Why Germany seems not to want a quick fix for the euro crisis • Hacker News Board

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

#101

Post by _delirium » Wed, Oct 05, 2011, 8:00 PM UTC

jfruh wrote: post #90

jules wrote: post #86

Earlier quoted context omitted.

Some Turks joke that the Turkish army has the largest gay porn collection in the world. According to a Turkish friend of mine, yours is not an accurate characterization of Turkey. There are still huge problems with democracy, power of the army, corruption, media controlled by people in power, torture, Cyprus, and more. According to him many of these things are worsening -- he is afraid that Turkey is going to go furt…

I am not at all trying to minimize Turkey's real problems. But many of the Eastern European EU states also have some of the same or similar problems (particularly Romania and Bulgaria). In their cases much of the reason given for admitting them to the EU was that membership would bring them closer to European norms. (Indeed, this is an incentive held out by those in Europe who favor Turkish EU membership.) My point i…

I agree the population size is a huge part of the problem, though I think it has more to do with immigration worries than voting-in-EU-institutions worries. There was already a bunch of nationalist ire over the proverbial "Polish plumbers" flooding western Europe and undercutting local labor, once they were fully admitted to the EU with free movement of labor. The prospect of 70 million Turks having the right to move to any city in Europe is much more unpopular than that (and good fodder for anti-immigrant populist parties), because there's more of them, they're poorer, and they're perceived as more foreign. If it were 10 million Turks, there might be more of a chance of getting people to agree.

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

#102

Post by tsotha » Wed, Oct 05, 2011, 8:09 PM UTC

_delirium wrote: post #52

Iv wrote: post #37

Earlier quoted context omitted.

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…

I'm not sure the falsification of records is really at the root of this, in the sense that it was a deception that did not really deceive anyone. There was a bit of consensual hallucination going on: nobody really believed Greece's numbers, but it was convenient for everyone to pretend to believe them. Lenders who bought Greek bonds should certainly have conducted their own analyses and had a decent idea that the hea…

Yes, everyone knew the Greeks were cooking the books. Hell, even the press knew - it was in the papers. But the expectation was that once they joined the Euro they would act more like Germans.

That seems to have been a bit of a miscalculation.

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

#103

Post by justincormack » Wed, Oct 05, 2011, 8:10 PM UTC

hugh3 wrote: post #70

jan_g wrote: post #69

Earlier quoted context omitted.

Most smaller countries with their own currency can not do (ii), because they can only get dollar or euro denominated debt from international markets/institutions.

What's "smaller" in this case? I thought that most countries didn't need to borrow money internationally, they just sell bonds primarily to their own citizens.

Depends on whether they are running a current account deficit too, in which case there will be net borrowing from abroad. Many countries borrow quite substantially abroad.

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

#104

Post by ugh » Wed, Oct 05, 2011, 8:14 PM UTC

mise wrote: post #47

It comes down to the Protestants keeping the Catholics in check :)

Germany is split in three (35% no religion, 30% catholic, 30% protestant), Greek Orthodoxy is prevalent in Greece.

There is nothing particular protestant about Germany and there is nothing particular catholic about Greece.

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

#105

Post by tsotha » Wed, Oct 05, 2011, 8:15 PM UTC

Uchikoma wrote: post #88

discreteevent wrote: post #61

Earlier quoted context omitted.

I agree. The simplest way to make this clear is to simply let the Greek banks default (and any other banks for that matter). This will expose the German banks and the German Government will be forced to bail them out. This bailout will be a much easier sell than the current one as it will be clear to the German taxpayer that they are bailing out their own banks who made bad bets out of greed, lack of diligence and ju…

German banks are - by a large margin - not the most exposed to Greece. French banks for example are much more exposed to Greek dept. If Greece fails, this will hit German banks, but other banks much more, it might be especially hard for countries with a smaller GDP and a higher bailout/GDP ratio. As a German taxpayer I don't care whom I bail out. Funny thing: People talk about Germany, instead of Greece. Sure, bailin…

Bailing out the Greeks made some sense when it was seen to be cheaper than bailing out German banks. But as the situation stands it looks like bailing out Greece is throwing good money after bad, and the German banks will have to be bailed out anyway. So from the German perspective the right thing to do would be to let the Greeks go bankrupt.

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

#106

Post by tsotha » Wed, Oct 05, 2011, 8:20 PM UTC

tomjen3 wrote: post #97

prewett wrote: post #46

Earlier quoted context omitted.

