YokoTsuno
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 9:09 pm

The Euro took a serious beating again yesterday after rumours surfaced that Greece wants to get out of the Euro and possible EU. Is this the beginning of the end of it all?

If the Europeans can't make the EU work, one can basically forget about ASEAN becoming something more than the talkshop it is today.

http://www.spiegel.de/international/europe/0,1518,761201,00.html

[Edited 2011-05-06 14:10:27]

[Edited 2011-05-06 14:10:56]
 
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DeltaMD90
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 9:32 pm

Quoting YokoTsuno (Thread starter):
Is this the beginning of the end of it all?

End of the EU? No, it will only expand IMO. As for the Euro, it may devalue and several may shy away, but I think most of our French and German posters would say the Euro is good. Time will tell, but I doubt much will happen.
Ironically I have never flown a Delta MD-90 :)
 
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Aesma
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 9:33 pm

For such a country, it doesn't make sense. The euro is what is keeping it afloat ! I wouldn't be surprised if this rumor came from the very newspaper you're quoting, which doesn't like anything European.
New Technology is the name we give to stuff that doesn't work yet. Douglas Adams
 
lewis
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 9:36 pm

I read the article this morning. I also read the news about the EU and the Greek government denying the "facts" of the Spiegel article.
I seriously do not know what to believe. After the revelation a few days ago by a previously unseen interview of Strauss-Kahn that the IMF was planning its involvement months before the government admitted it, I do not trust anything the government says. Let us also not forget that the government was denying IMF involvement and bailouts for months before it actually became a reality. At this point, anything is possible, we will just have to wait and see.
 
Asturias
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 9:37 pm

Well, I guess nothing is impossible, but I still doubt that Greece would actually go through with this. The advantage of a greek currency in a time of crisis are quite a few, through devaluation.

Devaluation of the hypothetical greek currency (replacement for Euro) would mean for instance, that there would be no need for negotiated and unpopular cut in wages across the board, it would happen automatically.

Devaluation is also a boon for export, as it will be relatively cheaper to buy greek products as the currency devaluates, which in turn can increase productivity (albeit with much lower wages), prevent increased unemployment (a combination of much lower wages and more export) and push for more investment (since holding on to the devaluating greek currency is a very bad option compared to investing).

Normally a devaluation would also lower national debts. However this is where the main obstacle presents itself; namely that the debts of Greece are in Euros, not the hypothetical currency. Thus making a transition to a new greek currency much more painful and difficult than had Greece never joined the Eurozone.

Thus in the end, it may be much better, looking objectively on the situation, that Greece sticks with the Euro and uses the more politically painful methods of resurrecting the economy: i.e. cut down corruption, wages and aim for a credible sustainable economy. Pay off the debts and accept a slow and painful recovery to become stronger than ever before.

This demands political courage and vision, this also demands cooperation in the society and understanding that prosperity can only happen slowly, when there is moderate equality, strong justice and a sense of community.

With all that said, it can still well happen that Greece decides to opt out of the Eurozone, while an option with it's own hurdles (as mentioned above) it is a viable one.

Finally it must be stressed, that the current crisis of Greece is not the fault of the Eurozone. It is a home made problem in Greece, but the question is only whether greeks perceive it easier to find their collective feet again inside it or outside it. The easier way is perhaps outside it, but the responsible and difficult way is inside it.

asturias
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Rara
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 10:16 pm

Quoting Aesma (Reply 2):
I wouldn't be surprised if this rumor came from the very newspaper you're quoting, which doesn't like anything European.

Der Spiegel is actually pro-Europe, as is most mainstream German media. The article is also very critical of the Greece-leaving-Eurozone scenario.

Well, I hope nothing comes out of it. As bad as the situation is, Greece withdrawing would only make matters worse.
Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
 
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OA412
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Rumours: Greece To Abandon Euro

Fri May 06, 2011 10:43 pm

I seriously doubt this development. There are issues that the EU must work out, and Greece needs to get (is currently busy getting) its house in order. However, Greece dumping the Euro, and possibly leaving the EU is not the solution, and the Greek government is well aware of that.
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ozglobal
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Fri May 06, 2011 10:59 pm

By all accounts in French media, this is a fantasy invented by Der Spiegel (you speculate on the motive); 21st century 'buzz' or news invention, universally and vigorously denied by EU Finance Ministers and not reported by other journals. Sad thing is, the currency has dropped 1% today against the USD as a result of this invention. What is it with that publication; are they the Fox News of Europe?
When all's said and done, there'll be more said than done.
 
lewis
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Fri May 06, 2011 11:46 pm

Quoting OzGlobal (Reply 7):
By all accounts in French media, this is a fantasy invented by Der Spiegel (you speculate on the motive); 21st century 'buzz' or news invention, universally and vigorously denied by EU Finance Ministers and not reported by other journals. Sad thing is, the currency has dropped 1% today against the USD as a result of this invention. What is it with that publication; are they the Fox News of Europe?

Maybe if they keep saying it over and over it will end up coming true, or that's what they're hoping.
 
