The Down Range Forum
Member Section => Politics & RKBA => Topic started by: tombogan03884 on November 07, 2011, 06:54:27 PM
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http://news.yahoo.com/idiot-guide-greek-debt-crisis-163212268.html
The European Union is an economic and political institution forged over decades, sealed with a treaty in 1993 but only, truly made real in 2002, when most of the current member states dropped their currency in favor of the common euro. For centuries a breeding ground for war and imperialism, Western Europe had bound itself together in peace and apparent prosperity, with a supranational government all its own to be quartered in Brussels.
Its anthem: “Ode to Joy.”
Things have changed. While most major banks remain multinational (with interests around the world) their errors — some would say crimes — have brought renewed focus on the sovereign state. Today, with Greece on the edge of default, the euro zone nations have a new catchphrase: “Exposure.” As in, how much “exposure” do our banks have to the bad debt held by yours.
It’s enough to make one’s head take an “Exorcist”-style lap around the neck. But here, below, is a simple guide to this latest and most important chapter in the crisis. The results in Greece will likely determine, and certainly predict, the fate of the European Union. This is the least you should know.
Why is Greece in debt?
Like any state (or person, for that matter) it spent more money than it took in. Traditionally, but especially after switching over to the euro, the Greek government paid out huge amounts of cash it simply did not have. To compound this, the retirement age there is low by modern Western standards, and benefits are generous. Public sector employees are well paid.
Sounds good, right?
The problem is that Greece is also infamous for mass tax evasion. That means severely limited revenue. So when the money ran out, Athens turned to European banks for loans. Soon, the government was borrowing billions and those debts, like subprime mortgages in the United States, were often repackaged and sold off around the Continent. Everyone, especially banks in France and Germany, wanted a piece. Now they have it.
Why does Europe — indeed, the world — care so much about Greece’s debts?
One of the perceived perks when Europe got together on a single currency (Greeks, for instance, gave up the drachma for the euro) was that a strong Europe could prop up an individual state in a time of need. But what’s happened is that Europe itself has become too weak, in the aftermath of the global financial meltdown, to bite the bullet on a country like Greece. A default would shatter otherwise monetarily strong countries like Germany. The Germans, like the Americans, would be left with a host of “too big to fail” banks ready to do just that.
What kind of deal has the EU offered the Greeks?
There have been a few already, and certainly a handful more are in the works, but it boils down to this: European banks will take 50 cents for every dollar owed to them by the Greek government. In exchange, Greece must impose what many have described as a crushing austerity. That means no more early retirement, reduced pay for public workers (the ones who manage to keep their jobs), large-scale cuts to social programs, and a staggered repayment of the reduced debt.
Why did Prime Minister Papandreou originally call for a referendum?
As you might imagine, “austerity” is a dirty word in large parts of Greece. Many people there believe the country is being unfairly affected by reckless spending and subsequent cutbacks by the government.
Papandreou, one assumes, didn’t want to be the guy everyone* blamed for taking the EU deal. So he proposed a vote. A referendum. This seriously worried the rest of Europe, as stock markets cratered on fears that Greek voters would spike the bailout. The PM’s decision was scrapped after foreign leaders (and some influential Greek politicians) put pressure on his governing coalition, which might still break any minute now.
*There have been riots in Athens and across the country. Anti-austerity protesters were further radicalized when three of their own were killed during a clash with police last year.
Why are the Greeks so reluctant to take the bailout?
Pete Morici, a professor at the Smith School of Business at the University of Maryland and former chief economist at the U.S. International Trade Commission, explained it rather well in his latest column:
“[In exchange for] aid from richer EU governments, Greeks must accept draconian austerity measures,” he wrote. “These would further drive up unemployment, and shrink Greece’s economy and tax base at an alarming pace, placing in jeopardy eventual repayment of Athens’ remaining debt. … As currently constituted, a single currency may serve the One Europe designs of France and Germany, but make Greece and the other Mediterranean states nothing more than the victims of a northern conquest.”
