By Tim Lister, CNN
Greece may have given us the word democracy and many of the principles of civil society. But now it is "the sick man of Europe," and the people of other European democracies are asking whether it's worth saving with billions more dollars of their money. Put crudely, their argument is this: So what if Greece slides ignominiously out of the eurozone?
Goodbye Greece ...
In continental terms, Greece is peripheral. It doesn't sit on reservoirs of oil, and it relies on agriculture and tourism as money-earners. It accounts for just 5% of the European Union's economic output. With the Cold War long over, its strategic position on the edge of the Balkans is not as important as it was.
Second, critics question whether Greece has the will or capacity to stay within the eurozone. In last Sunday's elections, the main Greek parties - those that had promised to swallow the medicine doled out by the European Union and International Monetary Fund - were trounced at the polls. Thursday, a third political leader was invited to try to form a government. Greek commentators predict no stable coalition is likely - and new elections probable, just as a further $15 billion of austerity measures are due.
Two weeks ago, the governor of Greece's Central Bank, George Provopoulos, warned that unless the country stayed the course, there could be "a disorderly regression, taking the country back several decades and eventually driving it out of the euro area and the European Union."
A majority of Greek - some 70% - tell pollsters they want the country to remain in the eurozone. But a substantial minority have just voted for parties that oppose what they see as austerity imposed by Berlin. They believe the medicine is actually making the situation worse. This year, the Central Bank forecasts the economy will shrink by 5%, after a 7% contraction last year. That means fewer jobs, less tax revenue and more difficulty meeting debt obligations.
Third, is the endless bailout smart economics? Or does it just perpetuate the crisis, as new debt replaces old? A confidential analysis by the IMF, European Central Bank and European Commission in February projected that Greek debt would still amount to 129% of GDP in 2020 and could be as high as 160%. The analysis, obtained by Reuters in February, estimated Greece would need some $175 billion in financing over the next two years.
Some argue that so long as Greece uses the euro as its currency, it will never become competitive. Research by investment bank Goldman Sachs concluded Greece needed a real depreciation in its exchange rate of a whopping 30% to restore competitiveness. Compare its situation to that of Iceland, which after a financial meltdown in 2008 thanks to its over-stretched banking sector, went cold turkey with a 40% devaluation of its currency and let bank creditors whistle in the wind. Now it's started growing again, albeit modestly.
U.S. economist Kenneth Rogoff has argued that Athens should be granted a sabbatical from the eurozone while remaining in the European Union, allowing it reintroduce the drachma at a deep discount to the euro and making its tourism industry wildly popular.
Hans-Werner Sim, head of German think tank Ifo, agrees. The money being showered on Greece to keep it in the eurozone would be better spent lubricating its departure, he says.
"The drachma will immediately depreciate, and the situation will stabilize very quickly. After a short thunderstorm, the sun will shine again," he told German magazine der Spiegel.
Fourth, beyond the discouraging arithmetic, some argue that the Greek state is too dysfunctional to cope with its massive obligations. Greece has a tax system that barely works, recalcitrant labor unions and extensive graft. The latest corruption league table from Transparency International ranks Greece as 80th – along with El Salvador.
"For decades the political elite, mired in corruption and rent-seeking, has followed the path of wasteful spending and patronage," wrote Kostas Bakoyannis, the mayor of Karpenisi, in the Wall Street Journal last month.
Greece hasn't privatized a single, state-owned industry despite repeated promises to do so. Its social fabric is fraying and it has a growing problem with political violence. Add to that, now, an unstable political order.
And finally, if Greece is unable to get its house in order and uncertainty persists, the dreaded contagion effect will rear its head again. It's a truism that markets hate uncertainty, and for the last year Greece has delivered it in weekly installments.
The never-ending melodrama could worsen the psychological climate for other "olive-belt" members of the eurozone. Negotiations on restructuring Greek sovereign debt have already left international investors wary of buying other south European debt. According to the Financial Times last month, investors have withdrawn $130 billion from Europe's sovereign bond markets over the past two years.