Klaus
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Sat May 07, 2011 12:01 am

Looks a lot like the greek side generating pressure on the european partners to come around with more help.

Actually going through with it would be devastating for Greece itself.

The confidential emergency meeting of the european finance ministers seems to indicate that it's not been just a media invention.
 
lewis
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Sat May 07, 2011 12:11 am

Quoting Klaus (Reply 9):
The confidential emergency meeting of the european finance ministers seems to indicate that it's not been just a media invention.

From what I read, the meeting was planned already and has Greece in the agenda but only to discuss change of the loan terms (duration, payments) and the possibility of a debt restructuring. At least that's what Merkel said. But as I mentioned before, I buy nothing of what's being said by government officials anymore.
 
Asturias
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Rumours: Greece To Abandon Euro

Sat May 07, 2011 2:58 am

Quoting Klaus (Reply 9):
Looks a lot like the greek side generating pressure on the european partners to come around with more help.

That's very cynical of you. Perhaps there is no truth to the speculations of the article and Greece is just working with the other Eurozone countries to get out of the current crisis.

asturias
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ozglobal
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Sat May 07, 2011 8:50 am

If this turns out to be a complete beat up by Der Spiegel for their own attention seeking and has bad consequences for the currency, they should be held to account for having abandoned journalism and be permanently classified as the German Glen Beck.
When all's said and done, there'll be more said than done.
 
Rara
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Sat May 07, 2011 9:31 am

Quoting OzGlobal (Reply 12):
If this turns out to be a complete beat up by Der Spiegel for their own attention seeking and has bad consequences for the currency, they should be held to account for having abandoned journalism and be permanently classified as the German Glen Beck.

I see your suspicion, and I'm not fan of theirs, but by and large, this paper is unusually well informed, and has a reputation to lose in this regard. Even if nothing comes out of this rumour (which I hope, and which Der Spiegel advocates as well), the story is very unlikely to be fabricated.
Samson was a biblical tough guy, but his dad Samsonite was even more of a hard case.
 
Klaus
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Rumours: Greece To Abandon Euro

Sat May 07, 2011 9:33 am

Quoting Asturias (Reply 11):
That's very cynical of you.

From my point of view it's simply the most plausible interpretation. Greece actually abandoning the Euro would get them into much bigger problems than they've got already.

Quoting OzGlobal (Reply 12):
If this turns out to be a complete beat up by Der Spiegel for their own attention seeking and has bad consequences for the currency, they should be held to account for having abandoned journalism and be permanently classified as the German Glen Beck.

This kind of report has only gained that much traction because the Spiegel has very good sources and is usually right about this kind of thing. It's not as if less reputable papers hadn't panicked all over already.
 
Asturias
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Sat May 07, 2011 1:50 pm

Quoting Rara (Reply 13):
I see your suspicion, and I'm not fan of theirs, but by and large, this paper is unusually well informed, and has a reputation to lose in this regard. Even if nothing comes out of this rumour (which I hope, and which Der Spiegel advocates as well), the story is very unlikely to be fabricated.

"unusually well informed" and "having a reputation to lose" are not words I would choose for Der Spiegel when it comes to reports and news on Airbus.  

asturias
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OA260
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Rumours: Greece To Abandon Euro

Sat May 07, 2011 4:45 pm

I can see Greece leaving the Euro but it will never leave the EU .
 
Klaus
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Sat May 07, 2011 5:15 pm

Quoting Asturias (Reply 15):
"unusually well informed" and "having a reputation to lose" are not words I would choose for Der Spiegel when it comes to reports and news on Airbus.

Or Boeing. Or computing. Or pretty much most technical issues when they get more complicated.   

But their main business has always been political reporting, and there they are very well connected and very well informed.

The rumour of the minister meeting has by now been confirmed to have been correct indeed.

On what level the greek government actually considered ditching the Euro remains the question. It may well have been just a theoretical study, or the idea may have been floated as a tactical ploy. The rumour was quite unspecific there. And, of course, that part may have been incorrect after all.
 
iakobos
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Rumours: Greece To Abandon Euro

Sat May 07, 2011 5:59 pm

Quoting Asturias (Reply 11):
That's very cynical of you. Perhaps there is no truth to the speculations of the article and Greece is just working with the other Eurozone countries to get out of the current crisis.

There might be a pinch of cynicism in our friend's comment but a tiny one then.
I would not be surprised if Der Spiegel is spot on.

Cooking the books and telling nice stories is, sorry to say, major pastimes in the country's administrations.
Successive governments have brightly shined through their glorious irresponsibility and their lies.

The problem with Greek finances has started a long long time ago. The EU kept pumping billions in various aids, subsidies, funding and stabilization programs without proper auditing and on-site supervision.
The crack could be sealed at the end of the 90's but it became a hole and the Greek "shipyard" does not have what it needs to fill it in. Come the global crisis and...

The economy is in shambles and whatever the government can do by cutting public expenditures and increasing taxation is insufficient to compensate for the loss of revenues.
Unsurprisingly, the latest figures concerning public debt are even worst than expected....and no one trusts the figures anyway.

