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[entremet]

Thomas Pinketty and other economist's letter to Merkel.

http://www.thenation.com/article/au...-letter-from-thomas-piketty-to-angela-merkel/

Chiding Germany a bit:

In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed program of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.

To Chancellor Merkel our message is clear; we urge you to take this vital action of leadership for Greece and Germany, and also for the world. History will remember you for your actions this week. We expect and count on you to provide the bold and generous steps towards Greece that will serve Europe for generations to come.

 

[Deleted member 231381]

Oh, I've seen it! And I agree! Although I'm unsure of your own thoughts on the solution, I've been hoping to see a combined fiscal policy that would attempt to fix the foundational problem, rather than the seemingly-prevailing view that we should just scrap the currency entirely. I'm reminded of the benefits of the euro every time I visit the UK, and have to endure so much more bureaucracy and excessive charges than any visit to a Eurozone country. I've been living in the Netherlands and accessing my Irish bank at ATMs with no charges whatsoever, while I get reamed while using a bank machine in the UK. While that's simply a measure of the personal benefits I experience, it's one small part of a benefit spread among millions.

Europe and the euro have a lot of changing to do if we can ever get the house in order, but I'd much prefer we build on them rather than tear them down.

I have no idea what a solution is that people will actually agree to, which is why I think in the long-run the Euro is going to see more nations crash out. I agree that a cohesive Eurozone would be the best future, but, well... apparently us Europeans do not like being cohesive.

 

[ElTorro]

Thomas Pinketty and other economist's letter to Merkel.

http://www.thenation.com/article/au...-letter-from-thomas-piketty-to-angela-merkel/

Chiding Germany a bit:

If Greece was Europe's only problem, I would totally be for a major and immediate debt relief. Greece can't pay back it's debt anyway.

I am not convinced though that Europe could afford to cancel debts for all the other economically challenged states in the Eurozone. Something that fairness would mandate us to do. If we grant Greece a debt relief, we have to grant similar benefits to other countries too. Countries with larger absolute debts than Greece.

The only thing I see as a politically viable solution is to gradually reduce Greece's debt over many years through thinly veiled actions like extending payment timeframes and reducing interest rates.

 

[pigeon]

Lets forget about raising taxes, lowering pensions and benefits for a second here... if Greek government implemented proper reforms that would cut tax evasion, increase government efficiency and apply a lot of common sense to banish silly laws that curb economic development, then they would like not be in this position today.

This is basically just magic. "Greece should just pass a law to make their government work better. Then everything would be fine!"

I mean, yes, probably, but believe it or not, if it were that easy, it would already have been done. Completely apart from everything else, Tsipras has a lot of political motivation to make the Greek government run better for the simple reason that he's a politician who wants to get re-elected.

That should be a telltale sign to you that the "commonsense reforms" you're talking about are probably neither.

 

[sflufan]

This story is from The Telegraph's Ambrose Evans-Pritchard who is perhaps the non-Greek reporter who is best connected with the Syriza government: Tsipras didn't expect (or even want) "No" to win.

 

[Coriolanus]

I am not convinced though that Europe could afford to cancel debts for all the other economically challenged states in the Eurozone. Something that fairness would mandate us to do. If we grant Greece a debt relief, we have to grant similar benefits to other countries too. Countries with larger absolute debts than Greece.

It's a fiat currency. Whatever costs that would entail from such a move would be reflected in a cheaper euro (which germany probably wants up to a point) and inflation (which the EU could also use a bit more). While the concern is valid, it seems quite... secondary to the current employment crisis several countries face.

 

[KingSnake]

If Greece was Europe's only problem, I would totally be for a major and immediate debt relief. Greece can't pay back it's debt anyway.

I am not convinced though that Europe could afford to cancel debts for all the other economically challenged states in the Eurozone. Something that fairness would mandate us to do.

The only thing I see as a politically viable solution is to gradually reduce Greece's debt over many years through thinly veiled actions like extending payment timeframes and reducing interest rates.

