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February 12, 2010

chris poelker

Here we go again! Everybody wants to blame the U.S.A. for their problems. Why not look at the socialism that is engulfing Europe as the real reason that these economies are going downhill fast?

February 13, 2010

Michael Schultz

Interesting options you are presenting here.

I think it would be best to kick Greece out of the euro zone. I don't think this would lead to market distrust against the euro, because the markets will realize that Greece is a special case. It is the only country that cheated so repeatedly.

Second best option in my opinion is this "firewall" to protect the rest of the euro zone from contagion as French President Sarkozy suggested.

"More powers to the European Council?" No, not really. A strong ECB and sound fiscal rules should be sufficient.

"More powers to Germany?" I think this is a likely option, if a bailout becomes necessary, but it is not ideal since neither Germany nor the rest of the EU wants it.

"Is the United States to blame for the euro zone's trouble?" Ha, funny. That will be the favorite excuse for all the Anti-Americans if the euro does go south from now on.

February 13, 2010

Michael Schultz

"Demonstrators prepare to burn an EU flag in central Athens, Greece,"

http://www.monstersandcritics.com/news/europe/news/article_1532209....

Unbelievable. These notorious cheaters.
We should be burning Greek flags.

February 13, 2010

Member deleted

It is spectacular to witness public opinion makers considering inaction and leaders mixing Internet policies with financial affairs in Europe. Inaction is the utter annihilation of the Euro and death sentence for the EU after all that was fought for the Lissabon treaty.
A firewall would never protect us from implications of free markets and currency speculations as the latter also incorporates political performance of respective governments. It is good to have a European Central Bank, Mr, Sarkozy!

The striking trade-off to be witnessed will be the question, who talks? Mr Herman Van Rompuy takes it right saying, if those decentred governments, and relics of old Europe cannot manage their house, he is going to do exactly kindly without respective request…

Politically a smart move as a power struggle over Greece will unfold fuelled by heads of state searching for bold headlines like: “We took Greece, no casualties” Coalition crisis in Germany, Islam-bashing in France, incompetent government in Spain and a hatemonger facing trial in the Netherlands asks for something really substantial and professional.

Nevertheless, what Germany assumes everybody does, so finally Mr van Rompuy will be a European dept manager for its PIGS (Portugal, Italy, Greece, and Spain). As this would not be forfeit enough (look how he smiles), however, in order to get there leaders of strong EU economies will cross-fertilize each other demanding harsher and harsher sanctions for faking data sheets and a lack of budget discipline. The EU will never again witness a lack on budget discipline!

So a bail out an imperative and the EU will now be handed over the measures in order to keep the house in order…

United States??? They fight our wars, protect our oil, and now they are assigned blame… what if they employ Mr. van Rompuy one day in order to manage our transatlantic dept?

February 13, 2010

Anja A. Vojvodic, New York University Global Affairs, Bronze Contributor (20)

Of course Greece should be bailed out. If this does not happen, there will be dire consequences, not only for Europe but for the world. The EU is a partnership and countries should be prepared to help each other even if it isn't exactly comfortable for them. The countries are bound by a shared currency (among other things) and they should realize that something that affects one will affect all others.

It is curious to notice that everyone (at least in this comment section) is having such a visceral reaction to a Greek "bailout", going so far as to call Greeks (!), presumably, "notorious cheaters"; when exactly did they cheat? I am not following this logic. The parallel drawn here to Lehman Brothers is not exactly appropriate; Greece did not get into this situation because of sheer greed, let's not forget.

I think the Independent is getting a little too anxious. I don't think the EC is grabbing for "national budgets"; this is exactly why countries should be sure that they want to join the Union before they do so. No one ever said it would be always a pleasant walk in the park. The worldwide economic slump/recession/mess is extremely problematic for many countries; let's not single out just Greece and point accusatory fingers.

We are at the end all in this together. If Europe wanted a Union then it should have known that you stick with your partners in good AND bad times. This has been a test for Europe and already I am seeing a nationalist and frankly counterproductive fury emerge. It's a shame, truly.

February 13, 2010

Christopher LaPrade, Florida State University (Alumni), (3)

The Greeks are in dire straights and desperately need the help of their European partners. However, I hope this was a lesson learned for all involved. I believe in the effort to expand the European economic movement, the MU was haste in their decision to bring Greece on so early in the Eurozone process. 120% deficits (of GDP) is not sound fiscal policy. I hope the MU will take this into consideration when processing applications for future admission into the Eurozone.

