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Someone recently suggested the current mood in Europe was a bit like the mood in the spring of 1914 -- a sort of uncaring and sloppy optimism, a sense that real

Someone recently suggested the current mood in Europe was a bit like the mood in the spring of 1914 -- a sort of uncaring and sloppy optimism, a sense that real disaster can not possibly happen, a stumbling blindness that makes real disaster more likely, exactly because so few, among those in leaderships positions, are thinking that disaster is possible. 15 years ago German was stuck in a slump with high unemployment and little growth. It got out of that slump thanks to the euro, which created a boom in southern Europe, and thus generated export markets for Germany. The nation which benefited the most from the euro is Germany, and yet Germany seems willing to sabotage its own success. If Greece leaves the euro, it becomes more likely that Spain or Italy or Portugal or Ireland might leave the euro. Once these countries leave the euro, they will have weak currencies that will make it easy for them to underprice Germany. One can get a small sense of how this plays out by looking at the growth that Poland has enjoyed, thanks to the weakness of the zloty. Of course, Poland has not seen high growth, since all of its trade partners are stuck in, or near, recession, yet Poland has gained market share in dozens of small industries, such as coffins and beer. And the advantages that Poland has would also become advantages of Greece and Italy and Spain, etc, if they leave the euro. A rational German minister would avoid this at any cost, but the Germans themselves seem entirely blind to the disaster they are getting themselves into. If the euro dies, all of Europe will be hurt, but Germany most of all. Edited to add: interesting about the rapid upvotes and downvotes on this comment. Right now the comment has a total of 20, but every time I check it has gone up 4, then down 3, then up 2, then down 1, then up 3, down 2, etc. I've never before written a comment that drew forth such intense up and down voting.

