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Possible Lynching?
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Er, right, ok guys, you know that referendum you had last week.....etc
How is Tsipras going to explain that despite voting him in on a non austerity ticket and also voting against austerity in the referendum, he's gone and done a deal that is more austere than the previous austerity that they elected him to get shot of? Mussolini moment?
Er, right, ok guys, you know that referendum you had last week.....etc
How is Tsipras going to explain that despite voting him in on a non austerity ticket and also voting against austerity in the referendum, he's gone and done a deal that is more austere than the previous austerity that they elected him to get shot of? Mussolini moment?
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New Judge,
They joined the €uro precisely because their existing currency was rubbish.
Under the drachma loans were costing 18%. By joining the €uro they got the same loans for 3%. That encourage them to borrow too much, and then the Credit Agencies effectively took away their ability to borrow money, so the need bailouts. If they went to a new currency, they would still have a lousy credit rating and still need bailing out.
They joined the €uro precisely because their existing currency was rubbish.
Under the drachma loans were costing 18%. By joining the €uro they got the same loans for 3%. That encourage them to borrow too much, and then the Credit Agencies effectively took away their ability to borrow money, so the need bailouts. If they went to a new currency, they would still have a lousy credit rating and still need bailing out.
Yes quite so. It cost them 18% to borrow because that refelected the value of the risk the markets were being asked to take.
But it's clear for all to see that simply becoming a member of the eurozone was not the cure for those ills. Nothing changed except that they were suddenly presented with the chance to borrow money at the same rates as Germany. They may have obtained a longer "free ride" had the 2008 financial crisis not occurred and may still be merrily strolling along, borrowing vast sums of euros at (for them) rock bottom prices. But I doubt it. All the crisis did was to hasten the inevitable.
The fact is that the Greek economy is in very poor order (the reasons need not trouble us here). Their old currency was not rubbish; it was their economy that was (and still is) rubbish. The currency simply reflected the state of their economy and adjusted (mainly downwards) accordingly. The euro does not do so.
In adopting the euro they signed up to a financial discipline that they clearly are not capable of adopting. Of course they borrowed hugely (who wouldn't when suddenly presented with such comparitively low interest rates?). The result of that folly is now plain to see.
The euro is the principle cause of their plight. Had they not adopted it their economy would stilll have struggled along (because they have made no meaningful reforms) but the Drachma would simply have declined in value to match that of their economy. Furthermore they would not have taken on the huge loans they are now being pressed to repay (because they would not have been able to afford them and lenders would not have granted them). The euro gave the Greeks artificial wealth which they have spent and have no chance of repaying.
There is no way that those loans are going to be repaid - ever. The lenders must take the results of their stupidity on the chin. But so long as Greece continues using the euro it will never be competetive in the few things it does than can earn them money
But it's clear for all to see that simply becoming a member of the eurozone was not the cure for those ills. Nothing changed except that they were suddenly presented with the chance to borrow money at the same rates as Germany. They may have obtained a longer "free ride" had the 2008 financial crisis not occurred and may still be merrily strolling along, borrowing vast sums of euros at (for them) rock bottom prices. But I doubt it. All the crisis did was to hasten the inevitable.
The fact is that the Greek economy is in very poor order (the reasons need not trouble us here). Their old currency was not rubbish; it was their economy that was (and still is) rubbish. The currency simply reflected the state of their economy and adjusted (mainly downwards) accordingly. The euro does not do so.
In adopting the euro they signed up to a financial discipline that they clearly are not capable of adopting. Of course they borrowed hugely (who wouldn't when suddenly presented with such comparitively low interest rates?). The result of that folly is now plain to see.
The euro is the principle cause of their plight. Had they not adopted it their economy would stilll have struggled along (because they have made no meaningful reforms) but the Drachma would simply have declined in value to match that of their economy. Furthermore they would not have taken on the huge loans they are now being pressed to repay (because they would not have been able to afford them and lenders would not have granted them). The euro gave the Greeks artificial wealth which they have spent and have no chance of repaying.
There is no way that those loans are going to be repaid - ever. The lenders must take the results of their stupidity on the chin. But so long as Greece continues using the euro it will never be competetive in the few things it does than can earn them money
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