There is no in-house solution in the short term.
The Greek for HELP is boeithia (pronounce boïthia)
 
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OA260
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Sat May 07, 2011 6:07 pm

Quoting iakobos (Reply 18):
The Greek for HELP is boeithia (pronounce boïthia)

Voeithia   ( βοήθειά )
 
wardialer
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Rumours: Greece To Abandon Euro

Sat May 07, 2011 6:38 pm

Well, I dont blame them.

Here is why.

As you may have noted in the past year or so, all the European countries that DO NOT have the EURO currency in place, are not the ones suffering. Like Hungary, for example. And this would be a great example. No failing banks, No recession, the unemployment there is like around 2 to 3 percent. And no wonder all the US-based companies are investing their resources in one of these Eastern European countries. And this is whats hurting America I may add.....
 
iakobos
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Sat May 07, 2011 7:05 pm

Quoting OA260 (Reply 19):
Voeithia

Xero... I know but non-Greek speakers would think I mistyped a B for a V  
 
Klaus
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Sat May 07, 2011 7:42 pm

Quoting wardialer (Reply 20):
As you may have noted in the past year or so, all the European countries that DO NOT have the EURO currency in place, are not the ones suffering.

Right. Germany, for instance, is suffering horribly from having the Euro.

Sorry, but that is just the usual, unreflected Euro-bashing.

The much more complicated reality is that Ireland, Greece and Portugal each have entered the Euro zone under pretenses which had been flattering and convenient in the short term, but became untenable once reality couldn't be denied any longer.

In contrast, countries which have entered the Euro zone on reasonable parity with their actual, sustainable economic performance have fared rather well.

And Hungary is not exactly a poster child for political stability and economic growth. They've got substantial economic and political problems. The current government is aggressively pursuing a hard-right takeover of the state, progressively dismantling democratic checks and balances and openly sympathizing with the nazi groups who are not just parading the streets but are also stepping up the violence against roma and other minorities.

The longer-term impact of their economic program is also not visible yet – it is relatively easy to create a short upwards spike, but creating sustained growth from a stagnating and insufficiently reformed post-communist economy is a lot harder.

If you're looking for a model state in Europe, I'd really recommend you to look again.
 
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OA260
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Sat May 07, 2011 7:47 pm

Quoting wardialer (Reply 20):
Well, I dont blame them.

Here is why.

I think this is the reason why Greeks may look at life without the Euro but from my own family and friends point of view they actually think they need to stay in the Euro and take the pain for the next 20 years the truth is most Greeks trust the EU monitors more than their own government.

[quote=iakobos,reply=21]Xero... I know but non-Greek speakers would think I mistyped a B for a V

Im used to explaining Greeklish lol...
 
janmnastami
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Sat May 07, 2011 8:05 pm

Quoting wardialer (Reply 20):
As you may have noted in the past year or so, all the European countries that DO NOT have the EURO currency in place, are not the ones suffering. Like Hungary, for example. And this would be a great example. No failing banks, No recession, the unemployment there is like around 2 to 3 percent.

I'm sorry, but it's absolutely not true.

UK: Northern Rock, Royal Bank of Scotland, HBOS, Lloyds TSB nationalised or helped by the state;
Hungary: IMF loan of more than 15 billion USD approved in 2008, talks for a new loan for the next year.
 
einsteinboricua
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Sat May 07, 2011 10:17 pm

Quoting Asturias (Reply 4):
Finally it must be stressed, that the current crisis of Greece is not the fault of the Eurozone. It is a home made problem in Greece,

IMO, all the more reason for them to abandon the currency.

Quoting Rara (Reply 5):
As bad as the situation is, Greece withdrawing would only make matters worse.

Well, the euro would take a heavy toll, I'll give you that. But I don't consider leaving Greece in the eurozone will make things better.

Quoting OA412 (Reply 6):
However, Greece dumping the Euro, and possibly leaving the EU is not the solution, and the Greek government is well aware of that.

They can remain in the union. A market and political union doesn't create many problems. However, when you are in a currency union and right from the start you did not meet the criteria, then you should be out. Period. The other eurozone members should not have to bail you out just because you faked your data and failed to keep your house in order. The same goes to Ireland and Portugal.
"You haven't seen a tree until you've seen its shadow from the sky."
 
iakobos
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Sat May 07, 2011 11:31 pm

Quoting Klaus (Reply 22):
The much more complicated reality is that Ireland, Greece and Portugal each have entered the Euro zone under pretenses which had been flattering and convenient in the short term, but became untenable once reality couldn't be denied any longer.

Correct (for Greece at least), a bit like the pilot who forged his logbook to get a seat in the cockpit.

302 billions due to lenders (150%+ of GDP), 75% of it to non-Greek lenders, the biggest being France, Switzerland and Germany.

The government measures towards the public sector should be able to save 1 billion this year, half an olive so to speak, but it hurts the little people, public servants and pensioners.
The end of life carrot, already very small, is further cut by 14% and comes 2 years later. Salaries have gone down 20-30% and end of year bonuses have disappeared.

