Referendum in Greece
Jul 6th, 2015, 09:14 AM
#62
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<<Does this mean Greece is leaving the Euro zone, since they voted "No" on the agreement with IMF and others?>>
Not necessarily. The Greeks don't want to leave. The EU governments, for the most part, are afraid of what will happen if a country actually does leave the euro. But, the conventional playbook for a country in Greece's situation would include devaluing their currency, and they can't do that so long as they remain in the euro. So, unless the rest of the EU decides to make a huge direct transfer to Greece, or to engage in inflationary monetary policy that would not suit Germany and a number of other Eurozone nations, it seems that Greece has to leave he euro, or be resigned to slow strangulation for the foreseeable future.
Not necessarily. The Greeks don't want to leave. The EU governments, for the most part, are afraid of what will happen if a country actually does leave the euro. But, the conventional playbook for a country in Greece's situation would include devaluing their currency, and they can't do that so long as they remain in the euro. So, unless the rest of the EU decides to make a huge direct transfer to Greece, or to engage in inflationary monetary policy that would not suit Germany and a number of other Eurozone nations, it seems that Greece has to leave he euro, or be resigned to slow strangulation for the foreseeable future.
Jul 6th, 2015, 09:16 AM
#63
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twk: Your assessment goes to the heart of the problem with the Eurozone: How do you build tied-in economies with a shared currency when the countries are allowed to make independent political decisions that affect their own own economies?
Has anything like this ever been tried in the history of the world?
Has anything like this ever been tried in the history of the world?
Jul 6th, 2015, 01:29 PM
#64
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"How do you build tied-in economies with a shared currency when the countries are allowed to make independent political decisions that affect their own own economies"
They were to supposed to do so.
All Eurozone members were supposed to operate budget deficits and debt levels within predetermined and agreed limits. This aimed to negate the effects of independent economies being tied to a single currency and negate the possibility of exporting inflation, unemployment and competitive advantages between member nations.
Unfortunately, Greece operated debt and deficit levels well outside the agreed levels. Mainly because they were newer members and the argument over the years was that they needed a wider band to "adjust" to life in the Eurozone.
Cynics would suggest that allowing Greece to operate outside its debt band also allowed German and French banks to flood the Greek personal and government finance markets with cheap debt. For centuries, Greece was effectively a cash economy with low gearing. Bring in cheap debt and consumption increased to unsustainable levels.
"Has anything like this ever been tried in the history of the world"
It has been argued that in terms of cultural differences between members a single currency, local legislature and a federal bond, the EU members aren't hugely different to the the states in the US.
They were to supposed to do so.
All Eurozone members were supposed to operate budget deficits and debt levels within predetermined and agreed limits. This aimed to negate the effects of independent economies being tied to a single currency and negate the possibility of exporting inflation, unemployment and competitive advantages between member nations.
Unfortunately, Greece operated debt and deficit levels well outside the agreed levels. Mainly because they were newer members and the argument over the years was that they needed a wider band to "adjust" to life in the Eurozone.
Cynics would suggest that allowing Greece to operate outside its debt band also allowed German and French banks to flood the Greek personal and government finance markets with cheap debt. For centuries, Greece was effectively a cash economy with low gearing. Bring in cheap debt and consumption increased to unsustainable levels.
"Has anything like this ever been tried in the history of the world"
It has been argued that in terms of cultural differences between members a single currency, local legislature and a federal bond, the EU members aren't hugely different to the the states in the US.
Jul 6th, 2015, 02:40 PM
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<<It has been argued that in terms of cultural differences between members a single currency, local legislature and a federal bond, the EU members aren't hugely different to the the states in the US.>>
2 out of 3 may apply, perhaps, but there is a clear difference on the US Federal/European Union fiscal bond.