Portugal, Italy, Spain and the rest are part of these discussions. It's not like their finance ministers are not taking part in this and won't understand a thinly veiled action. The power of example is the same in the end. Unless we consider the governmental officials in those countries stupid.

 

[oti]

I love it when the the concept of democracy should be ignored if it doesn't help the own interests anymore.

And sadly (or for good reasons) Merkel isn't the dictator of the EU.

You know what I mean. Imagine what would happen if Germany was suddenly anti-austerity.

 

[chadskin]

Yes, but this goes back to what I was saying: this is a political decision by Germany. The ECB could act to do this. It is perfectly feasible for Draghi to cut Merkel out of the decision entirely, sit down, and say to Greece "if you pass reforms x, y, and z, we will buy your bonds for the next n years". Note that this is still dependent on reforms happening, but it also actually gives Greece the capacity to actually undertake those reforms. Trying to stick to the ESM is literally madness. It costs money to implement reforms - you think tax auditors are free? No, you have to hire them, train them, give them office space. Greece is paralyzed at the moment. They can't do anything even if they wanted to.

It does not just affect Germany but all other EU members as well as they're all, to a varying degree certainly, shareholders whose taxpayer's money would be at stake.

Also, after Tsipras threw out the troika in January, I'm not sure Syriza is a partner you can necessarily trust if you just tell them "do these reforms" and sit on the sidelines. Besides, no one knows what the political landscape will look like in at most four years after the next election. What if the reforms proposed by the ECB lead to a further deteriorating situation, putting a party like Golden Dawn in charge of the government because they promised to end the misery and default?

The situation in Greece is extremely volatile, both economically and politically, putting the ECB in charge of something with an unknown outcome is not a viable option.

 

[Deleted member 231381]

If Greece was Europe's only problem, I would totally be for a major and immediate debt relief. Greece can't pay back it's debt anyway.

I am not convinced though that Europe could afford to cancel debts for all the other economically challenged states in the Eurozone. Something that fairness would mandate us to do. If we grant Greece a debt relief, we have to grant similar benefits to other countries too. Countries with larger absolute debts than Greece.

The only thing I see as a politically viable solution is to gradually reduce Greece's debt over many years through thinly veiled actions like extending payment timeframes and reducing interest rates.

The consequence of a large scale debt relief programme for indebted European countries for whom the Euro is an overvalued currency is inflation, which would... stop the Euro being an overvalued currency.

 

[Syriel]

Yes, but this goes back to what I was saying: this is a political decision by Germany. The ECB could act to do this. It is perfectly feasible for Draghi to cut Merkel out of the decision entirely, sit down, and say to Greece "if you pass reforms x, y, and z, we will buy your bonds for the next n years". Note that this is still dependent on reforms happening, but it also actually gives Greece the capacity to actually undertake those reforms. Trying to stick to the ESM is literally madness. It costs money to implement reforms - you think tax auditors are free? No, you have to hire them, train them, give them office space. Greece is paralyzed at the moment. They can't do anything even if they wanted to.

Greece has more than $4 billion in gold. It could easily choose to earmark some of that for reforms and immediate needs (healthcare, etc.) while still negotiating on everything else.

It's not like there is zero money in the bank. Greece has liquid assets.

 

[Deleted member 231381]

It does not just affect Germany but all other EZ members as well as they're all, to a varying degree certainly, shareholders whose taxpayer's money would be at stake.

The taxpayers' money is not at stake when the body acting is the lender of last resort. They can create their own money, they do not need to rely on taxpayer money except insofar as it is politically useful.

Also, after Tsipras threw out the troika in January, I'm not sure Syriza is a partner you can necessarily trust if you just tell them "do these reforms" and sit on the sidelines. Besides, no one knows what the political landscape will look like in at most four years after the next election. What if the reforms proposed by the ECB lead to a further deteriorating situation, putting a party like Golden Dawn in charge of the government because they promised to end the misery and default?

The situation in Greece is extremely volatile, both economically and politically, putting the ECB in charge of something with an unknown outcome is not a viable option.

