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If Greece will leave the Euro on Sunday, will this open a Pandora's Box?
I am worried. Very very much worried. I firmly believe that when Greece most likely will leave the Euro-zone next Sunday, a Pandora's Box will be opened. Words like "Treaty of Versailles", "Wallstreet Crash 1929" and "The Failure of the League of Nations" (predecessor of UN, founded in 1920) were very much heard today in the European Parliament. I am myself a progressive-centrist-liberal (www.d66.nl) who firmly believes in a strong EU and Europe.
Alas, even in the past days since the Greek referendum I have become very pessimistic about a possible solution. And I've even come to think that whatever will be decided on Sunday, will most likely lead to an unthinkable chain of events. I'm afraid of that.
Though I do like to point out former Belgian PM Verhofstad's speech today in the European Parliament, aimed directly at PM Tsipras of Greece. The video is embedded in this Dutch article, though the video is entirely in English:
http://nos.nl/artikel/2045843-vurige-verhofstadt-weg-met-griekse-privileges.html
Alas, even in the past days since the Greek referendum I have become very pessimistic about a possible solution. And I've even come to think that whatever will be decided on Sunday, will most likely lead to an unthinkable chain of events. I'm afraid of that.
Though I do like to point out former Belgian PM Verhofstad's speech today in the European Parliament, aimed directly at PM Tsipras of Greece. The video is embedded in this Dutch article, though the video is entirely in English:
http://nos.nl/artikel/2045843-vurige-verhofstadt-weg-met-griekse-privileges.html
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Comments
Greece likely will leave the Euro unless Angela stops protecting the banks. She probably won't. Democracy and the people have spoken. Good for them. Good for Tsipras. I thought he looked super cool in that video calmly listening to the Belgian rambling on (and why is he shouting?)
Greece will be better off outside the Euro anyway. Let them get a new, lower priced currency, become super competitive again and get back on their feet. The people have suffered enough. Structural reforms are definitely needed (no question) but even if they are implemented, Greece cannot be competitive in the Euro. It is the currency that is the issue (without one fiscal body). The construct is unsustainable....Heck, even France, Spain and Italy are not competitive in the Euro (it's just being covered up for now.....).
This whole thing is one big political sham to keep 'old Europe' together and strong against the rising mega powers of the BRICS. It's failing, and the biggest beneficiary of the Euro has been super competitive, machine like Germany, who benefits from the low Euro/one currency, and open markets.
I look forward to the continued fiasco, but only because the Euro construct is not sustainable in its current form.
Watch China - that's where problems are going to come next (markets are tanking over there).
PS: This whole thing was exposed due to the 2008 Financial Crisis caused by the big buddy on the other side of the pond. We are still feeling its effects.
And if you say right now that you look forward to the fiasco of the Euro, then....then you're also looking forward to a new future for Europe. A future of increasing prosperity, the end of the prosperity and welfare as we know it, countries like China and Russia who will dictate policies in Europe even more. A future of not just one Greek fiasco, but also a future of 18 other 'Greek fiasco's' (the other 18 Eurozone member states) and other 9 'Greek fiasco's' (the rest of the EU-members who don't have the Euro).
You're basically calling for the destruction of Europe.
By the way, I wholeheartedly agree with Guy Verhofstadt. If Tsipras is using empty polemic and rhetoric in populist speeches, then the least thing one should do is giving a counter-reaction to that. Screaming? My God, have you seen videos of the English Parliament?
The Belgian looked desperate. There is no need to shout. Tsipras looked Bondian cool in that clip. I would have put my finger up at what looked like a crazy man shouting at him....
Regarding the Euro and my point of view. Of course I don't want the destruction of Europe. However I think it's completely unacceptable for Europe to throw the Greek people under the bus. If you have an unsustainable system, then fix the system. Don't blame the weakest party/link in that system to protect the strongest party/links - that's patently wrong....
What they should consider right away is the following:
1. create a mechanism to allow countries to temporarily get out of the Euro (when they have problems) and come back in when they have their problems fixed. So adopt/create a parallel currency mechanism so that countries can go onto it (convertible to Euro at a certain rate) when needed. The mechanism obviously has to be considered carefully, but it can be done (use Bitcoin, or IMF SDR currency or something else....it does not have to be the Drachma 2.0 which everyone is talking about.....that's just not necessary)
2. look into the possibility of creating two Euros (one for economically stronger Northern European countries and one for weaker countries) because the economic imbalances between strong and weak will continue to exist.
