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Originally Posted by nomadking
How did the Germans get the Greeks to go on a spending spree, hide excessive government spending, not pay taxes and, pay certain groups(eg railway workers) excessive wages? How did they get the Irish and the Spanish to overdo building projects? That would be a good trick. Nobody forced them into borrowing too much.
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No-one forced it but the interest rates the Eurozone shared were not conducive to their economies. In the case of Ireland especially joining the Euro halved their interest rate overnight. When you have growth significantly higher than interest rates it makes debt an extremely good way to go as the debt is outgrown.
The problem is of course when the growth stops.
Again, though, it's all well and good preaching that, doesn't change that there's a very clear balancing act between interest rates and economic growth and interest rates set to help the Germans increase their exports were completely inappropriate for Ireland et al and incentivised getting into serious amounts of debt to fuel further economic growth.
The Euro appears to exist as a political project and, from the economic point of view, a great way to keep German exports cheap. Rather than having the strong deutschmark that their economy merits and under normal circumstances would most definitely receive, strong countries have strong currencies due to demand for them, they get to dilute their currency with the rest of the Eurozone producing a weaker currency and making their exports cheaper.
The Euro broke many standard stability mechanisms for economies and we're now enjoying the end result, just as the Bank of England with that moron Mervyn King broke standard stability mechanisms by running laughably low interest rates during the noughties when a massive asset bubble was building.
---------- Post added at 22:49 ---------- Previous post was at 22:43 ----------
Quote:
Originally Posted by nomadking
Exactly, you're saying that it should go to the Greeks instead. Where else were you saying it should go?
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Nope I didn't say anything about where it would be going. They shouldn't be getting a bailout at all, they should be defaulting and the banks who were stupid enough to lend them the money should be having to reconcile it on their balance sheets.
That is, last time I checked, what capitalism is about, taking risks and them paying off or not. I'm unsure why risks taken on sovereign debt when they don't come off should end up getting repackaged and shoved onto taxpayers through other mechanisms.
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Originally Posted by nomadking
Somebody forgot to tell that to Blair and Brown.
Even if Greece hadn't taken out all of the loans to fund the Socialist polices, they could never pay back even limited borrowing in their 'good times', because their 'good times' are not that special.
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Listening to the coalition's ******** I see. Blair and Brown didn't overspend by nearly as much as the Tories would have people believe.
No-one is excusing Greece but, tell me, if it was so obvious that Greece were taking out loans to fund socialist policies which they didn't have a hope of paying back why were private banks continuing to advance this cash, and why shouldn't they see the full extent of the pain as a result of these stupid loans?
They took a risk, justified it with the higher interest rates, it's not come off. They should pay 100% of the price. That's capitalism, not the corporatism that's practised within Europe where private losses are socialised.
Greece aren't even the worst for this, Ireland's government of the time should've been lined up against a wall and shot for even contemplating taking billions of bad private loans onto the public accounts.
Iceland told the private creditors to deal with it and are growing strongly. Capitalism works, corporatism doesn't.