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[Coriolanus]

The worse thing is that while Greece is shown as the devil, there is practically no country in eurozone (other than Germany) that is financially healthy at this point. The debt levels are just insane. Coincidentally (not really) the German economy is the one that benefits the most out of euro. I'm very curious about the reactions in the other euro countries after Greece will be kicked out as a bad tooth. Especially Portugal, Spain and Italy.

Krugman was making an argument the other day that France's economy is actually quite diversified and healthy. They just run at high debt, is all.

Can't say that i bothered to fact check him.

 

[Green Yoshi]

Do all the countries in the Eurozone borrow the same amount of money? I'm trying to understand why Germany is doing well and Greece isn't. Does Germany have some rare natural resources? How are Spain, Italy and the rest of the countries doing and will they run into a similar problem in the future ?

Thanks.

Germany has a lot of skilled workers and unlike UK it didn't sacrifice its industry for the finance sector. Furthermore bad paid workers in Germany get social security payments.

Without the Euro, the German currency would appreciate. This would be bad for the German exports, but good for the other countries in Europe.

Spain is doing even worse than Greece concerning the budget deficit, but they are allowed to make more debts than Greece.

The problems of Greece are rather complex. Since the 2000s the wages have risen faster than the productivity, there was excessive government spending and pensions were too high. Greece has cut their expenses in the last five years, but as a Euro member they couldn't devalue their currency. That is why they are in a recession and not competitive. So they import far more than they export. Germany on the other hand exports far more than it imports.

 

[cjp]

Guess this all will delay our roadmap towards the United States of Europe by another 10-20 years. Maybe in 2150.

Good. USE would be a terrible idea.

 

[Ether_Snake]

Not at all. I think Greece is likely doing the best thing for themselves right now. That said Russia has been actively pushing for this direction for sometime. Most of the Current Greek Leadership are in close relations to Alexander Dugin. Russia will get its chance to be the big hero now. Maybe even get themselves a nice Mediterranean Port to base out of. Russia actively funds groups within the EU for moments like these.

Sure it does, but who is to blame for the division itself? I'd say promoters of austerity. When people are in favor of gay rights, it also brings out support for right-wing parties. Immigration also does, etc. So the best defense against this is unity, and in this particular case reforming the EZ so it doesn't erode each time a country is in a difficult financial position. You can't really say something is falling apart if nothing was actually holding it together to begin with.

 

[Deleted member 231381]

What about the hundreds of billion Euros Greece has received from the EU since it joined it, bro?
Greece is said to have received 3 times more subventions from the EU than any other EU country.
These are the result of the taxes, I'm not talking about bailouts.

Greece's GNI had a net intake of ~3% in contributions from the EU. This is barely enough to cover the current primary surplus, let alone make up for the lost exports due to the relative strength of the Euro.

 

[sublimit]

Spain is doing even worse than Greece concerning the budget deficit, but they are allowed to make more debts than Greece.

I wonder for how long though?

 

[wsippel]

Do all the countries in the Eurozone borrow the same amount of money? I'm trying to understand why Germany is doing well and Greece isn't. Does Germany have some rare natural resources? How are Spain, Italy and the rest of the countries doing and will they run into a similar problem in the future ?

Thanks.

Pretty much the only rare natural resource Germany has in abundance is Uranium, and we don't mine it. We specialize in engineering: Cars, planes, spacecraft, boats, engines, tools, machines, optics, chemical products, a little software and highly specialized electronics. Greece on the other hand exports some olive oil and cotton and that's basically it. Their main source of income is tourism.

 

[CrunchyB]

Guess this all will delay our roadmap towards the United States of Europe by another 10-20 years. Maybe in 2150.

Maybe this Greece disaster will prompt some Eurozone reforms. If they're smart they'll want to make sure something like this can't happen with Italy or Spain. Debt relief to those countries seems easier to accomplish politically than helping Greece, even though it's probably much more expensive.

 

[Deleted member 231381]

I wonder for how long though?

If I were being cynical, I'd say until the ECB can finish purchasing at-risk Spanish debts from German and French banks. ¯\_(&#12484_/¯

 

[Theonik]

Is he trying to blackmail the Eurozone or just stupid?

I don't see how this is a blackmail.

And for good reason no one is gonna believe that promise.

