"Austerity" now a dirty word in Europe

Fortunately, I am not concerned with your opinion of me, Foofie.

Cycloptichorn

Computer nerds and freaks: Germany's Pirate Party rides wave of popularity

How hum

When confronted Lustig, I tend to be confrontational.

I hardly claim to know more about your country than do you, but I do claim that you don't know more about your country than anyone else who lives there.

I just spent time with your neighbors who, I'm convinced, would tell me you are full of ****.

Maybe you are and maybe you aren't but I'm afraid I'm just not inclined to accept you as the expert on all things British.

Obviously, this pisses you off, but I would never expect you to consider me a the expert on all things American.

That's where we differ to a very large degree.

I'm not sure the degree is as big you would like to imagine, Finn. You are mightily ignorant of your countries wrongdoing. Moreover, you are deathly afraid to address any of it, preferring lame excuses like blaming someone who simply raises these issues. Or another perennial favorite, which you've used, 'troll', or 'bore'. Another, again one you've used, the "great Satan" routine. Snood likes that one too. See, you and Snood have something in common.

All these, of course, absolve you from thinking - something that I'm sure you find highly rewarding.

What could you possibly be bored about finding out that you've been subjected to a series of lifelong lies? That should, I say 'should' because I realize who I'm speaking to, make a person want to discover more.

You've never said anything that pisses me off Finn, you do amuse me though. I love the way you won't ever admit to being wrong, or having been hoodwinked.

The Cabbie played you beautifully, going round the houses, then turning off the meter to let you off £12 which you paid anyway, and a tip. You're really not that hard to fathom out.

You were talking to my neighbours? You should have told me you were in Southampton.

There's no restriction on putting up flags if you want to, unless there's a particular reason, like a listed building. Sporting and royal events aside, we are not a nation of flag wavers. Your EDL pal wasn't banned from putting up his flag in case he offends anyone. He chose not to put his flag up because he didn't want his neighbours to know he was a dickhead. He obviously found a kindred spirit in you.

Explain how the difference is not as big as I would like to imagine.

I just admitted to not being the expert on all things American and you countered with my ignorance of all things American. It appears to me that you jumped at an unsubstantiated scold. What a surprise!

You are boring JTT, and that has nothing to do with whether or not your obsessive screeds are in fact entirely true.

Except for the occasional foray into language, your sole contribution to this forum are your repetitive rants.

Either your goal is to educate us on what you perceive to be the truth about America, or to damn us for our complicity.

If it's the former you have absolutely no hope of achieving your goal, and if it's the latter, pretty much everyone in this forum has replied with either a "shut the **** up you nagging bore," or the ignore button.

You have tenacity though. I'll give you that.

Back to the topic at hand.

It certainly appears that Greece will sever it's ties with the Euro.

Ironic or fitting that the birthplace of democracy is going to undermine the technocratic tyranny of the EU, because Germany cannot dictate what government the Greeks will choose for themselves.

I would not want to be a Greek pensioner at the beginning of my retirement when the bottom completely falls out.

Momentous times.

I think that's true. With an independent currency German products would come at a higher price in most of the nations that buy their goods. Germany has a particularly favorable balance of trade with a huge surplus of exports over imports and more than half of them go to other EU nations. However, I suspect that is a relatively small part of the overall issue. Germany doesn't have enough money or borrowing power to rescue Spain or Italy if it comes to that, so I suspect they see collective fiscal discipline and labor market liberalization as necessities. The main EU nations are mostly concerned about their banks which have significant exposure to the bonds of Greece, Italy, Spain and other nations facing financial stress. Most are running current deficits and have higher-than-normal overall debt levels and need continued access to their own banks to stay afloat. (The U.S. is in no position to criticize as our debt levels and current deficit levels are even higher than those of Germany, France and the UK, though our GDP growth is marginally higher.)

We all face a narrow potential path forward in that we already have too much debt to borrow and spend our way out of the recession, and at the same time we need to stimulate more business investment and private spending in a world in which the labor supply is shrinking due to demographic changes and the private sector is reducing debt and in many areas hoarding cash, partly out of fear over what governments might do next.

The Greek Exit?

By John Fund
May 29, 2012

The next act of Greece’s financial tragedy looks like it’s coming. Whether or not Greece exits the euro zone immediately after its June 17 elections, most analysts now predict it’s only a matter of time until it does so.

Recriminations are being hurled in all directions with Greeks blaming the European Union for abandoning them while more and more EU officials say the Greeks should look in the mirror.

