What will become of the eurozone?

[Sheilbh]

What Rules did the Germans break?

Growth and stability pact on deficits.  The Germans, French and Italians broke it year in year out (the Irish and Spanish adhered) which rather removed any force it would have had when the big three just ignore it.

[Razgovory]

What Rules did the Germans break?

Growth and stability pact on deficits.  The Germans, French and Italians broke it year in year out (the Irish and Spanish adhered) which rather removed any force it would have had when the big three just ignore it.

What are Growth and stability pacts on deficits?

[Admiral Yi]

Portraying this as some sort of morality play isn't helpful.

It's very helpful in demonstrating that people suffer consequences from their own bad choices and that assistance is also a choice, not an obligation.

[Neil]

I don't think you can get a pass on debt if you say it was the previous governments fault.  I feel more sorry for the a Germans, who kept their house in order and keep having to give handouts to their spendthrift Greek cousins.  The Germans are framed the bad guys because they give their cousins a budget, tell them to lay off the pot, and force them to get a job.

I understand you also support similar attitudes from the Tea Party congress members who refused to increase the US debt cap?

Ignoring Raz's idiocy and attempts to score political points, the real problem with the Tea Party is their stupidity and their belief that if only they trust in Jesus and lower taxes, everything will work out.  The second problem flows from the first.

[Zanza]

I think the German government's tended to choose the worst action at every given moment.  When decisiveness was needed there was dithering, when a decision had been reached it was ineffective and often edged with contradictions from senior figures in the German government.  I know there were real constitutional problems for Germany but I don't think the government's handled it well and that they've, if anything exacerbated the situation.

I've read that a lot in the English media. Can you give an example or two?

By contrst the Greeks have gone through hell.  They've passed truly painful austerity several times over the last 2 years, this government wasn't the one who fudged the figures and they've had to deal with massive uncertainty when despite all this because, due to often domestic political reasons, each tranche of funding is subject to new Euro infighting (normally, though not always, led by the German government).  I think it's dawning on Europe that Greece isn't a debt problem.  Greece is a far bigger problem involving the debt and a sclerotic economy.  All Europe's offering Greece is more cuts and tax rises with no plan or idea of how to help fix the Greek economy.  It's not enough simply to inflict pain if there's no idea of how to support growth.

Greece hasn't privatized anything yet, Greece hasn't even been able to stop that unbelievably ridiculous lorry licensing scheme, the have no plan to really cut down their huge government workforce, rich Greeks still don't pay taxes as all the tax raises hit the employees etc.
If not for the bailouts, they would have crashed much, much harder.

[Zanza]

What are Growth and stability pacts on deficits?

The Eurozone countries were meant to have less than 60% of GDP in debt and less than 3% annual deficit. Germany never fulfilled the former and broke the latter for three or four years in the early 2000s. Without consequence as France had broken them too and they basically told the rest to ignore that or else.

[Razgovory]

What are Growth and stability pacts on deficits?

The Eurozone countries were meant to have less than 60% of GDP in debt and less than 3% annual deficit. Germany never fulfilled the former and broke the latter for three or four years in the early 2000s. Without consequence as France had broken them too and they basically told the rest to ignore that or else.

So Germany violating this somehow hurts Greece?

[Admiral Yi]

So Germany violating this somehow hurts Greece?

Germany violating it and getting away with it arguably hurt Greece.

[Sheilbh]

I've read that a lot in the English media. Can you give an example or two?

The one that sticks out in my mind was Merkel mentioning the need for private sector involvement and a bond haircut on one day and, after market panic, having to clarify that she meant after 2013 and the form would still have to be decided.  It seemed like the first comment was for domestic consumption without an awareness of how the market would respond to loose talk. 

Greece hasn't privatized anything yet, Greece hasn't even been able to stop that unbelievably ridiculous lorry licensing scheme, the have no plan to really cut down their huge government workforce, rich Greeks still don't pay taxes as all the tax raises hit the employees etc.
If not for the bailouts, they would have crashed much, much harder.

I support the bailouts and Greek austerity.  I think Britain should be contributing to them.  But there needs to be a plan beyond bailouts and austerity such as the promise of support devising labour market and bureaucratic reforms and later infrastructure subsidies.

I believe around 80 000 public sector workers are on compulsory unpaid leave and there are things like top-rate pensions have been cut by 20%.  You're right about the tax evasion as a problem.

As I say my problem is that I think the Irish economy will recover.  I think the Italians, Portuguese and Spanish have a relatively clear route to getting a sustainable and slightly more liberal economy.  With Greece the size of adjustment, both fiscal and in policy terms, is so large it's like looking at the equivalent of a former Eastern Bloc or Latin American state.

[Sheilbh]

So Germany violating this somehow hurts Greece?

