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The European Debt Crisis Thread  
User currently offlineeinsteinboricua From Puerto Rico, joined Apr 2010, 3175 posts, RR: 8
Posted (3 years 2 months 3 weeks 1 day 15 hours ago) and read 2249 times:

While we at the US are facing the possibility of a default, our friends on the other side of the pond are feeling some pressure of their own. Let's take a little review:
1. Two bailouts for Greece
2. One bailout for Ireland
3. One bailout for Portugal

All of this includes credit rating cuts for many of the Mediterranean EU countries where Portugal and Greece, and Ireland, are in junk status while Italy and Spain remain in not-so-good-but-still-good levels.

As if this weren't enough, Cyprus has been dragged into the crisis with its credit ratings being cut to about 3-4 notches above junk status. There are also rumors that France might also be dragged into the crisis.

Now the questions come in:
1. Why is is that the euro is still doing far better than the dollar at this point? Surely with the uncertainty among its members of a possible default by Greece and more bailouts, how is it that the currency can continue to appreciate or maintain its value?
2. What scenarios would be viable if this debt crisis continues to spread to other countries (like say Italy requiring a bailout, Greece defaulting, and riots from eurozone citizens saying no more bailouts to their governments)? Would the euro be devalued? Would it be abandoned? Would a smaller version be created for these countries as an alternative to the euro? Would they expel countries who don't fare well with the euro? Notice I'm using euro, as in the currency, not the Union as a whole.
3. Will eurozone countries draw the line on how many bailouts they are willing to handout? I'd be pretty upset if my country continues to pick up the slack for the fiscal irresponsibility of another country.

Certainly this crisis has cooled interest in candidate countries for joining the EU, and for those that are in the EU, to adopt the euro. Is it possible that this currency union has been rushed? And what would the future hold for future currency unions?


"You haven't seen a tree until you've seen its shadow from the sky."
32 replies: All unread, showing first 25:
 
User currently offlineshamrock604 From Ireland, joined Sep 2007, 4192 posts, RR: 13
Reply 1, posted (3 years 2 months 3 weeks 1 day 15 hours ago) and read 2238 times:

Quoting einsteinboricua (Thread starter):
3. Will eurozone countries draw the line on how many bailouts they are willing to handout? I'd be pretty upset if my country continues to pick up the slack for the fiscal irresponsibility of another country.

That is a very simplistic idea.


The Fiscal irresponsibility was endemic right across the Euro. While cash was being pumped into the "peripheral" countries, the banking regulators of the Core Euro countries and indeed the European Central Bank failed to see a threat from this either. German and French banks sought to profit from Property and contruction booms in Ireland and Spain, while banks in those countries gambled the cash loaned from the Core banks. When the Credit crunch took hold, the whole Ponzi scheme tumbled.

The EU's response has been to blame the Irish and Spanish (and Greeks and Portuguese) while exhonorating the Core area banks that fed those booms.

Part of the problem with this crisis is that the EU has failed to grasp it is a PAN EUROZONE issue and cannot be solved on a country by country basis.

In addition, these "bailouts" are not "bailouts" at all. The loans given to Greece, Ireland and Portugal have to be paid back, at a high interest rate. Greece may well default on part, but for Ireland and Portugal, we will be paying out for several years so that Ultimately, the French, German, British banks etc etc get bailed out.

The circle of the "bailout" is:

1) Core area states lend money to peripheral state.

2) Peripheral state pays the money to its banks to keep them solvent.

3) The peripheral area bank pays back the Core area Bank.

4) The Peripheral country tax payer is faced with the final bill which goes back to the Core area state, with a profit on top.

Thus, the core area bank remains solvent. The Periperal area bank remains solvent. The Core area state gets it money back with a tidy profit.

The Periphery area tax payer has to endure years of austerity for something they didnt even do.

This does apply a bit more to Ireland than to the other two because Ireland's issue is fundamentally a banking crisis. The sovereign debt is actually quite manageable, and had it not been for the bailout of private banks, we would already have a balanced budget again.

Europe needs to wake up to what is happening, and so do it's citizens who are thinking in "Nation state" rather then "Eurozone" terms. This problem is far bigger than individual states.



Flown EI,FR,RE,EIR,VE,SI,TLA,BA,BE,BD,VX,MON,AF,YS,WX,KL,SK,LH,OK,OS,LX,IB,LTU,HLX,4U,SU,CO,DL,UA,AC,PR,MH,SQ,QF, EY, EK
User currently offlineDerico From Argentina, joined Dec 1999, 4312 posts, RR: 11
Reply 2, posted (3 years 2 months 3 weeks 1 day 14 hours ago) and read 2214 times:

How the world changes in 10 years… Back then it was the Argentine debt crisis.

Now it's topics like “The United States debt crisis”, and “The European debt crisis.” Who would have ever thought it.



My internet was not shut down, the internet has shut me down
User currently offlinePyrex From Portugal, joined Aug 2005, 4025 posts, RR: 28
Reply 3, posted (3 years 2 months 3 weeks 1 day 14 hours ago) and read 2208 times:

Quoting shamrock604 (Reply 1):
In addition, these "bailouts" are not "bailouts" at all. The loans given to Greece, Ireland and Portugal have to be paid back,

Oh, gasp! The shock, the horror! Having to repay one's debts, what a novel concept, isn't it?

Quoting shamrock604 (Reply 1):
at a high interest rate

Yeah, because 5% is so high...



Read this very carefully, I shall write this only once!
User currently offlineshamrock604 From Ireland, joined Sep 2007, 4192 posts, RR: 13
Reply 4, posted (3 years 2 months 3 weeks 1 day 12 hours ago) and read 2183 times:

Quoting Pyrex (Reply 3):
Oh, gasp! The shock, the horror! Having to repay one's debts, what a novel concept, isn't it?

