The future of the Euro

[Aberlour10]

Greece struggles with enormous problems , the financial situation in several countries of the Euro-Zone is not easy...Spain and Portugal and other may follow...what is your opinion, what may happen?

 

Robert

[Al_U_Card]

Does not the term "Balkanization" apply in this situation?

 

Purchasing power (the ultimate arbiter of value) can be greater in Germany than in Greece. The German engineer gets 100K euros per year while the Greek engineer gets 50K.....same currency, different "real" value. When it comes to imports, that is where the Balkanization will occur. Greece can import the 100K car but no engineers can afford it. Gradually, PIGS and any other country that follows in their indebted ways will end up being a source for cheap labor....just like they want them to be....just like when they had their own currencies.

[jjbrr]

http://www.cnbc.com/id/36999483

 

It's having effects across seas, too :P

[hotShot]

If you look at the economical size of Greece compared to the whole €-Zone, you will notice that the markets are overreacting.

The rating agency's did not do a proper job evaluating Greece, so they had to downgrade Greece twice within about a week.

Germany's political system is focused is a local election, if this had happened next week, the German position would have been much clearer.

 

Everything will calm down within a few weeks.

[kenberg]

I voted for the first option but I would, if I could choose the wording, say that I expect some reasonably stable result at a lesser value and then I expect a gradual strengthening. In other words, "weak and volatile" seems excessive, but I don't regard it as a minor blip either.

I suppose (echoes from another thread) this is more a matter of faith than of carefully reasoned argument.

[mike777]

Greece struggles with enormous problems , the financial situation in several countries of the Euro-Zone is not easy...Spain and Portugal and other may follow...what is your opinion, what may happen?

 

Robert

If Greece has enormous problems.....they wont be solved in a few weeks.

 

If the problems in Greece or Spain or Port or Ireland are minor in nature, than the fix should be pretty easy.

 

If the citizens of those countries dont really know what the problems are, then I doubt they will fix them in the short run. OTOH if they pretty much agree on what the problems are, that will be a big first step.

 

When I read reports that possibly in 2013 or so 25% of all income tax revenue will go to nonGreek debt holders....that sounds like a problem.

[Fluffy]

The problems in Spain ain't that bad, unfortunatelly we have stupid politicians in charge, and the main opposiiton ain't much better so the problems will be worse, not better.

[kfay]

The problems in Spain ain't that bad, unfortunatelly we have stupid politicians in charge, and the main opposiiton ain't much better so the problems will be worse, not better.

I thought Spain had a 20% unemployment rate?!

[Winstonm]

I think there is a strong likelihood that many countries will be forced to leave the Eurozone and the Eurozone will rework its member requirements.

 

The Greece fix does not look easy or quick - it looks like a generational problem.

[Aberlour10]

Germany's political system is focused is a local election, if this had happened next week, the German position would have been much clearer.

 

Everything will calm down within a few weeks.

German position is already clear, they announced to loan about € 23 billions on Greece. Experts agree, it could be much cheaper if Merkel acted earlier and did not block this help hoping to do it after the elections. The Iron Lady may experience a rude surprise on Sunday.

[hotShot]

http://www.cnbc.com/id/36999483

 

It's having effects across seas, too <_<

These signal triggered computer sales act as an amplifier if stock values go down.

They can't act intelligent, they act like a crowd in panic. And since they are faster than human traders they can make lots of bad deals before any human can stop then.

So any small reason can cause a big avalanche that is not justified by the facts.

[Fluffy]

The problems in Spain ain't that bad, unfortunatelly we have stupid politicians in charge, and the main opposiiton ain't much better so the problems will be worse, not better.

I thought Spain had a 20% unemployment rate?!

almost 20% yes, since it is almost summer people are hired for summer works so 20% hasn't been reached yet, wait till october.

[helene_t]

Something between 1 and 2, as Ken says.

 

It would be nice to get rid of certain countries but it is not practical. No creditor who is owed some amount of Euros by a (say) Greek debtor will accept having the dept converted to Drachmas. Say Greece leaves the monetary union so a Greek house-owner will have his salary (if he is lucky enough to keep his job) paid in worthless Drachmas while his mortgage still has to be paid in Euros.

 

But OK if Iceland joins then the Greeks could get the old Icelandic banknotes, saving them some printing costs <_<

[Al_U_Card]

So, when the markets dropped precipitously, there was money to be made.

