ChatterBank0 min ago
Does anyone have a simple explanantion of how the present Euro crisis has developed ?
To what extent is cash used in all these financial goings on?
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The 2009 global financial crisis caused by inept bankers and dubious lending takes hold and Greece’s national debt rises to €262bn from €168bn in 2004. In 2005 the Government imposed an austerity budget and GDP rose 4.1%. However the bounce was short lived, and the 2009 World Finance Crisis hit them hard. Unlike the UK, Greece was a relative poor EU member and were unable to cope with the rise. It has struggled to to meet its payments.
Attempting to answer the question without naked political spin:
The Euro crisis has come around because investors are losing confidence (temporarily anyhow) in the Euro zone - the reason for that is because of the situation in Greece is threatening to drag down the value of the rest of the currency (which is obviously used by all the EMU countries). If that happened, it would drastically affect the terms of trade of any country using the Euro - and therefore would also affect anyone they trade with or who has substantial investment in them.
That's my basic understanding of it anyway, but I freely admit that I find the detailed economics a bit confusing. Would be much obliged if more confident ABers could point out any flaws in my understanding.
The Euro crisis has come around because investors are losing confidence (temporarily anyhow) in the Euro zone - the reason for that is because of the situation in Greece is threatening to drag down the value of the rest of the currency (which is obviously used by all the EMU countries). If that happened, it would drastically affect the terms of trade of any country using the Euro - and therefore would also affect anyone they trade with or who has substantial investment in them.
That's my basic understanding of it anyway, but I freely admit that I find the detailed economics a bit confusing. Would be much obliged if more confident ABers could point out any flaws in my understanding.
-- answer removed --
It's complicated because there are a number of factors.
Depending on your political persuasion you will give more or less weight to different factors.
Certain facts though are clear.
Almost all countrys borrow money to finance public spending. They do this by selling bonds at a set interest rate. these bonds are bought by investers - possibly banks or people investing our pensions!
Certain countries though have been borrowing so much money that they are having difficulty meeting the interest payments.
This isn't just a Euro issue - we've a large debt from bailing out the banks.
The worst case is Greece in terms of their debt compared to their income - Italy's debt is bigger but they have a much bigger economy.
If Greece were to default - refuse to pay their debts they would not be able to raise money any more and very soon they'd not be able to pay their police, doctors bin men etc.
This would undermine confidence in the Euro but Germany and France get huge advantages from that and aren't about to let it fail so they're pumping money into Greece but insisting that they reform their economy which involves huge cuts to public spending in Greece (very tough times).
The Greek PM doesn't want to take sole responsibility for this and carry the can so he threatened a referendum if the opposition doesn't back the rescue deal too.
I think that's a fairly factual neutral summary
Depending on your political persuasion you will give more or less weight to different factors.
Certain facts though are clear.
Almost all countrys borrow money to finance public spending. They do this by selling bonds at a set interest rate. these bonds are bought by investers - possibly banks or people investing our pensions!
Certain countries though have been borrowing so much money that they are having difficulty meeting the interest payments.
This isn't just a Euro issue - we've a large debt from bailing out the banks.
The worst case is Greece in terms of their debt compared to their income - Italy's debt is bigger but they have a much bigger economy.
If Greece were to default - refuse to pay their debts they would not be able to raise money any more and very soon they'd not be able to pay their police, doctors bin men etc.
This would undermine confidence in the Euro but Germany and France get huge advantages from that and aren't about to let it fail so they're pumping money into Greece but insisting that they reform their economy which involves huge cuts to public spending in Greece (very tough times).
The Greek PM doesn't want to take sole responsibility for this and carry the can so he threatened a referendum if the opposition doesn't back the rescue deal too.
I think that's a fairly factual neutral summary
Thc I have often asked myself the same question as the one you pose. It seems to me that the increasing population is clamouring for more and more of the necessities of life than it is producing - clothing, warmth, food, etc. Consequently countries are borrowing more and more from each other and do not have the means to get out of debt. It's a vicious circle and I fear for the future of humanity.
As I understand it one of the keys to Greece's problems is huge tax avoidance and a large black economy.
The Eurozone crisis is largely as a result of scrutiny of how the single currency struggles in situations where one member country's economy - such as Greece's falters. And with the prospect of others to follow.
However, I am not an economist.
The Eurozone crisis is largely as a result of scrutiny of how the single currency struggles in situations where one member country's economy - such as Greece's falters. And with the prospect of others to follow.