Greeks who oppose the deal — and even many who support it only as a means of staying a member of the EU — don’t want to end up like an American post-grad, forever in debt to the banks that provided college loans.
What would happen if Greece defaulted on its foreign debt?
The first thing you would notice is a massive drop in stock markets from the U.S. to Japan, and all across Europe. It is extremely important to understand that what happens in Greece will be seen as the way forward for a number of other countries — Spain, Portugal and Ireland, to name a few. Some believe Italy could follow suit. Default by the Greeks would likely mean other sovereign states to follow.
Strictly within Greece, it wouldn’t be as bad. Relatively speaking. They would drop the euro and return to the drachma, which would, in turn, be severely devalued. Not great news for Greek tourists planning on a trip abroad anytime soon, but very good news for exports, which would become extremely cheap, like those coming out of China or other, smaller developing markets.
Outside of Greece, it would be a big mess. German banks, and maybe French too, would need massive bailouts. The prospect of those defaults in other debt-ridden countries (see above) could cause a run on the banks. Even more money would leave the market. And when money leaves the market, demand drops. When demand drops, economies crater.
What would happens if Greece accepts the EU deal?
Now that Greek PM George Papandreou has called off the referendum on the deal — a vote would have been very close as polls indicate the Greeks are very closely split on the EU proposal — this is the most likely outcome. Greece would see its debt cut in half and be made to enforce the tough austerity discussed before. Expect riots. Banks around Europe would take a “haircut” but remain, for the moment at least, solvent.
Greece would pay over time, but most of the money right now would come out of a fund sponsored by the stronger state economies from Europe and the IMF. In short, everyone would relax, safe in the knowledge that the global financial system we’ve all come to know and, well — the system we’ve come to know would keep on spinning for at least another day.
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Any of this sound familiar ?
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The greeks are rational to protest. The EU should be limited to Germany, France, the UK, and the usual Northern European suspects. The rest are a disaster waiting to happen. But by being the first to bail? The Greeks can hold the EU up for a lot of ducats, and if that fails they lose little as Portugal, Italy and Spain are one step behind them.
FQ13
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Italy is coming to the front burner as we post....
Burlesconi has to get to another bunga-bunga orgy, and can't be bothered with such matters,....he's related to Nero don't ya' know...
Italy is 6 times larger, economically, than Greece....and Germany is the only one with their head above water, and Merkel has had about enough of this bailout crap...
Sure am glad the Progressive/Dems, in this country, are so supportive of the European Model as a foundation for the "Fundamental Change Of America"....
Hope & Change Baby,.... It's Workin' out real good.....
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The greeks are rational to protest. The EU should be limited to Germany, France, the UK, and the usual Northern European suspects. The rest are a disaster waiting to happen. But by being the first to bail? The Greeks can hold the EU up for a lot of ducats, and if that fails they lose little as Portugal, Italy and Spain are one step behind them.
FQ13
This is where your liberalism glares forth. Based on the GDP Greek were under worked, over paid leeches who are harvesting what they sowed by voting with their hands out.
Just like Americans have been doing for the last 60 years or so.
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This is where your liberalism glares forth. Based on the GDP Greek were under worked, over paid leeches who are harvesting what they sowed by voting with their hands out.
Just like Americans have been doing for the last 60 years or so.
You misunderstand Tom. I'm just saying that the Greeks realize that if they fail, their creditors get dragged down with them. In this case a wise man does play chicken. Refinance my loan or I default, and you're screwed too. Its how the world works. Its the old adage of "If you owe the bank $100,000 and you can't pay its your problem. If you owe the bank $100,000,000 and you can't pay, its the bank's problem". :-\
FQ13
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This is just another reason that the "world economy" cannot and will not work!
You just cant trust the rest of the world!
With the exception of tourism and the gyro, what can Greece do for the rest of the world? The same goes for Italy, France, and any number of insignificant European, African, Asian, Central, South American, and the middle East!