panarky 11y ago
I don't believe The Spirit of 1914 [1] was about being uncaring or just blind optimism. It was euphoria that war had finally broken out, ending bitter domestic struggles and endless, fruitless diplomacy. But in hindsight, as miserable as the pre-war time must have been, open war itself was far, far worse. It seems we may be at a similar place today, at least economically, if not geo-politically. People want this Greece shit to be over with, but will Europe really be better off without Greece? Or in hindsight, will we realize that pre-Grexit was nothing compared to post-Grexit? [1] https://en.wikipedia.org/wiki/Spirit_of_1914 https://en.wikipedia.org/wiki/Spirit_of_1914
- narrator 11y ago
  I think WWI is a bad analogy. In WWI all sides were completely caught off guard by the destructive power of modern industry applied to warfare. WWI was a case of ignoring the looming technological disruption of international relations and politics caused by modern warfare. I think WWI is basically the most panic inducing analogy anyone can come up with. It's great propaganda, but not at all realistic. I think what's going on in Greece is that the new world financial order, where permanent vassal states are created that must obey and pay tribute to their banker overlords, is slowly unravelling. Not because of outright revolt, but because it's just so impossibly awkward to operate these farces in the context of nominally democratic states. The Greek people are proud and patriotic and they aren't going to believe that their country should be essentially denationalized over debt. What is a government's power if not the way it spends its tax money?
  - Pyxl101 11y ago
    Greece borrowed a lot of money and spent more than they could afford for a long time, and now the loans are coming due and Greece can't pay. The countries who loaned them money have a right to be mad about that (they are taking a loss because of it) and demand that Greece take all reasonable measures to repay them. (Edit: And, apparently, the Greek government has likely been committing fraud by cooking its financial books, both to get into the Euro and afterward; see links elsewhere in this thread.) The organizations that Greece borrowed money from are not "banker overlords". Greece chose to take the loans, and they can choose to default on them if they wish (and accept the consequences, like a person would, including ruining their credit rating). This would likely ruin their import/export business and tank their economy even further (due to the difficulty of trading without loans), and is not something that anyone wants; but if Greece does not demonstrate a way to reign in their spending and repay money that was borrowed, it's what may happen. Greece can certainly do what it wants. Other countries are not going to stage a military invasion over a loan default. However, as I said, it will ruin their ability to trade. Would you trade with someone who doesn't keep their promises to pay their creditors? How would you feel about sending a ship to Greece with some goods they've promised to purchase from you upon arrival, when you know that the Greek government has decided to default on foreign loans? What if they refuse to pay you too? Moreover, tanking their credit score will tank their ability to borrow money, which will cause their internal banking system to seize, since credit is essential to the economy -- perhaps the company you're planning to sell the goods to wants to pay you, but can't because they can't get a loan either, or can't get their hands on the currency they owe you. Really, it's no good for anyone. Countries need to make good on their promises to trading partners.
ekianjo 11y ago
> And the advantages that Poland has would also become advantages of Greece and Italy and Spain, etc, if they leave the euro That won't make Greeks able to make cheap BMW on their own anytime soon though. There are stuff where they could compete with a weak currency, and there are a bunch of stuff that Germans are known for that not many countries can hope to match for now. I don't think they are too worried about that.
- GnarfGnarf 11y ago
  Yeah, but who's going to buy those BMWs?
  - ekianjo 11y ago
    Well they are sold everywhere around the world, not just in Europe. They are quite popular in Asia, for example.
  - deleted 11y ago
    [deleted]
  - beedogs 11y ago
    Nobody down here in Australia: a frigging 3-series costs about $100k AUD.
  - adventured 11y ago
    The US and China account for ~38% of BMW sales (with China taking a slight majority of that split).
    - laurentoget 11y ago
      Aren't most BMWs sold in the US made in the US, though? Germany does need a strong european market to keep its manufacturing sector healthy.
      - protomyth 11y ago
        I would be surprised if all the parts were made in the U.S.
drcode 11y ago
> a stumbling blindness that makes real disaster more likely I think as long as there is a party at the table with an interest at stability and that still has deep pockets (Germany) the chance of a crisis is close to 0%. The Greeks right now have little incentive to make real "hard choices" because they know at the 11th hour, no matter how much Germany protests, there is still an almost unlimited supply of money available to bail them out and give them a bridge loan for yet another year. I will be much more worried in some future year if/when Germany lands in a deep recession, THAT is the time when disaster can happen. THAT is when this state of affairs will stop being sustainable.
- panarky 11y ago
  You write as if Greece has made no real "hard choices". FTFA: The public sector’s structural deficit turned into a surplus on the back of a ‘world record beating’ 20% adjustment Wages fell by 37% Pensions were reduced by up to 48% State employment diminished by 30% Consumer spending was curtailed by 33% Even the nation’s chronic current account deficit dropped by 16%. The whole point of Varoufakis publishing this on his own blog is because the creditors and the media assume that feckless Greece has done nothing but soak up repeated bailouts. Nothing could be further from the truth. The truth is that Greece took the medicine that the creditors prescribed, and it made the patient sicker. They shrunk the economy more than any other nation in peacetime. That makes it even harder to pay back the impossible sums owed.
  - drcode 11y ago