However, I am not an economist.
Simple explanation
1 France & Germany want to run Europe (as per Napoleon / Hitler)
2 They suckered other countries into a "free trade" area.
3 Their faceless unelected unaccountable bureaucrats (did i say corrupt?) set up a gigantic empire, which nobody (after Maggie) had the guts to challenge.
4 The Northern countries are hard working & productive, while the Southern mediterranean countries are lazy idle slackers, and don't pay taxes.
5 The idea that a common currency would somehow unite all this is unworkable.
6 The basic stupidity was shown up by the externally generated global crisis
7 er... that's it
1 France & Germany want to run Europe (as per Napoleon / Hitler)
2 They suckered other countries into a "free trade" area.
3 Their faceless unelected unaccountable bureaucrats (did i say corrupt?) set up a gigantic empire, which nobody (after Maggie) had the guts to challenge.
4 The Northern countries are hard working & productive, while the Southern mediterranean countries are lazy idle slackers, and don't pay taxes.
5 The idea that a common currency would somehow unite all this is unworkable.
6 The basic stupidity was shown up by the externally generated global crisis
7 er... that's it
"which nobody (after Maggie) had the guts to challenge.
"
I'm no Thatcherite (God forbid) but it's a myth that she was anti-Europe. She did, after all, negotiate the Maastricht treaty.
Apart from that venator:
Point one is just silly
Ditto point two.
Er, and point 3.
There's some truth in 4, but I must say I sympathise with the south :-)
Point five is not proven but I agree it might be born out. I believe it will not be, however.
Point six betrays the fact that the current crisis is not caused by the euro, however much being in the Euro might have been considered not to have helped. But it's an interesting debate as to how much the euro is either a hindrance or a help to Greece. Certainly now it is vital to it.
"
I'm no Thatcherite (God forbid) but it's a myth that she was anti-Europe. She did, after all, negotiate the Maastricht treaty.
Apart from that venator:
Point one is just silly
Ditto point two.
Er, and point 3.
There's some truth in 4, but I must say I sympathise with the south :-)
Point five is not proven but I agree it might be born out. I believe it will not be, however.
Point six betrays the fact that the current crisis is not caused by the euro, however much being in the Euro might have been considered not to have helped. But it's an interesting debate as to how much the euro is either a hindrance or a help to Greece. Certainly now it is vital to it.
A simple economist could have forseen the trouble that would arise with the Euro. Before the Euro existed countries such as Germany had a very strong currency whereas others were weak. Overnight Greece joined the Euro and expected to be on a par with Germany in terms of worker efficiency. Now it turns out the the average Greek worker is lazy, wants more holidays and better pension provisions and produce less.
Reality has now set in!
Reality has now set in!
So Venator’s first two points are silly, Ichkeria?
Point one – look at European history. Point two – look at the founding principles of the EU. It was, remember, born as the “Common Market” and it maintained that title until most of the major players had joined.
Points five and six are most definitely true. Certainly the current crisis was not caused by the Euro but had each of the Euro nations maintained their own currencies each could have dealt with the current circumstances as best suits them – which they cannot do whilst trapped inside a currency which many of them cannot afford to use. Additionally Greece would not have racked up such huge debts had they maintained the Drachma. They were only able to because the interest rates charged to them were about a fifth of that they had been paying prior to 1999. In addition to accumulating the debts they squandered the money by expanding its State sector way beyond its means.
Politicians were warned by economic experts that a single currency could not cope with extreme circumstances affecting the whole zone. They chose to ignore those warnings and everybody is now paying the price.
Point one – look at European history. Point two – look at the founding principles of the EU. It was, remember, born as the “Common Market” and it maintained that title until most of the major players had joined.
Points five and six are most definitely true. Certainly the current crisis was not caused by the Euro but had each of the Euro nations maintained their own currencies each could have dealt with the current circumstances as best suits them – which they cannot do whilst trapped inside a currency which many of them cannot afford to use. Additionally Greece would not have racked up such huge debts had they maintained the Drachma. They were only able to because the interest rates charged to them were about a fifth of that they had been paying prior to 1999. In addition to accumulating the debts they squandered the money by expanding its State sector way beyond its means.
Politicians were warned by economic experts that a single currency could not cope with extreme circumstances affecting the whole zone. They chose to ignore those warnings and everybody is now paying the price.
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