3 ms·

You're point are all at a high level valid, but in raw Euros, countries who are already financially stretched will be asked to write-off tens of billions of Eur

You're point are all at a high level valid, but in raw Euros, countries who are already financially stretched will be asked to write-off tens of billions of Euros, which they will have to finance through increased debt. That's tens of billions removed from their taxpayers. If you're a national of another country who is currently undergoing painful austerity and Greece gets significant debt forgiveness, wouldn't you want the same for yourself? Ireland, Spain, Portugal have all taken significant pain to their economies, do you thinnk their leaders can easily ask their tax payers to take more to bail the Greeks out? And then if they do, would they not want their own debt forgiveness? The rest of Europe can't sustain a large number of countries seeking debt write-downs...

hackuser 11y ago
I don't see Europe as so economically fragile. If it were a nation, the EU would be the wealthiest in the history of the world (with the possibly exception of the U.S.; I'm too lazy to look it up). This is hardly a novel or outlandish situation. The nature of bankruptcy is that creditors get a haircut; many nations have had their debts reduced (including Germany). The nature of civilization is that those with resources help those without. > would they not want their own debt forgiveness? It's theoretically possible, but the same could be said of any bankruptcy (my neighbor had his/her debts forgiven; do I want to go bankrupt too?) or for any program that benefits one region/state/industry more than another, yet these programs persist. Also, maybe the EU or Eurozone does need a program to help all struggling states.
- iofj 11y ago
  The long answer: https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis TLDR: Greek debt is used as collateral for loans by European banks. When Greek debt takes a haircut, most (nearly all) European banks have to choose one of two options : either they can raise capital equivalent to the net Euro value of the haircut OR they have to reduce the amount they're loaning out by the net Euro value of the haircut times 100 (it was times 50 in the last crisis). In practice for most banks that will mean raising 3-4% capital (which will still seriously impact their share price of course), but apparently in a few cases it's near-distressed banks that'd need 20%. Most banks will use a combination of both, so this will mean that effectively money loaned out across Europe by banks will have to reduce by 5%-10%. [1] https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.html https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.htm...

hackuser 11y ago

I don't see Europe as so economically fragile. If it were a nation, the EU would be the wealthiest in the history of the world (with the possibly exception of the U.S.; I'm too lazy to look it up). This is hardly a novel or outlandish situation. The nature of bankruptcy is that creditors get a haircut; many nations have had their debts reduced (including Germany). The nature of civilization is that those with resources help those without. > would they not want their own debt forgiveness? It's theoretically possible, but the same could be said of any bankruptcy (my neighbor had his/her debts forgiven; do I want to go bankrupt too?) or for any program that benefits one region/state/industry more than another, yet these programs persist. Also, maybe the EU or Eurozone does need a program to help all struggling states.

iofj 11y ago
The long answer: https://en.wikipedia.org/wiki/European_debt_crisis https://en.wikipedia.org/wiki/European_debt_crisis TLDR: Greek debt is used as collateral for loans by European banks. When Greek debt takes a haircut, most (nearly all) European banks have to choose one of two options : either they can raise capital equivalent to the net Euro value of the haircut OR they have to reduce the amount they're loaning out by the net Euro value of the haircut times 100 (it was times 50 in the last crisis). In practice for most banks that will mean raising 3-4% capital (which will still seriously impact their share price of course), but apparently in a few cases it's near-distressed banks that'd need 20%. Most banks will use a combination of both, so this will mean that effectively money loaned out across Europe by banks will have to reduce by 5%-10%. [1] https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.html https://www.ecb.europa.eu/mopo/implement/mr/html/calc.en.htm...