Europes Debt Crisis

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Europes Debt Crisis

Postby sardia » Fri Jun 17, 2011 8:57 am UTC

http://www.nytimes.com/2011/06/17/world ... ce.html?hp
Quick summary: Some Euro nations are doing well, some are in heavy debt, and then there are the P.I.G.S
Those countries are dragging Europe down and spooking the markets. Problem is, the political answer to the markets are upsetting the common folk.


This is a lot harder to solve than I originally thought it was. What do you guys think the answer is? Maybe have the richer 2 or so nations just assume all the debt in exchange for uniting the continent?

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Re: Europes Debt Crisis

Postby Eowiel » Fri Jun 17, 2011 9:30 am UTC

Europe has already lent money to Greece, Ireland and recently Portugal with a low intrest rate. So basically Europe is already assuming the debt and if Europe is paying for something that more or less means that it's really Germany that is paying for it.

I personally think the current course of action coupled with a (forced) thorough reorganisation of government spending and the economic regulations of the affected countries is the way to go. In that respect I think it's wise and fair to let Germany dictate the conditions for the European aid, since they're the ones who will bear most of the risk and they've shown that they know how to recover from an economic crisis.

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Re: Europes Debt Crisis

Postby Iulus Cofield » Fri Jun 17, 2011 9:35 am UTC

Perhaps this will lead to more power to the EU proper and a more unified Europe. The debt crisis itself is beyond my ability to intelligently comment on, but I hope that it is resolved well and even causes greater political stability.

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Re: Europes Debt Crisis

Postby Zamfir » Fri Jun 17, 2011 10:06 am UTC

I recently read an article that made the good point that muddling through is working a lot better than people give it credit.

There is a lot of attention for Greece now, and there is indeed no realistic way for Greece to pay back its debts in full, or even to rolling over old debt. But Greece is small, with outstanding debts of the order of a single large bank. There is no doubt that the Eurozone could bail out Greece without credit risk for the bailing-out countries. It's a matter of resolve and deal making. After all, any deal will leave some people richer and others poorer.

But when the "PIIGS" started, they included Italy and Spain. Each of them economies significantly larger than the other 3 combined. Italy has dropped off the screen completely (and should perhaps never have been included anyway). And Spain has no problems anymore getting loans on the normal market, at somewhat bearable rates. Those were the countries that could have pulled down the entire zone, because supporting their debt would have had significant credit implications for the countries doing the supporting.

That means that people can now make deals on the remaining countries without collapse breathing in their necks. In the case of Ireland and Portugal that means special loans at below-market rates, and getting them to pull through to better economic times.

In the case of Greece, it is clear that loans are not really loans. There is no realistic way how they can repay all their loans, so some people who loan more will end up not getting their all their money back. Question is, how will those losses be divided, and how can this be done smoothly without creating more problems.

Greek debt is held by foreign banks and pension funds, Greek banks, the ECB (unknown amount), the EFSF, the IMF. When the IMF and EFSF increase their share, the banks (and perhaps the ECB) can get out of the debt. We're basically moving to a situation where nearly all Greek debt is held by foreign governments through the EFSF and IMF, and those then tell Greece what to do to squeeze as much money out of there as possible.

We've seen that in many other countries, it's not pleasant. Many people say it is better for everyone, country and foreigners, not to squeeze and reform too hard. Because in the long run a squeezed country is poorer and can actually pay less, not to mention the actual poverty itself. But tell that to the voters in the other countries.

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Re: Europes Debt Crisis

Postby Mittagessen » Fri Jun 17, 2011 11:20 am UTC

Zamfir wrote: There is a lot of attention for Greece now, and there is indeed no realistic way for Greece to pay back its debts in full, or even to rolling over old debt. But Greece is small, with outstanding debts of the order of a single large bank. There is no doubt that the Eurozone could bail out Greece without credit risk for the bailing-out countries. It's a matter of resolve and deal making. After all, any deal will leave some people richer and others poorer.


Greece wasn't doing worse than any of the other PIGS until the markets paniced and the EU/IMF stepped in. The only reason they can't get loans to the conditions Spain or Portugal do is because it's not clear that the next administration will keep the current course when faced with widespread public anger. While the Greek public has a reputation of taking their grievances to the streets rather easily, Athens wouldn't be as much of a battlefield if the Greek government would have received IMF support with the same conditions as Portugal. They only had the bad luck to fail first and get the 'shock therapy'. As soon as the BZB (and its appendix the ECB) saw events unfolding in Greece all other debtors received emergency aid under considerably milder terms. So while Greece will be plunged into poverty for the next few decades, Portugal and Spain get to keep their social security nets while being in more or less the same condition.

