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Why Germany seems not to want a quick fix for the euro crisis

economist.com

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Re: Why Germany seems not to want a quick fix for the euro crisis

#31

Post by phillmv »

_delirium wrote: post #21
mtts wrote: post #16

Earlier quoted context omitted.

While morally entirely correct (IMHO, I'm Dutch, we also use the same word for guilt as we do for debt) I doubt the Germans can hold on to this position for very long. Apparently the German "Landesbanken" are heavily invested in Greek and other crappy debt, which is a problem because these banks also fund a large part of the "real" German economy. So Germany probably has no choice but to prop up the lousy debt.

That's the main quandary that the politicians/economists appreciate but the general public doesn't, I think: either way Germany is stuck bailing out this debt, because in large part it's not really bailing out Greece , but bailing out German banks . The main choice is whether to pay the banks directly (let Greece default on the bonds, then cover the losses to keep banks solvent), or to pay them indirectly (send Greec…

This is what I hate, hate, hate about all the language used to describe the PIIGS. Deadbeats! Irresponsible losers!

Well, a little bit but – someone had to lend them the money in the first place. The liquidity crisis of 2008 hit everyone…

Re: Why Germany seems not to want a quick fix for the euro crisis

#32

Post by [deleted] »

phillmv wrote: post #31
_delirium wrote: post #21

Earlier quoted context omitted.

That's the main quandary that the politicians/economists appreciate but the general public doesn't, I think: either way Germany is stuck bailing out this debt, because in large part it's not really bailing out Greece , but bailing out German banks . The main choice is whether to pay the banks directly (let Greece default on the bonds, then cover the losses to keep banks solvent), or to pay them indirectly (send Greec…

This is what I hate, hate, hate about all the language used to describe the PIIGS. Deadbeats! Irresponsible losers! Well, a little bit but – someone had to lend them the money in the first place . The liquidity crisis of 2008 hit everyone…

[deleted]

Re: Why Germany seems not to want a quick fix for the euro crisis

#33

Post by fforw »

> and jealous institutions such as the constitutional court.

The Bundesverfassungsgericht (federal constitutional court) is the only organ that reliably keeps doing its job, ensuring that the newly passed laws are in fact constitutional -- a test that was failed so many times in the recent past. Calling that jealous behavior is a very strange position to take.

Re: Why Germany seems not to want a quick fix for the euro crisis

#34

Post by mtts »

HSO wrote: post #24
zerostar07 wrote: post #9

Earlier quoted context omitted.

It only makes sense, right? Personally i am quite pleased that the Germans lead this psychological warfare against the faceless 'markets', that are pushing more and more to funnel taxpayer's money in their ill-gone investments. As a greek, i find it ridiculous that the world's markets are turbulent over a tiny small country like Greece (the only PIGS country that is actually bankrupt), and exaggerate the risks so muc…

Have you ever thought twice about what exactly "faceless markets" are? Markets are composed of many agents, people, institutions, and mostly your pension money! It's true. Pension funds and other institutional investors are the single-largest segment, esp. of sovereign bond markets! Now ask yourself, with the Greek government in its current position, if it came to you today and asked you to lend it money, not to inve…

Markets are indeed composed of many agents, people and institutions squandering your pension money, all of whom hide behind the faceless market, arguing that if "the market" is doing it, it has to be right. Which is exactly what got us into this mess in the first place - everyone shirking off responsibility for their actions.

Re: Why Germany seems not to want a quick fix for the euro crisis

#35

Post by jonnathanson »

paulkoer wrote: post #5

As a German I must say that in my opinion this article captures the German sentiment very well. On the one hand it is short sided, it will likely lead to more economic problems than necessary and the stance of the Euro members (and Germany especially) on Greece is hurting the economy there much more than necessary. On the other hand I do feel that some of this sentiment is justified. After all the example of Italy (B…

The sentiment is justified, but the position is untenable. With every passing day, Greek debt compounds massively, and the hole gets bigger. Meanwhile, the uncertainty in the markets causes further volatility and pain for all concerned, and you risk the setting in of total panic. You end up with the worst of both worlds: all the market pain of a Greek default, without the default itself...but with the default still quite likely.

The Greek economy is dysfunctional to its core (even a passing skim-through of Michael Lewis's new book will give you a sense for just how dysfunctional it is). But that isn't the root of the problem. The root of the problem is that Greece was brought into the Euro monetary collective in the first place, and given the credit ratings and borrowing rates of a country like Germany. Banks had a large part in helping put lipstick on the Greek pig, covering up its systemic flaws and getting it ready for EU primetime.