International Monetary Fund chief Christine Lagarde put it bluntly on Friday, telling Britain’s Guardian newspaper that Greece has to shape up, and she is more concerned about Africans in poverty than Greek citizens in financial peril:

“As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time. All these people in Greece who are trying to escape tax.”

Even more than she thinks about all those now struggling to survive without jobs or public services? “I think of them equally. And I think they should also help themselves collectively.” How? “By all paying their tax. Yeah.”

It sounds as if she’s essentially saying to the Greeks and others in Europe, you’ve had a nice time and now it’s payback time.

“That’s right.” [Lagarde] nods calmly. “Yeah.”

Her comments unleashed a torrent of anger not only from Greeks but from leftists in other countries. French left-wing politician Jean-Luc Mélenchon said Lagarde should resign. A spokesman for the new French Socialist government called her remarks “stereotypical.”

But just because they are stereotypical doesn’t make them untrue. Nick Dewhirst, a director at wealth management firm Integral Asset Management, told CNBC on Monday that much of Greek society was built on cheating and scheming, saying “everyone does it” but that other European nations were now fed up.

“The basic question is that a German has to increase working from 65 to 67 and that is to pay for Greeks retiring at 50. The 17th of June is the perfect opportunity to say either ‘we’ll behave’ or ‘we’ll carry on cheating,’” he said.

Harsh words, but they are confirmed by many Greeks I know. A Greek member of parliament told me recently that tax reform was “almost impossible” to achieve because “our tax system is run by the Mafia.” I laughed and said that many countries had people who thought of their tax collectors that way. “No, no,” the parliamentarian insisted. “I mean that organized crime really runs the tax agencies for their benefit, taking a cut of the reduction in taxes they give out to citizens. Every person appointed to reform the system has been pushed out. Respect for authority is nil.”

It increasingly looks as if Greece is on the verge of collapse, a sad condition for the nation that gave us democracy and so much of our civilized heritage 2,500 years ago. But the Greeks should have been warned. It was in the famous Greek tragedies that the concept of hubris was explored — the notion that excessive pride or defiance of the gods leads to disaster. How Greece recovers will depend in part on how much its people take that lesson to heart and start rebuilding.

The End Of The Euro: A Survivor’s Guide

By Peter Boone and Simon Johnson

In every economic crisis there comes a moment of clarity. In Europe soon, millions of people will wake up to realize that the euro-as-we-know-it is gone. Economic chaos awaits them.

To understand why, first strip away your illusions. Europe’s crisis to date is a series of supposedly “decisive” turning points that each turned out to be just another step down a steep hill. Greece’s upcoming election on June 17 is another such moment. While the so-called “pro-bailout” forces may prevail in terms of parliamentary seats, some form of new currency will soon flood the streets of Athens. It is already nearly impossible to save Greek membership in the euro area: depositors flee banks, taxpayers delay tax payments, and companies postpone paying their suppliers – either because they can’t pay or because they expect soon to be able to pay in cheap drachma.

The troika of the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) has proved unable to restore the prospect of recovery in Greece, and any new lending program would run into the same difficulties. In apparent frustration, the head of the IMF, Christine Lagarde, remarked last week, “As far as Athens is concerned, I also think about all those people who are trying to escape tax all the time.”
Ms. Lagarde’s empathy is wearing thin and this is unfortunate – particularly as the Greek failure mostly demonstrates how wrong a single currency is for Europe. The Greek backlash reflects the enormous pain and difficulty that comes with trying to arrange “internal devaluations” (a euphemism for big wage and spending cuts) in order to restore competitiveness and repay an excessive debt level.

Faced with five years of recession, more than 20 percent unemployment, further cuts to come, and a stream of failed promises from politicians inside and outside the country, a political backlash seems only natural. With IMF leaders, EC officials, and financial journalists floating the idea of a “Greek exit” from the euro, who can now invest in or sign long-term contracts in Greece? Greece’s economy can only get worse.

Some European politicians are now telling us that an orderly exit for Greece is feasible under current conditions, and Greece will be the only nation that leaves. They are wrong. Greece’s exit is simply another step in a chain of events that leads towards a chaotic dissolution of the euro zone.

During the next stage of the crisis, Europe’s electorate will be rudely awakened to the large financial risks which have been foisted upon them in failed attempts to keep the single currency alive. If Greece quits the euro later this year, its government will default on approximately 300 billion euros of external public debt, including roughly 187 billion euros owed to the IMF and European Financial Stability Facility (EFSF).

