Greece getting more interesting by the day >> Germany rejects Greece's demands for WWII reparations >> I say Greece exits Euro...it is clear that Greece knows they can never repay so why subject their citizens to decades of enslavement.
.. i've always felt that once it was established it would take many years for institutions and policies to evolve, but in the long run the euro would survive .. it's obviously as much a gut thing as other ..
To go by the pronouncements coming out of Germany over the last couple of weeks, you might naturally conclude that the euro is toast. Speaking before Parliament, Chancellor Angela Merkel broadly rejected “counterproductive” proposals to pool Europe’s resources to help floundering Mediterranean nations. Germany’s “strength is not infinite,” she stressed.
Thomas Peter/Reuters
Chancellor Angela Merkel’s country has benefited greatly from the existence of the euro.
Op-Ed Contributors: To Save the Euro, Leave It (June 27, 2012)
German voters are even more skeptical than their leaders about financing their “slothful” and “profligate” neighbors. Though most still tell pollsters they want to keep the single currency, almost four-fifths want Greece to leave — oblivious to the chain reaction that Greek departure would unleash against Portugal, Spain and even Italy.
Yet it would be wrong to kiss the euro goodbye just yet. For all of Berlin’s neins, shooting down every serious proposal to address its woes, the German government knows it must ultimately cave and open its wallet to save the single currency.
Berlin’s wall of hostility against bailouts of Europe’s south will be on display this week, when European leaders will again try to cobble together a plan to address their debt crisis. They will discuss Greece’s request to ease the terms of its $217 billion rescue package, as well as proposals to create a regional banking union and Spain’s request for $125 billion to shore up its failing banks.
Berlin will drag its feet as long as it can before offering help, as has been its wont throughout the crisis. It will demand assorted quid pro quos. Last week, the German finance minister, Wolfgang Schäuble, warned Greece not to expect much sympathy and demanded that Athens comply with the austerity measures “quickly and without delay.”
But Ms. Merkel knows that Germany must ultimately underwrite the euro’s rescue, pretty much regardless of whether its conditions are satisfied. There are three good reasons. First, the euro has been very good to Germany. Second, the bailout costs are likely to be much lower than most Germans believe. Third, and perhaps most important, the cost to Germany of euro dismemberment would be incalculably high — far more than that of keeping the currency together.
Let’s take the reasons in turn. Germany has had a fairly good crisis so far. Since 2009, when it fell into a deep recession, it has grown faster and suffered less unemployment than almost any other industrialized country. Wages are rising .. http://www.reuters.com/article/2012/05/20/germany-wages-idUSL5E8GK41Z20120520 . And exports have rebounded sharply from the crisis to surpass their peak of 2008.
Germany owes much of this to the euro — which tethered its ultracompetitive manufacturing to the mediocre economies of its neighbors. Since the advent of the single currency, Germany’s labor costs have fallen more than 15 percent against the average labor costs of all the countries using the euro, and about 25 percent against those of the troubled nations on the periphery. If it dumped the euro for a new deutsche mark, its exchange rate would surge to make up for the difference, potentially crippling its exports, which have fed most of its economic growth over the last decade.
What about the cost of a bailout? German economists are pushing the story that Germany has already squandered enormous sums on the euro’s survival, going above and beyond the call of duty. Hans-Werner Sinn, who heads the Ifo Institute for Economic Research in Munich, argued in a commentary piece on the Op-Ed page of The New York Times that Germany had given Greece so far the equivalent of 29 times the aid given to West Germany under the Marshall Plan after World War II. His analysis omitted, however, that aid was just a small part of the Marshall Plan’s help to Germany. Most important, the plan also wiped out .. http://www.economist.com/blogs/freeexchange/2012/06/economic-history .. a majority of Germany’s debt.
While Germany has committed a few hundred billion euros to rescue the currency, if the rescue succeeds, it should recover all of it. And it can readily do more. William R. Cline, an economist at the Peterson Institute for International Economics, told me that covering the entire financing needs of Greece, Ireland, Portugal, Spain and Italy through 2015 would cost about $1.6 trillion.
