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In a bid to increase its membership and make its currency look good, the EU invited Greece as well as several other questionable economies to join in without looking at or turning a blind eye to its books.
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It is an approval of the Greek people to tell the leadership of its country to tell the EU the fuck off, we don’t have money for any more country club fees, and you can take the interest and shove it up your ass.
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This is so overblown. If Greece defaults on its debt, it will take 10-20 years of court battles to straighten it out; see Argentina. Argentina still exists, right? And they were worse off than Greece with a bigger potential impact on the economy.
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Very little. The bullshit artists who have been trying to scare the shit out of you are gold advertisers on conservative talk radio. While a Greek withdrawal from the Euro would be a PR embarrassment for the EU, the reality is Greece is better off bailing on this experiment and going back on the drachma tied to the Euro or the US Dollar. They will still be in deep shit for while, but with a locus from which they can only go back up.
I must disagree. The consequences of an imperfect currency area are well understood (Puerto Rico is another good example), and the problems with having both northern and southern Europe in the Eurozone were predicted contemporaneously by any number of people. The motivation for the European currency union may not have been strictly ideological, but it was very much a political attempt to knit countries together in defiance of the underlying economic fundamentals.
Moderator Action
This thread seems to be having difficulty staying within the bounds of GQ, which probably has more to do with the topic than anything else. I’m seeing a lot of opinions here and a bit of debate, but I don’t think there’s enough of a debate here to justify a move to GD (not yet anyway). Let’s try IMHO for now.
Moving thread from General Questions to In My Humble Opinion.
The Greeks have run out of other peoples money.
Wow, did you come up with that all by yourself? Amazing! You reduced a complex economic issue down to a bumper sticker!
I don’t think it can be boiled down to a catchphrase. The Greeks have to address the issue of how they collect their taxes and how they fund pensions and so on. Forcing them into extreme austerity seems to be quite insane and Merkel should be ashamed of her heavy handed tactics. It seems to me that some debt should be forgiven and some should be restructured. I don’t think it’s accurate to say that the Greeks are living off of the labor of the rest of Europe, that seems simplistic and cartoonish.
Mississippi is dirt poor. But nobody ever says “Mississippi might have to leave the US and stop using the dollar”. What specifically is the relevant difference between the relationship of the States to the US and the individual European countries to the EU? (I know many differences already – I’m trying to find out the differences relevant to this specific banking/currency issue.)
Is there a difference between being in the EU and the “Eurozone”? Is there a difference between being in the EU and using the Euro as your country’s currency?
I guess I’m trying to nail down exactly why the US states can share a currency with no problem but the EU cannot without crisis after crisis? Is this just matter of a lack of strong Federalism? Is the current European Union analogous to the US under the Articles of Confederation, and the Greek crisis is illustrating their need for a stronger organization to oversee the EU, analogous to our Constitution?
The last time Mississippi tried to pull a Grexit, we fought a war about it.
But the part about federalism is a lot of it. The US central government is much more embedded into the culture than the EU government is in the culture of Greece.
Regards,
Shodan
After any event has happened there is no shortage of people who can truthfully point out their prior predictions.
The issue with Greece isn’t poverty so much, but debt. Greece has a bunch of government programs that a U.S. state doesn’t have by itself, such as a national pension system, national health care system and military. Greece has funded these by selling bonds, which it is now having trouble honoring. While the state of Mississippi also sells bonds (all states do), it doesn’t have the same set of obligations that a nation does, and in fact gets a lot of federal dollars to support state programs such as education.
Mississippi’s debt is about 4.1 billion dollars, and its GDP is about 88.6 billion dollars, so its debt is about 4.6% of its GDP. Greece’s debt is about 177% of its GDP. If Mississippi were to leave the U.S., it would lose its federal aid and would have to develop its own national programs, which would probably greatly increase its indebtedness. Greece is already a nation, so abandoning the Euro or leaving the EU wouldn’t cause the country to have a set of new, expensive obligations.
As far as how this affects the world economy, about as much as the US state of Oregon does according to these charts.
This chart places Greece GDP at 238 billion: http://knoema.com/nwnfkne/world-gdp-ranking-2015-data-and-charts
This chart lists the GSP (gross state product) of each state, Oregon is number 25 at 229 billion: List of U.S. states and territories by GDP - Wikipedia
Yeah, I know. There’s a whole Bunch of people oughta be ashamed.
Look, its a little bit of a Hijack, but its worth sharing. Yesterday, some scumbag suggested elsewhere on the internet that if you can travel with sufficient hard currency, Greece is yours for the taking.
It didn’t take a Phd to guess that he meant, [GaryGlitter]“I have PLENTY of Hard Currency…! Where is your wife? Where are de little children?”[/GaryGlitter]
Expect MF-er carpet-bagger scumbags to be landing in Greece in Droves…
Or, as noted eonomist Paul Krugman accurately put it last week, Greece’s economyis about the same as that of metropolitan Miami. The real fear is that if Greece leaves the Euro behind, Spain and Portugal may follow. It would be the first chink in the Euro armor.
Don’t forget about the UK. There’s a referendum coming up on whether they should leave the EU. If countries start dumping the Euro (or being kicked off of it), it could tilt British sentiment against staying in the EU.
Especially if those countries start to do well.