I'm not questioning the concept of paying one's debts back, you sarcastic individual. But - are they Really MY debts?

NO! They are not MY debts. They are the debts of private banks who gambled and lost. IT IS NOT MY DEBT, yet I along with every other bloody tax payer, end up paying for it.

I am questioning why these are being called "bail outs". Who exactly is getting bailed out here? It sure isnt the State, the government or the tax payer. At least in the case of Ireland.

Quoting Pyrex (Reply 3):
Yeah, because 5% is so high...


Actually, Ireland's rate over 7 years was 6%. Which translates to a 9 BILLION euro profit for the EU. Which means, as you should have noted from my post above, that Core area banks get bailed out at my expense, My country's banks get bailed out at my expense, and the core states make a nice profit on top.

[Edited 2011-07-30 22:24:06]


Flown EI,FR,RE,EIR,VE,SI,TLA,BA,BE,BD,VX,MON,AF,YS,WX,KL,SK,LH,OK,OS,LX,IB,LTU,HLX,4U,SU,CO,DL,UA,AC,PR,MH,SQ,QF, EY, EK
User currently offlinelewis From Greece, joined Jul 1999, 3653 posts, RR: 5
Reply 5, posted (3 years 2 months 3 weeks 1 day 9 hours ago) and read 2145 times:

Quoting Pyrex (Reply 3):
Oh, gasp! The shock, the horror! Having to repay one's debts, what a novel concept, isn't it?

It is not what he was saying at all. If it is a loan, call it a loan, not a bailout. By the way, even if Greece declares bankruptcy, all debts will be paid eventually as all previous ones have, no matter how many times Greece has declared bankruptcy in its history. The fact that countries will end up making hundreds of millions of profit from the financial misery of the others makes it a (very profitable) loan and not a "bailout". I would maybe accept the term "bailout" if talking about the German and French banks being bailed out. They invested, the investment got bad and they will still get their money, even if it is later than previously agreed. So for them, no matter what they invest in, it is always a win-win, even though they were charging higher interest for some entities, simply because the investment risk was higher? Where is that risk for them exactly?

Quoting Pyrex (Reply 3):
Yeah, because 5% is so high...

It is considered high when Greece got offers from non-EU countries with a much smaller interest. It is also considered high if a country borrows at 3% and then passes it on with 5%.


User currently offlineshamrock604 From Ireland, joined Sep 2007, 4192 posts, RR: 13
Reply 6, posted (3 years 2 months 3 weeks 1 day 8 hours ago) and read 2133 times:

Quoting lewis (Reply 5):

Thank you Lewis. At least you actually read what I said instead of quoting one line out of context to take a cheap, pathetic shot like Pyrex did.



Flown EI,FR,RE,EIR,VE,SI,TLA,BA,BE,BD,VX,MON,AF,YS,WX,KL,SK,LH,OK,OS,LX,IB,LTU,HLX,4U,SU,CO,DL,UA,AC,PR,MH,SQ,QF, EY, EK
User currently offlineRara From Germany, joined Jan 2007, 2111 posts, RR: 2
Reply 7, posted (3 years 2 months 3 weeks 1 day 7 hours ago) and read 2121 times:

Quoting einsteinboricua (Thread starter):

1. Why is is that the euro is still doing far better than the dollar at this point? Surely with the uncertainty among its members of a possible default by Greece and more bailouts, how is it that the currency can continue to appreciate or maintain its value?

This can be explained by the Dollar's weakness rather than by the Euro's strength. Remember it's always a two-ways system. If the US were faring significantly better right now, you'd see the Dollar appreciate a lot against the Euro. But they have their own huge problems that proportionately put their burden on the Dollar.

Look to the Swiss Franc for an indication of how the dollar might have appreciated if the US were financially sound right now.

Quoting lewis (Reply 5):
The fact that countries will end up making hundreds of millions of profit from the financial misery of the others makes it a (very profitable) loan and not a "bailout"

No, sorry. There's nothing profitable about loans with returns far below market value. Even if Greece fully repays the loans (in a best-case scenario), the net effect for Germany, France etc. will likely still be negative, because they internalize a good bit of Greece's liabilities and therefore has to pay more for their own loans. I agree that your point is often missed in the public discussion, but in itself it's only part of the story.



Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
User currently offlinePyrex From Portugal, joined Aug 2005, 4025 posts, RR: 28
Reply 8, posted (3 years 2 months 3 weeks 1 day 4 hours ago) and read 2074 times:

Quoting shamrock604 (Reply 4):
I'm not questioning the concept of paying one's debts back, you sarcastic individual. But - are they Really MY debts?

Yes they are. You, like every Irish person, profited from the bubble through higher tax revenues on the profits of the banks and construction companies, increased value of the equity of your home, etc. Now it is time to pay the piper.

Quoting shamrock604 (Reply 4):
Actually, Ireland's rate over 7 years was 6%. Which translates to a 9 BILLION euro profit for the EU.

What profit? When that same money could have been invested in Irish bonds in the market with the same maturity that were yielding 14% (i.e., a reflection of the actual cost of debt of the loan)? When absolutely no-one was willing to lend you money? I know you (and Greece, and Portugal - not escaping any blame here) are desperate to find a culprit for your problems ("it was Mercedes who benefited from Greece's profligacy" - have heard that over and over again) but when someone (i.e., Germany) is willing to save your (our) asses the correct response should be "Thank you, mam, may I have another?", not "You are doing nothing but your obligation".

Quoting lewis (Reply 5):
It is not what he was saying at all. If it is a loan, call it a loan, not a bailout.