Next measure on the agenda and that one could be a whole forest of olive trees is tax evasion.
Estimates of the black economy range from 30 to 40% of the GDP...think about it.
Will something be done about actually combating it ?
In a country where MP's prescription (limitation of actions act) is 2 years (yes, two !), I have cynical doubts about it.
 
Asturias
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Sat May 07, 2011 11:57 pm

Quoting einsteinboricua (Reply 25):
IMO, all the more reason for them to abandon the currency.

The fact that the crisis in Greece has nothing to do with the Euro is all the more reason for Greece to abandon the currency? Perhaps you meant to say something else, because that hardly makes any sense.

asturias
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Asturias
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Sun May 08, 2011 12:04 am

Quoting iakobos (Reply 26):
Correct (for Greece at least), a bit like the pilot who forged his logbook to get a seat in the cockpit.

Perhaps (I take you as an authority on Greece, of course), but Klaus is completely wrong about Ireland and Portugal. Neither country faked anything to join the Eurozone. The economic crisis would have happened, Euro or no. The problem is now that there *is* a crisis, the Eurozone countries can't stray away from the economic demands of the Eurozone (regarding debts, inflation etc.) and they certainly can't devalue their currency.

This makes a recovery much harder because it demands the recovery to be within the bounds of the Eurozone system - though when I write "much harder" I mean it in the traditional sense. Taking on more debts, allowing inflation to run rampant and devalue the currency are all cheap tricks that protect a rotten system - and actually fixing a system; that is difficult.

There are many people very rich because of the rules that let to the crisis and they would be most unhappy if regulation, fairness and responsibility would be introduced to the "holy" free market.

asturias
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Klaus
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Sun May 08, 2011 12:06 am

At least theoretically, curbing tax evasion and corruption should help bring in the funds to afford regular people decent pensions.

Maybe it's not entirely a bad thing if external pressure and oversight deflect some of the short-term(?) resistance against a cleanup there.

There is no doubt that this will be hard, but I think it is also clear that the EU partners will help substantially (if not by just pouring money down the same old, broken pipes).
 
Klaus
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Sun May 08, 2011 12:30 am

Quoting Asturias (Reply 28):
Perhaps (I take you as an authority on Greece, of course), but Klaus is completely wrong about Ireland and Portugal. Neither country faked anything to join the Eurozone.

Yes, they did.

Ireland presented itself as if their unstable bubble economy was actually sustainable growth.

Portugal is probably not quite on the same level, but their presentations regarding their then current and projected economic performance were not realistic either.

The problem is that the Euro zone was created during the bubble economy phase and all members to some extent based their projections on that.

Germany was one of the countries which didn't seem to benefit much from that bubble, but in fact it didn't hurt much from its bursting in the end.

Even Portugal hoped to gain some perspectives from an ongoing stream of easy money, and they actually might have, if the bubble hadn't just been that. But so in the tightening economic situation where fundamental value creation has again become more important, their lacking productivity has become a much bigger problem than anticipated.

Greece simply lied about its fundamentals; And Ireland pretended that the bubble wasn't one. (If Britain should have attempted to join, they would now be down there with Ireland.)

Quoting Asturias (Reply 28):
There are many people very rich because of the rules that let to the crisis and they would be most unhappy if regulation, fairness and responsibility would be introduced to the "holy" free market.

While the Commission has in principle promoted free markets, it has also undertaken several harsh measures to regulate markets where they saw abusive behaviour of corporations or anticompetitive collusion, generally taking a stance for the european citizen and consumer.

I would say things could be way worse in that regard (and I'm definitely not the greatest fan of the EC otherwise!).
 
Asturias
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Sun May 08, 2011 1:40 am

Quoting Klaus (Reply 30):
Yes, they did.

No they did not. Ireland had no bubble when they joined the Eurozone. Which was in 1999. Process started in 1992.

Quoting Klaus (Reply 30):
Portugal is probably not quite on the same level, but their presentations regarding their then current and projected economic performance were not realistic either.

Obviously you don't have a clue of what you are talking about. Using weasel words like "probably not quite". Indeed.

Quoting Klaus (Reply 30):
The problem is that the Euro zone was created during the bubble economy phase and all members to some extent based their projections on that.

1992-1999/2002 was not during a bubble economy for Ireland or Portugal. In Portugal there was an average GDP annual growth rate of about 3-4%. Modest enough, since a relatively poor country like Portugal can grow much much faster than an established country such as Prussia. I mean Germany.

Meanwhile Ireland was living quite more impressive growths, the Celtic Tiger was in full swing, resulting in an immense 9% growth rate on average in the same time period. But the reasons were not "cheap money" of a bubble economy, but rather some very favorable tax rates for companies, EU aid, industry policy and cheap labor. In other words, they were *making* something. Not speculating with bubble money. The net export rate compared to import rate in Ireland constantly growing over that period. Very healthy, very un-bubbly.