I think it hurt the credibility of fiscal discipline in the Eurozone that the three big members ignored the rules and weren't censured (and weren't able to censure smaller states breaking the rules).  But I didn't argue that, I just disagreed with your idea that Germany kept their house in order while the spendthrift Greeks were pissing it all away.  The Greeks were, but the Germans weren't saints.  That's a relatively recent development

[Zanza]

I support the bailouts and Greek austerity.  I think Britain should be contributing to them.  But there needs to be a plan beyond bailouts and austerity such as the promise of support devising labour market and bureaucratic reforms and later infrastructure subsidies.

There is exactly one group of people that can fix the Greek labor market. And that's the Greeks. The EU has no competences in that area and it shouldn't have either. And infrastructure subsidies? They got those for decades. And then they got cheap credit from the Euro. Did they use that for infrastructure? I guess you could say that if private swimming pools and big marinas full of shiny boats count as infrastructure.

I believe around 80 000 public sector workers are on compulsory unpaid leave and there are things like top-rate pensions have been cut by 20%. 

It depends on how you count it, but apparently their public sector and state owned enterprises are rather bloated from all the cronyism that has gone on for decades. 80,000 on unpaid leave is just the consequence. Without the bailouts it would probably be more as the state would just not have any money to pay their wages anymore.
And top-rate pensions being cut? Greeks apparently have a considerable part of their pension money invested in Greek government bonds. Let them default and see who pays. I'll give you a hint - it's not the vilified German and French banks. They will write down their assets a bit and might need a small recapitalization. The Greek pensioner however is in very deep shit then.

You're right about the tax evasion as a problem.

That, corruption, cronyism, protectionism etc. all harm the Greek economy and those are all things that only the Greeks can fix.

[Martinus]

I don't think you can get a pass on debt if you say it was the previous governments fault.  I feel more sorry for the a Germans, who kept their house in order and keep having to give handouts to their spendthrift Greek cousins.  The Germans are framed the bad guys because they give their cousins a budget, tell them to lay off the pot, and force them to get a job.

I understand you also support similar attitudes from the Tea Party congress members who refused to increase the US debt cap?

Tea Party members tended to come from red states, the states that typically get more federal money then they take in.  Not to mention they identified with the party that created a vast debt over the last decade.  With out raising so much as a peep.  So it's more analogous to your cousin blowing all his money on a stereo system and they raising a stink when you pay the utility bills.

Germany benefited hugely from having Greeks (and others) in the system (German economy is strong arguably because of having large export markets within the EU; I find it rather funny how everyone now praises Germans for being so good at fiscal matters, whereas about 5-10 years ago, the federal republic was widely derided as the "sick man of Europe"). And as others pointed out, they broke rules too.

I started a thread recently asking why the Tea Party got the bad rap over doing something comparable to what Germans are doing now - and people doubted this is the case. This thread proves I was right.

[Zanza]

I find it rather funny how everyone now praises Germans for being so good at fiscal matters, whereas about 5-10 years ago, the federal republic was widely derided as the "sick man of Europe").

Germany's fiscal policy was not the reason why it was called the sick man of Europe.

I started a thread recently asking why the Tea Party got the bad rap over doing something comparable to what Germans are doing now - and people doubted this is the case. This thread proves I was right.

Only if one accepts your premise that what Germany and the Tea Party are doing is actually comparable.

[Razgovory]

Germany benefited hugely from having Greeks (and others) in the system (German economy is strong arguably because of having large export markets within the EU; I find it rather funny how everyone now praises Germans for being so good at fiscal matters, whereas about 5-10 years ago, the federal republic was widely derided as the "sick man of Europe"). And as others pointed out, they broke rules too.

I started a thread recently asking why the Tea Party got the bad rap over doing something comparable to what Germans are doing now - and people doubted this is the case. This thread proves I was right.

They don't appear to be doing something comparable.  The Tea Party didn't exist prior to the Obama administration, nor is it in a position to bail out anyone.

[Iormlund]

I don't get why Spain is getting beat up along with the others.  Debt is 78% of GDP, lower I think than Germany.

1) As far as I understand our debt is often grouped with other Med bonds, which drags it down.
2) While government debt is low, private debt is quite high as a result of the bubble.
3) Extremely high unemployment.
4) Low growth prospects.
5) Lack of confidence in administrations.

It all sort of goes together: up until the sub-prime market blew up interest rates were lower than inflation. The government paid off some debt, which is why it is low, but businesses and families logically borrowed heavily and either invested or bought real state.
When it all came apart the entire construction sector (around 15% of the economy back then) was wiped out. Banks stopped lending, administrations froze payments and businesses started collapsing. By the time dust settled we had 20% unemployment and very high deficit. Furthermore, my entire generation has mortgaged their future (and often that of their parents as guarantors).
Add the austerity plans and you can see why internal consumption has plummeted.

The natural solution would be to export more. The problem is everyone else is in the same boat as we are, so growth prospects are not good.