The people in Greece that need a currency to trade with but are denied Euros because the Greek Central bank can't make them.

Guess this all will delay our roadmap towards the United States of Europe by another 10-20 years. Maybe in 2150.

If anything it advances it. A real kick in the nuts is what will get the ball rolling. It highlights the need for a functional Eurozone and the solution is to bring the union closer not further apart. Then other common sense integration can proceed.

 

[mr2t]

Racist pretty much is a buzzword now, even if the both sides of the equation are white or same 'race'. At best your comment was ignorant, maybe ethnocentric thinking only Germans 'work', assuming you are both white (German, Greek).

It's not ignorant. The Greek work force has the lowest labor participation rate in the EU. Worker productivity is low as well.

 

[tokkun]

I'm trying to understand why Germany is doing well and Greece isn't. Does Germany have some rare natural resources?

Not super deep, but an interesting take on some of the cultural-economic differences between Germany and the UK:
https://www.youtube.com/watch?v=9bTKSin4JN4

 

[rezuth]

I feel kinda shitty that I won money betting on them saying no.

 

[Ether_Snake]

Maybe this Greece disaster will prompt some Eurozone reforms. If they're smart they'll want to make sure something like this can't happen with Italy or Spain. Debt relief to those countries seems easier to accomplish politically than helping Greece, even though it's probably much more expensive.

Sadly, the more they put reforms in place that wouldn't put the south at a disadvantage, the less beneficial it is to stay in the EZ. The better the south gets, the higher the Euro goes. It would even out the European economies that hold the Euro, but that means contractions in exports for countries like Germany.

 

[KingSnake]

Krugman was making an argument the other day that France's economy is actually quite diversified and healthy. They just run at high debt, is all.

Can't say that i bothered to fact check him.

France is an interesting example because its economy it's quite neutral to euro gains/losses overall. The French currency was strong enough to sustain the economy and weak enough to not hurt the exports.

Besides that any debt that high compared to GDP is a potential risk, no matter how healthy an economy is. Not an immediate one though.

 

[PodcastFips]

I feel kinda shitty that I won money betting on them saying no.

I imagine the quote was pretty low, though.

 

[LoveCake]

They should definitely not do that. I was sceptical at the start but at this point he's the only one talking sense in this circus.
Everyone should watch these videos if they are not convinced:
https://www.youtube.com/watch?v=YF4XJ9gs6Bo
https://www.youtube.com/watch?v=HgyxnLKPX7Q

Well worth watching these videos!

 

[chadskin]

Eurogroup president Jeroen Dijsselbloem:

I take note of the outcome of the Greek referendum. This result is very regrettable for the future of Greece. For recovery of the Greek economy, difficult measures and reforms are inevitable. We will now wait for the initiatives of the Greek authorities. The Eurogroup will discuss the state of play on Tuesday 7 July.

http://www.consilium.europa.eu/en/p...ogroup-president-following-referendum-greece/

 

[le-seb]

Greece's GNI had a net intake of ~3% in contributions from the EU. This is barely enough to cover the current primary surplus, let alone make up for the lost exports due to the relative strength of the Euro.

Greece hasn't been forced into joining the Eurozone, though.
I'm all for not letting you down, but stop blaming other countries for how badly your country's been managed.

 

[Coriolanus]

Besides that any debt that high compared to GDP is a potential risk, no matter how healthy an economy is. Not an immediate one though.

Yeah, but then one enters confidence fairy territory and has to start explaining shit like japan's debt to gdp while contrasting it with SK's and China's and stuff, factor rating agency grades and it becomes a mess.

 

[AstroNut325]

So what are the possible effects of Greece leaving the Euro?

 

[KHlover]

I feel kinda shitty that I won money betting on them saying no.

Don't feel shitty, you're in the 1% of ...entities probably who actually made money out of thies, even if it's just a few monies from a joke bet. Since you were actually able to bet on this I guess you're from the UK? Or was it just a bet with friends?

 

[pigeon]

Greece hasn't been forced into joining the Eurozone, though.
I'm all for not letting you down, but stop blaming other countries for how badly your country's been managed.

I mean, if your argument is "it's Greece's fault for being stupid enough to join the euro in the first place," then fair enough, but that is not a great argument for the euro.

