. And Greece is suffering pretty badly. Their best option would be to sever their usage of the Euro and return to the Drachma. Such a move would be disastrous in the first year or two however and so no politician is really going to porsue it.
So, unless the politicians start doing what they failed to do so far: have a vision and lead the events, rather than reacting to what should have been obvious disasters from the beggining, we will continuing the downward path we've been through so far.
Faça o que a familia real fez, fuja pro Brasil! :lol:
I heard that Portugal is exporting a lot of gold thanks to a lot of people melting their jewelry, is this true?
-
Also the fact that the gold industry is peculiarly skyrocketing right now.
-
There are a lot of commercials here from companies that are buying gold from families and so on, so yeah I guess that's true.
-
My dad's in the jewellery industry, and you should hear what we talk about. Gold is at it's highest value it's been in a very long time - I think at least a few decades (IIRC). He's been in the industry for 30 years, and still can't tell exactly why it's like this.
-
My dad's in the jewellery industry, and you should hear what we talk about. Gold is at it's highest value it's been in a very long time - I think at least a few decades (IIRC). He's been in the industry for 30 years, and still can't tell exactly why it's like this.
The answer is pretty much obvious. Everyone is scared **** of currencies right now for fear of inflation (a somewhat ridiculous fear, but still very prevalent in some circles, for example those so fond of the Gold standard), but everyone is also scared **** of the markets for fear of a recession / depression (deflation, yeah I know). So metals are an answer. And then it rises.
And when it rises, people recognize it and it becomes a bubbling ponzi scheme. Suddenly people believe that the rise is here to stay because some reason, and when everyone is not paying attention it suddenly collapses and the now owners of crates of these minerals facepalm themselves with how it was so obviously a bubble.
Just wait a couple of years, you'll see.
-
And lots of people are emigrating to Angola in search of a better life. You've gotta laugh at that one.
-
And lots of people are emigrating to Angola in search of a better life. You've gotta laugh at that one.
Do you have a source on that? That would be terribly ironic.
-
My dad's in the jewellery industry, and you should hear what we talk about. Gold is at it's highest value it's been in a very long time - I think at least a few decades (IIRC). He's been in the industry for 30 years, and still can't tell exactly why it's like this.
The answer is pretty much obvious. Everyone is scared **** of currencies right now for fear of inflation (a somewhat ridiculous fear, but still very prevalent in some circles, for example those so fond of the Gold standard), but everyone is also scared **** of the markets for fear of a recession / depression (deflation, yeah I know). So metals are an answer. And then it rises.
And when it rises, people recognize it and it becomes a bubbling ponzi scheme. Suddenly people believe that the rise is here to stay because some reason, and when everyone is not paying attention it suddenly collapses and the now owners of crates of these minerals facepalm themselves with how it was so obviously a bubble.
Just wait a couple of years, you'll see.
I like the explanation. It does sounds pretty logical when you think about it.
And lots of people are emigrating to Angola in search of a better life. You've gotta laugh at that one.
Do you have a source on that? That would be terribly ironic.
That one has been coming for years, actually. At least south here there seems to be a growing (http://online.wsj.com/article/SB10001424052970203550304577137174048327642.html) trend (http://www.worldcrunch.com/some-europeans-latin-america-once-again-land-opportunity/culture-society/for-some-europeans-latin-america-is-once-again-a-land-of-opportunity/c3s4547/#.UHXOTq4S8Y8) of immigrants from formerly rich and powerful countries coming to formerly poor and futureless countries. It's not only ironical, but decidedly unfair.
-
http://www.bbc.co.uk/news/world-europe-19886626
^^this is priceless :lol:
-
She was somewhat both corageous going down there, and downright ****ing terribly late.
The best thing that could ever happen to Europe right now would be Germany to leave the Euro. Ain't gonna happen for bloody obvious reasons.
-
The best thing that could ever happen to Europe right now would be Germany to leave the Euro. Ain't gonna happen for bloody obvious reasons.
You do speak nonsense.
-
No actually I do not. I'm speaking high level macroeconomics analysis, but the handwaving snark manner of the comment makes it look crazy I do admit.
-
I'm speaking high level macroeconomics analysis
Haha
Ha.
Good one.
-
No. Forreal. Want me to go on?
I haz some minutes (waiting for a render so).
So here's the big problem within the Euro: Germany and other countries of the so-called "core" have too much productivity when compared with the PIIGS, however they do not like a debasing-the-currency policy (aka inflationary policies), which is what it would take for a synchronization of all european economies (increasing wages of Germans while maintaining wages of the periphery). Right before the fan was hit by ****, the peripherical countries were buying and borrowing too much due to the historical lows of the loan yields. In 2009, Merkel made a very infamous speech in which she declared that each country should face their own banking problems, and when the markets slowly figured out that she was speaking for real, all the peripherical countries' borrowing yields skyrocketed.
Without the Euro, what would normally happen would be that the countries with productivity problems would devalue their own currencies against the Mark, increasing their own productivity against Germany, empoverishing every citizen by an equal amount. The pain would be sharp, but quickly dealt with. However, Portugal, Greece, etc., cannot devalue their own Euro against Germany's Euro right now.
If Germany left the Euro, all the remaining countries could devalue the Euro against the Mark. Given that all debts are issued in Euros, this would in turn solve the debt problem by itself. The countries could abandon their austerity measures and start more Keynesian measures for the prosperity of the economy (one can include in these the lowering of taxes, for instance). The Mark's slow rise against the Euro would stop the latter of devaluing too much, since a freefall of the Euro would mean the total destruction of Germany's exports for these countries (still a majority of its exports). The Euro would be, in this scenario, balanced by the Mark.
All this precludes many other discussions of course. It's just one scenario. And between them all, this is one of the most positive ones. The one which we are currently facing is far, far, far worse. A continuing of "doin nuthin, whistle whistle" will mean the perpetuity of austerity measures and the destruction of the welfare systems of the peripherical countries, a massive unemployment that will create an immense rise of inequality. We have all seen this before, in every single country the IMF has bothered to enter into.
-
The only real solution to the problem I've seen minus the entire euro periphery defaulting and leaving the eurozone: the reworking of the euro as a special drawing rights currency, ala the original idea for the Bretton Woods system envisioned by Keynes.
http://www.debtdeflation.com/blogs/2012/07/26/the-euro-as-the-sdr-of-europe/
-
No. Forreal. Want me to go on?
[snip]
That analysis sounds a lot the kind of stuff Krugman's been screaming from the rooftops (and his classroom, and his blog, and his newspaper column) for a good few years now. Of course noone listened to him when he was warning about the housing bubble either...
-
No. Forreal. Want me to go on?
[snip]
That analysis sounds a lot the kind of stuff Krugman's been screaming from the rooftops (and his classroom, and his blog, and his newspaper column) for a good few years now. Of course noone listened to him when he was warning about the housing bubble either...
That's because he's Krugman disguised as a portuguese, nobody would see that coming.
http://www.dw.de/dw/article/0,,16297765,00.html
More bad news from Portugal.
-
Yes, I do tend to read Krugman a bit. /hides
edit: but actually that idea was Soros' not Krugman's.
I like Vega's link quite a lot btw.
http://www.dw.de/dw/article/0,,16297765,00.html
More bad news from Portugal.
That's what I was referring to the previous page. We are all psyched!!
-
Without the Euro, what would normally happen would be that the countries with productivity problems would devalue their own currencies against the Mark, increasing their own productivity against Germany, empoverishing every citizen by an equal amount. The pain would be sharp, but quickly dealt with. However, Portugal, Greece, etc., cannot devalue their own Euro against Germany's Euro right now.
If Germany left the Euro, all the remaining countries could devalue the Euro against the Mark. Given that all debts are issued in Euros, this would in turn solve the debt problem by itself. The countries could abandon their austerity measures and start more Keynesian measures for the prosperity of the economy (one can include in these the lowering of taxes, for instance). The Mark's slow rise against the Euro would stop the latter of devaluing too much, since a freefall of the Euro would mean the total destruction of Germany's exports for these countries (still a majority of its exports). The Euro would be, in this scenario, balanced by the Mark.
So, if German products - for example Porsche, BMW, Mercedes - became more expensive, the customers will buy more sport cars from Greece ? ;)
Or do they buy more I-Phones from Spain and Portugal ?
Even without Germany in the Euro ( an Idea many Germans find appealing ) Greece would face still competition from nations like Spain, France, Italy and Portugal who are still inside the Euro and have a higher productivity.
The second thing is what you can't nowadays compete over the price.
The Chinese are always cheaper.
Nobody buys a Porsche, a BMW or a Mercedes because it's cheaper than a Seat, a Lancia or a Peugeot or a non existing Greece sports car.
The customer pays for quality and service (and the name of the brand), if that's not important he buys Chinese.
Well, I don't have any Idea who to fix that, but thinking anything would be better if German Goods became more expensive could be false.
The next thing is what even the Greeks don't want to left the Euro for a weaker currency. A weak Euro without Germany is the same - a weak currency they don't want.
-
Well depending on view, the Greek economy was pretty weak sauce to begin with. Simply put, tourism played a heavy factor to my understanding, but the danger was attempting to float a weak economy on a strong currency, something it could never really do in the first place.
-
...
The second thing is what you can't nowadays compete over the price.
The Chinese are always cheaper.
Nobody buys a Porsche, a BMW or a Mercedes because it's cheaper than a Seat, a Lancia or a Peugeot or a non existing Greece sports car.
The customer pays for quality and service (and the name of the brand), if that's not important he buys Chinese.
Well, I don't have any Idea who to fix that, but thinking anything would be better if German Goods became more expensive could be false.
The next thing is what even the Greeks don't want to left the Euro for a weaker currency. A weak Euro without Germany is the same - a weak currency they don't want.
You're drawing the comparison in a flawed manner, with the one type of good (expensive brand-name luxury items) that is least relevant to this kind of discussion.
The benefits to this kind of policy are most likely to be apparent in areas like perishable foodstuffs, things that you can import from a neighboring country, but that it's impractical to import from halfway around the world, or quick-turn-around items, where shipping from china is highly impractical due to the transit times required.
-
You're drawing the comparison in a flawed manner, with the one type of good (expensive brand-name luxury items) that is least relevant to this kind of discussion.
The benefits to this kind of policy are most likely to be apparent in areas like perishable foodstuffs, things that you can import from a neighboring country, but that it's impractical to import from halfway around the world, or quick-turn-around items, where shipping from china is highly impractical due to the transit times required.
And foodstuff and quick-turn-around items are the most imported exports from Germany in Greece, Spain, Portugal, France and Italy ?
-
Al Rik, that wasn't even a wrong analysis. That was an abomination of snarkiness against what is practically one of the most established truths of macro-economics, namely the relationship between a currency's value and both the import-export balance sheet of a country and its relative productivity.
Really, before going all out snark against common truths, at least have the courtesy of spending more than the few seconds of thought you obviously deemed too much for such an observation.
To take your "example", if say a Portuguese is thinking about buying a BMW but it costs 30% or 50% more due to the devaluation of his own currency, the chance that he will do so is diminished. This is so frakking obvious that I just can't see what went through your mind here. If the iPhone costs more, then the quantity of Italians who buy them will also diminish and substitute those buys for middle range smartphones. This substitution is obviously good for the balance sheet.
The contrary is also true. If to a German, a portuguese shoe costs 40% less than it used to, the chance he will buy one will rise by a predictable amount.
Do you get it now, or do I have to teach you economics 101 first?
Well, I don't have any Idea who to fix that, but thinking anything would be better if German Goods became more expensive could be false.
It is definitely not. It's actually what every goddamned top economist is saying everyone. Why do you think Krugman asked for a 20% reduction in salaries in Portugal? Why do you think everyone talks about the problems of "productivity" in the periphery? What do you think they are refering to?
The next thing is what even the Greeks don't want to left the Euro for a weaker currency. A weak Euro without Germany is the same - a weak currency they don't want.
A "weak" currency is a million times better than a completely flawed one. Ask Argentina.
-
To take your "example", if say a Portuguese is thinking about buying a BMW but it costs 30% or 50% more due to the devaluation of his own currency, the chance that he will do so is diminished. This is so frakking obvious that I just can't see what went through your mind here. If the iPhone costs more, then the quantity of Italians who buy them will also diminish and substitute those buys for middle range smartphones. This substitution is obviously good for the balance sheet.
