Posted on 02/10/2015 12:00:12 PM PST by Kaslin
Germany has been sacking Greece and other Mediterranean economies for years, and the Hellenic revolt against austerity is overdue.
When the euro was established in 1999, prices were translated from the mark, franc and other currencies into euro at prevailing exchange rates. (Greece joined the Eurozone in 2001, giving up the drachma.)
National prices reflected differences in labor costs and efficiency across countries, but owing to a variety of social and demographic conditions, productivity improved more rapidly in Germany and other northern countries. Making goods in the South became too expensive, and Greece and others could no longer export enough to pay for imports.
Without a single currency, the values of the drachma and other Mediterranean currencies would have fallen against the German mark to restore competitive balance.
Europe has few of the mechanisms that facilitate adjustment in the United States, which has a single currency across a similarly wide range of competitive circumstances. A single language permits workers to go where the jobs are, whereas most Greeks and Italians are stuck where they are born. New Yorkers’ taxes subsidize public works, health care and the like in Mississippi through the federal government in ways the European Commission cannot accomplish.
Germany uses its size and influence to resist changes in EU institutions that could alter fiscal arrangements.
Hence, the Greeks and other southern Europeans were forced to borrow heavily from private lenders in the north—mostly through their commercial banks—to provide public services, health care and similar services that were hardly overly generous when measured by German standards.
All this kept German factories humming and German unemployment low.
When the financial crisis and meltdown of global banking made private borrowing no longer viable, Greece and other southern states were forced to seek loans directly from Germany and other northern governments.
Bailouts implemented by Germany through the European Central Bank, the International Monetary Fund and the European Commission required labor market reforms, cuts in wages and pensions, higher taxes, and less government spending.
All to restore Greek competitiveness, growth and solvency—and all have absolutely failed.
Starved for investment, the Greek industry is now even less capable of exporting to pay for the imports of everyday items Greeks need. GDP is down 25 percent, unemployment is about 25 percent, and health care spending is down 40 percent.
When austerity began, Greece’s sovereign debt was 110 percent of its GDP. Now it is 160 percent, grows larger by the day and can never be repaid.
That should hardly surprise Chancellor Merkel. Germany pursues many of the same policies that she wants Greece to jettison—it just does those differently.
Many German workers belong to unions that negotiate pay and work rules through national contracts. As a result they enjoy the highest wages and the shortest work week among large industrialized countries.
When recession struck in 2008, German businesses were freer from legal restrictions than Greek employers to lay off workers. So, Berlin subsidized employers to reduce hours, share work and still pay nearly full wages. And Germans were hardly required to accept huge cuts in the quality and availability of health care.
If Greece and the others really straightened out their economies, Germany and other northern countries would lose a great number of jobs to the South and political clout within Europe.
The newly elected Greek government is quite correct to eschew austerity and seek reductions in what it owes northern European governments. In making those loans, the latter chose to ignore key facts.
Namely, the single currency is punishing the South, and solving Mediterranean states’ chronic financial problems will require moving some industry from the North to the South. More austerity will only bleed the patient further.
In the near term, spending more and taxing less will help the Greek economy recover. But unless the single currency is abandoned and the EU is run to benefit all its members, Greece and the other Mediterranean states can never prosper.
I am no economist (I have this belief in honest work for honest wages which probably disqualifies, lol) but it is not difficult for me to imagine that economists would argue that when and wheree wages are lower in a free trade economic system, that the system can be expected to respond by shifting production to that region. In Greece’s case, production factories should have moved from Germany (high wages) to Greece (low wages), and nothing in EU should have prevented Greece from thus determining their own economic destiny, i.e., the people of Greece could reap the economic rewards of working hard. What happened? Their government and culture contained too much collective inertia, and politics combined with overly easy lending policies led them over the cliff(?)
Personal anecdote: I was in Greece in 2010, and the most visible problem was exploitation of foreign workers from the Balkan countries. Greece had a relatively high minimum wage, which enticed many foreign students to go work there to work in tourist shop retail sales. However, payroll often falls behind (or at least, so I was told), and as a result, the foreign workers often work for little or nothing and their livelihood is often at the mercy of the locals.
This is why I no longer frequent the Townhall website.