More importantly and currently less obvious to German taxpayers, Greece will likely default on 155 billion euros directly owed to the euro system (comprised of the ECB and the 17 national central banks in the euro zone). This includes 110 billion euros provided automatically to Greece through the Target2 payments system – which handles settlements between central banks for countries using the euro. As depositors and lenders flee Greek banks, someone needs to finance that capital flight, otherwise Greek banks would fail. This role is taken on by other euro area central banks, which have quietly leant large funds, with the balances reported in the Target2 account. The vast bulk of this lending is, in practice, done by the Bundesbank since capital flight mostly goes to Germany, although all members of the euro system share the losses if there are defaults.

The ECB has always vehemently denied that it has taken an excessive amount of risk despite its increasingly relaxed lending policies. But between Target2 and direct bond purchases alone, the euro system claims on troubled periphery countries are now approximately 1.1 trillion euros (this is our estimate based on available official data). This amounts to over 200 percent of the (broadly defined) capital of the euro system. No responsible bank would claim these sums are minor risks to its capital or to taxpayers. These claims also amount to 43 percent of German Gross Domestic Product, which is now around 2.57 trillion euros. With Greece proving that all this financing is deeply risky, the euro system will appear far more fragile and dangerous to taxpayers and investors.

Jacek Rostowski, the Polish Finance Minister, recently warned that the calamity of a Greek default is likely to result in a flight from banks and sovereign debt across the periphery, and that – to avoid a greater calamity – all remaining member nations need to be provided with unlimited funding for at least 18 months. Mr. Rostowski expresses concern, however, that the ECB is not prepared to provide such a firewall, and no other entity has the capacity, legitimacy, or will to do so.

We agree: Once it dawns on people that the ECB already has a large amount of credit risk on its books, it seems very unlikely that the ECB would start providing limitless funds to all other governments that face pressure from the bond market. The Greek trajectory of austerity-backlash-default is likely to be repeated elsewhere – so why would the Germans want the ECB to double- or quadruple-down by suddenly ratcheting up loans to everyone else?

The most likely scenario is that the ECB will reluctantly and haltingly provide funds to other nations – an on-again, off-again pattern of support — and that simply won’t be enough to stabilize the situation. Having seen the destruction of a Greek exit, and knowing that both the ECB and German taxpayers will not tolerate unlimited additional losses, investors and depositors will respond by fleeing banks in other peripheral countries and holding off on investment and spending.

Capital flight could last for months, leaving banks in the periphery short of liquidity and forcing them to contract credit – pushing their economies into deeper recessions and their voters towards anger. Even as the ECB refuses to provide large amounts of visible funding, the automatic mechanics of Europe’s payment system will mean the capital flight from Spain and Italy to German banks is transformed into larger and larger de facto loans by the Bundesbank to Banca d’Italia and Banco de Espana– essentially to the Italian and Spanish states. German taxpayers will begin to see through this scheme and become afraid of further losses.

The end of the euro system looks like this. The periphery suffers ever deeper recessions — failing to meet targets set by the troika — and their public debt burdens will become more obviously unaffordable. The euro falls significantly against other currencies, but not in a manner that makes Europe more attractive as a place for investment.

Instead, there will be recognition that the ECB has lost control of monetary policy, is being forced to create credits to finance capital flight and prop up troubled sovereigns — and that those credits may not get repaid in full. The world will no longer think of the euro as a safe currency; rather investors will shun bonds from the whole region, and even Germany may have trouble issuing debt at reasonable interest rates. Finally, German taxpayers will be suffering unacceptable inflation and an apparently uncontrollable looming bill to bail out their euro partners.

The simplest solution will be for Germany itself to leave the euro, forcing other nations to scramble and follow suit. Germany’s guilt over past conflicts and a fear of losing the benefits from 60 years of European integration will no doubt postpone the inevitable. But here’s the problem with postponing the inevitable – when the dam finally breaks, the consequences will be that much more devastating since the debts will be larger and the antagonism will be more intense.

A disorderly break-up of the euro area will be far more damaging to global financial markets than the crisis of 2008. In fall 2008 the decision was whether or how governments should provide a back-stop to big banks and the creditors to those banks. Now some European governments face insolvency themselves. The European economy accounts for almost 1/3 of world GDP. Total euro sovereign debt outstanding comprises about $11 trillion, of which at least $4 trillion must be regarded as a near term risk for restructuring.