I'm not saying sit on the sidelines, anything but. What I am saying is that the choice right now is between an ECB solution and a default. The best the ESM can do at this stage is a fudge that allows this whole catastrophe to trickle on for a few more years, the worst it can do is irreparable damage to the Greek economy. Countries have two responses to recessions, fiscal and monetary. European countries are not willing to undertake the fiscal (transfer from rich to poor). The ECB must therefore undertake the monetary - acting to devalue the Euro by purchasing Greek bonds. One of these two options must be taken or this will never be properly resolved.

 

[ElTorro]

Portugal, Italy, Spain and the rest are part of these discussions. It's not like their finance ministers are not taking part in this and won't understand a thinly veiled action. The power of example is the same in the end. Unless we consider the governmental officials in those countries stupid.

I don't think that hiding a debt relief from the finance ministers is an issue. They are more familiar with what's necessary and realistic. The real issue is to hide it from their electorate. At least from a politician's point of view.

 

[maquiladora]

I still think some type of an agreement will be reached, even if it only kicks the can down the road again.

 

[pigeon]

Greece has more than $4 billion in gold. It could easily choose to earmark some of that for reforms and immediate needs (healthcare, etc.) while still negotiating on everything else.

It's not like there is zero money in the bank. Greece has liquid assets.

Greece's gold is considered a reserve asset under the terms of the ECB.

Article 31 of the Statute of the ESCB and ECB, which addresses foreign reserve assets held by national central banks, says that beyond certain pre-existing obligations to various international organisations, “all other operations in foreign reserve assets remaining with the national central banks” are “subject to approval by the ECB in order to ensure consistency with the exchange rate and monetary policies of the Union.” So, any Euro member central bank would have to get the approval of the ECB before buying or selling any of its monetary gold.

https://www.bullionstar.com/blogs/ronan-manly/spotlight-on-greeces-gold-reserves-and-grexit/

In other words, Greece can't touch any of that gold without ECB approval.

 

[Coriolanus]

This story is from The Telegraph's Ambrose Evans-Pritchard who is perhaps the non-Greek reporter who is best connected with the Syriza government: Tsipras didn't expect (or even want) "No" to win.

That is such a weird article. It paints a scenario where Varoufakis had created a very detailed strategy to force the EU's hand into compliance, but blames Tsipras for chickening out at the last second.

 

[Deleted member 231381]

Greece has more than $4 billion in gold. It could easily choose to earmark some of that for reforms and immediate needs (healthcare, etc.) while still negotiating on everything else.

It's not like there is zero money in the bank. Greece has liquid assets.

Telling Greece to liquidate assets immediately before a potential default doesn't exactly seem the smartest move I've ever heard of. Not to mention it's actually illegal under the conditions of the ECB (iirc, Greece actually has less gold than it should).

EDIT: Beaten.

 

[KingSnake]

I don't think that hiding a debt relief from the finance ministers is an issue. They are more familiar with what's necessary and realistic. The real issue is to hide it from their electorate. At least from a politician's point of view.

PI_S electorate? (the G will be soon silent) Isn't that a little bit late at this point? What would the electorate do? Vote some anti austerity movement like, let's say, Podemos?

 

[Heartfyre]

PI_S electorate? (the G will be soon silent) Isn't that a little bit late at this point? What would the electorate do? Vote some anti austerity movement like, let's say, Podemos?

For the sake of catchy acronyms, Sweden should go into default after Greece so we can all be PISS. Otherwise, we'll be countries SIPping from EU bailout funds. Doesn't work as well.

 

[McBryBry]

I wish I had any sort of understanding for economics. I'm just now tuning into this stuff and I'm lost. All I really understand is that Greece might be leaving the EU?

 

[YourMaster]

Forgiving the Greek debt will work as a short term solution, but does nothing to prevent Greece or any other country from getting back in the same sort of trouble: They need to either be able to devaluate their currency against the other Euro countries or to receive a steady influx of money (transfers).

