I didn’t want to bump an old thread from December but I was interested. A few months ago people were predicting the end of the Euro. Now I was reading in the Financial Times how even if Greece and a few others bailed, the Euro would still be OK.
Of course there is the Iceland example, which according to the FT is a shinging example. I don’t know about that, but what I read made sense.
What’s the state of it now? Do you see it collapsing? Or do you see counrties leaving? If so then what?
As a person who’s been out of work (well underemployed) for about 9 months, I am looking at how the Euro may drive the US back into a recession. If that is at all possible.
The Euro and the nations of Europe are incompatible. Either the Euro will cease to exist or the countries in Europe will cease to exist. Greece needs to be bailed out by Germany, Germany will not give the money unless Greece does what Germany tells it to do. If Greece is doing what the Germans tell them to do in what sense are they a self governing nation? What Germany wants Greece to do will most likely implode the economy, after further implosion will Greece still want to be taking orders from Germany?
Spain, Portugal, Ireland, and Italy will soon be faced with the same dilemna. They can do what Germany tells them and hurt their economies or they can ditch the Euro and have their economies hurt, but at least retain their national sovereignity.
European politicians fear nationalism more than they like democracy, so they are trying to keep the Euro and ditch their nations. I do not know enough about European people to know if they will make the same choice.
The current prediction that I’ve read in several places is that Greece will inevitably leave the euro, but that this will be good long-term for greece, and good for the euro because the pain experienced by all will force tighter integration (banking / fiscal union).
So essentially the euro will circle the drain, followed by spiralling back out and rolling into a rose bush. No cause for concern.
Coincidentally, Obama got Merkel in a head lock at the G20 in Mexico this weekend, David Cameron grabbed a leg, the thick set guy from the EU grabbed another and they were about to put her in the trunk of a car that already had the engine running . . . but she caved, just in time:
Fortunately the German voters have her by the balls so there are limits to how far she can bend over. If Obama or Cameron or the fat EU guy is so dead set on bailing out underperforming economies in dire need of reforms, they can do it themselves.
Germany has benefitted enormously through the participation of Greece and other countries in its great project - note Germany’s current 20-year unemployment low, and status as the worlds largest exporter until last year.
It’s a great wheeze to suppress the value of the DMark by diluting it among other currencies, it’s caused a wonderful export boom in German manufacturing. And they also get to charge considerable interest on the loans to the countries who want to stay in the project - a double win!
But wait! It’s got nothing to do with that, Germany has apparently become a great exporter because of the willingness of workers to accept low wages for years. Yeah, really. We were all born yesterday.
The DMark was effectively devalued by the adoption of the Euro, and Germany will protect that status quo at whatever cost to the working class people of other European nations. That’s the story here.
Lets not be too critical of Germany, they have made many sacrifices for the Euro. They have already sacrificed the economy of Greece, and stand ready to sacrifice the economies of Italy, Portugal, Ireland, and Spain. Plus when this is all over they will have to take on the burden of telling all of the other countries’ governments what to do.
You’re right: the US should stop bailing out economically underperforming states. Dear Mississippi: we’ll stop collecting taxes from down there, but no more Social Security or Medicare or military bases or Federal highway money for you - we’re done propping you up!
The real problem is that Europeans are thinking of themselves as Germans, Greeks, French, etc, when they should be thinking of themselves as Europeans. Which do they want to be?
Sure, the Greek government could decide not to pay their loans (even if they stay in Euro) and be forced to balance their budget because no one wants to lend to them. And the other European governments will face similar choices. Then the German government will have to either bail out the German banks with Greek loans or let them go bankrupt, with large economic costs both ways. Everyone for themself.
Or, they can all work together. That means everyone pays for others’ mistakes, and everyone gets a say in what others’ can and cannot do.
The problem is the opposite, if they had been thinking of themselves as Greeks, Spanish, or Italians they would have never given their currency to another country to run. Then they would not have been able to borrow as much as they did and would not have had the bubble economies which have now popped.
The leaders of Europe have overlearned the lessons of WW2 and forgotten the lessons of WW1, not to mention the American Civil War.
The German government can either let the periphery nations go off the Euro and bail the german banks out or it can keep the periphery nations in the Euro and bail out the periphery nation’s banks. The reality is a huge mistake has been made and it will cost alot to get out of it. The Europeans ignored reality when they created the Euro but however much you ignore it reality does not go away.
If by sacrificing you mean lending them hundred of billions of euros. Many of which are already lost for good. Then sure. Damn the Germans for lending them money.
I know it is an issue that is hard to come to grips with for Americans, but some things are not in the USA. Europe for instance.
In any case a more apt comparison would be Mississippi being forced to send tons of money to Utah (or whatever other US state that is much more affluent than Mississippi) since we can repeat the fact that the European countries in trouble are in fact among the richer states on the continent.
There have been extended enormous amount of goodwill (and funds) from northern European nations towards the troubled economies. (Not from Cameron’s Britain of course, he’s content with playing side-line coach) It is amazing that Germany is not being credited for the money they have extended to the Club Med. The response they have received for what they have done so far would sorely test my will to do more if I had been German, but the things that saps my will for further help is that the troubled countries is not seen doing enough to change the things that are at the heart of their economic problems. It is still illegal to lay off workers in Greece. The bureaucracy is still absurd. The ease of business index still places Greece under war torn Yemen and communist Vietnam. etc. And on top of that tax is still not being collected in a proper method. If Greeks merely cut down their tax cheating to the level of a European average they wouldn’t need German money to help pay their bills. German workers are being asked to fund Greek tax cheating. And now France is trying to join the exclusive PIIGS club. After having lower the pension age to 60, the new socialist president of France wants to raise the tax rate through the sky (driving business to Britain) and combat unemployment by making it near impossible for companies to lay off workers. Those are all such complete hair-brained ideas that the mind boggles, but when they fail to boost the French economy or halt the rising unemployment rate, they can always blame the Germans and austerity.