When a state like, for lack of a better example, Illinois, finds itself in a crunch, it may be obligated by law and/or by simple constraints of the market to operate within the constraints of a balanced budget, which would be counter to Keynesian philosophy, but, the state budge only has a relatively small impact on the Illinois economy--federal fiscal policy is more important, and it will proceed apace with programs that would counteract a downturn--unemployment benefits, welfare benefits, social security benefits, federally guaranteed or subsidized loans, and direct federal spending through any number of programs. And, to top it all off, the mobility of labor means that folks in Illinois who can't find work, can always move to Texas (and many do)
By and large, the EU does not quite play the same role for the Greeks and southern Europe when they experience a downturn, that the US federal government plays for the states. Yes, EU money flows into Greece, and, yes, Greeks can leave for other EU countries, but it's just not the same level of interconnection, or labor mobility.
Some people envision an EU where the nations that compose the EU are more like US states, and where many more aspects of sovereignty are transferred to the EU. I think the EU's anti-democratic history (it has repeatedly ignored the results of votes that didn't go the way EU officials wanted) will probably be an obstacle that keep it from ever reaching that level, as the citizens of EU nations will never trust such an anti-democratic institution with all aspects of sovereignty. As long as "ever closer union" also means less voice for the voters, I don't see the EU integrating any further than it already has.
2 out of 3 may apply, perhaps, but there is a clear difference on the US Federal/European Union fiscal bond.
When a state like, for lack of a better example, Illinois, finds itself in a crunch, it may be obligated by law and/or by simple constraints of the market to operate within the constraints of a balanced budget, which would be counter to Keynesian philosophy, but, the state budge only has a relatively small impact on the Illinois economy--federal fiscal policy is more important, and it will proceed apace with programs that would counteract a downturn--unemployment benefits, welfare benefits, social security benefits, federally guaranteed or subsidized loans, and direct federal spending through any number of programs. And, to top it all off, the mobility of labor means that folks in Illinois who can't find work, can always move to Texas (and many do)
By and large, the EU does not quite play the same role for the Greeks and southern Europe when they experience a downturn, that the US federal government plays for the states. Yes, EU money flows into Greece, and, yes, Greeks can leave for other EU countries, but it's just not the same level of interconnection, or labor mobility.
Some people envision an EU where the nations that compose the EU are more like US states, and where many more aspects of sovereignty are transferred to the EU. I think the EU's anti-democratic history (it has repeatedly ignored the results of votes that didn't go the way EU officials wanted) will probably be an obstacle that keep it from ever reaching that level, as the citizens of EU nations will never trust such an anti-democratic institution with all aspects of sovereignty. As long as "ever closer union" also means less voice for the voters, I don't see the EU integrating any further than it already has.
Jul 7th, 2015, 12:59 AM
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Sorry yes.
It wasn't later entry that was the issue 12 years ago. I had in my mind the fact that the EU bent over backwards and changed the criteria for Eurozone entry many times in 2003 for a number of countries. I was mistaken about the reason, I remember the huge reservations many had at the time about the timing of the Euro introduction.
Having checked, the issue in Greece's case was trying to establish an accurate debt figure at the time and the EU being unable to produce a system to record debt in a uniform manner.
At the time it was apparent that political momentum was over-ruling economic fundamentals. Many of the member states economies were not sufficiently synchronised to justify currency union. Underlying issues seemed to have been papered over in the spirit of a unified Europe.
It seems from this mornings discussions that few in Brussels know how debt should be calculated or accounted for. It appears that much Greece's so called debt to the ECB has been accounted for in a way that it appears to have been written off. The IMF are continuing to be firm that the EU's current offer to Greece is unsustainable.
Non of which is helping the people on the streets of Greece.
It wasn't later entry that was the issue 12 years ago. I had in my mind the fact that the EU bent over backwards and changed the criteria for Eurozone entry many times in 2003 for a number of countries. I was mistaken about the reason, I remember the huge reservations many had at the time about the timing of the Euro introduction.
Having checked, the issue in Greece's case was trying to establish an accurate debt figure at the time and the EU being unable to produce a system to record debt in a uniform manner.