On the other hand ...
The opposing argument is that a "disorderly default" or even a managed exit by Greece would have far-reaching consequences for Europe - none of them good - and misreads the Greek mood.
Pierpaolo Barbieri, Ernest May Fellow at the Harvard Kennedy School's Belfer Center, has written extensively about Europe's financial crisis.
"Greek voters have turned against the old duopoly of PASOK and New Democracy," he says, referring to the dominant parties of the past 30 years.
"They are tired of crisis. That doesn't mean they are against being part of the eurozone. They realize their savings would be wiped out if a devalued drachma took the place of the euro and that Greek banks would collapse. So it's important to separate the weakness of the existing political parties from the issue of the bailouts and the eurozone."
Second, there is no playbook for leaving the single currency, no rules governing expulsion. It was just never envisaged. A new Greek government, by persistently defaulting on debt repayments, might effectively vote itself out of the eurozone, but the process would be messy. Greek companies that take advantage of the single market would be badly affected.
"Any announcement of Greece's departure would wreck havoc in the markets. If Greeks elected someone who wanted to pursue this path, it would be impossible to get back in at a later date," Barbieri told CNN.
In addition, he says, there is no guarantee that excising Greece from the eurozone will relieve pressure on other members. It might simply refocus anxiety on the next most vulnerable state.
"If Greece were to fall out, what would that say to Portugal, Italy, Spain and Ireland? There would be a danger to the whole European construction, including the single market. The Germans often say "If the euro fails then Europe fails" - and project Europe has been at the core of German foreign policy for half a century."
Italy, Spain and Portugal are in the middle of painful restructuring; just this week the Spanish government announced it would have to step in to rescue the country's third largest bank.
The worst-case scenario: that the whole concept of an "ever-closer union" toward which Europe has been striving will unwind, one state at a time.
"Europe will have difficulty forming a federation, if its first action is to jettison countries that are unable to make ends meet," wrote commentator Barbara Spinelli in the Italian newspaper la Repubblica.
Let them eat carrots
Is there a way to muddle through? Maybe. But it will require a tilt from "austerity" toward "growth" to persuade the Greeks that their suffering will not be endless.
The basic choice may remain bailout or bankruptcy, but the bailout can be sweetened, as a spokesman for EU Economics Commissioner Olli Rehn hinted Tuesday.
"We can do lots to assist Greece, and we are doing so. Our member states, our taxpayers in other European member states of the euro area, are providing this solidarity," he said.
Concrete action must follow, says Barbieri.
"Europe needs to show the Greeks that they have reason to hope by staying the course, that it won't just be pain and more pain. There have to be measures to help growth, such as European investment projects in infrastructure and help for small and medium businesses starved for funding, which can be achieved through the European Investment Bank. The ECB should continue to help Greek banks, so as to start lending again."
Next year, Angela Merkel will be seeking a third term as German chancellor. If she gets one, analysts say, she may have greater freedom to tilt toward growth.
"It would be a positive development if Francois Hollande [the newly elected French President] could hasten this development and create 'rewards' for reforming countries, so as to remind European electorates the monetary union is not a 'suicide pact,' says Barbieri.
It may be that even with a rancorous political atmosphere, mass unemployment and street protests, Greece is actually making progress. If (yes, it's a large if) the next round of public spending cuts goes through Greece get close to achieving what's called a primary balance, its revenue will pay for its spending. According to the Central Bank, the economy may finally stop shrinking in 2013.
But 2013 seems a long way off, and these are the first tentative steps toward convalescence. Anyone who has seen the movie "Monty Python and the Holy Grail" will recall what happened to the man who insisted he wasn't dead yet.
© 2012 Cable News Network. Turner Broadcasting System, Inc. All Rights Reserved.
