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Old 07-04-2015, 04:55 PM   #321
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In the US, some states perform better than others. As a result, some states are more dependent on federal aid than others.

Imagine if the federal govt. or the more affluent states negotiated with the needy states for aid or loans or loan guarantees.

Wonder if Americans in more affluent states would be as charitable towards the poorer states as the EU are towards Greece.
But that is exactly what happens in the US - some states get more in federal aid per capita, others give more. (Goggle "which states are givers"). Here, because we share a somewhat common culture, history, and sovereignty, such disproportionality does not yield political difficulty.

But the EU is different - a common currency shared among different sovereigns who, as often as not, were enemies in the past. If Greece bails out, it will highlight a fundamental political weakness of the Eurozone that may cause irremedial damage to this grand experiment of a common currency zone.

In the long run, Germany has more to lose than Greece, if the Euro is destabilized.
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Old 07-04-2015, 05:53 PM   #322
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In the long run, Germany has more to lose than Greece, if the Euro is destabilized.
I would bet Germany gets over it more quickly than Greece.
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Old 07-04-2015, 06:09 PM   #323
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Here's one (link to CNN article) unusual suggestion on how to fix the problems caused by the common currency: Have Germany leave the eurozone instead of kicking Greece out. From the piece:

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With Greece probably heading for an exit from the euro, the European and global economies may be facing disaster. However, there is still time for European leaders to reverse this destructive dynamic with one simple, outside-the-box solution: Instead of pushing Greece out of the eurozone, Germany should voluntarily withdraw and reissue its beloved deutsche mark.
The analysis of the problems of the euro and the European Union has long been upside down, focused on the debt and competitive weaknesses of the so-called peripheral countries (Greece, Italy, Spain, Portugal and Ireland) and especially of Greece. But issues of debt and competitiveness existed and were dealt with rather easily long before the euro arrived, through periodic devaluation of the currencies of the less-competitive countries against those of the more competitive countries, and especially against the deutsche mark.
The problem now is not the weaknesses of the periphery, it's the excessive competitive strength of Germany. Not only is the German economy inherently strong as a result of the high productivity of its workforce, its exports have added competitiveness because the euro is undervalued as far as Germany is concerned. Because it is the common currency of the eurozone countries, the value of the euro reflects the average of their combined competitiveness. But Germany's competitiveness is far above the average. So, for Germany, the euro is too weak. This is why Germany has been accumulating chronic trade surpluses on the scale of the Chinese.
The remaining countries in the eurozone can inflate the currency as needed, just like they used to with their old national currencies.

It wouldn't work any better than the present setup, due to the remaining significant cultural and political differences in the countries. It will just breed resentment (as it is doing now). Having individual currencies starts to look much better and more efficient now that the problems with the euro are evident.
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Old 07-04-2015, 06:27 PM   #324
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They should be allowed to default and go their own way. If they do it right, they could follow Iceland's path.
Late to chime in on this interesting thread, but I agree. Swallow the bitter pill and get it over with.
Greece's economy is much smaller, per capita, than Iceland's, so I think it should be quite doable.

There doesn't seem to be anything wrong with getting out of the Euro and going to a new drachma. The horrified gasps from the Eurocrats in Brussels aside, I just don't see it as so unthinkable. The original founders of the Euro zone were adamant that there would never be an option to withdraw from it, but the best laid plans of mice and men ...
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Old 07-04-2015, 07:18 PM   #325
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As a EU voter and taxpayer, I am fed up with the ludicrous demands of the Greek government. The rhetoric out of Athens is just plain insulting at this point and I am fast losing any sympathy I might have had.
I was thinking that myself... even though I am not in the EU... but if I were on the other side negotiating with the Greeks I would have left a LONG time ago and said "Good luck"....


