Should Greece leave the Euro-Zone?

 Pages 1 2 NEXT
 

So, after rwhat do you guys think, should Greece leave the Euro-Zone? I was watching this.....

and it seems like a growing number of Germans feel that way.

Seeing as how Merkel refuses to revalue her austerity plans, and Alexis Tsipras's[1] comment about Merkel and the Euro-Zone, it seems like events are going to lead to that happening. The only thing that keeps me from being 100% certain about this happening is that Tsipras has admitted that such action would be devastating to Greece as well as the rest of Europe.

What do you think, is Greece going to leave the EU?

-------------Off Topic-------------

[1] for those that don't know, he is predicted to win the June election

I hope so. Keeping that place around, especially after the citizens basically said "fuck these plans to prevent another disaster!", is like keeping a portable active volcano on your roof.

I dunno, I'm no expert but surely if Greece drops out the value of the Euro will crash, and that'll drag down everyone else, not just the Eurozone, but everyone in the EU or the EEA, and by extension, everyone who's invested in them.

The problem is, the Eurozone was a mal-formed idea to begin with. The lack of political and economic unification to moderate the unstable economic cycles of Europe, unable to 'even out' the areas that were going in to expansion and/or recession, meant the system was doomed to fail from the word go. The only sane option Greece has left is leaving and reinstating the drachma, and then dramatically devalue it, unless they want to start auctioning off land to the highest bidder. Since it's about the only thing left; leaving, or liquidation of assets. At least in my opinion.

They won't leave, they'll end up being kicked out. I think it's for the best, but it will seriously hurt not Only Greece, Not Only Europe, but everyone else will also feel the effects.

It's Greece that made me realize that Keynesian Economics isn't for everyone, and that each country needs its own form of Welfare, not just a Keynesian Style.

DJjaffacake:
I dunno, I'm no expert but surely if Greece drops out the value of the Euro will crash, and that'll drag down everyone else, not just the Eurozone, but everyone in the EU or the EEA, and by extension, everyone who's invested in them.

The big question is what will lower the value more: Greece's population voting to break their promises, bankrupt themselves and drag the rest down with them, or the uncertainty caused by changing all the treaties and tossing Greece out.

I'm thinking throwing them out now is the wiser choice. First it seemed like they'd reform, but after the last elections it's pretty clear the Greeks don't want a solution.

Blablahb:
The big question is what will lower the value more: Greece's population voting to break their promises

The population made no such promises, though. So it doesn't come as a surprise that they're voting out the ones who did.

I'm thinking throwing them out now is the wiser choice. First it seemed like they'd reform, but after the last elections it's pretty clear the Greeks don't want a solution.

It's only clear that they don't want this one particular solution, which, to be honest, was kind of forced on them in the first place. I say let them think one up on their own, yes. Just don't let 'em drag us into that one too.

But to blame the people of Greece for this fiasco is a dishonest. You're basically saying "How dare they vote for someone we don't want them voting for!"

Vegosiux:
It's only clear that they don't want this one particular solution, which, to be honest, was kind of forced on them in the first place.

Forced? Remind me: who voted into office the previous governments who went to great lengths to falsify the numbers to join the eurozone and keep living large with huge pensions while that was actually unafforable?

Vegosiux:
But to blame the people of Greece for this fiasco is a dishonest. You're basically saying "How dare they vote for someone we don't want them voting for!"

Oh, they can vote for it, that's their right. The consequence in my view however is them becoming a pariah nation that needs to depart from the EU as soon as possible.

Everybody else is taking their responsibility at least to a large degree. Greece can't expect to first take other people's money, and then ignore everybody else and not work on a solution while everybody else watches their cash reserves tumble in value and their rents go up because Greece can't be arsed to clean up their own mess.

Because on the topic of voting, I didn't vote to plan for the 'grey wave' 20 years ahead of time and reform the social services both in the 80's and early 2000, only to find I can't reap the benefits because the Greeks collapsed the value of those things for me.

Blablahb:

Vegosiux:
It's only clear that they don't want this one particular solution, which, to be honest, was kind of forced on them in the first place.

Forced? Remind me: who voted into office the previous governments who went to great lengths to falsify the numbers to join the eurozone and keep living large with huge pensions while that was actually unafforable?