Interestingly the GDP annual growth rate of GERMANY in the period between 1992 and 2002 was about 2.5%, and with a much more established infrastructure, economy and size of economy, far more bubbly than Portugal, with its modest economy and modest 3-4% annual growth of GDP.

Quoting Klaus (Reply 30):
Germany was one of the countries which didn't seem to benefit much from that bubble, but in fact it didn't hurt much from its bursting in the end.

There was no bubble in Europe between 1992 and 1999. Denmark hanging in about 4% annual growth, Austria about 3%, Spain at about 3-4%.. and Germany at about 2.5%. The US hit a bubble in mid 2000 with a sudden growth to 5% and then collapsed. Fast. Dropped to 1% the same year. That's a bubble. Going from 4% to 1% in three years is not. That's more akin what happened in many countries in Europe 2003 or so, when the economy felt the effect of the US bubble. The slow deflation of the EU economies at the time just prove that there was no bubble.

I doubt you recognize it, but I'm sure most other people will, who read this thread.

Quoting Klaus (Reply 30):
Even Portugal hoped to gain some perspectives from an ongoing stream of easy money, and they actually might have, if the bubble hadn't just been that. But so in the tightening economic situation where fundamental value creation has again become more important, their lacking productivity has become a much bigger problem than anticipated.

Astute readers will note that Portugal's economy never burst suddenly like happens when a bubble occurs, but rather calmly and un-dramatically faded down from 4% annual growth to 2% annual growth over 2 years. Who are you trying to convince here?

Quoting Klaus (Reply 30):
Greece simply lied about its fundamentals; And Ireland pretended that the bubble wasn't one. (If Britain should have attempted to join, they would now be down there with Ireland.)

Now I'm not sure what "bubble" you are on about. Your imaginary bubble of the 90s or the actual bubble of the 21st century? If the former, ignore this because that bubble only exists in your mind, but if the latter, the UK went down there with Ireland as well, the entire year of 2009 spend with -4% average annual GDP, immense debts, bailout of their fraudulent banks and an austerity program by the government that is pretty much dismantling the welfare state.

Quoting Klaus (Reply 30):
While the Commission has in principle promoted free markets, it has also undertaken several harsh measures to regulate markets where they saw abusive behaviour of corporations or anticompetitive collusion, generally taking a stance for the european citizen and consumer.

Indeed, but not in banking. The EU does stand up for the consumer, which is applaudable, but that's neither here nor there. It wasn't consumer protection that caused the current crisis.

asturias

[Edited 2011-05-07 18:43:02]
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Braybuddy
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Sun May 08, 2011 1:58 pm

Quoting einsteinboricua (Reply 25):
The other eurozone members should not have to bail you out just because you faked your data and failed to keep your house in order. The same goes to Ireland and Portugal.


Our banks lied to the government about their solvency, which led to the government guaranteeing depositors and bondholders, which in turn precipitated the country's economic collapse. Unfortunately, there was no mechanism in place at national or ECB level to curb or rein-in the massive borowings of Irish banks, for which we are now paying the price. While it's fortunate that we are being bailed-out by other EU countries and the ECB, this money is not a gift. It's a loan, for less than we would pay on the open market, but still on favourable terms to the lenders.
 
Klaus
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Sun May 08, 2011 5:36 pm

Quoting Asturias (Reply 31):
Now I'm not sure what "bubble" you are on about.

There is one possible point of view to see a bubble only the last five minutes before it actually bursts, or another seeing it already when economies are detaching themselves from actual value creation by fictitious financial maneuvers, which is the actual root cause of the disaster and which has its origin a lot earlier.

The roots of the recent financial crash had been laid in the 1980s and 1990s already, with some analysts recognizing the problems right away back then. But as usual they were laughed at and ignored.
 
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Braybuddy
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Sun May 08, 2011 8:05 pm

Quoting Klaus (Reply 33):
The roots of the recent financial crash had been laid in the 1980s and 1990s already, with some analysts recognizing the problems right away back then. But as usual they were laughed at and ignored.

Part of the problem as far as Ireland is concerned Klaus, is that for every merchant of doom, we had many, many cheerleaders, at home and abroad. The Economist even named Ireland as the "Best Country to Live" as recently as 2004: http://news.bbc.co.uk/2/hi/4020523.stm

"The Republic has made significant gains from its membership of the EU, earning the soubriquet Celtic Tiger for its economic progress. Commentators say it is widely admired by the EU's newest members, and has become a model for what they hope to achieve."

And in the same year, even Jean-Claude Trichet got in on the act, in a lecture in Dublin:
http://www.ecb.int/press/key/date/2004/html/sp040531.en.html

"Rather the process of transformation that you began over four decades ago has become a model for the millions of new citizens of the European Union."

How times have changed . . .

It's generally accepted that, while we had a genuine economic boom in the mid-to-late '90s and early 2000s, things started to get out of hand around 2003. It's here the line from boom to bubble was crossed, and indeed the warning signs were recognised by all-too-few economists. As soon as the slowdown started in early '07 the vast majority of economic commentators predicted a soft landing for the property market, and that seemed to be playing out, right up to the time of the Lehman Bros collapse in Sept '08. Much to his subsequent embarrassment, one economist even published a book around that time entitled 'The best is yet to come'.