If the International Monetary Fund contributed one-third, Germany and other rich euro area countries would be left to put up the rest. But even if Germany’s share reached $500 billion, it would not forfeit this money. After all, the goal of the bailout would be to prevent defaults. Germany could even turn a profit.
Most economists and policy makers outside Germany agree that keeping Europe’s common currency together over the long term will require a permanent mechanism to pool risk — transferring resources from the euro area’s powerful core to its weaker members. Germany, predictably, has balked at this prospect as way too expensive. Yet German estimates seem exaggerated.
One way to pool risk would be to allow countries to issue “euro bonds,” which would be jointly guaranteed by all the countries in the euro area and thus carry a much lower interest rate than markets are charging countries like Italy and Spain.
Kai Carstensen of the Ifo Institute estimated that euro bonds would end up raising Germany’s annual borrowing costs by 1.9 percent of the country’s gross domestic product — more than $60 billion — because it would pay a higher rate of interest than German bonds do now.
But an analysis by Mr. Cline of the interest rates paid by countries of different credit ratings since the late 1990s suggests a much lower price tag: the borrowing costs of triple-A countries like Germany and France would rise by 0.35 percent of G.D.P. per year. And the benefits would clearly outweigh the costs. Portugal, for instance, would save 1.9 percent of its G.D.P. in lower interest costs, giving it much-needed breathing room.
Rather than spending so much effort discussing the cost of bailing out Europe, Germany might do better by opening a public debate about the costs of letting the euro start to fall apart. Those are likely to be much less manageable.
If the package for Spanish banks was agreed to, Germany would be left directly responsible .. http://www.efsf.europa.eu/attachments/faq_en.pdf .. for more than $100 billion committed since 2010 to the rescues of Greece, Ireland, Portugal and Spain. The Bundesbank is owed nearly $900 billion .. http://www.bundesbank.de/Redaktion/EN/Standardartikel/Service/Services_banks_companies/target2_balance.html .. by other central banks in the euro area. And its banks still have hundreds of billions in loans to banks in peripheral countries. It’s hard to say what would happen to this debt if the euro were to break apart and weak countries to default. But chances are much of it wouldn’t be honored.
Then, there are the more difficult to measure strategic costs. Already, commentators in Europe are urging .. http://blogs.reuters.com/anatole-kaletsky/2012/06/20/can-the-rest-of-europe-stand-up-to-germany/ .. France, Spain and Italy to isolate Berlin, offering Germany the kind of ultimatum Germany likes to issue to its poorer neighbors: accept a common European bailout or leave the euro zone.
In light of costs and benefits, it is perplexing why Germany is so adamant in saying no. It hasn’t just blocked pooling bonds. It opposes allowing the European Central Bank to become a lender of last resort for troubled banks. Calls to let German wages rise as fast as German productivity, to allow peripheral countries to close the gap with German labor costs, are derided in Berlin as absurd attempts to curb German competitiveness.
The Harvard economist Jeffrey Frankel, who was on President Bill Clinton’s Council of Economic Advisers when the euro came into being more than a decade ago, pointed out that skeptical German voters agreed to trade in the deutsche mark only after their political leaders assured them they would never have to bail anybody out. “It turns out German taxpayers were right and their political leaders were wrong,” Mr. Frankel said.
Chancellor Merkel’s foot-dragging, the impossibly harsh conditions attached to ineffective bailout packages and the German demands to centralize control in Brussels over weak countries’ budgets can be understood as an attempt to persuade German voters that monetary union could be rewritten on German terms. “Merkel will try to extract quid pro quos,” noted Barry Eichengreen, an economist at the University of California, Berkeley. “She will do this by delaying, by asking for prior actions, hoping the other side moves first.”
But given the stakes, it is hard not to conclude that Germany will ultimately pay whatever it takes. It’s not that difficult a call. On one hand, there are manageable costs and clear benefits. On the other, there is a decent chance of unmitigated disaster.
Profiting from Pain: Europe's Crisis Is Germany's Blessing
ByStefan Schultz January 10, 2012 – 03:21 PM
Its neighbors may be suffering, but the euro crisis has created conditions that actually benefit the German economy. Not only is the government enjoying the windfall of negative interest rates on bonds, but unemployment is down and exports are booming.