It is a loan way below market terms (in that they are even willing to lend with their taxpayers' when someone who has their own money on the line never would). This after decades and tens of billions of euros of direct subsidies that will never be repaid, and were likely wasted. That is the definition of a bailout.

Quoting lewis (Reply 5):
By the way, even if Greece declares bankruptcy, all debts will be paid eventually

Yeah, tell that to the Argentine bondholders who are still waiting to see their money. But if you do want to go ahead and default on your commitments, as so many Greek people (the majority?) seem to be able to do, by all means, please go. Of course there are consequences - for starters, every Greek state-owned asset abroad automatically becomes liable for seizure - better say goodbye to those Airbuses. Second, no-one will lend you money (and even if they did, it would get confiscated immediately to repay old bondholders - Argentina is still shut down from international debt markets because of this), and since you are still running a massive primary budget deficit (even before cost of debt) you will have to make even more, and more painful, cuts just to keep the government running. Better say goodbye to that retirement at age 50. Ultimately you will be forced to leave the Euro as you cannot afford to keep the government running, all your banks will go bankrupt and 25% inflation will eat away at the value of the savings of those Greeks that were smart enough to save some money throughout the years (instead of spending everything and then some, as the majority of their countrymen) but dumb enough to keep it in the country instead of somewhere safe.

Oh, that's right, defaults have consequences. And me here thinking it was only saying "I will no longer pay my debts" and everything would be fine.

Quoting lewis (Reply 5):
profit from the financial misery of the others makes it a (very profitable) loan and not a "bailout".

Ok, if the "loan" is not a bailout, what about the tens of billions of euros the Germans poured into Greece over the decades that were just flushed down the drain? Was that not a bailout either.

Quoting lewis (Reply 5):
It is considered high when Greece got offers from non-EU countries with a much smaller interest.

So go ahead and take them, save me the money! Oh, that's right, they came with strings attached...

It never ceases to amaze me the lack of gratitude of people in certain European countries (my own included) to those that have supported them throughout the years and are bailing them out now. It reminds me of a weird, sick version of La Fontaine's fable "The ant and the grasshopper" - it is like the grasshopper fiddled away all summer while the ant stored its food, and then when winter comes along the ungrateful grasshopper goes around to the ant mound and doesn't ask gently but demands to be taken in, claiming that the ants have an obligation to feed them. Maybe they use this same attitude every time they go to a bank to try to get a loan and that is why they are shot down.

If any Germans are reading this - thank you very much. You have given us way more than you had to throughout the decades and we wasted it (at least we got a good highway network out of this, able to compete with the autobahn). You in no way owe us anything and are not obliged to help. However, if you could see it in your hearts to help out a bit more throughout this crisis we promise to try to make things better this time around (can't talk for other peripheral countries, though).



Read this very carefully, I shall write this only once!
User currently offlineshamrock604 From Ireland, joined Sep 2007, 4192 posts, RR: 13
Reply 9, posted (3 years 2 months 3 weeks 17 hours ago) and read 1997 times:

Quoting Pyrex (Reply 8):

I did not have a home back then, Sir. I bought as the boom was tumbling - but I am still in negative equity, and will be for quite some time.

You do make some good points, now that you have taken your sarcastic hat off and actually engaged in the debate.

However, I am simply loath to agree that the Peripheral countries must accept all the blame. The ECB failed to cry stop when Euro banks were lending irresponsibly. I'm not pinning the blame just on them either. The world got in to a debt frenzy. But lets admit that, and stop trying to blame individual states.

Sure, i'm grateful to the Core that their support is there, But when i'm paying 600 euro more tax a month for a crisis I didnt cause, you can be certain I feel angry when I am cast as some sort of debt sinner!



Flown EI,FR,RE,EIR,VE,SI,TLA,BA,BE,BD,VX,MON,AF,YS,WX,KL,SK,LH,OK,OS,LX,IB,LTU,HLX,4U,SU,CO,DL,UA,AC,PR,MH,SQ,QF, EY, EK
User currently offlinesomething From United Kingdom, joined May 2011, 1633 posts, RR: 21
Reply 10, posted (3 years 2 months 3 weeks 16 hours ago) and read 1977 times:

Quoting einsteinboricua (Thread starter):
As if this weren't enough, Cyprus has been dragged into the crisis with its credit ratings being cut to about 3-4 notches above junk status. There are also rumors that France might also be dragged into the crisis.

Don't forget Malta.

Quoting einsteinboricua (Thread starter):
1. Why is is that the euro is still doing far better than the dollar at this point? Surely with the uncertainty among its members of a possible default by Greece and more bailouts, how is it that the currency can continue to appreciate or maintain its value?

The Euro is not just these countries. The Euro is also Germany. Germany = money, money, money. Germony, would be a more suitable name at this point.

What you forget to take into consideration is that the Euro isn't intrinsicly strong. It is stronger against other currencies by default, simply because most other nations aren't doing much better themselves.

Quoting einsteinboricua (Thread starter):
2. What scenarios would be viable if this debt crisis continues to spread to other countries (like say Italy requiring a bailout, Greece defaulting, and riots from eurozone citizens saying no more bailouts to their governments)? Would the euro be devalued? Would it be abandoned? Would a smaller version be created for these countries as an alternative to the euro? Would they expel countries who don't fare well with the euro? Notice I'm using euro, as in the currency, not the Union as a whole.

Italy needs to take care of some minor issues only. Italy is a good country, with a great economy and good people. They have some ''distribution'' issues at the moment and they've been rather reckless in their spending for the past 10-15 years. But I am very confident they will sort their stuff out.

