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Germany may have profited from the spending sprees of the southern nation, but it did not directly cause the problem. Lack of discipline is what caused the cris
by o1iver 14y ago
Germany may have profited from the spending sprees of the southern nation, but it did not directly cause the problem. Lack of discipline is what caused the crisis. Germany passed difficult structural reforms in the 2000s and is now reaping the rewards, whilst the southern nations abused the availability of cheap money. Germany reformed and invested, whilst the southern nations didn't! And it is not like Germany was just sitting by doing nothing... That money going to Greece and Spain is coming from somewhere! German politicians are very hard at work keeping the German population from revolting about so much money being "transferred"!
My personal opinion is that the correct way is austerity, but not like it is being forced unto Greece at the moment. The greek economy is in shatters as is, the current austerity measures are not helping. I think the solution is that Germany should lend Greece way more money than currently so that they can build up their economy, whilst enforcing structural and governmental reform (ex: taxes must be collected, bureaucrats fired, etc)... Finally the money should be paid back over the next 40 years, as the economy recovers.
- debacle 14y agoGermany has been exporting its inflation to other European nations since the inception of the Euro, and will continue to do so as long as it can.
- nickik 14y agoYou act like they degined it that way. In reality german was more or less forced into the Euro.
- planetguy 14y agoHow'd that happen? Why didn't it happen to the UK? Or Denmark?
- nickik 14y agoIt would be long story. Basiclly the DM stopped other contrys from devaluating (they had agreed to that). So most of all france wanted to get ride of it and have contoll over the euro. The would only vote for reunigicatin if germany agrees. This stuff is not well documented but it not a conspirecy theory either. I will update the post with some soures latter.
- excuse-me 14y agoGerman politics is paid for by the manufacturing industry. They needed a weaker DM and a stronger Franc/Lira/Peseta to sell stuff. UK politics is paid for by the financial industry - they need more currencies to trade. A stable predictable and universal currency would kill the city. Denmark stayed out because it was forced to have a referendum and sensible people always vote against anything that politicians are all in favour of.
- nickik 14y agoSorry not correct. Germany didn't want it. Im not sure about UK, I think they still have the pride of a I think they still have the pride of an empire. I know nothing about Denmark.
- _delirium 14y agoSpain actually had better fiscal discipline than Germany during the boom, with lower government deficits and lower public debt, so "discpline/indiscipline" is definitely not the whole story.
- o1iver 14y agoWhat I meant with discipline is the general attitude towards spending. Germany has spent a lot of money, but they spent it smartly, building up to becoming one of the most powerful industrial nations in the world, whilst the southern countries built houses that now stand empty in the spanish ghost towns.
- excuse-me 14y agoThat still made more sense than Ireland. For the last 40 years if you built property in Spain people from Germany/UK would buy it. How did Irish banks expect to sell more new houses than they had people?
- mafribe 14y agoBut Spain had an absolutely massive private debt, that's now crashing down. Moreover this building bubble has been extremely obvious to anyone who's ever been to Spain in the last few years. A responsible government should have been stepped in a few years ago. What matters in terms of financial responsibility is not public debt alone, or private debt, but both.
- dimitar 14y agoIt did try to regulate building, but there was too much money coming in from abroad as loans. It couldn't stopped its inflow because it is against EU treaties.
- JumpCrisscross 14y agoThe central government was. But historically as now the relatively weak central government wasn't the problem - the regional governments ran up (and some continue to run up) exorbitant deficits. This is in exclusion of private Spanish debts, which are very large.
- knowtheory 14y agoHow do you figure? German banks very much fueled the housing and lending bubbles in the rest of Europe. This is one of the reasons Germany is so against debt holders taking haircuts on their loans. Germany is very much a part of the neighborhood going south (so to speak) in that they were at the very least enabling all the loose lending, if not actively complicit in fostering such an environment (e.g. why weren't they vetting their loans better).
- skylan_q 14y agoOne could argue that they were in a way complicit, but not responsible. Is it Germany's fault that the representatives of a country made it seem that they were able to make good on their debts?
- icebraining 14y agoRepresentatives of a country aren't exactly magicians that can hide the anemic growth and money pissing (particularly in Public-Private "partnerships") that countries like mine - Portugal - had. They were either fully aware or extremely incompetent, and the latter isn't plausible.