First thing you’ll need is a working crystal ball and/or time machine.
I think it would be a real shame if the EU were to fall apart. The common currency has caused a lot of problems, but that’s not the whole of the EU. The establishment of the EU also eliminated tariffs, created common labor and environmental standards, allowed workers to cross borders easily, established standards for human rights. . . The increased economic and cultural ties reduce the chance of future wars in Europe. I’d hate to see the whole thing come to an end because of one bad idea in an ocean of good ideas.
My understanding of Greece is less than perfect, so I’m happy to be corrected.
Greece, to my understanding, was, and has been, relatively underdeveloped, compared to the rest of Europe. Modern democracy is relatively new there (a modern constitutional democracy was not adopted until 1975, for example). Their GDP and wealth has been lower than other European countries for decades. They also face some of the challenges of other undeveloped countries: at least some corruption, for example, and tax evasion.
Greece was allowed to adopt the euro in 2001, despite some misgivings. The result was a massive lending binge, by European banks, to Greece. The lending led to a massive expansion of the Greek economy, along with a substantial increase in the quality of life of most Greeks.
However, after the financial panic of 08/09, the European economy went into a slump. The countries that were hit hardest included countries in the south of Europe, including Spain, Portugal, Italy, and of course, Greece.
When the Greek economy was expanding, it was easy for Greece to make payments on its loans. When the country went into a recession, it became much more difficult.
The European banks, which had lent Greece the money, became worried, and successfully petitioned their respective governments to take over the loans. So now, instead of owing money to Deutsch Bank, Greece owed money to Germany.
This is where things went off the rails. In a recession, ordinarily a country employs inflationary measures, such as running government deficits, reducing interest rates (through the central bank) and “printing money” (again, through the central bank).
The US employed all these measures, and the result was a reduction in unemployment from about 10% to about 5%.
Greece, however could do none of those things, because it does not control its own currency. By adopting the euro, it relinquished control over its money, its supply of money, and its interest rates. Furthermore, foreign creditors demanded - and successfully got - large reduction in public spending, along with Greek government surpluses.
These are all the opposite of the policies necessary to correct a recession. As a result, Greek unemployment rose to 25%. Among young people, it’s 50%. There is no population that will happily live with that kind of misery. Furthermore, in their effort to get Greece to pay back the money it owed, the creditors made Greece poorer, which in turn made it that much more difficult for Greece to repay its loans.
The Greeks responded by electing a party that is very left-wing: somewhere between socialist and communist. But the party spoke to the voters by promising to reduce unemployment and force the creditor nations to negotiate better terms for Greece.
In the short time the new government has been in power, they’ve failed to deliver on those promises. The creditor nations have shown little or no willingness to negotiate better terms for Greece, and the economy of Greece has not improved.
In fact, because of the continuing stand-off between Syriza and the creditor nations, capital flight from Greece (meaning people taking their euros out of Greek banks) has accelerated, to the point that Greek banks have had to shut down, and withdrawals limited. Depending on who you ask, Greek banks may only have a few days left of currency, even at the reduced withdrawal levels. The Greek banking system, in other words, is on the brink of collapse.
The only thing that’s supporting them is a lifeline thrown by the European Central Bank. But there’s a real question about how much longer the lifeline will last.
In sum: Greece gave up sovereignty over its currency. In exchange, it got a lot of loans, and its economy grew. Then there was a recession, and creditors began to demand money from Greece at the same time Greece needed money itself. The flow of money from Greece exacerbated the Greek recession, which in turn made repaying loans that much more difficult. The result is where we’re at now: creditors demanding payment, and Greeks saying “we don’t have it”.
There’s no practical result. The creditors had already withdrawn the offer the Greeks were voting “no” on. It does, however, demonstrate the determination of the Greek people to put the interests of Greece over those of the creditor nations.
The US has its own money (the dollar) and its own central bank (the Fed). It therefore controls its own monetary policy. The Fed has created approximately $3.2 trillion dollars over the past several years, as part of an attempt to counter-act the effects of the recession.
Greece, however, does not have control over its own currency. There is no Greek counterpart to the Fed. If there was, Greece would not be in the mess it’s in now.
Some argue what is happening in Greece now, is simply an inevitable consequence of a economic arrangement that was badly flawed from the beginning.
The only effect its likely to have on you is - if Greece leaves the euro - vacations there will likely become extremely cheap. If you’ve ever had in interest in visiting Greece, consider buying a ticket if Grexit occurs.
Oh, and make sure you show up with currency, not a credit card.
For a less simple explanation, try:
http://www.nationofchange.org/2015/07/05/greece-what-you-are-not-being-told-by-the-media/
Beyond that, we are looking at the effects of increasing debt in capitalist systems, part of fears of another global financial crisis, with the last one linked to the effects of peak oil and even environmental damage (via price increases in oil, food, etc., due to high oil production costs and/or food crop damage brought about by abnormal weather conditions).
Hence, not just Greece but PIIGS, and not just that but the U.S. (e.g., more than $50 trillion in total debt, $200 trillion in unfunded liabilities, exposure to unregulated derivatives with a notional value of $350 trillion), and not just both but the EU, Japan, China, etc.
That has to be the clearest and most complete explanation of the Greek crisis I’ve read anywhere. Thanks!
Thank you! 