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Yes, Germany benefitted hugely from southern European countries joining the Euro as it made it much easier for Germany to export goods to southern Europe. At t
by wsc981 4y ago
Yes, Germany benefitted hugely from southern European countries joining the Euro as it made it much easier for Germany to export goods to southern Europe.
At the same time it was made much easier (at lower interest rates) for southern European countries to borrow money from northern European countries and other markets, as creditors would feel more secure that they'd get their money back. Creditors would assume the northern European countries would bail-out southern European countries in case of problems.
And that caused southern European countries to lend more which might benefit a country like Germany again. These countries could lend more easily to buy luxury cars, for example.
- rich_sasha 4y agoThis narrative is kind of correct, but it irks me when people somehow blame northern Europe for southern Europe's debt. No one forced them to overborrow, especially since it mostly happened in times prosperity. Generally speaking, access to cheap debt is seen as a uniformly good thing.
- random_kris 4y agoWell the northern European will blame southern for not being frugal enough. But this is the same as drug dealer saying their dead customer was not responsible enough. Yeah it true, but some people just are not responsible for their own actions and the dealer was happily benefiting all the time from him
- rich_sasha 4y agoWhen dealing with the public, sure I agree. But not at all when dealing with (supposedly) professional bodies such as national governments, I don't buy it. I'm not pointing the "overspending" finger either, just saying, countries should take responsibility for their actions, not complain at the enablers.
- QuarterReptile 4y agoI don't know much about Italian government, but unless there's some fundamental difference between them and the US, I don't see any chance of a government showing restraint and staying in power, when the other guys could deliver prosperity without the bill coming due for 10+ years. What am I missing?
- dmichulke 4y agoWell, this! Except that the dead customer still owes 590 billion to (mostly) the drug dealer mentioned above and won't be able to pay it. And the goods delivered were not drugs but things that usually don't alter your way of thinking (like cars, machines, ...), even less if we're talking about a group of people (like the government or a country of 60mn people) Oh and there was also trading (i.e. delivering goods back), so Italy is not only consumer but also producer.
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- wsc981 4y agoIf politicians have the ability to borrow, they will generally make use of it. Which is why the weaker currencies were a much better fit for Southern European countries. Creditors would expect a high interest, due to high inflation, thus limiting the politician's ability to borrow money. I do feel northern Europe (especially Germany) is partially to blame, since they were very much interesting in increasing their exports and the Euro was the enabler.
- qeternity 4y ago> If politicians have the ability to borrow, they will generally make use of it. This does not absolve the politicians, nor the electorate.
- Ygg2 4y ago> how blame northern Europe for southern Europe's debt. They both share the blame. If a bank clerk keeps giving loans to a drug addict something is definitely off. Especially if it suggest settling the debts via organ sale (austerity).
- djbebs 4y agoIncentives matter, and when you create incentives to over borrow, you're going to see entities overborrow.
- mirko22 4y agoIt’s the North providing the debt :)
- disgruntledphd2 4y agoThe really low interest rates set by the ECB for the benefit of Germany/Northern Europe pre financial crisis absolutely poured fuel on the bubble fires of the PIIGS.