Compared to other euro-zone countries, the economic outlook is rosy in Germany.
It's every debtor's dream. When asked for a loan, the bank not only agrees, but actually pays the borrower for their patronage. It sounds like a fairy tale, as though the laws of the market economy had been suspended. But on Monday it really happened.
The Finance Ministry should be pleased. In the last four years, they've had to shell out around 1.8 percent in interest for such bonds. But recently even interest rates on German bonds with longer maturities have decreased significantly. The federal government is saving a bundle.
The reason for the windfall? Amid the ongoing euro crisis .. http://www.spiegel.de/international/topic/euro_crisis/ , Germany is one of the few borrowers that are still regarded as a safe haven. Many investors would rather lend the government money at bargain-basement rates than risk losses.
Half of Europe Suffers While Germany Profits
Other countries can only fantasize about such a bonanza. Italy is currently being forced to pay record interest rates of some 7 percent on 10-year government bonds because investors lack confidence in the government in Rome. Questions remain over whether Prime Minister Mario Monti will succeed in reducing the government's €1.9 trillion mountain of debt without stifling the economy. Meanwhile bond yields in crisis-stricken countries like Spain and Ireland have also risen sharply.
It has become a rule of the euro crisis: While a number of euro-zone countries suffer, Germany profits. The crisis may slow economic growth in Germany, but there are also a raft of crisis-related mechanisms that help the country profit at the expense of other nations. As long as a big euro-zone crash doesn't materialize, this cushions the effects of the downturn for Germany.
A recent projection by the Munich-based Ifo Institute for Economic Research found that the economies of France, Spain, Italy, Belgium, Greece, Portugal and Cyprus would likely shrink in 2012. The German economy, on the other hand, is still expected to grow by 0.4 percent this year.
The imbalance between Germany and many other euro-zone countries is most apparent on the job market, though. Euro-zone unemployment now averages 10.3 percent, but in Germany the figure sank to 7.1 percent for 2011. Last year, just under 3 million unemployed people were registered out of 82 million residents in Germany. By contrast, the number of unemployed in Spain recently reached 4.42 million out of just 45 million residents.
German Firms Profit from Weak Euro
As mass protests form in Spain due to high unemployment among young people, Germany is benefiting from an influx of new skilled professionals. An increasing number of southern Europeans looking for work are heading north to prosperous Germany. The number of Greek immigrants rose by 84 percent in the first half of 2011 to reach some 4,100 people, according to the Federal Statistical Office. The total number of immigrants rose by 19 percent year-on-year for that time period, reaching 435,000.
But that's not all. Indirectly, Germany also profits from a simple symptom of the crisis -- the weak euro, which has fallen to about $1.27, its lowest value since Sept. 2010.
For German companies, the sinking euro acts as a kind of crisis buffer. While it reduces demand for German products within the euro zone, these make up only around 40 percent of the country's exports. But for the rest of the world, a weak euro means cheaper German products, which means they're more competitive.
Indeed, German exports grew by 2.5 percent month-on-month in November, reaching €94.9 billion. Compared to a year earlier, exports were up by an impressive 8.3 percent. The crisis notwithstanding, exports for 2011 as a whole surpassed the historic trillion-euro level, a benchmark not even reached during the boom year of 2008.
Nobel Laureate Joseph Stiglitz: Greece Not the Problem, Germany Is
By admin on February 2, 2015 Greece, News
Nobel Prize-winning economist and Columbia University professor Joseph Stiglitz .. https://twitter.com/josephestiglitz .. told CNBC on Monday that the policies Europe has pushed on Greece have not worked and was harshly critical, calling them a mistake. He called the Euro a failed experiment and suggested that Germany benefitted much more than anyone.
“While it was an experiment to bring them together, nothing has divided Europe as much as the euro,” Stiglitz said in a “Squawk Box” interview.
Greece is not the only economy struggling under the euro, and that’s why a new approach is needed, Stiglitz said. “The policies that Europe has foisted on Greece just have not worked and that’s true of Spain and other countries.”