Besides there not being a single European identity in which countries would willingly subsidize other countries, people seem to miss one vital aspect of what is required for a transfer union to function; equality between the people who give and the people who receive.
People in general accept the rich paying for the poor, but between countries it is not just how wealthy they are, but also on how they spend their tax money. If for example a country which has a 55% income tax has to do a fiscal transfer to a country with a 35% income tax this would feel wrong, and the citizens of that first country would be better off to just lower their income tax to 35% as well so their citizens are better of and their government does not have to money to do the transfer anymore. Likewise countries with proper governments would rightfully hate to transfer money to countries with nepotism and corruption.

Such integration does not work, will not work anywhere near in time to solve the problems with the Euro. We'd need to turn Europe into a single country, preferably with the best aspects of each member country, not the worst ones.

That leaves only the collapse of the Euro. I suggest to start a controlled demolition now.

 

[burnjanso]

Greece Given Sunday Deadline To Present Proposals

Overcoming their surprise when Tsipras failed to come up with a detailed plan, the leaders reluctantly agreed to a final summit Sunday, saying that could give both sides an opportunity to stave off collapse of the struggling but defiant member nation.

But patience among Greece's allies was wearing very thin ahead of the meeting.

"You know, there was a promise for today. Then, they're promising for tomorrow," said Lithuanian President Dalia Grybauskaite. "For the Greek government it's every time 'manana.'"

"I'm extremely somber about this summit. I'm also somber about the question of whether Greece really wants to come up with proposals, with a solution," Dutch Prime Minister Mark Rutte said.

"Everybody was angry," said the official, who asked not to be identified because he was commenting on a closed meeting.

 

[TheLaughingStock]

Even the Greeks have argued that their peak was unsustainable because it was fueled by borrowing that outpaced improvements in productivity. If that's the case, then comparing GDP to the peak during the bubble days is not exactly a good measure of health.

My point was to show how poorly advanced European economies were doing relative to the US economy at the time of the article. The metrics from the article and the yields in 2015 are showing that there are fundamental differences in the design of financial systems and approaches coming out of the banking crisis that impacted all of those countries.

 

[ElTorro]

This photo is great.

"Everybody was angry," said the official, who asked not to be identified because he was commenting on a closed meeting.

 

[Coriolanus]

Tailor-made for that keynes "if i owe you" quote.

 

[oti]

This photo is great.

#YOLO

 

[spwolf]

This is basically just magic. "Greece should just pass a law to make their government work better. Then everything would be fine!"

urgh... nothing else will fix Greece... country with 28% of black market economy AND most underfunded pension system in western world can not continue to function like this.

You can not have huge social benefits while at the same time you have huge black market economy and tax evasion.

You end up being in deficit, having to raise taxes which curbs economic growth and eventually you need loans to keep going.

And yes, they can pass the laws, problem is that with proper laws they wont be re-elected because many people are evading taxes, taking bribes, claiming false social benefits, etc, etc... without curbing that, they will end up in debt again.

 

[NYCmetsfan]

I'm always amazed and Europe's complete inability to learn from history

The articles of confederation/US constitution/compromise of 1790 (which a large part had to do with debt restructuring and overcoming a wealthy elites disgust had having to send their taxes to states which were in more debt) and the EU's own post war formation and its debt relief seem ripe for the Union to learn from but they seem to be intentionally ignoring them and other examples (no doubt their are differences) and insisting on standing on moral principle which seems counter to reality and their desired end goal.

This seems to be the continent's M.O. though (and one of the anglosphere's greatest assets it seems to not have adopted this, not that it doesn't have other problems)

 

[chadskin]

The taxpayers' money is not at stake when the body acting is the lender of last resort. They can create their own money, they do not need to rely on taxpayer money except insofar as it is politically useful.

Even as a lender of last resort, the taxpayer may have to foot the bill if things go from bad to worse (to worst) which just can't be ruled out.