If the BMW costs 30% to 50% more he will buy a French or a Italian car - not a car made in Portugal.
And the middle range smart phones are - like the I Phone - produced in China.
And this should be good for the balance sheet ?
The contrary is also true. If to a German, a portuguese shoe costs 40% less than it used to, the chance he will buy one will rise by a predictable amount.
Shoes from Morocco, China or Vietnam are still cheaper.
It is definitely not. It's actually what every goddamned top economist is saying everyone. Why do you think Krugman asked for a 20% reduction in salaries in Portugal? Why do you think everyone talks about the problems of "productivity" in the periphery? What do you think they are refering to?
Productivity in what field ?
How low must the salaries be to reach the productivity of a shoemaker in Morocco, China or Vietnam ?
And even without Germany, they still will face competition by France and Spain...
The next thing is what even the Greeks don't want to left the Euro for a weaker currency. A weak Euro without Germany is the same - a weak currency they don't want.
A "weak" currency is a million times better than a completely flawed one. Ask Argentina.
And still the Greeks don't want to leave the Euro. Maybe they should ask the Argentinians ?
-
DISCLAIMER: I'm no economist.
The next thing is what even the Greeks don't want to left the Euro for a weaker currency. A weak Euro without Germany is the same - a weak currency they don't want.
A "weak" currency is a million times better than a completely flawed one. Ask Argentina.
Are you sure you can so happily draw such parallelisms? While I certainly respect your wisdom in this field and I agree with pretty much everything I've read from you so far, and while it IS true that every economist I've ever heard or read agrees in that devaluing a country's currency is a quick, easy and foolproof way of regaining some competitiveness against another country's larger economy, the differences between pre-collapse Argentina and nowadays Greece are, as far as I know, quite significant.
Argentina, even in its darkest hours, still had a large, dormant industrial capacity; a highly skilled workforce; one of the most competitive, export-oriented primary sectors in the world; some interesting high-tech exports like cars, nuclear reactors and fissionables; and a sizeable internal market. Also, our best exports suddenly raised in price just a few years after the devaluation, just in time for us to capitalize on it. So it was a combination of devaluing to regain competitiveness, reorienting our industrial production to our internal market, reprioritizing our exports towards our neighboring countries, and actually HAVING something to compete with in the international economic arena in first place. And luck. Lots of luck.
As far as I know, Greece's situation is totally different.
So my question to you is: Would just devaluing the currency work for Greece? Would it solve their problems?
And still the Greeks don't want to leave the Euro. Maybe they should ask the Argentinians ?
But that's the problem, isn't it? Everybody wants a stronger economy, and everybody knows in the long run it will benefit everyone. But here and now, nobody wants to pay the price. It was the same here in Argentina. it was no secret that the dollar-peso parity was untenable, and yet nobody wanted to get out of it. And in stupidly delaying the unavoidable, we were only making the situation worse and worse with each passing day. That is, until it blew up in our face like bubbles tend to do.
-
If the BMW costs 30% to 50% more he will buy a French or a Italian car - not a car made in Portugal.
And the middle range smart phones are - like the I Phone - produced in China.
And this should be good for the balance sheet ?
Yes. First, if the car is bought in France / Italy, then it will improve France/ Italian balance sheets, two countries which would be under the new "euro-without-the-mark". These countries would be better off, and in a better position to buy whatever goods Portugal is able to export.
Shoes from Morocco, China or Vietnam are still cheaper.
Does not matter one iota. If Portuguese shoes are cheaper than they are right now, they will be bought more than they are now, irrespectively of other countries' own exports. This is econ 101.
Productivity in what field ?
How low must the salaries be to reach the productivity of a shoemaker in Morocco, China or Vietnam ?
They don't have to reach the "productivity" of other places. They only need to synchronize their own productivity with Germany's. Germans may have high salaries, but they compensate with a very organized economy. Without such organization (which is a very wide, subjective concept: it includes the whole economy's overall efficiency, from political institutions to mechanical processes of construction, etc.), countries must compensate with lower salaries, etc.
And even without Germany, they still will face competition by France and Spain...
France and Italy suffer the same problems that Portugal faces against Germany. In simple words, they are economies "used to" some form of inflationary economic policies, which were abandoned in favor of a strong stable currency by the Mark standards. While Germany stabilized prices and salaries, France, Italy, Spain, Portugal and so on rose them. The reason why they did this is multiple, but a strong case can be made that the lowering of borrowing rates "fooled" everyone (public and private) in these countries into thinking they had more money in their pockets than they used to (and so they could "share the wealth" to the employees, who then borrowed money from the banks with the low rates, which in turn created another level of risk and so on).
And still the Greeks don't want to leave the Euro. Maybe they should ask the Argentinians?
They might have no choice on the matter. Argentina wouldn't have been any better off continuing to peg its currency to the dollar once they figured out they were in deep trouble. It would only have made matters worse before they were forced to unpeg their currency.
Greece is doomed to continue their completely unpopular "austerity measures" forever if they insist on being inside the eurozone. It would be much better for them to reach a deal where their debt would be nominated in Drachmas (whose value would be negociated politically), and then make them leave the eurozone. The fact that their debt is now in Drachmas makes sure they do not enter in hiper-inflation, and further measures can be taken so that the capital does not run off from panic (a long weekend may be required to secure every bank militarily so that no one is able to run off with the money, print new Drachmas and make the change in 3,4 days. A very difficult task, no doubt).
-
Are you sure you can so happily draw such parallelisms? While I certainly respect your wisdom in this field and I agree with pretty much everything I've read from you so far, and while it IS true that every economist I've ever heard or read agrees in that devaluing a country's currency is a quick, easy and foolproof way of regaining some competitiveness against another country's larger economy, the differences between pre-collapse Argentina and nowadays Greece are, as far as I know, quite significant.
Argentina, even in its darkest hours, still had a large, dormant industrial capacity; a highly skilled workforce; one of the most competitive, export-oriented primary sectors in the world; some interesting high-tech exports like cars, nuclear reactors and fissionables; and a sizeable internal market. Also, our best exports suddenly raised in price just a few years after the devaluation, just in time for us to capitalize on it. So it was a combination of devaluing to regain competitiveness, reorienting our industrial production to our internal market, reprioritizing our exports towards our neighboring countries, and actually HAVING something to compete with in the international economic arena in first place. And luck. Lots of luck.
As far as I know, Greece's situation is totally different.
Yes, it is. Your analysis is spot on from what I know. Every analogy is somewhat flawed, and Argentina's case is different even in historical reasons. However, Argentina did have to unpeg their currency and it devalued 2 to 3 times its value in 2003. Its burden of external debt caused its hyperinflation in 89, the main reason why was because of most of it was nominated in foreign currencies.
So my question to you is: Would just devaluing the currency work for Greece? Would it solve their problems?
They would have to turn their debt from "euros" to "drachmas". A political decision on this matter is fulcral before leaving the eurozone. Only then, a devaluation is inevitable. It is a means of empoverishing everyone involved in the country in an equalized fashion (sharing the burden so to speak), diminishing the problems of sharp inequalities and so on, so that the whole economy gets in tandem with everyone else around them.
But that's the problem, isn't it? Everybody wants a stronger economy, and everybody knows in the long run it will benefit everyone. But here and now, nobody wants to pay the price. It was the same here in Argentina. it was no secret that the dollar-peso parity was untenable, and yet nobody wanted to get out of it. And in stupidly delaying the unavoidable, we were only making the situation worse and worse with each passing day. That is, until it blew up in our face like bubbles tend to do.
Right on. That's only too human.
-
Germany leaving the Euro ist probably not the most stupid idea, but I would not be so sure if that could solve to basic problems of this messed up currency union. These are:
1) wage increasments differ from productivity increasments which leads to different inflation rates in the single countries which means that some countries lose their competetiveness against others which they can't compensate by devalueing their national currency
2) no common political body that has any economic responsibilities to speak about
These problems are not solved by single countries leaving the Eurozone. This measure could solve the current crisis to a degree but it wouldn't solve the currency union's structucal deficits.
The biggest problem atm is that Germany is currently governed by the most stupid and incompetent band of jerks EVER! This government has not understood anything and absolutely everything they do has nothing to do with the actual crisis which is not a crisis of public budgets but a balance of payment crisis. Especially the FDP and CSU are so far away from reality how one can possibly be. Alas, most of the german voters somehow still think that Merkel's policy would be the best way to solve this mess. Must be because of the great success she's having so far in containing public debt. :banghead:
-
Yeah, and the last reports from the FMI, which can be read as an "ooopsie daisy, we made a slight blunder on our proposed policies" - basically the "contractionary multiplier" was off by a lot (assumed a 0.5 multiplier, and an observed 0.9-1.7 one) - is a big slap in the face to everyone who suffered through the austerity measures.
heyaaa'll, good news folks know those sacrifices you had to endure? They made things worse! Ain' it great? Let's have caaaaaake!!!
Merkel now wants to make Europe be able to dictate national budgets (the #%$#$&!), and our government is about to pass in the parliament another "package" of austerity taxes (the ones referred to above) which we now know makes matters worse.
You can imagine my feelings. Filled with daisies and green pastures. And reavers.
-
Seems to me the problem isn't so much that Germany needs to leave the Euro but rather that everyone should have been a lot more selective on who was allowed in in the first place. Reading about Greece's fiscal situation makes me just about shake my head off my shoulders. I have a great deal of difficulty feeling sorry for people who want top-notch social programs but refuse to pay the taxes necessary to fund them - and problem that seems to be fairly common in the nations in Europe that are in serious financial difficulty. If you elected governments that left your fiscal liabilities unfunded and didn't ever question their books, you pretty much deserve what you've been sold.
-
Seems to me the problem isn't so much that Germany needs to leave the Euro but rather that everyone should have been a lot more selective on who was allowed in in the first place. Reading about Greece's fiscal situation makes me just about shake my head off my shoulders. I have a great deal of difficulty feeling sorry for people who want top-notch social programs but refuse to pay the taxes necessary to fund them - and problem that seems to be fairly common in the nations in Europe that are in serious financial difficulty. If you elected governments that left your fiscal liabilities unfunded and didn't ever question their books, you pretty much deserve what you've been sold.
Yeaaaaah, you are basically clueless about what's happening in the Eurozone. Greece's corrupted numbers are merely an excuse that blinded everyone from the real problems with the Euro.
Ok ok, now don't get annoyed with me. If you are really interested to know exactly what the problem is, I have a tremendous link for you. George Soros *nailed it* in his oped here a month ago. I cannot recommend it more, it analyses the economic / political problems so nicely:
http://www.georgesoros.com/articles-essays/entry/the_tragedy_of_the_european_union/
-
Yeaaaaah, you are basically clueless about what's happening in the Eurozone. Greece's corrupted numbers are merely an excuse that blinded everyone from the real problems with the Euro.
Ok ok, now don't get annoyed with me. If you are really interested to know exactly what the problem is, I have a tremendous link for you. George Soros *nailed it* in his oped here a month ago. I cannot recommend it more, it analyses the economic / political problems so nicely:
http://www.georgesoros.com/articles-essays/entry/the_tragedy_of_the_european_union/
The article fails to address why there are deficit countries in the first place (though it does elaborate on why their situations got worse under the Euro), which comes down to a very simple premise that anyone can understand: if you spend more than you make, you're digging yourself in debt. Not disputing that there are significant problems with the Euro as a whole and the way its policies have been run, but the simple fact is that some of the countries which were allowed into the Euro have a historical and cultural background of desire for little work, high pay, and great social programs. In fact, those three factors are common to all the Euro countries currently in financial trouble. Greece was only the first to show this because their situation was the worst.
Which comes back to my original point - the Eurozone would be in better shape had the financial side been more choosy about its membership. Faulting Germany for paying their fiscal balance sheets properly seems like nothing more than whining at this juncture.
-
Not only is your rant racist in tone, it's pretty much untrue. Every country in the developed world has a thing called "deficit", and the majority of deficits in europe was pretty much small compared to, lets say, the frakkin US of A, Japan, etc. For instance, Spain had a really low deficit compared to its own GDP.
To state that the woes were due to the "social programs" is inane GOP Glenn Beck style shenanigan going full retard. I know this kind of thing is quite common to say nowadays, but the issues are completely unrelated. If you make a chart comparing the social programs with the rate of "trouble" of the countries, you will find no correlation whatsoever. I know that Romney and his party likes to say these things "Let's not get towards Greece", but those kinds of statements only work because most of the audience is clueless about real economics and macroeconomics*.