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if greece is left to sink then another one is sure to follow, then another one, then another one, until each one to his own. one wonder if not the whole of eurozone will gdet sucked up then. is the world nears its end?
Greeks don't want to leave the Eurozone and they reject the austerity measures as well.
@ jvh; Just out of curiosity, I'm sure you saw the news this morning about the $2 billion loss due to the derivative screw up at JPM. But are you aware as to WHY there are well over $200 trillion currently amassed on the books? When you understand this, feel free to let the tax payers of the world in on it.
Because they want to earn money without working
That like saying I am starving and want to eat but don't like the food. They don't make sense.
Who will benefit when all sink? There is always a beneficiary.
Big government idiota likw our Bozobama, that's who benefits. Socialist fools who say to let government take care of you, that's who. Remember this in November people, and get rid of our socialist fool before he leads us into a Greek-like mess.
Anyone importing their good. Their currency will be so weak if they leave the euro their products will cost next to nothing because of the exchange rate.
Actually, no. It is not about letting it sink, but putting it in a position where it can recover. The problem with a Joint currency like the Euro is that if a country gets into trouble, it cannot take actions on its own to address its problems. The US has essentially been printing money through its monetary policies, which have helped make exports cheaper to foreign customers. (This has made imports, like oil, more expensive, though.) By devaluing its currency, the US also in effect devalues its debt, since the debt is priced in US dollars. The Greek debt can not be devalued, and they have no control on that currency, so they are stuck with a currency that does not effectivly reflect thir national economic situation. By going to the Drachma, switching their debt load to be valued in drachma's, they can then devalue the drachma, which objectively lowers their debt, while encouraging tourism and making their exports more attractive.
The fundamental problem with the Euro is the range of countries involved. It works fine for more industrialized nations like France and Germany, but smaller economies with more variable GDP's are vulnerable.
Perfectly stated. That is why I prognosticate that Greece will leave the EURO, print Drachma, watch the Drachma fall 40% against other currencies, increase tourist revenue, and reemerge in seven years. However, if Frau Merkel wants to pay Greece $200,000,000,000 then Greece will stay with the EURO a few more years.
Nice post. Kudos
If Greece is cut loose, then other weak Eurozone countries will see the consequences for not getting off their a$$ and getting their financial affairs in order. The world is over-leveraged and no matter how you slice it, markets are going to dive one way or another. It is just a matter of time. Greece is chump change relative to the whack banks and countries will take inevitably. Cut Greek bait and the sooner the better as loaning them another cent is just flushing it down the toilet.
Nah, this means cheaper airfare on Aegean airlines! Woot
if greece is left to sink then who would be next?
well, this might just be the wrong "domino" hypothesis... We all remember that a similar idea concerning the spread of communism in Asia was the main reason for the U.S. to intervene in Vietnam... but these domino effects did not really occur after the US left Vietnam and this weird hypothesis was simply falsified. So perhaps Greece will simply sink... and that's it... I believe that other countries such as Italy or Spain have a better potential and are more promising, they might not sink...it's an empirical question, so lets see... but that's a story some people would not like to hear...
The Cambodians might disagree with yor assessment of the domino theory....
to Paul: Nah, communists fight among themselves all the time and mistrust each other more than democratic governments. Korea was a good call in either case though.
Hearing about falling dominos reminds me of a paranoia during the cold war especially surrounding the Vietnam War (LOL).
10. Spain
9. Portugal
8. Italy
7. Denmark
6. Belgium
5. Luxemburg
4. France KABOOM no more eurozone
If any of the to ones go, it adios. Germany, France, Italy, UK Spain.
Why is Denmark on your list? They are not in the Eurozone because the voters were smart and voted no in the referendum. Denmark has a much smaller national debt than most of the other EU countries because of the North Sea oil and balanced budgets.
Nobody will be the next, there exist always beneficiaries.
In order: California and Illinois will sink next! Then Italy, Spain, and Portugal will sink. Then, if Obama and his Democrats are still in power, the US will collapse. Socialism doesn't work. The EU and California have proven that beyond a reasonable doubt.
