The future of the Euro

[Aberlour10]

As a (sort of) outside observer I have been waiting for the explosion. Everyone is too stunned to speak? My reaction to the plan for a referendum was that if the deal were put to, say, German voters or French voters, there probably would be no deal at all. It's a very good thing that I am not in charge of anything. I lack patience for those who think last minute cuteness is clever.

 

The problem by referendum about such complex situation is... how this one ( YES_NO) question will be formulated. Anyway, if Greece will say NO, that will be end of all bailout plans, the state goes bancrupt and drachma will come back at the end.

[PassedOut]

Anyway, if Greece will say NO, that will be end of all bailout plans, the state goes bancrupt and drachma will come back at the end.

And the bankers will also have some problems.

[WellSpyder]

The problem by referendum about such complex situation is... how this one ( YES_NO) question will be formulated.

How about this? "If you would prefer the German and French taxpayers to be forced to make ultimately unlimited pledges to enable the country to continue functioning, albeit subject to considerable austerity measures, please tick the box labelled yes. If you would prefer to reject such help and watch the economy go up in flames, please tick the box labelled "no".

[kenberg]

This [a no vote] seems likely to me as well, but I make no real prediction on that. What does seem clear to me is that Papandreou is through as a negotiator. If, during negotiations, he had announced the need for a referendum then, whatever the reaction to it he could have maintained trust. To agree to the deal, return to his country, and then say "Oh by the way, I forgot to mention there has to be a referendum" is unacceptable and will not be accepted. I don't see anyone sitting down at a table with him in the future.

[helene_t]

A very interesting source!

 

At a first reading it appears that the Greeks are working much longer hours than the Germans. But Germany is wealthy enough so that it can misplace 55B or so w/o crashing, while Greece needs every Euro, or even Drachma, that is up for grabs.

 

How can this be? The data Y produced is for hours per worker, not hours per adult person. This may be part of it. If Greeks retire early then the retiree's lost hours do not, I think, show up in this data (the retiree is not a worker). But this is unlikely to be the whole story. It is at least plausible to suspect that economic and social structure fit into this somehow.

 

It seems worthwhile to put ideology and easy judgments aside and try to get to the heart of it. I would expect there to be lessons for the USA in such an analysis.

OECD says that the data are meant for trend analysis in individual countries, not for comparison between countries as the definitions vary between countries.

 

The two countries I know the best are Denmark and Netherlands. Probably those two countries are much more similar in terms of labour market structure than either are to Greece. But even so, the differences are stunning:

- Most Danish employers include the lunch break when reporting working hours to stats offices. Most Dutch employers don't. Danish employers are also much more likely to keep track of extra hours.

- Both countries have (had) various forms of pseudo-employment, i.e. subsidized jobs which are created in order to keep people busy rather than because the job needs to be done. Those are gray areas, both in terms of reality (some of those jobs are de facto jobs, others pure occupation therapy, many somewhere in between), and also the way they are dealt with in statistics wary.

- The Dutch statisticians rely mostly on interview panels, the Danish mostly on data collected for administrative purposes. (This particular OECD statistics must be based on panel data in Denmark, too, though).

- There is still a significant number of housewives in the Netherlands. They are generally not registered as unemployed. In Denmark they are very rare - meaning that technically, the Danes contribute to labour statistics by taking care of other people's children, while many Dutch take care of their own children which does not contribute to statistics. The few Danish housewives that do exist are often registered as unemployed.

- More generally, since it has usually been easier to get benefits in Danmark than in the Netherlands, people who don't work (for whatever reason) are more likely to be registered as unemployed than the Dutch.

- Danes have had a higher retirement age than the Dutch, although I believe at the moment both have 65.

[Aberlour10]

How about this? ;If you would prefer the German and French taxpayers to be forced to make ultimately unlimited pledges to enable the country to continue functioning, albeit subject to considerable austerity measures, please tick the box labelled yes.  If you would prefer to reject such help and watch the economy go up in flames, please tick the box labelled

 

Tja this question could also be : "Are you willing to accept all these painful cuts at the present and much more hard measures in the future to avoid state bancrupcy and quitting the euro-zone?"

 

Principally these two (yours & mine) questions are about the same, but I bet there would be by far not the same voting results.

IMO Papandreou wants a clear mandate from the Greeks. He afraids, he hasn't one at the moment for giving up a lot of state souverenity to the bailout countries. His move is right but it comes too late. Why didn't he do that before negotiations started?

[hotShot]

There are strikes and there is violence on the streets in Greece.

Employees of the government get 35% less payment for their jobs.