Which comes back to my original point - the Eurozone would be in better shape had the financial side been more choosy about its membership.
Yes, that is probably right in the "meanwhile", but the problems are so systemic that it would come about anyway. Perhaps it wouldn't strike Greece so hard, but it would still be facing huge hurdles like Portugal for instance.
Faulting Germany for paying their fiscal balance sheets properly seems like nothing more than whining at this juncture
What. The. Hell. Did anyone make this point at all? Is this. What is this I don't even.
Did you even bothered to read the whole oped? Because at this point I really doubt you did.
* The only way the US would go the way of Greece would be for them to enter a currency union and forfeit the ability to print their own dollars, share such a union with larger economies with better productivity numbers, and be unable to pressure the central banks to induce inflation and growth out of their debts.
-
I wasn't ranting, and why do you keeping speaking to me like I'm an American? I live in Canada - you know, that big northern country with a small population that has its financial **** together [mostly]? FYI - racism implies denigrating a race. I'm denigrating governments that can't tell their fiscal balance sheets from tourism advertisements. And I did read the whole op ed which is a very good take on the problems with the Euro and how they may be resolved, but has no comment whatsoever on the fundamental systemic cause of the whole mess which can and should be laid directly at the feet of a few national governments.
Yes - every modern democracy runs a debt. Not all of them run deficits (ours had been eliminated prior to the 2008 mess). Now, the difference between a country like Greece running a deficit and a country like the United States running a deficit is what backs those deficits, how they are reported, and how accurately they are reported. The Greek deficit had virtually no backing (Greece's economy was not export, manufacturing, technology, or resource driven), those deficits were never reported properly, and the Greek government outright lied about their fiscal situation until a new government was elected and they were forced to come clean. Now, the reason the Greeks faced those deficits is because their expenditures outpaced their revenues - Greeks work short hours, their economy wasn't strong to begin with, and the government faced constant pressure to continue with generous social benefit programs (and retirement ages, and low taxes, etc) which were a continual net drain on the economy. I have nothing against social programs - Canada has a strong history of them - but you have to pay for the things that you want to benefit from, and Greece didn't. It was and remains a ingrained attitude that their lifestyle was sacrosanct and untouchable by lesser concerns like the whole country essentially headed for bankruptcy. Social programs are not the root of the evil here (as morons like Beck would have us believe) - it's demand for them coupled with an unwillingness to properly pay for them. Exhibits: P, I, I, G, S. If fiscal liabilities matched revenues and fiscal backing, none of those countries would have landed in the mess they're in. Yes, the Euro made it worse, but the fundamental source of this problem is systemic in the nations themselves - and they were all still operating their budgeting process as if they could rely on currency devaluation to bail them out, which is a bad backup plan anyway.
As for the "faulting Germany" comment, there is an awful lot of whining coming from the PIIGS countries about the Germans - some of it justified, most not. The fact is that Germany has their fiscal **** together and these countries don't. Part of the reason is the Euro, no doubt, but part is because they got themselves into the mess in the first place and now expect Germany to solve their problems without any fiscal hurt at home, and that just isn't going to happen.
Keep in mind you're getting an observer's opinion here while you're embroiled in the Portuguese mess.
-
I wasn't ranting, and why do you keeping speaking to me like I'm an American? I live in Canada - you know, that big northern country with a small population that has its financial **** together [mostly]? FYI - racism implies denigrating a race. I'm denigrating governments that can't tell their fiscal balance sheets from tourism advertisements. And I did read the whole op ed which is a very good take on the problems with the Euro and how they may be resolved, but has no comment whatsoever on the fundamental systemic cause of the whole mess which can and should be laid directly at the feet of a few national governments.
The fundamental systemic cause was what Soros described in detail. You have a different idea on what is at "the core" of the Euro problem, but what I think you fail to understand is that the problem in the Euro is in its architecture, not at the "cultural ****tiness of some countries". (BTW when you rail against a culture for being "lazy" that's racist). This problem would have come up even if Greece was not in the eurozone. What happens is that it cracked on the weakest link, and because the weakest link is, by definition, weakest, people blamed the weaknesses instead of the whole architecture.
Yes - every modern democracy runs a debt. Not all of them run deficits (ours had been eliminated prior to the 2008 mess). Now, the difference between a country like Greece running a deficit and a country like the United States running a deficit is what backs those deficits, how they are reported, and how accurately they are reported. The Greek deficit had virtually no backing (Greece's economy was not export, manufacturing, technology, or resource driven), those deficits were never reported properly, and the Greek government outright lied about their fiscal situation until a new government was elected and they were forced to come clean.
They lied about their past deficits when they entered the euro union. Your explanation is still lacking when it comes to explain what happen with Spain and other countries which had a not-so-bad deficit. No, the problem was not the deficit, and the focus on it was precisely what made the matters worse. Every country that adopted the so-called "Austerity" measures only made it worse, exactly what the latest FMI report concluded. The ****ing FMI, not a communist paper.
Now, the reason the Greeks faced those deficits is because their expenditures outpaced their revenues - Greeks work short hours, their economy wasn't strong to begin with, and the government faced constant pressure to continue with generous social benefit programs (and retirement ages, and low taxes, etc) which were a continual net drain on the economy.
Bollocks. The greeks work by far the largest amount of hours per year inside the eurozone.
Oh, what's that? Did you think otherwise? Well, it doesn't surprise me in the least that you've been lied to. You were not the only one. Here: http://www.guardian.co.uk/news/datablog/2011/dec/08/europe-working-hours
I have nothing against social programs - Canada has a strong history of them - but you have to pay for the things that you want to benefit from, and Greece didn't. It was and remains a ingrained attitude that their lifestyle was sacrosanct and untouchable by lesser concerns like the whole country essentially headed for bankruptcy. Social programs are not the root of the evil here (as morons like Beck would have us believe) - it's demand for them coupled with an unwillingness to properly pay for them. Exhibits: P, I, I, G, S.
Jesus. Do you even know what the "S" in the PIIGS stands for? Spain. Spain had a surplus (not a deficit!) before the crisis hit. A ****ing surplus. The percentage of debt against GDP was like 60% or less. Do you consider having a surplus "heading for bankruptcy"? What bollocks are you trying to share here? The other countries did not have huge deficits, too. In 2009, however countries decided to go Keynesian against the biggest crisis they had faced yet, while their revenues bottomed, so sure the deficits skyrocketed. The problem was not that. The problem was that while they did this, Merkel decided to leave them in the ****ters, telling them that the banking problem was for each country to solve on their own, which then skyrocketed the borrowing yields, bankrupting everyone.
Yes, we can trace much of current Euro dire situation directly into Merkel's appalling political moves that were almost perfectly synchronized in time just to get the problems even worse each year.
Had that issue been resolved earlier (everyone knowing that the bank risks were not shared by the whole eurozone), it would have created problems in the periphery but they would have had been resolved on their own much easier.
If fiscal liabilities matched revenues and fiscal backing, none of those countries would have landed in the mess they're in. Yes, the Euro made it worse, but the fundamental source of this problem is systemic in the nations themselves - and they were all still operating their budgeting process as if they could rely on currency devaluation to bail them out, which is a bad backup plan anyway.
No. This was not the problem at all. You are still not getting it.
The problem was that when these countries entered the Euro, everyone was fooled in thinking that the risks were shared and thus the borrowing yields lowered for the PIIGS, etc. By doing so, everyone in these countries thougth they had more cash in their hands (because they, ahhh, literally did), and thus they used it. Why shouldn't they? An argument that states that they shouldn't have done so is an argument against free markets (irony).
But the lack of risk was an illusion. And it shattered right when it shouldn't have, inside the 2009 crisis.
So to add up to the Keynesian measures every government decided it was sane to do, they ended up having to deal with the rise of those borrowing costs. And suddenly it all fell down.
As for the "faulting Germany" comment, there is an awful lot of whining coming from the PIIGS countries about the Germans - some of it justified, most not. The fact is that Germany has their fiscal **** together and these countries don't. Part of the reason is the Euro, no doubt, but part is because they got themselves into the mess in the first place and now expect Germany to solve their problems without any fiscal hurt at home, and that just isn't going to happen.
Keep in mind you're getting an observer's opinion here while you're embroiled in the Portuguese mess.
Faulting Germany is justified for plenty of reasons. Not only it was proved that their recipe is wrong (by empirical means), they had this canning ability to do everything exactly wrong in the exact right time to get things worse. And worse, they profited by this: by extending the crisis, they still have the splendid state of affairs of having amazing commercial balances against countries which should have devalued their own currency against Germany already (but can't, they are inside the Eurozone). This is why Germany's growth hasn't been negative lately, and why they don't care much about us. However, this thing can't go on, and even Germany will taste its own poison.
-
You're getting very worked up over all of this.
The problem, as I've repeatedly said, is not just the Euro's architecture, as I've acknowledged I agree with Soros on, but rather the state of the fiscal situation in the countries being admitted to the Euro. Which you just agreed with concerning Greece's lies about past deficits. Nor was I railing against the Greeks for being lazy (or being racist, since again I'm talking about government fiscal policy and not the people but anyway), I'm saying that the Greeks should have expected financial difficulty when they work less (productivity, not hours necessarily), expect high pay, and demand social benefits they aren't paying enough taxes to pay for. As for Spain and other countries with low deficits or surpluses, the issue remains with the financial structure of their nations. Spain's financial house wasn't in order either - the Euro may have exacerbated the problem, but the issues with the Euro required an outstanding deficit problem (unfunded liabilities) to exacerbate in the first place - as Soros states outright.
I haven't commented at all on the current measures in place for dealing with the issue, let alone taken a position on them, so I'm not sure why you're ranting about the IMF.
The Guardian article points out that while Greeks work longer hours (and acknowledges that Greek statistics are highly suspect), their productivity numbers are not reflective of those hours. Hence, "work less."
Spain's surplus wasn't structural, either, and their banking system was on poor ground when the recession hit. They're hardly a model of fiscal responsibility. Which brings us to Merkel and Germany. And in their shoes, I wouldn't be telling countries like Greece, like Spain, that I'm going to bail out the finances and banking sectors that they've allowed to run amok, either. I'm getting it quite well, thank you. As you've acknowledged, the problem was the shared assumptions when countries were admitted to the Euro. Remember in my first post (which you immediate launched into diatribe mode on) that I said the problem was who was allowed into the Euro in the first place? Thanks for agreeing with me.
Soros makes a good case for how to go about fixing the Euro mess, but once again - while Germany may have extended the Euro problems, their fiscal house was in order and they didn't force anyone to join the Euro. In point of fact, they probably would have been wiser to keep a fair number of current Euro countries out. Then they could happily devalue their currencies against the Euro and plunge their countries into further economic pain without taking the Eurozone with them. There's a lot of German hate flying around Europe right now, but the fact of the matter is that PIIGS are only at the mercy of the Euro and German fiscal policy because they decided to put themselves there when they knew - or should have known - that their own financial books were on risky ground to begin with.
So, to come full circle and reiterate my first post - the problem, it would seem, is that membership in the Euro was not nearly selective enough and the countries that should have gotten their fiscal houses in order long ago are now feeling the pain and taking the rest of the Eurozone with them. You haven't, despite all your huffing and puffing, managed to debunk that opinion, but rather agreed with it on a few occasions now.
So, can we move on or are you planning to rant at me, accuse me of racism, or basically say I have no idea what I'm talking about then proceed to agree with my fundamental assertion some more today?
-
Can we please lower the heat over here? I feel like roasting!
As for the topic... well you could see this as Germany's revenge for the conditions of the treat that ended The Great War.
Remember in the end Capitalism is about profit, and Germany is definitely profiting form everyone else being tied to them.
I'll personally refrain from commenting much since I've never been to Europe, so I don't know the conditions people have to live with and I won't believe some article form the Internet.
-
If the BMW costs 30% to 50% more he will buy a French or a Italian car - not a car made in Portugal.
And the middle range smart phones are - like the I Phone - produced in China.
And this should be good for the balance sheet ?
Yes. First, if the car is bought in France / Italy, then it will improve France/ Italian balance sheets, two countries which would be under the new "euro-without-the-mark". These countries would be better off, and in a better position to buy whatever goods Portugal is able to export.
Shoes from Morocco, China or Vietnam are still cheaper.
