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As you can read, his tone and style is almost like an u-turn on how staunch Mr Varoufakis acted during the negotiations. This could be the kind of realism that is necessary to create a breakthrough compromise between Greece, IMF, ECB and the EuroGroup.
At least Greece is now willing to really do something about their insane pension system (as of 52 years it is possible to get a pension there!) and the (VAT) taxes.
A glimmer of hope today. But, is it too late?
Ironically, if Greece leaves the Euro, Germany in particular will likely want to ensure that it completely fails....
This is because if it actually succeeds, like Iceland, then the Euro project is effectively over because the proud people of Italy, Spain etc. will want their national sovereignty back and to leave the Euro.
Interestingly, this fiasco is likely going to lead the Brits to vote no in next yr's referendum as well.
http://www.huffingtonpost.com/tom-ginsburg/a-novel-solution-for-the-_b_7750474.html
Novel or not: This just came in:
http://money.cnn.com/2015/07/09/news/economy/greece-crisis-bailout-reforms/index.html
Basically, in short, Greece now 'suddenly' commits to all the demands from IMF/European Central Bank/Euro Group. It's.....remarkable....
This isn't going to work. It may give some breathing space, but we'll be back here again in a while, even with reforms (which won't really be implemented as proposed).
Bottom line is Greece can't print money while in the Euro. Everyone else (outside the Euro) is printing money, so the Greeks are of course going to get less competitive compared to those other countries. The only ones who are not printing money in comparison to them are those within the Euro, but the Greeks were always uncompetitive against them from the start, and now they can't devalue to survive. Same goes for Italy (remember the Lira and what it used to be worth) and Spain (the peseta was also a joke at one point).
It's inevitable in the Euro that the weakest members get the shaft and the strongest members benefit. It's a fascinating experiment. Without the Euro the weaker countries wouldn't be able to buy anything from China because their home currency would be worthless, but ironically with the Euro they aren't able to buy anything either because they're bankrupt with no jobs.
The Brits were smart enough to stay the hell away from this thing.
Are you sure about that? Bulgaria is one of the weakest countries (if not THE wekest) of the EU, doesn't have the Euro, but China is its 3rd biggest import country. https://atlas.media.mit.edu/en/profile/country/bgr/
That's true, but I should clarify my statement. It's in relation to current living standards and historical purchasing power, and I did not mean to single out China. I meant lower purchasing power in general from other countries (not just China).
Those countries within the Euro group have large purchasing power, since they are using the Euro as the currency to make purchases. If they go to another depreciated currency (like the Drachma for instance) then their living standards will inevitably fall if they are big importers (which the Greeks are). This is because their cost of imports will rise, affecting their balance of trade.
Bulgaria never had the Euro, so they don't know any better. Greece will feel the effects in lost purchasing power (both in terms of buying from other countries within the Euro group and in terms of buying from countries outside the Euro group) if they go onto a new, lower value currency. What cost them 2 Euro to buy before may cost them 50 Drachma or even 100 Drachma. Also the countries they import from may want to settle the trade in Euros, or $ and not in Drachma, which could result in even additional costs.
So going to their own currency is not without risks and problems. It may be the best thing in the long run, but there will be short term pain if choosing that route as well.
So they are robbing Peter, to pay Peter? lol
As long as Merckel acts like the stubborn person she is, and keeps shouting around that Greece must pay, the greek debt will continue to rise, until we actually do reach the point of no return. And in the same time, as my lists in the first page shows, the debt of Italy, Portugal will by then have reached the level of where Greece was in 2015, and then we will be in big trouble, in much bigger problem.
Whether Greece must pay or not, is not the issue. Logically, I think they should pay. The whole problem is they will never be able to pay such a huge amount of money. The day Merckel and the EU will understand that, then we will be able to pull our heads out of the sand. The plan today will lower their debt by a fraction, and then it will start to rise again.
They're likely betting that growth rates will increase in a few years, and therefore the 'debt as a % of GDP' should decrease, making it less of an issue for financial markets. That may also be unrealistic, although it's possible that the Euro area growth rate in a few years will be higher than their current anemic levels if the US starts to grow again (the US has really been suffering since the financial crisis), since Europe exports a lot to the US.
I think Europe is doing some kind of free trade pact with the US and one with Canada as well so that may help to boost growth as well, but whether Greece will benefit from it is another matter (the world only needs so many olives.....).
The problem also is that the politicians only worry about their electoral cycle. Most of them will be long gone from their jobs by the time this becomes a major problem again, so 'can kicking' makes sense to them. It's the same in the US with issues like Social Security or Student Loans etc..... just ignore until it becomes a major crisis.
I really think Syriza and Tsipras (as a new party with more of a people focus rather than an old party who has become more like regular politicians) have done a good job in highlighting the issue/pain facing the Greek people, and this whole problem has shown up the relative selfishness/myopia of the other European countries regarding the structural problems with the Euro.
At the end of the day, I don't think this whole fiasco has given anyone (including global investors) any real confidence in the Euro system.
Like various countries I am not sure what they needed the Greeks in the Eurozone for before cleaning up their own home, which applies to a few more states in the EU. The Euro experiment would have worked much better with the stronger financial countries. But alas greed and stupid politicians make great stinking and festering wounds.