Arguments put forth against a lender of last resort in the government bond market are the following: (1) inflation risk through an increase in the money stock; (2) losses to taxpayers because in the end they bear the losses of the ECB; (3) moral hazard, i.e. governments have an incentive to take more risk; (4) Bagehot's rule of not lending to insolvent institutions; and (5) violation of the statutes of the ECB which do not allow the ECB to buy government bonds directly.

https://en.wikipedia.org/wiki/Lender_of_last_resort#In_the_government_bond_market

I'm not saying sit on the sidelines, anything but. What I am saying is that the choice right now is between an ECB solution and a default. The best the ESM can do at this stage is a fudge that allows this whole catastrophe to trickle on for a few more years, the worst it can do is irreparable damage to the Greek economy. Countries have two responses to recessions, fiscal and monetary. European countries are not willing to undertake the fiscal (transfer from rich to poor). The ECB must therefore undertake the monetary - acting to devalue the Euro by purchasing Greek bonds. One of these two options must be taken or this will never be properly resolved.

What mandate and competence does the ECB have to do anything but sit on the sideline and hope for the best? It's precisely why the ESM includes all finance ministers of the member states on its board, to legally be able to monitor the implementation of reforms, grant disbursements and, if required, sanction a receiving member state if it for instance reverses a reform on its own decision.

 

[Coriolanus]

Even as a lender of last resort, the taxpayer may have to foot the bill if things go from bad to worse (to worst) which just can't be ruled out.


https://en.wikipedia.org/wiki/Lender_of_last_resort#In_the_government_bond_market

Fun fact: if you follow the citation for that bit about taxpayers being put in a position where they foot the bill? This is what it says:

A second criticism is that lender of last resort operations in the government bond markets can have fiscal consequences. The reason is that if governments fail to service their debts, the ECB will make losses. These will have to be borne by taxpayers. Thus by intervening in the government bond markets, the ECB is committing future taxpayers. The ECB should avoid operations that mix monetary and fiscal policies (see Goodfriend(2011)).

All this sounds reasonable. Yet it fails to recognize that all open market operations (including foreign exchange market operations) carry the risk of losses and thus have fiscal implications. When a central bank buys private paper in the context of its open market operation, there is a risk involved, because the issuer of the paper can default. This will then lead to losses for the central bank3. These losses are in no way different from the losses the central bank can incur when buying government bonds. Thus, the argument really implies that a central bank should abstain from any open market operation. It should stop being a central bank. The truth is that a central bank should perform (risky) open market operation. The fact that these are potentially loss making should not deter the central bank. Losses can be necessary, even desirable, to guarantee financial stability.

Weird.

And that is why one should check the sources.
-

heh
next paragraph

There is another dimension to the problem that follows from the fragility of the government bond markets in a monetary union. I argued earlier that financial markets can in a self--‐fulfilling way drive countries into a bad equilibrium, where default becomes inevitable. The use of the lender of last resort can prevent countries from being pushed into such a bad equilibrium. If the intervention by the central banks is successful there will be no losses, and no fiscal consequences.

Lawd, the article really drags the handling of the ECB over the coals. Sauce.
---

Well, now wondering why i bothered reading the sauce. Sure, it nukes from orbit that excerpt you put up in great detail, but its not like the very next paragraph in the wikipedia article didn't already do that in a concise manner:

According to De Grauwe none of these arguments is valid for the following reason: (1) The money stock does not necessarily increase if the money base is increased. (2) Firstly, all open market operations generate taxpayer risk, and secondly if the lender of last resort is successful in preventing countries from moving into the bad equilibrium, it will not suffer any losses. (3) The risk of moral hazard is identical to the moral hazard in the financial market and should be overcome by risk-limiting regulation. (4) If the distinction between illiquid and insolvent were possible, the market would not need the support of the lender of last resort, but in practice the distinction cannot be made. (5) While article 21 of the treaty prohibits buying debt from national governments directly because this "implies a monetary financing of the government budget deficit," article 18 allows the ECB to buy and sell "marketable instruments," and government bonds are marketable instruments.[17] Finally De Grauwe[43] asserts that only the central bank itself has the necessary credibility to act as a lender of last resort and should therefore replace the EFSF (and its successor the ESM). These two institutions cannot guarantee that they will always possess enough liquidity, or "fire power" to buy debt from sovereign bond holders.

 

[Ether_Snake]

If Greece was Europe's only problem, I would totally be for a major and immediate debt relief. Greece can't pay back it's debt anyway.