Does not matter one iota. If Portuguese shoes are cheaper than they are right now, they will be bought more than they are now, irrespectively of other countries' own exports. This is econ 101.
Basic rules still have to be used on real conditions. Not always the real world economics behave like the econ 101 predict.
If there is a market for Portuguese shoes - or Portuguese cell phone - or Portuguese electronics they may profit from a potential Euro Zone without Germany.
If there exports are more or less similar than the products of the remaining Nations in the Euro Zone they still face competition.
And what's the real conditions ?
Many Germans spend their vacations in Turkey or Egypt. Most of the stuff they buy is produced in Asia (Clothes, Electronics, Shoes). Food is imported from Spain, France (the most selled Feta is produced in France, not in Greece) Italy and even Israel. Italian, French, Czech or Japanese Cars are common in the lower price bracket.
No doubt France and Italy - and several Asian Nations - would profit if Germany goes back to the Mark. But Portugal and Greece ? I doubt it. We will see it if Germany really leaves the Euro Zone, at the moment a highly unrealistic scenario.
France and Italy suffer the same problems that Portugal faces against Germany. In simple words, they are economies "used to" some form of inflationary economic policies, which were abandoned in favor of a strong stable currency by the Mark standards. While Germany stabilized prices and salaries, France, Italy, Spain, Portugal and so on rose them. The reason why they did this is multiple, but a strong case can be made that the lowering of borrowing rates "fooled" everyone (public and private) in these countries into thinking they had more money in their pockets than they used to (and so they could "share the wealth" to the employees, who then borrowed money from the banks with the low rates, which in turn created another level of risk and so on).
And still the Greeks don't want to leave the Euro. Maybe they should ask the Argentinians?
They might have no choice on the matter. Argentina wouldn't have been any better off continuing to peg its currency to the dollar once they figured out they were in deep trouble. It would only have made matters worse before they were forced to unpeg their currency.
Greece is doomed to continue their completely unpopular "austerity measures" forever if they insist on being inside the eurozone. It would be much better for them to reach a deal where their debt would be nominated in Drachmas (whose value would be negociated politically), and then make them leave the eurozone. The fact that their debt is now in Drachmas makes sure they do not enter in hiper-inflation, and further measures can be taken so that the capital does not run off from panic (a long weekend may be required to secure every bank militarily so that no one is able to run off with the money, print new Drachmas and make the change in 3,4 days. A very difficult task, no doubt).
I agree with you, nobody likes inflationary economic policies, that's the reason no Nation in the Euro Zone want's to leave it.
I also agree that Greece is doomed, but but the fleeing of the money has started. Wealthy Italians and Greeks are buying real estate in Germany, in the hope to save their money.
The funny thing is that Germany isn't really an good example for austerity and a well managed debt.
O.K, most investors believe that Germany is able to pay the interests on it's bonds.
Some even believe the Germany will spend money to keep the Euro Zone intact.
And in the German Constitution a law has been inserted that explicit forbids a too high debt...
But not everybody likes that law - especially politicians from the left would like to get rid of it and spend more money.
Chances are hight what they will be part of the next Government, and what this law will be ignored for the duration of the crisis (as other, similiar laws have been ignored because there is always a crisis to justify more public spending). Chances are also high what the forced switch from Nuclear Energy to Renewable Energy would have a big negative impact on the German Economy.
If the investors on day came to the conclusion that there is a real chance Germany isn't able to pay the interest because the German Economy has massive problems or because the German Government doesn't seem to care about the debt any more... well when the Interesting Times ( as in the Chinese Proverb ) will start - not only for Germany, but for the whole Euro Zone... ;)
-
You're getting very worked up over all of this.
Well, wouldn't you? It's not your fault MP, of course, but if you were in the middle of such storm (and paying the bills for the incompetence of others), you'd be pretty pissed as well...
The problem, as I've repeatedly said, is not just the Euro's architecture, as I've acknowledged I agree with Soros on, but rather the state of the fiscal situation in the countries being admitted to the Euro. Which you just agreed with concerning Greece's lies about past deficits. Nor was I railing against the Greeks for being lazy (or being racist, since again I'm talking about government fiscal policy and not the people but anyway), I'm saying that the Greeks should have expected financial difficulty when they work less (productivity, not hours necessarily), expect high pay, and demand social benefits they aren't paying enough taxes to pay for.
But this analysis pressuposes that everyone knows their "true" worth, among other impossible things. No one does, and if they earned X they thought they deserved it (like everyone else in the world). Greece had a particular problem of corruption that we can agree, but the whole crisis is a whole order of magnitude greater than that. Proof of what I am saying is that the pardon Greece received for their debts is much bigger than the value of the hidden debt they had.
As for Spain and other countries with low deficits or surpluses, the issue remains with the financial structure of their nations. Spain's financial house wasn't in order either - the Euro may have exacerbated the problem, but the issues with the Euro required an outstanding deficit problem (unfunded liabilities) to exacerbate in the first place - as Soros states outright.
My point was that it is an error to say that the problem were the government deficits. Of course the housing bubble was a big problem, the whole shenanigan about that one started in the USA. Spain had this huge construction boom based on Iberia being a promising european "Florida". If Europe had been as cohesive as the USA was naturally the problems of Spain would have been solved very quickly (for instance, the state of Texas received, since the crisis began, more than 300 billion dollars from the federation itself by the natural redistributive mechanisms). However, Merkel stated "deal with it yourself", and so it is slowly collapsing.
I haven't commented at all on the current measures in place for dealing with the issue, let alone taken a position on them, so I'm not sure why you're ranting about the IMF.
Well, because the only alternative to the current measures is to have had much more cooperation intra eurozone. Share the burden. That is, if you want to keep the Euro. As things are going, I wouldn't mind going back to the Escudo myself. And having more cooperation means to stop having this conversation on how the governments were to blame.
They weren't. They did their best to keep the deficits under 3%, and let me remind you that the first country to ignore that rule was... ahem... Germany (creating a whole moral hazard in itself).
The Guardian article points out that while Greeks work longer hours (and acknowledges that Greek statistics are highly suspect), their productivity numbers are not reflective of those hours. Hence, "work less."
Productivity has nothing whatsoever to do with "lazyness". It has to do with the overall structure of the economy. Germany uses top-notch processes, extremely organized, very high tech, and so on. Other countries have less efficient structures, and thus the productivity is smaller. It's a "holistic" measurement.
Spain's surplus wasn't structural, either, and their banking system was on poor ground when the recession hit. They're hardly a model of fiscal responsibility.
Name one country at the time that had a "structural surplus". One.
Which brings us to Merkel and Germany. And in their shoes, I wouldn't be telling countries like Greece, like Spain, that I'm going to bail out the finances and banking sectors that they've allowed to run amok, either. I'm getting it quite well, thank you. As you've acknowledged, the problem was the shared assumptions when countries were admitted to the Euro. Remember in my first post (which you immediate launched into diatribe mode on) that I said the problem was who was allowed into the Euro in the first place? Thanks for agreeing with me.
It has nothing to do with "who was allowed into the Euro". Even if you had the pipe dream of only accepting countries like Germany, France, Holland and Belgium, you'd still end up with a divergence between those countries (despite perhaps of such divergence take longer to notice). The problem of badly perceived assumptions is explained by Soros. The assumption was that the whole architecture would "eventually" be settled. The crisis hit before said settlement. You say you don't want to "bail out the finances and banking sectores that they've allowed to run amok". But the thing is that Europe is being forced to do just that. The trouble is that they have to do so and more, since the whole problem has been aggravated by not doing anything about it. So you are wrong on that one too. (Greece was already pardoned 50% of its debt, accounting for 75% of future earnings by the banks). Rescued countries are borrowing by rates much lower than the markets want (which means a bail out). Spain is about to ask for a huge bail out in the coming days / month (and everyone has to accept it).
Soros makes a good case for how to go about fixing the Euro mess, but once again - while Germany may have extended the Euro problems, their fiscal house was in order and they didn't force anyone to join the Euro. In point of fact, they probably would have been wiser to keep a fair number of current Euro countries out. Then they could happily devalue their currencies against the Euro and plunge their countries into further economic pain without taking the Eurozone with them. There's a lot of German hate flying around Europe right now, but the fact of the matter is that PIIGS are only at the mercy of the Euro and German fiscal policy because they decided to put themselves there when they knew - or should have known - that their own financial books were on risky ground to begin with.
Bollocks. Only Greece had this "financial books" issue. Portugal was quite clean for example. No one knew there would be this misalignment between assumptions and realities (easy to see in hindsight) and the Euro was promising in the late 90s. Of course, if you ask me if Portugal would have been better if it had never entered the Euro, I say yeah obviously. Hindsight is amazing.
So, to come full circle and reiterate my first post - the problem, it would seem, is that membership in the Euro was not nearly selective enough and the countries that should have gotten their fiscal houses in order long ago are now feeling the pain and taking the rest of the Eurozone with them. You haven't, despite all your huffing and puffing, managed to debunk that opinion, but rather agreed with it on a few occasions now.
Again, bollocks. The argument is that the trouble is systemic, meaning that even if you took away the "troubled countries", the rest of the eurozone would still diverge. However, to proclaim or imply that the economies of Spain, Italy and Ireland are "peripheric" in Europe is to enter in a very strange case indeed.
So, can we move on or are you planning to rant at me, accuse me of racism, or basically say I have no idea what I'm talking about then proceed to agree with my fundamental assertion some more today?
You called Greek culture "lazy".
-
Does not matter one iota. If Portuguese shoes are cheaper than they are right now, they will be bought more than they are now, irrespectively of other countries' own exports. This is econ 101.
Basic rules still have to be used on real conditions. Not always the real world economics behave like the econ 101 predict.
If there is a market for Portuguese shoes - or Portuguese cell phone - or Portuguese electronics they may profit from a potential Euro Zone without Germany.
If there exports are more or less similar than the products of the remaining Nations in the Euro Zone they still face competition.
And what's the real conditions ?
Many Germans spend their vacations in Turkey or Egypt. Most of the stuff they buy is produced in Asia (Clothes, Electronics, Shoes). Food is imported from Spain, France (the most selled Feta is produced in France, not in Greece) Italy and even Israel. Italian, French, Czech or Japanese Cars are common in the lower price bracket.
No doubt France and Italy - and several Asian Nations - would profit if Germany goes back to the Mark. But Portugal and Greece ? I doubt it. We will see it if Germany really leaves the Euro Zone, at the moment a highly unrealistic scenario.
Germany is the third country to where Portugal exports. http://www.indexmundi.com/portugal/exports.html
If the investors on day came to the conclusion that there is a real chance Germany isn't able to pay the interest because the German Economy has massive problems or because the German Government doesn't seem to care about the debt any more... well when the Interesting Times ( as in the Chinese Proverb ) will start - not only for Germany, but for the whole Euro Zone... ;)
Bah. Those times are not going to happen. The Euro is a glorified Mark anyway.
-
Nowhere did I call the Greeks lazy. Those are your words. I merely pointed out that the Greek work levels, economy, and demand for social benefits produce unfunded liabilities. You can accuse me of racism until you're blue in the face, but you've just constructed essentially a strawman.
So that's a no to the moving on then. Since you haven't added anything new other than another long wall of text that still doesn't refute my original point, I'm simply done. Enough is enough, the walls of text are tedious. Nowhere have you demonstrated that withholding Euro membership from the weak economies couldn't have prevented the current mess from evolving so my original opinion post seems to stand up to scrutiny (or at least the scrutiny you've leveled at it) just fine. I'll let others be the judge of this exchange.
-
Yeah, unless something changed, there were five occurrences of the word 'lazy' in this thread four hours ago, and all of them were from you Luis.
-
Yeah, unless something changed, there were five occurrences of the word 'lazy' in this thread four hours ago, and all of them were from you Luis.
To be fair I just had to use it to point out that I hadn't earlier =)
-
While I basically agree with MP-Ryan here on the whole "Euro for everyone! =) " thing being plainly irresponsible (not because people "work less" but because, as was pointed out later, their nation's economies don't enjoy similar levels of productiveness and competitiveness, and so they were doomed from the start), the old and tired argument of "it was their fault, they wanted a free ride, they should have put their houses in order first, blah blah blah" has already been beaten to death by reality.
Still, I'm not surprised people keep using it. I can only guess it works as a psychological defense to make people feel safer and somehow assure them that poverty is something that simply won't happen to them, both as individuals and as nations. Nor does it occur to them that PERHAPS they have a share of the responsibility.