February 14, 2010

Michael Schultz

@ Anja

to answer your question about the cheating Greecians:

"In 2004, Greece admitted that it had lied about the size of its deficit ever since 2000 – precisely the years used to assess Greece’s application to join the euro zone. In other words, Greece qualified only by cheating. In November 2009, it appeared that the Greek government lied once again, this time about the deficit in 2008 and the projected deficit for 2009.

Italy also has a long history of neglecting European fiscal rules (as do Portugal and France). Like Greece, Italy was admitted to the euro zone despite being light-years away from meeting all the criteria. Public debt in both countries was well above 100% of GDP, compared to the SGP’s threshold of 60% of GDP. Italy did not fulfill another criterion as well, as its national currency, the lira, did not spend the mandatory two years inside the European Exchange Rate Mechanism."

February 14, 2010

Michael Schultz

@ Anja,

"If Europe wanted a Union then it should have known that you stick with your partners in good AND bad times."

I know it is Valentine's Day today. And you are indeed very romantic! But: The EU is about politics and economics, not love!

Besides, even in a love relationship you can dump your partner if he or she has been a notorious lier and cheater!

February 14, 2010

Jonathan Miller

I found this analysis by John Browne, senior market strategist at Euro Pacific Capital. fascinating:
http://www.atimes.com/atimes/Global_Economy/LB12Dj01.html

"So, we are witnessing the results of this inherent contradiction.

If the EU becomes the "bailout union", a free-ride area where entitlement spending in Greece is underwritten by German taxpayers, then the euro will stabilize in the short-term, as investors face reduced uncertainty. However, this will lock the Union on a trajectory to gradual monetary collapse - the path currently being followed by the US dollar.

If Greece is left to face the consequences of its profligacy, then the integrity of the euro will be preserved. The key in this scenario is whether Greece leaves the euro, or the Union, when it defaults. If it does, we could see weaker economies cast out one-by-one until Europe returns to a system of national currencies, with perhaps a rump euro uniting the Nordic block. If Greece defaults but remains in the block, then short-term shock will give way to a renewed confidence in the euro as a lasting reserve currency.

The future of the EU is being tested severely, together with much of the wealth of investors who have diversified into its currency. Likely, this crisis will draw the EU member states into a covert political struggle over the future of Europe. As this battle ebbs and flows, both the euro and the US dollar likely will suffer great volatility. Those of us parked in the safe harbor of gold may benefit greatly from this transatlantic turbulence."

February 14, 2010

Anja A. Vojvodic, New York University Global Affairs, Bronze Contributor (20)

@ Michael

Touche.

Indeed it is Valentine's Day. So Happy V-day to you (haha). But I still would not venture to call all Greeks cheaters and liars. That is harsh, no? There are many good Greeks who had nothing to do with the admitted mess they're in right now. Of course this is about politics and economics-- agreed.

And indeed maybe the Europeans have to be less flexible and more stringent when it comes to their admission standards, it seems that many countries are "cheating", are neglectful and and/or are cooking the books (you even mentioned one of the original six, home of General de Gaulle-- France!).

In any event, I do have to disagree with you on some levels :).

I hope we agree that the European Union was formed to integrate Europe in an attempt to prevent future conflict, a common monetary policy was a part of this integration. The EU members, upon expansion, should have been cognizant that it was allowing in some members that were not as financially strong as the the others. In light of that, what should the Union do now? Expel Portugal, Italy, Spain and Greece? I agree one has the right to disband any unfrutiful union but going down this path might be more dangerous than just helping these countries achieve their most optimal level of financial health. I don't expect that Greece, unfortunately, will ever be a German-like country (does it have to be, can it be?); that is too unrealistic to expect: there will always be economic powerhouses and those who lag behind. I agree that Greece must shape up for their own benefit and the benefit of the EU but at the end of the day leaving them out in the cold will do more harm than good. Let's also not forget the precarious political situation within Greece (civil unrest and protests namely). The Greeks have their hands tied, I would argue.

Thanks for you response. Nice debating with you :).

Anja

February 14, 2010

Michael Schultz

@ Anja,

when I did call all Greeks "cheaters"?