Europe’s rich capital markets and banking system, including the market for 185 trillion dollars in outstanding euro-denominated derivative contracts, will be in turmoil and there will be large scale capital flight out of Europe into the United States and Asia. Who can be confident that our global megabanks are truly ready to withstand the likely losses? It is almost certain that large numbers of pensioners and households will find their savings are wiped out directly or inflation erodes what they saved all their lives. The potential for political turmoil and human hardship is staggering.

For the last three years Europe’s politicians have promised to “do whatever it takes” to save the euro. It is now clear that this promise is beyond their capacity to keep – because it requires steps that are unacceptable to their electorates. No one knows for sure how long they can delay the complete collapse of the euro, perhaps months or even several more years, but we are moving steadily to an ugly end.

Whenever nations fail in a crisis, the blame game starts. Some in Europe and the IMF’s leadership are already covering their tracks, implying that corruption and those “Greeks not paying taxes” caused it all to fail. This is wrong: the euro system is generating miserable unemployment and deep recessions in Ireland, Italy, Greece, Portugal and Spain also. Despite Troika-sponsored adjustment programs, conditions continue to worsen in the periphery. We cannot blame corrupt Greek politicians for all that.

It is time for European and IMF officials, with support from the US and others, to work on how to dismantle the euro area. While no dissolution will be truly orderly, there are means to reduce the chaos. Many technical, legal, and financial market issues could be worked out in advance. We need plans to deal with: the introduction of new currencies, multiple sovereign defaults, recapitalization of banks and insurance groups, and divvying up the assets and liabilities of the euro system. Some nations will soon need foreign reserves to backstop their new currencies. Most importantly, Europe needs to salvage its great achievements, including free trade and labor mobility across the continent, while extricating itself from this colossal error of a single currency.

Unfortunately for all of us, our politicians refuse to go there – they hate to admit their mistakes and past incompetence, and in any case, the job of coordinating those seventeen discordant nations in the wind down of this currency regime is, perhaps, beyond reach.

Forget about a rescue in the form of the G20, the G8, the G7, a new European Union Treasury, the issue of Eurobonds, a large scale debt mutualisation scheme, or any other bedtime story. We are each on our own.

The last two years have clearly tought that the euro does not work as it was set up. The EU must either further intigrate or else get rid of the euro. Intigration on the scale need is however almost impossible to pull off as fast as is required by the money lenders, and almost certainly is politically impossible. There-fore, the Euro appears to be on borrowed time.

And this from Forbes

http://www.forbes.com/sites/billfrezza/2011/07/19/give-greece-what-it-deserves-communism/



It's not often one gets to witness the climactic end of an era, and it feels like we're about to.

Europe has been steadily marching towards the edge of socialist cliff and Greece, being one of the prime examples of a nation of irresponsible and selfish freeloaders will be the first to fall, holding tightly to the hand of the rest of Europe and carrying it over with them.

Unfortunately, the ramifications will be global in nature.

Ideology trumps everything for you. Remember Communist China's money stopped American Capitalism from collapsing. Greece has been dealing with austerity for two years now, and hard-working Greeks have managed to reduce the deficit.



http://www.reuters.com/article/2012/04/23/us-greece-deficit-idUSBRE83M0U420120423

The thing is, all mainstream politicians can offer is more of the same. You should be concerned with the fact that neo-Nazis are now in parliament. The social ramifications of this are truly terrifying, instead of pontificating on the ideological terrors of Socialism, you should be congratulating the Greeks on the good work done so far.

You are right about this being a global problem though, the far right did very well the last time there was a similar global problem, and we should be doing all we can to avoid a recurrance of 1930s politics.

Greece will struggle for long into the future, because their primary economy is tourism. I had a very bad experience in Athens when I was there last month, and will never return to Greece on a holiday.

I have also warned travelers to Greece on my travel blog that's read by thousands every month. It's pretty bad when I've traveled most countries in this world, and the worst experience has been in Athens. Be forewarned; I believe it's going to get worse as wages and benefits are cut to the bone with an already high unemployment rate.

Ah Kettle, please remind me of your pragmatism so devoid of ideology.

When the excesses of any political system require the Piper to be paid, the result is very often an excessive response.

This is where Greece now finds itself.

By Neo-Nazis, I assume you mean The Golden Dawn Party.

What a lyrical name. It reminds me of The Shining Path of Peru. Don't you love it when poets find politics?