In the case of Greece, it is clear that loans are not really loans. There is no realistic way how they can repay all their loans, so some people who loan more will end up not getting their all their money back. Question is, how will those losses be divided, and how can this be done smoothly without creating more problems.
...
We've seen that in many other countries, it's not pleasant. Many people say it is better for everyone, country and foreigners, not to squeeze and reform too hard. Because in the long run a squeezed country is poorer and can actually pay less, not to mention the actual poverty itself. But tell that to the voters in the other countries.


The debt is held mainly by French and German banks. The stuff the Greek people bought with this loans is mainly French and German stuff. All the state-owned companies Greece is selling right now are bought by German and French corporations.
The whole Euro zone is basically an operation designed to reinforce German (and to a lesser extend French) hegemony over Europe. Saving Greece and Portugal and Spain has nothing to do with some ideal of European brotherhood but with allowing Germany to keep its ridiculously large trade surpluses. As long as they keep the brown people out of Europe and buy machinery from Siemens and ICT from Deutsche Telekom, the rest of Europe couldn't care less if they live in squalor.

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Re: Europes Debt Crisis

Postby Le1bn1z » Fri Jun 17, 2011 2:43 pm UTC

You have a country where the rich categorically refuse to pay taxes, and the poor demand massive social outlays.

What did people expect was going to happen?

The solutions are not great. The nation needs to crack down on tax evasion. I do not know whether, in a politically unstable atmosphere, the government has the political capital to launch a full-frontal attack on the culture of entitlement and contempt that defines Greece's upper-class. After all, these are the donors, friends and family who keep any government afloat.

Greece should be careful. The next step might be being kicked out of Europe, or it might be the next generation of Darien
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Re: Europes Debt Crisis

Postby Zamfir » Fri Jun 17, 2011 2:54 pm UTC

Le1bn1z wrote: I do not know whether, in a politically unstable atmosphere, the government has the political capital to launch a full-frontal attack on the culture of entitlement and contempt that defines Greece's upper-class.

I am kind of curious, on what are you basing that "culture of contempt"? First hand experience? I can imagine Greek upper class people go to Canadian schools or something, or do you have family in Greece?

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Re: Europes Debt Crisis

Postby Le1bn1z » Fri Jun 17, 2011 3:01 pm UTC

There has been massive coverage of the absurdity of Greek Tax statistics.

According to them:

1.) Only six people in Athens own pools.
2.) Doctors make, on average, less than the national average income.
3.) The sum total of corporate and pesonal income and expenditures reported is massively less than the GDP.

Accounting 101: Income and expendiutres define assets and debts over time. If you're claiming income of $30,000/year, expenditures of $29,000/year, and have, in 10 years, accumulated $1,000,000 of stuff, what does this say?

The wealthy evade taxes on an epic scale. That's the culture of contempt.

EDIT: Note, this is to say that the problem isn't really the people rioting in the streets. They know they have a raw deal and are right. When the govenrment says its raising taxes AND cutting services and cutting wages, this needs to be understood in the context of a country of casual and massive tax evasion.
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Re: Europes Debt Crisis

Postby Zamfir » Fri Jun 17, 2011 3:21 pm UTC

Ah, I misunderstood. The tax evasion stories are all over the news here of course. I thought you were implying that you had personal experience with how rich Greeks thought about it.

Perhaps I am just a cynic, but without better info I simply assume that people dodge taxes because they can. Germans are supposed to be the anti-Greeks, but they dodge taxes just as easily when they think they can get away with it. And quite some Americans love to proclaim how taxes are theft.

I guess you could call those cultures of contempt and entitlement too. But there is enough contempt and entitlement to be found in all upper classes, perhaps all classes really.

Perhaps it is really stronger in Greece, the relation between government and people there is not exactly shining. But in the mean time, I'd assume that people don't pay pool tax because they have found out that no one checks up on the pool tax.

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Re: Europes Debt Crisis

Postby Eowiel » Fri Jun 17, 2011 4:25 pm UTC

Mittagessen wrote:Greece wasn't doing worse than any of the other PIGS until the markets paniced and the EU/IMF stepped in. The only reason they can't get loans to the conditions Spain or Portugal do is because it's not clear that the next administration will keep the current course when faced with widespread public anger. While the Greek public has a reputation of taking their grievances to the streets rather easily, Athens wouldn't be as much of a battlefield if the Greek government would have received IMF support with the same conditions as Portugal. They only had the bad luck to fail first and get the 'shock therapy'. As soon as the BZB (and its appendix the ECB) saw events unfolding in Greece all other debtors received emergency aid under considerably milder terms. So while Greece will be plunged into poverty for the next few decades, Portugal and Spain get to keep their social security nets while being in more or less the same condition..


