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Re: undefined

#51

Post by ristretto »

danmaz74 wrote: post #42
guelo wrote: post #19

What I didn't understand about the Greece situation is why they caved to the massive privatization and austerity measures when they should have realized that they are the ones in the drivers seat. If Greece defaults it's the German banks who will pay instead of the Greek public. Of course if the German banks fail it will put the whole Euro project in danger, but why should it be up to ordinary Greeks to save the Euro…

The past Greek government blatantly lied about the debt they were accumulating to appease their voters. In a democratic system, unfortunately, nobody can say "it's not my fault" (this is unfortunately true for me too, here in Italy, even if I never voted Berlusconi). That said: - if you default as a Country and don't pay back your debts who is going to trust you again? Greece needs foreign investment - if they were f…

- Greek bonds are already in the "default" category, nobody trusts greece anyway

- The equivalent in euros of wage cuts / taxation that we see now in greece

- Going out of the eurozone doesnt mean secession from the EU

In practice a default will have similar effects as the austerity packages, compressed in time (~4 years instead of 10+ which the current austerity packages propose). In fact, a devalued currency might stimulate internal growth as imports will become unaffordable.

Re: undefined

#53

Post by danmaz74 »

guelo wrote: post #50
danmaz74 wrote: post #48

Earlier quoted context omitted.

I agree with you that the BCE policy is too tight, but, for one, what makes you think that Greece, using competitive devaluations, could still be admitted in the EU common market without barriers and tariffs? Maybe a little economy like the Greek one could be allowed, but I'm pretty sure that it wouldn't be the same for Italy and Spain. And in the case of Banks that invested in Greek bonds, don't forget that the acco…

I'm not talking about morality, I'm talking about what would make the most sense for a rational Greek people to do going forward. I'm arguing that a default would make the most sense, but in reality the interwining of the euro makes these issues very complicated. The larger picture is that this is the biggest crises the euro has faced and it might not survive, especially since the nationalistic politics make it so ha…

I agree about the euro bond. About the rational choice, I think there are too many variables at play to really make a rationally "good" choice. In the end you have to make a bet based on insufficient data, as it is almost always the case in these matters, and I would bet on a tighter European Union, not on "everybody for themselves". Let's hope that our leaders will somehow see the light... and lead!

Re: undefined

#54

Post by [deleted] »

psykotic wrote: post #3

Beware: This article is filled with factual errors. I was making a list as I went along, and when I afterwards read the comments section I realized I had overlooked many more. That does not by itself affect the validity of the author's overarching thesis, but if someone can't be bothered to get their basic facts straight (e.g. Iceland's EU membership status), it casts serious doubt on their ability to perform the muc…

[deleted]

Re: undefined

#55

Post by Symmetry »

guelo wrote: post #19

What I didn't understand about the Greece situation is why they caved to the massive privatization and austerity measures when they should have realized that they are the ones in the drivers seat. If Greece defaults it's the German banks who will pay instead of the Greek public. Of course if the German banks fail it will put the whole Euro project in danger, but why should it be up to ordinary Greeks to save the Euro…

Even after the austerity measures Greece is still spending more money than its taking in. If they disavowed their debt they wouldn't be able to get anyone to lend to them, and they would have to undertake even more radical austerity measures.

EDIT: Defaulting and then doing even more austerity isn't a horrible solution and might be better than their current zombie status, but they aren't refusing to do that because they're stupid or sellouts.

Re: undefined

#56

Post by Symmetry »

guelo wrote: post #46
danmaz74 wrote: post #42

Earlier quoted context omitted.

The past Greek government blatantly lied about the debt they were accumulating to appease their voters. In a democratic system, unfortunately, nobody can say "it's not my fault" (this is unfortunately true for me too, here in Italy, even if I never voted Berlusconi). That said: - if you default as a Country and don't pay back your debts who is going to trust you again? Greece needs foreign investment - if they were f…

If you look at the example of Argentina's default their economy has recovered nicely, and Iceland is also starting to recover. The economies go through an initial shock but then they can recover without the burden of the debt. After a default Greece would have to immediately stop borrowing and close their budget deficits, but what is happening now is a fantasy, they are only borrowing so they can pay their previous d…

The problem is that Greece isn't "only borrowing so they can pay their previous debt", Greece is still running a primary account deficit, which means that they'd still be borrowing even without having to pay interest. If they could get to where they were running one like Argentina was when it defaulted then default would start to look like a pretty reasonable option.

I absolutely agree about EU monetary policy, though. Its incredible that the EU central bank is raising interest rates right now.

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