BTW, who says that the debt goes away Sure, Greece will not pay... but as Argentina has found out, not paying on a debt does not mean it no longer exists...
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Old 07-04-2015, 07:23 PM   #326
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Who is acting unreasonably here? Could it be the EU leaders who so far have refused even to discuss debt restructuring, which IMF has deemed necessary to Greek's survival? Not so clear cut that Greek leaders are the bad guys. Looking backwards, Greece probably didn't really qualify for Eurozone inclusion, given the significant cultural/fiscal differences. But, now here we are. Who is going to act like adults? So far, nobody, including the EU leaders.

I think you have not been reading much on the proposals... there have been big time debt restructuring offers.... much later maturities, delayed interest payments, even lower interest rates etc. etc....

What has not been proposed is debt relief... that seems to be what Greece is looking to get and if they do not they will not agree.... I think they had a good offer and screwed up by not taking it.... kinda like when the Palestinians did not take the offer from Israel where they could have had most of what they wanted, but now have very little many year later...
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Old 07-04-2015, 07:29 PM   #327
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But that is exactly what happens in the US - some states get more in federal aid per capita, others give more. (Goggle "which states are givers"). Here, because we share a somewhat common culture, history, and sovereignty, such disproportionality does not yield political difficulty.

But the EU is different - a common currency shared among different sovereigns who, as often as not, were enemies in the past. If Greece bails out, it will highlight a fundamental political weakness of the Eurozone that may cause irremedial damage to this grand experiment of a common currency zone.

In the long run, Germany has more to lose than Greece, if the Euro is destabilized.
If I were Illinois I would not be hoping to get a bail out from the fed gvmt for all the spending that has been going on for years.... so in a way it is like the EU and Greece.... and since Illinois cannot file for BK.... they are not going to get debt forgiveness either...
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Old 07-04-2015, 07:50 PM   #328
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We have only heard from a few folks in this thread who have identified themselves as Europeans. Having lived amongst [archaic Scottish word] them, it interests me what their opinions are, bein' as how they are committed as opposed to involved. (Reference joke about pigs and chickens w/ respect to bacon and eggs.)

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Old 07-04-2015, 08:16 PM   #329
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Reason Greece didn't default in 2009, when their problems were uncovered, is that it would have hurt a lot of German and French banks.

So essentially, the EU "rescued" Greece, which basically prevented their banks from being hit hard.

Germany doesn't want to go back to Deutsch Mark. Their economic growth comes from exports. They run a trade surplus and if their products become more expensive, that will hurt their growth.
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Old 07-04-2015, 08:56 PM   #330
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Reason Greece didn't default in 2009, when their problems were uncovered, is that it would have hurt a lot of German and French banks.

So essentially, the EU "rescued" Greece, which basically prevented their banks from being hit hard.

Germany doesn't want to go back to Deutsch Mark. Their economic growth comes from exports. They run a trade surplus and if their products become more expensive, that will hurt their growth.
Interesting rationalizations. Perhaps a screen-name change to explanadanopoulos is in order?


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Old 07-04-2015, 11:27 PM   #331
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If I were Illinois I would not be hoping to get a bail out from the fed gvmt for all the spending that has been going on for years.... so in a way it is like the EU and Greece.... and since Illinois cannot file for BK.... they are not going to get debt forgiveness either...
IL is going to possibly feel the pain as Greece and Puerto Rico are feeling of workers leaving for better opportunities and in the case of IL less taxes.
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Old 07-05-2015, 01:06 PM   #332
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It is now clear "NO" is going to win, and likely there will be plenty of pain to go around. Because EU would not consider even partial debt relief (as the IMF urged was necessary), it now faces the prospect of total debt default of $1 trillion. A senior German banking official is quoted today a saying this would "blow a hole" in Germany's budget.

Amazing to watch mature politicians, on all sides, acting like adolescents and precipitating a potential political crisis that was not necessary.
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Old 07-05-2015, 01:24 PM   #333
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I would bet Germany gets over it more quickly than Greece.
You're probably quite right about that, but Germany's export-oriented economy has greatly benefited from the Eurozone (more than any other EU country perhaps?). Germany may have just lost the Greek market.
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Old 07-05-2015, 01:26 PM   #334
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Interesting rationalizations. Perhaps a screen-name change to explanadanopoulos is in order?


