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Germany has massive part on it by enforcing such shockingly low borrowing rates across the Eurozone. It completely destroyed countries with immature Real Estat

• lispm 14y ago
  Germany 'enforced' the borowing rates? Let's look a few years back. The rating agencies rated all kinds of junk very high. The banks all over the place where very creative with products hiding the risks. When Germany was asking for tighter regulations we were ignored or laughed at. Now the Germans simply demand that the lessons are learned and we see structural reforms - reforms which can not be done by just throwing more money at countries high in debt.
  • muyuu 14y ago
    Yep, they pretty much control the rates. This is not "a few years back" - this clusterfuck has been brewing since year 2000 with the euribor. At that point several countries needed high rates to stop their overheating borrowing and they were given a shower of petrol to stop their fires.
• Uchikoma 14y ago
  As this pops up everywhere, could you please cite a source from e.g. a ECB protocol or otherwise how Germany "controls the rates" or "enforces shockingly low borrowing rates" in violation of the ECB charta? The ECB back then set rates in accordance with inflation, e.g. to keep it low. That's the charta of the ECB. When a high inflation country joins a construct that has a goal of keeping inflation low, then yes you have a problem if you do not change. But I'm not sure Greece e.g. was forced to join a low inflation construct. From the ECB homepage: "The ECB is the central bank for Europe's single currency, the euro. The ECB’s main task is to maintain the euro's purchasing power and thus price stability in the euro area." (Beside the obvious fact that "shockingly low borrowing rates" would lead to high inflation, which could then not lead to "countries used to high inflation rates that collectively shot themselves in the foot.") (PS: I'm biased as I'm German)
  • muyuu 14y ago
    The rates always follow the needs of Germany and sometimes France. The rates are discretionary and set by the president of the ECB. Borrowing in most countries with a "hot" Real Estate market was unstoppable. Only higher rates like they historically had could have controlled it. The dimension of the damage done by this policy is incalculable. There was no compromise. If a middle-ground, 5-6% rate had been set, the cost would have been shared. Now we're like Japan, the UK and to some extent the US: way over-leveraged, and the problem is our asymmetry and the fact that we really don't believe in the Union. When push comes to shove we shift blame. In the US nobody talked about expelling California from the Union when it went kaput and their hole is of a much bigger dimension than that of Greece. Germans will never consider Greeks as equals, it's a fact, so we either enforce it or call it quits.
    • lispm 14y ago
      The EU consists of independent countries which have their own governments, their own economic policies, their own banks, ... a real-estate bubble in Greece is fully the responsibility of Greece. A hot 'real-estate' market not stoppable? Where was it tried? How about Mexico? Would the US pay for Mexico to prevent a bancruptcy there?
      • muyuu 14y ago
        If someone in the US decided the interbank interest rate, then they would have shared responsibility. You are very misguided. The EU is one thing and the eurozone is a different thing. The UK does have some economic independence and very importantly, monetary independence. Those countries in the eurozone have surrendered their monetary policy to the ECB, and the ECB responds mostly to the interests of Germany, followed by France, followed by Italy, Spain and then smaller countries. The economic cycle of Germany is substantially out of phase with that of most countries from Southern Europe, who in turn thought the Germans would pay for the party. In any case it wasn't their call. Turns up things have snowballed out of control.
        • Uchikoma 14y ago