 

[le-seb]

So what are the possible effects of Greece leaving the Euro?

Shit will happen. Even if they don't leave Euro.

 

[Deleted member 231381]

Greece hasn't been forced into joining the Eurozone, though.
I'm all for not letting you down, but stop blaming other countries for how badly your country's been managed.

In fairness to Greece, when they joined the Eurozone, they were told it would be for "ever closer Union", not "to help German industry profit". If you're saying they were stupid for not realizing that, it... doesn't really reflect too well on Germany, either.

 

[ScHlAuChi]

So who is to blame for this whole Greece disaster?

http://www.businessinsider.com/the-...ry-sexy-story-between-two-sinners-2012-3?IR=T

 

[Rektash]

So who is to blame for this whole Greece disaster?

http://www.businessinsider.com/the-...ry-sexy-story-between-two-sinners-2012-3?IR=T

Who needs to read articles when you can just blame germany?

 

[Nivash]

If anything it advances it. A real kick in the nuts is what will get the ball rolling. It highlights the need for a functional Eurozone and the solution is to bring the union closer not further apart. Then other common sense integration can proceed.

I fully agree and I really hope so too. We need unity. We're going to get ripped to pieces later in the century if we're still divided. The Greek Fiasco really has revealed a lot of critical flaws in the system - I think it's obvious by now that the way it is currently designed it only really works in boom times, like before the crisis. It just removes too many tools for governments to deal with a crisis and does too little to replace them. It needs reform.

As for Greece itself, a Grexit is the only sane option at this point. I read the IMF report. 15 years more of austerity and still unsustainable debt just isn't a choice you can make. For the record I deeply disapprove of the antics of the Syriza government in the negotiations (Eurogroup as terrorists, really?) but they're right about one thing - any deal that doesn't include very large scale debt relief is economic suicide. Maybe they would have had a shot at securing such a deal if they had been more diplomatic, maybe not. Pointless to discuss any more.

I wish the best for Greece and I hope the EU is in fact prepared to move in with humanitarian aid if need be. A NO and Grexit might make the most sense in the long run but in the short run things could get really nasty. Europe needs to step up to the plate.

 

[Ted Striker]

So who is to blame for this whole Greece disaster?

http://www.businessinsider.com/the-...ry-sexy-story-between-two-sinners-2012-3?IR=T

 

[Frankfurter]

You sure? I mean look at all that growth!

The point concerning Estonia and a couple of others is that at their peak they were probably operating well above capacity. In many cases primarily because of a huge housing bubble.
See Spain for instance where in 2007 (or 2006, can't remember) more houses were built than in Germany, France and the UK combined. Obviously that is gonna cause GDP to skyrocket, but not for long.

 

[Deleted member 231381]

I wish the best for Greece and I hope the EU is in fact prepared to move in with humanitarian aid if need be. A NO and Grexit might make the most sense in the long run but in the short run things could get really nasty. Europe needs to step up to the plate.

Yes. Leaving Greece in a situation where it has to run digital IOUs would be a genuine moral evil. Even if they leave, giving them the few months support they need to transition should be an absolute basic minimum and I would be ashamed of Europe and my European identity if that did not happen.

 

[KHlover]

So who is to blame for this whole Greece disaster?

http://www.businessinsider.com/the-...ry-sexy-story-between-two-sinners-2012-3?IR=T

It's true, if Greece hadn't cooked their books to get into the Euro despite not meeting the requirements we wouldn't be in this situation today. That part is squarely on Greece. After the crash of 2008...who knows.

 

[bigmit3737]

It's to do with how currencies work. Suppose that Germany and Greece had two different currencies for a moment. Germany is an industrial economy. Industry tends to see quite good productivity rises over time - people making new machines and better technology that allow Germans to make more products. Greece is an agricultural economy. Agriculture doesn't tend to see very good productivity rises - wheat is wheat, it's difficult to invent faster growing wheat. Therefore, if you invest money in Germany, you get a better return than if you invest money in Greece.

This means people want to invest money more in Germany than they do Greece. So they try and buy more German currency than they do Greek currency, which drives up the price of German currency and drives down the price of Greek currency. The effect of this is to equalize the two countries - one has high returns on an expensive currency, the other low returns on a cheap currency, so that the supply and demand are met for each.

