Posts Tagged ‘euro’

Greece is about the leave the Eurozone

The Greek government is limited in its abilities to use fiscal policy to stimulate its economy because Greece is attached to the euro. Germany governs how and when an expansion of the euro will take place, and the Germans are mostly worried about inflation, which is not a problem that Greece has. Attachment to the euro has created a disaster for Greece. Now the government there is preparing to leave the Eurozone. Staying in the eurozone redistributes income from Greek citizens to foreign bankers because the government needs to borrow money in order to stimulate the economy, and the terms of the borrowing has been onerous for the citizens of Greece since linkage to the euro has pushed the nation into a deep and long lasting recession since 2009.

Banks prepare for the return of the Greek drachma

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Exit polls in Greece suggest the Greek people have decided get rid of their government of the bankers. The government has virtually no ability to engage in fiscal policy to stimulate the economy because they’re tied into the euro, which is controlled by the high powered Germans. The euro is a failure since the Greeks have been forced to cut their social safety net in order to secure loans from banksters to pay off bonds that are coming due. The result of this “austerity madness” has been a worsening economic crisis, further deepening the economic disaster, and ordinary folks are paying the price. Now they’re justifiably mad.

Click here for "Greeks Kicking Out Their Worthless Government"

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A deal has been reached between the Greek government and the rest of the Eurozone. Greece will get a series of loans that should save it temporarily from defaulting on government bonds; the deal will also ensure Greece will move deeper into misery and that the current recession that began five years ago will get worse.

Unemployment is already at 20 percent. It will grow because the new austerity measures include slashing pensions and lowering the minimum wage from 751 to 580 Euros per month. That’s called slashing the demand for goods and services. That’s called increasing misery. The Greek government is facing insolvency, dissolution and probably revolution in the coming months.

The Euro is good for the European banksters, but bad for the people of Greece. The Greek politicians know this.

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Greek Unions Unleash 48 Hour Strike as Eurozone Begins Crackup

Greek labor unions are fighting back against the failure of government austerity measures.

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President Obama has been lucky the weak American economy hasn’t gone back into recession, at least not so far. Under Obama’s watch, the economy has even managed to create jobs, although at a pace that any previous business expansion beats, except for the dismal record of George W. Bush. But can the so-called business recovery survive a global downturn and fiscal conservatism on Capitol Hill?

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Economics in 2012: no gain, just pain as austerity brings misery to all

The fluctuations of the financial markets and the relentless round of make-or-break euro-summits gripped the attention in 2011, but this will be the year when the shockwaves are felt by millions of people in Europe and beyond.

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Europeans migrate south as continent drifts deeper into crisis

Since its conception, the European Union has been a haven for those seeking refuge from war, persecution and poverty in other parts of the world. But as the EU faces what Angela Merkel has called its toughest hour since the second world war, the tables appear to be turning. A new stream of migrants is leaving the continent. It threatens to become a torrent if the debt crisis continues to worsen.

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It the Euro Zone About to Collapse?

EVEN as the euro zone hurtles towards a crash, most people are assuming that, in the end, European leaders will do whatever it takes to save the single currency. That is because the consequences of the euro’s destruction are so catastrophic that no sensible policymaker could stand by and let it happen.

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I agree with Paul Krugman and his take on the Euro crisis, but there is one thing Mr. Krugman doesn’t mention. At least two of the nations, Spain and Italy, shipped away much of their manufacturing base long ago in order to redistribute income and wealth from working people to the politically powerful affluent class. The same thing happened in the UK. Sweden and Germany didn’t do the same thing nearly so much, so these nations remain economically vibrant because the working classes there have good paying jobs. –John Hively

Published: November 10, 2011 in the New York Times

This is the way the euro ends — not with a bang but with bunga bunga. Not long ago, European leaders were insisting that Greece could and should stay on the euro while paying its debts in full. Now, with Italy falling off a cliff, it’s hard to see how the euro can survive at all.
Fred R. Conrad/The New York Times

But what’s the meaning of the eurodebacle? As always happens when disaster strikes, there’s a rush by ideologues to claim that the disaster vindicates their views. So it’s time to start debunking.

First things first: The attempt to create a common European currency was one of those ideas that cut across the usual ideological lines. It was cheered on by American right-wingers, who saw it as the next best thing to a revived gold standard, and by Britain’s left, which saw it as a big step toward a social-democratic Europe. But it was opposed by British conservatives, who also saw it as a step toward a social-democratic Europe. And it was questioned by American liberals, who worried — rightly, I’d say (but then I would, wouldn’t I?) — about what would happen if countries couldn’t use monetary and fiscal policy to fight recessions.

So now that the euro project is on the rocks, what lessons should we draw?

I’ve been hearing two claims, both false: that Europe’s woes reflect the failure of welfare states in general, and that Europe’s crisis makes the case for immediate fiscal austerity in the United States.

The assertion that Europe’s crisis proves that the welfare state doesn’t work comes from many Republicans. For example, Mitt Romney has accused President Obama of taking his inspiration from European “socialist democrats” and asserted that “Europe isn’t working in Europe.” The idea, presumably, is that the crisis countries are in trouble because they’re groaning under the burden of high government spending. But the facts say otherwise.

It’s true that all European countries have more generous social benefits — including universal health care — and higher government spending than America does. But the nations now in crisis don’t have bigger welfare states than the nations doing well — if anything, the correlation runs the other way. Sweden, with its famously high benefits, is a star performer, one of the few countries whose G.D.P. is now higher than it was before the crisis. Meanwhile, before the crisis, “social expenditure” — spending on welfare-state programs — was lower, as a percentage of national income, in all of the nations now in trouble than in Germany, let alone Sweden.

Oh, and Canada, which has universal health care and much more generous aid to the poor than the United States, has weathered the crisis better than we have.

The euro crisis, then, says nothing about the sustainability of the welfare state. But does it make the case for belt-tightening in a depressed economy?

You hear that claim all the time. America, we’re told, had better slash spending right away or we’ll end up like Greece or Italy. Again, however, the facts tell a different story.

First, if you look around the world you see that the big determining factor for interest rates isn’t the level of government debt but whether a government borrows in its own currency. Japan is much more deeply in debt than Italy, but the interest rate on long-term Japanese bonds is only about 1 percent to Italy’s 7 percent. Britain’s fiscal prospects look worse than Spain’s, but Britain can borrow at just a bit over 2 percent, while Spain is paying almost 6 percent.

What has happened, it turns out, is that by going on the euro, Spain and Italy in effect reduced themselves to the status of third-world countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies. In particular, since euro-area countries can’t print money even in an emergency, they’re subject to funding disruptions in a way that nations that kept their own currencies aren’t — and the result is what you see right now. America, which borrows in dollars, doesn’t have that problem.

The other thing you need to know is that in the face of the current crisis, austerity has been a failure everywhere it has been tried: no country with significant debts has managed to slash its way back into the good graces of the financial markets. For example, Ireland is the good boy of Europe, having responded to its debt problems with savage austerity that has driven its unemployment rate to 14 percent. Yet the interest rate on Irish bonds is still above 8 percent — worse than Italy.

The moral of the story, then, is to beware of ideologues who are trying to hijack the European crisis on behalf of their agendas. If we listen to those ideologues, all we’ll end up doing is making our own problems — which are different from Europe’s, but arguably just as severe — even worse.

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