Should we be surprised that in a country in which the national free ride is perceived, by the passengers, as being derailed by foreign powers that nationalism would become attractive?

As long as Greece remains a democracy (which is not likely to be for much longer) the Greeks seem bound and determined to ignore their plight and vote in anyone who tells them what they want to hear:

"Austerity won't work! The government doesn't need to spend less, it needs to spend more!"

And more insidiously, perhaps:

"Our dire straits aren't the fault of true Greeks, it's the immigrants and Jews who have taken us down!"

If I were an immigrant or Jew living in Greece, I would begin to map out an escape route.

It's terrible of course but it comes with the refusal of the Greek people to accept the foul tasting medicine they require to recover from their possibly fatal profligacy.

Since they seem to have less than a collective will to take their medicine, it's likely that a strongman will have to appear to assume their care.

Unfortunately, strongmen tend to provide the wrong medicine, an elixir that addresses the acute symptoms but eventually carries the patient to Death's door.

While I don't think it's that much of a stretch to imagine economic chaos in Europe giving rise to far right regimes in such countries as Greece, Spain, Portugal and perhaps even Italy, it is quite a stretch to forecast a repeat of Europe of some 80 years ago.

None of the nations we might imagine to succumb to the infection are or will be in any shape to carry the contagion beyond their borders., and even all of the conditions for a European pandemic coalesce, a united and aggressive Fascist Europe will not present the same threat to the world in the 21st Century that Nazi Germany did in the 20th.

No, this is first and foremost Europe's problem, and Europe needs to shoulder the responsibility to fix it. (Which is not to say that it isn't trying like Hell to do so).

The US has enough financial problems of its own without taking on the debt compiled by welfare states of Europe, and as you pointed out, China has placed its bet on the US in a big way. They just don't have enough Yen or Dollars to bail out Europe too.

I wish this European drama could proceed without affecting the US, but it can't, and so I maintain a shred of hope that less selfish minds will prevail.

Anyone trying to forecast the future is stabbing in the dark. Dire predictions often go unrealized and hopeful assurances often prove to be cruelly foolish optimism.

It's worth absolutely nothing, of course, but I just have this unshakeable feeling that very momentous events are right around the corner.

If I'm right, many will suffer and the many will most likely be European.

It's a rare, but excellent History teacher who relates the momentous events of the past with the lives of the common folk who lived through them.

If I'm right the same will likely be the case for future History teachers, but we will be the participants who know and if very lucky merely the observers with a ring side seat.

Golden Dawn is actually the name of a magical society. Aleister Crowley was a member, it was prefixed with the phrase "Hermetic order of the...."

One thing we can agree on is that Greece's benefit system was too generous, and the tax system not rigorous enough. That's no longer true.

A good welfare state isn't a something for nothing idea, it's a safety net to protect the most vulnerable, and it goes both ways. I've paid National Insurance since I was old enough to start working.

The problem is, austerity is stifling growth, if countries are to reduce their deficits they need the extra tax revenues that are generated by growth.

Interestingly enough, I just read an article (I'm afraid I know not where) that decried how healthcare in the UK was suffering because of cut backs that reduced the number of doctors and nurses operating in the system.

This despite the fact that so many Brits (rightly or wrongly) defend National Healthcare Insurance.

The reality is that such a program can work just fine if there is enough national money to fund it, but eventually there will not be.

One can't ignore the cost of national healthcare to a nation. There is only so much money to go around, and when the government finds itself in dire financial straits there will be cuts.

One would think that enlightened governments that provide their citizens with free health care would use discretion when hard times called for cuts. For instance perhaps maintaining the current number of nurses is more important than continuing the Royal stipend.

However, this is not the way governments operate.

Governments consist of competing bureaucratic cells, all of which consider their charge paramount because it insures the salaries of their bureaucrats. No governmental chief executive seems capable of making intelligent decisions about the worth of one over the other and so when there are cuts to be made, they are implemented across the board.

The same thing happens in corporations of course but the huge difference is that when corporations repeat the same petrified approach year after year, they go bust.

True efficiency and dedication to purpose is only possible in relative small organizations. Bloated governments are anything but that.

As far as I know (which certainly is a limited knowledge but some local persons, insured by and/or working for the NHS) the actual discussion now is about pensions.

Perhaps, the NHSs of the UK really have a huge bureaucracy. Our health insurance companies in Germany work differently (mine is one, I only have phone and email contact with) as well as our system is different to the British one (and some dozens of years older)