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Paul Krugman: Greece euro exit possible next month, Eurozone-wide meltdown incoming

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Lagspike_exe

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Paul Krugman's latest blog:

Some of us have been talking it over, and here’s what we think the end game looks like:

1. Greek euro exit, very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.

And we’re talking about months, not years, for this to play out.
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http://krugman.blogs.nytimes.com/2012/05/13/eurodammerung-2/

Complete and total failure of austerity due to Germany's strategy of promoting "market confidence" is about to cause on of the greatest crisis in Europe's recent history. And only 4 years ago, with the implementation of pro-growth strategy, everything could have been prevented.
 
Lagspike_exe said:
Complete and total failure of austerity due to Germany's strategy of promoting "market confidence" is about to cause on of the greatest crisis in Europe's recent history. And only 4 years ago, with the mplementation of pro-growth strategy, everything could have been prevented.
Click to expand...

Eagerly await the excuses of the Austrian-schoolers.

"We just didn't austerity hard enough!"
 
It would be sad day to see Euro go, I really hope it won't come to that :(
Can't we plan stimulus packages like US did? Well, anyway I do hope euro zone gets through this.
 
AAequal said:
It would be sad day to see Euro go, I really hope it won't come to that :(
Can't we plan stimulus packages like US did? Well, anyway I do hope euro zone gets through this.
Click to expand...

They should have pumped trillions into eurozone back in 2008 when everything started, but they choose to stick with austerity. You could do it now, of course, but the issue is that EU has lost 4 years in failed policies.
 
Here's some new info that's fun, and that would have been laughed off as hate-mongering or a conspiracy theory a few months back:

Merkel deliberately pressed for humiliating and impoverishing measures on Greece so that the measures would "cause pain" to Greece and no one else would want a similar "bailout". Greek officials and even the IMF asked for more logical structural reforms, but Merkel would have none of it.

http://online.wsj.com/article/SB10001424052702304203604577393964198652568.html?mod=googlenews_wsj

wsj said:
Mr. Papandreou says that when he asked German Chancellor Angela Merkel for gentler conditions in 2010, she replied that the aid program had to hurt. "We want to make sure nobody else will want this," Ms. Merkel told him.
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It gets even funnier when you consider the suicides and the unemployed here, as well as the tens of billions that Germany gained through this "bailout".

As for whether Greece will exit the Eurozone, it's a possibility at this point of course, but things are moving too fast.
Already the TROIKA of "no further negotiations possible, ever, submit or be destroyed", offered new, much lighter terms, including a real reduction of debt (the current PSI is a scam that saves banks and magnifies Greek debt), returning pensions to previous numbers, and lightening of the immense taxation imposed. That's on the condition that the Memorandum is upheld and a government with their puppets from PASOK and ND (political parties that already signed obedience to the terms of the Memorandum) is formed.
 
If we do have a Euro meltdown, America, China, Japan, Brazil and most major economies will also be pulled into the abyss, this is no laughing matter.
 
Good thing I've invested in Diablo III and a GTX 670 prior to my money no longer having any worth. Hope it'll be a few months till the lights finally go out.
 
About time, one can hope Spain is the next one so we can fucking wake up frm this shitty trap the Eurozone got us in.
 
Norwegian Wood said:
If we do have a Euro meltdown, America, China, Japan, Brazil and most major economies will also be pulled into the abyss, this is no laughing matter.
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How's China getting dragged in? They don't have a lot of credit exposure to EU and most of their trade is based on their relationship with US. They can only get dragged in if the US gets damaged so severely (they won't), so that the aggregate demand falls in the US dragging China imports along with it.

itxaka said:
About time, one can hope Spain is the next one so we can fucking wake up frm this shitty trap the Eurozone got us in.
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IMO, Spain is the nuclearbomb inside EU. Economic colapse that will occurs in countries with unresolved internal issues (Catalonia and the rest of the provinces seeking independance) is usually followed by violence and possibile attempts at secession.
 
MiDNiGHTS said:
For the last 4 years people keep making threads talking about impending economic doom and it never happens. Just saying...
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Exactly. This is proof that making a thread talking about impending economic doom in fact causes said doom to not happen.

We just prevented a Greece Euro exit. Whew!
 
Lagspike_exe said:
How's China getting dragged in? They don't have a lot of credit exposure to EU and most of their trade is based on their relationship with US. They can only get dragged in if the US gets damaged so severely (they won't), so that the aggregate demand falls in the US dragging China imports along with it.
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The European Union is China's largest trading partner.