I am not convinced though that Europe could afford to cancel debts for all the other economically challenged states in the Eurozone. Something that fairness would mandate us to do. If we grant Greece a debt relief, we have to grant similar benefits to other countries too. Countries with larger absolute debts than Greece.

The only thing I see as a politically viable solution is to gradually reduce Greece's debt over many years through thinly veiled actions like extending payment timeframes and reducing interest rates.

You can't, unless you implement reforms at the same time.

In fact, the very idea of cutting Greece's debt without EU-wide reforms is ridiculous, as all it will do is keep the Troika in a position of superiority which will inevitably lead to the same outcome, regardless of the details. The EU can't work this way. That's why Tsipras had pushed for something bigger than just reforms for Greece, but of course it was shut down.

So yes Europe should review all of the EU nations' debts, and at the same time implement major reforms to strengthen the union, but it will not happen, period.

I can see Greece agreeing to anything this weekend, but everyone will know well that it will just be to buy themselves some time, because everyone knows the situation is unworkable. If anything, Greece will draw out their exit from the EZ to later this year, and closer to the Spanish elections. They need more time, but we all know it's to move to the Drachma.

edit: I wonder if Varoufakis will run for PM after Tsipras steps down, post-Grexit announcement.

 

[chadskin]

Fun fact: if you follow the citation for that bit about taxpayers being put in a position where they foot the bill? This is what it says:

Weird.

And that is why one should check the sources.

I'm aware, it says as much in a summarized form in the Wikipedia article just below the quote I cited.

(2) Firstly, all open market operations generate taxpayer risk, and secondly if the lender of last resort is successful in preventing countries from moving into the bad equilibrium, it will not suffer any losses.

If it isn't, the taxpayer will have to foot the bill. Whether that's "necessary, even desirable" is certainly debatable, De Grauwe does not inherit the definitive truth, otherwise he'd rule the world economy on his own and we'd all be rich AF. That, however, wasn't the topic.

The ECB route eliminates the national parliaments in the process and puts taxpayer money at stake, while the ESM route allows the national parliaments which represent the taxpayer whose money is at stake to decide upon whether they grant a third bailout program or not. Like I said, all 18 EZ members have just as much right to voice their opinion as the Greek had in the referendum. If one of them rejects the bailout program, then that frankly has to be accepted as well. Democracy goes both ways.

 

[gutter_trash]

I protest by burning my

Spoiler

5

Euro bill

 

[Coriolanus]

The ECB route eliminates the national parliaments in the process and puts taxpayer money at stake, while the ESM route allows the national parliaments which represent the taxpayer whose money is at stake to decide upon whether they grant a third bailout program or not. Like I said, all 18 EZ members have just as much right to voice their opinion as the Greek had in the referendum. If one of them rejects the bailout program, then that frankly has to be accepted as well. Democracy goes both ways.

The money is at stake either way.

 

[Ether_Snake]

This story is from The Telegraph's Ambrose Evans-Pritchard who is perhaps the non-Greek reporter who is best connected with the Syriza government: Tsipras didn't expect (or even want) "No" to win.

This article is great, must read.

 

[spindoctor]

I just caught up on the news and it's kind of mindboggling that Greece showed up to the meeting yesterday without a concrete proposal. Instead there was a picture on Twitter showing the Greek finance minister with handwritten notes on hotel stationery. And he apparently ended up doing a verbal presentation? I don't have the words to describe how crazy this sounds.

 

[chadskin]

The money is at stake either way.

It is but it can ultimately lead to a situation described by Foreign Policy:

Among other things, the Germans fear that if, for instance, the ECB starts buying lots of Italian government bonds, it will take the pressure off Rome to reform and put its public finances in order. They reason that this could eventually put the ECB in an impossible position: keep buying the bonds of a by-then-insolvent Italy or precipitate a default in a 2.1-trillion-euro bond market — the eurozone’s biggest — that may impose hefty losses on the ECB’s shareholders, not least the German government, and doubtless shatter the euro. Moreover, Germany’s Constitutional Court objects to open-ended ECB commitments that may entail open-ended losses for German taxpayers. Since Draghi dare not offend Germany too much, any QE program will be limited and hedged with conditions.

http://foreignpolicy.com/2015/01/21/the-ecbs-damned-if-you-do-qe-moment/

We simply don't know for sure what would happen if we go down the ECB route. What we do know is that a Greek default to the ESM would have none of these possible consequences because it was precisely set up for the situation Greece faces. Hence why I said it's a risky gamble that no one, even including Greece, seriously entertains these days.