Ultimately, it's not like all of that self-indulgent superiority complex is going to help anyway. The crisis will expand towards the core countries too until the whole thing is an indescribable mess. And then the more developed nations of the partnership are going to be a lot less harsh with themselves than they were with their former partners. It's always easier to blame it on the victim. Have seen it happen so many times already.
-
Look, I'm no economist but implementing austerity measures in the middle of a global recession is the stupidest thing Merkel has done. Austerity can work in the middle of a recession but only if global growth is strong enough to buffer it. Canada did it in the 1990s but benefited from the boom in the US.
The problem from my perspective is that Europe wants all the benefits of integration(The Euro) without paying for it(Sovereignty). I still do not fully understand the depth of the Euro crisis but I know that it is much more complex than simply saying that it is the fault of profligate governments.
In any case, if the status quo goes on, I predict France getting lumped with the PIIGS instead of Germany. Then breakup would have its foot in door and the costs of maintaining the Euro would probably be more than allowing it's disintegration.
-
I enjoy that there is a wide ranging conversation taking place. But debate the issues, not the people presenting them. Lets scale back a bit on the more member personal directions that this could go into please.
-
The problem from my perspective is that Europe wants all the benefits of integration(The Euro) without paying for it(Sovereignty).
This is very much the root of the issue.
Even Helmut Kohl already said, before the Euro was introduced, that a financial unification of Europe has to be followed by a political one, or it will ultimately fail.
One can bicker and quarrel and point fingers during the current crisis until everyone is blue in the face and one can rescue this and that country and introduce whatever reforms are the flavor of the month, but this is what it will always come back to and this is the issue that will eventually have to be addressed, if anything is to be accomplished at all. In the long term, Europe will have to aim for political unification and the financial crisis may as well be the catalyst that could finally convince everyone of that fact and start at least some movement in the right direction.
A painful process for all countries involved for sure... but arguably less painful than a continuation of a status quo that can not be sustained.
The pink elephant in the room of course being the fact that Europe in general is hardly the biggest issue the "world" has right now. I.e. if the US thoroughly drives itself fullspeed against the debt wall then there won't be anyone in position to rescue anyone else and it frankly won't matter what European country is worse or better off than the rest, the whole world's economy will suffer on a scale not seen since the Great Depression. The scary part here is that, as already shown during the housing bubble, it only takes one key company to go down to trigger financial armageddon and then it's all a question of whether the government can still take the additional abuse i.e. debt or whether the whole mess truly blows up in everyones face right there and then. National bancruptcy down the road vs. financial armageddon here and now is a wonderful choice... and right now, since the systemic issues have still not been addressed (and are matter of fact mostly not even being discussed as a "main/major issue", not even with an upcoming presidential election, funny that), any step to avoid the later still inevitably takes you closer to the former.
-
The problem from my perspective is that Europe wants all the benefits of integration(The Euro) without paying for it(Sovereignty).
This is very much the root of the issue.
Even Helmut Kohl already said, before the Euro was introduced, that a financial unification of Europe has to be followed by a political one, or it will ultimately fail.
One can bicker and quarrel and point fingers during the current crisis until everyone is blue in the face and one can rescue this and that country and introduce whatever reforms are the flavor of the month, but this is what it will always come back to and this is the issue that will eventually have to be addressed, if anything is to be accomplished at all. In the long term, Europe will have to aim for political unification and the financial crisis may as well be the catalyst that could finally convince everyone of that fact and start at least some movement in the right direction.
A painful process for all countries involved for sure... but arguably less painful than a continuation of a status quo that can not be sustained.
The pink elephant in the room of course being the fact that Europe in general is hardly the biggest issue the "world" has right now. I.e. once the US thoroughly drives itself fullspeed against the debt wall then there won't position to rescue anyone and it frankly won't matter what European country is worse or better off than the rest, the whole world's economy will suffer just the same.
The big problems with any political unification is that was not what the EU was set up for, it was intended as a means of creating an economic alliance and forcing economic reliance between members to prevent a 3rd Global War stemming from a European conflict as under the EU such a conflict would between member states would instantly deny crucial resource sources their economy had become dependant on. As a result the groundwork was never put in place for it to be a de facto or full blown government.
What has happened is that we no longer have a significant risk of a war between the big powers in Europe and thus the EU has achieved it's founding goal, but the open trade and other economic benefits are really handy for it's member states and so the EU has been maintained past its use by date to administer these conditions. Now when you have an organisation like the EU you generally need some for of council to administer changes formed by representatives of member states, currently this is in the form of a parliament which is in session most days of the week whose representatives are elected by national populations, all good so far, here is the catch, without fail every member government for the last several decades have dumped varying amounts of blame for economic issues in their country on the EU in general of the activities of other member states through the EU structure, meaning that the general consensus of the masses is either neutral or slightly anti EU.
These disillusioned national populations are of course the same population demographics who elect the Members of the European Parliament for their regions/nations so members are pulled between national loyalties + pressure from their home government and what's in the best interest in the EU and tbh national loyalties is what often wins out so everything is a cluster **** of compromises and special cases which makes new/revised legislation at best questionably effective.
This division also frustrates attempts to change the EU structure and cause it to get bogged down in years of negotiation as each nation tries to impose their own view on what should be done and ultimately each attempt fails as an agreement due to at least one veto carrying nation will be opposed to the current form because their aspects have been watered down too much for them to find acceptable. There is also the issue that some legislation needs to be ratified by each member nation to be applied to them.
And this is all before we consider recent EU expansions adding more voices to this mess from Nations wanting a piece of the economic pie at the time was not a bad pie to have.
-
The big problems with any political unification is that was not what the EU was set up for, it was intended as a means of creating an economic alliance and forcing economic reliance between members to prevent a 3rd Global War stemming from a European conflict as under the EU such a conflict would between member states would instantly deny crucial resource sources their economy had become dependant on. As a result the groundwork was never put in place for it to be a de facto or full blown government.
What has happened is that we no longer have a significant risk of a war between the big powers in Europe and thus the EU has achieved it's founding goal, but the open trade and other economic benefits are really handy for it's member states and so the EU has been maintained past its use by date to administer these conditions. Now when you have an organisation like the EU you generally need some for of council to administer changes formed by representatives of member states, currently this is in the form of a parliament which is in session most days of the week whose representatives are elected by national populations, all good so far, here is the catch, without fail every member government for the last several decades have dumped varying amounts of blame for economic issues in their country on the EU in general of the activities of other member states through the EU structure, meaning that the general consensus of the masses is either neutral or slightly anti EU.
These disillusioned national populations are of course the same population demographics who elect the Members of the European Parliament for their regions/nations so members are pulled between national loyalties + pressure from their home government and what's in the best interest in the EU and tbh national loyalties is what often wins out so everything is a cluster **** of compromises and special cases which makes new/revised legislation at best questionably effective.
This division also frustrates attempts to change the EU structure and cause it to get bogged down in years of negotiation as each nation tries to impose their own view on what should be done and ultimately each attempt fails as an agreement due to at least one veto carrying nation will be opposed to the current form because their aspects have been watered down too much for them to find acceptable. There is also the issue that some legislation needs to be ratified by each member nation to be applied to them.
And this is all before we consider recent EU expansions adding more voices to this mess from Nations wanting a piece of the economic pie at the time was not a bad pie to have.
Your post indeed excellently describes why there was up to this date no political unifcation - despite everyone knowing beforehand that a financial/economic unification would later require a political one in order to remain stable.
Possibly it was thought that political union may be easier to achieve "later" once everyone enjoyed all the benefits of a common currency... :shrugs: well so much for that. ;) lol.
It's important however, to not confuse the European Economic Community (EEC), which was indeed founded (around 1958) out of the desire to prevent future wars like the first two world wars, with the much later conceived idea of the "European Union", which only really gathered momentum by the end of the millenium and which actually is aimed at well.... unifying Europe - and not just economically.
-
very true, a mistake I should have know better than to make
-
www.economist.com/blogs/schumpeter/2012/10/greece’s-shadow-economy
A relevant discussion on how things might not be as bad for a portion of Greece
-
*Not to pound, but to clarify*, since it is already on record that I may have lied or something. The thing that sparked my comment about "racism" (which was a very small nuanced point) was this comment by MP-Ryan:
Not disputing that there are significant problems with the Euro as a whole and the way its policies have been run, but the simple fact is that some of the countries which were allowed into the Euro have a historical and cultural background of desire for little work, high pay, and great social programs.
IOW, "lazy". I won't further the point, it's so marginal and I'm sure MP didn't mean any offense whatsoever.
So that's a no to the moving on then. Since you haven't added anything new other than another long wall of text that still doesn't refute my original point, I'm simply done. Enough is enough, the walls of text are tedious.
This is somewhat disappointing. I've explained to you why these budget problems were created and exarcerbated by the systemic problems deriving from the architecture of the Euro, refuting or at least marginalizing most of your points, and your answer is "you haven't refuted me at all". Extremely disappointing.
The pink elephant in the room of course being the fact that Europe in general is hardly the biggest issue the "world" has right now. I.e. if the US thoroughly drives itself fullspeed against the debt wall then there won't be anyone in position to rescue anyone else and it frankly won't matter what European country is worse or better off than the rest, the whole world's economy will suffer on a scale not seen since the Great Depression.
That's not really a problem. As I've stated before, the US can only run into these kinds of problems when they cannot command their own printing presses and monetary policies. (If such issues would be so problematic, the japanese would have "hit" that wall a decade or more ago. They haven't). The biggest thing we can learn from this crisis is how much more awesome the architecture of the dollar is compared to the euro.
-
This is somewhat disappointing. I've explained to you why these budget problems were created and exarcerbated by the systemic problems deriving from the architecture of the Euro, refuting or at least marginalizing most of your points, and your answer is "you haven't refuted me at all". Extremely disappointing.
No, you haven't. You've pointed out repeatedly how the Euro has made problems worse, but every time we get into the financial state of affairs pre-Euro you're hand-waving about how stable these economies were. Since you've backed off the wall-o-text line-by-lines for the moment, let's get into that. Spain, the poster child you keep holding up, did not have a structural surplus. You're correct that no country does (or at least for long, because all democratic governments either spend that surplus or eliminate it through tax cuts). But my point in saying that is that the fact that Spain may have had a surplus is irrelevant. What the Euro crisis has shown is that a number of these countries who didn't have their financial ducks in a row when times were good - but looked as though they did, like Spain - subsequently got thrashed when the global markets tanked and took their house-of-cards banking systems with them.
Did the fact that they were part of the Euro make it worse? Absolutely. But that is precisely why I've said that membership in the Euro should have been more exclusive to begin with. It's perfectly fine to have a financial union between nations with disparate productivity levels provided they all have similar principles in the way their economies function and produce. The trouble arises when you throw a country like Greece (who I'm picking on because their finances were a corrupted trainwreck even before they were admitted to the EU, as we've found out in the last year or so) and a country like Germany into the same financial union without political union as well.
A few other posters have hit the nail on the head here - if you want a wide membership in the Euro, you need a political union as well. This is why countries like Canada have managed to do quite well even with the recession (Canada's finances are arguably the most stable in the G8 at the moment). While our provinces have some local autonomy and widely different levels of productivity while being unified with a single currency, there is still an overarching government that sets financial policy for all of them and equalizes the system. Luis, you've been drumming this point for a while about how the Eurozone could have experienced a great deal less pain - had the EU gone at it with unified financial policy you could have probably fixed this mess sooner. The trouble with that is that national governments would have to give up political autonomy as well - a point you already railed against when talking about Merkel suggesting the EU should be dictating control over national budgeting.
The Germans are in a tough spot - if they say everyone goes it alone, they get *****ed at for being selfish and causing the members-who-shouldn't-have-been-members to flatline. If they call for political unity to address the crisis, they get called worse (see swastikas in Greece on Merkel's visit) because they're perceived as trying to take away political autonomy from some EU member nations.
Circling back, that means either devising a Euro with a much more selective membership (as I've been saying should have been done in the first place), or devising a Euro in which member nations essentially become provinces/states of a unified European Union with complete political and financial authority. Given the response to German influence in the financial affairs at the moment in some of the PIIGS, I don't see option 2 as being politically palatable to a number of countries anytime soon. That means either taking Soros' advice or similar points to fix the Euro now, or start over with a much more selective membership and a condition in which auditors from the EU are doing forensic audits of each nations books over a period of years before a country can be admitted.