*sigh* Do we have to go down this road? No, the Greeks didn't vote for the last government so they would cook the books. No, they didn't vote for them to ruin the economy with unsustainable policies.

They voted for joining the eurozone and they voted for a "good life" in pension. You can't blame them for the ways in which that was achieved. It's the equivalent of me hiring a guy to take care of the rat problem in my house, and him burning my house down, then you walking up to me and telling me it's my own damn fault that I don't have a house left, cause I hired that guy.

Greece shat it's own bed and begged everyone else to clean it up. Now after taking a bailout and agreeing to austerity measures they want to resume the bed defecation policies that got them into a mess.

They can elect new politicians but I expect necessity will force them to comply with the rest of Europes demands. They won't leave the Euro Zone

If they think leaving would help in any way shape or form then they are all fucking morons.

If they leave, no one will lend them money. There would then be a cashflow problem... then... whatever they do would result in failure.

Quite honestly the best case scenario if Greece were to leave would be Britain when under control of the IMF in the 70's.
Yeah, that's the BEST CASE SCENARIO.
For the worst case senario see: Weimar Republic
(btw no that does not invoke Godwin)

As for the effect on the rest of Europe it could go either way. It wouldn't put confidence in Spain Italy etc etc. However getting Greece away with, would be positive in every other regard for the Euro. It's just the case of containing the crisis in the next country and hope they don't shoot themselves in the face like Greece has.

Mr.Mattress:
They won't leave, they'll end up being kicked out. I think it's for the best, but it will seriously hurt not Only Greece, Not Only Europe, but everyone else will also feel the effects.

It's Greece that made me realize that Keynesian Economics isn't for everyone, and that each country needs its own form of Welfare, not just a Keynesian Style.

Greece's problem isn't welfare, or Keynesian economics, it's that it's had a corrupt governance for years that can't keep it's books straight.

I mean, a government take a look back through it's books and says "Oh, yeah; you know how we said our debt a few years ago was 4% of GDP? Our bad, it was actually 12% of GDP. No idea how that happened", so suddenly no private business wanted to loan them money because they were obviously untrustworthy. And then they had a technocrat come in and take a look at stuff, and when he figured out that things were even worse, what did they do? They charged him with a felony for telling the truth about Greece's actual budget.

Anyway, it certainly wouldn't be good for Greece in the long run to leave the Euro Zone, but what they really need to do is demand better behavior from their government, stop putting up with dishonesty and liars. If they can't do that, then nothing else matters.

Mr.Mattress:
Keynesian Economics isn't for everyone

Keynesian economics, works, providing that certain conditions are met. Those conditions in short being that the economy is stimulated by more than is being spent... that and th country is not abserdly in debt, because it has been spending more than it has in the good economic times, and therefore is in debt when the bad times kick in.

Keynesian economics can't be applied to most economies due to the fact we are all in debt because of spenting rather than saving in good economic times. If any country had a surplus then the Government could easily get the country out of recession and moving again... but globally that would only help if all countries took that action at the same time... which they can't...

Keynesian economics was meant to address a particular situation, ie the Great Depression. Things change and we need to address things differently than "throw money at it", because whenever we do that now... all that happens is some cunt steals most of the money...
We need to be smarter in spending and should not emphasise bailing out failing businesses, but rather creating tempory Government jobs and then when the economy has picked up, throwing these qualified people out to get jobs.

That and do not encourage tourism... just no... I mean allow it, but do not spend money on increasing it because in a large recession tha covers a region of the planet then tourism is the first casulty...

It's difficult. On the one hand, I can understand the sentiment, on the other it feels like we've already invested so much. What, Greece takes the EU's money and then leaves the currency union? Did the rest of us just get tricked and screwed over? The growing anti-German and anti-EU sentiment in Greece certainly doesn't help and them electing far-right and far-left extremists doesn't, either.

Not only Greece , keep only the countries that can hold their own weight ( Yes , that means kicking out Italy , Spain and others .) Euro will collapse , start from 0 , this time with a cofederation-federal system with a federal government etc . Who doesn't want to take part is free to go solo.( I'm pretty sick of paying for other countries mistakes , everyone is responsible when they vote.)

Gwarr:
(I'm pretty sick of paying for other countries mistakes , everyone is responsible when they vote.)

