Is this the end of the euro?

  • Posted by a hidden member.
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    May 01, 2010 3:33 AM GMT
    " ... The euro project can work only if its members are improbably virtuous. ... too much borrowing and too much pay -- the first is getting all the attention, but the second is most threatening to the euro. After all, a government that borrows too much can simply default. It can do that whether it is inside a currency union or outside it.

    But a eurozone member that allows wages to rise unsustainably has no such easy exit. It cannot regain its competitiveness by the usual trick of devaluing its currency because it no longer has its own currency. It therefore must compete by pushing wages down, an extraordinarily unpopular recourse that is unlikely to succeed in a democracy. Offered a choice between this root-canal austerity and quitting the euro, there is little doubt about which option most voters would go for.

    Moreover, even if workers could be persuaded to accept wage cuts, the medicine could well fail anyway. Uncompetitive countries run trade deficits: They buy more from other nations than they sell and pay for the difference by borrowing from foreigners. Now, what happens when an indebted country tries to become competitive by forcing wages down? Falling wages means deflation, and deflation increases the burden of those debts -- if you owe a bundle on your credit card and your wages take a sudden hit, you will struggle to make your next payment. Because of this debt-deflation pincer, uncompetitive and indebted countries must choose between default and leaving the euro. ...

    The eurozone's twin temptations -- to borrow too much, to raise wages too much -- always threatened the cohesion of the currency union. But if Greece is rescued from its follies, the temptations will become stronger. Bailed-out investors will be reinforced in their convictions that they can lend freely to big spenders, so the spending will go on. Eventually some profligate member country will prove too big to bail, and the euro edifice will topple. ... "

    http://www.washingtonpost.com/wp-dyn/content/article/2010/04/29/AR2010042904530.html?hpid=opinionsbox1

  • Posted by a hidden member.
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    May 01, 2010 11:27 AM GMT
    Judge for yourself what the Euro has "accomplished".

    Recently in Italy:

    4 Potatoes
    4 Onions
    1 Bunch White Grapes
    4 Lemons

    Cost €14 = $19
  • Posted by a hidden member.
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    May 01, 2010 12:26 PM GMT
    To quote another...
    Right, so the EU powers that be have two options:
    1. Admit they were wrong and dismantle the Euro, or
    2. Use it as an excuse to centralise more power in Brussels, "harmonising" the spending policies of the various member nations
    Which do you think they'll pick?
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    May 01, 2010 12:55 PM GMT
    Caslon14000 said Uncompetitive countries run trade deficits: They buy more from other nations than they sell and pay for the difference by borrowing from foreigners... .

    Guess what other country meets this description.
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    May 01, 2010 12:56 PM GMT
    riddler78 saidTo quote another...
    Right, so the EU powers that be have two options:
    1. Admit they were wrong and dismantle the Euro, or
    2. Use it as an excuse to centralise more power in Brussels, "harmonising" the spending policies of the various member nations
    Which do you think they'll pick?


    Yeah, I'm thinking option two, lol. I have to say though, I found it funny when 'devaluing currency' was compared to 'pushing wages down,' and only the latter was judged to be extraordinarily unpopular. Both options suck if you're a person living in the affected country and the effects of either option aren't all that dissimilar. Either way basic goods and services become really hard to pay for. Notably, I've heard a lot recently on the BBC about Britain's current financial woes and the similarity to the Greek situation.
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    May 01, 2010 1:05 PM GMT
    Vigorousinfact said
    riddler78 saidTo quote another...
    Right, so the EU powers that be have two options:
    1. Admit they were wrong and dismantle the Euro, or
    2. Use it as an excuse to centralise more power in Brussels, "harmonising" the spending policies of the various member nations
    Which do you think they'll pick?


    Yeah, I'm thinking option two, lol. I have to say though, I found it funny when 'devaluing currency' was compared to 'pushing wages down,' and only the latter was judged to be extraordinarily unpopular. Both options suck if you're a person living in the affected country and the effects of either option aren't all that dissimilar. Either way basic goods and services become really hard to pay for. Notably, I've heard a lot recently on the BBC about Britain's current financial woes and the similarity to the Greek situation.

    It's definitely not just Greece. That's the fear at the moment. It's the PIGS - Portugal, Ireland, Greece and Spain - though the fears are easing: http://www.benzinga.com/253866/greece-rallies-as-bailout-nears

    I suspect worse is to come for Europe and it'll definitely be useful to watch whether or not Greece does take in an even more draconian set of policies as handed down to them by whoever bails them out. They have certainly not done themselves any favors with the profligate spending and corruption - and it's not as if this should be a shock to anyone particularly in Greece.
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    May 01, 2010 1:06 PM GMT
    What I can't understand is what the Greek unions are thinking. They're so myopic. srsly, wtf? icon_surprised.gif

    (well, ok, they're probably calculating that their efforts will preserve their share of the pie so sufficiently well that, despite their efforts' consequent reducing of the pie-size, they'll still come out ahead. but if so they're unbelievably optimistic.)
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    May 01, 2010 1:14 PM GMT
    UrsaMajor saidJudge for yourself what the Euro has "accomplished".

