[AmeNoJaku]

Interesting opinions...

Originally Posted by willx

Er? Cursory research will tell you the problem with Greece, much of the Mediterranean and a lot of other states that are now in trouble is due not to "right wing" policy but actually "left wing" policies. I'm Canadian and believe in the importance of a social safety net, but you cannot grant your citizens and government employees massive benefits and pensions without tax and other revenues to support it.

That must have been a very quick search, since the nature of the financial problems of Portugal, Spain, Italy, Greece and Cyprus are very different... probably you are thinking about the solution that the German government imposed on them (as it did with Ireland), which was to turn each problem into public debt. Cyprus, like Ireland (as well as Luxemburg, Malta, UK and Germany) have disproportional financial services compared to the size of their "real" economies. Greece has an extremely inefficient public sector, but the recipe there only made the problem worse since for the last three years they are trying to reduce it by forcing workers into pension, therefore maintaining the cost, while losing the services.

As for right/left wing divide, I consider conservative parties (Merkel, Berlusconi, Sarkozy, Cameron) as right wing. These along with the similarly minded parties in smaller countries bloated the problems in mid-2000s and are now dealing with them.

Also funds for social services can be acquired cheaply by internal lending (as was done before euro), the problem is that the ECB is not allowed to do that, and it's a pillar of the current policy, that it should never be allowed to do that. Couple that with the rest of the austerity measures, obviously the only outcome would be for the economy to shrink.

I am not saying that economies should be bubbles as are all western economies, but deflating them, and having systems that are based in real production, instead of private sector lending should be done slowly and across Europe, not overnight by annihilating whole countries.

Originally Posted by willx

On top of that, remember that when a country applied to join the EU, they also agreed to budget constraints and the benefits and limitations of joining a single collective currency. Policy makers failed to understand this issue and the founders of the EU looked the other way when financially unsound countries applied for membership.

The budget constrains were readjusted for Germany and France in early 2000s, and for the US housing bubble. Also there is a misconception between the EU and the eurozone here. EU is a political union of independent states, the eurozone countries are bound by a strange banking system that benefits one of them.

Originally Posted by willx

Frankly, the idea that there is any conspiracy at work here is laughable, the ability for a large group of people to accidentally do something harmful is generally much greater than any minimal conspiracy among "German oligarchs" -- there is plentiful literature on the topic available. If you want to be informed, it is out there for you, but it may or may not jive with your vision of the world.

What conspiracy? I think that this is a matter of perspective, whether one understands reliance of politics to the private sector as beneficial or not.

Originally Posted by Xellos-_^

just let the banks go bankrupt.

You mean in every country? Should that happened for example in Greece the German private sector would have lost about 150 billion euros, which was slowly mitigated across all European taxpayers, mainly Greeks (through the memorandum measures).

Originally Posted by willx

This may or may not work. Iceland is an analog we can learn from -- in that situation the banks were all allowed to go "bankrupt" and were seized and restructured by the government. Shareholders and creditors of the banks got mangled. Depositors were mostly left whole -- except for some foreign depositors. See: Landsave dispute. There are some key differences though:

1) Iceland was not part of the EU and had its own currency the Icelandic Krona which it could print and thus devalue the currency. Cyprus cannot as it is part of the EU and cannot freely print Euros. Remember though, printing money is a "currency tax" and causes inflation and therefore hurts everyone that holds your currency. Inflation was up >50% in a year. Imports became prohibitively expensive. Unemployment jumped to double digits. Many shipping and airline and other tourism and import based businesses went bankrupt.

2) When you allow a bank or any large business or institution to go under and you hurt its creditors .. you hurt its creditors no matter who they are. For example, in Iceland's situation, in addition to overseas holders of shares and bonds, Iceland's own pension funds faced significant losses in the range of 15-25%. The reverse trickle down effect resulted in the entire country's economy shrinking by >10% in a year.

That all said, the pain has been "shorter but more intense" than in other situations. The Icelandic economy is expected to grow 2% this year and unemployment is back to single digits.

Indeed, but you are missing another key difference for Cyprus, their economy is based around their banking system, whether you force them into bankruptcy or destroy their credibility is in effect completely destroy the country altogether. On the other hand, it would be unfair not remind everyone that Germany and Cyprus are doing all these for less then 6 billion euros that is about 0.13% of Germany's GDP or 20% of Cyprus'.

Originally Posted by ArchmageXin

The whole idiotic problem is EU have so many different cultures/people, and they are strait-jacketed to a single currency.

In pre-EU days, a bottle of mineral water in Greece would worth $0.25 USD, today it is 2.1 Euros.

Yes, Greece cheated, yes Greece didn't reorg their economy in time. Yes Greece has unions. But there lies the fundamental part of the problem, as long as they have Euro hanging over their necks, they can't reform enough to reverse to profitability.

EU and euro are not the same, as for the price of bottled water inflation is to blame (which in principle austerity is trying to fight), and you are forgetting that salaries have proportionally increased in the public sector (for Spain and Italy in the private sector too).

Originally Posted by willx

^ I mostly agree, somewhat disagree. Greece should never have been part of the EU. They shouldn't be part of the EU now. They need to live or die by their own policies and budget.

(They'll die. Repeatedly. Greece has gone bankrupt multiple times. There are stories that after being taken over by the Germans during WW2, the regime attempted to extract resources to fuel the war machine but couldn't because Greeks don't pay taxes and don't keep their books in order. They had to basically blow up the economy via tying currency first to gold then to real assets to extract any value.)

With that logic EU should be Germany, Switzerland, Austria, and maybe Finnland and the Netherlands. But again I think you are equating the EU with the eurozone. This is no EU, but WW2-like allience. As for a eurozone with those countries will strip them of the all the benefits euro gave them.

Personally, I agree that Ireland, Portugal, Spain, Italy, Greece, and Cyprus shouldn't have entered the eurozone, and it would have been better if they have left when their problems started manifesting when UK and Germany bailed in their own banks and the later readjusted the budget constrains. I can understand that they were counting on doing so later in their cases, but that was wishful thinking.

Originally Posted by ogon_bat

^ Besides, I dunno why all this drama about the "evil executives in Brussels", unlike any state of the USA they have the option to secede if they really think they would be better on their own.

States in the USA can not secede. Back to the eurozone, countries can exit the monetary union, only by exiting the union, which would be disastrous for everyone. It would be great if there was a mechanism to leave temporarily the eurozone, but that like complete exit would be very bad for the strong economies.

Originally Posted by ArchmageXin

The problems with succession is

1) It will hurt Greece...a lot.

2) EU will be hurt, if close to critically, because EU's debts are priced on the idea it is carried by the power/faint/credit of the entire EU. If people like Greece can just walk off, the other 16 members will be hurt...dreadfully.

That was true before the memorandum, because one of the terms was to switch external debt to foreign legal jurisdictions (mainly UK law). Still political and psychological factors aside, euro will rapidly rise, German exports will be hurt, and should the poor countries leave EU (and only the eurozone) a third of the highly skilled workforce of rich countries will overnight disappear.