 

[pigeon]

I'm aware, it says as much in a summarized form in the Wikipedia article just below the quote I cited.


If it isn't, the taxpayer will have to foot the bill. Whether that's "necessary, even desirable" is certainly debatable, De Grauwe does not inherit the definitive truth, otherwise he'd rule the world economy on his own and we'd all be rich AF. That, however, wasn't the topic.

The ECB route eliminates the national parliaments in the process and puts taxpayer money at stake, while the ESM route allows the national parliaments which represent the taxpayer whose money is at stake to decide upon whether they grant a third bailout program or not. Like I said, all 18 EZ members have just as much right to voice their opinion as the Greek had in the referendum. If one of them rejects the bailout program, then that frankly has to be accepted as well. Democracy goes both ways.

This is a surprisingly strong claim.

Let's say that 17 EZ members vote to give Greece another bailout and one (let's say France) votes not to.

Are you suggesting that they shouldn't give Greece the bailout and force them to leave the euro because one country voted against it?

Wouldn't it make just as much sense for France to leave the euro if they disagree with the policies of the euro zone countries? I mean, it's 17 to 1. Aren't they outvoted?

 

[LJ11]

That foreign policy scenario is loaded garbage.

What if the Italians stay lazy and the ECB has to keep printing Euros!

 

[KHarvey16]

Pretty decent summary from John Green:

https://www.youtube.com/watch?v=tigaryz-1y4

 

[DirtyManos]

Wonder if there will be any serious diplomatic fallout between the US and the Euro countries if a Grexit occurs.

 

[Coriolanus]

That foreign policy scenario is loaded garbage.

What if the Italians stay lazy and the ECB has to keep printing Euros!

It's the risk of moral hazard, and the answer to that is also covered by the article he had originally linked.

Also covered more in depth in the sauce, obv.

We simply don't know for sure what would happen if we go down the ECB route. What we do know is that a Greek default to the ESM would have none of these possible consequences because it was precisely set up for the situation Greece faces. Hence why I said it's a risky gamble that no one, even including Greece, seriously entertains these days.

We simply don't know what will happen if we allow the ECB to act like a central bank. Ok =/

The risk of not going to the ECB is default, potentially contagion and bringing the whole thing crashing down.

 

[Ether_Snake]

Wonder if there will be any serious diplomatic fallout between the US and the Euro countries if a Grexit occurs.

The US is pretty much stuck because any action that would be perceived as criticizing Germany will stoke anti-American/Atlantic sentiment. The US can't say anything or do anything in Europe other than military cooperation. If the US says anything, then they'll lose someone.

The Russians aren't crazy in wanting to deepen a rift between the US/UK and the rest of Europe, and Germany is really on the line. France less so these days, unlike 15 years ago.

 

[pigeon]

It is but it can ultimately lead to a situation described by Foreign Policy:

http://foreignpolicy.com/2015/01/21/the-ecbs-damned-if-you-do-qe-moment/

We simply don't know for sure what would happen if we go down the ECB route. What we do know is that a Greek default to the ESM would have none of these possible consequences because it was precisely set up for the situation Greece faces. Hence why I said it's a risky gamble that no one, even including Greece, seriously entertains these days.

I didn't respond to this the first time you posted it, but I did want to point out that it's a little breathtaking. The article literally says "if the ECB just lends money to Italy without conditions then Germany won't have leverage over Italy to use to control its government."

That's a pretty bald-faced admission of the politics at play here!

 

[Piecake]

I didn't respond to this the first time you posted it, but I did want to point out that it's a little breathtaking. The article literally says "if the ECB just lends money to Italy without conditions then Germany won't have leverage over Italy to use to control its government."