    I should clarify that by "hard choices" I mean giving up control of their fiscal matters entirely to the European Union (Similar to how US states function.) This has nothing to do with cutting more pensions. Cutting pensions is an easy choice, in comparison (and they're still misleading the extent of those in TFA by saying "up to 48%".)
    - TazeTSchnitzel 11y ago
      > I should clarify that by "hard choices" I mean giving up control of their fiscal matters to the European Union Ceding sovereignty to an undemocratic body. Wonderful.
sien 11y ago
Where is the evidence for this claim? "It got out of that slump thanks to the euro, which created a boom in southern Europe, and thus generated export markets for Germany. " Germany's biggest trade partners are France, US, UK and China. https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/ForeignTrade/TradingPartners/Tables/OrderRankGermanyTradingPartners.pdf?__blob=publicationFile https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvir... Germany's improvements have more to do with Germany's changes to industrial --(relations) reform than to do with Southern Europe: https://en.wikipedia.org/wiki/Hartz_concept https://en.wikipedia.org/wiki/Hartz_concept -- edit added (relatations) to the sentence.
- zurn 11y ago
  The mechanism by which Germany has benefited at the expense of other Euro countries is the large trade surplus vs exchange rates. Normally a big country's currency will appreciate once they start running prolonged large trade surpluses, but the Euro has enabled Germany to keep siphoning in wealth in a way that wasn't possible before the Euro. Similarly pre-Euro the southern countries would have seen their currencies depreciate and get a break in competitiveness. Hartz is also part of it, Germany has kept labour costs down while southern countries in the same currency area experienced high inflation due to masses of cheap money coming in again due to the Euro. And of course Germany has been leading the austerity brigade in response to the crisis. http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03-germany-trade-surplus-problem http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03...
  - istvan__ 11y ago
    I am not sure if Germany at fault here, bringing in the euro was not forced by them and Greece was cooking the books to get in. http://www.forbes.com/sites/timworstall/2011/09/12/greece-was-lying-about-its-budget-numbers/ http://www.forbes.com/sites/timworstall/2011/09/12/greece-wa... I think most of southern Europe should be not in the euro zone at all, their economy would have better time on a weaker currency. http://stephansmithfx.com/articles/how-a-weak-currency-affects-an-economy/ http://stephansmithfx.com/articles/how-a-weak-currency-affec...
mc32 11y ago
It's a calculated risk though, right? If they bail out Greece that sets precedent for future mismanaged economies to get bailed out and it gives the rest of the pigs the impression you don't have to pay the piper. On the other hand, if you let Greece leave the euro, it signals the others that Germany (and France) are serious and they had better not fool around. A Greece with a weak currency does not impact the euro zone economy in any great way. Yannis probably thinks Germany would blink but at this point Germany has likely written them down already.
- x0x0 11y ago
  It's nothing like it. The simple fact is that states that have large differences in productivity / accumulated infrastructure / endowments must either 1 - have floating currencies; 2 - use government purchases to sterilize the currencies ala china; 3 - support permanent financial flows from the more to the less productive states Since the currency union effectively forbids #1 and #2, the only solutions left are #3 or the end of the currency union. This is more-or-less identical to the continued subsidization of the south -- direct fed to state government transfers, eitc, medicare and medicaid, welfare, the military (which is, for many soldiers, essentially a work program), etc -- in the united states by the more productive coastal and northern states. You may also be unaware that Greece has largely never been bailed out: of the so-called bailout so far, more than half the cash went to shaky German and other foreign banks [1]. [1] http://www.bloombergview.com/articles/2012-05-23/merkel-should-know-her-country-has-been-bailed-out-too http://www.bloombergview.com/articles/2012-05-23/merkel-shou...
  - eru 11y ago
    > The simple fact is that states that have large differences in productivity / accumulated infrastructure / endowments must either What happens if they don't?
    - x0x0 11y ago
      we're about to find out!
paulsutter 11y ago
It's very kind of you to be so considerate of the Germans, and it's so altruistic of the Greeks and other countries to take on such selfless burdens on behalf of Germany. So why is public opinion so polarized in the opposite way in these countries?
- atmosx 11y ago
  I will give a Greeks view, backed by some facts, then I'll express my opinion about what happened in Germany. Greece was never asked to take any burden. It was exploited and it's still being heavily exploited because it's politicians allowed this. Modern Greece is a protectorate. It has always been like that. It's political class has always acted as a low-level lackey more than anything else. Of course the population is to blame too, but with so much misinformation receive by the tightly controlled media (Press Freedom Index says Greece is 99th bellow Kyrgyzstan and Gabon - no offense to these countries) by a small oligarchy, it's only natural that the average Greek doesn't really know what's happening. SOME FACTS The "bail-outs" Greece received where the largest ones, but they were never meant to help Greece. They were made in order to save German and French banks. Less than 10% from the money received so far stayed in Greece. These money were issued in order for Greece to pay high-yielding bonds to Franco-German banks, until these banks were able to dump their bonds to the ECB. Basically they made a private debt (held by bankers) public (now is held by the ECB and by extension by EU tax-payers.). The result for Greece was that the public debt rose and sacrifices went largely unnoticed. The German's gov choice for a Greek technocrat PM was, Loukas Papademos. He acted as a middleman between the Simitis government and Goldman Sachs. Isn't that a weird choice, from a country who accuses Greece of false statistics? I'd say it's weird. Christoforakos was