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It also destroys confidence within countries that are near the brink of collapse, why would I invest in a country that has an unstable future, is what credit ma

It also destroys confidence within countries that are near the brink of collapse, why would I invest in a country that has an unstable future, is what credit markets would be thinking. As well, the debt of Greece has been restructured in light of their financial issues so that the ECB and IMF hold the majority of Greek bonds, have the other faltering countries had their debt restructured? If not that could be an issue going forward. Would the collapse of one country lead to financial contagion? Germany has gained quite a bit from being a part of the Euro, they would also stand to lose a lot from the dissolution of it.

mc32 11y ago
My understanding is the rest of the pigs are, relative to Greece, much more viable and can avert defaults and likely would not need to exit the euro. They have a good industrial base. Greece has perennially been an underachiever and on top of that wants to live like the rest of europe. One of the biggest issues is tax corruption. They just don't get the tax revenue they need in order to support the lifestyle (retirement, social services, etc) they desire. People with means had an easy time evading taxes --for some income brackets it was practically voluntary. That's not viable. Bailing Greece out would be throwing good money after bad. At some point you have to realize there are better places to invest your money.
- nhaehnle 11y ago
  My understanding is the rest of the pigs are, relative to Greece, much more viable [...] This explains why today, after the financial crisis of 2007/08, it happens to be Greece in this miserable situation. Greece was the weakest link of Euro countries. However, imagine a world in which there is a precedent for a Euro exit, and another recession hits. Big funds that have money tied in government bonds will want to exit bonds of weaker countries out of fear that the Greek story repeats. This then creates the same self-fulfilling vicious cycle that hit Greece: as creditors move elsewhere, interest rates for the weakest countries increase, which worsens those countries' fiscal position, which makes more creditors leave, etc. In such a situation, it is easy for the weakest link to be pushed over the brink. Bailing Greece out would be trowing good money after bad. Keep in mind that Greece isn't actually asking for more money for Greece. The Greek government was running a primary surplus for some time, and is perhaps even running one today, or at least close to it. The only reason for the Greek government to be in deficit is the interest payment, which means that all money that is being "thrown at Greece" actually ends up abroad in creditor countries!

mc32 11y ago

My understanding is the rest of the pigs are, relative to Greece, much more viable and can avert defaults and likely would not need to exit the euro. They have a good industrial base. Greece has perennially been an underachiever and on top of that wants to live like the rest of europe. One of the biggest issues is tax corruption. They just don't get the tax revenue they need in order to support the lifestyle (retirement, social services, etc) they desire. People with means had an easy time evading taxes --for some income brackets it was practically voluntary. That's not viable. Bailing Greece out would be throwing good money after bad. At some point you have to realize there are better places to invest your money.

nhaehnle 11y ago
My understanding is the rest of the pigs are, relative to Greece, much more viable [...] This explains why today, after the financial crisis of 2007/08, it happens to be Greece in this miserable situation. Greece was the weakest link of Euro countries. However, imagine a world in which there is a precedent for a Euro exit, and another recession hits. Big funds that have money tied in government bonds will want to exit bonds of weaker countries out of fear that the Greek story repeats. This then creates the same self-fulfilling vicious cycle that hit Greece: as creditors move elsewhere, interest rates for the weakest countries increase, which worsens those countries' fiscal position, which makes more creditors leave, etc. In such a situation, it is easy for the weakest link to be pushed over the brink. Bailing Greece out would be trowing good money after bad. Keep in mind that Greece isn't actually asking for more money for Greece. The Greek government was running a primary surplus for some time, and is perhaps even running one today, or at least close to it. The only reason for the Greek government to be in deficit is the interest payment, which means that all money that is being "thrown at Greece" actually ends up abroad in creditor countries!