Spain has problems that will become detrimental in the next 5-10 years, not necessarily now. 50% of Spain's college graduates are without a job. South America is a growing economy, Germany needs 200 000 immigrants per year. Spain needs new industries.

Northern Europeans will not ''protest'' against these bailouts. Some 65%+ of German exports go to the European Union. The last thing Germany needs are unstable currencies of their trade partners. Germany, BeNeLux and Austria (though those are all tiny) love the EU more than they hate it, from an economical standpoint. Same can be said about Finnland.

Quoting einsteinboricua (Thread starter):
3. Will eurozone countries draw the line on how many bailouts they are willing to handout? I'd be pretty upset if my country continues to pick up the slack for the fiscal irresponsibility of another country.

The money will be paid back. In addition, Greece alone wants to hire up to 33000 German workers to help them fix their infrastructure.

Quoting einsteinboricua (Thread starter):
Certainly this crisis has cooled interest in candidate countries for joining the EU, and for those that are in the EU, to adopt the euro. Is it possible that this currency union has been rushed? And what would the future hold for future currency unions?

Finland and Luxembourg are the only EU members right now that do not violate the Maastricht criteria. Italy's, Greece's, Malta's, Cyprus's, Portugal's and Spain's problems are nothing new. They had these problems before the Euro and it was just a matter of time before they'd escalate.

But the reason why things are as they are, should be most obvious to you as a Puerto Rican. People ''down south'' have a very different approach to life and politics than people up north. Tranquilo tranquilo.

But I am not overly concerned things will go up again. Spain and Portugal will run into problems in the future, for the lack of an actual industry other than tourism. The others will pull themselves out of the dirt again.

To put it simple.. Southerner's have to realize you can't retire at 50 if you can't afford it. Changes will have to be made, some of them hurtful, but people will accept it and move on.



..sick of it. -K. Pilkington.
User currently offlinelewis From Greece, joined Jul 1999, 3653 posts, RR: 5
Reply 11, posted (3 years 2 months 2 weeks 6 days 22 hours ago) and read 1884 times:

Quoting Rara (Reply 7):
No, sorry. There's nothing profitable about loans with returns far below market value. Even if Greece fully repays the loans (in a best-case scenario), the net effect for Germany, France etc. will likely still be negative, because they internalize a good bit of Greece's liabilities and therefore has to pay more for their own loans. I agree that your point is often missed in the public discussion, but in itself it's only part of the story.

So when Germany gets loans at 3% and passes them to Greece at 5%, that difference is not profit? So far, only Austria has come out to say how happy they are with the money they are making with interest payments of the "bailout". Germany is set to make a few billions in profit from that whole story, if everything goes well.

Quoting Pyrex (Reply 8):
So go ahead and take them, save me the money! Oh, that's right, they came with strings attached...

And the IMF loans have no strings attached?

Quoting Pyrex (Reply 8):
But if you do want to go ahead and default on your commitments, as so many Greek people (the majority?) seem to be able to do, by all means, please go

Can you point out where I said that?

Quoting Rara (Reply 7):
Even if Greece fully repays the loans (in a best-case scenario), the net effect for Germany, France etc. will likely still be negative, because they internalize a good bit of Greece's liabilities and therefore has to pay more for their own loans.

Don't you worry, since two weeks ago, Deutsche Telekom is the majority holder of Greek telecoms, paying only 1/3 of the fair market price for the shares. You will end up making a lot of money out of the yard-sale that is taking place in Greece right now.

Quoting Pyrex (Reply 8):
but when someone (i.e., Germany) is willing to save your (our) asses the correct response should be "Thank you, mam, may I have another?", not "You are doing nothing but your obligation".

I am sorry but as a citizen of a country that has been bombarded continuously with insults, I will refuse to say thank you. We have been continuously insulted not only by German press but by their political class who kept fueling anti-Greek (and borderline racist) sentiments for a couple of years now. And you want me to say "Thank you".

Quoting something (Reply 10):
Southerner's have to realize you can't retire at 50 if you can't afford it.

Enough with the "Daily Mail" fun facts, we have heard them enough times so far.

Quoting Pyrex (Reply 8):

Ok, if the "loan" is not a bailout, what about the tens of billions of euros the Germans poured into Greece over the decades that were just flushed down the drain?

Farming subsidies? Infrastructure aid? Yep we got something out of it and the German construction companies got something out of it too, I call it win-win.
I see a lot of Germans complaining about bailing out other countries, they do forget though that Germany owes its powerhouse properties to multiple debt write-offs and debt forgiveness from many other countries. Not saying it wasn't the the right move, I would fully support it, but they should be the last ones to complain about pouring money to "the losers". After fudging up royally, they were propped up by the rest of the world because this is what you should do. But apparently they deserved a second chance while Greece will have to be broken up into tiny pieces and be auctioned off...


User currently offlineRara From Germany, joined Jan 2007, 2111 posts, RR: 2
Reply 12, posted (3 years 2 months 2 weeks 6 days 19 hours ago) and read 1850 times:

Quoting lewis (Reply 11):

So when Germany gets loans at 3% and passes them to Greece at 5%, that difference is not profit? So far, only Austria has come out to say how happy they are with the money they are making with interest payments of the "bailout". Germany is set to make a few billions in profit from that whole story, if everything goes well.

No. First there is a time factor. Germany may end up with getting back more money from Greece than they gave to Greece first; only that will be much later. Money has opportunity costs; 2 billion Euros now are worth more than 2 billion Euros in the future. Second, "bailing out" Greece, be it by guaranteeing some of Greece's liabilities, or supplying considerable loans to Greece, will worsen Germany's credit rating, even though only slightly. It will then become more expensive for Germany to borrow money on the credit market, outweighing the "profit" they make from the money that Greece repays. Altogether, the difference between German interests and Greek interests (the 3% and 5% you mention) is only meant to cover some of the losses. To put it bluntly, investing in Greece is not a good business decision; one that wouldn't be made if it wasn't for necessity. As to what the Austrians say, I have no idea. Perhaps they need to sell the decision to their own population (there have been attempts of doing the same in Germany, without much success).