not extradited to Greece[1] from Germany. I'd say that this again is a weird choice from someone who is taking a "moral" stance towards Greece, wouldn't you? I think Germany exploited Greece in every possible way, like getting paid for non-working submarines. Bribing politicians to get corporate contracts, etc. Add to that 1945 (second WW) German atrocities to all that, which is a theme revived by far-right and far-left political and social groups and you see the pictures. Some say that WWII doesn't matter, but I'd say that it's hard to swallow for people who saw their entire families annihilated and they're still alive[3]. You could say that in the end of the day, it's Greece fault. But that's partly true. Greece has it's own faults, of course, who doesn't? But in many situations, it was never given a real choice, because in the bigger picture, Greece "matters" way more than it would be optimal. Also here, we have to understand, that Greece has 400 years of Turkish occupation that left an incredibly strong cultural sign. Greece is literally a mix between western and eastern culture and this is something that takes many generations to change. By all means, Greeks work more hours on average than any other European[4]. Yet they are mostly seen as "lazy". Again that's not the EU's fault. Greece has a prime minister who literally took a tour of around Europe stating that "Greeks are lazy, tax evaders" (George Papandreou). ABOUT GERMANY Angela Merkel's 2009 victory was largely based on the promise that "Greeks will pay" for their "bad attitude". This "hate speech" (she literally called Greeks "lazy" among other negative terms) let to the largest CDU victory in their history. And she delivered, I mean Greece has already collapsed, the only who doesn't know are people getting informed from the TV. At the same times - as other people noted - German exports boomed. Unemployment in Germany became record low, because having countries like the PIGS inside the EU drove the EURO exchange rate down and Germany exploited the situation. It even borrowed money to Greece with a "lower" interest rate (which morally speaking, it's like raping a dead woman.. but anyway). After SYRIZA came to power, populist German media (mainly Bild, but not only) fueled the feeling that "Greece is a household of people who party day and night and pass the bill to them". Merkel found herself against the wall because IMHO she would very much like to end this crisis with a debt-restructing and a New Deal for Greece... Because the numbers are not that big and ultimately the Euro is very positive for Germany, but how do you explain to your voters that you were lying all these years? That's impossible. Every time Merkel (it's Brussels but the quarrel is perceived between Germany and Greece mostly) gives away something the opposition attacks, every time she stands 'firm' she risks finding herself in uncharted waters bringing Greece closer to default. In the end of the day the problem was never financial. The problem is/was political. SYRIZA is in the same position: If it blinks it looses the majority overnight, if it doesn't it will have to manage an extremely difficult situation (at least in the short-term, but will it survive?). [1] https://de.wikipedia.org/wiki/Michael_Christoforakos https://de.wikipedia.org/wiki/Michael_Christoforakos [2] http://www.telegraph.co.uk/news/worldnews/10895239/Greece-sues-for-7-billion-euros-over-German-submarines-that-have-never-sailed.html http://www.telegraph.co.uk/news/worldnews/10895239/Greece-su... [3] https://en.wikipedia.org/wiki/Distomo_massacre https://en.wikipedia.org/wiki/Distomo_massacre [4] http://www.theguardian.com/news/datablog/2011/dec/08/europe-working-hours http://www.theguardian.com/news/datablog/2011/dec/08/europe-...
cperciva 11y ago
Once these countries leave the euro, they will have weak currencies that will make it easy for them to underprice Germany. All this talk of "weak currencies" is delusional. It doesn't matter if workers get paid in Euros, Drachmas, Bitcoins, or precious metals; those currencies are all interchangeable. Now, there is a way that Greece could underprice Germany -- a way which is likely to happen if Greece leaves the Euro, and which happened before Greece entered the Euro. That way is by paying workers less. Of course, this has the effect of lowering the standard of living; that is, roughly speaking, to lower the Greek standard of living to what it was before Greece entered the Eurozone and inflated their economy with lavish borrowing. Of course, there would be (more) riots in the streets if the Greek government legislated wage cuts for the private sector. So Greece will exit the Euro, spent a tremendous amount of effort converting X EUR/hour wages to Y GRD/hour; then the Drachma will be devalued to bring wages in line with market forces. Same net result, but slower, more expensive, and less riot-prone.
jakozaur 11y ago
Poland recent progress is mostly non-currency related: 1. Still a lot of catch-up grow. Well educated workforce, great productivity, proximity (geo/legal/cultural) to advanced countries though way lower salaries. If you are from software company in SF Bay Area and looking to build up global presence, this region is likely your best bet. 2. Healthy banking sector. Low number of defaults. No collapse of real estate value. 3. Good use of EU development aid funds. A lot of new roads and infrastructure spending when crisis hit Europe. 4. Responded well to crisis: raised retirement age, froze public salary budget, increase some taxes (by 1% VAT). Let me give you a couple of other examples countries with euro or currency pegged to Euro. Latvia, Estonia, Lithuania, Slovak Republic: https://www.google.pl/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_pp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:LVA:EST:LTU:SVK&ifdim=region&hl=en&dl=en&ind=false https://www.google.pl/publicdata/explore?ds=d5bncppjof8f9_&c... All of them have down GDP in 2008-2009, but all of them has recovered and grow a lot since then. However, they all don't have deep structural problems as Greece and got governments who can act in crisis situation effectively.
nationcrafting 11y ago
We live in a fast-changing world. Just because something was good for Germany/Greece once, doesn't mean that is still the case. I'm reminded of something PG wrote in a recent essay: "When experts are wrong, it's often because they're experts on an earlier version of the world."

