Slovakia, the mouse that roared.

[citizen k]

Slovakia votes against Greek bailout.

[MadImmortalMan]

They're in the back room discussing Eurobribes right now. Then they'll just keep putting it up until it passes. Just like Lisbon.

[Viking]

Didn't know the concept for Moral Hazard had reached that far east?

But, seriously, Slovakia has done everything right, made hard choices and run their country well becoming the Detroit (the Detroit of 1950, not 2010) of Europe as a popular place for manufacturing, especially of cars. They already suffered pain to have a sensible economy. Greece declined the pain and had a stupid economy. If Slovakia is arguing that it is unfair then I agree with them.

Note, the likely result of this is a big bribe to Slovakia or a bi-lateral bailout by Germany.

[The Minsky Moment]

The Slovaks are being asked to contribute a lot in relation to their population and GDP.

[Martinus]

Didn't know the concept for Moral Hazard had reached that far east?

But, seriously, Slovakia has done everything right, made hard choices and run their country well becoming the Detroit (the Detroit of 1950, not 2010) of Europe as a popular place for manufacturing, especially of cars. They already suffered pain to have a sensible economy. Greece declined the pain and had a stupid economy. If Slovakia is arguing that it is unfair then I agree with them.

Note, the likely result of this is a big bribe to Slovakia or a bi-lateral bailout by Germany.

It depends how you look at it. Becoming a part of the Eurozone is a bit like subscribing for shares in a company. Doesn't matter if you just put the money in or did it long time ago and the company was badly managed - now it is a common business and the company will go bust if everyone doesn't contribute more. It may be "unfair" but that's how it works. You can of course refuse to put more money in, call it quits and let the whole thing collapse, but you should be aware of - and willing to take responsibility for - the consequences.

From that perspective, Slovakia has not "done everything right". For one, they joined the Eurozone on the brink of a crisis - that was apparently a bad decision and they now have to pay for it. Poland is not required to pay (although we will apparently chip in) but we didn't join the Eurozone.

[Viking]

Saving Greece is not required to save the Eurozone. Furthermore the demands made on Greece are not the only possible demands that can be made. Slovakia may have come in late, but the Slovaks have not run long term budget deficits. The sense in which Slovakia has done everything right (obviously not including Magyar Civil Rights etc.) is that they do not need a bailout.

The Eurozone can be saved by royally screwing over Greece. This bailout is there to save Greece rather than saving the Eurozone. Kicking Greece out on the grounds of willful and repeated violations of the Stability Pact (or whatever it's successor was named) and leaving the Greeks to rot can save the Euro as well.

[Martinus]

Saving Greece is not required to save the Eurozone. Furthermore the demands made on Greece are not the only possible demands that can be made. Slovakia may have come in late, but the Slovaks have not run long term budget deficits. The sense in which Slovakia has done everything right (obviously not including Magyar Civil Rights etc.) is that they do not need a bailout.

The Eurozone can be saved by royally screwing over Greece. This bailout is there to save Greece rather than saving the Eurozone. Kicking Greece out on the grounds of willful and repeated violations of the Stability Pact (or whatever it's successor was named) and leaving the Greeks to rot can save the Euro as well.

You are just asserting these claims as facts, but apparently this is not the case. There is a lot of dispute whether kicking Greece out would help the rest of the Eurozone or not. It seems the majority has decided on one course of action. Slovakia can leave.

[Tamas]

Fuck'em.


Both Slovakia and Greece.

[Viking]

Saving Greece is not required to save the Eurozone. Furthermore the demands made on Greece are not the only possible demands that can be made. Slovakia may have come in late, but the Slovaks have not run long term budget deficits. The sense in which Slovakia has done everything right (obviously not including Magyar Civil Rights etc.) is that they do not need a bailout.

The Eurozone can be saved by royally screwing over Greece. This bailout is there to save Greece rather than saving the Eurozone. Kicking Greece out on the grounds of willful and repeated violations of the Stability Pact (or whatever it's successor was named) and leaving the Greeks to rot can save the Euro as well.

You are just asserting these claims as facts, but apparently this is not the case. There is a lot of dispute whether kicking Greece out would help the rest of the Eurozone or not. It seems the majority has decided on one course of action. Slovakia can leave.