Quoting lewis (Reply 11):

I am sorry but as a citizen of a country that has been bombarded continuously with insults, I will refuse to say thank you. We have been continuously insulted not only by German press but by their political class who kept fueling anti-Greek (and borderline racist) sentiments for a couple of years now.

You must have gotten the wrong impression there. Sure we have a low-standards tabloid press here, just like most countries, and their coverage of the Greek crisis has been abominable. That, however, is only one end of the spectrum. The vast majority of the media has covered the affair in a balanced and fair manner (and has been supportive of the financial support for Greece). If you look at their reporting, you will find that while understandably critical of the past Greek governments, they usually have great sympathy for the plight of the normal Greek people.
As for politics, we don't have a "political class" but rather five major parties, of which every single one (!) supports the Greek bailout, even the opposition. Political rhetoric has been rather low-key on the subject, stressing factual reasons much more than emotions, and definitely not "fueling anti-Greek sentiments" - with public opinion already critical about the issue, that would be the last thing our government needs.

All in all, you don't need say "say thank you"; we're all in the same boat after all, and it makes good economic sense for Germany not to let Greece go bankrupt. And still, a little more appreciation instead of haltless allegations would probably go a long way.



Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
User currently offlinelewis From Greece, joined Jul 1999, 3653 posts, RR: 5
Reply 13, posted (3 years 2 months 2 weeks 6 days 19 hours ago) and read 1833 times:

Quoting Rara (Reply 12):
You must have gotten the wrong impression there. Sure we have a low-standards tabloid press here, just like most countries, and their coverage of the Greek crisis has been abominable. That, however, is only one end of the spectrum. The vast majority of the media has covered the affair in a balanced and fair manner (and has been supportive of the financial support for Greece). If you look at their reporting, you will find that while understandably critical of the past Greek governments, they usually have great sympathy for the plight of the normal Greek people.
As for politics, we don't have a "political class" but rather five major parties, of which every single one (!) supports the Greek bailout, even the opposition. Political rhetoric has been rather low-key on the subject, stressing factual reasons much more than emotions, and definitely not "fueling anti-Greek sentiments" - with public opinion already critical about the issue, that would be the last thing our government needs.

All in all, you don't need say "say thank you"; we're all in the same boat after all, and it makes good economic sense for Germany not to let Greece go bankrupt. And still, a little more appreciation instead of haltless allegations would probably go a long way.

When I say political class I mean the German government (wrong wording). Even Merkel came out to say that Greeks cannot keep taking long vacations while Germans work more. She probably forgot that Germans in general take much more vacation time that any S.European country... and this is what I am talking about, using scapegoat tactics with not-very-flattering characterizations to put the whole blame on lazy, tax-dodging liars. While I was in Germany for work and I introduced myself as a Greek, I got the reaction "..and what are you doing here? Vacationing on our money??" and many other "jokes" in German, as they thought I could not understand German. As you can imagine, I have been made to feel unwelcome just because of my birth country in many places (actually N.Europe only), which does not make me very happy. Unfortunately this is the sentiment that has been passed to the general population, maybe you and the more educated people can see why this is false, but the ordinary person does identify with those ideas.

Don't get me wrong, I would feel obliged to be thankful if this whole deal had anything to do with saving Greece and helping its people. But unfortunately, it is all about improving the banks' balance sheets so that they are able to withstand Greece defaulting, being shot out of the Eurozone and possibly the EU and be left to take its own course. Mark my words, this is how it's all gonna end. As for the haltless allegations, just remember where they started (Bild, Focus....); this is where they have to stop as well.

[Edited 2011-08-01 16:10:08]

User currently offlinelewis From Greece, joined Jul 1999, 3653 posts, RR: 5
Reply 14, posted (3 years 2 months 2 weeks 6 days 17 hours ago) and read 1817 times:

Quoting Pyrex (Reply 8):
instead of spending everything and then some, as the majority of their countrymen

That is called private debt, not public debt. There is a list showing the number for each country and how their citizens "spend more than what they earn", Greece is quite low on the list. Public debt is when the government spends more than what it earns, not the citizens as individuals.


User currently offlineshamrock604 From Ireland, joined Sep 2007, 4192 posts, RR: 13
Reply 15, posted (3 years 2 months 2 weeks 3 days 6 hours ago) and read 1712 times:

Now that I am at a P.C , please allow me to deal with some of these points.

Quoting Pyrex (Reply 8):
Yes they are. You, like every Irish person, profited from the bubble through higher tax revenues on the profits of the banks and construction companies, increased value of the equity of your home, etc. Now it is time to pay the piper.

Just because I "profited" as a side effect of the construction boom does NOT mean the debts are mine! That's a crazy conclusion to draw! Banks lent to each other on the hope of profiting from this boom and so fed it. They gambled on it - and this time, they lost because they got greedy. That is their problem, not mine. They are private companies. Aerlingus and Ryanair beneffited from the increased travel demand as people had more disposable income. Does this mean that these airlines are somehow responsible to pay back these debts? This may seem like a trite comparison, but that is exactly what you are saying of the Irish tax payer.

Could we also make the arguement that because young Irish people stopped being able to even get on the property ladder because of the vastly inflated prices, that the "piper" owes them? Somehow I doubt you are going to agree with that!