panarky 11y ago

I don't believe The Spirit of 1914 [1] was about being uncaring or just blind optimism. It was euphoria that war had finally broken out, ending bitter domestic struggles and endless, fruitless diplomacy. But in hindsight, as miserable as the pre-war time must have been, open war itself was far, far worse. It seems we may be at a similar place today, at least economically, if not geo-politically. People want this Greece shit to be over with, but will Europe really be better off without Greece? Or in hindsight, will we realize that pre-Grexit was nothing compared to post-Grexit? [1] https://en.wikipedia.org/wiki/Spirit_of_1914 https://en.wikipedia.org/wiki/Spirit_of_1914

narrator 11y ago
I think WWI is a bad analogy. In WWI all sides were completely caught off guard by the destructive power of modern industry applied to warfare. WWI was a case of ignoring the looming technological disruption of international relations and politics caused by modern warfare. I think WWI is basically the most panic inducing analogy anyone can come up with. It's great propaganda, but not at all realistic. I think what's going on in Greece is that the new world financial order, where permanent vassal states are created that must obey and pay tribute to their banker overlords, is slowly unravelling. Not because of outright revolt, but because it's just so impossibly awkward to operate these farces in the context of nominally democratic states. The Greek people are proud and patriotic and they aren't going to believe that their country should be essentially denationalized over debt. What is a government's power if not the way it spends its tax money?
- Pyxl101 11y ago
  Greece borrowed a lot of money and spent more than they could afford for a long time, and now the loans are coming due and Greece can't pay. The countries who loaned them money have a right to be mad about that (they are taking a loss because of it) and demand that Greece take all reasonable measures to repay them. (Edit: And, apparently, the Greek government has likely been committing fraud by cooking its financial books, both to get into the Euro and afterward; see links elsewhere in this thread.) The organizations that Greece borrowed money from are not "banker overlords". Greece chose to take the loans, and they can choose to default on them if they wish (and accept the consequences, like a person would, including ruining their credit rating). This would likely ruin their import/export business and tank their economy even further (due to the difficulty of trading without loans), and is not something that anyone wants; but if Greece does not demonstrate a way to reign in their spending and repay money that was borrowed, it's what may happen. Greece can certainly do what it wants. Other countries are not going to stage a military invasion over a loan default. However, as I said, it will ruin their ability to trade. Would you trade with someone who doesn't keep their promises to pay their creditors? How would you feel about sending a ship to Greece with some goods they've promised to purchase from you upon arrival, when you know that the Greek government has decided to default on foreign loans? What if they refuse to pay you too? Moreover, tanking their credit score will tank their ability to borrow money, which will cause their internal banking system to seize, since credit is essential to the economy -- perhaps the company you're planning to sell the goods to wants to pay you, but can't because they can't get a loan either, or can't get their hands on the currency they owe you. Really, it's no good for anyone. Countries need to make good on their promises to trading partners.

ekianjo 11y ago

> And the advantages that Poland has would also become advantages of Greece and Italy and Spain, etc, if they leave the euro That won't make Greeks able to make cheap BMW on their own anytime soon though. There are stuff where they could compete with a weak currency, and there are a bunch of stuff that Germans are known for that not many countries can hope to match for now. I don't think they are too worried about that.

