More Greek trouble

[despaer]

Like I said previously, this is far from over. The Greeks have now been given formal notice that they can no longer borrow money on sensible and affordable terms. The IMF/EU bailout may hold them for a while but it still doesn't address the problem of why, for example, the Germans have to retire later than the Greeks whilst helping to bail them out

Comments

[simoneck]

I think it gives a good picture of the EU idea of democracy that they are waiting until the 10th May to hold the urgent discussions that are needed to finalize the EU package/bailout. ie one day after the German regional elections.

[andygates]

Are you saying conspiracy, or just implying conspiracy while pointing out that a big organization's timing never suits all of its members?

[simoneck]

It's not a conspiracy really, just realism.
Merkel is much less likely to push money Greece's way when the German public are about to vote.
'But with 57% of Germans against helping to support Greece, and with Angela Merkel facing a regional election in the country's most populous state, North Rhine Westphalia, on 9 May, it is far from clear just when and to what extent the German government will show its willingness to endorse funds towards a multibillion rescue package.'
And this is from the Guardian

The sad thing is the EU project being pushed forward without taking the public with them. It's only storing up trouble imho.

[andygates]

That's obligations for you, nobody likes the bit where you pay out.

But overall, yes, it's a mess, and I still think that a really robust EU needs to be federated like the Americans to weather the hard stuff. Halfway-house arrangements just move the problem until the time the cheque gets cashed.

[despaer]

The point about the Yanks is that although they have some local tax differences in their states their national economy is understood to be underwritten as one single unit. The Europeans have still, after nearly 20 years, not grasped the fact that operating one currency ultimately binds them all together whether they like it or not. It is telling that the only real alternative to the Germans and the rest (including the Irish and Portugese) putting their hands into their pockets is to encourage the Greeks to revive their Drachma and leave the Euro. For what it is worth I think that this is what will happen anyway in the fullness of time.

[andygates]

You think it likely they'll default?

[despaer]

I can't in the long run see how they can avoid defaulting, either directly by just not paying or indirectly by a restructure or by leaving the Euro and forcibly re-denominating the debts in Drachma and then devaluing the new Drachma (this is what Argentina did with the USD/Peso about 8 years ago).

They demonstrably can't raise tax, its like an ingrained thing that you dont pay tax over there and they will not be able to borrow at sensible rates ever again without massively reducing their current debt. All that is happening at the moment is the rest of the Euro governments hoping it will magically go away but it wont, hence why I think they will be invited to leave.