I repeat - it is not my debt. Ireland's sovereign debt IS my problem - and one I have no issue whatsoever with sorting out. The hole in our national budget was 18 Billion 4 years ago, and despite about 25 Billion is spending cuts and tax rises, it is still 18 Billion. Why is this? Because the exchequer has had to bail out the banks, so instead of now being back to balanced budgets, we are still facing more Austerity.

Quoting Pyrex (Reply 8):
It is a loan way below market terms (in that they are even willing to lend with their taxpayers' when someone who has their own money on the line never would). This after decades and tens of billions of euros of direct subsidies that will never be repaid, and were likely wasted. That is the definition of a bailout.

If Ireland as a state had not had to take on the debts of the banks, we would have had no issue continuing to borrow on the markets. The sovereign was manageable. But because Monsieur Trichet called up our Finance Minister and instructed him to "protect the banks at ALL costs" the state ended up assuming that burden that froze us out of the markets, who detected, quite correctly, that the burden was too big for this small state to manage. So again, we see how protecting these banks, PRIVATE enterprises, forced us into this position and not OUR STATE, NATIONAL debt.

I also question your assertion about wasted structural funds. Nothing was wasted when the EU funded part of Irish infrastructure during the 80's and 90's - in fact, Ireland was acknowledged for putting that money to such good use that it was one of the Keys by which Ireland's economic potential was realised. For example, on our Roads, The EU invested some 7 Billion Euro. That initial investment sorted out some of the worst transport bottlenecks and years later, after strong growth, the Irish tax payer funded a 34 Billion Euro investment in Transport with no EU funding. So to say that any monies received were "wasted" in Ireland's case is a complete and utter fallacy.

This country does not have to entertain any such nonsense that we sat on our asses with a begging bowl- we put it to damn good use, revitalised our country and from 1990 until 2002 when the GENUINE and REAL export led boom we had became corrupted and distorted by property and cheap finance, we were a genuine success story.

Quoting Pyrex (Reply 8):
When absolutely no-one was willing to lend you money? I know you (and Greece, and Portugal - not escaping any blame here) are desperate to find a culprit for your problems ("it was Mercedes who benefited from Greece's profligacy" - have heard that over and over again) but when someone (i.e., Germany) is willing to save your (our) asses the correct response should be "Thank you, mam, may I have another?", not "You are doing nothing but your obligation".

I dont need you or anyone else to tell me who is to blame for these problems. As a nation, we have spent the last four years discussing it. But I am not going to allow anyone who tries to tell me it is "my fault" or even "Ireland's fault" alone, go unchallenged, because that is a lie.

We blame:

1) Our government for not cooling the property market, instead choosing to look after its mates in the construction trade
2) Our regulator, for not calling "STOP"
3) Our banks for being reckless with lending

4) The ECB for not seeing a EUROPE wide problem was emerging
5) Core area banks for recklessly lending to the banks in the periphery
6) Core area bank regulators who also failed to spot a problem

Are we wrong for seeing who in Our own country, but also who in other countries, was to blame?

We elect governments, who appoint regulators, to manage these affairs. The ordinary punter on the street is not an economics specialist, does not understand high finance, and so appoints suitable representatives to manage these affairs.

So unimpressed were we with the job of our last government, we wiped them out at the last election. They went from largest party in Ireland to actually now having not one single MP in Dublin, and just 18 nationwide. (They had 82 MP's last time).

What more do you expect us to do? So no, we are not scrambling around trying to blame some exterior force for our problems. We blame Domestic and Foreign elements - because that IS where the blame should lie.

The Euro area has failed as a whole to regulate itself. Which part of this isnt clear? It's not just us "Peripherals" anymore... it's now reaching the core, and when it does all this horrible mess that the ECB has made me, and you, and our Greek friend Lewis, feel guilty for when we did nothing, is going to be exposed for what it is, and Frau Merkel will run out of Stereotypes to use when she is trying to appease the German electorate by massaging the national ego.

So in short, if you Portuguese wish to go around feeling guilty for sins commited by banks, be my guest. But I'm not going to join you.



Flown EI,FR,RE,EIR,VE,SI,TLA,BA,BE,BD,VX,MON,AF,YS,WX,KL,SK,LH,OK,OS,LX,IB,LTU,HLX,4U,SU,CO,DL,UA,AC,PR,MH,SQ,QF, EY, EK
User currently offlinezhiao From United States of America, joined Jan 2011, 400 posts, RR: 0
Reply 16, posted (3 years 2 months 1 week 4 days 18 hours ago) and read 1556 times:
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Surpised this has not gotten more attention. The crisis is now much worse, with now France in the mix. It appears that a credit crunch may come about like what the US had in 2008.

User currently onlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 17, posted (3 years 2 months 1 week 4 days 17 hours ago) and read 1547 times:

Quoting Rara (Reply 12):
No. First there is a time factor. Germany may end up with getting back more money from Greece than they gave to Greece first; only that will be much later. Money has opportunity costs; 2 billion Euros now are worth more than 2 billion Euros in the future. Second, "bailing out" Greece, be it by guaranteeing some of Greece's liabilities, or supplying considerable loans to Greece, will worsen Germany's credit rating, even though only slightly. It will then become more expensive for Germany to borrow money on the credit market, outweighing the "profit" they make from the money that Greece repays. Altogether, the difference between German interests and Greek interests (the 3% and 5% you mention) is only meant to cover some of the losses. To put it bluntly, investing in Greece is not a good business decision; one that wouldn't be made if it wasn't for necessity. As to what the Austrians say, I have no idea. Perhaps they need to sell the decision to their own population (there have been attempts of doing the same in Germany, without much success).