GnarfGnarf 11y ago
Yeah, but who's going to buy those BMWs?
- ekianjo 11y ago
  Well they are sold everywhere around the world, not just in Europe. They are quite popular in Asia, for example.
- deleted 11y ago
  [deleted]
- beedogs 11y ago
  Nobody down here in Australia: a frigging 3-series costs about $100k AUD.
- adventured 11y ago
  The US and China account for ~38% of BMW sales (with China taking a slight majority of that split).
  - laurentoget 11y ago
    Aren't most BMWs sold in the US made in the US, though? Germany does need a strong european market to keep its manufacturing sector healthy.
    - protomyth 11y ago
      I would be surprised if all the parts were made in the U.S.

drcode 11y ago

> a stumbling blindness that makes real disaster more likely I think as long as there is a party at the table with an interest at stability and that still has deep pockets (Germany) the chance of a crisis is close to 0%. The Greeks right now have little incentive to make real "hard choices" because they know at the 11th hour, no matter how much Germany protests, there is still an almost unlimited supply of money available to bail them out and give them a bridge loan for yet another year. I will be much more worried in some future year if/when Germany lands in a deep recession, THAT is the time when disaster can happen. THAT is when this state of affairs will stop being sustainable.

panarky 11y ago
You write as if Greece has made no real "hard choices". FTFA: The public sector’s structural deficit turned into a surplus on the back of a ‘world record beating’ 20% adjustment Wages fell by 37% Pensions were reduced by up to 48% State employment diminished by 30% Consumer spending was curtailed by 33% Even the nation’s chronic current account deficit dropped by 16%. The whole point of Varoufakis publishing this on his own blog is because the creditors and the media assume that feckless Greece has done nothing but soak up repeated bailouts. Nothing could be further from the truth. The truth is that Greece took the medicine that the creditors prescribed, and it made the patient sicker. They shrunk the economy more than any other nation in peacetime. That makes it even harder to pay back the impossible sums owed.
- drcode 11y ago
  I should clarify that by "hard choices" I mean giving up control of their fiscal matters entirely to the European Union (Similar to how US states function.) This has nothing to do with cutting more pensions. Cutting pensions is an easy choice, in comparison (and they're still misleading the extent of those in TFA by saying "up to 48%".)
  - TazeTSchnitzel 11y ago
    > I should clarify that by "hard choices" I mean giving up control of their fiscal matters to the European Union Ceding sovereignty to an undemocratic body. Wonderful.

sien 11y ago

Where is the evidence for this claim? "It got out of that slump thanks to the euro, which created a boom in southern Europe, and thus generated export markets for Germany. " Germany's biggest trade partners are France, US, UK and China. https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvironment/ForeignTrade/TradingPartners/Tables/OrderRankGermanyTradingPartners.pdf?__blob=publicationFile https://www.destatis.de/EN/FactsFigures/NationalEconomyEnvir... Germany's improvements have more to do with Germany's changes to industrial --(relations) reform than to do with Southern Europe: https://en.wikipedia.org/wiki/Hartz_concept https://en.wikipedia.org/wiki/Hartz_concept -- edit added (relatations) to the sentence.

zurn 11y ago
The mechanism by which Germany has benefited at the expense of other Euro countries is the large trade surplus vs exchange rates. Normally a big country's currency will appreciate once they start running prolonged large trade surpluses, but the Euro has enabled Germany to keep siphoning in wealth in a way that wasn't possible before the Euro. Similarly pre-Euro the southern countries would have seen their currencies depreciate and get a break in competitiveness. Hartz is also part of it, Germany has kept labour costs down while southern countries in the same currency area experienced high inflation due to masses of cheap money coming in again due to the Euro. And of course Germany has been leading the austerity brigade in response to the crisis. http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03-germany-trade-surplus-problem http://www.brookings.edu/blogs/ben-bernanke/posts/2015/04/03...
- istvan__ 11y ago
  I am not sure if Germany at fault here, bringing in the euro was not forced by them and Greece was cooking the books to get in. http://www.forbes.com/sites/timworstall/2011/09/12/greece-was-lying-about-its-budget-numbers/ http://www.forbes.com/sites/timworstall/2011/09/12/greece-wa... I think most of southern Europe should be not in the euro zone at all, their economy would have better time on a weaker currency. http://stephansmithfx.com/articles/how-a-weak-currency-affects-an-economy/ http://stephansmithfx.com/articles/how-a-weak-currency-affec...