Unfortunately, it's at least partly the fault of everyone in the Eurozone.

Bashing the countries at the worst end of the problem is just scapegoating. The countries at the better end fucked up too, they just want to pretend they didn't.

Mr.Mattress:
They won't leave, they'll end up being kicked out. I think it's for the best, but it will seriously hurt not Only Greece, Not Only Europe, but everyone else will also feel the effects.

It's Greece that made me realize that Keynesian Economics isn't for everyone, and that each country needs its own form of Welfare, not just a Keynesian Style.

The problem with Greece isn't Keynesian Economics. It's massive fraud, failure to pay taxes, and misappropriation of wealth.

they should

mainly because i dont want the money we loaned to ireland being worthless.

Well if they do have to leave the Eurozone I'd hate to be a Greek in the next 60 years. Their banking system will collapse and they are running a deficit even if you clear their budgets of interest rates. They're going to be out in the cold internationally for a long time, and I think it will be quite humiliating for them to be overtaken by Turkey in living standards and economic development, as well as acceptance amongst the European community.

Adding to that is that their economy is built up around an extremely inefficient public sector means that there's a risk that their Government structure will end up Somalia'd.

I never thought I'd make Somalia a verb.

Wasn't Greece's problem trying to have their cake and eat it too?

Istvan:
Well if they do have to leave the Eurozone I'd hate to be a Greek in the next 60 years.
...
Adding to that is that their economy is built up around an extremely inefficient public sector means that there's a risk that their Government structure will end up Somalia'd.

That's completely absurd. People really need to tone down the hyperbole.

A country with a well established society, democratic system, and educated populace is going to pick up the pieces and rebuild, not collapse into Somalia-like anarchy.

Greece can quite reasonably do an Argentina: they recovered within ten years.

http://www.google.co.uk/publicdata/explore?ds=d5bncppjof8f9_&met_y=ny_gdp_mktp_cd&idim=country:ARG&dl=en&hl=en&q=gdp+argentina+graph

I suspect that's what many Greeks are eyeing up. Leave the Euro, go bankrupt, devalue the drachma to restore competitiveness. This means a huge and heavy hit early on followed by rapid recovery. They might quite reasonably prefer this to staggering under the full weight of massive debts for 20 years which they can't unload or ameliorate because the ECB only gives a shit about what's good monetary policy for Germany.

Very good question.

As it stands right now its highly probable that Greece will have to leave the Euro Zone as far as I understand - the second Greek elections will probably produce an ever better result for the non-austerity parties and it is doubtful that the German government (and other creditor nations) will just alter their stance without some heavy diplomacy going on in the back rooms for example by an insisting Mr. Hollande.

As for if its actually a good idea, well, the question is whether the costs of a Greek exit outweigh its benefits - and that margin is shrinking. The 75% haircut agreed upon by private creditors has already limited their exposure to a significant degree and they are probably already expecting to lose the rest 25% of value of their assets, too. As for the banks, two years into the Euro Crisis plus heavy intervention by the ECB should have brought them to the conclusion that Greek debt is not safe anymore - its likely that they limited their exposure to a significant degree already and shored up capital to make up for the loss. Both points diminish the systemic risk inherent in a Greek exit.

As for what is better for Greece thats where the question becomes a bit trickier. As far as I understand its essentially a question of Greece taking on a decade of hardship by trying to reform without leaving the Euro or a few years of wrecking the Economy by leaving it but afterwards having a comparably higher growth with a devalued Drachma.

One of the biggest German News magazines (Der Spiegel) actually advocated Greece's departure from the Euro Zone in its leading article this week (which should also tell you something about the general feeling around here):

image

The cover of this weeks Spiegel reading: Why Greece has to leave the Euro now

The article actually makes some good points as to why Greece should leave the Euro to survive including,

  • A corrupt political elite, still doing its best to delay any kind of reform process.
  • Lack of political will by the populace. Not least, because of the increasing hardships they have to endure (like around 50% unemployment of people to 25, shrinking minimum wages, new taxes and tax increases etc.).
  • Shrinking Systemic Risks (as detailed above)
  • A Greek exit or its stay in the Eurozone wouldn't mean the end of monetary transfers to Greece: Greece has to be supported for years to come to get out of the current crisis. Leaving the Euro would actually put this problem where it belongs right now: on an EU level i.e. making it a question about regional stability first and foremost instead of a question about the Euro.
  • Also Hukari is right, the situation in Greece is essentially symptomatic of the naive framework of the Euro: No debt pooling mechanisms and no hard measures for countries with a large deficit prompting them to reform. While the latter was actually tried to be implemented by virtue of the Growth and Stability pact right from the start of the Euro it was soon watered down to the point of non-existence: The first countries who violated it where France and Germany back in 2002 and 2003 who both used their political clout to water down the treaty to escape any possible sanctions, rendering it completely useless in the process.

