Greece default

pqrdef

Reaper wrote: »

However if Germany and France were to leave that would work and allow the over priced Euro to sink and take the pressure off the struggling economies.

Yes. In the short term, I expect people will just keep lending the Greeks more money, but there's no long-term solution in which the euro carries on trying to be a Deutschmark. The ECB will have to manage the euro in the interests of the whole eurozone. And there'll be some catching up to do. The Germans are not going to like it. But if any country leaves, they need to be the first. This thought probably hasn't occurred to them yet.

Bloomberg

pqrdef wrote: »

Yes. In the short term, I expect people will just keep lending the Greeks more money, but there's no long-term solution in which the euro carries on trying to be a Deutschmark. The ECB will have to manage the euro in the interests of the whole eurozone. And there'll be some catching up to do. The Germans are not going to like it. But if any country leaves, they need to be the first. This thought probably hasn't occurred to them yet.

Greece is a bottomless pit. In my opinion Greece needs to be left to go to the wall. Any further assistance is tantamount to throwing good money out to bad. They have only themselves to blame for this mess, they had a excessively generous benefits system along with a very inefficient tax system. The writing has been on the wall for a long time. There is no coming back for Greece.

Ark_Welder

pqrdef wrote: »

The Germans are not going to like it. But if any country leaves, they need to be the first. This thought probably hasn't occurred to them yet.

Some Germans probably have thought of it. Germany is benefitting from being in the Euro because the currency's weakness against others is allowing Germany to boost its exports, and therefore, its economy. If Germany were to revert to the Deutchmark - or a 'northern-euro' then that currency would probably appreciate against others due to it being seen as a 'safe haven', making German exports more expensive abroad, possibly leading to a reduction in their economic output.

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From Reuters, [edit] Lawrence Summers: Europe's dangerous new phase

Bloomberg

Ark_Welder wrote: »

Some Germans probably have thought of it. Germany is benefitting from being in the Euro because the currency's weakness against others is allowing Germany to boost its exports, and therefore, its economy. If Germany were to revert to the Deutchmark - or a 'northern-euro' then that currency would probably appreciate against others due to it being seen as a 'safe haven', making German exports more expensive abroad, possibly leading to a reduction in their economic output.

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From Reuters, [edit] Lawrence Summers: Europe's dangerous new phase

I totally agree that at the moment the Germans are doing very well out of the Euro.

In your opinion do you think that had we joined the Euro at the onset that things would be much worse here?

Ark_Welder

Bloomberg wrote: »

I totally agree that at the moment the Germans are doing very well out of the Euro.

In your opinion do you think that had we joined the Euro at the onset that things would be much worse here?

My first instinct was to say 'yes', but I wanted to say why - it's easier for people to disagree with when they can see the reasoning! So I wanted to check up on some figures first, namely inflation and interest rates in the Eurozone and UK over since the Euro's inception.

Whilst inflation rates have been similar - up to 2008 - that for the Eurozone's has been achieved with a lower ECB interest rate compared to those set by the BoE. So if interest rates in the UK had been lower over the past decade then I think that inflation would have been higher in the UK. And lower interest rates would probably have meant more money going into that great old British favourite, the housing market. So a credit-crunch in the UK under those circumstances I think would have resulted in a far worse situation here now. Perhaps closer to a Spanish or Irish situation.

However, the above does assume that a UK in the Eurozone would not have had an impact on interest rate decisions, which could have led to interest rates being higher in the zone than they were.

Also, a floating exchange rate has allowed the the Pound to drop against the Euro which should help UK exports to the region because they become cheaper there. It's probably one of the causes of rising inflation here too.


So yes, I think that if the UK had been in the Euro then the situation would be worse here than it now is.



http://www.ecb.int/stats/prices/hicp/html/inflation.en.html
http://www.ecb.int/stats/monetary/rates/html/index.en.html
http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp

Bloomberg

Ark_Welder wrote: »

My first instinct was to say 'yes', but I wanted to say why - it's easier for people to disagree with when they can see the reasoning! So I wanted to check up on some figures first, namely inflation and interest rates in the Eurozone and UK over since the Euro's inception.

Whilst inflation rates have been similar - up to 2008 - that for the Eurozone's has been achieved with a lower ECB interest rate compared to those set by the BoE. So if interest rates in the UK had been lower over the past decade then I think that inflation would have been higher in the UK. And lower interest rates would probably have meant more money going into that great old British favourite, the housing market. So a credit-crunch in the UK under those circumstances I think would have resulted in a far worse situation here now. Perhaps closer to a Spanish or Irish situation.

However, the above does assume that a UK in the Eurozone would not have had an impact on interest rate decisions, which could have led to interest rates being higher in the zone than they were.

Also, a floating exchange rate has allowed the the Pound to drop against the Euro which should help UK exports to the region because they become cheaper there. It's probably one of the causes of rising inflation here too.


So yes, I think that if the UK had been in the Euro then the situation would be worse here than it now is.



http://www.ecb.int/stats/prices/hicp/html/inflation.en.html
http://www.ecb.int/stats/monetary/rates/html/index.en.html
http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp

Thank you for post. I agree that had we gone down the Euro road then our dire situation would be far worse. Giving up control of our interest rates would have been a catastrophic.

talexuser

If we had gone in, would we not have a bigger deficit now from having to contribute more to support the PIGS directly?

Ark_Welder

talexuser wrote: »

If we had gone in, would we not have a bigger deficit now from having to contribute more to support the PIGS directly?

Most likely. Currently, the UK's contribution is via its IMF commitments, the European Financial Stability Mechanism which covers all EU members, and a direct facility given to Ireland. [edit] Eurozone members also contribute via the European Financial Stability Facility, which is substantially larger than the EFSM.

In 2013 the EFSM and EFSF will become combined into the European Stability Mechanism, which will be for Eurozone members only, but with optional participation from non-Euro members of the EU.

ipri

Does any of this affect the money I have in the bank?...thats all many people are intrested in!

talexuser

ipri wrote: »

Does any of this affect the money I have in the bank?...thats all many people are intrested in!

The money in your bank is being depleted by our inflation as a first order factor to worry about.

If you have shares/pensions/mortgages/insurances invested in stock market vehicles they could decrease in the short term if the crisis causes a stock market dip.

In the last resort if your bank goes bust because it has too much Greek/Euro debt make sure you have less than 85k in any one license organisation.