Open Letter from Syriza Leader to German People

tberry6686

Germany will never return to the DM. The destruction of it's economy that would ensue makes it politically impossible.

The current German industrial strength is built on an exchange rate that is held artificially low by the rest of the Euro region.

Generali

michaels wrote: »

Germany's economic success of late has been very much driven by a much lower exchange rate than would have been the case had it not tied its currency to the countries it now berates. A case of trying to have ones cakes and eat it.

I'm not sure that's the full story as Germany also has a massive trade surplus inside the Eurozone.

TBH, I think the problem is that German workers are underpaid as they can't afford to buy what they produce.

michaels

Generali wrote: »

I'm not sure that's the full story as Germany also has a massive trade surplus inside the Eurozone.

TBH, I think the problem is that German workers are underpaid as they can't afford to buy what they produce.

Surely that is precisely because their currency is tied to those of the other eurozone members, otherwise the DM would have appreciated against the Drachma to the extent that Greeks didn't run up a huge deficit buying BMWs because they would have been too expensive.

antrobus

stator wrote: »

The greek people weren't forced to accept the bail out. They could have defaulted on their loans at the time. They now have the choice of defaulting and leaving the eurozone or sticking with the current plan. I do wish they would stop moaning about it though. Pretending they were forced into anything is a lie. They took their choices before and have to live with the consequences.

Oddly enough, Tsipras has ruled out the option of "defaulting and leaving the eurozone". Doesn't that leave "sticking with the current plan" as the only option?

Generali

stator wrote: »

The greek people weren't forced to accept the bail out. They could have defaulted on their loans at the time. They now have the choice of defaulting and leaving the eurozone or sticking with the current plan. I do wish they would stop moaning about it though. Pretending they were forced into anything is a lie. They took their choices before and have to live with the consequences.

...and one of the consequences could be a partial default either negotiated or not.

The point that Syriza has spot on is that Greece wasn't and isn't suffering a liquidity problem it has a solvency problem. Trying to deal with solvency by offering liquidity doesn't work any better than treating a virus with creosote.

Greece was persuaded that the Troika bailout was in their best interests. A quarter of Greeks being unemployed would tend to suggest that was wrong.

If you knowingly lend an insolvent person money and they fail to repay, who is to blame? When the banks did it prior to the GFC it was decided that the banks were all to blame for being venal and acting in their short term interests. When Governments do the same thing they are somehow acting in the interests of the Greek people at the risk and expense of their people.

Rubbish.

Generali

michaels wrote: »

Surely that is precisely because their currency is tied to those of the other eurozone members, otherwise the DM would have appreciated against the Drachma to the extent that Greeks didn't run up a huge deficit buying BMWs because they would have been too expensive.

Fair point.

HAMISH_MCTAVISH

antrobus wrote: »

Tsipras has ruled out the option of "defaulting and leaving the eurozone".

Of course.

Greeks are overwhelmingly in favour of keeping the Euro and remaining in the EU.

Doesn't that leave "sticking with the current plan" as the only option?

No.

There are many other options, ranging from restructuring the repayment profile of Greek debt, to a consensual haircut on the debt, to closer fiscal union or direct state-to-state aid.

I'd suggest it's more likely that a solution will be found which allows Greece to stay in the EZ than a default and Grexit.

antrobus

HAMISH_MCTAVISH wrote: »

Of course.

Greeks are overwhelmingly in favour of keeping the Euro and remaining in the EU.

No.

No, the answer is 'yes' in terms of stator's post, because he only offered two options.:)

HAMISH_MCTAVISH wrote: »

...There are many other options, ranging from restructuring the repayment profile of Greek debt, ....

That's what will happen. Because that was what was going to happen anyway.

HAMISH_MCTAVISH wrote: »

..
to a consensual haircut on the debt, to closer fiscal union or direct state-to-state aid....

None of which will happen.

HAMISH_MCTAVISH wrote: »

..I'd suggest it's more likely that a solution will be found which allows Greece to stay in the EZ than a default and Grexit.

In the medium term (Six months? Two years?) the most likely solution is that the current Greek government will collapse, and be replaced by a different one.

Thrugelmir

Generali wrote: »

TBH, I think the problem is that German workers are underpaid as they can't afford to buy what they produce.

Germans are naturally cautious. Savers rather than spenders (on credit). A hangover from the reconstruction years. Often forgotten how badly Germany suffered in the Allied bombing raids. That were far far worse than the blitz.

Thrugelmir

antrobus wrote: »

Oddly enough, Tsipras has ruled out the option of "defaulting and leaving the eurozone". Doesn't that leave "sticking with the current plan" as the only option?

The plan has to be fiscal unity. Standardised retirement ages, VAT rates, minimum wage etc etc. National Governments doing their own thing will never work. Both France and Italy require structural reforms of the labour markets.