The other PIIGS countries that had to receive aid had considerably less debt than Greece to start with. Another major issue is that the Greek economic data was proven to be manipulated to a great extent, so one couldn't even make a rational assesment of the risk anymore since there was no trustworthy economic data available. Spain and Italy are suspected of doing the same, but as Zamfir already pointed, those didn't receive any aid and are out of the danger zone already.

Mittagessen wrote:
The debt is held mainly by French and German banks. The stuff the Greek people bought with this loans is mainly French and German stuff. All the state-owned companies Greece is selling right now are bought by German and French corporations.
The whole Euro zone is basically an operation designed to reinforce German (and to a lesser extend French) hegemony over Europe. Saving Greece and Portugal and Spain has nothing to do with some ideal of European brotherhood but with allowing Germany to keep its ridiculously large trade surpluses. As long as they keep the brown people out of Europe and buy machinery from Siemens and ICT from Deutsche Telekom, the rest of Europe couldn't care less if they live in squalor.


Can you point me to any legislation or reports that show that Germany or France force other European countries to buy their products or borrow their money?

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Re: Europes Debt Crisis

Postby Dark567 » Fri Jun 17, 2011 4:32 pm UTC

Zamfir wrote:I guess you could call those cultures of contempt and entitlement too. But there is enough contempt and entitlement to be found in all upper classes, perhaps all classes really.
In the US, I know a number of bartenders and waitstaff at various restaurants/bars. Most earn a large chunk of their income as cash via tips and completely ignore it when they file their income taxes, knowing that the likeliness of audit is near zero.

Anyway I wanted to give you some numbers on the amount of evasion going on by country:
Image
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Re: Europes Debt Crisis

Postby Le1bn1z » Fri Jun 17, 2011 7:25 pm UTC

Dark567 wrote:
Zamfir wrote:I guess you could call those cultures of contempt and entitlement too. But there is enough contempt and entitlement to be found in all upper classes, perhaps all classes really.
In the US, I know a number of bartenders and waitstaff at various restaurants/bars. Most earn a large chunk of their income as cash via tips and completely ignore it when they file their income taxes, knowing that the likeliness of audit is near zero.

Anyway I wanted to give you some numbers on the amount of evasion going on by country:
Image


I'm skeptical of these numbers, and suspect that America's might be a little low. But I suppose it depends on what you count as "shadow" economy: Is that strictly grey market? Would outright fraud or criminal enterprise be included in this?

The outline of the problem is well captured here, though. Its a question of scale. Who do you allow to get away with this, and to what degree?

There are degrees of douchebaggery. There are those who believe that they are entitled to more than others, and don't care much for their fellow citizens (America or Canada's upper class in many cases). Then there are those who don't give a rat's a** about their country, couldn't give a s*** if it went down in flames and think those who work for them are less than human (Saudi Arabia.) The upper class of Greece is closer to the Saudis than to America, I think.
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Re: Europes Debt Crisis

Postby sardia » Fri Jun 17, 2011 7:33 pm UTC

The typical answer is cost benefit analysis. Take on the people who evade the most and try to get as much out of them, then work your way down til you stop making a profit.

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Re: Europes Debt Crisis

Postby Dark567 » Fri Jun 17, 2011 7:34 pm UTC

Le1bn1z wrote:I'm skeptical of these numbers, and suspect that America's might be a little low. But I suppose it depends on what you count as "shadow" economy: Is that strictly grey market? Would outright fraud or criminal enterprise be included in this?
It's grey market, as I don't think black market transactions are usually counted as part of GDP.

The IRS is very fairly vigilant in the US. To avoid taxes you generally need to either make a lot of your income directly via cash(which rarely happens for the upper class) or finding a way to offshore your income in a tax haven(must be very rich and be willing to risk prosecution). Most of the time in the US if you want to avoid taxation you hire a good lawyer to find you as many loopholes as possible, and avoid taxes legally.
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Re: Europes Debt Crisis

Postby Dauric » Fri Jun 17, 2011 7:42 pm UTC

Le1bn1z wrote:[I'm skeptical of these numbers, and suspect that America's might be a little low. But I suppose it depends on what you count as "shadow" economy: Is that strictly grey market? Would outright fraud or criminal enterprise be included in this?