Yes, there is a lot of dispute - I come out on the side of the people saying that the Eurozone can save itself by screwing greece over and forcing the greeks to return to the drachma and guarantee their own loans. The majority might not agree with me, (the majority being decided by who has enough euros saved up to pay for the bailout, i don't have remotely enough euros to bail out greece). Now I don't see what difference (for the world banking community's view of the reputation of the remaining euro members) of the act of kicking greece out or the act of permitting slovakia to resign? Both are effectively the same action; removing a member from the eurozone. One, however, removes a solvent member, the other removes an insolvent member.

Now, one of the worst consequences of kicking greece out would be "runs" on the Europeseta, Euroescudo and Eurolira. Each of which would be bad for Spain, Portugal and Italy respectively. But, again, the issue of moral hazard. These countries themselves broke agreements they made getting themselves into precisely the situations they are in. You don't have the Euromark or the Euroguilder in trouble.

[Admiral Yi]

I don't get your company going bust analogy Marty.  If Greece defaults and exits there's nothing that prevents the other members from maintaining the euro as their currency.

I think you were on more solid ground (though I still disagreed) when you were arguing that bailing out Greece was in the self-interest of the Eurozone because a default would trigger a double dip.

[Martinus]

I don't get your company going bust analogy Marty.  If Greece defaults and exits there's nothing that prevents the other members from maintaining the euro as their currency.

I think you were on more solid ground (though I still disagreed) when you were arguing that bailing out Greece was in the self-interest of the Eurozone because a default would trigger a double dip.

Well that's what I meant really - i.e. Greece going to fuck itself would be bad for everyone, not just for Greece. That's why this is not a case of "moral hazard". Moral hazard is a situation where someone screws himself over by being stupid and then asks others for help on *moral* grounds (hence the word moral there). Moral hazard is not something that is a pragmatic solution.

In fact, it's Slovakia here that plays something akin to moral hazard (only looking at it from the other side of the equation) - i.e. they refuse to compromise their "moral" principle of not helping the screw up, even though it will screw up everyone (including Slovakia). It's akin to the Tea Partiers refusing to prevent the US default back in August.

[Martinus]

In any case, the point is moot. Apparently, the Slovakian government fell over the veto and the Parliamentary majority is going to support the bail out.

[Tamas]

I am no economist, but look at stuff like the industrial statistic from Germany: in contrary to the expectations they actually showed some growth.
There is nothing wrong with the productive side of the economy - there are no resource shortages or anything. There is a serious problem with the financial markets because decades of blowing away printed money on welfare and other careless government spending is hitting back hard, and trust in the system is near zero.

I am afraid that if Greece gets bailed out, that lack of trust will remain. So let them burn. Spend the money on surviving the initial negative reaction on the markets. Cleanse the system and start anew.

[Tamas]

I don't get your company going bust analogy Marty.  If Greece defaults and exits there's nothing that prevents the other members from maintaining the euro as their currency.

I think you were on more solid ground (though I still disagreed) when you were arguing that bailing out Greece was in the self-interest of the Eurozone because a default would trigger a double dip.

Well that's what I meant really - i.e. Greece going to fuck itself would be bad for everyone, not just for Greece. That's why this is not a case of "moral hazard". Moral hazard is a situation where someone screws himself over by being stupid and then asks others for help on *moral* grounds (hence the word moral there). Moral hazard is not something that is a pragmatic solution.

In fact, it's Slovakia here that plays something akin to moral hazard (only looking at it from the other side of the equation) - i.e. they refuse to compromise their "moral" principle of not helping the screw up, even though it will screw up everyone (including Slovakia). It's akin to the Tea Partiers refusing to prevent the US default back in August.

The Slovakian PM made the vote a vote of confidence on herself because she thought the MPs wouldn't dare risking the launch of a European shitstorm to oust her. She went all in and lost. There was nothing in this vote about the moral questions of the EU and the eurozone, or about anything else in the world but internal Slovakian politics.

[Viking]

Well that's what I meant really - i.e. Greece going to fuck itself would be bad for everyone, not just for Greece. That's why this is not a case of "moral hazard". Moral hazard is a situation where someone screws himself over by being stupid and then asks others for help on *moral* grounds (hence the word moral there). Moral hazard is not something that is a pragmatic solution.

In economic theory, moral hazard is a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk.

So, no, your definition of moral hazard is not correct. The moral hazard refers to the greek willingness to behave badly on the grounds that they could rely on a bailout. The bailout has been going on since the start of the euro zone since the euro has drastically reduced the cost of greek debt.