The Democrats are not in power. The Republicans hold the House completely, as demonstrated by their ability to frequently pass bills with not a single Democratic vote. The Democrats hold a non-super Majority in the Senate, which means that the Republicans can block any legislation upon which they do not wish to see a vote, and Democrats can defend the President from bad veto press by nixing any lopsided House bills.
The miseducation of a blogger.
The trouble with the German package for Greece that it is all stick and no carrot. In a democracy, we have become accustomed to being offered a carrot. Berlin feels a carrot is not within the confines of its fiscal discipline programme. But turkeys don't vote for Christmas and voters in a democracy cannot be expected to vote for mass economic suicide.
Come on, Frau Merkel: Harvard economists destroyed the Soviet economy; Frankfurt economists destroyed the East German economy; let's not completely destroy the Greek economy as I have a summer house there. Offer them a carrot for goodness sake, we're living in a democracy not the Fourth Reich.
oh, well, so it is all about Merkel, and the fourth Reich, say "hi" to "Godwin’s law", lol.
Carrot is fine, if other all European countries contribute relatively equally to that type of carrot help...I think the UK should pay their fair appropriate share.
The carrot is that you keep living in a semi-normal democratic country.
Tighten the belt for a while and in a few years, reap your rewards.
Or, destroy yourselves from within.
amen...
What good is the carrot if there is not a stick?
Agreed ! Let it fail ! Let them all fail ! And then make sure we rebuild one's that are responsible and actually work properly.
Take a look at the Greek Euro coins one will understand why Greece wants to remind us Europeans of the historic influence it had over our continent.
The one-Euro coin is an exact copy of a fifth-century BC Athenian coin with a beady-eyed owl, a symbol of the goddess Athena, the protector of the city of Athens. The city-state was then a democracy yet also "an exploitative empire, controlling many other states around the Mediterranean" according to historian Mary Beard. The Athenians forced their neighbours get rid of their own currency and use the silver owl instead. Irony has it that 2500 years later Greece saw its reversal of fortune and finds intself in a dilemma. The ancient owl coin had even fascinated President Theodore Roosevelt. He had one as a pocket piece, which should inspire him to have American coins redesigned in the early 20th century.
The two-Euro coin is even more dramatic. It shows ZEUS, the ruler of the Olympian gods grabbing Princess EUROPA and raping her.
"It doesn't sit on reservoirs of oil"... Someone did not study well last night! Greece literally sits on oil and gas, which is known since years and cannot be pumped up because of the aegean dispute. Just look at Cyprus which is going to be the new Norway in some years. Moreover, if we are such a peripheral country... I am wondering, why should there be any NATO bases in Greece, for example on Crete? Such articles make me want to throw up. Seriously.
There is severe disillusionment in Greece and in the Eurozone. Just giving them jobs will not fix. We are past that. This is bad.
After two years of austerity it is clear that it didn't work. I hate how mindless so-called reporters don't take into account that we gave all we had years ago... we gave workers for Germany after WW2, we lost so many things in the 20th century and even if we leave the eurozone we will not simply disappear into the thin air. We give constantly to the western world for over 5 thousand years and that's not going to change any time soon... I know for sure that we will be around for a few thousands more. You disregard all modern history of Greece, all the overpriced goods and military equipments Greece got from Germany and France this past decade and we pay 20% more for goods that any other country in Europe... Funny how it only got worse by the 15% on top of the existing prices during the austerity measures.. Please by all means try to live with not even 400$ per month when you have to pay 4$ for bread and milk per day... It's easy to lament over an empty grave when it's not you that is about to be buried.
When the grave was being dug maybe someone should have noticed?
i told you once...