Various Greek governments, however, have repeatedly cheated. And Goldman Sachs, the company that runs the White House, has helped them:

"In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means."
http://www.nytimes.com/2010/02/14/business/global/14debt.html

February 14, 2010

Michael Schultz

"In light of that, what should the Union do now? Expel Portugal, Italy, Spain and Greece?"

Just kick them out of the euro zone. And reduce their voting rights at EU meeting as punishment. And they should not be allowed to participate in European soccer champion ships and the Eurovision Song Contest.

February 15, 2010

Heinrich Bonnenberg, Energiewerke Nord
DGAP, Platinum Contributor (358)

Every federation/union has wealthy and less wealthy member states. In the Federal Republic of Germany, there is the strong state of Baden-Wuerttemberg and the weak state of Mecklenburg-Vorpommern. In all federations/unions, there are equalization payments.


Different reasons can explain the deficiencies of the weak members, most of the time a poor structure or bad management.



In the case of bad management a court of the federation/union must hold accountable and prosecute those responsible. When will the leaders of the Greek government be indicted at the European Court of Justice in Luxembourg?

After the weak member state undertakes all conceivable efforts to improve his situation, wealthy member states should ultimately assist the weaker ones through consulting and financial support.


Cohesion in times of crisis is the true test of a federation/union’s raison d'être.

February 15, 2010

Joe Noory

To begin with, investment bankers were propositioned to offer governments way to harvest more money out of free markets and skirt the law, because they wanted the money. These are not cases of 'geeks bearing gifts', because the like of Goldman and Lehman don't benefit from contributing to the creation of poor investment environments.

Further, the ECB and the EU need to deal with Greece because they are a member state, and use the Euro. To 'kick them out', which I suppose means to cut the Government and Greece-based banks off from borrowing from the window, is to write down their own debts which devalues the Euro in the same way issuing bonds to bail them out would, only with a tone of selfish irresponsibilty.

Think about it this way: a region has floods. The National government of the nation that region is in declares that it is no longer part of that nation, and tells it to pump it's own ruins out and go into hock with the IMF. The 'zone' inspired no confidence in the future (and thus to present day bond purchasers on whom they depend) by cherry-picking it's boundaries to always and only look good in a way that doesnt reflect the real valuation of bonds and the currency, and thus of that economy. That will only make for a crash, since it cannot go long without bearing a relationship to reality.

Furthermore, the ECB and the EU are responsible to Eurozone states who have surrendered their trust to the central authority, and that doesn't mean 'the second I in PIIGS'. Iceland cannot be involved in the same way. If EU citizens and institutions lost money in Iceland, that's just too bad in many ways - based on the idea that governments that insulate investors of all risk result in investments that are as poorly performing as those governments' performance, but worst still compels them to find some kind of growth in riskier investments.
I suspect that this is why people pursued the glittering yields that they were showing in Iceland, even though no sane person who did their homework should even have concidered it anything but speculative, even at its' height.

The worst thing that they could do is to create a giant moral hazard for the future by nationalizing those losses, and in effect, insuring a risk-investment.

Of course, wherever there was legal wrong-doing, it should be pursued on moral grounds, but that's irrelevant in any other meaningful way as a precedent or a salve. It will not restore losses.
Lynching a broker will do no good. Giving a broker a reason why they need to put a high percentage of their holdings in pathetically high risk propositions because investments in the domestic economy are sapped by governments harvesting markets bare to cover pension liabilities is even worse.

The lesson here to individuals, is to stop trusting investment trusts, especially those whose objectives are influenced by governments, are partially owned by governments, or resemble in any way a 'public-private partnership'. Invest on your own, and not only will you have more control over your own fate, but will contribute to economic groth in a real way that puts slightly more of the society's wealth out of the hands of government.
After all, what IS the sovereign debt problem? It is one of governments using market instruments to enable further profligate spending, and, in turn, taxing the population a second time by enfeebling economies and becoming the 500 pound gorilla in those economies, not intelligent beneficiaries of the by-product of a society that is creating jobs and wealth.

February 16, 2010

Marie-Claude Corneauster, self-employed, Gold Contributor (125)

Mr Schultz

"Italy also has a long history of neglecting European fiscal rules (as do Portugal and France). "

yeah, and the rules were edicted by Germany, and solaly for the benefit of Germany, ie the rigidity of the central bank, and fiscality : don't you remember that your country were denying our restaurateurs to get a lower tax until Sarkozy managed to charm Angela ?

this was giving a pass for Quick burgers, Macdonald and tulli sorts of temples of low cookings, but at lower Tax t'em ! while traditional restaurants for workers, (~ 10 € to 12 €) were going bankrupted ! what had these restaurant to do with a Frankfurt sausage and or Butter Brots plus Bierschen ? not the same customers, not the same places !