We really have to stop talking about the Germans lending this money. It needs to be done by the ECB which is guaranteed commonly by all the euro members. There needs to be market intervention where a fund financed purely by the ECB will buy bonds and push their rates down. This is the only way to tell the market that there is no point in thinking that any country in the euro area will go bankrupt. Ultimately Europe needs to make it clear to the market that the ECB will print as much money as needed. This is the only way to end the crisis. Another idea is a Eurobond where investors can exchange their debt at "market rates" for Eurobonds i.e. Greek bonds would be discounted. And then the ECB would guarantee that people can sell the Eurobonds at par. Keep in mind that the US fed has bought up 1.6 trillion dollars worth treasuries in the last two years i.e. printing money. Without a central bank that is willing to do this countries become vulnerable to what's happening in Europe.

We also need to stop talking about bailouts. If you bailout a country then that makes things worse because the markets will turn on that country. Something that might otherwise not happen.

I'm willing to bet that what I describe above will be cheaper in the long term for all than a situation where the markets are allowed to bankrupt Europe.

The major flaw of the euro is that countries give up the ability to print money. I think we have to accept that if countries don't want to get into trouble they need to be able to print money. After all money is not a law of nature. It is simply a tool created by man. The euro simply needs a mechanism that can print money. The ECB is that mechanism. And it has started printing money to buy up Greek, Irish, Italian and Spanish bonds. If a solution is not found the ECB will continue to buy more and more bonds but without a formal framework. The ECB will never allow a euro area member to go bankrupt. It's that simple. Also it should be noted that the ECB already holds hundreds of billions in euro area government bonds through repo loans. So let's not pretend that the euro area isn't already guaranteeing each others debt.

People need to stop talking about the Wiemar Republic with regards to inflation. Today the worry should not be that we have to much inflation. It is the opposite. We need to worry about the fact that we don't have any inflation and might get ourselves into a Japan like situation where we see stagnation for years. That would be just as bad as too much inflation.


User currently offlineaerorobnz From Rwanda, joined Feb 2001, 7259 posts, RR: 13
Reply 18, posted (3 years 2 months 1 week 4 days 9 hours ago) and read 1500 times:

Surely the answer is to maintain diplomatic EU with borders etc, but disband the common currency? Let those who are in the EU make financial decisions for themselves and their own specific circumstances/currencies, rather than the borrowing and spending that the smaller countries within the EU were doing to try and keep up with the bigger countries within the EU... cough cough ireland, greece, portugal...

Sure the potential for a much higher currency based on the combined EU is possible, which we have seen, but also that it's also possible for it to plummet when times are hard for the collective as a whole. Rule #1 should be look after your own affairs first, and then your friends second, but the EU conglomerate has practically reversed that. It seems of late they have been thinking purely as a collective instead of the merits and demerits of the individual countries. One would think the situation would have been weathered slightly better by individual countries if this had happened, and those that would have been worse off would have stayed that way.

I don't know, I'm no economist, but I think if we still had deutschmarks ,lira,drachma,francs we might have had a slightly different scenario...


User currently onlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 19, posted (3 years 2 months 1 week 4 days 8 hours ago) and read 1497 times:

Quoting aerorobnz (Reply 18):
Surely the answer is to maintain diplomatic EU with borders etc, but disband the common currency? Let those who are in the EU make financial decisions for themselves and their own specific circumstances/currencies, rather than the borrowing and spending that the smaller countries within the EU were doing to try and keep up with the bigger countries within the EU... cough cough ireland, greece, portugal...

That would cause more problems than it solves and it wouldn´t solve this problem. Plus your caracterization of why countries were borrowing is not based on any economic theory.


User currently offlineJJJ From Spain, joined May 2006, 1860 posts, RR: 1
Reply 20, posted (3 years 2 months 1 week 4 days 8 hours ago) and read 1496 times:

Quoting something (Reply 10):
But I am not overly concerned things will go up again. Spain and Portugal will run into problems in the future, for the lack of an actual industry other than tourism. The others will pull themselves out of the dirt again.

Such were the conditions under which Spain and Portugal entered the EU. A lot of the (admittedly non-competitive) industry had to be dismantled, and increased competition did the rest, but at the same time a new flow of investment created new industries.

And, in any case, Portuguese and Spanish industrial sector are still a higher % of GDP than in the UK (22% for the UK, 23% for Portugal and 24% for Spain). Especially for Spain the problem is the enormous size of the construction market absorving the huge stocks created during the boom.

For a short while in the 1st quarter, Spain even had an industrial surplus with the EU as exports rebounded. Spain has quite a few challenges (housing bubble, severe unemployment), but the economy fundamentals are sound.


User currently offlineaerorobnz From Rwanda, joined Feb 2001, 7259 posts, RR: 13
Reply 21, posted (3 years 2 months 1 week 4 days 5 hours ago) and read 1462 times:

Quoting eaa3 (Reply 19):
Plus your caracterization of why countries were borrowing is not based on any economic theory.

Sure it's not "economic theory" - just human behaviour observation of the world around me. If everyone around you has something you want it too, it's a basic human desire to feel included and 'the same' as everyone else in your group/team/family/country etc etc... Given the urge of the majority of the capitalist world to desire to have a bigger car/house/boat etc etc than everyone else I'm sure the same can be said for national budgets/economies etc etc.
It's not economic theory, sure but politicians and heads of state and professional economists are still fallable humans driven by egos, human behaviors as everyone else.

You cannot tell me that not being part of the EU 'team' currency has disadvantaged Switzerland or Norway in any way whatsoever. They kept their identity, their currency and have continued to focus on themselves rather than joining the EU club.

The fact is that all the treasuries didn't seem to predict this, so they're either negligent and or they deliberately brought this about to make a huge pile of cash for themselves during the decline. Surely this whole sorry affair shows to us that modern economic system is just a theory that needs major alteration or abandonment.