The professor is one of 18 prominent economists who co-authored a letter saying that Europe would benefit from giving Greece a fresh start through debt reduction and a further conditional extension in the grace period. But in the letter in the Financial Times last week, they stressed that Greece would also have to carry out reforms.
“Greece made a few mistakes … but Europe made even bigger mistakes,” Stiglitz told CNBC. “The medicine they gave was poisonous. It led the debt to grow up and the economy to go down.”
“If Greece leaves, I think Greece will actually do better. … There will be a period of adjustment. But Greece will start to grow,” he said. “If that happens, you going to see Spain and Portugal, they’ve been giving us this toxic medicine and there’s an alternative course.”
Insisting that it’s best for Europe and the world to keep the euro intact, he argued that keeping the single currency together requires more integration. “There’s a whole set of an unfinished economic agenda which most economists agree on, except Germany doesn’t.”
He said the real problem is Germany, which has benefited greatly under the euro. “Most economists are saying the best solution for Europe, if it’s going to break up, is for Germany to leave. The mark would raise, the German economy would be dampened.”
Under that scenario, Germany would find out just how much it needs the euro to stay together, he added, and possibly be more willing to help out the countries that are struggling. “The hope was, by having a shared currency, they would grow together.” But he said that should work both ways.
the ability of countries to be able to use interest rates and exchange rates to manage their economies is key .. those were taken away, and Europe didn't put anything in their place .. it was NOT excessive spending which caused the problem, but structural deficiencies, "not of individual countries, but of Europe as a whole" .. the countries are too diverse to operate under one currency as it was set up .. America's financial system has made trillions of dollars worth of mistakes .. markets left alone do not work .. 2008-2009 America's financial system failed .. inefficient, incompetent...
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Prof. Josef E. Stiglitz: "The Future of Europe"
UBS Center - Published on Feb 4, 2014
Public Lecture by Prof. Josef E. Stiglitz The Future of Europe Monday, January 27, 2014
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Stiglitz: Leaving the euro painful but staying in more painful
ari100teles Published on Feb 22, 2014
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Stiglitz: The Euro Crisis – Causes and Remedies
ari100teles Published on Oct 11, 2014 September 23, 2014, Rome, Italy
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Nobel Economist Joseph Stiglitz Hails New BRICS Bank Challenging U.S.-Dominated World Bank & IMF
democracynow Published on Jul 17, 2014
http://www.democracynow.org - A group of five countries have launched their own development bank to challenge the U.S.-dominated World Bank and International Monetary Fund. Leaders from the so-called BRICS countries -- Brazil, Russia, India, China and South Africa -- unveiled the New Development Bank at a summit in the Brazilian city of Fortaleza. The bank will be headquartered in Shanghai. Together, BRICS countries account for 25 percent of global GDP and 40 percent of the world's population. To discuss this development, we are joined by Nobel Prize-winning economist Joseph Stiglitz, a professor at Columbia University and the World Bank's former chief economist. "It's very important in many ways," Stiglitz says of the New Development Bank's founding. "This is adding to the flow of money that will go to finance infrastructure, adaptation to climate change -- all the needs that are so evident in the poorest countries. It [also] reflects a fundamental change in global economic and political power. The BRICS countries today are richer than the advanced countries were when the World Bank and the IMF were founded. We're in a different world -- but the old institutions haven't kept up."
Don’t Blame the Internet for Rising Inequality - by John Quiggin .. excerpt..
The growing wealth and power of the 1 per cent has been driven by the expansion of the financial sector. The rise of finance has coincided with the collapse of those institutions which, in the ‘Great Compression .. http://www.nber.org/papers/w3817 ’ of the income distribution during the 1950s and 1960s, saw workers in the US and other developed countries capture a large share of growth. Domestically, these institutions included strong trade unions, an education system that promoted social mobility and macroeconomic policies that prioritised full employment. In global terms, at least in the First World, these institutions were backed up by the Bretton Woods system of fixed exchange rates, a system which included tight restrictions on international flows of capital, particularly short term flows of speculative capital.
