Discussion in 'Economics' started by maxitronixy, Apr 22, 2010.

  1. Hi can somone fully explain the Greece situation,

    The piigs, Ireland , protugal , etc

    The relationship of The economy to it's currency, why Greece or can't print it's way of out debt, why the rest of the EU would care, the relutance of Germany and it's voters to bail out Greece, Relutance of approaching the IMF? how Greece got into this situation in the first place?

    is the issue sovergien default?

    And any other relevant explanations please, im totally lost on the greece situation.
  2. The PIGS (sans Ireland) used to be world empires - The Athenian, Alexander the Great, Rome, Byzantium, Spanish Conquistadors, Portugal in the New world... etc...

    and then one day, after reaching such spectacular heights of power, civilization, and wealth, they realized it's not really worth it. So they invented the siesta - and also focused on food, fashion, music, and casual strolls on the piazza.

    The Anglo Americans and Northern Europeans didn't evolve to that point. They hatched a villainous plan to overtake these "slow and lazy" countries. They indebted these "poor" countries all the while, these "PIGS" (Portugal, Italy, Greece, and Spain)consumed the economic output of their more industrious neighbors.

    Why were they indebted, you ask? Well, the North, particularly Germany, wanted to gain clout in Europe as it is in it's DNA to do so, and to spectacularly fail as well.

    So Germany kept Euro rates lower to regain competitiveness, which had the effect of creating bubbles and loss of productivity in the PIGS. The PIGS' governments, understanding the nature of fiat money and it's inherent short-term life cycle and ultimate collapse, partied away, all the while knowing that the game will end up badly for all anyway.

    Thus, the PIGS will default, they will hold onto that German drywall, the German solar and windturbines, etc... and the Germans and other northerners will be holding onto worthless paper. And all economies and currencies will collapse anyway.

    And you know what else? well... I think it's siesta time. I'll finish this post mañana (tomorrow).

  3. promagma


    well said :)
  4. seriously...a 4 hour lunch.
  5. Greece needs to be completely weened away from financing their gov't with debt. Regardless of whether they choose to raise taxes or cut spending to balance the budget, the gov't that implements these reforms will be voted out. The next gov't that is in place can then take the credit for Greece's recovery once a substantial part of the debt is cleared out.
  6. jasonc


    Piigs represent countries that have significant financial problems in the EU, either high debt or deficit levels or both generally. Greece cannot print money to get out of debt because they are part of the euro and have therefore given up its ability to print money or see a devaluation of its currency to compensate for its poor economic situation.

    The greek government has had excessive spending and also have a variety of government programs such as great pension and benefit plan for workers but cannot afford it so Germany does not want to bail them out. Also Germany does not want to seem too easy on countries who are not responsible and also does not want to do anything that may boost inflation in Germany.

    Since the Euro is a shared currency it complicates the situation even more and sovereign default is possible or restructuring.

    There is more to it but i am bored writing now, google it and you will find all the answers.
  7. C6H12O6


    I'm sorry to disprove your theory, but Italian private debt/GDP is 35%, the lowest among all the civilized countries, and Italian aggregate debt/GDP is comparable to Germany's.

    Perhaps you should stop reading losers like ZeroHedge :D
  8. i have to agree. i think the i is ireland not italy. it is not in great shape but it is not as bad as the other pigs.
  9. The EU is a trade bloc between a number of European countries. It came out of the brainchild by France and Germany, but was trumpeted by Churchill himself. (Google it...) The EURO is an extension of the EU. It is the natural progression of an economic block.

    The EURO had to have the support of all member nations, and the one that was the most difficult was the German Bundesbank. They forced a stability in the maastricht treaty (the one that binds the EURO). This stability is both good and bad.

    For France, Germany, and the Netherlands the Euro was business as usual. However, for Italy, Spain, Portugal, and Greece it was a big change. Namely it gave these countries cheap financing and a stable currency. Surf over to the following link, and look at the interest rate graph near the end.

    Spain went from a 15% interest rate to 2%. This meant that countries like Spain could go on a spending spree. And they did. With Greece being the badest and worst of them. Right now Greece relies on borrowing of 45% to fill the budget. As a comparison the US is borrowing about 28% of its budget.

    Greece is BANKRUPT!

    Spain, Portugal, Italy, and Ireland are not quite as bad shape, even though it appears as such.

    Germany is reluctant to help Greece because they went through Hartz 4. This is an austerity measure introduced by the SPD and Greens. In hindsight I have to admit it really did help Germany. But the social toll has been immense. The problem is that Greeks have a number of privileges that Germans don't have and as such any German politician that supports Greece will not have a job tomorrow. Germans will protest and bring down the government. It is not a joke!

    The Greeks on the other hand think they are suffering, but the reality is that the Greeks are BANKRUPT! Greece could save itself if it introduced some harsh austerity measures, but that is not going to happen. Hence they should be kicked out of the Euro, left to go bankrupt and if all else fails kicked out of the EU.

    The falling Euro is a godsend to European exporters. That is why no Euro member will support the Euro. When the Euro was increasing I saw politicians quickly saying, "oh oh look we have some much debt." The European countries have had some of the strongest growth in ages due to a cheaper Euro.

    The advantage of a cheaper Euro and pressure by Washington on a more expensive Chinese Yuan is that the Euro wins against China. Irony of ironies...

    Euroland right now is in pretty good shape, but don't expect a rapid appreciation of the Euro.

    So back to Greece. Greece can't print because they are not in control of the printing presses. The ECB is control. And because Greece ratings have dropped they can't give their IOU's to the ECB. Greece needs to go to the market.

    Germany has the advantage that they can go to the ECB and ask for money. People think that the Euro will collapse because of the debt, but the reality is that the Euro zone is self-sufficient and hence does not need outside capital. Countries like the US are dependent on outside help. And now Greece needs outside help, hence the rapid increasing yield.

    I know I am rambling a bit, but its late and if you have any further questions just ask...
  10. 9999


    #10     Apr 22, 2010