The stark choice: Increase German debt or save the Euro

[sasguru]

Ambrose likes to exaggerate because it makes good reading

The problem is not Greece, Greek debt is not that large and you can fairly easily go through a restructuring, and this will happen. The trouble is it can't happen now, because Italy and Spain need to get their finances in order first. Incidentally their debt is lower than Britain's, but their current deficits are high and a Greek default would set interest rates spiralling, which would trigger a major problem. Once Italy and Spain have their current deficits under control, Greece will be retrsuctured. When this happens it's the banks and the insurance companies that will be hit. But it won't be massive because their bonds are already discounted by 50%.

The other thing to bear in mind is that although some members of Merkel's party oppose the new fund all opposition parties support it, and they're riding high in the polls. So she can push it through easy peasy with the opposition.

The British "Anti-Euro" establishment is enjoying blowing this up, as there is nothing more satisfying than "I told you so" gloat. They predicted the Euro was imminently going to break up in 2008, they are now and they will be in 2018. But it won't. Germany will probably have a balanced budget next year, whereas UK is gushing out of it's aorta. If I were in the UK I think I would be worrying about the UK's finances.

Mark my words, Europe is not the big problem, it's being solved. In fact Greece has been like a sharp short shock therapy forcing all Eurozone to cut deficits to almost 0. The UK will continue to gush out it's aorta and when Labour get's in I suspect it won't be long before they will be off to the IMF with a begging bowl. The US has a huge problem brewing unless it can get it's spending under control.

Your wishful thinking about Europe is laughable. While the Euro may well survive (and I hope it does as the consequences if it does not are drastic), the PIIGS economies are basket cases. Germany can save them, but only at great cost to itself. The choice to Germany is let the Euro fail or pay for it not to. Either way Germany is fooked for many years.
Fact is all Western economies have lived outside their means and all of them, one way or another, are going to have to pay the piper.

[sasguru]

reminder of the UK's finances

...though it has improved a tiny bit, with the "austerity" budget

.

In spite of which money is piling into British bonds. The markets can see what you don't.

[Mich the Tester]

Fact is all Western economies have lived outside their means and all of them, one way or another, are going to have to pay the piper.

If not, will he lead all the children away, never to return?

[sasguru]

If not, will he lead all the children away, never to return?

He already has, he's piping them to the dole office.

[BlasterBates]

Your wishful thinking about Europe is laughable. While the Euro may well survive (and I hope it does as the consequences if it does not are drastic), the PIIGS economies are basket cases. Germany can save them, but only at great cost to itself. The choice to Germany is let the Euro fail or pay for it not to. Either way Germany is fooked for many years.
Fact is all Western economies have lived outside their means and all of them, one way or another, are going to have to pay the piper.

Not at all, you do realise don't you that Germany's public deficit this year is 1%. Does that strike you as a "fooked" economy? The UK is 10%. The UK has one of the highest deficits in the EU. Last year it surpassed Greece.

[Churchill]

Not at all, you do realise don't you that Germany's public deficit this year is 1%. Does that strike you as a "fooked" economy? The UK is 10%. The UK has one of the highest deficits in the EU. Last year it surpassed Greece.

The difference being that we're such good little tax payers!

[TimberWolf]

The difference being that we're such good little tax payers!

Nice bush.

[sasguru]

Not at all, you do realise don't you that Germany's public deficit this year is 1%. Does that strike you as a "fooked" economy? The UK is 10%. The UK has one of the highest deficits in the EU. Last year it surpassed Greece.

Are you AtW in disguise?
Perhaps you shouldn't be discussing economics if you don't realise that the deficit (I assume you mean spending/income gap) is a short term issue and not particularly indicative of a nation's health.
Most economists use the debt/GDP % as the prime indicator and by this measure Germany isn't too healthy at all, in fact in the same ball park as the UK.

Prior to the crisis the UK had the best Debt/GDP ratio of the European countires at about 40% i.e. we lived within our means.

[doodab]

Food for thought

Economic Outlook No 89 - June 2011 - Annual Projections for OECD Countries

Sort by the size of the deficit for 2010, 2011 or 2012 and you can see who is still living beyond their means and who has made the changes required to get things back under control.

Economic Outlook No 89 - June 2011 - Annual Projections for OECD Countries

The Italians aren't running a large deficit, they have a lot of outstanding debt but how much of that requires refinancing in the short to medium term? They might not need as much help as some people seem to think.

It's all well and good gloating but if there is a knock on effect from a Greek default how long is it before the markets decide the UK needs to pay a bit more, and what happens then?

[doodab]

Are you AtW in disguise?
Perhaps you shouldn't be discussing economics if you don't realise that the deficit (I assume you mean spending/income gap) is a short term issue and not particularly indicative of a nation's health.
Most economists use the debt/GDP % as the prime indicator and by this measure Germany isn't too healthy at all, in fact in the same ball park as the UK.

Prior to the crisis the UK had the best Debt/GDP ratio of the European countires at about 40% i.e. we lived within our means.

Indeed. Spain and Iceland weren't far behind.