4 ms·

"... if they return to the Drachma and then devalue their currency, their debt goes up even more!" The point of exiting the Euro and reintroducing a state's ow

by drucken 14y ago

"... if they return to the Drachma and then devalue their currency, their debt goes up even more!" The point of exiting the Euro and reintroducing a state's own currency is because they can then fully choose what to pay back, i.e. to default.

mpweiher 14y ago
I am pretty sure defaulting is independent of the currency that you decide not to pay your debts in... Anyway, the default has already occurred, so I must have missed the news on the Euro exit: http://www.economist.com/node/21550271 http://www.economist.com/node/21550271
- drucken 14y ago
  Note. That's a technical default or externally-led debt restructuring. It is not within full control of the Greek state as it would be under its own currency. For example, a price for remaining within the Eurozone was for ensuring none of the ECB's large Greek bond holdings (approx. EUR 50bn), now or in future, will be exposed to enforced losses. This has always been politically understood.
  - mpweiher 14y ago
    So not "being able" to default is not a result of being in the Euro, but of wanting to remain in the Euro...
    - hobbes 14y ago
      The former. There was no mechanism to allow someone to leave the Euro - it just was never an option and the "coherence" of the system depends on this not happening. So, once you permit a member to do so, the whole Euro system becomes precarious, to say the least. See http://www.bbc.co.uk/news/business-15575751 http://www.bbc.co.uk/news/business-15575751 The drive for greater fiscal union, a common regulatory authority, etc, that we see now is an attempt to fix such issues - ie having so much control that these defaults never happen. Please excuse me while I try to suppress my cynicism.
      - mpweiher 14y ago
        "The former. There was no mechanism to allow someone to leave the Euro" Hmm...this is once again conflating defaulting with leaving the Euro. From the article you cited: "Actually, a second [default], as Greece technically defaulted on its debts when it renegotiated a 50% write-off of its debts with its creditors earlier this year." So Greece has defaulted, but they haven't left the Euro. "The drive for greater fiscal union, a common regulatory authority, etc, that we see now is an attempt to fix such issues - ie having so much control that these defaults never happen." I would say: "...that this sort of debt-binge on someone else's dime can't happen." If you have a common currency, you also need these other mechanisms. It wasn't politically feasible to get this at the time, so the Euro was used as a "forcing function". Once you had the Euro, there really wasn't a way around more common financial control.

by drucken 14y ago

mpweiher 14y ago

I am pretty sure defaulting is independent of the currency that you decide not to pay your debts in... Anyway, the default has already occurred, so I must have missed the news on the Euro exit: http://www.economist.com/node/21550271 http://www.economist.com/node/21550271

drucken 14y ago
Note. That's a technical default or externally-led debt restructuring. It is not within full control of the Greek state as it would be under its own currency. For example, a price for remaining within the Eurozone was for ensuring none of the ECB's large Greek bond holdings (approx. EUR 50bn), now or in future, will be exposed to enforced losses. This has always been politically understood.
- mpweiher 14y ago
  So not "being able" to default is not a result of being in the Euro, but of wanting to remain in the Euro...
  - hobbes 14y ago
    The former. There was no mechanism to allow someone to leave the Euro - it just was never an option and the "coherence" of the system depends on this not happening. So, once you permit a member to do so, the whole Euro system becomes precarious, to say the least. See http://www.bbc.co.uk/news/business-15575751 http://www.bbc.co.uk/news/business-15575751 The drive for greater fiscal union, a common regulatory authority, etc, that we see now is an attempt to fix such issues - ie having so much control that these defaults never happen. Please excuse me while I try to suppress my cynicism.
    - mpweiher 14y ago
      "The former. There was no mechanism to allow someone to leave the Euro" Hmm...this is once again conflating defaulting with leaving the Euro. From the article you cited: "Actually, a second [default], as Greece technically defaulted on its debts when it renegotiated a 50% write-off of its debts with its creditors earlier this year." So Greece has defaulted, but they haven't left the Euro. "The drive for greater fiscal union, a common regulatory authority, etc, that we see now is an attempt to fix such issues - ie having so much control that these defaults never happen." I would say: "...that this sort of debt-binge on someone else's dime can't happen." If you have a common currency, you also need these other mechanisms. It wasn't politically feasible to get this at the time, so the Euro was used as a "forcing function". Once you had the Euro, there really wasn't a way around more common financial control.