mc32 11y ago

It's a calculated risk though, right? If they bail out Greece that sets precedent for future mismanaged economies to get bailed out and it gives the rest of the pigs the impression you don't have to pay the piper. On the other hand, if you let Greece leave the euro, it signals the others that Germany (and France) are serious and they had better not fool around. A Greece with a weak currency does not impact the euro zone economy in any great way. Yannis probably thinks Germany would blink but at this point Germany has likely written them down already.

x0x0 11y ago
It's nothing like it. The simple fact is that states that have large differences in productivity / accumulated infrastructure / endowments must either 1 - have floating currencies; 2 - use government purchases to sterilize the currencies ala china; 3 - support permanent financial flows from the more to the less productive states Since the currency union effectively forbids #1 and #2, the only solutions left are #3 or the end of the currency union. This is more-or-less identical to the continued subsidization of the south -- direct fed to state government transfers, eitc, medicare and medicaid, welfare, the military (which is, for many soldiers, essentially a work program), etc -- in the united states by the more productive coastal and northern states. You may also be unaware that Greece has largely never been bailed out: of the so-called bailout so far, more than half the cash went to shaky German and other foreign banks [1]. [1] http://www.bloombergview.com/articles/2012-05-23/merkel-should-know-her-country-has-been-bailed-out-too http://www.bloombergview.com/articles/2012-05-23/merkel-shou...
- eru 11y ago
  > The simple fact is that states that have large differences in productivity / accumulated infrastructure / endowments must either What happens if they don't?
  - x0x0 11y ago
    we're about to find out!

paulsutter 11y ago

It's very kind of you to be so considerate of the Germans, and it's so altruistic of the Greeks and other countries to take on such selfless burdens on behalf of Germany. So why is public opinion so polarized in the opposite way in these countries?

atmosx 11y ago
I will give a Greeks view, backed by some facts, then I'll express my opinion about what happened in Germany. Greece was never asked to take any burden. It was exploited and it's still being heavily exploited because it's politicians allowed this. Modern Greece is a protectorate. It has always been like that. It's political class has always acted as a low-level lackey more than anything else. Of course the population is to blame too, but with so much misinformation receive by the tightly controlled media (Press Freedom Index says Greece is 99th bellow Kyrgyzstan and Gabon - no offense to these countries) by a small oligarchy, it's only natural that the average Greek doesn't really know what's happening. SOME FACTS The "bail-outs" Greece received where the largest ones, but they were never meant to help Greece. They were made in order to save German and French banks. Less than 10% from the money received so far stayed in Greece. These money were issued in order for Greece to pay high-yielding bonds to Franco-German banks, until these banks were able to dump their bonds to the ECB. Basically they made a private debt (held by bankers) public (now is held by the ECB and by extension by EU tax-payers.). The result for Greece was that the public debt rose and sacrifices went largely unnoticed. The German's gov choice for a Greek technocrat PM was, Loukas Papademos. He acted as a middleman between the Simitis government and Goldman Sachs. Isn't that a weird choice, from a country who accuses Greece of false statistics? I'd say it's weird. Christoforakos was not extradited to Greece[1] from Germany. I'd say that this again is a weird choice from someone who is taking a "moral" stance towards Greece, wouldn't you? I think Germany exploited Greece in every possible way, like getting paid for non-working submarines. Bribing politicians to get corporate contracts, etc. Add to that 1945 (second WW) German atrocities to all that, which is a theme revived by far-right and far-left political and social groups and you see the pictures. Some say that WWII doesn't matter, but I'd say that it's hard to swallow for people who saw their entire families annihilated and they're still alive[3]. You could say that in the end of the day, it's Greece fault. But that's partly true. Greece has it's own faults, of course, who doesn't? But in many situations, it was never given a real choice, because in the bigger picture, Greece "matters" way more than it would be optimal. Also here, we have to understand, that Greece has 400 years of Turkish occupation that left an incredibly strong cultural sign. Greece is literally a mix between western and eastern culture and this is something that takes many generations to change. By all means, Greeks work more hours on average than any other European[4]. Yet they are mostly seen as "lazy". Again that's not the EU's fault. Greece has a prime minister who literally took a tour of around Europe stating that "Greeks are lazy, tax evaders" (George Papandreou). ABOUT GERMANY Angela Merkel's 2009 victory was largely based on the promise that "Greeks will pay" for their "bad attitude". This "hate speech" (she literally called Greeks "lazy" among other negative terms) let to the largest CDU victory in their history. And she delivered, I mean Greece has already collapsed, the only who doesn't know are people getting informed from the TV. At the same times - as other people noted - German exports boomed. Unemployment in Germany became record low, because having countries like the PIGS inside the EU drove the EURO exchange rate down and Germany exploited the situation. It even borrowed money to Greece with a "lower" interest rate (which morally speaking, it's like raping a dead woman.. but anyway). After SYRIZA came to power, populist German media (mainly Bild, but not only) fueled the feeling that "Greece is a household of people who party day and night and pass the bill to them". Merkel found herself against the wall because IMHO she would very much like to end this crisis with a debt-restructing and a New Deal for Greece... Because the numbers are not that big and ultimately the Euro is very positive for Germany, but how do you explain to your voters that you were lying all these years? That's impossible. Every time Merkel (it's Brussels but the quarrel is perceived between Germany and Greece mostly) gives away something the opposition attacks, every time she stands 'firm' she risks finding herself in uncharted waters bringing Greece closer to default. In the end of the day the problem was never financial. The problem is/was political. SYRIZA is in the same position: If it blinks it looses the majority overnight, if it doesn't it will have to manage an extremely difficult situation (at least in the short-term, but will it survive?). [1] https://de.wikipedia.org/wiki/Michael_Christoforakos https://de.wikipedia.org/wiki/Michael_Christoforakos [2] http://www.telegraph.co.uk/news/worldnews/10895239/Greece-sues-for-7-billion-euros-over-German-submarines-that-have-never-sailed.html http://www.telegraph.co.uk/news/worldnews/10895239/Greece-su... [3] https://en.wikipedia.org/wiki/Distomo_massacre https://en.wikipedia.org/wiki/Distomo_massacre [4] http://www.theguardian.com/news/datablog/2011/dec/08/europe-working-hours http://www.theguardian.com/news/datablog/2011/dec/08/europe-...