    Recently in Italy:

    4 Potatoes
    4 Onions
    1 Bunch White Grapes
    4 Lemons

    Cost €14 = $19

    Exactly, inflation is disgusting considering how back in the day, if something needed to go up in price, 10 centimes of a franc wasn't a big deal compared to 10 centimes of a Euro. It is mind boggling how people have overlooked the inflation costs in both Spain and France, hell EVERYWHERE with the Euro.
  • Hunter9

    Posts: 1039

    May 01, 2010 3:11 PM GMT
    Pinny said
    UrsaMajor saidJudge for yourself what the Euro has "accomplished".

    Recently in Italy:

    4 Potatoes
    4 Onions
    1 Bunch White Grapes
    4 Lemons

    Cost €14 = $19

    Exactly, inflation is disgusting considering how back in the day, if something needed to go up in price, 10 centimes of a franc wasn't a big deal compared to 10 centimes of a Euro. It is mind boggling how people have overlooked the inflation costs in both Spain and France, hell EVERYWHERE with the Euro.


    im guessing those are some fine white grapes
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    May 01, 2010 4:46 PM GMT
    The unions have absolutely nothing to lose and everything to win in an Euro crisis. Their enemy is the artificial strength of the Euro (a bane to exports and tourism) and not the comparative weakness of the Greek economy.

    Likewise, as you point out, they are only likely to increase their stake in a more-affordable pie.

    I doubt very seriously that their position is based on optimism, rather they are playing from experience.

    I've been saying since the recovery began (often on here) that we still have the hump of a 30% overvalued Euro to get over. After the recent adjustment that is looking more like 20-25% overvalued.

    The Northern Europeans have succeeded in maintaining the status quo up until now for a couple of reasons (in my opinion). First, the strength has allowed them to "somatize" the incredible investments that they made in exotic investment vehicles denominated in dollars (which they greedily bought like tic-tacs during the inflation of the bubble). Second, the artificially inflated Euro has enabled the industrial sector to buy cheap labor and manufacturing in China for products actually consumed in Europe (even while this has profoundly damaged European exports).

    By now it is clear that the pressures between the northern and southern European economies are so severe that the Euro will either correct or collapse. It would be nice if the whole thing came in for a smooth landing. Of course, speculators stand to make so much money on the way down that things are more likely to remain volatile.

    For the guys who have posted about Bruxelles, you have to keep in mind that no E.U. member nation is going to cede any authentic power to a federal authority. The practice is to outsource unwanted politicians to Bruxelles where they oversee vital issues like putting plastic wrappers on individual sugar cubes while issuing position papers on global warming.

    It isn't hard to see how weak E.U. authority actually is. Just look at the chaotic non-response to the "Acropolis Now" situation or the ludicrous spectacle of the Icelandic ash cloud.

    I don't foresee Sarkozy, Merkel, Berlusconi, etc. ceding one iota of power or autonomy the sugar-cube bureaucrats.






    Satyricon331 saidWhat I can't understand is what the Greek unions are thinking. They're so myopic. srsly, wtf? icon_surprised.gif

    (well, ok, they're probably calculating that their efforts will preserve their share of the pie so sufficiently well that, despite their efforts' consequent reducing of the pie-size, they'll still come out ahead. but if so they're unbelievably optimistic.)
  • Posted by a hidden member.
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    May 01, 2010 4:49 PM GMT
    This is what happens when social programs finally become a burden. And we want this?
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    May 01, 2010 4:53 PM GMT
    Horse shit. This is what happens when Goldman Sachs, Soros, et. cie. game the bond market of a small country with virtually no manufacturing sector and an economy that depends on tourism and agricultural exports.

    Without those unions the Greek people would be in a far worse situation, just ask anyone in Iceland.


    agri_sci saidThis is what happens when social programs finally become a burden. And we want this?
  • Nayro

    Posts: 1825

    May 01, 2010 4:55 PM GMT
    And guess which countries are gonna pay to support Greece, EVEN THOUGH the deal was NOT to give any financial support to countries within the EU who needed it.....
    But now the excuse is that if Greece falls, the others will go down too, so we have to send money there...
  • Posted by a hidden member.
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    May 01, 2010 5:00 PM GMT
    Remembr the days of travelling through Europe and coming home with 15 different types of leftover currency? That was fun.

    It must be great to be the head of a country and having your picture on the money.icon_biggrin.gif There's a lot of guys on RJ that could pull that off easily.
  • coolarmydude

    Posts: 9190

    May 01, 2010 5:05 PM GMT
    UrsaMajor saidHorse shit. This is what happens when Goldman Sachs, Soros, et. cie. game the bond market of a small country with virtually no manufacturing sector and an economy that depends on tourism and agricultural exports.