GREEK PEOPLE
in the UNITED STATES
becomes BANKS
u coordinate with the central banks
through their papers
to get fractional reserve to every possible citizen in various countries
negating your 9x lien
GREEK!
then becomes it's own currency
the weed you could grow alone for having your own money is worth the struggle!
think about cannabis based alcohol for your palettes and uzo
uzo uzo
get your own banko
solve the greek debt crisiso
buy israel buy israel
Mental inertia! Mayblossom senility! Marvelous!
You should go on Jerry Springer!
Greece should better leave the EURO zone right now. This might be a painful process , but the best for EUROPE - hatred and frustration spreads from Greece..this is not good for any country.
Corruption and inefficiency in Greese for decades..!! But every country gets the gouvernment they deserve!
As long as "the state" paid, people over there did not really care or *change* anything.. for whatever resaons...
Greece are now getting billions of dollars of monetary help from a variety of countries... and their response?? thankfulness? Change of working life? No, of course not!
Excuses, blaming others, the past. etc. etc.
Nobody really needs excuses and complaints! When it is obvious that the majority are not willing to take any austerity measures. ok, then, that's fine. But please pay for your own debts, as every child learns on this world: the past, the bad banks, terrible politicians, etc etc., are facts other countries have to deal with, as well...
Only Greece seems to have such big problems with it...they surely suffered most in WWII. of course, and WWI, and Napoleon, and Chingis Kahn, and whatever...
But the truth is: we are living here and now, what happened 60, 100, or 500 years ago is simply irrelevant for the present problems, and no human being living today is responsible for these historical events.
Greece, get your problems fixed! Or sink!
Having a single European currency without one single country is the cause of problem. Each country has different work culture. Germany is the strongest country economically and industrially, so if they really want to solve the problem, let entire euro zone become part of Germany with each country becoming a state similar to U.S.
Otherwise it is very hard road for next 20 to 30 years for everyone. Any solutions such as austerity measures or aid packages is just a temporary bandage over a permanent wound.
It will serve the purpose, Germany ruling all of European states(a dream of Sir Adolf Hitler coming true).
Greece's president is meeting with the top three political parties in a last-ditch effort to form a new coalition government.
Greek President Karolos Papoulias is holding talks Sunday with the heads of the conservative New Democracy party, the radically liberal Syriza party and the socialist PASOK party. He will meet later with heads of smaller parties that won parliamentary seats in the May 6 election.
The talks are the president's final bid to avoid a new election, after the results from the vote earlier this month left no party able to cobble together a majority coalition.
Mr. Papoulias has until next Thursday to broker a deal to create a coalition government. If he fails, Greece will have to hold a new vote in June.
The key point of contention centers on the debt-ridden Greek government's agreement to demands from its international lenders and European neighbors. They call for sharp austerity measures in exchange for approval of the country's second bailout in two years.
The New Democracy and PASOK parties supported the social spending cuts, but the Syriza party says voters repudiated the austerity agreement. Greeks have frequently taken to the streets in massive, sometimes violent protests against the plan that calls for higher taxes, reduced pensions and thousands of government job eliminations.
http://blogs.voanews.com/breaking-news/2012/05/13/greeces-president-tries-to-broker-coalition-government/
Greece will not leave the eurozone because it helps as a buffer zone for all economic vultures to prey upon. It acts as a designated target so that other "more European economies", don't suffer these attacks.
We do have to clear up our house indeed but it is not like the "European Friends" have not benefited financially from our troubles ...
They will only benefit AFTER Greece pays its debt, currently its a risk by the other countries supporting Greece.
How many other European countries did you omit? Your focus is Greece, but when this train gains steam, reverberations will be worldwide.
Start with the PIIGS, and add to the list.
You all missing or escaping the reality, here.
The Monsters group, purposely they made Greek to suffer and to become a trouble State from Euro.
It is a pre-meditated attack against Greek economy.
Proof? Well, find-out all the meetings, discussions and non-supported economy agendas, that has been held regularly and secretly without the knowledge and present of Greek intellectuals (who preferred Greek to rise) many times, by Western MANIPULATORS.
