It's a sticking plaster, delaying the inevitable. I don't suspect the 'new deal' will work and I think the growing discontent among the Greek people will continue to rise, especially under the measure of the latest deal. Greece will remain a protectorate and an insubordinate trouble child under the ECB's whip. Similar scenarios will likely play out in other southern European nation states in the next decade also.
Problem is the Greek's were screwed over in the first 'bailout'.
They should have defaulted on the debt they owed to the private sector banks but instead EU/IMF etc. convinced them to borrow money from them to pay off the banks.
Germany and France could, if they wanted to, completely void Greece's debt. They have a combined GDP of about $6.5 trillion. Greece GDP is $0.24 trillion and is one of the smallest players in the EMU. But the don't have to and they don't want to because then other countries could also think that they shouldn't have to pay their debts.
I think they are ruining the Euro project because they are creating a lot of animosity between peoples. Greece will survive but it will be remembered for a long time that in their worst crisis they were being bullied by their bigger brothers. Right or wrong, that's how it is seen.
Adopting a free floating currency so that countries aren't tied to other, more powerful countries but can instead let their economies grow at different speeds.
I agree that would be the best economic theoretical model, is it in any way feasible realistically though?
Politically?
Even if ignoring the EU side of it (which is nontrivial for various reasons not limited to defense, the vision of the EU, etc), is there a magic wand that would make the Greek government not be populist and wasteful with their own currency?
Politically it would be very difficult. The problem with the EU is that it fantasises about being a United States of Europe.
The problem with this is that Europe is not united. We have different languages, culture and histories. This is also what make Europe a beautiful, culturally rich place. The political elites are trying to impose a one size fits all model across Europe which won't work because we are not really all that united.
We don't have a common European demos that means that individual countries are fighting for their own interest and their is no overall strategy for Europe because the electorate doesn't really care about Europe, just what they get from being a part of it.
We really need to go back to being a trading block and to remove all of the political dictact and interference. If we really must have political unions, then they need to be between countries that share a common language so that the people can challenge their political masters collectively. This would mean Britian and Ireland, Germany and Austria, France and Belgium.
Euro as a common currency makes travel super convenient for example, not to mention the Schengen area and open borders.
Same could be said for certain regulations in health and sanitation for example, knowing you could rely on some forms of standards existing (however poorly implemented or not).
Also why would you make artificial barriers based on language, shouldn't the lines be formed based on culture and common understanding instead? Language is not what is preventing common people from participating in politics.
Not having to change currencies is convenient but at least in the UK you can get Credit Cards without charge for use overseas including cash withdrawl - http://www.halifax.co.uk/creditcards/clarity-card/. Then when you travel you don't need to change currency, just head to the ATM or just use your card. You can't compare prices so easily, but then taxes are different even within the eurozone.
Language is preventing me from watching Austrian TV and phoning into their radio debates. That is, the population of Europe is silo'd whilst their political masters are attempting to work together. This is fractured because the electorate that place these politicians into positions of power cannot unite together to challenge them.
If there was a political union between the UK and Ireland then language wouldn't prevent me from calling an RTE show. We even already have a political party operating both in Westminster and Dublin - Sinn Féin.
>Euro as a common currency makes travel super convenient for example, not to mention the Schengen area and open borders.
Perhaps the various recommendations made in the late 80s and early 90s would be useful to reconsider. Hayek, for example, often suggested that the EEC could make every member nation's currency legal tender in all the others, to create a free market of currencies. He was a big fan of denationalising currencies anyway, and of having currencies compete against each other.
Another proposal on the table for many years was the idea of launching the Euro as a parallel currency to every nation's own currency. So, you could still pay your restaurant bills accross Europe with a single currency if you wanted to, but nations would still be able to fluctuate against it in case of trade surplus or deficit, the very thing that has been putting so much stress on the Euro's frequent deficit members (i.e. Greece, Portugal and Spain), and stress on the Euro itself.
I'm not sure. I was in Maastricht for a few months in 92 when the treaty was being signed. Maastricht is a border town between Belgium, the Netherlands and Germany. Every bar and restaurant I went to, every market stall, and many shops easily accepted 3 or 4 different currencies. Today this would be even easier, since so many people just pay with plastic.