So, while some commentators did get it right, they were many, many more who got it wrong. And after over a decade of prosperity and growth, it would have been politically difficult, or impossible, to kill the goose laying the golden egg. And with light-touch regulation, and a financial regulator who was asleep on the job, and no mechanism in place at an ECB level to put manners on our banks, by that stage the die for the subsequent bust was well-cast.
 
Klaus
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Sun May 08, 2011 8:13 pm

Quoting Braybuddy (Reply 34):
So, while some commentators did get it right, they were many, many more who got it wrong. And after over a decade of prosperity and growth, it would have been politically difficult, or impossible, to kill the goose laying the golden egg. And with light-touch regulation, and a financial regulator who was asleep on the job, and no mechanism in place at an ECB level to put manners on our banks, by that stage the die for the subsequent bust was well-cast.

No doubt – the snake-oil dealers often get the upper hand when sufficiently many people can be lulled into complacency.

This development was a global one, with centers in the US and Britain and serveral epicenters such as Ireland...

Quoting Braybuddy (Reply 34):
Much to his subsequent embarrassment, one economist even published a book around that time entitled 'The best is yet to come'.

Ouch! But at least he can use his book to keep himself warm in winter, I'd expect...!   
 
Asturias
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Sun May 08, 2011 8:28 pm

Quoting Braybuddy (Reply 34):
It's generally accepted that, while we had a genuine economic boom in the mid-to-late '90s and early 2000s, things started to get out of hand around 2003.

  

Indeed, that is my take on it too, and it correlates with evidence, such as production rate and GDP - but apparently Klaus thinks differently and claims Ireland tricked itself into the Eurozone atop a bubble.

Quoting Klaus (Reply 30):
Ireland presented itself as if their unstable bubble economy was actually sustainable growth.

     

That's quite "out there" in terms of analysis (to be kind)

asturias
Tonight we fly
 
DETA737
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Sun May 08, 2011 11:08 pm

Greece's (and the rest of Souther Europe's) situation is akin to Argentina's from 1992 to 2002 when they pegged the peso to the U.S. dollar. The Euro is simply too strong a currency for these countries much like the dollar was a the time for Argentina.

Eventually Greece and probably other countries will need to restructure their debt (default) and probably abandon the Euro. In 2002 most economists predicted that Argentina would never recover from defaulting on their debt. However, by devaluing the peso, Argentine exports became competitive abroad. Tourism boomed, Buenos Aires went from being one of the most expensive cities in the world to one of the cheapest. Between 2003-2007 their economy grew at a rate of 8.8% per year. For countries so dependent on tourism such as Greece, Spain and Portugal this is something to keep in mind.

Of course Germany and France do not want this to happen since their banks would suffer from any default. In the end though the alternative is having more austerity imposed and years of low or negative economic growth. This disproportionately affects the middle classes in these countries and eventually something has got to give. When rumours start circulating in the media usually they lead to something (anyone remember when the eurocrats were denying that Greece would even need a bailout).
 
PPVRA
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Sun May 08, 2011 11:35 pm

Quoting DETA737 (Reply 37):

Note that a lot of countries use the USD as their own currencies and I have not heard of any of these countries going through what Argentina did. Panama has used it for about a century, for example.
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
DETA737
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Mon May 09, 2011 3:46 am

Quoting PPVRA (Reply 38):
Note that a lot of countries use the USD as their own currencies and I have not heard of any of these countries going through what Argentina did. Panama has used it for about a century, for example.

Panama has not had the implosion that Argentina has, but Panama did have to turn to the IMF more than any other country but Pakistan being under the tutelage of 17 IMF programs between 1965 and 2000. Go to page 7 on the paper below to read more.

http://www.anderson.ucla.edu/faculty...astian.edwards/Edwards_dollar1.pdf
 
Derico
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Mon May 09, 2011 4:36 am

Quoting DETA737 (Reply 37):
Greece's (and the rest of Souther Europe's) situation is akin to Argentina's from 1992 to 2002 when they pegged the peso to the U.S. dollar. The Euro is simply too strong a currency for these countries much like the dollar was a the time for Argentina.

Somewhat, however the US dollar has been going down significantly since 2001. If Argentina had held out a bit longer it would have benefited from the 40% devaluation up to today. And Argentina did grow vigorously until 1999.

The problem was the country ran out of time because every solitary other country in the emerging world had devalued their currency in half by 2001: Thailand, South Korea, Indonesia, Mexico, Brazil, Russia, Turkey... Brazil's devaluation was particularly harmful, since at the time it seemed every factory and slaughterhouse in Argentina wanted to pull out and set up shop in Brazil. It was simply not sustainable to keep such an overvalued currency when many of your competitors were literally 50% off in labor costs dollarwise.