- JumpCrisscross 14y agoException: Greece. It defrauded investors by producing false accounts.
- o1iver 14y agoI agree with you that the German banks facilitated the spending, but the fault still lies with the countries that abused that money. You cannot blame the bank for your debt after requesting your 12th credit card! Aside: I believe that the German banks have to live with their mistakes regarding due diligence, although even that isn't so clear as it seems that the greek authorities weren't entirely honest when it came to their financials.
- 14y ago
- skylan_q 14y ago"Lack of discipline is what caused the crisis." Don't say this kind of stuff. It's verboten. Always, always blame lack of government spending. ;)
- CJefferson 14y agoActually, Germany did cause quite a bit of the problem. Without Germany, the Euro would have devalued much faster, much earlier, which would have easied some problems. A Germany going it alone would also have a much more expensive currency. This is one reason Germany doesn't want the Euro to collapse I suspect (along with the massive disorganisation)
- lispm 14y agoGermany has no problems with a more expensive currency.
- steve8918 14y agoYou don't understand the Germany economy. Most of Germany's trading partners are within the Eurozone. If Germany left the euro, then their currency would skyrocket relative to the rest of the Eurozone, making their exports much more expensive, and it would absolutely devastate the German economy. Germany needs the Euro as much as the Euro needs them. The entire situation is a disaster, because the only solution really is for Germany to support the rest of the EU through the issuance of Eurobonds. This will never happen. So the entire Eurozone is locked in this death grip.
- yummyfajitas 14y agoIf Germany left the euro, then their currency would skyrocket relative to the rest of the Eurozone, making their exports much more expensive, and it would absolutely devastate the German economy. Huh? According to you, Germans currently work hard building products that will be enjoyed by others in the Eurozone. Why would it be bad for them if that situation reversed, and suddenly they were able to purchase the fruits of other's labor? That's like saying it would be bad for me if my stock portfolio suddenly increased in value, and I were able to hire a cook rather than cooking for myself.
- lispm 14y ago> You don't understand the Germany economy How do you know? I'm German and I follow the German economic development for several decades now. > If Germany left the euro, then their currency would skyrocket relative to the rest of the Eurozone You mean to the level we had before in West Germany? Check out the economic 'failure' of West Germany some time. > The entire situation is a disaster because the only solution really is for Germany to support the rest of the EU through the issuance of Eurobonds. This will never happen. So the entire Eurozone is locked in this death grip. Now it seems that you don't understand European economy.
- dimitar 14y agoMost countries, including Spain ran surpluses. Their public finances were in order. However governments couldn't stop the flow of liquidity from 'the Centre' - because of the whole 'free flow of capital thing'. At the same time Germany and France recovered from euro-sclerosis not only because they reformed, but because demand for its products expanded a lot from the increased trade and growth in the periphery. Germans should be mad at their bankers who financed the whole bubble and now demand to be bailed out with their money. Germany being mad at Spain for bank bailouts is like New York mad at Florida for the same. We are all in this together.
- nickik 14y ago> Most countries, including Spain ran surpluses. Why did the spending expand (or the tax go down)? I dont think there is one clear answer to this quiestion but it does not matter. Eitherway the government shuld have reacted and cut spending (or collecting more taxes). > Germans should be mad at their bankers who financed the whole bubble and now demand to be bailed out with their money. The EU made that difficult to default (imposible? we will se) and the EU created the insentiv to lend so much money to these countrys (bail out garantee). Additionally the ECB broke there rules of not exepting junk as collateral. The just keeped exepting greek bonds. The ECB made the hole thing worst (kicking the can down the road) and now it backfires. Just blaming out the banks is simplistic, the just reacted to instentiv like anybody else. > Germany being mad at Spain for bank bailouts is like New York mad at Florida for the same. We are all in this together. Sorry that is not the case.
- streptomycin 14y ago> the government shuld have reacted and cut spending (or collecting more taxes). Any economist will tell you that the worst time to do that is in the midst of a horrible economic slump.
- nickik 14y ago1. Not every economicst will tell you that 2. Like we can see in spain or greek, not cutting it right away can have very bad consequences 3. The slump has been much worse by the thread of defaulting countrys. This would not have happpend if they had cut when they started to get a bad deficit.