    Also its clear that a lot of political good will was involved in allowing Greece into the Euro in the first place: as far as I know, the cooked books weren't hard to see if someone had bothered to look closely. But nobody did, instead naivety about the grand European project won and Greece was let into the Euro regardless of its state at the time.

    EDIT: Just saw that the OP actually linked to an english translation of the article from Der Spiegel.

    Gwarr:
    Not only Greece , keep only the countries that can hold their own weight ( Yes , that means kicking out Italy , Spain and others .) Euro will collapse , start from 0 , this time with a cofederation-federal system with a federal government etc . Who doesn't want to take part is free to go solo.( I'm pretty sick of paying for other countries mistakes , everyone is responsible when they vote.)

    Spain and Italy are really fine.

    Spain was running a balanced budget before the fiscal crises hit. Yeah, they're not now, but nobody does in a really severe recession. The only reason they're having a problem is because investors are spooked by the Greek dibacle and don't want to loan them money hte way they normally would.

    Italy is basically the same as Spain. They are running a pretty low deficit as a percentage of GDP. They have a lot of old debt; they were doing fine keeping up with that, but again, investors have spooked because of Greece, so now they're having a harder time rolling over their old debt at reasonable rates.

    All that has to happen is that someone (ideally the European Central Bank) needs to reassure investors that it will not, under any circumstances, let Italy and Spain go bankrupt; promise to buy Italian and Spanish bonds any time the interest rates go over 7% or whatever, and investors will chill out and Italy and Spain will be fine. They should have done that ages ago, in fact.

    The Italy/Spain crises is totally artificial; it's just panic breeding panic. They don't have the kind of deep, structural issues that Greece does.

    Yosarian2:
    Spain and Italy are really fine. Spain was running a balanced budget before the fiscal crises hit. Yeah, they're not now, but nobody does in a really severe recession. The only reason they're having a problem is because investors are spooked by the Greek dibacle and don't want to loan them money hte way they normally would.

    That's not entirely true. A lot of Spain's economic growth was due to the building industry, and that had a huge bubble which has now popped. They have millions of unused structures including a complete ghost-airport on which not a single plane has landed lying around now. Now obviously the building industry can't carry on like before the crisis, and can actually expect a long structural decline as all the unused buildings now fill up future construction needs. As a result the growth rates of the pre-Credit Crisis times will never be realised in Spain for quite a few years.

    Italy's big problems are tax evasion, corruption, and organised crime, and in that order. That in a way is a stable situation, but no less threatening. I recall a chart detailing estimates of the percentage of tax evaded, and the highest category, present in 3 regions, went up to 85%.

    Now that's pretty stunning, especially since with modern screening techniques and connected databases, some forms of fraud now yield a 99,9% detection rate. To name an example here, taxation services always detects radical lowering of revenues compared to purchases. If you're in a business that requires resources and your purchases remain steady while your declared income suddenly falls, you'll automatically pop up on the system because that's an indication of not declaring full income. That doesn't guarantee an inspection, but it's a usefull screening tool. Underdeclaring a lot is very unwise as a result, and you'll be hard-pressed to even find a bookkeeper willing to do it for you, because they know the chance of being detected is near 100% in 10 years.
    Shortfalls in the stock declared, purchases and sales are also automatically compared. If they walk in for a check and the books don't match (because you sold things or used materials during undeclared business), you've got a problem. If they catch a bookkeeper committing fraud, it's standard practise to investige all clients he's serving and served. My father runs a bookkeeping office, and for instance we've had a full examination because one of our clients had rented out his flat, and someone started growing pot in it. Taxation services know pot planatation owners skip tax, and the records for real estate owned, pot plantations busted matched, so they checked him, his company, and father's as he was the bookkeeper. Now in that case it's overzealous because the appartment had been rented out, but it demonstrates the power of modern connected databases.