...all these, wouldn't happened, if Greek politicians and its economy subjected to manipulations.
Since the disruption or protesting started and kept on going, THE REALITY SINKS and peoples attention has been diverted. These FOOLS Greek, for a long term, while it becomes the LAUGHING STOCK for those who ARCHITECTS Greeks trouble, professionally.
Solution, well its like saving the life of Fish, who has been left or placed without Water, for several Days or....
However, the wise Greeks will connected Greeks economy (Import/Export), and life will be better.
"You all missing or escaping the reality, here." And this would be the "reality" where exactly? The Planet Zircon? My investment in tinfoil stocks is looking better everyday...
Letting Greece slide out of the Euro i snot a bad thing - they can then devalue the drachna and begin to start making a comeback – albeit a low one. And if Greece exits the Euro, that will pave the wqy for others to alao exit gracefully – starting with Spain; then Portugal; next Italy. and then france. After France, he aeirozone will officially be DOA and we can all go back to the way it was for thousands of years
That would pretty much leave them with Germany, Poland, Netherlands, Belgium, Luxembourg, Austria, and Switzerland. Will they rename it the Holy Roman Empire?
Yes let's have another American USA stamped brainy Iraq solution.
The Iraqi Dinar used to be worth around 3.00 USD now after USA governorship and dumping 7 trillion dollars to end the
weapons of mass destruction that never existed in the first place.
Now the Iraqi Dinar is worth one half of one cent.
That is the Amway economic solution.
Just found 38 cents in my couch..think I'll buy some land in Greece....
The Euro is a failed attempt! The Euro is the problem and will be changed at the least or many will leave!
Greece was a socialist failure I guess thats why Fareed thinks they should be bailed out. The Euro zone did bail them out in return for Greece to stop spending more money than they have. This seems to be something liberals just can't seem to make themselves do...a balanced budget is the devil for lefties
Greece's problem is complicated and is not just a easy & quick fix as some commentators may think. First you see Greek, a country despite so much injections through bail out money from ECB & IMF over the last 2 years is hardly showing any signs of progress. 2nd austerity measures pushed down by EU are neither working and distress signs continue to persist. I wounder if going back to the drachma and devaluing i t would work. As its situated today, Greece needs a stimulus package to drive confidence of the markets, to put some lubricants to keep wheels turning in spending and keep it moving. Spending is key thing here. Greece does not need austerity measures. In the medium to long term, how can Greece meet its debt obligations if it is unable to collect funds because their is no economic activity. Those how claim to be Greece's friends, pls lets give the people of Greek some hope and confidence and stop spreading pessimism.
A journalist still quoting Goldman Sachs is junk. Talking about a country like it is a bug. This wannabee gordon gekko talk is what is really wrong. Elite are messing normal people who live a peaceful life, going to school finding a job and 40% cut after the banks filled them with debt for a house or whatever else and than say you cannot pay me back. Where are talking about people. This populistic nobody paid taxes and everybody got a pension at 50 years is a big lie. I lived in athens and saw to my horror that almost everybody that i knew had 2 jobs!!! Why same currency same prices but labour was paid in comparance to the drachme time. Sick and tired of these rubbish journalists. Still have not heard a single voice saying something 100% truth and not just another master hiding the truth...
How can anything, whether it be austerity measures or stimulus, be expected to work in a system that is so thoroughly corrupt? Not saying that the average Greek person is part of this corruption. I've lived (not vacationed) in two foreign countries (Italy- 3 years and Turkey- 1 year) and eight states in the U.S. From my life's experiences, I've found that the majority of people work hard and just want the basics in life. But if a system is so corrupt is there really any other solution, as bad as it is, than to let it crash to the ground and rebuild from the ashes? This would mean leaving the Eurozone. But is there any other realistic workable solution instead of pretending what should be?