I'd put a pretty firm guess that that table is only looking at illegal tax evasion, which the IRS has a reputation for being one of those organizations one does not f-k with. Most complaints in the U.S. about the wealthy avoiding taxes aren't that they're dong illegal things to not pay taxes, but rather that the tax code has more holes than Swiss cheese, and you could shove an entire offshore tax shelter through them if you can afford the personal tax lawyers and the various fees that offshore banks will charge for the privilege.

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Re: Europes Debt Crisis

Postby Zamfir » Fri Jun 17, 2011 7:42 pm UTC

Speculative, I'd say VAT could have an influence on the numbers. If there is a noticable tax on more kinds of transactions, it makes sense to grey more of them.

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Re: Europes Debt Crisis

Postby brume » Sat Jun 18, 2011 3:24 am UTC


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Re: Europes Debt Crisis

Postby Eowiel » Sat Jun 18, 2011 3:54 pm UTC

Le1bn1z wrote:
I'm skeptical of these numbers, and suspect that America's might be a little low. But I suppose it depends on what you count as "shadow" economy: Is that strictly grey market? Would outright fraud or criminal enterprise be included in this?



Usually, the wording "shadow economy" is used to refer to income that has not been reported on tax filings ( even tax free income usually has to be reported). Ofcourse, since it's not reported, people can only guess how big those unreported income is. It doesn't really matter whether it is illegal money or not. Income from theft won't be reported, but criminals will often whitewash their money and this requires their income to be reported on tax filings, so not all criminal money will be part of the shadow economy.

Out of personal experience I know that US companies are much less willing to take any risks with respect to tax filings than European companies and that the IRS demands much more extensive and thorough reporting than any European tax authority. Therefore, personally, I wouldn't be surprised if the shadow economy was indeed as low as this graph shows.

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Re: Europes Debt Crisis

Postby TheStrongest » Sat Jun 18, 2011 11:51 pm UTC

sardia wrote:This is a lot harder to solve than I originally thought it was. What do you guys think the answer is? Maybe have the richer 2 or so nations just assume all the debt in exchange for uniting the continent?


The only straightforward answer is long-term cuts to government spending and reorganization of the bureaucracy, and, since the crisis has reached this level of severity, short-term tax hikes to make some of the money back.

As for the tax evasion going on, I don't have any experience with taxation save what I deal with here in the US. The highest tax bracket we have here is 35% for personal income as of 2008; quick searching led me to find a tax rate of 40% for Greece. Also, social security tax is 16% of one's salary. Of course, correct me if I'm wrong. The point I'm making is that, perhaps if taxes were lowered, less evasion would occur? Sure, if they thought there was a good chance they could do so without reproach, I think many would evade taxes. Considering the risks involved, someone would probably be more likely to try and get past the system if they will end up paying more.

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Re: Europes Debt Crisis

Postby CorruptUser » Sun Jun 19, 2011 1:15 am UTC

Dark567 wrote:
Zamfir wrote:I guess you could call those cultures of contempt and entitlement too. But there is enough contempt and entitlement to be found in all upper classes, perhaps all classes really.
In the US, I know a number of bartenders and waitstaff at various restaurants/bars. Most earn a large chunk of their income as cash via tips and completely ignore it when they file their income taxes, knowing that the likeliness of audit is near zero.

Anyway I wanted to give you some numbers on the amount of evasion going on by country:
Image


Quite sure that the shadow economy in NYC ALONE makes up that 7.2%. You have all the stands, all the fruit vendors, the various cash-only stores, the cash-only businesses, the uncertified professionals*, most of the bars restaurants**, and that is not even beginning to touch on the Mafia, drug dealing, prostitution...

*e.g., dentists from other countries who set up a shop in their building, servicing only other members of their community. No taxes, and also no recourse if there is malpractice.

While not all of their business is underground, I doubt that tips and such are always reported to the IRS, and I don't think illegal immigrants file taxes.
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Re: Europes Debt Crisis

Postby Dark567 » Sun Jun 19, 2011 1:21 am UTC

CorruptUser wrote:Quite sure that the shadow economy in NYC ALONE makes up that 7.2%.

Huh. NYC's GDP is about $1.1 trillion. 7.2% of the US's GDP is about $1 trillion. Your telling me that 90% of NYC's economy is grey market. That makes no sense.
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Re: Europes Debt Crisis

Postby CorruptUser » Sun Jun 19, 2011 1:23 am UTC

Official GDP. If half of NYC's economy is underground, then the actual GDP is double.