Now, my dear ffriends, on your holidays travel roads to Spain, don't complain if there isn't a cheap restaurant nor a Backerei, unless you drive 300 to 400 km !

our Restaurants and small businesses ain't Germany, nor any other european countries !

This is where I hate this overwhelming ridicule EU administration and their elitist servants, we have lost our identity and our freedoms !

February 16, 2010

Marie-Claude Corneauster, self-employed, Gold Contributor (125)

Mr Bonneberg

"When will the leaders of the Greek government be indicted at the European Court of Justice in Luxembourg?"

I hope this will never come ! Besides Greecs have a long habit of discussing prices whn they buy something in their stores, and thus don't pay taxes, or eaven that their goods are aquierred through traffics, also have of their jobs are not decleared, but "black". So if you tried Greec government into a court, then you must also pursue 10 millions of Greecs ! This is ridiculous, Greecs will not change their habits, so better leave them alone, as most of them will turn anti-EU.

EU isn't a Federation,

in the Maastricht agreement Germany was eagering to add this article" that each country isresponsible for its acts and economy, and that there was no forecasted solidarity for bailing out any ot them", so in other words there isn't a true EU community, each states must face their own fate

February 16, 2010

Marie-Claude Corneauster, self-employed, Gold Contributor (125)

Mr Schultz

"Just kick them out of the euro zone. And reduce their voting rights at EU meeting as punishment"

yeah, kick yourself out of EU, that would be the solution !

February 16, 2010

Marie-Claude Corneauster, self-employed, Gold Contributor (125)

In the light of this crisis, there isn't a reason to keep the EU administration as so important and costful for our countries tax payors, I for myself would be happy to recover our liberties and sovereignity ! if Germany wants to get rid of its weak parners, go on, sur Russia is more interesting, but don't forget, Russia isn't a weak partner, and agreements with Russia often finished badly, but this time, I expect not for Russia, that has a strong leadership !


BTW why Jürgen Stark had to open his mouth ? had he a hidden agenda ?

http://tinyurl.com/yjucgfs "Les 30 jours qui ont ébranlé l'euro, 6 janvier : Jürgen Stark allume la mèche" y'a des bavards qui auraient mieux fait de se la fermer !

February 19, 2010

Philip H Tuson, NYU MSGA, Bronze Contributor (14)

Milton Friedman wrote that economic freedom is a necessary (but not sufficient) condition for political freedom. Capitalism needs democracy. Yet it is the failure of democratically elected officials to suitably reign in the bad behaviour such that those in power in the time prior to the crisis have often left office by the time of the crisis unfolding and are no longer 'accountable' for the mess they created. But this 'lack of punishment for failure' system is not teaching anyone a lesson that is worth learning. The system does not discourage suitably destructive and counter productive behaviour from ravaging society. We call for less regulation, but we stand back and allow our banks to be bailed out. We call for more democracy in the world, yet we bail out governments who cannot spend responsibly. The reward system of capitalism and its cosy relations with democratically elected officials is a flaw in the ideology that will surface over and over until a new system can bring prosperity without catastrophe. And that renowned trouble maker 'nationalism' is looking for a comeback moment as well...

If the EU is to survive, punishment needs to meted out... a strong message has to be sent or the whims of the speculators and the fear spread by the media will trigger an unnecessary chain reaction that could be catastrophic for the EU.

The banks are not evil - they are just wrongly incentivised and poorly regulated. It takes two sides to undertake a transaction - a lender and a borrower. We want more freedom, yet we cannot be trusted to self regulate. To reign in capitalism we will need to forego more freedoms. You cannot have your cake and eat it as the phrase goes....

February 21, 2010

Eugenio Herrmann

In a few years the Euro is going to become the biggest issue in Europe because there are big diferences among the countries members of the EU. US is going to take advantage of this.

February 25, 2010

Anthony Brauer

it is interesting to note that the PIGS (not including Ireland) correspond with the countries President Sarkozy nominated as making up a possible "Mediterranean Community"

This may be one way of quaranting these relatively unstable economies, and could also be an indirect way of bringing Turkey on board.