    If a country has to go without such systems and has a culture of tax evasion in addition, then they've got a serious problem.

    Blablahb:

    Yosarian2:
    Spain and Italy are really fine. Spain was running a balanced budget before the fiscal crises hit. Yeah, they're not now, but nobody does in a really severe recession. The only reason they're having a problem is because investors are spooked by the Greek dibacle and don't want to loan them money hte way they normally would.

    That's not entirely true. A lot of Spain's economic growth was due to the building industry, and that had a huge bubble which has now popped. They have millions of unused structures including a complete ghost-airport on which not a single plane has landed lying around now. Now obviously the building industry can't carry on like before the crisis, and can actually expect a long structural decline as all the unused buildings now fill up future construction needs. As a result the growth rates of the pre-Credit Crisis times will never be realised in Spain for quite a few years.

    Yeah, the housing bubble bursting hit a lot of places, but it Spain pretty hard, that's certanly true. It's basically on par with Ireland or Flordia as far as that goes.

    That's not something that they won't eventually recover from, though. It's basically a massive misallocation of capital on a global scale due mostly to a investment system that briefly went nuts for housing derivatives. It hit some places harder then others, but it's something that we'll all eventually recover from; it's certainly not a reason to think Spain would not be good on it's debts in the long term. Investors really only panicked because of the Greek thing. It was basically one of those "if everyone panics, Spain will be in trouble, so we'd better pull out before everyone else panics" scenerios, kind of like a run on the bank.

    Italy's big problems are tax evasion, corruption, and organised crime, and in that order. That in a way is a stable situation, but no less threatening. I recall a chart detailing estimates of the percentage of tax evaded, and the highest category, present in 3 regions, went up to 85%.

    Agreed, those are problems, and they generally got worse under Berlusconi. While there were problems in some of the poorer regions of Italy, though, Northern Italy has generally had a good growth rate and a pretty decent rate of tax collection. I'm not going to say that Italy doesn't have problems, but they've been running low deficits as a percentage of GDP for a while now; there's no logical reason for the investor panic.

    Don't get me wrong; these are both countries with serious problems that need to be addressed. Neither one of them, though, has a fundamentally broken government system the way Greece does.

    image

    Greek economic policies have been horribly mismanaged for decades, they haven't even collected taxes properly, and their debt is still immense. And now they've pretty much become politically unstable and untrustworthy too. So yes.

    A Greek default will cost Europe quite a bit in lost loans, but tying your economic future to it is even more costly. It'd probably also be better for Greece itself, since the economic steps and policies it needs are radically different from the rest of the euro zone (barring perhaps Italy, which has also been mismanaged for decades).

    Greece, to all intents and purposes, cannot exist as an economic entity within the Eurozone. There are Austerity measures pushing them to the bring of Social collapse and they are STILL needing fortnightly bailouts from the ECB and IMF.

    Frau Merkel can bluster and threaten all she likes - her vision of a Europe under one currency just isn't working (Interesting to note Germany having the best economy of all Eurozone members).

    What were the latest unemployment figures? 22%? Nearly 50% for Young People? How can they possibly grow when that many people can't get work?

    Things will get worse before the end, but nobody is able to end it. Greek politicians can't even form a Coalition government amid falling support for the main parties and the surgance of fringe parties. 30% of people still want Greece to remain in the Euro, but want the Austerity measures relaxed. They can't their Cake and eat it.

    They either have to throw it out the window or let it go rotten.

    Imperator_DK:

    A Greek default will cost Europe quite a bit in lost loans, but tying your economic future to it is even more costly. It'd probably also be better for Greece itself, since the economic steps and policies it needs are radically different from the rest of the euro zone (barring perhaps Italy, which has also been mismanaged for decades).

    In the long run, I think staying in the Euro Zone is probably better for Greece if they can; being part of the European economic zone and being on the single currency is certainly going to help their growth, but even more important is that they're going to have to actually get a handle on corruption, tax evasion, and generally on modern government accounting in order to stay in, and that's what they're going to need in the long term anyway to start fixing their deep structual problems.