Do keep in mind that the world survived thousands of years on the gold specie standard without too much issue....


User currently onlineeaa3 From United States of America, joined Sep 2007, 1015 posts, RR: 0
Reply 22, posted (3 years 2 months 1 week 4 days 4 hours ago) and read 1460 times:

Quoting aerorobnz (Reply 21):


Sure it's not "economic theory" - just human behaviour observation of the world around me. If everyone around you has something you want it too, it's a basic human desire to feel included and 'the same' as everyone else in your group/team/family/country etc etc... Given the urge of the majority of the capitalist world to desire to have a bigger car/house/boat etc etc than everyone else I'm sure the same can be said for national budgets/economies etc etc.
It's not economic theory, sure but politicians and heads of state and professional economists are still fallable humans driven by egos, human behaviors as everyone else.

You cannot tell me that not being part of the EU 'team' currency has disadvantaged Switzerland or Norway in any way whatsoever. They kept their identity, their currency and have continued to focus on themselves rather than joining the EU club.

The fact is that all the treasuries didn't seem to predict this, so they're either negligent and or they deliberately brought this about to make a huge pile of cash for themselves during the decline. Surely this whole sorry affair shows to us that modern economic system is just a theory that needs major alteration or abandonment.

Do keep in mind that the world survived thousands of years on the gold specie standard without too much issue....

The Gold standard is extremely bad economic policy. It is one of the main causes of the great depression.

The problem with your comments is that the eurozone countries were not increasing their debt as a share of GDP in the 2000´s. They only started rising in 2008. Today there are only 2 countries that have a debt to GDP ratio of over 100% (Italy and Greece). The United States has a debt to GDP ratio of 100% but the rates they are paying on treasuries is at historical lows. The only difference is that the US can print money and do market interventions. The EU needs to do the same. But apart from that there is no problem at all.

Saying that these countries behave badly because of the EU is bull and the statistics show it. The EU did not force Ireland to save the banks and didn´t force the EU countries to borrow.

Here are the statistics for debt to GDP.:

http://epp.eurostat.ec.europa.eu/tgm...lugin=1&language=en&pcode=teina225

So what are you blaming the EU for.


User currently offlineiakobos From Belgium, joined Aug 2003, 3313 posts, RR: 35
Reply 23, posted (3 years 2 months 1 week 4 days 3 hours ago) and read 1430 times:

Quoting lewis (Reply 13):
As you can imagine, I have been made to feel unwelcome just because of my birth country in many places (actually N.Europe only), which does not make me very happy. Unfortunately this is the sentiment that has been passed to the general population, maybe you and the more educated people can see why this is false, but the ordinary person does identify with those ideas.

Sorry Lewis, but that sentiment is not born on a vacuum.
Passed the nationalist sensitivity you should realize that Greek economics and society's' old habits played the major roles in the situation.

I was declared an idiot for not "playing" with someone else's money instead of my own, a naive for following the rules, an imbecile for refusing to bribe, a karagiozi for criticizing the rotten system, a devil for predicting a catastrophic outcome (14 years in advance), etc...overall I gained the reputation of being the bad foreigner, a dangerous disease as you probably know.

In religious circles they would say: now has come the time for repentance.
Instead, there is an epidermic reaction here to blame the others and even when facing compelling evidence of your own mistakes: never give up arguing and never admit anything.

I am still waiting (well actually I am not) to see someone coming up with ideas how to tackle the real societal problems in this country, not simply the economics which are not the cause but a mere consequence of deeper moral weaknesses.
That would be an earthquake of a magnitude never experienced before, but don't hold your breath.


User currently offlineshamrock604 From Ireland, joined Sep 2007, 4192 posts, RR: 13
Reply 24, posted (3 years 2 months 1 week 4 days 2 hours ago) and read 1414 times:

Quoting aerorobnz (Reply 18):

Ireland did NOT spend and borrow trying to keep up with anyone!

The construction boom meant that there was a huge tax boom for the exchequer. It didn't have to borrow anything. We ran budget surpluses right up until 2007 when the credit crunch caused a property crash. Then, because the property/construction sector tax take was nearly wiped out overnight resulting in a deficiet.

Ireland wasnt trying to keep up with anyone - it didnt have to.



Flown EI,FR,RE,EIR,VE,SI,TLA,BA,BE,BD,VX,MON,AF,YS,WX,KL,SK,LH,OK,OS,LX,IB,LTU,HLX,4U,SU,CO,DL,UA,AC,PR,MH,SQ,QF, EY, EK
25 lewis : When did I say they did not. I just hate generalizations and stereotypical insults (from both sides). And enough with the nationalist sensitivity lin
26 PPVRA : Gold did not cause the Great Depression nor was it a contributing factor. Printing money does not fix anyone's economy either, it simply sends the pa
27 iakobos : And in this you are no different than anyone else. The world boils with clichés, though in most civilized places this is a very thin crust and it is
28 lewis : I am not, a simple insult by a person or two will leave me untouched, I will not like it of course but it will not scar me or anything! Insults, ster
29 lewis : You, me and people with some knowledge on how an economy works picked that up a decade ago at least, that is true. For the average citizen, proclamat
30 iakobos : Of course Panagiota did not know, but Mr X who had a very high position in the Ministry of prime interest did not either (and I knew him very well).
31 lewis : Agreed, agreed and agreed once more. What a pathetic joke, the Greek justice system. You can have as many laws as you want, if you cannot enforce the
32 prebennorholm : In fifty years time the history books will tell us that the Euro was invented 20 years too early. The EU is simply not politically mature enough to ma
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