Eurozone crisis

[Unix]

I'm not sure it's a given that one EU country can default on debts to another without consequences.

The consequences are it will leave the Euro. Defaults happen all the time, when you lend money to a country without checking if their books are cooked by Goldman Sachs then you are taking on the risk that goes with that, i.e. a default.

As others have said Greece will run a Surplus without the debt, so will be in a much better position.

[Lightwave]

The consequences are it will leave the Euro. Defaults happen all the time, when you lend money to a country without checking if their books are cooked by Goldman Sachs then you are taking on the risk that goes with that, i.e. a default.

As others have said Greece will run a Surplus without the debt, so will be in a much better position.

Some people in Greece seem to be saying things are deteriorating and the surplus is in question now?

Will the EU keep throwing subsidies at Greece for roads and agriculture etc etc if it loses a few squillion?
The effects on Greek companies might not be benign.
There will be turmoil and people will get hurt.

[DodgyAgent]

<cap doff to DA>

If we find kebab houses under the brand name "majestic" then we will know for sure that Greece is being bankrolled by the soviets

[BlasterBates]

The new Greek government seem to be going through a crash course on:

"The realities of running a modern economy"

The finance minister seems to be looking ahead and is a bit nervous on the lesson on "not being able to pay anyone when you run out of money".

[DimPrawn]

If we find kebab houses under the brand name "majestic" then we will know for sure that Greece is being bankrolled by the soviets

[DodgyAgent]

[anonymouse]

'Ull, the place with KKK Wednesday for kids

https://www.facebook.com/topic/Krisp...30107609596283

[NickyBoy]

You always have wealth transfer between regions of differing economic strength under the same currency. In the UK, for example, a lot of the tax paid in London is transferred out to less affluent areas. If we didn't do that there would be some severe economic problems that would dwarf what we face now.

Under the Euro, Germany is the equivalent of their 'London' and the south European countries are the less affluent areas. Wealth transfer should be occurring between them naturally to maintain economic balance under the single currency. This should not have been handled as loans in the first place.

Of course, you can't expect Germany to just give the Greeks money without having any control over how it is spent. This is why the Euro is a bad idea without a real and full political and administrative merger of all the countries using it into a single entity.

When it comes to financial unions its a case of all or nothing. They opted not to go for all, so they will end up with nothing. If mainland Europe wanted to go for it, they should have gone for it fully. Now their dream of a United States of Europe is DOA.

Oh well

[Zero Liability]

The whole "wealth inequality" thing is only a valid concern insofar as Cantillon effects resulting from central bank monetary policy (i.e. the fact that credit expansion takes place in a staggered manner and in the direction of specific assets, like property), and other government schemes that artificially favour places like London are operative. Greece is just a case of a horribly mismanaged economy, that benefited immensely from all the years where it could borrow at interest rates previously accessible only to better managed economies, like the German one. A single currency of course is a severe restraint on countries that cannot manage their fiscal policy, but rather than result in superior behaviour on part of the formerly more profligate economies, it seems to have gone in the exact opposite direction. Unlike this country, where the government can just print up money if it over-extends its borrowing... and pretend it's solved its problems. It "works" if you can ensure demand for your currency doesn't fall too much as a result and tolerate some domestic price inflation (the whole point of it, to inflate away any debts) and a few bubbles here and there.

The entire thing resulted from an unstable banking system.

The fact that the Eurozone is freaking out over a small, unproductive economy like Greece leaving underlines just how fragile an illusion they're reliant on, if so. Yes sure, it may have a chain reaction, but they're basically trying to keep banks over-exposed to bad sovereigns afloat. The truth of the matter is, they would never see this money again without bailouts, and it is questionable that they'll see it even with them. So they're basically bailing out their debtors to retain the illusion that they're being repaid so that some banks don't collapse and the common currency doesn't come under threat. Very healthy.

It's just a means of keeping confidence in these banks and preventing them from having to write down the value of these 'assets' and potentially collapse, and to avoid 'deflation', which will penalise the debt addicted... like the sovereigns whose debt they're over-exposed to in the first place.

[DodgyAgent]

You always have wealth transfer between regions of differing economic strength under the same currency. In the UK, for example, a lot of the tax paid in London is transferred out to less affluent areas. If we didn't do that there would be some severe economic problems that would dwarf what we face now.

Under the Euro, Germany is the equivalent of their 'London' and the south European countries are the less affluent areas. Wealth transfer should be occurring between them naturally to maintain economic balance under the single currency. This should not have been handled as loans in the first place.

Of course, you can't expect Germany to just give the Greeks money without having any control over how it is spent. This is why the Euro is a bad idea without a real and full political and administrative merger of all the countries using it into a single entity.

When it comes to financial unions its a case of all or nothing. They opted not to go for all, so they will end up with nothing. If mainland Europe wanted to go for it, they should have gone for it fully. Now their dream of a United States of Europe is DOA.

Oh well

This only works if there is also labour mobility. There is very little of it between Greece and Germany or Greece and the UK.