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Post 17 Dec 2013, 1:03 pm

On the other hand, Ireland came out of their bailout last week.
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Post 17 Dec 2013, 1:19 pm

On the other other hand, Netherlands had their credit rating downgraded a couple of weeks ago, and this is one of the supposedly stronger northern core countries.

Ireland's problem was a little different to the rest of the bailout recipients in that it wasn't really a problem with the currency that landed them in trouble. They always had strong economic fundamentals and low deficits, they just couldn't cope with the amount of debt they needed to take on to bail out their bloated banking sector.

Of course, saying that, their inappropriate property boom was largely brought about by the cheap credit glut that came through Euro membership in the 'good' years...
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Post 17 Dec 2013, 1:20 pm

Sassenach wrote:The problems haven't gone away. France is about to tip into a triple-dip recession, Italy's debt to GDP ratio is sky-rocketing despite running a primary budget surplus, Spain and Portugal and Greece are still running youth unemployment rates of 40+% and anti-European parties are poised to sweep the board in a host of countries in next year's European Parliament elections. Right now the Front National is topping the polls in France. It remains to be seen whether they'll crash to earth again, but it's hardly an encouraging development.

The can has been successfully kicked down the road for a bit is all.


All true. But if you were to pick out a strong currency (according to the markets anyway), I'm not sure what major currency is stronger than the Euro, which suggests that its death knell is far off.
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Post 17 Dec 2013, 1:34 pm

Unlike Mach, I'm not willing to make any kind of firm prediction on what's going to happen. I'm pretty sure that even back in the dark days when he first made this thread I predicted that the Euro would probably survive just because the politicians wouldn't be willing to let it die. That's almost certainly still true today, but it may not always be that way. The Front National in France and the 5-Star Movement in Italy have both openly called for a return to their respective national currencies and both did pretty well in recent elections and look set do to do better. Berlusconi flirted with the idea of a return to the Lira as well, although he's out of the picture now. The Euro has always been first and foremost a political project and if it dies it'll be politics that kills it.
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Post 17 Dec 2013, 1:49 pm

I think it will be tough for countries to leave the Euro, even politically. If a party did try to do it in power, you'd immediately have a business community pointing out that there would be extra costs on them to prepare for a change and then for currency conversion if they trade to the Eurozone. Not really great for the economy, and thus more uncertainty for individuals.

I think it quite likely that voters will flirt with anti-EU parties, especially in hard times, but will they follow through when there's such an argument that their livelihood is at risk?
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Post 17 Dec 2013, 3:08 pm

It depends on how tough it gets. As things stand there are a number of countries on the Eurozone periphery who are locked into a deflationary fiscal straightjacket with very little chance of getting out of it save through a sustained assault on their living standards and job prospects. How long are they going to be willing to put up with that ? I don't know the answer to that question, but I'm pretty sure that if the same starts happening to France as is currently happening to Spain and Italy then it won't be long before something has to give.
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Post 17 Dec 2013, 11:37 pm

While we're on the subject, this is a decent article on the problems facing Italy:

http://blogs.telegraph.co.uk/finance/am ... no-remedy/

Granted, Ambrose Evans Pritchard publishes something along these lines every week and nothing much has changed yet, but it doesn't necessarily make him wrong. There's only so long that the Italian people can out up with 40% youth unemployment, 20% overall unemployment and perpetual economic slump when they're running a primary budget surplus.

AEP's preferred solution is not that the likes of Italy leave the Euro, rather that they gang together with the other debtors to sieze control of the ECB and force it into adopting a loose monetary policy to reflate their economies. I can see that happening, it's probably more likely than anybody pulling out unilaterally, but if so then you simply transfer the discontent to the German taxpayer. Like I said earlier in this thread, the crisis isn't solvable without stiffing German taxpayers for bailouts and hurting German savers through higher inflation (which would be the policy goals of any rebellion by the Club Med countries).
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Post 12 Mar 2015, 11:52 am

I thought it might be a good time to resurrect this thread. We seem to have right through the recent Greek elections and the fallout from it without anybody at Redscape batting an eyelid. That's quite odd when you stop to think about it, what with the potential consequences being so severe.

The Greeks are now demanding about 300 billion Euros in war reparations from Germany, threatening to grant legitimate papers to millions of Islamic migrants and send them on into Germany if Merkel doesn't cough up with yet more free money and generally making complete asses of themselves. This is not going to end well. It's the sort of behaviour that can only be explained if it's being done as a prelude to leaving the Euro. Looks like ol' Mach might finally have his prediction start to come true...
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Post 12 Mar 2015, 12:36 pm

geojanes wrote:As I've said before, your notion of the Euro failing ("Death Knell") is probably very different than most people. If Greece ends up dropping the Euro and reviving the Drachma, I don't think many people would say that is evidence the Euro failed. Rather, I would think that such an event would be evidence that Greece failed and was not able to bring the Euro down with it.
(from 2011!)