Anyway, the point being that there is no way only 7.2% of the US's economy is underground.

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Re: Europes Debt Crisis

Postby Jahoclave » Sun Jun 19, 2011 1:44 am UTC

TheStrongest wrote:
sardia wrote:This is a lot harder to solve than I originally thought it was. What do you guys think the answer is? Maybe have the richer 2 or so nations just assume all the debt in exchange for uniting the continent?


The only straightforward answer is long-term cuts to government spending and reorganization of the bureaucracy, and, since the crisis has reached this level of severity, short-term tax hikes to make some of the money back.

As for the tax evasion going on, I don't have any experience with taxation save what I deal with here in the US. The highest tax bracket we have here is 35% for personal income as of 2008; quick searching led me to find a tax rate of 40% for Greece. Also, social security tax is 16% of one's salary. Of course, correct me if I'm wrong. The point I'm making is that, perhaps if taxes were lowered, less evasion would occur? Sure, if they thought there was a good chance they could do so without reproach, I think many would evade taxes. Considering the risks involved, someone would probably be more likely to try and get past the system if they will end up paying more.

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Re: Europes Debt Crisis

Postby CorruptUser » Sun Jun 19, 2011 1:53 am UTC

TheStrongest wrote:
sardia wrote:This is a lot harder to solve than I originally thought it was. What do you guys think the answer is? Maybe have the richer 2 or so nations just assume all the debt in exchange for uniting the continent?


The only straightforward answer is long-term cuts to government spending and reorganization of the bureaucracy, and, since the crisis has reached this level of severity, short-term tax hikes to make some of the money back.

As for the tax evasion going on, I don't have any experience with taxation save what I deal with here in the US. The highest tax bracket we have here is 35% for personal income as of 2008; quick searching led me to find a tax rate of 40% for Greece. Also, social security tax is 16% of one's salary. Of course, correct me if I'm wrong. The point I'm making is that, perhaps if taxes were lowered, less evasion would occur? Sure, if they thought there was a good chance they could do so without reproach, I think many would evade taxes. Considering the risks involved, someone would probably be more likely to try and get past the system if they will end up paying more.


Don't forget to add in the stealth income tax; payroll taxes. FUTA, parts of Medicare and Medicaid, Worker's Comp, etc. Since they are part of what your employer has to pay in order to employ you, they are in effect taxes taken out of your wages.

Someone once said, taxation is the art of taking the most feathers from the goose with the least amount of squawking. The US's tax system involves shoving you next to a fat goose, ripping out your feathers, and claiming most of the feathers came from the fat goose, who still has a lot of feathers left so we should rip out some more.

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Re: Europes Debt Crisis

Postby Dauric » Sun Jun 19, 2011 2:55 am UTC

Eowiel wrote:Out of personal experience I know that US companies are much less willing to take any risks with respect to tax filings than European companies and that the IRS demands much more extensive and thorough reporting than any European tax authority. Therefore, personally, I wouldn't be surprised if the shadow economy was indeed as low as this graph shows.


TheStrongest wrote:As for the tax evasion going on, I don't have any experience with taxation save what I deal with here in the US. The highest tax bracket we have here is 35% for personal income as of 2008; quick searching led me to find a tax rate of 40% for Greece. Also, social security tax is 16% of one's salary. Of course, correct me if I'm wrong. The point I'm making is that, perhaps if taxes were lowered, less evasion would occur? Sure, if they thought there was a good chance they could do so without reproach, I think many would evade taxes. Considering the risks involved, someone would probably be more likely to try and get past the system if they will end up paying more.


So, to handle the italics in THeStrongest's post, we allow the U.S. IRS to offer it's services for a price. European nations knock down their tax evasion by using the more effective U.S. sytem of revenue gathering, and the U.S. gains a source of revenue to handle the U.S. debt. Europe gets on track, the U.S. avoids default and the world economy is saved.

Or.. y'know.. it's late on a Saturday and I decided to browse the forums on a whim, and I'm tired and this thought amused me.
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Re: Europes Debt Crisis

Postby sardia » Sun Jun 19, 2011 9:25 am UTC

Unfortunately the IRS is understaffed as is, though it would be funny hiring new guys at the lowest pay grade, cuz they're new, and then contracting out the most expensive ones to the Europeans. Wouldn't make much, but it'd probably profitable. Assuming the crazy idea that IRS guys somehow knew or had control over the tax code in any European country. Oh, don't forget the judges and legal code that comes with US tax law. Well, a guy can dream, can't he?

