Greece, the Euro Zone and Germany - will the Euro fail?

[Callisto]

I'm amazed that nobody is talking about this on here. Greece was (illegally, as I understand it) bailed out to the tune of 110 billion Euros last year. One year on and the Greek economy is practically non-existant, Germany are not keen on another bail-out and there is the distinct possibility that the Euro will fail. The European Central Bank has no money - it can print some or we can bail it out, or it can fail. If the Euro fails the European Union will likely fail and the result will make the credit crunch look like a tiny economic blip.

[SpotsMumSally]

A lot of people here blindly trust the government and don't even realise what is happening, more so the same "Irish" didn't have their noses firmly in any troughs and were just living day to day to the best of their abilities.

[alexpolismum]

I'm not in Athens any more. I'm in Alexandroupolis (hence the username).

It would be nice if we could hold politicians to account, but unfortunately they are the ones who set legislation, and they have guaranteed themselves immunity.

Ordinary people in Greece haven't had their hands in any pies, either, but are also just trying to get on with life as best they can.

[erebus]

What are the PIGS countries? Genuine question.

I agree, though, that the reality is that most people went on living their day to day lives with no concept of how shaky the economic ground was. I mean, if your pay rises 2-3% a year above a low level of inflation, you wouldn't anxiously wonder whether the country could afford that sort of pay rise, you'd assume someone (who was being paid a lot more than you!) had 'done the Math' already, wouldn't you?

Also, though I have significantly less sympathy with those who bought houses costing 10x their joint salary on 100% mortgages, I guess they had never had the 'benefit' of being parented by war babies who were scared of debt and therefore imbued their DCs with that fear.

I am also less sympathetic towards people with eye watering CC bills- it demonstrates a staggering immaturity- However that seems to encompass most of our Western governments, doesn't it??

[SpotsMumSally]

Portugal, Ireland, Greece and Spain.

[Al0uiseG]

Or Portugal, Ireland, Italy and Spain.

[SinicalSal]

Snouts in the Trough, Callisto? Really?
Even lil ole me? Please explain. Or, ideally, retract.

I understand the historical reasons why Germany shies away from the spectre of hyperinflation, but you'd think pragmatism would override old fears. Cranking up the printing presses may be the least worst option, at this point.

[Al0uiseG]

Sorry, i didnt put Greece into that last post.

[TheCrackFox]

I really think this will break the Euro and possibly even the EU.

The Euro was always a massively bad idea but the oplitical elite seemed to love it and pressed on regardless.

[SinicalSal]

I wonder why the insistance on the single currency Crackfox? Was it for free trade reasons, because the woolly We Are Family rhetoric doesn't really cut it.

[TheCrackFox]

I have always thought it was a vanity project by the Germans and French. It is more fun for the politicians to swan about having lovely dinners and chatting to other Heads of State than to go to dreary conferences with nurses, truck drivers etc where they will probably heckled or slow hand clapped etc.

[Al0uiseG]

I think you are spot on there CrackFox.

[Callisto]

Snouts in the trough of the Celtic tiger phenomenon of super-growth in the economy, spurred by massive EU handouts, which was completely unsustainable. House prices went mental, people got greedy, everyone thought it would go on forever, etc, etc. Of course it is a simplification and a generalisation. Not everyone benefitted or agreed with what happened, but plenty did.

[niceguy2]

Because a single currency is a precursor and a requirement to a United States of Europe which is ultimately where the EU want to end up. So we canrival USA and USSR (bear in mind when the EU started)

The theory is/was that a United States of Europe would be able to compete better politically, economically & militarily with USA, USSR and now a resurgent China. There's simply no way a single country like France, or Germany or even the UK could compete for global dwindling resources on their own.

Great idea in theory.....in practice we're nowhere near as aligned as each state is in USA.

[SinicalSal]

I am sick and tired of this We Are All To Blame - We All Partied - Snout Trough BS. Having a job, paying to put a roof over your head and not dying on a hospital trolley are indicators of a pretty modest, but satisfactory, lifestyle. I won't accept the blame for what's happened, and it's effin offensive to suggest the average Irish citizen should atone for their 'greed'. The average citizen anywhere just gets on with life, wringing a few drops of pleasure from it on the way without neccessarily fretting overmuch about international high finance and intricate fiscal policy.

Niceguy was this aim openly stated?