At the end of the day, it was the Germans who messed this up. They insisted on austerity after the financial crisis in 2008 and did not let the ECB do QE at that time. That was the wrong move. Every other country/block (US, UK, China, Japan, Canada, Australia etc. etc.) did QE and it helped them to hold their heads above water during the crisis via currency printing. The Germans (as mentioned, the biggest beneficiaries of the Euro) stopped the ECB from doing QE until this year..... 7 yrs after the crisis!.....making Europe extra uncompetitive during that time and prolonging recessions......on top of that, the Greeks have been suffering under unsustainable debts that keep mounting and pressure from lenders. It just wasn't going to work. Period.
The Greeks should not be wholly blamed for this. They should be partly congratulated for exposing the sham that is the current Euro construct. The flawed system must be reformed quickly (including putting in more shock absorbers/balancers) in order to be sustainable. Not ignored. Of course the Greeks need to reform their pension system and corruption.....but a lot of countries have that, not just them. They are being unfairly singled out.
PS: I am not aware of any fixed currency system that has survived in history without one overall Government (which Europe does not have). The Gold standard collapsed. The Bretton Woods $ standard collapsed. The European Exchange Rate Mechanism (predecessor to the Euro) collapsed.
What is unfortunate is that most Western countries (US included) will never pay up their debt either. Nearly all Western countries (Germany and some Northern European countries being the most notable exception, with Australia and Canada also in reasonable positions due to their natural resource wealth) are in debt overload situations.
It's just that the Euro system (which is dominated by the strongest country.....namely Germany) is more susceptible to cracks/fissures because they cannot individually depreciate their currencies (like the other countries outside the Euro system) to devalue their unsustainable debt. So the most beneficial aspect of the Euro (namely the one currency block) is also its weakest aspect. It's very good when everything is fine, but when there is stress/imbalance (like now), the system is not designed to accommodate it.
Well, are you familiar with the term "corrupted politicians"? What makes you think that the people will have to pay eternally for a few evil minds who spent and stole money like there's no tomorrow? Greek people never saw any raise in their salaries since the country
committed to euro. It's quite easy to blame everyone but the truth lies somewhere else.
And the vast majority of the Greek people can't take the blame, they are the easy target and the scapegoat. Well, we can't take it anymore given the fact that there can never be a better tomorrow with the EU suggestions. Things can only get worse, since the majority of the money they give to us are going to save the banks and the rest are just paying the low pensions. No, we can't be a German colony.
Actually this is not entirely true. The Greek people have suffered through draconian austerity for the past 5 years.
All one currency mechanisms (including the US, UK, Canada etc.) operate with stabilizing balancing/transfer mechanisms. It's just that they usually have one central government authority (a federal authority) that takes precedence and does the transfers.
The Euro experiment is the one novel system that does not have one elected overall Government. That has always been its flaw. There is no overall central mandate. The Greeks don't give a 'f' what the Germans think (why should they - they did not elect Angela, so she has no credibility with them....neither does Wolfang Schauble) and vice versa.
Bottom line: the Germans pushed the Greeks too far. They should have given some debt relief to the people and the creditor banks should have taken more of the losses on the chin in 2009. In a capitalist system, if you make a bad loan (as the German banks did), it's your fault. Sadly, since 2008, we've (all Western countries) socialized the losses for the Banks (at the taxpayer's expense), since they were considered 'too big to fail' and created what's known as 'moral hazard' in the banking system, which is very dangerous.
The German taxpayer is now on the hook for Greece......5 years ago, it was the German banks who were on the hook before the bailouts - it should have stayed that way.
Europe has survived two world wars, the dissolution of the European Union would be just a walk in the park for the old continent.
Yes, at great cost. The life's of millions of people.
I think we all agree that the dissolution of the EU would have a significantly smaller cost. Don't get me wrong, I'm not saying it would be a good thing. All I'm saying is that it would not be the end of Europe.
