A Greek crisis may well become Germany’s problem

Mr_Matey

From the Times:
http://www.timesonline.co.uk/tol/comment/columnists/bronwen_maddox/article6991719.ece


Summary:

• Greece is in all sorts of trouble and plan to cut budget deficit from 13% to 3% in 3 years
• The possibility they will get to the brink of defaulting on its sovereign debt remains real. This could lead to a domino effect with the next being Portugal, Spain and Italy.
• Angela Merkel sounds like she'd support Germany bailing out Greece, but German taxpayers may not support it.

The comments are worth a read too.

Generali

We're starting to see the cracks appearing from when the solvent bail out the insolvent.

In Germany this will be particularly pertinent as they have a constant and ongoing reminder of the costs of bailing out the insolvent East.

StevieJ

Is this the one great triumph of Brownie, I don't see the point of the one size fits all euro.

tomterm8

It's not going to happen... the IMF will bail out greece, not the eurozone, simply because the eurozone has no mechanism to cope with a default.

JP45

The Greek Government's plan to cut the budget deficit from nearly 13 per cent to under 3 per cent in three years is totally implausible. The cynic in me suspects they know it too. It's almost as if they're inviting a European bailout.

As one of the comments to the original article points out:

They should never have joined the euro and neither should any of the rest of the Southern Europe states.

Degenerate

tomterm8 wrote: »

It's not going to happen... the IMF will bail out greece, not the eurozone, simply because the eurozone has no mechanism to cope with a default.

I'm really not sure how the IMF would go about helping an individual euro-zone member, as their support usually comes as a package including stipulations over monetary policy. In any case, for the euro-zone leaders to stand by and allow that to happen would be tantamount to admitting the euro-zone is an abject failure.

tomterm8

Degenerate wrote: »

I'm really not sure how the IMF would go about helping an individual euro-zone member, as their support usually comes as a package including stipulations over monetary policy. In any case, for the euro-zone leaders to stand by and allow that to happen would be tantamount to admitting the euro-zone is an abject failure.

Same way as with Iceland, and the eastern european states. The IMF loans money to greece, with an agreement between the IMF and the Eurozone as to fiscal objectives. The eurozone issues a certain number of eurobonds as collateral to the IMF. IMF drawing rights are good as collaterol with the ECB.

The problem in this case isn't a currency crises, and so monetary policy, beyond setting ceilings as to debt, isn't all that relevant. The real policy would be internal devaluation, also known as deflation.

Rochdale_Pioneers

This is why I laugh when I read most of the froth about Britain being screwed, or our credit rating about to be sunk. Britain - unlike Greece, Ireland, Portugal etc etc actually has an economy that still functions. Has as independent a monetary policy as you can have in a globalised world. Prints its own currency to pay off debts held in that currency.

We're in a hole, course we are. But we're a long long way from the depths being dug by various EU colleagues - and I haven't mentioned the baltics or Eastern Europe yet.

tomterm8

Rochdale_Pioneers wrote: »

We're in a hole, course we are. But we're a long long way from the depths being dug by various EU colleagues - and I haven't mentioned the baltics or Eastern Europe yet.

It's very messy, though, isn't it? Eurozone countries are our biggest export market by a mile, with the US and Japan following. If the Eurozone is in deep trouble, I don't see how we can escape the consequences.

1984ReturnsForReal_2

Rochdale_Pioneers wrote: »

This is why I laugh when I read most of the froth about Britain being screwed, or our credit rating about to be sunk. Britain - unlike Greece, Ireland, Portugal etc etc actually has an economy that still functions. Has as independent a monetary policy as you can have in a globalised world. Prints its own currency to pay off debts held in that currency.

We're in a hole, course we are. But we're a long long way from the depths being dug by various EU colleagues - and I haven't mentioned the baltics or Eastern Europe yet.

I would argue with that.

IF we come out well in the next 6 months it will be as a result of the market recovery & tax paid on it.

But dont expect that market to produce much more profit.

Really2

tomterm8 wrote: »

It's very messy, though, isn't it? Eurozone countries are our biggest export market by a mile, with the US and Japan following. If the Eurozone is in deep trouble, I don't see how we can escape the consequences.

At least we will not be suffering reduced trading and then extra debt to support them also.