Now it is the opposite policy: a ridiculously cheap currency, while all our neighbors and beyond have far stronger currencies. Because of the cheap peso, there is a very low unemployment rate (in fact in Mendoza where I am from there is full employment, 3% jobless rate and shortage of construction and agricultural workers). Mendoza has the lowest unemployment by far of any large city because on top of the overheated economy Buenos Aires's policies have created, the local economy actually DOES have some very solid fundamentals in fine wine industry, huge wine and ski tourism, oil and mining, high end manufacturing (specially hydroelectric turbines and eolic, which feeds a large metalmechanic sector), and retail.

But the price to pay is a inflation rate of 20-25% annual. The cheap currency keeps industries like toy making and some textiles humming locally, that would otherwise not be able to compete with Asian labor. It also allows the government to reduce the debt burden, which has gone from 140% of GDP in 2002 to 45% today, mainly due to reestructured debt, monetary inflation, the government paying 30 billion in debts to the IMF, World Bank, etc.

The ultimate question is how can European countries (and I include the major ones such as France and Germany), or the USA or Japan, llower their debt rations without having to go the Russia or Argentina route. Just because people have a longer trust time horizon does not mean that such trust is endless and unless massive cuts are done, I don't see how debt will have to be dealt with in the future.
My internet was not shut down, the internet has shut me down
 
oldeuropean
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Mon May 09, 2011 6:00 am

Quoting Klaus (Reply 33):
There is one possible point of view to see a bubble only the last five minutes before it actually bursts, or another seeing it already when economies are detaching themselves from actual value creation by fictitious financial maneuvers, which is the actual root cause of the disaster and which has its origin a lot earlier.

It's funny that just articles in Der Spiegel already have forecasted the burst of the bubble and the world economy crisis nearly 1 year (!) before it happened.
I've read these articles back then and was always amazed how politics, banker, and economists all over the world alleged to have been surprised by the crash.
Wer nichts weiss muss alles glauben
 
bill142
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Mon May 09, 2011 6:24 am

Rumours were probably started by currency traders with huge short positions on the euro.
 
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shamrock604
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Mon May 09, 2011 6:36 am

Quoting Klaus (Reply 30):
hey did.

Ireland presented itself as if their unstable bubble economy was actually sustainable growth.


That is quite simply completely and utterly untrue. I'm sorry Klaus, but if we want to have an honest debate on this, i'm all for it, but let's tell the truth!

Ireland was a booming, export led economy pre 2002. It all started to go wrong when the property market exploded fuelled by cheap credit.

The Euro allowed access to that credit. Irish banks lent irresponsibly, funded by German and French banks who lent to them irresponsibly. These banks all became fat on the inflated Irish property market, and now your government has tried to paint the ordinary people of Ireland as "debt sinners" even though we did nothing.

Our banks and your banks are responsible for this mess, not helped by the fact that the Euro currency is essentially a big experiment, with no central governance, and with its member governments / central banks unable to take decsions with regard to their domestic situation.

The Euro is great for Germany because the ECB makes it decisions on interest rates etc with regard to the larger players in Europe, ie Germany and France.

Hence during our boom, and Germany's slump, we had record low interest rates that fuelled the Irish property bubble, but were good for the sluggish German economy.

Now, we are getting increased interest rates to curb German inflation that will probably send Ireland back into recession.

I am very passionately PRO Europe, but you need to realise that there are fundamental problems within the currency area, rather than simply blaming the lazy greeks, lying paddies.

This was a massive failure of regulation by not only the Irish Central bank, Greek Central Bank, but of the European Central Bank as well who could have cried stop to the lending bubble at any time - but didnt.

The World was on a debt binge - but now the Irish, Greeks and Portuguese are being painted as liars and cheats so that the errors in the Euro project are not exposed.

I do not believe Ireland or Greece should leave the Euro - but the way the Irish in patricular are being treated is a disgrace.

First, this "bail out". Most of Ireland's debt is bank debt. Our last government stupidly took on this debt after getting bad advice from the banks on how bad their losses were. The markets sensed this was too much debt for a small country to bear, and so jacked up interest rates. This eventually froze us out of the debt markets, so we were forced into a "bail out" that we didnt want.

The funny thing is, that this money loaned by the EU, will go to pay the debt of the Irish banks. And who is that debt owed to??

German Banks. French banks. British Banks. Belgian Banks.

And then teh really funny part - the Irish taxpayer, i.e ME, who did nothing, who didnt borrow recklessly, has to pay it back out of my wages, with 6% interest on top.

So, you guys dont have to pay for your bank losses, but I do!

And then, the ECB has the cheek to try to suggest that they are "bailing out" Ireland. What a load of crap!

So, enough of this teutonic superiority complex - Germany and everyone else gets a free bailout of their banks, with their bad debts paid off ultimately by the Irish tax payer.

The situation in Greece is somewhat different, as it is not mostly related to bank debt like our problems. So I will leave our Greek members to argue their case.

But if they decide to stand up for their country and leave the Euro, I will fully support them!