    In the short term though, they're basically damned if they do and damned if they don't. The austerity measures are brutal, but if they default on their loans and drop the Euro, they're actually going to have to cut government spending even MORE steeply and be even MORE austere then they are now, no matter what the politicians say, since in that scenario they won't be able to borrow money from *anyone* and they can't afford even what they're doing now without some borrowing. Also if they go back to their own currency now, without stable finance, without public, international, or investor trust in the Greek government and currency, and without support from the Euro, then they're going to have a really hard time getting people to have enough trust in their own currency to avoid hyperinflation kicking in. (If people don't trust that a government will be able to remain solvent, the value of its currency tends to spiral down quite rapidly.)

    I don't know if Greece is going to be able, in the end, to stay in the Euro. But if they can, they'll be better off, in both the short term and the long term.

    throw them out they only cost all the other countries boatloads of money.

    Well now that the german banks mostly got their money back from Greece, the rethoric changed to Greece being a "failed state", "bottomless pit", and well, now that they got their money back, Greece can burn, along with all the money other EU states contributed and are never getting back.

    I had some very juicy gratuitous german written here, but I'm going to pass it up.

    What I think is more shitty then the disater already, is that all of europe is pretty much all pressuring germany to bail them out again. Germeny knows this is a horriable idea but is getting pressured from all sides to do this.

    What we can learn from Greece is we (America) are looking at our future if we don't really buckle down and make so HUGE financal changes.

    Jeremy Meadows:
    What I think is more shitty then the disater already, is that all of europe is pretty much all pressuring germany to bail them out again. Germeny knows this is a horriable idea but is getting pressured from all sides to do this.

    Where's this "Germany bailing Greece out" coming from? As the largest economy of the EU, naturally their share in the financial injection was the largest, but other countries contributed significant amounts too - there was quite some rage going on in Slovenia for example, about paying for Greece while our own economy is not blooming, and while we also need every cent we can get.

    And that wasn't bailing Greece out, but rather "Bailing out the French and German banks". Now that that's done, as I said, Greece can apparently burn, along with what the other contributing countries are never getting back.

    Vegosiux:

    Jeremy Meadows:
    What I think is more shitty then the disater already, is that all of europe is pretty much all pressuring germany to bail them out again. Germeny knows this is a horriable idea but is getting pressured from all sides to do this.

    Where's this "Germany bailing Greece out" coming from? As the largest economy of the EU, naturally their share in the financial injection was the largest, but other countries contributed significant amounts too - there was quite some rage going on in Slovenia for example, about paying for Greece while our own economy is not blooming, and while we also need every cent we can get.

    And that wasn't bailing Greece out, but rather "Bailing out the French and German banks". Now that that's done, as I said, Greece can apparently burn, along with what the other contributing countries are never getting back.

    Pretty much watch more of the news. Germeny is currently doing the best fiscal wise so they are being pushed to shell out more money to save greece. And they are getting pissed about it. Germeny is good at being fiscal conservative and it shows in their country. Now when the rest of EU is drowing in debt all their own fault so Germeny is wondering why they have to bail out the illresponsable. Just another mirror of what's going on here in America.

    Jeremy Meadows:

    Pretty much watch more of the news.

    No, you watch more news, mate. Maybe more than just American news.

    Germeny is currently doing the best fiscal wise so they are being pushed to shell out more money to save greece.

    Pushed by whom, when, how? Sources, please.

    Now when the rest of EU is drowing in debt all their own fault so Germeny is wondering why they have to bail out the illresponsable. Just another mirror of what's going on here in America.

    Again, you haven't got a clue what you're talking about. MFor example, my country is dsealing with debt in no small part because it helped bail out Greece. You want to call that "irresponsible" and "our own fault", and pull parallels with the situation in America, fine, but it just shows your ignorance.

    Jeremy Meadows:
    What I think is more shitty then the disater already, is that all of europe is pretty much all pressuring germany to bail them out again. Germeny knows this is a horriable idea but is getting pressured from all sides to do this.

    Uh... what? I don't know where you get that from, but no such thing ever happened. Germany was very pro-active with it. It was France lobbying for a bailout because their banks were heavily present in Greece.

    Goes to show again that American news has about zero clues about internal EU politics.

     Pages 1 2 NEXT

    Reply to Thread

    This thread is locked