This system broke down in the 1970s (the causes of this breakdown, which remain controversial, are discussed in my book Zombie Economics [ http://press.princeton.edu/titles/9702.html ] ).[2] The result was the rise, or rather resurgence, of a finance-dominated form of capitalism and its associated ideology of market liberalism.
Global capital flows now massively exceed .. http://en.wikipedia.org/wiki/Foreign_exchange_market .. the volume of trade and long-term investment. By some measures, the volume of outstanding financial assets is now approaching a quadrillion (i.e. a billion billion) dollars, mostly in assets and liabilities that are supposed to offset each other, such as interest rate swaps. The majority of corporate profits, and of top 1 per cent incomes, are derived from the management of these financial flows .. http://www.epi.org/publication/ib331-ceo-pay-top-1-percent/ .
The link between the financialisation of capitalism and the rise of the 1 per cent is direct and, now that the evidence is in (thanks largely to the work of French economist Thomas Piketty and the public advocacy of leading economists like Paul Krugman and Joseph Stiglitz), seemingly undeniable. But the fact that the evidence appears undeniable does not mean that it will not be denied: any proposition, no matter how absurd, will have plenty of defenders if it is useful to the dominant class and its ideology.
For a while, defenders of market liberalism were able to argue that the growth of inequality was overstated, and that, in any case, static measures of inequality were less important than dynamic measures reflecting economic mobility. These arguments have largely been abandoned in the face of accumulating evidence that inequality is becoming increasingly severe and entrenched http://investorshub.advfn.com/boards/read_msg.aspx?message_id=109493464
And, despite some stern posturing from Germany on Thursday, Athens even seems to have won some concessions. On the one hand, it won't get the full six-month continuation it had originally asked for. It seemingly will also have to abide by the broad outlines of the previous austerity deal that Greece's left-wing governing party, Syriza, campaigned so vehemently against. On Monday, it is scheduled to submit a list of economic reforms and budget steps—or an "action plan .. http://www.bloomberg.com/news/videos/2015-02-20/what-greece-is-getting-out-of-eu-agreement "—that the Eurogroup will have to approve before it actually hands out any additional cash. But, importantly, it appears the Greek government will finally get some wiggle room on spending.
The exact terms of this accord will become clearer in the coming days. Meanwhile, the parties still need to repeat this whole process to reach a permanent bargain within the next four months. But given the utter lack of leverage Greece seemed to have had going into these negotiations, and the degree to which Germany seemed determined not to give ground, the fact that the country may walk away from this standoff with a concession is rather impressive. Greece's electorate isn't getting anywhere close to all the promises it voted for. But it got a small piece of them, which is more than many onlookers expected.
So, it's more like all the parties have agreed to agree to a deal, which could theoretically collapse again if Greece hands in a road map that doesn't satisfy the rest of Europe. But hopefully the next steps are mostly formalities.
Jordan Weissmann is Slate's senior business and economics correspondent.
Tsipras declares victory as Greece dodges financial ruin
By George Georgiopoulos and Karolina Tagaris
ATHENS Sat Feb 21, 2015 3:13pm EST
1 of 10. Greek Prime Minister Alexis Tsipras attends a cabinet meeting at the parliament building in Athens, February 21, 2015. Credit: Reuters/Kostas Tsironis
(Reuters) - Greek Prime Minister Alexis Tsipras declared victory on Saturday after agreeing a conditional financial rescue deal with Europe and despite making big concessions to avert a banking collapse within days.
With his left-wing leadership pilloried by German conservatives, Tsipras insisted that Friday night's last-minute agreement canceled austerity commitments and dispensed with the "troika" - European and IMF inspectors loathed by many Greeks.
"Yesterday we took a decisive step, leaving austerity, the bailouts and the troika behind," he said in a televised statement to the Greek nation. "We won a battle, not the war. The difficulties, the real difficulties ... are ahead of us."
After often ill-tempered negotiations in Brussels, Greece secured a four-month extension to euro zone funding, which will avert bankruptcy and a euro exit, provided it comes up with promises of economic reforms by Monday.
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