Posted on 02/18/2012 5:33:00 PM PST by bruinbirdman
Plans for Greece to default, potentially leaving the euro, have been drafted in Germany as the European Union begins to face up to the fact that Greek debt is spiralling out of control - with or without a second bailout.
The German finance ministry is actively pushing for Greece to declare itself bankrupt and to agree a "haircut" on the bulk of its debts held by banks, a move that would be classed as a default by financial markets.
Eurozone finance ministers meet on Monday to approve the next tranche of loans from the EU and the International Monetary Fund, designed to stave off national bankruptcy while the new Greek government puts the country's finances in order.
But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.
His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.
"He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he - and a growing group - are convinced it will not pull Greece out the hole," said a eurozone official.
"The idea instead is that the Greek government should officially declare itself bankrupt and begin negotiating an even bigger cut with its creditors. For Schäuble, it is more a question of when, not if."
The German finance minister's comments are certain to plunge the authorities in Athens into even deeper
(Excerpt) Read more at telegraph.co.uk ...
Socialists around the world are running out of other people’s money.
The USA will plunge headlong into another four years of it soon.
Germany has been working its butt off — especially when it took in East Germany after the fall.
Greece is like that drunk cousin who keeps asking for money and saying “really, I will get off the sauce today.”
And Greece is the USA in 5-10 years if the democrats continue to hold sway.
In the meantime, say “auf widersehen” to the Euro, the 2nd stupidest idea mankind ever came up with (Communism being #1)
I agree. The one statement in the article says it all “the general public will be left holding the bag”. They are positioning themselves to protect their investments and dump the dead cat on the uninformed.
The U.S. is a 3rd world Country. We are living on debt. We are living off of debt. Thanks to Obama and “free trade” with China, the U.S. is worse off than Greece . It is only that the U.S. can print the stupid dollar (for now). Greece is being forced into austerity measures. The U.S. has much more debt than Greece . The U.S. should be reducing spending not borrowing trillions more. This borrowing trillions will lead the U.S.to a much worse collapse than Greece.
It was a 2-way street. When Greece adopted the euro, it was at a rate that meant a revaluation of the drachma against the mark. This meant Greece became more uncompetitive than it already was, trade-wise. And for over a decade, Greece has been unable to devalue, even as Germany racked up massive trade surpluses vs the PIIGS. It's as if we got into a currency union with China, which would prevent us from getting the Chinese to revalue their currency. The result would be even bigger trade deficits for us vis-a-vis the Chinese.
The problem with a common currency for the EU is that it really only works if EU members have a common language, and discrimination on the basis of national origin is outlawed EU-wide. In reality, Greeks cannot get jobs in Germany. They are stuck in Greece. During the Great Depression, Okies could and did go to California, which was in much better economic shape. The lack of economic safety valves due to language differences is why the euro is ultimately doomed.
The Greeks want out of the Euro for the simple reason they want to be free to print up as many drachmas as they want.
If they drop the euro the new currency will be so devalued I’ll be able to afford a vacation there
Maybe not for countries, but what about the people and companies who loaned them money? We might see more MFGlobal type collapses.-tom
>>The problem with a common currency for the EU is that it really only works if EU members have a common language, and discrimination on the basis of national origin is outlawed EU-wide. In reality, Greeks cannot get jobs in Germany. They are stuck in Greece. During the Great Depression, Okies could and did go to California, which was in much better economic shape. The lack of economic safety valves due to language differences is why the euro is ultimately doomed.<<
That is an extremely insightful analysis.
Thanks!
“We’ll likely see massive outflows of capital from Europe to the United States, which would have an almost immediate and adverse impact on dollar denominated assets including US stocks, commodities, and precious metals.”
Wait, what? I am lost. Or the author is.
Similarly, using the common currency made Germany and France become more competitive than they would have been with their own currencies.
However bad the euro was for Greece and others was balanced by it being that much better for Germany and France.
That's a fact, jack. It will be just like it always USED to be.
Nice theory, but wrong.
Turks have have flooded into Germany, and because they are willing to work, they get jobs. A surprising number of Russians, as well. Poles have flocked to the UK.
And finally, Europeans with a modicum of education do have a common Language. English.
It has been going on since Ireland went bust, at least 18 months.
U. S.A. gets downgraded and so much money flows to Treasuries, interest rates go down.
We're good for the next five years while EUrotopia goes broke, or unless The Obammunist is re-elected.
yitbos
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