And please, if you're going to respond just leave the line by lines at the door and respond to the general message of the post rather than minutiae.
-
The US will hit the wall sooner than Japan. Japan's bond yields have been so low due to the high savings rate of the Japanese. The US does not have such a high savings rate but bond yields will be low for the foreseeable future as the the dollar is still the universal currency reserve(for now) and many still see treasury bonds as a safe haven.
Trying to pin the blame on the crisis on any one cause is fruitless at this stage. Firstly, such a crisis does not come from a simple cause like the ones politicians like to say they're about. Secondly, the focus should be on how to resolve the damn thing which is more political union or at the very least a banking union. Kicking anyone out of the Euro at this stage is counterproductive as it would trigger capital flights on the current PIIGS and bring breakup from a possibility to near certainty.
No one is blameless. The austerity Germany has imposed has unnecessarily prolonged the crisis and their unwillingness to take any real leading position looks likely to impose a lost decade on Europe. A depression in Greece and very likely the periphery, yet their greatest worry is still inflation. The PIIGS need to start pushing through labour reforms to get rid of labour rigidity to help employment instead of simply dumping more taxes on the people and more spending cuts. Everyone is to blame here but all the finger pointing right now has prolonged the crisis and made it far more painful than it needed to be.
-
@MP-Ryan
They were just as stable as any other non-eurozone country was. You were nitpicking about Spain's budget surplus not being structural (fair point), but the irony is that there was practically no other advanced country whatsoever running surpluses (be them structural or not) at all, so your point was moot. Small deficits are not even a problem (and this is why the Euro had a 3% limit on those, not 0%). The rate of debt against GDP in Europe is, despite all the troubles we are going through and all the deficits skyrocketing, still lower than the USAs (and let's even forget about Japan).
The main proof against all this backlash against the troubled countries debts and so on is to point out that the private debt in these countries is just as bad. Clearly, both the markets and the state institutions "failed" at the same time, which is a clear evidence that neither were at fault and rather a common denominator tackled them to the floor.
That same denominator was an inherently badly calculated borrowing yields from all banks in Europe. This is easy to calculate: if you suddenly pay less interest from all your debts, you will fool yourself into thinking you have more cash in your own hands. Which in turn you will spend, booming the economy (but not improving the productivity of it). Everyone will have the same potato in their hands, and suddenly they find out it's a hot one. This was a consequence of a badly managed Euro, not of a bad process of getting certain countries into it.
Now, we can discuss Spain if you want. The trouble of Spain can be summed up as having too many eggs in one basket, and it was the precise basket that collapsed in 2009 worldwide - as I said before, the construction in Spain was promoted by the idea of creating an "European Florida", which was a very worthwhile idea.
Now, if Europe were to be a more cohesive territory, the fact that a part of it tanked would be hedged by all the other parts that didn't. That's the whole premise behind securities, insurances and... ahem... economic unions. Had Spain been under the impression that they were really alone on their "venture", perhaps everyone involved (not only the public, but the private as well) would have been a lot more careful on their risk management.
A few other posters have hit the nail on the head here - if you want a wide membership in the Euro, you need a political union as well. This is why countries like Canada have managed to do quite well even with the recession (Canada's finances are arguably the most stable in the G8 at the moment). While our provinces have some local autonomy and widely different levels of productivity while being unified with a single currency, there is still an overarching government that sets financial policy for all of them and equalizes the system. Luis, you've been drumming this point for a while about how the Eurozone could have experienced a great deal less pain - had the EU gone at it with unified financial policy you could have probably fixed this mess sooner. The trouble with that is that national governments would have to give up political autonomy as well - a point you already railed against when talking about Merkel suggesting the EU should be dictating control over national budgeting.
I railed against it because of its lack of democracy, that is, what is being proposed is that a non-elected intergovernmental body have the final say on what each country decides to do in their own budget (which would be akin, realpolitically, to give up democracy on every peripheral country to Merkel and, by a lesser degree, Hollande), I fully agree with the larger point (which is rather obvious) of a currency union needing a political union.
If Europe would share the social burdens, all the austerity measures would have worked. Had Europe be built in such a way so that the unemployment subsidies, retirement salaries (?) and social security costs been completely shared (as in the USA or as in any particular country that controls its own currency), each country (or state) would have been able to manage their debt so much easier it isn't funny.
However, that entails a whole different conversation. Are we gonna build a federalized Europe? Are we gonna give up our independences? Right now, I don't see that happening without the curtail of democracy itself, that is, they building it behind our backs and against our interests (the devil is always in the details). A bureaucratic system that caters to every interest from the powerful against the minorities and the "peripherals" (call them PIIGS if you wish, or anything else). This process is happening before our very own eyes: the destruction of the soverreignity of the periphery bowing down to the core europe's interests.
And that means that the people will be against the whole idea, the program will have little popular support. And how is that sustainable?
-
To be clear, I was never pinning the blame for the Eurozone crisis on just one cause, but it's interesting that there are a variety of options that - if any just one had been exercised - could have prevented the whole thing from becoming a deeper mess.
The general theme that I'm seeing - that national finances weren't the fundamental problem at the basis of all of this, and they were victims of bad early-crisis planning - holds up only so long as you don't look at comparator nations. I already pointed at Canada's situation a couple times, but it's worth highlighting again because it demonstrates my point.
Canada at no point took a devaluation approach to manage the crisis - despite some whining from certain provinces, our currency has floated higher than usual against its usual benchmark (the US) since 2008. Part of that is because other currencies took a hit, but the point here is we didn't intentionally have to devalue the dollar to ride this out. This is a key issue because you've pointed out that the PIIGS could have avoided catastrophe had they devalued against the Euro mid-crisis. But, had any of those countries insisted on diversified economies, realistic national budgeting processes, or stricter regulation of overexposed banking sectors (Canada has done all three of these things) before or soon after joining the Euro, they could have weathered the storm quite nicely.
Instead what's happened is irresponsible national management of economies coupled with the benefits of the Euro and then the subsequently individualistic policies proposed to deal with the banking sectors collided to make a perfect storm and tank the economies of going-on 5, perhaps soon to be 6, countries. So while different policies on the Euro could have prevented the crisis from going nowhere nearly as badly, the entire mess could have been avoided through fiscal prudence in the first place. We (Canada) were lucky - our budgetary process was fixed, our banks were regulated, and our economy was diversified back in the 1990s through to 2006. Despite the fact that we also went Keynesian, we were in a good fiscal place beforehand. The PIIGS weren't - else the Euro mismanagement would not have hit them nearly as hard as it did (or, quite frankly, at all - look at the Germans).
And on the political union front, you're clearly demonstrating why the Germans ended up between a rock and a hard place. You really can't dump this all on Germany - there's no doubt this could have been handled better, but they would have been hated just as much or more for it. The German public (and probably the French, Belgian, and even Dutch) would not have bought into the idea of bailing out the banking sectors in countries that hadn't properly regulated them without some sort of political union, which is rejected by everyone needing bailouts because they lose their influence and autonomy, as you've frankly said.
So here we sit with the Eurozone in crisis.
-
This is where we depart. You insist on the general idea that countries were "irresponsible" and so on. I disagree with you there. I think they were just as "irresponsible" as any other country.
The major difference between a PIIGS country and Canada is that Canada can control its own currency, and the borrowing yields the canadian government has to subscribe to is realistic according to its currency and general economy. This was not the case with the PIIGS, where the markets had "established" that the risk was "shared" in the eurozone, thus the interest rates could go extremely low (2 to 3%). When the **** hit the fan and Merkel read the Maastricth treaty she noted that in fact the risk wasn't shared at all (woopsie daisy, my bad fellow peripherical friends it says right here you are on your own!), and thus those interests rose to 6,7% in Italy, Spain, and more in Portugal, and much much more in Greece, etc.
Let's be clear. If those interests had never risen (like in the USA where they actually fell, or Canada or so on), we wouldn't even be having any discussion on this. This has never happened in Canada. So I feel good for you that you do not have this problem, but let's have some perspective here.
There was also the matter of the Swiss central banks making huge buyings of central core european countries' debts, thus lowering their own rates (Germany, France), which even made things worse (by diverging even more their yields against the periphery). And perhaps a lot more "outstanding" market manipulators were in it real deep.
And on the political union front, you're clearly demonstrating why the Germans ended up between a rock and a hard place.
I didn't blame the "Germans". I blamed Merkel. Her incompetence, lack of leadership, downright sleaziness "where's the problem if our balance sheets are so amaaazing?", is what really annoys me, since she is the de facto leader of the eurozone and I never even elected her.
-
The periphery would not have to depreciate their own currency if they had one. The markets would probably do that for them by themselves.
Germany was one of the first countries to break the 3% deficit rule by the way. Then Merkel suddenly declared the rule to be cast in stone once Germany would clearly have no issue meeting that limit. Italy has a primary budget surplus and even during Berlusconi it still maintained that. Financial mismanagement is an inaccurate diagnosis of the Euro crisis.
-
As I believe I said earlier, the concern is not the size of the deficit so much as the solid financial backing behind it. Germany has the solid backing behind their economy where they can comfortably run a deficit of 3% or more. Somewhere like Greece doesn't. And Luis, you did give me some food for thought concerning the way the Euro and implied shared risk influenced the interest rates - but again, there was nothing stopping any of the peripheral countries from picking up a copy of the Treaty themselves and realizing that 'Oh ****, the risk in our financial sectors isn't actually shared so perhaps we'd better do something about this to deal with the possible risks we could face.' It's a measure that Canada is taking now - with astronomically low interest rates, or private debt levels and real estate markets went nuts, but the Bank of Canada and federal government have both taken action to bring those levels down so the country isn't overexposed. The peripheral countries had that option, and had they fully read the terms of the Treaty they should have considered exercising it.
I don't think we can escape from the fact that, regardless of German influence on overall Euro policy, there were a lot of things the periphery could have and should have done to keep their own finances in line, but ultimately didn't. Sure, hindsight is 20/20 and all but the collapse of the global financial system was predicted by several economists 6+ months in advance, who were promptly ignored. The nations who ignored them and hadn't got their financial affairs in order got hit hard (the US, PIIGS) while those that had their financial **** sorted didn't have to worry so much either way.
-
but again, there was nothing stopping any of the peripheral countries from picking up a copy of the Treaty themselves and realizing that 'Oh ****, the risk in our financial sectors isn't actually shared so perhaps we'd better do something about this to deal with the possible risks we could face.'
It wasn't written but it was implied in every political move, because the "process" was "inevitable", and the consolidation of a more robust architecture was believed to be "in the pipeline" by everyone, including the markets. And you are still talking about "countries", when the problem was much more generic: the markets that established the rates were free markets, not institutional governments. The "common knowledge" everyone had was that the risk was de facto shared. No one had predicted that a crisis like in 2008/9 would occur, and further no one would predict that in such a crisis a $*"#head like Merkel would leave everyone in the ****ters, based on a piece of paper rather than getting her sights from the spirit of the euro.
Sure, hindsight is 20/20 and all but the collapse of the global financial system was predicted by several economists 6+ months in advance, who were promptly ignored.
Nassim Taleb, a very marginal man, but mostly Robert Schiller who has this uncanny ability to foresee a crash before everyone else (had done the same in 2000/1). I myself was already furiously talking to everyone around me in November 2007 about the ****storm that was about to hit us. However, the "consensus" (whenever I read this word as an argument, I just LAFF) was the opposite: it was going to be a
mild correction. And it couldn't be otherwise, for the collapse of a boom happens precisely (like by definition) when a sufficiently big number of people (an elite minority) realises that it is going to collapse. Had the consensus been reached earlier, the collapse would have happened earlier as well.
-
I work in law enforcement and hear the "but it's the spirit of the law" "but that's not how we meant to write it" "it's implied!" arguments all the time. If there's one thing I've learned in approaching 8 years of law enforcement experience, it's this:
If it's not written into legislation, it's irrelevant. If these countries were basing their fiscal policy on an implied principle that didn't make it into the treaty, I feel even less sorry for them.
And it IS governments. Even in a free market, governments have a considerable ability to influence interest rates through policy decisions. Even without manipulating interest rates there is quite a bit that government can do to adjust economic functions - particularly if the functions in need of adjustment concern housing, construction, imports, and exports. Just because an interest rate is established at an absurd level does not mean that other policy actions aren't possible to discourage financial overexposure. Action along these lines is precisely what several national governments (mine included - see mortgage rule adjustments) have been doing this year.