 

Those computers were so fast that surely no one else (with computers) could have taken advantage of the opportunity.....just wondering. :)

[Aberlour10]

But OK if Iceland joins then the Greeks could get the old Icelandic banknotes, saving them some printing costs <_<

Iceland could be a "victim" of the current crisis, the willingness to incorporate new members in the Eurozone is very, very limited at the moment.

[PassedOut]

So, when the markets dropped precipitously, there was money to be made.

 

Those computers were so fast that surely no one else (with computers) could have taken advantage of the opportunity.....just wondering. <_<

It's being worked on right now. Wait until next time.

[Gerben42]

I think it was a mistake to send Greece loans. The reason was that apparently many European banks have Greek bonds. So what? They took the profit, they take the risk. There's no point in having high interest rates for the Greek bonds if there is no risk for a default.

 

The IMF has rules for countries going into "chapter 11", rather than throwing money in the direction of Greece we should let them use this opportunity to get rid of their debts. The price will be large, no doubt, but it will be much more controllable than what's going on at the moment.

 

Besides, after the default they will still be in the Eurozone, which means that the Euro as a total loses a worth of say 5% and Greece gets rid of its debts, but gets a strict course laid upon them by the IMF.

 

German position is already clear, they announced to loan about € 23 billions on Greece. Experts agree, it could be much cheaper if Merkel acted earlier and did not block this help hoping to do it after the elections. The Iron Lady may experience a rude surprise on Sunday.

 

It didn't have much to do with the elections I think. Merkel did the right thing but unfortunately there was no way around the current deal, even though it was probably a waste of money. The alternative would have been to quit the EU.

 

The voting crowd were going to vote off the liberal-conservative government anyway regardless of the Greek situation. I still think we just should have let it happen, because now Greece will fail later and we lose extra billions (which do not reach the Greek population but save the owners of the Greek bonds who have profited from the high % and now don't have the risk).

 

Anyway, North-Rhine / Westfalia will now be stuck with the socialists in their government. I already feel sorry for them. Do you need some comforting?

Although I agree that the current government has not done well so far, they have some good ideas. Their mistake was to have not hit the ground running and get their big points through until now. After this local election, the good ideas will be blocked by the opposition.

[mike777]

btw the Euro has lost about 9.5% so far this year vs USD.

[Aberlour10]

btw the Euro has lost about 9.5% so far this year vs USD.

This is not so bad...Europe benefits from it too...European export may rise, its important especially in Germany, where export is the "engine of the reflation"

[mike777]

btw the Euro has lost about 9.5% so far this year vs USD.

This is not so bad...Europe benefits from it too...European export may rise

yes countries with competitive export industries, such as Germany, should win big from a cheaper euro. But I think Greece may be hurt by a cheaper Euro.

 

 

I only hope that a tempory, muddle solution is not taken by the good people of Greece. At the very least this should be a good opportunity for them to debate just what kind of economy, priorities, they want in their country.

 

What trade off do they want to make for growth vs a social safety net that may or may not hold the needest in bad times.

[hotShot]

I don't know if Greece is importing much from outside the Eurozone.

 

 

About 70% Germanys exports stay inside the Eurozone, so the gain is not that big.

[mike777]

I don't know if Greece is importing much from outside the Eurozone.

 

 

About 70% Germanys exports stay inside the Eurozone, so the gain is not that big.

They could be big if Germany is more productive, as I said. Between the Euro block, the more productive producer should win, all else being equal.

[Winstonm]

btw the Euro has lost about 9.5% so far this year vs USD.

A stronger dollar hurts the profits of the U.S. multinational corporations, too.

[Aberlour10]

Although I agree that the current government has not done well so far, they have some good ideas. Their mistake was to have not hit the ground running and get their big points through until now. After this local election, the good ideas will be blocked by the opposition.

I suppose, you are afraid that the announced delay of the phase-out in the german nuclear power sector can be blocked by the opposition. The other ideas....? Hmmm the kamikaze-tax-reform? Anybody (out of the FDP) takes it in the current budget situation for simply a bad joke. Capitation fee in health service? Nobody ( out of the FDP ) wants it.

 

Robert

[shyams]

I think Paul Krugman argues in the NY Times that the long-term success of the Euro requires a Europe administration. This is something most countries in EuroZone would never accept.