 

I would say a referendum is about the only way to get the people to support or accept what they are asked to suffer in return for help.

[kenberg]

There may have once been merit in having a referendum, but the way it was done was a disaster. Here is a clipping from bbc:

http://www.bbc.co.uk/news/business-15550422

The French and German leaders are holding talks with Mr Papandreou during Wednesday evening.

 

Ms Merkel said she wanted "clarity" from Greece.

 

Mr Sarkozy said the talks with Mr Papandreou would include discussions on "the conditions under which the engagements undertaken will be kept".

 

Mr Sarkozy's Prime Minister, Francois Fillon, said Greeks "must say quickly and without ambiguity whether they choose to keep their place in the eurozone or not".

 

A Greek government spokesman confirmed on Wednesday that the referendum would only ask the public to vote for or against the bailout package, and would not ask about Greece's membership of the euro.

 

However, it is widely feared that a 'No' vote could nonetheless force Greece into a chaotic exit from the euro, and spread financial contagion.

 

Greece's next 8bn tranche of bailout money was approved last week by eurozone leaders, but only for payment in mid-November.

 

However, Reuters news agency reported a source on the board of the International Monetary Fund (IMF) as saying that the payment will be postponed until after the referendum - something that is not expected until January.

 

The Greek government has previously stated that it would run out of cash before then to fund its spending - which would include payments on its debts.

[/Quote]

 

I would get from this:

1. Merkel and Sakozy are seriously annoyed.

2. Greece will not be getting help until the referendum passes (don't hold your breath).

3. Greece needs help very soon, before the referendum will take place.

4. No one will be stepping in here. A stunt like this one by Papandreou tends to drive away supporters.

 

 

Maybe Papandreou is a negotiating genius. Anything is possible I suppose. Maybe Papandreou will back down. Not likely.

 

I was hoping there would be a solution. Anything the parties agrees to was ok by me. I no longer expect that to happen.

 

 

And now?

The news changes faster than I can type!. So I guess the referendum is out. I believe the Sun will rise tomorrow, other things I am less sure of.

Edited November 3, 2011 by kenberg

[Aberlour10]

Tja, this is Europe nowdays. What was yesterday valid, today its a last year snow.

 

"Was kümmert mich mein Geschwätz von gestern" said Konrad Adenauer a long time ago ( ~ Nevermind what I said yesterday )

 

And these politicans want to gain back the trust of the markets. Its a really bad joke.

[mike777]

As I pointed in earlier posts these bailouts still do not address one of the main issues. A main issue being the free movement of labor.

 

If you make it difficult through various laws to fire or hire people that makes it tough to grow productivity.

If you make it difficult to have flexible labor rules that makes it tough to grow productivity.

 

Another huge problem Greece has are property rights. It is very very difficult to transfer property rights compared to many other countries. IN fact it is difficult to find out who owns what.

 

Bailouts dont solve these issues.

 

Here in the USA one common example how we hurt our economy is the lack of visas/citizenship for students who graduate in engineering or the sciences from usa schools. We actually make them go home, nutty.

 

Another current example is how we send farm laborers back home.

 

Here in the USA we are actually making it more difficult to transfer property thus not allowing the real estate market to clear.

[blackshoe]

Here in the USA we are actually making it more difficult to transfer property thus not allowing the real estate market to clear.

 

Interestingly, I just read somewhere that Cuba has made it easier for people to transfer real property.

[y66]

Ground Control to ECB ... take your protein pills and put your helmet on.

[kenberg]

Ground Control to ECB ... take your protein pills and put your helmet on.

 

From the article:

 

Obama, on a visit to Australia, turned up the heat on Europe to act more boldly to extinguish the spreading bushfire.

 

"Until we put in place a concrete plan and structure that sends a clear signal to the markets that Europe is standing behind the euro and will do what it takes, we are going to continue to see the kinds of market turmoil we saw," he said.

 

Obama said that whilst there had been progress in putting together unity governments in Italy and Greece, Europe still faced a "problem of political will".

 

"We're going to continue to advise European leaders on what options we think would meet the threshold where markets would settle down. It is going to require some tough decisions on their part," he said.

[/Quote]

 

Translation: I have no idea what should be done. But "bold" has a nice ring to it.

 

 

Meanwhile, back at the ranch, we await the report of the supercommittee. But this is the wrong thread for discussing that turkey.

 

I think we are all down to hoping that Lady Luck treats us better than we deserve.