-
Well, of course, but that is a long term process, not a short-term emergency. The PIIGS were surprised by the events exactly when everyone was doing Keynesian measures. This also happened in Portugal. In Portugal, 2009 was an election year. The Socialist Party in power tried to porsue Keynesian policies to counter the coming deep recession, by porsuing public works. At the time I liked the decision, so I voted for them. However, in that same year, the interest rates boomed, and the result was that after a year where we had managed to control the deficits (the overall debt had actually decreased in 2007 and 2008), the deficit in 2009 was 9.6%. Everyone blamed the "socialists", but they had no power over the interest rates, for they rallied in less than 5 months.
We must realise that the crisis was sparked precisely because of the lack of understanding of long-tail events in the finantial sector, and a misunderstanding of the risks of derivatives, which were at the time left for computer algorithms to calculate and so on. The Black-Scholes model*, for instance, was a "huge breakthrough" at the time that managed to calculate precisely the amount of risk that anyone would incur by buying derivatives (and thus created the whole derivatives market). People like Nassim Taleb raged furiously against these kinds of "naive" equations that underestimated the risks, but they were ignored. So the markets boomed.
When the **** hit the fan circa march 2008, it became slowly obvious that all the agencies which rated these "products" triple A and so on had flawed methodologies, they were filled with corruption and so on. Then in 2009, Merkel made that speech. By the fall of that year, these agencies had rated Greece, Portugal, Ireland and so on as "trash", and the yields skyrocketed. You might say that the countries can do things to create credibility and so on, but you have to realise that this credibility existed before these moments (and so to demand to the rulers of these countries that they had to create credibility when there was one already would be silly), and it took only a few months for everyone to realise that after all, these countries' finances were in deep trouble.
I remember reading really good things about how the central bank / finance minister of Canada understood the fragilities named by Taleb much sooner than everyone else, and actually made sound policies to minimize their exposure to a possible crisis. So, again, I congratulate your government for having the insight practically no one else had.
*(http://static4.businessinsider.com/image/4ffc4b2369beddb15e000000-400-300/the-blackscholes-model.jpg)
-
Germany is the third country to where Portugal exports. http://www.indexmundi.com/portugal/exports.html
And Spain is the biggest partner, and France as big as Germany.
Portugal Exports - partners: Spain 25.2%, Germany 13.8%, France 12.2%, UK 5%, Angola 5% (2009)
And that is the meaning of it ? Nothing in special.
Do the German's drink more Wine from Portugal, if the Wines from Spain, France and Italy are also reduced in their price because Germany has left the Euro Zone ?
If Mercedes sells less cars and buys less leather and fine wood from Portugal for the seats and dashboards, is this a positive Effect ?
Econ 101 may give a general hint, but the real effects may differ, depending on the good exported and imported - and even by company.
So if generally Portugal will profit from an Euro Zone without Germany because Germany is the third country to where Portugal exports... how much bigger will be the benefit for the prime Import Partners ?
Germany: Imports - partners: China 9.7%, Netherlands 8.4%, France 7.6%, US 5.7%, Italy 5.2%, UK 4.7%, Belgium 4.2%, Austria 4.1%, Switzerland 4.1% (2009 est.)
Netherlands Exports - partners: Germany 26%, Belgium 13%, France 9.2%, UK 7.7%, Italy 4.9% (2009)
France Exports - partners: Germany 16.4%, Italy 8.2%, Belgium 7.7%, Spain 7.6%, UK 6.8%, US 5.1%, Netherlands 4.2% (2009)
Italy Exports - partners: Germany 13%, France 11.6%, US 6%, Spain 5.9%, UK 5.2%, Switzerland 4.7% (2009)
Belgium Exports - partners: Germany 19.1%, France 17%, Netherlands 12.2%, UK 7.2%, US 5.3%, Italy 4.7% (2009)
Austria Exports - partners: Germany 32.1%, Italy 7.9%, Switzerland 4.8%, France 4.2%, Czech Republic 4.1% (2009)
Spain Exports - partners: France 18.7%, Germany 10.7%, Portugal 9.1%, Italy 9%, UK 6.3% (2009)
If you want to apply Econ 101 the real profiteers from a Euro Zone without Germany would be these Nations, not Greece or Portugal.
And if the effect on Portugal and Greece is big enough to save them ?
If the investors on day came to the conclusion that there is a real chance Germany isn't able to pay the interest because the German Economy has massive problems or because the German Government doesn't seem to care about the debt any more... well when the Interesting Times ( as in the Chinese Proverb ) will start - not only for Germany, but for the whole Euro Zone... ;)
Bah. Those times are not going to happen. The Euro is a glorified Mark anyway.
Your fate in the German Economy and the wisdom of the next Federal Government of Germany is bigger than mine ;)
I'm cynical about it. Using the actual low interest rates for German Bonds to spend more money and hope what nobody will notice it until the next elections are over would be a logical thing for any politician.
And even than you can always blame the American Rating Agency's the greedy Banksters and the 1% when the problems start.
-
Germany is the third country to where Portugal exports. http://www.indexmundi.com/portugal/exports.html
And Spain is the biggest partner, and France as big as Germany.
Portugal Exports - partners: Spain 25.2%, Germany 13.8%, France 12.2%, UK 5%, Angola 5% (2009)
And that is the meaning of it ? Nothing in special.
Are you trolling me now? Because either you are not paying attention to basic reasoning here, or you are just pulling my leg. If you think that 12.3% of exports is "nothing in special" and that a devaluation against the Mark wouldn't have a noticeable effect in the commercial balance sheets then you are pretty high on weed.
Of course, it is not only about the Mark. It's about the entire rest of the world, to which the euro-without-the-mark would behave much differently. If you will porsue this line of thinking without making any reasonable argument from now on, I'll just stop the conversation.
Do the German's drink more Wine from Portugal, if the Wines from Spain, France and Italy are also reduced in their price because Germany has left the Euro Zone ?
Yes, Germans will buy more Portuguese wine, just as they will buy more spanish, french and italian wine.
If Mercedes sells less cars and buys less leather and fine wood from Portugal for the seats and dashboards, is this a positive Effect ?
Yes, because a Mercedes car is much more expensive than the whole amount of portuguese goods in it.
So if generally Portugal will profit from an Euro Zone without Germany because Germany is the third country to where Portugal exports... how much bigger will be the benefit for the prime Import Partners ?
Germany: Imports - partners: China 9.7%, Netherlands 8.4%, France 7.6%, US 5.7%, Italy 5.2%, UK 4.7%, Belgium 4.2%, Austria 4.1%, Switzerland 4.1% (2009 est.)
Netherlands Exports - partners: Germany 26%, Belgium 13%, France 9.2%, UK 7.7%, Italy 4.9% (2009)
France Exports - partners: Germany 16.4%, Italy 8.2%, Belgium 7.7%, Spain 7.6%, UK 6.8%, US 5.1%, Netherlands 4.2% (2009)
Italy Exports - partners: Germany 13%, France 11.6%, US 6%, Spain 5.9%, UK 5.2%, Switzerland 4.7% (2009)
Belgium Exports - partners: Germany 19.1%, France 17%, Netherlands 12.2%, UK 7.2%, US 5.3%, Italy 4.7% (2009)
Austria Exports - partners: Germany 32.1%, Italy 7.9%, Switzerland 4.8%, France 4.2%, Czech Republic 4.1% (2009)
Spain Exports - partners: France 18.7%, Germany 10.7%, Portugal 9.1%, Italy 9%, UK 6.3% (2009)
If you want to apply Econ 101 the real profiteers from a Euro Zone without Germany would be these Nations, not Greece or Portugal.
And if the effect on Portugal and Greece is big enough to save them ?
Yes. It would be a benefit to all those countries against Germany. And to the rest of the world.
Your fate in the German Economy and the wisdom of the next Federal Government of Germany is bigger than mine ;)
I'm cynical about it. Using the actual low interest rates for German Bonds to spend more money and hope what nobody will notice it until the next elections are over would be a logical thing for any politician.
And even than you can always blame the American Rating Agency's the greedy Banksters and the 1% when the problems start.
Germany is far, far from a debt problem, so I really have no idea what you are banging about here.
-
I railed against it because of its lack of democracy, that is, what is being proposed is that a non-elected intergovernmental body have the final say on what each country decides to do in their own budget (which would be akin, realpolitically, to give up democracy on every peripheral country to Merkel and, by a lesser degree, Hollande).
Political Union, as mentioned earlier, would of course not mean the abolishment of democracy. (That's some crazy line of thinking, seriously.)
What political union ultimately means is of course a unified Europe with some kind of federal system for its membership states - why would you think that this would/should be anything else but an European democracy? /shakes head.
-
Sounds like Europe is having to deal with the same stuff we had to deal with when we were trying to make a unified American nation. :lol:
-
Sounds like Europe is having to deal with the same stuff we had to deal with when we were trying to make a unified American nation. :lol:
Yeh well... one might hope that during our now oh so civilized 21st century :cough: it might be possible to do such a thing without the obligatory civil war ;) lol.
A cynic would propably say the lack of civil war is definitely why it's taking so frigging long to even decide how or even if to unite :)
-
Yeah, I hope that nonsense does not happen again.
Last thing the world need is an European Congress filled with byzantine politics and politicians that can't even get why people are mad at the idea of internet censorship.
-
Sounds like Europe is having to deal with the same stuff we had to deal with when we were trying to make a unified American nation. :lol:
Yeh well... one might hope that during our now oh so civilized 21st century :cough: it might be possible to do such a thing without the obligatory civil war ;) lol.
A cynic would propably say the lack of civil war is definitely why it's taking so frigging long to even decide how or even if to unite :)
Considering the Civil War was 80 years after the Constitution, give or take, you've got time to iron out your problems. No guarantees on the Scottish and Irish not rebelling against freshly-imposed liquor taxes, though. :p
-
I railed against it because of its lack of democracy, that is, what is being proposed is that a non-elected intergovernmental body have the final say on what each country decides to do in their own budget (which would be akin, realpolitically, to give up democracy on every peripheral country to Merkel and, by a lesser degree, Hollande).
Political Union, as mentioned earlier, would of course not mean the abolishment of democracy. (That's some crazy line of thinking, seriously.)
What political union ultimately means is of course a unified Europe with some kind of federal system for its membership states - why would you think that this would/should be anything else but an European democracy? /shakes head.
Perhaps before calling people crazy you'd do better by actually reading what they are saying. I have little against a "politically unified europe". This is not what is at the table right now. Right now, what is being discussed is a bureaucratic comittee nominated by the "EU" (much like the european commission right now) which will have powers over the national budgets. The lack of democratic oversight over these kinds of comittees and commissions means they have zero de facto power, and the leaders of Germany, France and a few others are who actually develop the policies. But the problem is, those leaders are elected by their own electorate and owe nothing to everyone else.
So TL DR: your pipe dream of a "of course it would be democratic" EU is far from what is actually happening.
-
I railed against it because of its lack of democracy, that is, what is being proposed is that a non-elected intergovernmental body have the final say on what each country decides to do in their own budget (which would be akin, realpolitically, to give up democracy on every peripheral country to Merkel and, by a lesser degree, Hollande).
Political Union, as mentioned earlier, would of course not mean the abolishment of democracy. (That's some crazy line of thinking, seriously.)
What political union ultimately means is of course a unified Europe with some kind of federal system for its membership states - why would you think that this would/should be anything else but an European democracy? /shakes head.
Perhaps before calling people crazy you'd do better by actually reading what they are saying. I have little against a "politically unified europe". This is not what is at the table right now. Right now, what is being discussed is a bureaucratic comittee nominated by the "EU" (much like the european commission right now) which will have powers over the national budgets. The lack of democratic oversight over these kinds of comittees and commissions means they have zero de facto power, and the leaders of Germany, France and a few others are who actually develop the policies. But the problem is, those leaders are elected by their own electorate and owe nothing to everyone else.
So TL DR: your pipe dream of a "of course it would be democratic" EU is far from what is actually happening.
I guess the part where everyone acknowledged the difficulties and reasons why - of course - a political union did not happen yet kind of eluded you?