Greece has a host of troubles, for sure, and they are certainly impacting the Euro, which is at near parity to the dollar for the first time in years. Greece may become a failed state or at least drop out of the first world into the second or third. Along their way to their final destination, they're going to do and say a whole host of things, none of which should be taken seriously. Greece is not getting better, and I believe people in Europe have prepared for the so-called Grexit, which will create very turbulent times should it happen. The question is, what comes out the other side? A Euro without Greece? Is that really so terrible? It may be painful, but doesn't that actually help make the Euro stronger in the long-run?
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Post 12 Mar 2015, 1:13 pm

Sassenach wrote:I thought it might be a good time to resurrect this thread. We seem to have right through the recent Greek elections and the fallout from it without anybody at Redscape batting an eyelid. That's quite odd when you stop to think about it, what with the potential consequences being so severe.
I had half thought of mentioning it, but the absence of Nostradamus/Mach doesn't make it quite so fun.

The Greeks are now demanding about 300 billion Euros in war reparations from Germany, threatening to grant legitimate papers to millions of Islamic migrants and send them on into Germany if Merkel doesn't cough up with yet more free money and generally making complete asses of themselves. This is not going to end well. It's the sort of behaviour that can only be explained if it's being done as a prelude to leaving the Euro. Looks like ol' Mach might finally have his prediction start to come true...
The other thing the Greeks are reminding Germany of is the deal in the 1953 whereby huge amounts of German debt was written off by the main creditors as part of the creation of the FDR (then to be West Germany). About 50% of the pre-WWII debts (mainly Versailles reparations unpaid) and post-WWII debts (mainly from the US) were written off, and the remainder were spread over 30 years and the interest and repayments capped and tied to German balance of trade. - http://en.wikipedia.org/wiki/London_Agr ... eece_issue

I'm not sure if this claim is valid (or even if it is it would result in any meaningful amount to offset Greek debts), but the observation that Germany did very well out of that debt write-off and is now taking the high moral ground on others' debts is what Greece is pointing out.

The other side to it is that while Greece crashing out of the Euro would likely only hit Greece itself initially (although Cyprus would also be a problem), it would mean two things:

1) the Greeks would be more likely to default or to devalue the debt, hitting their main creditors - German banks.
2) it sets a precedent that would put Portugal and Spain and possibly others under pressure. And worries over them would then start to also put pressure on banks in Germany and elsewhere.

As well as there being a political will still to maintain the Eurozone and continue to expand it, there are economic reasons why it is not necessarily going to be in German interests for Greece to go.

Syriza have another good point: the policies that were imposed on Greece were designed to help the country get back on its feet. But it is more crippled with debt than it was before, the economy is still in tatters, unemployment is awful and the trajectory looks bad. If the policies of the "troika" mean Greece's economy stagnates, so the government's fiscal position can't improve, then the debt will just pile up. So something does need to change. When the medicine makes the patient worse, you need to really be sure it's working - not demand they keep taking it.

Syriza are not getting all of their demands - at least not now. Not even close, just a can kicked down the road until the next renewal crisis point.

Grexit is perhaps on the cards, but it will probably rumble on for a long time first. The fear of the unknown is too great.
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Post 12 Mar 2015, 1:37 pm

Greece has also seen a massive writedown of its debts, with the remainder being put into very long terms with very low interest rates. What they're now demanding is essentially being allowed to default on the remainder while still being lent even more money. It's not politically sustainable.
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Post 12 Mar 2015, 1:49 pm

Sassenach wrote:Greece has also seen a massive writedown of its debts, with the remainder being put into very long terms with very low interest rates. What they're now demanding is essentially being allowed to default on the remainder while still being lent even more money. It's not politically sustainable.
not all of that has happened yet, and the argument is that the conditions for it are not helping - Greece has a structural surplus, but the economy is in a far worse state than it was when the bailouts started.
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Post 13 Mar 2015, 3:15 pm

The three of you would know more about the EU and its shortcomings than I would, as I am not a citizen of an EU member state, and therefore do not vote in their elections. But if Greek politicians act like everybody else's, then it sounds like they're making a lot of noise to gain political capital, while being disingenuously aware (privately aware) they cannot actually do what they are demanding. Unfortunately, this crisis seems to have very bad timing, and is, in some ways, how wars get started.

So if I understand you correctly, they're demanding reparations which I'm sure will magically equate with the amount of debt they happen to owe to German banks?
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Post 13 Mar 2015, 9:28 pm

http://www.vanityfair.com/news/2010/10/ ... nds-201010

This is old, but it gives a very good insight into the background to all this, how Greece got into such a mess. Well worth reading.

The current noise about nazi war reparations is for domestic consumption. It's not a serious proposition. The problem is that they're deliberately antagonising the Germans, which can only harden attitudes and make negotiations more difficult. That doesn't make except in the context of a ploy to engineer an exit from the Euro while letting Merkel take the blame for it.
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Post 15 Mar 2015, 9:46 am

Something tells me Merkel's popularity in Germany will increase as well.