At the moment, Germany and Greece share the same currency. That means that the value of the currency is roughly halfway between them (not really true as Greece is much smaller than Germany, but there are other countries dragging the Euro down like Spain, Portugal, etc). That means Germany is now a really good offer - you can buy Euros for a mid-price and get high returns in Germany still. Greece is now a really bad offer. You buy Euros for a mid-price, but you get low returns on them if you put them in Greece.

In other words, Germany does well *because* Greece is doing badly. This is how all monetary unions work. California does well because if you invest money in California, you get a better return than you do in Mississippi. If the United States functioned the way the European Union did, Mississippi would probably be in a better position if they said "fuck the dollar, we need a cheap currency so people will buy our products". However, most monetary unions also have fiscal union - taxes get raised in California and spent on supporting Mississippi. That's not the case in the EU, and so countries like Greece have a choice - either run surpluses all the time and accept the drop in living standards, or run up debts. Greece has been attempting to accept the drop in living standards, but it has simply been too large. That takes us up to now.

Thanks for this!
So basically Greece is screwed because it's an agricultural economy.

Now when you say invest in Germany, are you talking about private investors? Does each country have their treasury bonds despite being part of the Eurozone? Can you please explain specifically what they are investing in?

So If Greece is out of the Eurozone, the value of Euro goes up which will be bad for Germany's economy. Currency exchange will be more expensive.This seems like a hint of deflation .

Thanks!

 

[Souldestroyer Reborn]

People in Germany work.

It's not ignorant. The Greek work force has the lowest labor participation rate in the EU. Worker productivity is low as well.

And why do you think that is?

Is it because of 'lol lazy Greeks taken muh muhny' or is it because y'know there's no jobs due to heavy austerity, the result of any many given and being made going straight back out the door to German, Italian, Spanish banks? With some interest on top?

So fucking ignorant and clueless.

 

[Deleted member 231381]

It's true, if Greece hadn't cooked their books to get into the Euro despite not meeting the requirements we wouldn't be in this situation today. That part is squarely on Greece. After the crash of 2008...who knows.

having said that, neither France nor Germany actually met the financial stability requirements the Euro requires either, to the point hey had to redraft the rules. IIRC, I think the only country which has followed the Euro rules in their entirety since they introduced the Euro has been Estonia; so they probably have the most legitimate grievance right now.

 

[bigmit3737]

Not super deep, but an interesting take on some of the cultural-economic differences between Germany and the UK:
https://www.youtube.com/watch?v=9bTKSin4JN4

Thanks!

 

[Lovely Salsa]

Racist pretty much is a buzzword now, even if the both sides of the equation are white or same 'race'. At best your comment was ignorant, maybe ethnocentric thinking only Germans 'work', assuming you are both white (German, Greek).

White is such a bs word

greeks and germans look nothing alike on average. Europeans can experience racism

 

[Heartfyre]

The point concerning Estonia and a couple of others is that at their peak they were probably operating well above capacity. In many cases primarily because of a huge housing bubble.
See Spain for instance where in 2007 (or 2006, can't remember) more houses were built than in Germany, France and the UK combined. Obviously that is gonna cause GDP to skyrocket, but not for long.

You can throw Ireland in there as well. Much of our economic growth was based on the housing bubble that burst gloriously in 2008. The government has since been committed to ensuring that such a situation will never happen again, which means GDP is unlikely to ever grow to pre-crisis levels.

 

[Deleted member 231381]

Thanks for this!
So basically Greece is screwed because it's an agricultural economy.

Well, that was a simplification - realistically, Greece is more of a tourism and shipping economy although it does have more agriculture than the European average. A more accurate way of putting it would be to say Greece is screwed because currently it specializes in industries which expect to see only very slow growth over time even under good conditions, whereas Germany specializes in industries which expect pretty good growth.

Now when you say invest in Germany, are you talking about private investors?

Not necessarily, but they form the vast majority.

Does each country have their treasury bonds despite being part of the Eurozone?

Yes (and this is yet another big problem with the current design of the Eurozone).

Can you please explain specifically what they are investing in?

Anything in that country. That is, German bonds have to be comparable in returns (they can be reduced because they're less risky, but not totally out of proportion) to returns on German businesses, or otherwise nobody will buy German bonds. So, most investments in a country are set at the pace of the dominant industries.