Allowing Greece to fail would be like admitting that socialism doesn't work. ...they'll prove to us that socialism can work if it takes every dime we've got! ...LOL
The E.U. is a classic example of social tribalism in decline! These people are ready to kill each other at the drop of a hat, but somehow they're suppose to share a common currency without distain for each other. ...we arrogant americans think that we know something that the rest of the world didn't when it come s to this perverted form of government. Obama has already added more to our national debt than the last 3 presidents combined! ...our successes are apparently running parrallel to theirs!
as an Helene / Canadian – I am thoroughly disgusted by the ignorance this article spreads. Greece has many things to export and for those of you laughing ...not its not olives or oil. Although we do that too – does anyone know that to join the EURO greece had to uproot 1million olive trees...that was the agreement. Let me point some facts out to you. Greece has the largest deposits of GOLD in all of Europe. It has Uranium enough to support the Easter worlds needs, Natural Gas and many other minerals. But between the Euro Zone leaders, the American leaders and the Pathetic past leaders in Greece they sold GREECE OUT...get your facts straight...Greece has enough natural sunlight to power half of europe oh...but they stopped us from doing that too!!!
Greece should get out of European slavery otherwise it will become bankrupt like Pakistan(due to US Slavery).
Greece will be fine. Beaches, history, and sunshine. If they can avoid chaos and civil war, they'll be able to rebuild their reputation. The banks are exagerating their importance. The Euro has been relatively stable through all this. If the doomsayers were right, it would have been on a slow decline until this crisis had passed. That hasn't happened. If they go back to the Drachma, they'll be fine.
Greece will get money from World bank. Angela Merkel is not the only donor in this world.European slavery or slavery of World bank, there is no other choice for Greece.
Europe encouraged Greece to spend its way into this mess. It should now encourage Greece to spend its way out of this quagmire. Austerity measures can follow once the economy recovers. It is called social capitalism.
The bigger problem is in Asia.....India is down in the dumps...who will bail it out? You can take a country only so far based on call center economics.
Greece land should be divided up and givin to its debtors and its people sold into slavery. That would get other countries having the same problem a lilttle motivation to solve their problems.
The biggest problem is that ordinary Greek citizens are experiencing way too much hardship and feel they are being unjustly 'punished' to satisfy a debt that for many Greeks was not of their own making. In the minds of affected Greek citizens, the demands imposed by the EU, not only override Greece's sovereignty but are akin to breaking someone's thumbs for delayed payment. Being evicted from the EU might not be the worst thing that can happen to Greece or to the EU. Give Greece back its sovereignty, bring back the Drachma, and allow Greece to recover on its own.
Greece is doomed to failure unless they can figure out how to collect the taxes owed to the government. If they can fix the tax system, they may have a chance.
The Worst & Most Indebted Economies In the Eurozone:
1. Italy
2. Greece
3. Portugal
4. Spain
5. Ireland
6. U.K.
If this keeps up, all of Europe will be dissolved as a whole
Would not that same statement mean Germany, and France are the most "indebted" When is somebody going to say the classic line; it's like being shackled to a corpse. That one really stirs me into a frenzy.
Absolutely. The nations propping up the deadbeats are okay only as long as the deadbeats don't go belly up. Each default will take a political and economic bite out of Germany, France and the IMF in general. Germany is taking on debt to bail out the Greeks and others, which works so long as the money flows back. They can't eat an indefinite number of defaults.
Um sorry but the UK is not part of the euro zone they were the smart ones and said hell no we want our own money.
The EU was a poor idea from the start, & I've said so for more than 10 years.
Currencies come and go. I remember the old days in Europe when every country had it's own currency. Furthermore, you could not take any of that currency out of the country. You had to spend it right there at the border crossing. That was back when passports were stamped at the border too.
Bretton Woods system lasted from 1944 to 1971 when Richard Nixon converted the dollar over to a fiat currency. Inflation and devaluation is the natural order of things. When interest rates go up, people and governments spend less money.