Amir0x said:
I just hope whoever the American president is at the time is ready to take all the blame if the Eurozone collapses. If it's Obama and it happens before the election, he's done. If not and the Eurozone hasn't collapsed by election, then whoever becomes president is going to shoulder the monumental blame for the economic state for a generation. Whether it's the Democratic party or the Republican party, the blame is going to last for a generation. The set back to the party in question might be disastrous.

One has to wonder, if the Eurozone is really going to collapse, whether it'd be better to let Romney take that one for his team than it would be for Obama to take it. In other words: would it be better for Obama to lose anyway for the sake of the future of his party, or what?
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I wonder if we'll ever be able to discuss politics on GAF without it being about the US.
 
I just hope whoever the American president is at the time is ready to take all the blame if the Eurozone collapses. If it's Obama and it happens before the election, he's done. If not and the Eurozone hasn't collapsed by election, then whoever becomes president is going to shoulder the monumental blame for the economic state for a generation. Whether it's the Democratic party or the Republican party, the blame is going to last for a generation. The set back to the party in question might be disastrous.

One has to wonder, if the Eurozone is really going to collapse, whether it'd be better to let Romney take that one for his team than it would be for Obama to take it. In other words: would it be better for Obama to lose anyway for the sake of the future of his party, or what?
 
Norwegian Wood said:
If we do have a Euro meltdown, America, China, Japan, Brazil and most major economies will also be pulled into the abyss, this is no laughing matter.
Click to expand...

Fitch Ratings warned that 8 countries will be downgraded if Greece leaves the Eurozone.

http://uk.reuters.com/article/2012/05/11/uk-eurozone-fitch-idUKBRE84A0QM20120511

It said it was likely to put all euro area ratings on negative watch if Greece were to leave and that those countries which currently have a negative outlook on their ratings would be at most immediate risk of a downgrade.

It said those countries were France, Italy, Spain, Cyprus Ireland, Portugal, Slovenia and Belgium.
Click to expand...

itxaka said:
About time, one can hope Spain is the next one so we can fucking wake up frm this shitty trap the Eurozone got us in.
Click to expand...

Yep. If it wasn't Greece, some other country would blow up in some way. This economic attack against the countries of Southern Europe was obviously destined to have unfortunate results.

http://www.guardian.co.uk/commentisfree/2012/may/08/left-revolt-austerity-far-right

By rejecting renegotiation of either the treaty or the impossible terms of Greece's bailout, Angela Merkel has meanwhile turned the struggle over Europe's economy into a battle for democracy. The Greeks and French have now unequivocally voted to reject a programme the German chancellor insists they will have to swallow regardless.

And it's not difficult to see why they're rejecting it. Austerity isn't working, even in its own terms. Cutting jobs and pay while increasing taxes isn't reducing borrowing and debt, let alone leading to economic recovery. It's deepening recession, increasing debt and destroying jobs and squeezing living standards across the eurozone – in countries such as Spain and Greece, catastrophically – as well as in Britain.
Click to expand...

Nigel Farage talks of a possible violent revolution in European countries:

http://www.youtube.com/watch?feature=player_embedded&v=hJ6_Ey_MJV4

Farage: We face the prospect of mass civil unrest, even revolution
 
Amir0x said:
I just hope whoever the American president is at the time is ready to take all the blame if the Eurozone collapses. If it's Obama and it happens before the election, he's done. If not and the Eurozone hasn't collapsed by election, then whoever becomes president is going to shoulder the monumental blame for the economic state for a generation. Whether it's the Democratic party or the Republican party, the blame is going to last for a generation. The set back to the party in question might be disastrous.

One has to wonder, if the Eurozone is really going to collapse, whether it'd be better to let Romney take that one for his team than it would be for Obama to take it.
Click to expand...
Why would the US president be blamed for the collapse of the EU?
 
Salvor.Hardin said:
Lol. Ron Paul did not know what the fuck he was talking about there.
Click to expand...

'Inflation is theft. It's stealing from people who save!'

That is literally one of the most naive and stupid things I have heard in months. Sounds like he understands economics about as well as he does science.
 
Amir0x said:
I just hope whoever the American president is at the time is ready to take all the blame if the Eurozone collapses. If it's Obama and it happens before the election, he's done. If not and the Eurozone hasn't collapsed by election, then whoever becomes president is going to shoulder the monumental blame for the economic state for a generation. Whether it's the Democratic party or the Republican party, the blame is going to last for a generation. The set back to the party in question might be disastrous.