When banks start failing left and right, people start getting scared, taking their money out of banks, causing banks to become insolvent, causing more banks to fail, etc. When a bank fails, you lose money (absent depositor's insurance), potentially lots of it. This is not a good thing. It caused a lot of pain in 1929/1930s in the U.S., and led to the creation of the FDIC. Even 80 years later, we sort of have a cultur…

Well, yes they do. Unless the bamks are fdic insured, which I believe all banks are.

But bank failures cause a run on other banks. If the entire system collapses the FDIC will be unable to make good on its obligations.

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

#107

Post by eru » Wed, Oct 05, 2011, 8:20 PM UTC

hugh3 wrote: post #70

jan_g wrote: post #69

Earlier quoted context omitted.

Most smaller countries with their own currency can not do (ii), because they can only get dollar or euro denominated debt from international markets/institutions.

What's "smaller" in this case? I thought that most countries didn't need to borrow money internationally, they just sell bonds primarily to their own citizens.

They are lots of countries with debt dominated in foreign currency. Especially developing ones.

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

#108

Post by eru » Wed, Oct 05, 2011, 8:25 PM UTC

anamax wrote: post #76

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!

> When markets go astray the answer is not to make the taxpayer step in once more, but to introduce better regulation." And this better regulation is going to come from the folks who wrote Dodd-Frank, who think that the CRA is a good idea, who keep defending Fannie Mae and Freddie Mac.....

No, no, we are going to get it from the Germans.

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

#109

Post by j_col » Wed, Oct 05, 2011, 8:28 PM UTC

Uchikoma wrote: post #94

j_col wrote: post #59

Earlier quoted context omitted.

Precisely. That is why Germany does not have a great domestic economy, all of their wealth is generated from exports, i.e. first we lend you the money, then you buy our expensive cars with the money, then we ask for the money back ;-)

And then I bail you out with the money from my high income tax. You have the car. The carmaker has it's money. The bank has it's money. I don't have a car. I've paid for all this ;-)

Eh, who exactly is getting bailed out? I think you mean loans, which are expected to be paid back in full (and up until very recently, interest was also paid on these "bail outs" making it a profitable venture for the country doing the lending).

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

#110

Post by _delirium » Wed, Oct 05, 2011, 8:29 PM UTC

tsotha wrote: post #102

_delirium wrote: post #52

Earlier quoted context omitted.

I'm not sure the falsification of records is really at the root of this, in the sense that it was a deception that did not really deceive anyone. There was a bit of consensual hallucination going on: nobody really believed Greece's numbers, but it was convenient for everyone to pretend to believe them. Lenders who bought Greek bonds should certainly have conducted their own analyses and had a decent idea that the hea…

Yes, everyone knew the Greeks were cooking the books. Hell, even the press knew - it was in the papers. But the expectation was that once they joined the Euro they would act more like Germans. That seems to have been a bit of a miscalculation.

I do think there have been significant improvements in Greek public administration since joining the Euro, but miracles would've been needed to get the turnaround that would've been necessary in such a short time. If Greece had had 20 years to gradually get its economy in line with western Europe, I think it was on pace to do so, or at least come close, but the 7 years between it joining the Euro in 2001 and the financial crisis of 2008 weren't really enough, especially since some of the positive structural changes it had made (like the beginnings of pension reform) don't really pay dividends until some time into the future. Joining the Euro did help somewhat in improvements also, because Greek politicians were able to use the "it's not us, Brussels is making us" excuse to push through some of the less popular measures.

The changes, at least from the perspective of some of my Greek relatives, were pretty encouraging up 'til 2008. The notoriously inefficient public administration was still not good, but seemed to be getting better; some things that used to require you running across town to get physical stamps from 10 different offices were being consolidated in common service centers, the number of separate approvals needed for any given document was being reduced, etc. Outright corruption was greatly reduced from the pre-Euro government, and book-cooking seems to have been reduced as well (the vast majority of the dodgy statistics are pre-2001 data). The telecom sector got much better than the old OTE-or-nothing monopoly, leading to many Greeks finally having home internet. The Athens metro finally finished construction (partly spurred by the Olympics). The national sport of tax evasion was slowly being tackled, starting with "soft" shaming measures like publishing maps showing purported average incomes of various wealthy suburbs of Athens, if you took their official tax returns as accurate (all the wealthy suburbs somehow look like low-income ghettoes!), and moving to more hardball measures like doing inventories of yachts in yacht harbors and inquiring with owners who appear not to have ever reported sufficient income to explain owning one. Pensions went through at least the first round of rationalization to remove the most egregious loopholes that allowed some people to retire exceptionally early. Etc.

But basically the scope of changes needed was quite large, and the amount of cushion Greece had, with an already very-large debt, was quite small. Probably someone should've noticed the looming problem earlier and worked out a sensible restructuring and feasible N-year plan before it became a crisis.