If you get in the game an taken billions in bailouts, know the rules before you take the money and spend the cash. The truth is Tsipras has not got a clue he way out of his depth. He was protest vote who got in to power and gone to far to go back. The Greek people are desperate due to the prior governments failure to reform and failure to control spending. The Answer was not a rebel austerity vote all the Greeks have down is stick two fingers up at the hand that feeds them. It is not just about Germany it is about the other EU countries who feel betrayed by the Greeks because they want to change the rule book due to their own failings. If it wasnt for the threat that Russia would bail them out and have alli in Europe with shipping channels the remainder of the EU would probably be quite happy see the back of them. The people of Greece voted on Sunday to reject proposals but really what they did was put their EU membership at stake. They should have been infromed of the risks to voting No, because really what has happened is they have voted to leave the EU.
The European continent won't disappear. I mean, the European continent housed several hundreds of concentration/death camps during WW II.
So strictly spoken, Europe will always exist. But of the Euro starts to crumble and if, as a result, the EU gets dissolved, then that IS a major crisis. It would lead to reinforced and faster downfall of the welfare and prosperity we all, more or less, enjoy at the moment in Europe.
The situation in Greece will spread out, slowly, like a virus, over other EU nations. The now more prosperous Nordic nations will need to get acquainted to Greek-like unemployment rates and debts.
Referendum. ;) Then bring back pounds, shillings and pence ! :D
That's complete nonsense. Yes, Eastern + Souther European countries would probably suffer, but Nordic nations would fare just fine. Are you really implying that the Nordic countries would crumble without the EU? That's EU fanaticism on a whole new level!
Tsipras fully knows the situation and is acting as well as he can. He is absolutely not out of his depth. The Greek debt is unsustainable. Period. It is unpayable. Period. The troika have known this for some time. Anyone with the ability to understand finance has known this for some time. This can kicking experiment has been conducted in the vain hope that growth would increase and solve this problem. It has not. It was not realistic to expect that it would. The bailouts were initially conceived to save the European Banks who had lent money irresponsibly to Greece.
http://www.forbes.com/sites/afontevecchia/2012/02/21/greek-bailout-deal-a-farce-to-benefit-banks-at-the-expense-of-greece/
As I said before, all other major currencies have been devalued in the wake of the financial crisis to boost relative competitiveness (and prevent extreme austerity as well as reduce the real value of debts built up in the good days).
The Greeks cannot devalue relatively speaking to get the same result because they are in the Euro. The Euro system was designed to operate in a growth environment, not in an economic stagnation environment, which is what we've had globally (apart from real estate appreciation with its associated GDP impacts due to easy money policies in most Western countries, and the German/Northern European economic powerhouses) in most Western countries. The entire Euro experiment has been at risk for the past 7 years since the stresses of the financial crisis came into play........Greece is just the poster boy.
Exactly right. Unfortunately, given the stresses inherent in the one currency Euro system (without one central Government to conduct economic policy), extremism is going to increase in Europe. In fact, I'm rather sure that anti-immigration/anti-Islam sentiment is being used as a scapegoat to take attention away from the real problem, which is a failed political experiment that could come crashing down.
People worry about the Euro collapsing. It is the Euro that is the problem. Britain was smart to stay out of it and it has given them operating flexibility. It is a political construct that is untenable in its current form (due to meagre growth rates for the forseeable future) and dangerous (as can be seen by what's happening now).
They are fully recovered, know why? They did not bail out their banks, but let them collapse.
Precisely. The problem this time is it is the German banks who are most at risk (and there is potential American derivative add-on risk that no one knows the full exposure of). Moreover, the bank losses were socialized via the bailouts by the German taxpayer.
Sadly, there's more risk involved this time around. Iceland first of all is even a smaller economy than Greece. The country has a little more than 300,000 inhabitants, the number of people from a small city. Secondly, Iceland was/is not a member of the EU and the EuroZone.
This time around however, the implications are directly affecting the worth of the Euro and its EU Stability Pact.
Italy at 132%
Portugal at 130%
Ireland at 109%
Cyprus at 107%
Belgium at 106%
Spain at 97%
France at 97%
Austria at 84%
Slovenia at 80%
Germany at 74%
Netherlands at 68%
Malta at 68%
And also, the Euro Zone should stop all current deals with Hungary and Croatia for them to join the Zone, as their debt is higher than the authorized level (at 85% and 76%, respectively).