The only thing the Greeks are going to revolt over is more FREE STUFF!
Normally it should not be so easy to refute this editorial with a counterexample, but...:
Greek court acquits farmers who shot 28 Bangladeshi strawberry pickers
The Guardian
30 July 2014
http://www.theguardian.com/world/2014/jul/31/greek-court-acquits-farmers-shot-strawberry-pickers
I’m going to object to the premise of the article. From the inception of the European Common market (EEC) in the 1950s, there was opposition and concern, about admitting poorer countries from the South.
The fear was of eventually having to subsidize them.
That fear has been borne out, and the common currency is NOT the cause of problems in Greece.
The article alludes to ‘different demographics, customs, etc.’
The Germans are opposed to working 48 weeks out of a year, so the Greeks can work 42 weeks of a year, to put it in simple terms.
Austerity to Greece, is having to actually work.
And the Germans expect to be repaid.
If Russia thinks their greatly reduced oil revenue will afford them the ability to subsidize Greece, good luck with that.
WTH are you talking about, Townhall becoming a communist mouth piece. Please explain
Then why did you click on the thread?
The article you linked reveals another potentially serious problem for Greece.
The headline says that 28 laborers were shot, but the body of the article reports that only four were seriously hurt - apparently none killed.
That indicates a potentially serious deficiency in marksmanship training.
But seriously, the Guardian may be be engaged in slanted reporting, to advance their leftist worldview, as they usually do.
I would not be surprised if it had actually been a violent mob of Bangladeshis, demanding a change to previously agreed payment terms, storming a few people who happened to be armed. It seems like there might be more to the story than just this spin.
Yeah, maybe. I cannot say that my personal observation was representative but it convinced me that trusting the rule of law in Greece is an iffy proposition.
I think the important question is so what, then?
Greece can’t pay up and defaults, due to internal problems.
Lots of European investors go down.
Ripples of financial instability spread towards the USA from Europe.
Presuming Obama has not pre-destabilized the USA economy, the Fed goes into QE-infinity++ to compensate for the downfall of the Euro and effects on stock markets.
What have I missed? Germany invades Greece? (again?)
The article you posted is a bunch of falsehoods and misrepresentations designed to justify the current communist regime in Greece.
I believe that your observation is correct, and I have seen folks from the Balkans doing scut work in Greece on our visits as well. Just a heads up about the Guardian newspaper - proud of their long history as deliberate propagandists for the left.
So what then, for Greece and the financial system?
I see two options,: pay now, or pay more later.
The pay now scenario is the Greek exit from the Euro, with probable default. The European Central Bank would likely print money to sore up their banks, devaluing the Euro a bit. If the pain is enough in Greece, perhaps the government will fall within a year.
The pay more later scenario, as Freeper General Blather suggested, is more characteristic. They will all try to kick the can down the road, and send more good money after bad, letting the total future loss rise. It is getting harder to do that, as the total grows so big, that the monthly payments can’t be managed. Again, probable default by Greece, but only after raising the total and encouraging more of the European left to default as well.
What part of opinion do you not understand?
Thank you!
It appears they have come face to face with the socialist dilemma.
Huh? Who was debating “opinion”? You asked me to explain my prior comment and I kindly did so.
Also, the article represents itself as factual. Nowhere does it say “this is only an opinion”.
Most of the other posters also saw through the idiocy of that article (not that I much care one way or the other to hold the majority opinion).
Curiosity, like anyone else. Doesn’t mean I’ll be running over to the Townhall site.
Something you might have missed unless it states Townhall.com Staff next to the link the article was not written by Townhall.com only published, which is a huge difference
Thanks for the tip about the Guardian. I imagine that you are correct and that the article is slanted with omissions, bias, etc.
Here is an article which I found that also addresses some of my concerns:
Eurozone Leeaders believe that Szyira must fail and must be seen to fail
Feb. 11, 2015
One thing I am still not finding is the economics theory take on all of this. What are econ profs saying about the EU crisis in their classes? What scholarly papers (if any) predicted this disaster? Is economics a science or some form of math psychobabble used to justify the politics of the hour? where are the architects of the EU on this and are they being held accountable? Is there any review? Is there any attempt to reconcile economic theory with practice?
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