So If Greece is out of the Eurozone, the value of Euro goes up which will be bad for Germany's economy.

Yes and no. If the break-up goes really badly, and people start worrying about Portugal and Spain, the value of the Euro will stay low as people will worry about further repercussions. This would still be bad for Germany because in this situation the Euro is low because all countries are at risk - e.g., German investments are less attractive than they once were.

If the break-up goes smoothly and people think the Euro is stable afterwards, the value of the Euro will indeed go up, which will indeed be bad for Germany's economy. Mind, it won't go up very much because Greece is a fraction (less than 2%) of the European economy.

Currency exchange will be more expensive.This seems like a hint of deflation.

Correct (assuming the latter case above).

 

[Chariot]

Racist pretty much is a buzzword now, even if the both sides of the equation are white or same 'race'. At best your comment was ignorant, maybe ethnocentric thinking only Germans 'work', assuming you are both white (German, Greek).

Here we go again.
There are forms of racism that aren't about skin colour and that are important and heavy. Just being "white" isn't cutting it in Europe.

 

[gutter_trash]

Here we go again.
There are forms of racism that aren't about skin colour and that are important and heavy. Just being "white" isn't cutting it in Europe.

yup agree, there is some high snobbery on the part of Northern Europ towards their Southern neighbors

It's like the Northern countries continue to treat the Southern countries like vassal states

this frame of mind is still persistent across Germany, France and England (yes I said England, not UK) towards the South

 

[Reuenthal]

Some really good and informative posts about the crisis that might help people understand things:

http://www.interfluidity.com/v2/5965.html
http://www.interfluidity.com/v2/6013.html


A few excerpts from the second link:

Banks and Greece’s bailouts

Greece’s 2010 assistance program was largely a bailout of European banks, initiated to prevent a wider banking crisis. I didn’t expect this claim, from the previous post, to be very contentious. But apparently it is, so I’ll overdocument below. Certainly a bank bailout was not the program’s sole purpose — fear of contagion to other indebted Eurosovereigns was also concentrating people’s minds. But the operation was not a huge help to Greece except in the sense replacing private creditors with more generously scheduled official creditors gave the country breathing space.

Commenters have brought up the 2012 program, which is more complicated. It included “private sector involvement”, Eurospeak for getting private creditors to take a haircut on their holdings of Greek debt. That’s a more ambiguous case, and we’ll discuss it below. My view was and remains that the “cramdown” was made possible precisely because the first program helped European banks to reduce their exposures to Greece, both directly by getting paid in full on near-maturity debt, and indirectly by creating time and a window of optimism during which positions could be offloaded without too much impairment. Below, I link some data and and work through an exercise that supports my view, but I certainly don’t claim it is definitive.

Most of this post is going to be documenting stuff. But I want to correct a misperception I fear I may have left with the previous post.

I am not criticizing Europe’s handling of Greece because banks deserved to take a hit and were treated too lightly. It is not the absence of pain and blame that troubles me, but its asymmetry. What was required was a Europe-wide solution to a European problem. What occurred, in my opinion, was the quarantining of a scapegoat. I blame Europe’s leaders for not framing the crisis in a different way, for acting as though it was about alms to Southern miscreants rather than explaining its roots in EU-wide regulatory errors and poor credit allocation incentives, Europe-wide problems that threatened many states. Framed this way, solutions would have looked very different. They would have addressed Germany’s problems and France’s problems as well as those of Greece, Spain, Portugal, Italy, Ireland, and Cyprus. Framed this way, solutions would have been conducive to “ever closer union” one crisis at a time. Instead, leaders chose to inflame national stereotypes. They pretended that there were villains and angels, and that they (and their own constituents, of course) were the angels.

Former Bundesbank head Karl Otto Pöhl, just after the 2010 program for Greece was approved:

Pöhl: …a small, indeed a tiny, country like Greece, one with no industrial base, would never be in a position to pay back €300 billion worth of debt.

SPIEGEL: According to the rescue plan, it’s actually €350 billion …

Pöhl: … which that country has even less chance of paying back. Without a “haircut,” a partial debt waiver, it cannot and will not ever happen. So why not immediately? That would have been one alternative. The European Union should have declared half a year ago — or even earlier — that Greek debt needed restructuring.