Apple... Facebook... anyone want to buy a country?
Can I conquer France? Pleeeeeassssse?
"Second, there is no playbook for leaving the single currency, no rules governing expulsion. It was just never envisaged"
They're kidding, right? Some of us knew 30 years ago that the very notion of the EU and a single currency had fatal flaws, especially in light of the fact that each country retained it's sovereignty. EU states are nothing like US states yet somehow they envisioned a unified europe made up of sovereign countries. They seemed to have pushed aside the fact that the US has a shared and common history, a starting point, whereas Europe's countries are made up of different peoples, languages, cultures, histories and they've alternately warred on each other and been allies against others. I can't fathom how they could be so blind as to not only prepare for this to happen but not foresee it happening from the beginning. The one bright point in any of this is that Tony Blair wisely prevented the UK from dumping the pound in favor of the Euro. When the rest of Europe sinks into the abyss, the UK will be in a position to stay above the fray and displace Germany, which has gained far too much political and economic power of late.
Europeans are good for one thing War. They were great conquerors/colonizers. Now without the resources from conquest, they are declining. Greeks will eventually figure out that they can solve their problems by invading Turkey or Albania and getting the money to pay off their debts from them.
White People should go back culturally and behaviorially to the way they were in the 1500-1800s. White people kicked a** during that period. All the world was under their thumb.
I think the real fear in the EZ is that Greece will default and not because it will destroy the EZ economies but because it will leave the lenders holding the bag. Greece will not be torn apart if it defaults, what will eventually happen is what happened in Argentina. When Argentina decided to default what took place was several years of depression like economic activity but then growth return to the country. If Greece were to follow Argentina’s footsteps and succeed in turning its economy around the precedent would be set and other countries that are being forced to put their people through rough austerity measures would follow suite. This would be the worse case scenarios for the IMF and the ECB who would be left with nothing. This is the real fear and this is what is driving the major push to give the bailouts and pass austerity measures in these countries.
As this article points out that the tax system in Greece is in terrible shape with many not paying any taxes. Governments cannot exist without revenue and this clearly shows it. The Greek government cannot collect taxes owed and this is one of the reasons for their current problems.
stopped reading once i saw that the article quoted a goldman sachs report, really? isn't goldman sachs the same group that was working to mask the Greek debt? Not sure that you should trust a report put out by someone with a vested financial interest in the findings of the report.
The EU is collapsing. Globalism sux.
See http://thediplomad.blogspot.com/2012/05/meltdown-of-greekafornia.html which argues for cutting Greece free from the European currency and for letting California go free from the US monetary union.
Devaluation sounds like an easy response, but it's not. When you devaluate, lots of things happen for which there's no easy answer. Take one example: a foreign investor has money in Euros in a greek bank. After devaluation, do you return their money in Euros? If you say yes, you have to figure out where you get the money to do it, as you can't demand that debtors return what they owe in Euros since their income and the value of their property has been devaluated as well.
Also, the so called "30% devaluation" does not exist. If you devaluate by 30%, there's immediate inflation of at least 10 to 20%, since lots of resources (e.g. oil) are priced at global prices. So your effective devaluation becomes minimal, and you have to devaluate again and again until things stabilize. The typical result is a 2:1 to 4:1 devaluation. And at that point, your chances of paying off your national debt became zero, so you have to default.
Not saying a devaluation is not the best (less bad) of the options Greece has, but do not think for a minute that a devaluation is even close to an easy solution. It is a nasty, ugly one, with thousands of people out of a job, massive banking problems, forced breaches of contracts, default, loss of trust and ability to meet commitments and general caos. I've been through that twice. It's not nice at all.
The Euro was a bad idea to begin with. What they should have done was say yes the Euro is a new currency of all countries and back by all countries but not the only currency. Each country should have its own currency and also accept the Euro. When each of these countries went to this one currency they gave away power that should have never been given up. England was the only smart country out of the lot and now they have bragging rights.
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