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I believe he is correct, actually. But that was 2010, this is now. The EU has had 5 years to force the banks to treat Greek debt like the junky paper it really is instead of telling them Greek and German bonds are the same. Ultimately it is much more in Europe's interest to boot Greece than it was 5 years ago.
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Old 07-05-2015, 01:27 PM   #335
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I think you have not been reading much on the proposals... there have been big time debt restructuring offers.... much later maturities, delayed interest payments, even lower interest rates etc. etc....

What has not been proposed is debt relief... that seems to be what Greece is looking to get and if they do not they will not agree.... I think they had a good offer and screwed up by not taking it.... kinda like when the Palestinians did not take the offer from Israel where they could have had most of what they wanted, but now have very little many year later...
The IMF on the deal this past Thursday:
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To the contrary, the I.M.F’s analysis assumes that Greece accepts and meets the terms of the latest offer from its creditors, which the Prime Minister, Alexis Tsipras, rejected last weekend. This deal would involve the Greek government running a primary budget surplus of one per cent of G.D.P. this year, two per cent in 2016, three per cent in 2017, and 3.5 per cent thereafter. Even if this were to happen, and the Greek economy were to expand at a rate of 1.5 per cent annually, a fifty-per-cent improvement on its historical trend, Greece’s debts are so large that “further concessions are necessary for debt sustainability,” the report says.
Greece is bankrupt and no financial arrangement will change the fact the countries holding loans are just hoping Greece is bailed out and the can be pushed down far enough that it won't effect the reputations of the present financial ministers. At 5 percent interest rate interest would be nearly 10 percent of GDP, Greece is not the only economy in danger of this issue.

If the vote goes no as is appearing likely right now it will be interesting to see the effect on the markets. With 30% of the vote in it is going 60/40 no so those that loan at low interest rates to countries that cannot possibly pay must begin to look at other countries that are next in this market, it is the manipulated interest rates and excess debt that is causing the problem, not the failure to assure a deal at even lower rates.
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Old 07-05-2015, 01:28 PM   #336
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The Greeks assume that they will get a better deal in the negotiations. If I was on the other side, I would simply say, "That's nice that you had a referendum, but it will not blackmail nor humiliate me into changing my negotating stance."
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Old 07-05-2015, 01:40 PM   #337
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It is now clear "NO" is going to win, and likely there will be plenty of pain to go around. ...
Wow. WSJ (15 minutes ago) carries Official Greek projection, albeit very preliminary, of 61% "No." That is striking if it holds.

E.T.A. Link that should work: http://on.wsj.com/1evtvVK
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Old 07-05-2015, 01:46 PM   #338
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So what happens if Greece goes back to the drachma? Would your funds in a Greek bank be automagically converted to some number of drachma? What about Euros in current use inside the country?

As much as the haters hate gold, I imagine I would rather have a few kilograms of gold in my Greek safety deposit box than a few kilograms of whatever new drachma comes into existence.
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Old 07-05-2015, 01:47 PM   #339
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So what happens if Greece goes back to the drachma? Would your funds in a Greek bank be automagically converted to some number of drachma? What about Euros in current use inside the country?

As much as the haters hate gold, I imagine I would rather have a few kilograms of gold in my Greek safety deposit box than a few kilograms of whatever new drachma comes into existence.
Scratch that. I'd rather have a few kilograms of gold hidden in my home. Greek banks have been closed for a week.
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Old 07-05-2015, 01:57 PM   #340
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Scratch that. I'd rather have a few kilograms of gold hidden in my home. Greek banks have been closed for a week.
I would probably be paranoid with that amount in my house. Then again I would be paranoid with that amount in a Greek bank as well.
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