Sovereign debt bubble thread

[Zanza]

If the Greeks were sent to Madagascar the better areas of Greece could be sold off to pay the debt. As they are now, with Greeks in them, they are worthless.

Or maybe they'll use their freedom of movement and move to the EU country with the best economy: Sweden. 

[alfred russel]

Yes, but throwing them out of the EU would reverse 50 years of progress as Sheilbh said. Why would any EU politican want that? I think leaving the Euro will be painful enough to prevent other countries from dropping out.

Sheilbh is the talking about the threat to the common market, I'm the one arguing with him. 

[Zanza]

Yes, but you think that one of the reasons why Greece hasn't left yet is that it fears that "the rest of the eurozone and EU is prone to telling Greece to get lost in a way it isn't for Spain or Italy". I don't think that the rest of the EU would do that.

[The Minsky Moment]

The aftershocks of the financial crisis have really exposed the respective institutional weaknesses of the US and the EU respectively.  The fact that the US nearly defaulted on its sovereign bonds and ate a rating downgrade is pretty serious indictment of the current American political process; but the inability of the EU to act in a decisive manner is really quite staggering.  A problem that could have been resolved months ago with some common sense and willingness to bend a few principles has now mestatisized into a fiasco that threatens to take down what just a year ago was being debated as a potential successor to the dollar as the pivotal world reserve currency.

[DGuller]

There are always this many summits.  They just normally don't matter to the world.  But I don't think you're right, they've been creative and pushed the treaties to the limit but they have operated within them.  All authority over the past few months has been based on the existing treaties and, I think, approved by the German Constitutional Court.

If we reach the point where it's all falling apart then you're right the treaties probably won't matter.  And we'll already have seen so large a political failure that I think any salvaging operation would be very difficult.

But this isn't a case of the EU making a change so it's okay for a country to leave.  It's about all 27 countries agreeing to that treaty change - so our government overcoming the British Eurosceptic Tories not going mad that we're not renegotiating everything - and that it's then passed - which includes an Irish referendum and (I think) the German Constiutional Court checking it out.  It's effectively 27 countries having to make a change that's acceptable in their own domestic situation.

Saying that it should just be cobbled together is like suggesting Congress and the President should allow some extra-constitutional procedure on a bare majority justified by a crisis.  I just don't think it'd fly.

Did anyone ever stop and think that maybe modeling EU after a Polish-Lithuanian Commonwealth is not the best thing?  Constitution should be hard to change, but there is a balance to be struck.  You don't want to make it so hard to change that you're stuck with a relic of a system and no exit strategy, because the ultimate end-game for those systems is a violent disintegration.

[alfred russel]

Yes, but you think that one of the reasons why Greece hasn't left yet is that it fears that "the rest of the eurozone and EU is prone to telling Greece to get lost in a way it isn't for Spain or Italy". I don't think that the rest of the EU would do that.

Presumably the only way to exit the euro without rewriting the rules is to exit the EU. So there was some literary license taken when I wrote that: the EU wouldn't actively tell Greece to get lost, it would rather be a question of how hard they would actively work to keep them in sans euro after Greece took steps that would lead toward an exit.

[Zanza]

I don't see what interest the EU or Greece would have in making the situation even worse after a disorderly exit from the Eurozone.

[Barrister]

There may not be any rules regarding a country leaving the Euro, but what is going to stop the Greeks from just up and doing it?  It's not like they have complied with any of the rules while being in the Eurozone and nothing ever happened to them...

[Ideologue]

Superior airborne equipment and tactics should ensure that the Second Battle of Crete goes better.

[Zanza]

Did anyone ever stop and think that maybe modeling EU after a Polish-Lithuanian Commonwealth is not the best thing?  Constitution should be hard to change, but there is a balance to be struck.  You don't want to make it so hard to change that you're stuck with a relic of a system and no exit strategy, because the ultimate end-game for those systems is a violent disintegration.

The US could transform its Articles of Confederation into the highly successful US constitution.

[The Minsky Moment]

The talk about the 27 countries misses the point that the real problem here lies with the core, not the periphery.  The new states with a couple exceptions are realtively sound, and they are not in the ones standing in the way of effective resolution, as Sikorski's extraordinary intervention reminded us.  The Franco-German-Italian core never took the stability pacts seriously and set the tone for everyone else.  Italy dug itself into an impossible hole while the others rolled their eyes, tolerated Silvio's antics and made ethnically condescending jokes - now the joke is on them.  Germany, Holland and the Nordics reaped the benefits of the Euro but have done everything they can to avoid confronting the consequences and side effects of those benefits.

Dumping on Greece, howevery psychically satsifying, is just gross hypocrisy - it is like the corner liquor store owner casting moral opprobrium on the town drunk while counting up his Night Train receipts.

The tragedy is that I do think Merkel wants to do the right thing and is moving in the right direction, but it is all too little, too late.

[Iormlund]

Did anyone ever stop and think that maybe modeling EU after a Polish-Lithuanian Commonwealth is not the best thing?  Constitution should be hard to change, but there is a balance to be struck.  You don't want to make it so hard to change that you're stuck with a relic of a system and no exit strategy, because the ultimate end-game for those systems is a violent disintegration.

Yes, thus the attempt to rewrite the treaties in the form of the much maligned Constitution. Unfortunately, that didn't go that well.

[Iormlund]

The tragedy is that I do think Merkel wants to do the right thing and is moving in the right direction ...

What makes you think that?

[Zanza]

Germany's one year bond yields are negative now. People are paying to own short-term German debt.

[Tamas]

Germany's one year bond yields are negative now. People are paying to own short-term German debt.

the crash from this sudden insane optimism today will be quick and spectacular.