Quote from maxitronixy:
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.
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.
http://www.bde.es/webbde/Secciones/...adas/DocumentosOcasionales/06/Fic/do0608e.pdf
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...
