Jun. 29th, 2015

Greece eh?

Jun. 29th, 2015 02:25 pm
daveon: (Default)
I've been keeping an eye on this, as you do.  It does have that grim feeling that people may have had in 1913/14 while the wise heads agreed war was impossible, the events just kept unfurling.

As I remarked on Facebook, the problem with negiating agressively with somebody who has nothing to lose, is that they might, in fact, decide that they have nothing to lose.  It feels like we're at that point.

We could discuss that the Euro project was potentially doomed from the outset for various factors:

  • currency union without political union is unstable - how do you impose rules on people who are doing stupid stuff with your largess

  • Germany joined at the wrong part of it's business cycle when the value of the Mark was much lower than it had been, giving Germany a HUGE price advantage in the early stages

  • expecting members of your currency to depress their economies and GDPs to avoid other members experiencing any relative inflation isn't the right way to do things

Anyway, here we are.  The Greeks have called the German bluff and stated, correctly in my opinion, that this is now a matter for their voters.  They were elected, as a government, with a mandate to do something about austerity, they have tried, they have failed - it is now up to the people of Greece as a whole if they are prepared to deal with the consequences - either live with more austerity or get out of the Euro and possibly the EU.

At the crux of this is the idea that as long as you live 'within your means' and pay down your debt, confidence and growth will return to your economy.  The problem here is when your economy is running with 25-30% of the workforce unemployed, where does all the demand come from for there to be confidence?  I got nothing - there isn't a way to do it.

It has been suggested to me that all this posturing is purely because the Germans, ECB and the Commission are ok with losing Greece, as long as it shows the Spanish, Italians and Irish that they better not think about breaking ranks.  That feels potentially true especially after the tirade from the Commission Chair today where he basically demanded to know who the fuck these voters thought they were and what gave them any say in running their country?

What indeed?

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