Imposing sanitary standards from the centre sounds great but in reality is one countries ideals being pushed onto another's. For example, the EU is trying to prevent restaurants serving olive oil from jugs: http://www.telegraph.co.uk/news/worldnews/europe/eu/10064787...
This might seem sensible to many in Northern Europe, but I imagine that in the Mediterranean this is almost an attack on their culture. If countries like Britain and Germany want higher hygiene levels on the olive oil served in their restaurants then they can do that themselves but they shouldn't be imposing that onto Spain and Italy.
Part of the excitement on travelling to other countries is the differences; the longer the EU goes on with it's powertrip the more homogenised we will become.
Being from a EU country which overzealously implements all new directives (and having travelled the southern countries) I agree with the sentiment, but think we would all be better served discussing the implementation (is x going too far or not) not the ideology (don't tell me to do x).
Sometimes things go too far and then it's time to back off, but at the same time knowing that there's a good chance obviously dangerous things are banned is a good thing.
To renegotiate the debt of all €zone members.
The EU needs a solid program in the future for debt problems.
Right now its a mess. What will we do on the next recession that will come for sure.
Or does anybody believe France or Italy will accept cut downs like Greek or being treated like them.
Drop the Euro, devalue, re-adopt the Drachma, exit the single market currency and agree to more flexible debt repayment terms whilst not dictated to by the Troika. Obviously Greece will still have to make repayments, they'll be more on their terms, rather than the ECB's.
With the devalued drachma restored, the tourist sector will boom, and their exports will improve drastically. Subsequently their GDP will rise and they'll be in a better position to make repayments to its creditors. Without exposing further risk to surrounding Med member states who are not much stronger at the moment.
Individuals should convert their euro's into bitcoins or other, more stable, flexible assets to use whilst this happens and until the Drachma stabilises.
At this point either path will be a long and difficult one, but I think there's light at the end of the #Grexit path.
Why would the other southern European countries want to be in the EU at this point? There's not much to gain, and they're likely to also be made an example of if another financial crisis strikes.
True, but at this point joining the EU pretty much involves consenting to adopt the Euro. Only Denmark and the UK have an opt-out afaik, all the other EU countries are obliged to join
The main thing is that you can't tax by printing currency anymore which is a really easy way to levy taxes. That means you have to have an efficient taxation apparatus, tax the rich and poor equitably and be very careful with borrowing.
Greek's problem is that it isn't particularly strong in any of those and thus isn't really suited for being part of the Eurozone yet.
As it stands, keeping the 'poorer' countries in the Eurozone seems like a very bad idea. The main reason being that -unlike the USA- people in e.g. The Netherlands don't feel a connection with people from Spain and vice versa. People in the northern European countries don't even feel a connection with people in the countries close to them, even though the cultures are much closer aligned (in terms of sobriety, work-ethos, etc…)
This I think is the main difference with the USA. The USA also has richer and poorer stats, but because of the shared language, history and culture, people in both the richer and the poorer states feel like a US citizen.
Remember: "There is no way to leave the EU once you are in." Or the Euro. Or the Eurozone. Or the EEC. Or the European Continent. Well, unless you have a really big motor engine.
"Unless Germany wants you out", I guess. The terms of the deal for Greece have been pretty onerous, you lose control of your currency with no equivalent upside. Sure, there are plenty of advantages to being in the EU, but the disadvantages seem bigger.
If Germany actually wanted Greece out, they would have been kicked out 3-5 years ago. Germany desperately wants Greece in, why do you think they keep negotiating?
> The terms of the deal for Greece have been pretty onerous, you lose control of your currency with no equivalent upside.
No upside? What do you call a decade of easy access to super cheap credit? Also, these terms are not unique to Greece, no other Euro-zone country has control over it's currency.
That's easy enough to say in retrospect. The greek government actively and aggressively sought out membership, to the point of cooking the books, then eagerly availed themselves of the credit.
They can't. Not without support. It takes at least a year to create a new currency. They don't even have a functioning central bank. All businesses would have to adopt the new currency, all ATM machines, all government institutions. It's a huge project.