They could float the old idea of just having Euro bonds, akin to Treasury bills, instead of each country paying for their own bonds. This would average out the cost of interest, essentially having germany and france? paying higher interest in exchange for lowering the interest rates to the weaker countries. I mean, at this point that is what the germans are doing anyway, just a bit slower and taking some out of their tax revenue too. Of course forcing the Euro zone, *cough* germany*cough to shoulder this burden would require the weaker countries to give up something. Give the euro finance minister a direct say over the budgets of the weaker countries or enough power to halt state government funding? Now I'm getting confused myself because I'm not sure how the federal government influences the state budgets in dire circumstances. Don't the states simply stop providing services and the citizens leave for greener pastures? Or can state government default because they don't reflect the solvency of the federal government? God, I feel so american right now, I can't even explain how the states compare to the federal government regarding budgets. =\

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Re: Europes Debt Crisis

Postby Eowiel » Mon Jun 20, 2011 6:53 am UTC

sardia wrote: Don't the states simply stop providing services and the citizens leave for greener pastures?


That's a bit of an issue in Europe, in the US when a state's economy does bad and people loose jobs, they tend to move to states where there are jobs available, reducing the number of unemployed in the troubled state and providing more labour to the states that need it.

Between European countries the language and cultural barriers are harder to overcome which results in many more people staying in their country no matter how bad the economy is.

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Zamfir
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Re: Europes Debt Crisis

Postby Zamfir » Mon Jun 20, 2011 1:42 pm UTC

sardia wrote:Of course forcing the Euro zone, *cough* germany*cough to shoulder this burden would require the weaker countries to give up something. Give the euro finance minister a direct say over the budgets of the weaker countries or enough power to halt state government funding? Now I'm getting confused myself because I'm not sure how the federal government influences the state budgets in dire circumstances. Don't the states simply stop providing services and the citizens leave for greener pastures? Or can state government default because they don't reflect the solvency of the federal government? God, I feel so american right now, I can't even explain how the states compare to the federal government regarding budgets. =\

Well, sure that's how the IMF works, and why they can be so hated. The IMF gives a country loans, and in return they get a lot of say in that country's policies. Basically, the country loses a lot of sovereignity to make it own decisions. Of course, the intra-Europe loans of the moment share the same problem.

That's also the problem with Eurobonds. It wouldn't just mean higher or lower interest rates, without control it would also mean that countries could run up large debts that are shared by everyone else. The only to make that work is to take away budgetting power from countries, and move it to a higher level. Like the IMF, but then all the time instead of only in a crisis. In practice, that would be taking away sovereignity and turning the EU into a country.

By and large, people do not want that. There is very little support for a federal Europe outside of some parts of the elites (and Belgium). So it would be good to solve the crisis without shifting lots of power to the European level. It's better to accept inefficiency in solving the crisis than creating a federal government against the explicit wishes of the people.

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Re: Europes Debt Crisis

Postby Deep_Thought » Mon Jun 20, 2011 4:38 pm UTC

sardia wrote:Give the euro finance minister a direct say over the budgets of the weaker countries or enough power to halt state government funding?

The EU doesn't have a finance minister. The finance ministers of all member states meet regularly, but there is no one single finance minister.

Zamfir wrote:By and large, people do not want that. There is very little support for a federal Europe outside of some parts of the elites (and Belgium). So it would be good to solve the crisis without shifting lots of power to the European level. It's better to accept inefficiency in solving the crisis than creating a federal government against the explicit wishes of the people.

I'm not sure how this situation cannot be avoided in future without the introduction of mechanisms to exert some control on a Eurozone economy or to point blank eject members of the currency. The only real control the Euro has is on countries that haven't joined yet, after that it's just kind of assumed they will all behave, and none of them do. Currently there are only two members of the Euro that actually pass the requirements for joining it - Estonia is one and I think Luxembourg the other (but I can't find a decent source to check). Estonia only joined this year!

Unfortunately Germany (and other rich EU nations) are going to have to take a hit from this at some point. There is no doubt that the German economy has been motoring along mightily well in the last decade. But some of that is because they have been lending their own cash to countries like Greece in order to buy German products, without really checking on their credit-worthiness. As much as thriftiness is to be applauded, creditor nations need to read their Shakespeare and remember that "neither a borrower nor a lender be".


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