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You misunderstand Tom. I'm just saying that the Greeks realize that if they fail, their creditors get dragged down with them. In this case a wise man does play chicken. Refinance my loan or I default, and you're screwed too. Its how the world works. Its the old adage of "If you owe the bank $100,000 and you can't pay its your problem. If you owe the bank $100,000,000 and you can't pay, its the bank's problem". :-\
FQ13
Missed the point. Again.
This is a damned if they do and damned if they don't situation - the Greeks will fail, they will default, the only question is will they now or in 6, 9, 12, 15 months after yet another bailout? Papandreou won't commit political (or actual) suicide by demanding the Greek people get off their lazy asses and actually get back to work - assuming there are jobs - and the Greek people are too damned entitled at this point to revert to normal (by USA standards) productivity.
Like kalifornicated, it is a beautiful place completely and totally hosed by libtards promoting entitlement. And it further reinforces my point about Europe being so completely mind-f..ked by 2 World Wars fought on their soil and in their homes that they are brain damaged at this point and cannot think rationally.
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If Europe spirals out of control into default, the U.S. exports to Europe, will crash. Thus increasing the global spiral downward, including the ripple effect on our country.
Soros, aka Puppet Master, is smiling as this is part of the grand design.....
All too easy,....
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My point in posting is that we've been doing the same stupid shit .
Any country that's citizens allow it's govt to spend 140% of it's earnings deserves what will inevitably happen.
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My point in posting is that we've been doing the same stupid shit .
Any country that's citizens allow it's govt to spend 140% of it's earnings deserves what will inevitably happen.
We're probably way beyond that given the increases automatically driven by our laws!
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Historically, our economy drove the worlds economy! With the inception of the Euro, Europe thought that they could challenge that thinking. Greece, Italy and a few other failed experiments have proven that to be a false claim.
For all I care, Greece, Italy and any number of countries can go to hell. I could care less!....
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If Europe spirals out of control into default, the U.S. exports to Europe, will crash.
I thought the US had no exports, we don't make anything anymore because all of our manufacturing has moved to China? ::)
Actually I know better, in fact I work for a company that exports stuff to Europe every year, we just sent a line via airtrans over to Ireland last month, glad I didn't foot that bill.
The trouble started when the lesser countries in Europe couldn't print money after taking the Euro as their currency. The US won't default anytime soon because the fox is printing hens as needed, BUT this won't work forever because inflation will eventually rear its head. I was but a wee little child in the late '70s and stagflation was running rampant but I remember my dad bouncing around jobs that ranged from close to home to the next county and even state just to pay the bills.
THANK GOD FOR RONALDUS MAXIMUS!
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The European debt problem has been building since WWI.
The huge losses on the battlefield left the entire population feeling they were "owed" a debt by their Nation's.
This dissatisfaction was used by the communist international to spread subversion, and unrest through out the continent, Spartacists in Germany, Communist uprisings in Austria,Italy, France, and Spain, and the growth of communist and socialist groups in the UK.
In order to end the continued violence that national Govt's no longer had the stomach to fight, they applied the same appeasement tactics that would work so well with Hitler by granting more benefits.
But none of them had any money, they were all hugely in debt already due to war expenses, so they shuffled things and remained on the verge of solvency. Some countries, like England never did recover. The only European country that truly recovered was Germany and that was not until the late 50's.
The trend has continued to the present day, Socialist labor unions start raising hell because they can gain advantage by telling the workers some one owes them something and the Govt's appease them with more bennies, more hand outs and shorter hours. Greece , Italy and France have been the most obvious examples but they have all followed the same pattern, they have been spending more than they have been earning and now they are running out of everybody else's money.
But the communist Unions would rather have the countries collapse than give up a bit of their inflated wages or actually do a full weeks work because chaos benefits the totalitarian ( socialist) parties .
And the stupid Democrats think it's wonderful and want to be just like them.