The fact that it will not happen anytime soon is however in no way or form an argument against why it is needed. A political union is needed if the financial union is to succeed in the longterm and anything but a democratic elected government is simply out of the question. The mess we have right now is more or less a result of the EU not really being able to *quite* decide yet, organisationally speaking, whether it is a collection of autonomous membership states or an actual political body for the whole Union... to some extents it is both right now, which leads to all the mess.
I actually quite agree with you on that the status quo of the EU is not really optimal in regards to being transparent, democratic or efficient.
What you do have to keep in mind is that you are observing a process that is quite literally trying to fit dozens of square pegs through round holes.
The only alternative that history offers to this process, up to now, is shooting all the ba*tards that disagree with you - and no one in the EU appears to want to go back to that, naturally. ;)
In other words... sometimes people just need enough time to find out that the status quo really does not work and something else (i.e. a true political union) is really needed before they are willing to truly consider implementing it... and as said earlier... the financial crisis appears to be rather good at teaching people what does not work right now.
-
In the long run Germany will just run the EU, anyways, since nobody else will want to put in the effort necessary to keep Europe running smoothly.
-
I guess the part where everyone acknowledged the difficulties and reasons why - of course - a political union did not happen yet kind of eluded you?
It must have eluded me. I haven't seen a good argument on why the people should be excluded from the political effort to unify europe anywhere. The implicit argument there is that "peoopl r stoopid" and untrustworthy, but you know what? I trust the politicians even less.
The fact that it will not happen anytime soon is however in no way or form an argument against why it is needed. A political union is needed if the financial union is to succeed in the longterm and anything but a democratic elected government is simply out of the question. The mess we have right now is more or less a result of the EU not really being able to *quite* decide yet, organisationally speaking, whether it is a collection of autonomous membership states or an actual political body for the whole Union... to some extents it is both right now, which leads to all the mess.
Well thanks for that captain obvious. I'm still oblivious to what extent that has anything to do with anything I've said (that prompted your "your line of reasoning is just crazy"), but yeah roses are red and the sky is blue and so forth.
I actually quite agree with you on that the status quo of the EU is not really optimal in regards to being transparent, democratic or efficient.
What you do have to keep in mind is that you are observing a process that is quite literally trying to fit dozens of square pegs through round holes.
The only alternative that history offers to this process, up to now, is shooting all the ba*tards that disagree with you - and no one in the EU appears to want to go back to that, naturally. ;)
Problem is that historically, the EU has never been democratic. The whole process has been decided top-down, "trickle-down-politics" (ah, I owe that to Romney sleazy line!), where referendums are repeated ad nauseum until the "people" vote "the right way", the executive powers are not elected, etc.
So while we can all go kumbaya and sing the all goodies that have stemmed from an unionized europe, we must confront the baddies and realise that because of the latter, we are in a political vaccuum, where no one really wants to build a federalized europe (and by no one I mean the people). This means we are far, far behind the utopia you are portraying here. Everyone loves utopias, but we do live in the present.
In other words... sometimes people just need enough time to find out that the status quo really does not work and something else (i.e. a true political union) is really needed before they are willing to truly consider implementing it... and as said earlier... the financial crisis appears to be rather good at teaching people what does not work right now.
Go tell the greeks about your vision and listen to what they are saying. Their answer is the Golden Dawn. It is a disease spreading quickly and viciously. And evidence that probably it is too damn soon for a "political union". There are far too many cultural differences in Europe for such a thing to occur. And I see no politician with enough insight and popular backing that can drive everyone to your paradise. All are mediocre hacks who bow down to interests and popularism.
-
There s a couple of things eluding you Luis Dias:
First... in the most unmistakable wording possible:
A political union at this point did of course not happen yet and it will not happen for quite a while.
But... again, that does not change the fact that a political union is needed if the financial union is to succeed longterm.
How... do you construct these statements of mine into "my" political union/paradise?
These two statements make rather evident the problem the EU currently faces... no more no less. That is what I said, no more, no less. So please do stop putting words about supposed utopias or paradise into my mouth, it's getting ridiculous.
The only thing I did say is that the financial crisis appears to teach people what does not work. Once everyone is truly convinced that the status quo is a deadend people usually do look for alternatives. But even if everyone was suddenly convinced that we really do need to have one European government, right now, tomorrow! ... then hammering out the details would still take decades of course.
I guess the part where everyone acknowledged the difficulties and reasons why - of course - a political union did not happen yet kind of eluded you?
It must have eluded me. I haven't seen a good argument on why the people should be excluded from the political effort to unify europe anywhere. The implicit argument there is that "peoopl r stoopid" and untrustworthy, but you know what? I trust the politicians even less.
There isn't a good argument for "why the people should be excluded from the political effort in europe"... and I certainly have never claimed that there was either. Implementing a true political union while at the same time abolishing democracy would be idiotic.
However, again, this does not change the fact that a political union is needed for the financial one to succeed. How you construe that fact to supposedly mean someone wants to abolish democracy is indeed crazy.
There is no easy solution... but the requirement for a political union and the difficulty of implementing one is the underlaying reason for the difficulties the EU is currently facing.
That is the whole point I was making here you know ;) ... the root of the issue is an organisational/structural problem and you will never fix that by trying to fix single countries like Greece or slapping bandaid fixes on the symptoms.
On the upside... at least in comparison, globally, the EU is still in pretty good shape even with the issues it has right now.
I.e. midterm, if the US doesn't go under financially, then it's gonna be a breeze for Europe.
On the other hand... if either the US or the EU can't, and financial meltdown really occurs, then both nations will be sh** out of luck. - and China as well lol.
-
The only one misrepresenting things here is you when you stated I was being crazy, here:
Political Union, as mentioned earlier, would of course not mean the abolishment of democracy. (That's some crazy line of thinking, seriously.)
When I was being anything but, since I never said anything like that. So if you want to discuss on how a currency union is impossible without a political union, go and find out anyone who actually disagrees with that notion and berate him instead. If you want to discuss something with me, please make the small effort to actually read what I write first.
There isn't a good argument for "why the people should be excluded from the political effort in europe"... and no one has ever claimed that there would be an argument for it either. It would be horrible.
If there isn't, and if you didn't even try to make one, then I'm completely at odds to what you disagree with me. Call me crazy and then furiously agree with my statements. What the hell are you smoking man, I want some of that **** too.
-
Sounds like Europe is having to deal with the same stuff we had to deal with when we were trying to make a unified American nation. :lol:
Well, speaking of the United States of America: The funny thing is that most Europeans don't understand the GOPs reason to fight against a bigger federal Government.
But at the moment and even for the near future they would never accept a unified social security system (unemployment, healthcare, retirement) in the EU, and the EU is often the scapegoat when national politicians have to explain unpopular laws.
In the long run Germany will just run the EU, anyways, since nobody else will want to put in the effort necessary to keep Europe running smoothly.
A great part of the actual problem is that the German politicians don't want to run the EU.
Germany was one of the first countries to break the 3% deficit rule by the way. Then Merkel suddenly declared the rule to be cast in stone once Germany would clearly have no issue meeting that limit.
That's correct. The Socialdemocrates and Greens broke the 3% deficit rule in 2002 and this was criticised by the Christdemocrates (Merkels Party) and the Liberals.
So holding the line of the defict rules is for Merkels Party and the Liberals a must, otherwise they became unbelievable.
The reason for breaking the rules was a crisis in the German economy, a flood in eastern Germany, the bad policy of the former governments, the stupid rules of the EU, the recession in the US market, ect., ect., ect... (there is always a crisis that justify more public spending).
Well, breaking the rules wasn't helpful, the economy wasn't booming and so the Government of the Socialdemocrates and Greens started with evil neoliberal policy:
They raised the age for retirement to 67 years and ban the practice of early retirement ( employees were send with 50 or 55 to retirement "to make room" for younger workers ).
Welfare for the unemployed was cut: from 53 % of the former salary for unlimited time to 63% of the salary for one year. After that year there is a basic welfare for everyone.
And you can't refuse a work offer if the job is under your qualification without getting basic welfare cut.
Most of the people who work for minimal wage haven't any negative effect by those new rules (they were screwed before, but nobody gave a dam, and are still screwed now) but all the well paid engineers, doctors and other high paid specialists are still be upset because they will be now treated as somebody once told me "Like Bums and Welfare Queens" (fact: most of the people on basic welfare have had bad luck: single mothers or chronically ill persons or workers without professional formation - sometimes all together ).
The effect was what during the next federal elections the Socialdemocratic party lost many Votes and get a fame as traitors to the working class, and Merkel was elected as Chancellor.
-
Let me rephrase: eventually the German leaders will get angry, decide the people in the PIIGS nations are idiots, and try and conquer Europe... again. 50/50 odds say Britain joins them so they can rebuild the British Empire. :lol:
-
Sounds like Europe is having to deal with the same stuff we had to deal with when we were trying to make a unified American nation. :lol:
Well, speaking of the United States of America: The funny thing is that most Europeans don't understand the GOPs reason to fight against a bigger federal Government.
But at the moment and even for the near future they would never accept a unified social security system (unemployment, healthcare, retirement) in the EU, and the EU is often the scapegoat when national politicians have to explain unpopular laws.
And at the same time some American politicians are always pointing towards some of those European countries and their national social security/healthcare systems when ranting against the evils of socialism in general and especially when ranting against unified social security and healthcare in the USA. - despite those countries being very wealthy and doing very well.
Politics... hah.
Also... from a citizens perspective it does not matter whether their national government or the EU is responsible for their healthcare.
Fact is... as German I am able to enjoy a national healthcare systems... while Americans do not.
Anyways... lets not drag healthcare into an EU discussion. The two are separate issues.
If the EU was a unified political body you could raise matters like that, but right now it really is not.
Discussing the lack of any kind of unified policies that a political entity, which has no power to implement them, did not implement, is rather pointless.
-
The periphery would not have to depreciate their own currency if they had one. The markets would probably do that for them by themselves.
Germany was one of the first countries to break the 3% deficit rule by the way. Then Merkel suddenly declared the rule to be cast in stone once Germany would clearly have no issue meeting that limit. Italy has a primary budget surplus and even during Berlusconi it still maintained that. Financial mismanagement is an inaccurate diagnosis of the Euro crisis.
Yes, exactly. I completely agree with you. That is why this whole debate here between Luis Dias and MP-Ryan almost completely missed the point. The latter seems to think the most important condition for a monetary union would be low public debt. The Euro's creators, especially the Kohl government (which was nearly as incompetent as the current Merkel government is), also thought that, but that is completely wrong. Low public debt is an absolutely secondary, if not tertiary, condition for creating a working a currency union. The most important thing is that the national inflation rates do not differ too strong in the medium run.
I'll try to explain it right from the beginning: The Euro led to nominal interest convergence, meaning the economies in the south had to pay the same low nominal interest rates like the economies in the north. That's obviously the goal of a monetary union: You have one central bank that induces one interest rate for all member countries.
Now the southern economies had a higher inflation rate than their nothern counterparts, especially Germany and Austria, which had two effects:
First, it means they lower real interest rates (real interest = nominal interest minus inflation rate) which means a higher stimulus for making debt. Spain even had negative real interest rates between 2002 and 2006 or so. That explains mostly were the spanish house price bubble comes from.
Second, their goods became more expensive compared to goods from northern Europe, especially Germany.
Usually, we have national monetary policy and exchange rates to counteract such developments. The Banco de Espana could've raised national interest rates and Greece could've devalued their Drachma in order to regain price competetiveness.
Now were do these different inflation rates come from? Germany has kept its wage increasments behind its productivity increasments since 1996 while in the South wages increased their wages above their productivity increasments. The german development did not happen by accident, but by deliberate political decisions and of course Germany is to be faulted for that as it aimed at having that absurd current account surplus which is nothing more than the counter entry of its trade partners' current account deficit. Of course countries like Greece are to be blamed for the far too strong wage raises, but that is only one side of the medal. I think most Southern Europeans pretty much realized what went wrong on their end of the bill and that they have to work to get it right. The only country that still didn't get it is Germany.
This is not a soverneign debt crisis! It is a debt crisis, however. As I said before the southern countries all have a current account deficit. They import more goods and services than they export. This means they consume more goods and services than they produce. The difference must, for obvious reasons, be paid by debts. This debt, again, must be supplied by someone, obviously someone who consumes less goods and services he produces. In this case: Countries with a current account surplus like Germany.
So to solve this crisis we ALL have to equal our current accounts by coming back to a wage policy where wages rise with productivity. Government debt does hardly play any role in there.