One has to wonder, if the Eurozone is really going to collapse, whether it'd be better to let Romney take that one for his team than it would be for Obama to take it. In other words: would it be better for Obama to lose anyway for the sake of the future of his party, or what?
Click to expand...

Why would Obama or Romney be blamed for a European debt crisis?


Stinkles said:
'Inflation is theft. It's stealing from people who save!'

That is literally one of the most naive and stupid things I have heard in months. Sounds like he understands economics about as well as he does science.
Click to expand...

he says that same silly line nearly every time I've seen him on TV
 
Greece should have never been able to get in on the Euro.

Also, if the EU is to go belly up, please do so in 2013 so Mitt Romney doesn't enact Uber Social Conservatism Madness v 3.0 on the US, thanks.
 
Amir0x said:
I just hope whoever the American president is at the time is ready to take all the blame if the Eurozone collapses. If it's Obama and it happens before the election, he's done. If not and the Eurozone hasn't collapsed by election, then whoever becomes president is going to shoulder the monumental blame for the economic state for a generation. Whether it's the Democratic party or the Republican party, the blame is going to last for a generation. The set back to the party in question might be disastrous.

One has to wonder, if the Eurozone is really going to collapse, whether it'd be better to let Romney take that one for his team than it would be for Obama to take it. In other words: would it be better for Obama to lose anyway for the sake of the future of his party, or what?
Click to expand...


lol what the fuck
 
Cyan said:
Exactly. This is proof that making a thread talking about impending economic doom in fact causes said doom to not happen.
Click to expand...

We need that one survivalist guy and Wii back to make sure nothing catastrophic ever happens.
 
Amir0x said:
I just hope whoever the American president is at the time is ready to take all the blame if the Eurozone collapses. If it's Obama and it happens before the election, he's done. If not and the Eurozone hasn't collapsed by election, then whoever becomes president is going to shoulder the monumental blame for the economic state for a generation. Whether it's the Democratic party or the Republican party, the blame is going to last for a generation. The set back to the party in question might be disastrous.

One has to wonder, if the Eurozone is really going to collapse, whether it'd be better to let Romney take that one for his team than it would be for Obama to take it. In other words: would it be better for Obama to lose anyway for the sake of the future of his party, or what?
Click to expand...

Yeah because Republicans would just sit back and accept blame for that, with their accomplished media savvy...
 
Stinkles said:
'Inflation is theft. It's stealing from people who save!'

That is literally one of the most naive and stupid things I have heard in months. Sounds like he understands economics about as well as he does science.
Click to expand...

That's Austrian Economics in a nutshell.

But anyway, this is going to be nuts.
 
MiDNiGHTS said:
For the last 4 years people keep making threads talking about impending economic doom and it never happens. Just saying...
Click to expand...

I don't think that's entirely fair. For a lot of people, those warnings of "doom" are panning out. There are lots of American workers who might never re-enter the labor force or will never do as well as they did before this recession (our talking heads believe their withdrawal from seeking employment is why the last official unemployment rate figure was slightly down). And Greek and Spanish workers, especially younger ones, seem to be facing impossible odds to begin their own careers or salvage them. When I think of "economic doom," the stories coming out of Athens are what I would have in mind. High unemployment, increases in homelessness, the stretching of vital public services, the increasing risk of hunger and the threat of fascism; that's not a picnic, surely.

Anyway, I suppose we're going to find out how the EU is going to resolve one of its oldest structural issues, the famed "democratic deficit." Chancellor Merkel might not approve of an anti-austerity government, and will go so far as to endorse candidates for national office in other countries to protect her vision of Europe (her endorsement of Sarkozy seemed particularly effective), but political realism still reigns. Its treaties might have limited sovereignty, but that doesn't mean Merkel can order Greece to do anything of the sort of this austerity regime if their voters firmly reject it. And, sorry, the cure she has in mind seems to be as awful as the disease. They don't need to cut all ties to Europe to maintain a currency they have no practical control over. And sure, Greek government is historically dishonest and incompetent, but the solution to that is not mass unemployment and back-breaking bailout terms.
 
Darklord said:
So what does this mean to people traveling to Europe soon? Will the drop heavily from this or what?
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It would have effect on everybody, some would feel it more some less, well off countries would also recover fast. It wouldn't be the end of the world. I'm just glad that these uncertain times I have a job that I recession free.
 
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