[blackshoe]

"Bushfire"? Are they trying to blame Obama's predecessor for all this? :lol:

[helene_t]

This "The Economist" article about why USA is less vulnerable to the Greek disease than is Europe, is interesting:

http://www.economist.com/blogs/freeexchange/2011/11/currency-unions?fsrc=scn/fb/wl/bl/sellyourbourbonyoubankrupkentucians

[Aberlour10]

Ground Control to ECB ... take your protein pills and put your helmet on.

 

The pressure to make ECB to a sort of the bad bank which buys unlimited all these "junk" bonds grows from day to day. Merkel still try to fight against this, but she cant stand it very long IMO.

[y66]

Merkel’s Path: Brinkmanship for Debt Crisis

 

http://graphics8.nytimes.com/images/2011/12/07/world/MERKEL/MERKEL-articleLarge.jpg

 

I love this part:

 

Despite her global prominence, Mrs. Merkel, an East German physicist turned politician, cuts a modest figure in Berlin. She still lives with her media-shy second husband, a quantum chemist, in the same apartment in the central Mitte District that they lived in before she became chancellor. Her daily commute carries her across the former path of the Berlin Wall, a reminder of her years trapped behind it.

 

Modesty is not in fashion at all over here.

[Aberlour10]

Poor standards by Standard & Poors? In Europe grows angry at the US rating agencies. No doubt, they have too much power and they have used it excessively during last 2 years. Which sort of the political game they play? Whatever the Europeans do to consolidate their debt problems( and they do a lot in last couple of months),these three companies response to it always with new downgrades ( 9 countries yesterday.) What's the name of this game?>>>>>Protecting the power of the US$ as the leading world trading currency at any cost? Damning Euro as a smokescreen for the real shape of the dollar? Its about time for the Europeans to opposite this pratice seriously and to cut definitely the power of these "big three", the power they don't deserve.

[mgoetze]

Yes, sefinitely there is more. Still, it surprised me to find that Greek workers put in more hours than German workers. If nothing else, the statistics warn me off of fruitless paths.

 

Well, if all Greek men worked 35 hours per week, all German men worked 40 hours per week, all Greek women stayed at home, and all German women worked 20 hours per week, this statistic would have German workers working an average of 30 hours per week and Greek workers working an average of 35 hours per week, non? (Uhm assuming equal numbers of men and women that is.)

[mgoetze]

Poor standards by Standard & Poors? In Europe grows angry at the US rating agencies. No doubt, they have too much power and they have used it excessively during last 2 years.

 

And why do they have so much power? Oh, right, because governments (especially European ones) write so many regulations forcing institutional investors to act on S&P's ratings. In the bond discussion forum for private investors which I frequent, noone gives a sh*t what S&P and co. think. So if European politicians are upset at how much power S&P has... well... they are the only ones who can change it.

[y66]

Isn't this fun?

 

http://graphics8.nytimes.com/images/2012/02/21/blogs/bailout/bailout-tmagArticle.jpg

 

Prime Minister Jean-Claude Juncker of Luxembourg, who leads the group of euro zone finance ministers, showed the strain on Tuesday after all-night talks on a Greek bailout.

[mgoetze]

Yes, lots of fun. Bought some more Greek bonds (maturing March 20th) today.

[Aberlour10]

Prime Minister Jean-Claude Juncker of Luxembourg, who leads the group of euro zone finance ministers, showed the strain on Tuesday after all-night talks on a Greek bailout.

<br /><br />The face of the tired man, who works very hard, but not more belives that this process will end successfully.

[y66]

Whats the problem?

 

Balance of payments?

 

 

http://graphics8.nytimes.com/images/2012/02/25/opinion/022512krugman3/022512krugman3-blog480.jpg

 

 

 

or budget deficit?

 

 

http://graphics8.nytimes.com/images/2012/02/25/opinion/022512krugman2/022512krugman2-blog480.jpg

 

 

Source: The great one.

[mike777]

FRANKFURT—European Central Bank President Mario Draghi warned beleaguered euro-zone countries that there is no escape from tough austerity measures and that the Continent's traditional social contract is obsolete, as he waded into an increasingly divisive debate over how to tackle the region's fiscal and economic troubles.

 

In a wide-ranging interview with The Wall Street Journal at his downtown office here, Mr. Draghi reflected on how the region's travails were pushing Europe toward a closer union. He said Europe's vaunted social model—which places a premium on job security and generous safety nets—is "already gone," citing high youth unemployment; in Spain, it ...

 

 

------

 

 

Until Greece is willing to free up its labor force, which will be painful, I dont see how the economy will grow to any degree.

 

In terms of labor freedom, Greece is ranked close to the bottom in the world. Yeman and Ethiopia have much more labor freedom than Greece.