As for the EU, it has done most European countries a lot of good including their citizens, economical it makes sense to take a united stand against the big economical powerhouses like China, Japan, Russia & the US.
The EU without the UK would make an economic disaster for not the EU but the British citizens as they are also depending on the EU and their import/export. Even most big banks would move their base of operation out of the UK pretty quickly which would hurt them even more.
Whatever you think and feel in a nationalistic way, the EU is the way forward and indeed perhaps Greece has seen that sign as well. A Grexit would be disastrous for the nation and its people.
Greece has capitulated.
Sadly, that's already 'old news'. The latest news is, that a majority of the EuroGroup finance ministers don't back the so called "Greek Capitulation":
http://nos.nl/artikel/2046473-veel-radicaler-hervormen-of-tijdelijke-grexit.html
I shall explain. Basically the IMF, European Central Bank and the chairman of the EuroGroup called the plans "positive" and were, until this morning, actually willing to go ahead with the "Greek Capitulation" (Mr Tsipras is asking creditors for €53.5bn ($59.47bn) to cover Greece's debts until 2018. It would be the debt-strapped country's third bailout.)
The problem is that these were the initial plans for the 2nd bailout on which the parties were negotiating for the past weeks. For this new bailout, the €53.5 Billion package does not suffice. Perhaps €80 Billion or more is needed, because of all those failed negotiations in the past weeks.
And this problem is addressed by the EuroGroup finance ministers. And as you know, all 19 finance ministers need to unanimously agree on the Greek package. So far not only the big economies of Germany, Netherlands and Belgium disagree.
Even more important are the Eastern-European finance ministers from Slovakia, Estonia, Slovenia, Lithuania and Latvia. Those finance ministers were firm today and even more negative: "This Greek proposal is NOT enough!". Do not forget that some of these countries are perhaps as poor as Greece, and they also paid and suffered a lot for these bailouts.
I think it's safe to say that as of tomorrow midnight the unthinkable will happen: The 'Grexit' will take place. Greece will leave the Euro. Perhaps Germany will call it a 'temporary 5-year Grexit', but it will feel different.
The consequences? Don't underestimate this. They will be even way more severe then if Greece will stay in the Euro-zone. Today there were already some fights on terraces in Athens when chairman Dijsselbloem and the finance ministers of Slovakia, Lithuania and Germany were speaking on Greek television (live broadcast in Brussels).
No, this will create massive social unrest in Greece as of tomorrow. And make no mistake, Greece will become in a swift pace very anti-Europe. They will start 'bullying' the NATO, UN and EU. Moreover, they will start focus on potential Russian help. So geopolitically, it's really the worst-case scenario.
Secondly, the British will most likely feel strengthened to vote "YES" on a 'Brexit' in 2017. And this creates a negative precedent on other EU nations.
From an economical point of view, interest rates on bonds in the weaker European nations will go skyrocketing again. Cash shortage of Spanish, Portuguese and Italian banks will increase again, and on top of that the Euro will fall tremendously against the Dollar. Perhaps 1 Euro will become like 1,1 Dollar in the upcoming two years. So a 'Grexit' would strengthen other 'Exits' again.
And this is bad for countries like Italy, Spain and Portugal. So I'm afraid this is going to open a Pandora's Box. It will create a snowball effect towards total destruction of the EU and the Euro. And moreover. And within 10 years Europe will suffer the worst loss of prosperity and welfare since......the 1930's?
This weekend is turning into the darkest and blackest weekend for Europe since decades :-(.
The proposed Greek bailout package is not enough and it won't work, so even if it is accepted at the last hour, we will be back here again in a few months or years with bigger issues than we have now. Structural changes within the Euro will not work for Greece....the people will not be able to take it. Only structural changes, pension reform etc. outside the Euro (with a depreciated currency) will work.
As mentioned before, the Euro is a political experiment designed to facilitate/retain the relative importance and power of the European countries in the context of a rising 'third world'. It worked for a while......the illusion worked.....but as I mentioned, the Euro experiment was never designed to work in moments of extreme stress. This type of economic stress was not 'modelled' when they conceptualized the Euro.
Thank the Americans for blowing a big hole in everything with the financial crisis (although arguably the hole was already there for decades, but just covered up by the indebted American consumer buying from the rest of the world).
Inevitably, once the Euro group faces stress (as it is now), the only solution is for draconian policies, centralization of power in Brussels and the 'end of democracy'. That is the only workable solution in this situation.........The Greeks were smart enough to say no, enough is enough, and the people of the other nations, as you say, will come along soon enough, even if their governments do not.
It's going to be interesting next week. Watch for some convenient destabilization to coincidentally take place elsewhere in the next months to take attention away from this shambles/fiasco.
http://www.ft.com/cms/s/0/c3e2221e-2639-11e5-9c4e-a775d2b173ca.html#axzz3fiGzIjM2
Russia is already betting on a 'Grexit' :-(. God, I'm very pro-EU, pro-Europe, but these days have been the darkest day for me in European history....
It is hubris @Gustav_Graves. Europe is paying the price of 'hubris'. A greek word, as is 'democracy'......ironically.
What I DO NOT understand is that there are factions in Europe who're openly calling for the complete destruction of the Euro and the EU. THOSE neo-conservative, xenofobic, ultra-left-wing, ultra-right-wing parties I find even more dangerous. THEY don't know what they are doing.