cperciva 11y ago

Once these countries leave the euro, they will have weak currencies that will make it easy for them to underprice Germany. All this talk of "weak currencies" is delusional. It doesn't matter if workers get paid in Euros, Drachmas, Bitcoins, or precious metals; those currencies are all interchangeable. Now, there is a way that Greece could underprice Germany -- a way which is likely to happen if Greece leaves the Euro, and which happened before Greece entered the Euro. That way is by paying workers less. Of course, this has the effect of lowering the standard of living; that is, roughly speaking, to lower the Greek standard of living to what it was before Greece entered the Eurozone and inflated their economy with lavish borrowing. Of course, there would be (more) riots in the streets if the Greek government legislated wage cuts for the private sector. So Greece will exit the Euro, spent a tremendous amount of effort converting X EUR/hour wages to Y GRD/hour; then the Drachma will be devalued to bring wages in line with market forces. Same net result, but slower, more expensive, and less riot-prone.

jakozaur 11y ago

Poland recent progress is mostly non-currency related: 1. Still a lot of catch-up grow. Well educated workforce, great productivity, proximity (geo/legal/cultural) to advanced countries though way lower salaries. If you are from software company in SF Bay Area and looking to build up global presence, this region is likely your best bet. 2. Healthy banking sector. Low number of defaults. No collapse of real estate value. 3. Good use of EU development aid funds. A lot of new roads and infrastructure spending when crisis hit Europe. 4. Responded well to crisis: raised retirement age, froze public salary budget, increase some taxes (by 1% VAT). Let me give you a couple of other examples countries with euro or currency pegged to Euro. Latvia, Estonia, Lithuania, Slovak Republic: https://www.google.pl/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&bcs=d&nselm=h&met_y=ny_gdp_pcap_pp_cd&scale_y=lin&ind_y=false&rdim=region&idim=country:LVA:EST:LTU:SVK&ifdim=region&hl=en&dl=en&ind=false https://www.google.pl/publicdata/explore?ds=d5bncppjof8f9_&c... All of them have down GDP in 2008-2009, but all of them has recovered and grow a lot since then. However, they all don't have deep structural problems as Greece and got governments who can act in crisis situation effectively.

nationcrafting 11y ago

We live in a fast-changing world. Just because something was good for Germany/Greece once, doesn't mean that is still the case. I'm reminded of something PG wrote in a recent essay: "When experts are wrong, it's often because they're experts on an earlier version of the world."