That's a pretty bald-faced admission of the politics at play here!

I think the US should follow the EU. I think it would be pretty interesting to see New York and California withhold money and demand changes from Alabama and Mississippi in order to get it

Spoiler

Not Serious

 

[Coriolanus]

That's a pretty bald-faced admission of the politics at play here!

They did kinda conclude with

Ultimately, the reason why the eurozone is stagnating and sinking into deflation is that it is depressed by excessive debt. Since the mutual monetization of debts by the ECB is politically unacceptable, the eurozone needs to move forward with debt restructuring. Instead of wasting political capital enraging the Germans with half-hearted QE, efforts should focus on the need for a debt conference to relieve public debt, along with wholesale restructuring of private debts on zombie banks’ balance sheets.

Which is essentially "EZ, plz find the balls to tell the germans to get fucked".

 

[chadskin]

This is a surprisingly strong claim.

Let's say that 17 EZ members vote to give Greece another bailout and one (let's say France) votes not to.

Are you suggesting that they shouldn't give Greece the bailout and force them to leave the euro because one country voted against it?

Wouldn't it make just as much sense for France to leave the euro if they disagree with the policies of the euro zone countries? I mean, it's 17 to 1. Aren't they outvoted?

Unanimity is the way the ESM was set up after e.g. Finland demanded it. And they have a point, it's an intergovernmental rather than a supranational institution and should require unanimity. They're all still sovereign nations, after all.

If it's a good offer for everyone, it's going to be accepted. If not, then they have a right to reject it. Let's also not forget these are extraordinary circumstances. If Greece had accepted the extension of the second bailout program on June 27, we would have had four+ months to negotiate and debate about a third program, both at the level of the EU and the national parliaments. Now we have less than a week. How is a MP going to be able to read and understand the Greek proposal in that short of a time to form a well-founded opinion?

I didn't respond to this the first time you posted it, but I did want to point out that it's a little breathtaking. The article literally says "if the ECB just lends money to Italy without conditions then Germany won't have leverage over Italy to use to control its government."

That's a pretty bald-faced admission of the politics at play here!

Not Germany but the institutions. Again, the ESM specifically includes all finance ministers of the EZ on its board to monitor reforms, grant disbursements and, if required, sanction a receiving state.

 

[Coriolanus]

If it's a good offer for everyone, it's going to be accepted. If not, then they have a right to reject it. Let's also not forget these are extraordinary circumstances. If Greece had accepted the extension of the second bailout program on June 27, we would have had four+ months to negotiate and debate about a third program, both at the level of the EU and the national parliaments. Now we have less than a week. How is a MP going to be able to read and understand the Greek proposal in that short of a time to form a well-founded opinion?

This is a bit facetious. "If the greek government had capitulated, we wouldn't be in this mess right now".

Indeed.

 

[chadskin]

This is a bit facetious. "If the greek government had capitulated, we wouldn't be in this mess right now".

Indeed.

Going by all accounts, they weren't that far away from a deal. Juncker made a last-ditch effort that could've been accepted: http://www.ekathimerini.com/198709/...ing-junckers-last-minute-proposal-sources-say

The same offer they're basing their new proposal on now, apparently. Who knows what three more days of serious negotiations would've brought?

 

[shinra-bansho]

This is a surprisingly strong claim.

Let's say that 17 EZ members vote to give Greece another bailout and one (let's say France) votes not to.

Are you suggesting that they shouldn't give Greece the bailout and force them to leave the euro because one country voted against it?

Wouldn't it make just as much sense for France to leave the euro if they disagree with the policies of the euro zone countries? I mean, it's 17 to 1. Aren't they outvoted?

I guess that once again touches on one of the fundamental problems of the European project.
It is not a political union. It's a collection of separate sovereign nations [with sometimes disparate domestic goals], that have by various treaties forged a common economic zone and, for some, monetary union.

I am pretty curious whether voters in respective nations would be willing to cede further sovereignty towards fiscal and political union. My initial hunch is probably not.