At the time it was apparent that political momentum was over-ruling economic fundamentals. Many of the member states economies were not sufficiently synchronised to justify currency union. Underlying issues seemed to have been papered over in the spirit of a unified Europe.
It seems from this mornings discussions that few in Brussels know how debt should be calculated or accounted for. It appears that much Greece's so called debt to the ECB has been accounted for in a way that it appears to have been written off. The IMF are continuing to be firm that the EU's current offer to Greece is unsustainable.
Non of which is helping the people on the streets of Greece.
Jul 7th, 2015, 01:15 AM
#68
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I don't suppose many of us are such specialists as to predict what will happen or even explain why it happens.
Somehting I personnaly like is that it proves that everybody is entitled to have an opinion and voice it.
Greeks have said NO democratically.
Now Eurozone can think about what to do with thei No saying, democratically too.
And I like the idea of leaving Eurozone : a club should always have rules to enter it but also to leave it. Up to now the scenario of leaving Eurozone has never been taken into consideration.
Now, I'd personally wait before going to Greece... let us see how it develops.
Somehting I personnaly like is that it proves that everybody is entitled to have an opinion and voice it.
Greeks have said NO democratically.
Now Eurozone can think about what to do with thei No saying, democratically too.
And I like the idea of leaving Eurozone : a club should always have rules to enter it but also to leave it. Up to now the scenario of leaving Eurozone has never been taken into consideration.
Now, I'd personally wait before going to Greece... let us see how it develops.
Jul 7th, 2015, 03:07 AM
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One doesn't need to be much of an expert to see that one way or the other, there is going to be debt relief for Greece. European leaders have a choice to structure it or just stand back and watch it happen without a plan.
I am mystified by the statement that "Now Eurozone can think about what to do with thei No saying, democratically too." Part of the reason for mystification is that the Eurozone is not run democratically, especially in the core issues of the euro currency itself, and that is not just "an opinion". The ECB is not an elected body.
There is no rational reason for tourists to postpone a trip to Greece. For tourists, nothing has changed from what it was before the referendum, or even earlier in the year, or last year. (In fact, if anything, Greece streets are rcalmer than they have been under previous governments, and yesterday all the political parties in Greece signed a joint statement of solidarity.) All transport services in Greece are being maintained, and tourists report having a very nice time every single time a journalist sticks a microphone in their faces.
I am mystified by the statement that "Now Eurozone can think about what to do with thei No saying, democratically too." Part of the reason for mystification is that the Eurozone is not run democratically, especially in the core issues of the euro currency itself, and that is not just "an opinion". The ECB is not an elected body.
There is no rational reason for tourists to postpone a trip to Greece. For tourists, nothing has changed from what it was before the referendum, or even earlier in the year, or last year. (In fact, if anything, Greece streets are rcalmer than they have been under previous governments, and yesterday all the political parties in Greece signed a joint statement of solidarity.) All transport services in Greece are being maintained, and tourists report having a very nice time every single time a journalist sticks a microphone in their faces.
Jul 7th, 2015, 03:07 AM
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>>It has been argued that in terms of cultural differences between members a single currency, local legislature and a federal bond, the EU members aren't hugely different to the the states in the US.<<
I've heard that argument before, and I'm sorry to be blunt, but it's nonsense. And I guess it was one of the premises used to justify the EU concept.
A "federal bond" that's the same as that among the states of the US? Please. Just one example: Greece seceding from the EU and using its own currency is a much-discussed real option. How realistic would that be for one US state?
twk has done a good job of detailing why "it's the same as the US states" isn't true.
I've heard that argument before, and I'm sorry to be blunt, but it's nonsense. And I guess it was one of the premises used to justify the EU concept.
A "federal bond" that's the same as that among the states of the US? Please. Just one example: Greece seceding from the EU and using its own currency is a much-discussed real option. How realistic would that be for one US state?
twk has done a good job of detailing why "it's the same as the US states" isn't true.
