The EU and Greece economy

[marharth]

Maybe its not this simple, but why is greece still part of the EU? Wouldn't them staying a part of the EU cause some serious problems in the long run?

[HeyYou]

Not sure that booting them out wouldn't cause more problems than keeping them around.

 

Now, rumor has it, that the current rounds of bailouts aren't going to be sufficient to fix the problem. It will be interesting to see where this goes.

[Lisnpuppy]

I think these bailouts are kinda like with the Big 3 Auto Makers here in America. As unpalatable as it may be it is needed to save the whole thing. Governments will need to be more fiscally responsible. I also think that the big wigs in government need to take the same cuts. It is my understanding that in many cases they do not like that...Italy springs to mind.

 

I have read just some about this but I have seen very little from any economist that do not think something HAS to be done. The how and how much seems to be the only issues. Europe can not just cut them out completely as the Union is only as strong as its weakest link.

[JimboUK]

Not sure that booting them out wouldn't cause more problems than keeping them around.

 

Now, rumor has it, that the current rounds of bailouts aren't going to be sufficient to fix the problem. It will be interesting to see where this goes.

 

There's only one way this is going to end, the sooner the politicians realise this the better.

 

 

I think these bailouts are kinda like with the Big 3 Auto Makers here in America. As unpalatable as it may be it is needed to save the whole thing. Governments will need to be more fiscally responsible. I also think that the big wigs in government need to take the same cuts. It is my understanding that in many cases they do not like that...Italy springs to mind.

 

I have read just some about this but I have seen very little from any economist that do not think something HAS to be done. The how and how much seems to be the only issues. Europe can not just cut them out completely as the Union is only as strong as its weakest link.

 

The problem with the bailouts is they are throwing good money after bad, Greece can't pay the debts it already has, piling on more debt will only make matters worse. Greece should be removed from the Eurozone so they can return to the Drachma, devalue or even default if necessary, the Greeks need to be able to set a fiscal policy that suits them, not be stuck with one that is set for Germany, Holland and Austria.

[Lisnpuppy]

I guess that makes some sense but how would defaulting and having a money that is worthless really going to help?

[Aurielius]

I guess that makes some sense but how would defaulting and having a money that is worthless really going to help?

A devalued Drachma would make Greek exports cheaper there by more competitive. Greece relies heavily on tourism, a devalued Drachma would make the Euro or Dollar go twice or three times as far, making Greece more competitive than other resort locations, increase in tourism..more hard currency within the country.

Instead of having Greece's economic policy being formed in Paris and Bonn it would be made in Athens. Think of Greece as an habitual shopaholic being in hock to credit card company and who has maxed out their credit to the extent that the only thing being covered is the interest. More credit is not the answer. Aside from the fact it will deepen the economic pit Greece is in, it will have eventual serious repercussions on the viable European economies that are funding it.

Edited October 21, 2011 by Aurielius

[Lisnpuppy]

I guess that makes some sense but how would defaulting and having a money that is worthless really going to help?

A devalued Drachma would make Greek exports cheaper there by more competitive. Greece relies heavily on tourism, a devalued Drachma would make the Euro or Dollar go twice or three times as far, making Greece more competitive than other resort locations, increase in tourism..more hard currency within the country.

Instead of having Greece's economic policy being formed in Paris and Bonn it would be made in Athens. Think of Greece as an habitual shopaholic being in hock to credit card company and who has maxed out their credit to the extent that the only thing being covered is the interest. More credit is not the answer. Aside from the fact it will deepen the economic pit Greece is in, it will have eventual serious repercussions on the viable European economies that are funding it.

 

OK...I get that. However what about some emergency money? There would seem to be many things that can not be let through the cracks. Can there not be any help or is this an all or nothing thing?

[JimboUK]

I guess that makes some sense but how would defaulting and having a money that is worthless really going to help?

A devalued Drachma would make Greek exports cheaper there by more competitive. Greece relies heavily on tourism, a devalued Drachma would make the Euro or Dollar go twice or three times as far, making Greece more competitive than other resort locations, increase in tourism..more hard currency within the country.

Instead of having Greece's economic policy being formed in Paris and Bonn it would be made in Athens. Think of Greece as an habitual shopaholic being in hock to credit card company and who has maxed out their credit to the extent that the only thing being covered is the interest. More credit is not the answer. Aside from the fact it will deepen the economic pit Greece is in, it will have eventual serious repercussions on the viable European economies that are funding it.

 

OK...I get that. However what about some emergency money? There would seem to be many things that can not be let through the cracks. Can there not be any help or is this an all or nothing thing?

 

All emergency funding will do is postpone the inevitable, sooner or later they are going to have to get their finances under control, with the interest mounting up the sooner they do that the better. Their debt is 160% of GDP, unsustainable for a country that controls it's own economy, a disaster for one that doesn't. Anyway emergency money would have to come from taxpayers in other countries, counties where cuts are already being made.

 

Unmarried or divorced daughters of civil servants collect their dead parents' pensions.

Civil servants can retire in their 40s.

Greek pensions cost 12% of GDP against an average of 3% for the rest of the EU.

The state owns over 70 loss making utilities and companies.

Defence spending is 6% of GDP, again well above the average.

The average railway worker earns $95,000 a year.

Their subway system relies on a honesty system for ticketing, needless to say few bother with tickets.

Paying tax is seen as optional, the threshold for paying tax is about $15,000, many who say they earn less than that also own boats and nice houses, many with pools.

The list goes on.

 

Greece has quite rightly been described as a poor country full of rich people, it can't be fair to ask those struggling to get by in other countries to continue subsidising this madness.

[Lisnpuppy]

Ah...I see. Well then fair enough thank you Jim and Aurielius for taking the time to answer my questions.

[Aurielius]

Just an update..Greece has decided to put up the European Union bailout to a public referendum, which most analysts think will fail to pass. The day after this political hide saving move the Euro tumbled in value and though the EU has agreed to formulate a plan to help Greece they have yet to find a buyer for the bond notes proposed, China the only likely candidate has preconditions among which is for their artificial maintenance of of their undervalued Yen to go unquestioned in the European money markets. If things look bad now for the EU imagine what they will be like after a default on payments by Greece will be like. An additional note is that Italy with a much larger impact on the currency markets is not far behind Greece in this unfolding debacle.