    Without those unions the Greek people would be in a far worse situation, just ask anyone in Iceland.


    agri_sci saidThis is what happens when social programs finally become a burden. And we want this?


    I agree. Over the last decade here in the US, I started to notice a very strong reaction in the economy as it directly related to the strength of manufacturing. As manufacturing jobs were outsourced, the economy weakened. I'm seeing another striking correlation between US manufacturing and the economy in that the economy seems to be recovering as well as the sharp rise in manufacturing, and I really mean a sharp rise in manufacturing.
  • coolarmydude

    Posts: 9190

    May 01, 2010 5:06 PM GMT
    Niceguy89 saidAnd guess which countries are gonna pay to support Greece, EVEN THOUGH the deal was NOT to give any financial support to countries within the EU who needed it.....
    But now the excuse is that if Greece falls, the others will go down too, so we have to send money there...


    "We" as in the US? Where do you get that from??
  • hdurdinr

    Posts: 699

    May 01, 2010 5:11 PM GMT
    UrsaMajor saidJudge for yourself what the Euro has "accomplished".

    Recently in Italy:

    4 Potatoes
    4 Onions
    1 Bunch White Grapes
    4 Lemons

    Cost €14 = $19


    I certainly don't pay that much!
  • Posted by a hidden member.
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    May 01, 2010 5:12 PM GMT
    That is the basic problem. Dutch politicians have to answer to Dutch voters who only marginally perceive themselves as stakeholders in the situation in Greece (I say marginally because we are talking about the Dutch, other Europeans perceive no stake whatsoever.)


    Niceguy89 saidAnd guess which countries are gonna pay to support Greece, EVEN THOUGH the deal was NOT to give any financial support to countries within the EU who needed it.....
    But now the excuse is that if Greece falls, the others will go down too, so we have to send money there...
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    May 01, 2010 5:14 PM GMT
    Where are you shopping? If you go to the ipermercato then the price is going to be a little bit less. However, if you are in the centro storico of Firenze, I'll bet the prices at any frutti vendolo are that or more.


    hdurdinr said
    UrsaMajor saidJudge for yourself what the Euro has "accomplished".

    Recently in Italy:

    4 Potatoes
    4 Onions
    1 Bunch White Grapes
    4 Lemons

    Cost €14 = $19


    I certainly don't pay that much!
  • Nayro

    Posts: 1825

    May 01, 2010 5:19 PM GMT
    coolarmydude said
    Niceguy89 saidAnd guess which countries are gonna pay to support Greece, EVEN THOUGH the deal was NOT to give any financial support to countries within the EU who needed it.....
    But now the excuse is that if Greece falls, the others will go down too, so we have to send money there...


    "We" as in the US? Where do you get that from??


    no, we as in The Netherlands (where I live) and all the other northern countries like Germany, Belgium etc
  • coolarmydude

    Posts: 9190

    May 01, 2010 5:24 PM GMT
    Niceguy89 said
    coolarmydude said
    Niceguy89 saidAnd guess which countries are gonna pay to support Greece, EVEN THOUGH the deal was NOT to give any financial support to countries within the EU who needed it.....
    But now the excuse is that if Greece falls, the others will go down too, so we have to send money there...


    "We" as in the US? Where do you get that from??


    no, we as in The Netherlands (where I live) and all the other northern countries like England, Germany, Belgium etc



    My bad. Your eyebrows looked American. hehehehehehehe icon_lol.gif
  • Nayro

    Posts: 1825

    May 01, 2010 5:33 PM GMT
    I hear that a lot ;)
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    May 01, 2010 5:36 PM GMT
    Yeah agreed we pay too much for stuff

    But look at it this way

    I buy $8 gas and grapes because of sales tax, consumption tax and higher income tax to the workers that made them

    But that includes 90% of my healthcare and university education and in some EU countries 100%

    that's a pretty good deal... Can any of you say you wouldn't pay it if you didn't have to pay for your health insurance and student loans
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    May 01, 2010 5:49 PM GMT

    You all put forth some very interesting points, although each jaded to its master's own desires.
  • hdurdinr

    Posts: 699

    May 01, 2010 6:02 PM GMT
    UrsaMajor saidWhere are you shopping? If you go to the ipermercato then the price is going to be a little bit less. However, if you are in the centro storico of Firenze, I'll bet the prices at any frutti vendolo are that or more.


    hdurdinr said
    UrsaMajor saidJudge for yourself what the Euro has "accomplished".

    Recently in Italy:

    4 Potatoes
    4 Onions
    1 Bunch White Grapes
    4 Lemons

    Cost €14 = $19


    I certainly don't pay that much!


    I live by Sant' Ambrogio (the market is literally outside my window!) - and I buy all my organic fruit and vegetables from one stall there and pay not so much - the other day I got a big mixed bag of apples, carrots, onions, lemons, broccoli and bananas for five euros! I also live in Ireland some of the year and over there prices are much much higher than in Italy. It is true however that food prices soared here once the euro was introduced.