SPIEGEL: But according to Chancellor Angela Merkel, that would have led to a domino effect, with repercussions for other European states facing debt crises of their own.

Pöhl: I do not believe that. I think it was about something altogether different… It was about protecting German banks, but especially the French banks, from debt write offs. On the day that the rescue package was agreed on, shares of French banks rose by up to 24 percent. Looking at that, you can see what this was really about — namely, rescuing the banks and the rich Greeks.




Pöhl, by the way, agreed with the now-(in)famous Yanis Varoufakis that from Greece’s perspective, a partial default would have been superior to the 2010 package. Here’s Pöhl again:

Pöhl: …They could have slashed the debts by one-third. The banks would then have had to write off a third of their securities.

SPIEGEL: There was fear that investors would not have touched Greek government bonds for years, nor would they have touched the bonds of any other southern European countries.

Pöhl: I believe the opposite would have happened. Investors would quickly have seen that Greece could get a handle on its debt problems. And for that reason, trust would quickly have been restored. But that moment has passed. Now we have this mess.

 

[old]

I don't follow Tsipras's logic. He says this vote will give them the leverage to negotiate a better deal. How? I don't see how this tells the creditors anything but the Greeks are unwilling to compromise on spending.

 

[Relaxed Muscle]

The point concerning Estonia and a couple of others is that at their peak they were probably operating well above capacity. In many cases primarily because of a huge housing bubble.
See Spain for instance where in 2007 (or 2006, can't remember) more houses were built than in Germany, France and the UK combined. Obviously that is gonna cause GDP to skyrocket, but not for long.

The problem is, austerity is not going to cover the loss of the housing bubble economy, you need a substitute for that. These countries has to decide (and needs) to decide what kind of economic work force they want to be.

And you need investment in education and other areas (I+D) to make that possible, unless Estonia and Spain want to be a place of cheap labor for multinationals for the rest of their history and repeating the same housing bubble or any other bubble every few years.

 

[Deleted member 231381]

I don't follow Tsipras's logic. He says this vote will give them the leverage to negotiate a better deal. How? I don't see how this tells the creditors anything but the Greeks are unwilling to compromise on spending.

Well, yes. That's a pretty important message at this point. The creditors now know that many Greeks are willing to default if the deal isn't good enough, so creditors now have a choice between some repayment (i.e., partial haircut in exchange for reforms) or no repayment (Greece defaults). Before the referendum, a lot of people thought that the result would be yes, so they were giving Tsipras shitty offers because they didn't think that Greece would actually dare risk a default.

 

[Dartastic]

It's true, if Greece hadn't cooked their books to get into the Euro despite not meeting the requirements we wouldn't be in this situation today. That part is squarely on Greece. After the crash of 2008...who knows.

Thanks, Goldman Sachs.

 

[old]

Well, yes. That's a pretty important message at this point. The creditors now know that many Greeks are willing to default if the deal isn't good enough, so creditors now have a choice between some repayment (i.e., partial haircut in exchange for reforms) or no repayment (Greece defaults). Before the referendum, a lot of people thought that the result would be yes, so they were giving Tsipras shitty offers because they didn't think that Greece would actually dare risk a default.

Thanks, I forgot about the default option.

 

[Sakura]

Not sure what to think about this.
An article on the CBC I read recently said that the CAD could go down to 65 cents US by next year if a No vote wins, but I don't know if that is true (I hope not).
In either case it seems like things in Greece are going to get worse before they get better.

 

[Tugatrix]

I don't follow Tsipras's logic. He says this vote will give them the leverage to negotiate a better deal. How? I don't see how this tells the creditors anything but the Greeks are unwilling to compromise on spending.

They don't have a problem of spending, they have crushing debt that sucks all the money of the state budget, they also have no real GDP growth. You still insisting on austerity when is no solution whatsoever

 

[Relaxed Muscle]

It's true, if Greece hadn't cooked their books to get into the Euro despite not meeting the requirements we wouldn't be in this situation today. That part is squarely on Greece. After the crash of 2008...who knows.

Yeah, Greece was at fault up to the 2010.

From that point on, the Troika did bad choice after bad choice.