Is the Euro Kaput?
I take no joy in the suffering of others. Then again, when you are a contrarian…grinning like the Cheshire Cat while winking I toldya so is about as satisfying as life can get.
For many years now, well before it became the stuff of Wall Street Journal headlines and Bloomberg op-ed columns, I have touted the Euro’s demise. It hasn’t been out of personal spite, though I must admit travelling through Europe is a lot more expensive than it used to be. It has been out of the simple fact that it endorses institutional socialism and the welfare state mentality.
In this very telling David Marsh quip, the most important side of the coin is examined. The Deutschemark side of the coin.
As I have stated to much scorn and ridicule over the years, Germany don’t like the Euro. As I have stated to far more scorn and ridicule over the years, Germany is the Euro. A more than perfunctory scrape over European post-World War 2 economic history leads to telling conclusions. Namely, Germany recovered and prospered… everybody else did not. By everybody I am alluding to countries not in Germany’s sphere of influence and cultural values towards work, discipline and fiscal austerity.
Today 71% of Germans no longer trust the Euro, a steep rise from below 50% in just 2008. It is amazing the effect that the outstretched hands of beggars can have on the psyche of the saver. This is a theorem we also ignore in the United States, though we too will be forced to deal with the same harsh realities soon enough.
Perhaps the most telling bit of info in an otherwise very intriguing article lies in its opening paragraph.
Two years ago, at a semi-official Anglo-German meeting with financial and business figures in London, I asked a well-known German bank chairman with whom I have a reasonable acquaintance how he would react if Greece one day asked to leave the euro. This was an open question-and-answer session in front of about 50 people "I would act like Clint Eastwood," my banker friend said, with rollicking good humor. "I would say, 'Go ahead, make my day.”
That day is ever closer and ultimately, it will be more than just Greece asking to leave the party.
Why would Greece ever ask to leave?? Sure being tied to the euro has taken away a Greek national monetary system or central bank that could be used to print more bills and solve their crises U.S.-style, but given the headlines, imagine how quickly a Greek currency would have gone to shit over the past year. The "banker friend" has an understandable reaction because Germany is keeping most of the rest of Europe afloat, as you mentioned, but Greece benefits too much from this situation to justify leaving the euro.
If the euro is to fade into oblivion, it will be because countries like Germany don't wish to support such indolence as is found in the economies and cultures of the PIIGS. At the same time though, Germans realize the interconnectedness of their own economy with the rest of Europe and still feel too bad about WWII to do something so drastic.
Because the survival of a state is not simply about markets and econ. I had a nice ringside seat for the festivities in Athens this past week and rest assured that they are dealing with some issues that central bankers cannot influence. Though I co-sign the vast majority of what you wrote, the game changes when the rioters come out.
I tend to agree with Midas about the whole game changing when the rioters come out. I don't know if Greece has the balls to ask, much less actually get, out, though. I think they are so far beyond fucked at the moment that there really isn't a great solution. If the EU kicks them out then questions are going to be raised about how 'together' the Union is in times of crisis and if they keep them (as well as Spain and Ireland) the rest of the nations are going to get really sick of footing the bill for countries that can't keep their shit together.
Good point
Wrong question
When is the Euro done ?
Answer:
maybe in a few years
Italy has to pay interest up to $100 billion every year.
Footing the bill for Greece is merely a political liability when the weakness of the euro helps you print +9% GDP in a quarter. The European Union has always been at odds with what the masses think they want but the core has gained far too much from the euro in the past 10 years to bail. Greece may have to leave at some point, but it's very much in Germany/France's economic interest to keep them in.
Greece must leave (the EWU) and Spain,Portugal and Italy must also be excluded
The idea of a multinational currency is so dumb. Without one government and one set of policies it means that exploitation will continue. If I was Germany I would want to leave the Euro rather than continue bankrolling the lazy and socialist Grecians, Italians, and Spaniards. Who knows who is next?
Multinational curreny seems to be very dumb. Leaving the Euro will destroy Germanys power. The best way to save the euro is to exclude Spain,Portugal,Greece and Italia. Ireland looks solid, their banks were smashed hard, but the economy can be solid in a few years.
Poland is also underestimated, they have growth rates far over 5%. There is hope (when the PIIGS have to leave the EMU)
I think there are two options, along the lines of what MMBinc said. Either we unify our economic policies and start enforcing the laws we were supposed to have (like deficit
[quote=Maximus Decimus Meridius]I think there are two options, along the lines of what MMBinc said. Either we unify our economic policies and start enforcing the laws we were supposed to have (like deficit
Midas and happy, I agree with your point about things changing with rioters, but what else can be done? I don't think there's anything that the ECB could've done differently because a Greek default would be a catastrophe and yet regardless of how unhappy the rioters might be, Greece wasn't going to get any aid without painfully reversing it's years of fiscal irresponsibility and mismanagement.
Maximus, do you really think such unification of policies is possible? You seem to be speaking from the point of view of a European, so I'm just trying to gauge your honest opinion on this one.
I personally agree with Rex's previous statement and think the European Union is doomed. There's too much bad with no end in sight, especially in terms of employment in Italy and Spain.
It seems most everybody agrees about the impending demise of the euro, just a few differences on when and how. Hopefully the EU will limp on for a few more years and let the global economy get back on its feet first.
Those in the "know" among Germany's population understand that the Euro is acting as a wealth transfer mechanism - from poorer PIIGS to savvier/most fiscally responsible powers such as Germany.
Look at Germany's unemployment rate - it's the envy of the developed world. Sure the average German hates seeing headlines about bailouts and debt crises but what they don't understand is they are the current beneficiary...
Youre absolutely correct. The whole EMU seems to be a wealth-transfer mechanism and thats really worse for strong economies like Germany or France
Wait. Whaaaaa.... You just came to the opposite conclusion of what he stated was occurring.
No, hedgefund13 has it right. Germany and France have gained far more from the low exchange rate the Euro offers them than they would ever have to pony up bailing out Greece, Ireland and Portugal. Spain and Italy are a different matter which is why finding a durable solution, such as an European fiscal policy, is so important.
The biggest impediment to a safe euro is the lack of labor mobility in the euro zone caused by language and cultural differences. Packing your bags and moving from Athens to Frankfurt just isn't the same as going from Detroit to NYC.
Culpa et porro et molestiae tempora ducimus repudiandae. Eum est debitis ipsum totam culpa. Blanditiis ut optio exercitationem laudantium. Voluptatem ut asperiores voluptate et iste.
Explicabo blanditiis corrupti totam ea et illum. Optio dicta voluptatem voluptates nulla. Rerum autem quo est cumque voluptate sed. Vitae id velit perspiciatis aut at inventore. Maxime iusto rerum quae. Voluptatibus voluptatem explicabo asperiores voluptates.
Eius repellat dicta minus est. Veritatis odio est repellendus aspernatur et. Quod unde repellendus voluptas distinctio enim eveniet fugit. Voluptas qui voluptatem aliquid corporis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...