[Edited 2011-05-08 23:44:44]
 
iakobos
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Mon May 09, 2011 2:33 pm

Our best friends at Standard & Poor's have dropped this morning our long term credit rating at B and short term at C.
Rumours are that the brave finance ministry is investigating the alphabet in hope that the lowest possible rating is at the letter Z.
 
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OA260
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Mon May 09, 2011 4:38 pm

Weird for the first time today I heard alot of my colleagues say they want to default and return to the Irish Pound ( Punt ) ! I guess people are getting sick of the way Europe is treating Ireland. And they are also getting tired of Frances attempts to try to make the Irish ditch the low corporation tax.
 
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shamrock604
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Mon May 09, 2011 5:03 pm

I am more hopeful today Phil. I think some sense is finally being seen at EU level. You cant saddle a huge debt on a country, to be paid back in 3 years, that requires savage spending cuts to pay it back, in the middle of a deep recession.

Who thought that would work??

The problem is that a weak Euro, weakened by the problems in the so called "periphery", mean German exports are cheaper......so Germany races ahead by ensuring continuing instability that keeps the currency weak.

Some union. Some solidarity.

Its a joke.
 
PPVRA
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Mon May 09, 2011 6:56 pm

Quoting DETA737 (Reply 39):
Panama has not had the implosion that Argentina has, but Panama did have to turn to the IMF more than any other country but Pakistan being under the tutelage of 17 IMF programs between 1965 and 2000. Go to page 7 on the paper below to read more.

Thanks for that, I am going through it. Though from what page 7 alone says doesn't sound surprising. They get themselves into fiscal trouble just like every other Latin American country, but don't have the power to devalue the dollar, so they have no option but either to drop the dollar and devalue or go to the IMF. Much like the predicament Greece is in. No doubt their monetary history would have been much rougher had they not dollarized (I am not strictly in favor of dollarization, only in case your local central bank is worse than the American one)
"If goods do not cross borders, soldiers will" - Frederic Bastiat
 
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shamrock604
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Mon May 09, 2011 9:19 pm

Quoting OA260 (Reply 45):
Weird for the first time today I heard alot of my colleagues say they want to default and return to the Irish Pound ( Punt ) ! I guess people are getting sick of the way Europe is treating Ireland. And they are also getting tired of Frances attempts to try to make the Irish ditch the low corporation tax.

Even the IMF have now admitted that Ireland were "screwed" by the ECB and The European Commision, but equally that our government at the time seemed to want to side up the EC / ECB in a show of what "good little Europeans" we were.

When even the IMF say this, you know things are bad!

What is uber sickening is the German Superiority complex - the Irish, Greeks, Spanish and Portuguese are just lazy / stupid / unwilling to change etc. Did the German Media, who are fuelling this wave of "anti peripherals" ever stop and think why this issue is affecting a group of states all of whom lie on the fringes of Europe?

Did they ever think why the ECB seems to be so keen to destroy the economies of these states by giving them just 3 years to pay back their "bail out"??

Do they ever wonder what economic sense there is in forcing massive public spending cuts and tax increases in the middle of a deep recession, which will only ensure lower government revenues and reduced ability to ever pay the debt off?

The reason is simple - the instability of the currency suits the core of Europe by making its exports cheaper so they can recover from the downturn faster while condemning us to economic strangulation.

But now - the game is up. Even the dogs on the street realise that the EU have set out on a quite frankly stupid course of action that is merely papering over the cracks - but equally, the dogs on the street know they did it on purpose. They did it to promote the interests of the core.

Their game is now coming back to haunt them and the markets ensure they do not get away with their behaviour. There is no option now but to massively pull back on the restrictions of these "bail outs" and give the countries longer to pay so they can stop the very spending cuts and tax rises that are pushing their economies into an abyss.

Ireland played by the rules - its sense of national purpose in the early 1990's, by accepting pay moderation, by making its labour market ultra flexible, by accepting social protections that were generally inferior to anywhere in Europe, led to a power house that grew and grew as exports boomed.

Then... along came the Euro. And almost at that exact moment, the madness began. House prices spiralled. Because of this, wage demands soared so people could actuallty afford housing. Our hard work and unity of purpose unravelled.

Our own government stupidly allowed this to happen, and the ECB sat back and did nothing to help, only contributing further to the mess by cutting interest rates so a sluggish German economy could cope.

And now, Germany tries to blame us?

I have huge respect for Germany as a country, and I have even more respect for its people who turned thei rnation into an economic powerhouse after the horrorof WW2.

So, I ask any German contributor here to open their mind, think a little beyond the pile of Rubbish that "Bild" likes to tell you, and ask yourself - is it really all our fault? Or is there really something wrong in the Euro that needs fixing once and for all?

The Euro is at stake here, as is the EU. Because after our recent experience, you wont see any EU treaty being approved by the voters of this country ever again unless this "bail out" is exposed for what it is and better terms applied.
 
fraspotter
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Mon May 09, 2011 11:50 pm

If Greece does end up pulling out of the EU and Euro currency, could this be a possible opening for Turkey to get in?
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