Besides, without trust in the new currency it won't be worth anything. That trust has to come from the backing of a foreign institution.
> It takes at least a year to create a new currency
A new full blown currency, yes. A new temporary currency can be done in days, or weeks at most - East Germany did it. Slovakia did it. The process involves your current currency and a stamp.
For businesses and institutions, it's much easier, everything is electronic anyway. Your bank accounts just switch over from EUR to XGD.
> it won't be worth anything
That's pretty much the point. Exports and tourism will be boosted and the debt will be re-denominated in the new currency (at a fraction of its EUR value) or outright defaulted on.
A new currency would be worth much less than the Euro. That's a good thing. But it would still need to be more or less stable. I'm skeptical that an emergency currency would hold its value, because of capital flight.
Yes, the currency would take a while to stabilise, but it's not like Greece is a model of stability as it is. The argument for, is that the stabilisation following a massive devaluation, will happen sooner than whatever the endgame to the current circus is, will.
> My "at least a year" claim is based on this:
Now, why would a politician exaggerate how painful a solution he doesn't like is? Does he really think that post-grexit Greece and Iraq in 2003 are completely comparable in terms of security and infrastructure? Does he know that Iraq's economy was almost entirely cash-based whereas Greece's is based on a fairly modern banking system?
If I put on my conspiracy cap, I wouldn't be surprised if a helpful soul decided to discreetly have a transition-currency printed up, ready-packed on pallets in a basement somewhere in Frankfurt.
I agree that a massive devaluation followed by a stable-ish currency is preferable to the current circus.
I also agree that your skepticism is justified. However, you're mistaken that Varoufakis wrote that because he doesn't want an exit. In fact he's been arguing that Greece should have started preparations for a new currency years ago. Varoufakis even got fired because Tsipras wasn't willing to gamble with a possible grexit. Of course it's possible that Syriza did make preparations for the new Drachma and all claims to the contrary are just misdirection. I don't believe that, though.
"That trust has to come from the backing of a foreign institution."
Central Bank of Russia. That's its self descriptive name.
Now that I've pointed out there are more than binary alternatives WRT euro or drachma, I'm not about to start claiming this 3rd alternative is the only other possible alternative. But it sure is a good idea!
From the Greek perspective they're "all equal under the law" in theory but in practice they're gonna be debt slaves until they finally break completely free. There are alternative short term plans but NO alternative long term plans. Better sooner than later. What I mean is something like revolution now and be back to normal in 2020, or five years of grinding poverty (if they're lucky enough to have it that good) followed by revolution in 2020 and back to normal in 2025. The Russians are big enough to take care of greek issues, are somewhat more financially competent than the greeks, and are reasonably nearby.
From the Russian perspective this would be a "cheap" way to gain a friendly client state in Europe. Aid business is corrupt as heck so some fraction of the "aid" would just get recycled into Russian arms industries, like every other foreign aid package. Russia has natgas and resources in general. Greece has ports and Russia always likes ports... Greece has land that would hold a Russian military base or airfield or naval base.
And that is exactly why the other eurozone countries had so much leverage in the negotiations. I suppose Tsipras could have foreseen this from a negotiation point of view.
As a Dutch citizen, I'm not particularly proud of the way my government (and Germany, etc.) handled this. Silver lining is that it includes a 12.5b investment in the Greek economy, if invested well will boost economic recovery.
I ask myself, would Greece be able to improve government spending and reduce corruption without this pain?
> I suppose Tsipras could have foreseen this from a negotiation point of view.
I think Tsipras was naive: he probably hoped Germany would be lenient because the alternative was so unthinkable.
In theory it's great to force a country to make productive reforms that politicians would otherwise refuse. In practice, the reforms demanded here are largely punitive and pointless.
The focus on corruption is a cheap way to claim to moral high ground, and to justify antidemocratic "parental oversight". If Greece allowed the equivalent of A Dutch Sandwich tax arrangement it would be called fraud and corruption. But when the Dutch do this it's somehow OK. Clamping down on corruption in Greece would certainly be a good thing, but the hysteria about corruption in the media is absurd.