So imagine that Greek dysfunction was like a caged and abused pitbull, and Greece's EU inclusion was like walking into that cage waving a bloody hunk of meat in either arm. Who do you blame when you lose a few limbs: the pitbull, or yourself?

Re: Why Germany seems not to want a quick fix for the euro crisis

#36

Post by Aloisius »

gibsonf1 wrote: post #26

I have no idea why Keynesian ideas are assumed as the proper way to solve economic problems when, in fact, they never work. Germany is unusual, especially in comparison to the United States, in that they make a point of only spending the money they have. They have been watching the "wonderful" results of Keynesian intervention in the US recently and around the world and likely noticed that the results are always grea…

Are you saying Germany has no debt?

Re: Why Germany seems not to want a quick fix for the euro crisis

#37

Post by Iv »

paulkoer wrote: post #5

As a German I must say that in my opinion this article captures the German sentiment very well. On the one hand it is short sided, it will likely lead to more economic problems than necessary and the stance of the Euro members (and Germany especially) on Greece is hurting the economy there much more than necessary. On the other hand I do feel that some of this sentiment is justified. After all the example of Italy (B…

I see only one way out : find responsibles and punish them. Through fines and prison terms. Some people have hidden the true state of Greece by fraudulent accounting with the help of experts from Goldman Sachs.

Politician who participated in that should be judged for treason. Financial experts for fraud. Goldman Sachs must be fined heavily for this.

Right now, Dexia is falling despite 6 billions of aid in 2008 and a successful "stress test". Obviously some fraud happened there too. There are many places where inquiries should be made.

Heads must roll, then austerity will become a possibility. Many people see this as just an economical problem but it is a very political one. There is a crisis of legitimacy amongst the people who are organizing the austerity : in most place it is the same people who caused the crisis.

Re: Why Germany seems not to want a quick fix for the euro crisis

#38

Post by DasIch »

gibsonf1 wrote: post #26

I have no idea why Keynesian ideas are assumed as the proper way to solve economic problems when, in fact, they never work. Germany is unusual, especially in comparison to the United States, in that they make a point of only spending the money they have. They have been watching the "wonderful" results of Keynesian intervention in the US recently and around the world and likely noticed that the results are always grea…

Germany uses Keynesian ideas as well for example it launched a Konjukturpaket[1] in 2009. Germany was just not hit as hard and recovered faster, there is nothing particularly unusual about that.

[1]: http://de.wikipedia.org/wiki/Konjunkturpaket_II

Re: Why Germany seems not to want a quick fix for the euro crisis

#39

Post by zerostar07 »

HSO wrote: post #24
zerostar07 wrote: post #9

Earlier quoted context omitted.

It only makes sense, right? Personally i am quite pleased that the Germans lead this psychological warfare against the faceless 'markets', that are pushing more and more to funnel taxpayer's money in their ill-gone investments. As a greek, i find it ridiculous that the world's markets are turbulent over a tiny small country like Greece (the only PIGS country that is actually bankrupt), and exaggerate the risks so muc…

Have you ever thought twice about what exactly "faceless markets" are? Markets are composed of many agents, people, institutions, and mostly your pension money! It's true. Pension funds and other institutional investors are the single-largest segment, esp. of sovereign bond markets! Now ask yourself, with the Greek government in its current position, if it came to you today and asked you to lend it money, not to inve…

I fail to believe that markets serve the common good when the price of gold (a barely useful metal that on its own can't feed a single child) soares and also that the economic output of europe relies on greece. That's what the market would suggest. I'm not saying kill the markets, i just like rational markets. PSI invested in greek bonds (for 10 years now), for their own reasons, let them take the hit.

Re: Why Germany seems not to want a quick fix for the euro crisis

#40

Post by tomjen3 »

mtts wrote: post #17
sunnydaynow wrote: post #2

"The vast majority of financial transactions, he told fellow finance ministers in a closed meeting earlier this month, “do not serve the real economy”. When markets go astray the answer is not to make the taxpayer step in once more, but to introduce better regulation." Spot on!

With this caveat that financial markets fund a lot of the real economy as well. So you really don't want banks going bust left and right, as morally righteuous as that would be.

Why not? All that would happen would be that some other previously small bank would get more business.

Remember, nobody is too big or has been around too long to be allowed to fail. Assyria fell, so can Goldman Sax.

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