Slovakia votes against Greek bailout.
They're in the back room discussing Eurobribes right now. Then they'll just keep putting it up until it passes. Just like Lisbon.
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 Slovaks are being asked to contribute a lot in relation to their population and GDP.
Quote from: Viking on October 11, 2011, 06:10:45 PM
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.
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.
Quote from: Viking on October 13, 2011, 01:49:48 AM
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.
Fuck'em.
Both Slovakia and Greece.
Quote from: Martinus on October 13, 2011, 01:54:01 AM
Quote from: Viking on October 13, 2011, 01:49:48 AM
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.
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.
Quote from: Admiral Yi on October 13, 2011, 02:51:47 AM
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.
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.
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.
Quote from: Martinus on October 13, 2011, 03:04:00 AM
Quote from: Admiral Yi on October 13, 2011, 02:51:47 AM
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.
Quote from: Martinus on October 13, 2011, 03:04:00 AM
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.
QuoteIn 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.
Quote from: Admiral Yi on October 13, 2011, 02:51:47 AM
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 the Euro would probably collapse. There'd be so much fear of as Viking said Ireland, Spain, Italy and Portugal leaving that the cost of any further bailout for those countries would increase to an implausible level and I think markets would start looking more suspiciously at, say, Belgium and possible France.
Member states need to be able to go bust within the Euro if it's to work as a currency, just as is, I believe, the case with US states. I don't know, but my opinion is that if Greece left we'd be looking at a Northern European Euro before long. With a prolonged recession and a second financial and banking crisis of greater magnitude than the last.
Quote from: Tamas on October 13, 2011, 03:07:31 AMThe 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.
This. The failed vote was domestic power politics, not on the issue itself. It was always clear that there would be a majority in the Slovakian parliament for the issue. That's why they voted again on it just
one day later and passed the EFSF enlargement.
Quote from: Sheilbh on October 13, 2011, 04:23:21 AM
Member states need to be able to go bust within the Euro if it's to work as a currency
I don't see why that's not the case right now.
Quote from: MadImmortalMan on October 11, 2011, 06:05:17 PM
They're in the back room discussing Eurobribes right now. Then they'll just keep putting it up until it passes. Just like Lisbon.
It passed a day later.
Quote from: Viking on October 11, 2011, 06:10:45 PMNote, the likely result of this is a big bribe to Slovakia or a bi-lateral bailout by Germany.
The result - as was known beforehand to everybody who cared - was that the opposition voted in favor of the issue on the next day.
If we let Greece fail and kick it out the Euro, isn't the EU just sending a big signal that it might not be willing to back a whole host of other eurozone states? Aside from punishing Greece by condemning it to at least a decade of economic doldrums (despite everyone having nodded and winked when our Hellenic friends joined a completely unsuitable currency system), I don't see how this would forestall more devestating attacks on Spain, Ireland, Italy and Portugal - and then god knows who else. EU member states have dithered and dithered in taking effective action, and there is no reason to believe this will change. So what are markets to make of an EU that can't take decisive action, and is now not even backing the weakest members?
Quote from: Warspite on October 13, 2011, 04:55:27 AM
If we let Greece fail and kick it out the Euro, isn't the EU just sending a big signal that it might not be willing to back a whole host of other eurozone states?
Letting Greece (and other insolvent states?) fall would only work if there was a credible way to support the illiquid but solvent states (e.g. Spain) in regaining their liquidity.
QuoteAside from punishing Greece by condemning it to at least a decade of economic doldrums (despite everyone having nodded and winked when our Hellenic friends joined a completely unsuitable currency system),
I honestly don't see any way around that, no matter what.
QuoteI don't see how this would forestall more devestating attacks on Spain, Ireland, Italy and Portugal - and then god knows who else. EU member states have dithered and dithered in taking effective action, and there is no reason to believe this will change. So what are markets to make of an EU that can't take decisive action, and is now not even backing the weakest members?
I think distinguishing between insolvent and illiquid member states is key here. The latter could be supported by unlimited liquidity from say ECB or EFSF, the former should be allowed to default and remain in or leave the Euro.
Quote from: Tamas on October 13, 2011, 03:05:19 AM
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.
Last I heard, Germany was going strong until Q2 and is now as stagnant as the rest of the big players. Which is not surprising since its biggest trading partners are all in trouble.
Also, it is precisely lack of trust that a default will create. Lack of trust in Ireland, Portugal, Italy, Spain ... and if any of those last two goes down we're in deep, deep shit.
Here is the prediction for Germany. The last bit is good news if it actually happens (btw. that's not how the EU measures unemployment - that's lower), the rest is not unexpected.
QuoteThe leading German economics institutes have painted a sombre picture of Germany's economic outlook in an assessment presented in Berlin on Thursday.
The experts predict a sharp economic downturn for 2012. They say gross domestic product (GDP) will sink from an expected 2.9 percent this year to just 0.8 percent in 2012.
Their original growth projection for 2012 was 2 percent. Germany saw unexpectedly good growth in GDP at the start of the year, which has since stalled.
On a more optimistic note, the report also predicted a slight reduction in the unemployment rate from 7 per cent this year to 6.7 per cent in 2012.
http://www.dw-world.de/dw/article/0,,15457269,00.html
Germany's problem is that a chunk of their economy involves net exports to financial weak EU partners that run chronic current account deficits - including Greece, Spain, and Portugal.
One cannot run a fixed exchange rate system -- which is what the euro is -- without some viable mechanism for resolving chronic current account imbalances. But the eurozone just buried their hands in the sand over this problem.
What is the effect of burying your hand in the sand?
Quote from: Razgovory on October 13, 2011, 10:13:51 AM
What is the effect of burying your hand in the sand?
It makes it much, much harder to clap.