[alexpolismum]

SinicalSal - Nicely said. I am also sick of hearing that we are all to blame.

And as for receiving high payrises - many people in Greece believed that it was part of the transition from drachma to euro, that they were simply bringing their salaries in line with people in other eurozone countries. Practically every day we would hear how much better people were paid for the same jobs in Germany and France, and when the euro was introduced prices rocketed overnight here. A lot of people assumed that things would gradually even out across the eurozone, that there was some kind of grand plan in place.

In any case, not everyone received these high payrises. I wish I had had one! They only went to a category of public sector workers.

[MoreBeta]

My feeling for at least the last year is that Greece, Ireland and Portugal would be better off defaulting on their sovereign debts and then leaving the Euro to restore their industrial competitiveness. Leaving the Euro would allow them to adopt their old currencies then allow them to devalue. Politically, I think both default and leaving the Euro are inevitable becuase that is what the people of those countries will vote for. Look at the demonstration in Greece over austerity measures.

The Euro though will still exist even if a few countries leave and I do believe that France and Germany will defend the Euro to the last and if necessary make it a currency that covers only France and Germany.

It is though the defaults on soverign debt that threaten the financial system more than a break up of the Euro. Default on sovereign debt will destroy banks and pension funds and insurance companies that hold that debt. It will also destroy the ECB balance sheet as it holds so much Greek, Portugese and Irish sovereign debt. The ECB will have to be recapitalised but it will survive with stronger rules about what it is allowed to do and its role better defined in maintaining a strong Euro.

The twists ans turns over Greece are about saving teh global financial and banking system - not about what is good for Greece. The Greek people will eventually force their politicians to throw in the towel and force default. The question is when and how, not if that will happen.

[SpotsMumSally]

Have you any thoughts on what will happen to the countries you mentioned if they did default/leave the euro?

[SinicalSal]

I see a more centralised europe wide fiscal policy being adopted if the PIIGS stay in. A step forward for the European project, as defined by NiceGuy above.
As it is in Ireland a spending report has to be submitted to the Troika every fortnight by every public body in the country.

I don't know how it will work if there is a default. Does that automatically led to establishment of a new national currency? The argument seems to be that this will lead to an export led growth. But wouldn't personal debt still be denominated in euros? Bad news for mortgage holders.
I'm all questions no answers.

[Hullygully]

I want the Greeks to default now. If they cave into the IMF they will only be even worse off, as there will be an enforced privatisation programme (watch the French, Germans etc grab the utilities, airports, railways etc etc) which will bring in even less money and make the poor even poorer. Without even mentioning the trillions of foreign debt that every Greek euro will go towards servicing. The ordinary tax payer will just hand over their money to foreign banks while their country goes to shit.

The IMF have done this all over the world. Anyoen remember Asia?

[SinicalSal]

Yup Hully.
That's the inevitable conclusion of not defaulting. But no one speaks of it - bad form to mention the huge transfer of wealth from the poorest to the richest. Makes you look like a bit of a commie.

[sayanything]

Default is tricky. As a poster cited above, the ECB holds a ton of Greek debt - a default, even a haircut, would wipe out massive amounts of money from ECB coffers and severely destabilise the rest of the EU. Also, a lot of Greek debt is held by Greek pension funds - what happens to people's pensions if the slate is wiped clean?

I don't know enough about this, even though I'm in Brussels and married to a Greek , but it's all extremely worrying.

[Hullygully]

Can't we all shout it everywhere?

[SinicalSal]

There are no answers. Somebody suffers in all scenarios. Just pick your victim. I'm guessing it won't be the top tier.

[niceguy2]

Sinical, no this was never a documented aim but it's pretty obvious where the EU wanted to be. Why otherwise create an EU parliament? Why have an EU diplomatic core? A president? If it looks like a duck, quacks like a duck....

The only reason they don't talk about it is because they know the people don't want it. But that's never stopped them. Look at the Irish when they rejected the Lisbon Treaty. Instead of accepting the will of the people, they were told to do it again (and presumably come back with the right answer this time....)

As for Greece, I know the impact on the ECB and the rest of the EU will be large. The flipside though is by throwing more "good money" after bad, we just end up in a worse situation later down the line when it appears we can no longer delay the inevitable.

[Hullygully]

The only good thing is that more and more young Greeks are moving back to family land in the countryside where they can support themselves. Not much fun for them without any techno techno, but keeps the land alive.