’Would you pool your debt
with a bunch of debt addicts that have no intention of reducing their wild
spending habits? Of course you wouldn't. But that is exactly
It is easy to try to portray the Germans as the "bad guys" in all this, but try to step into their shoes for a minute.
If you had some relatives that were spending wildly and that had already run up $100,000 in credit card debt, would you be a co-signer on their next credit card application?
Of course not.
The recent elections in France and Greece made it abundantly clear that the populations of those two countries are rejecting austerity.
Instead, they want a return to the debt-fueled prosperity that they have always enjoyed in the past.
Unfortunately, they need German help to be able to do that.
is why new French President Francois Hollande is
pushing so hard for eurobonds. He wants the
rest of the eurozone to be able to
Germans greatly fear what a co-mingling of eurozone
debt could eventually mean. Not only would
Finland and the Netherlands are also against eurobonds,
but the key is
"It’s just about not spending more than you collect. It’s astonishing that this simple fact leads to such debates"
And she is right.
Why is it so controversial to insist that people not spend more than they bring in?
But this is the problem that is created when you create a false lifestyle fueled by debt that goes on for decades. People become accustomed to that false standard of living and they throw hissy fits when that false standard of living begins to disappear.
The Germans don't want to make great sacrifices just so the Greeks, the French and the Italians can go back to borrowing and spending wildly.
Why would the Germans want to do that?
And as a recent CNN article noted, German politicians believe that eurobonds are explicitly banned under existing EU treaties anyway....
is no way of introducing them under the current [EU] treaties. Indeed, there is
an explicit ban on them," one senior German official said, adding
politicians such as Hollande are complaining that
austerity could seriously damage living standards throughout
And Hollande is right about that.
When you inflate your standard of living with borrowed money for many years, eventually there comes a time when you must pay a great price.
Anyone that has ever been in trouble with credit card debt knows how painful that can be.
shameful for the rest of Europe to be pleading and begging
They should take care of themselves.
wrote about the other day,
in the financial press all over the world there are calls for someone to come
up with a "plan" to "rescue"
There have been two main responses to the crisis: austerity, and kicking cans down roads. Austerity, in case you haven’t noticed, is so last year. It’s out. Which means that unless something else is found, some other comprehensive plan, the other main response, can kicking, is going to run out of road.
Just about everybody backed the idea of eurobonds, except for the Germans, and since they’re the ones with all the money, they’re kind of the only ones whose vote counts anyway. So, it’s time to go to plan B. Only there’s no Plan B, and there’s no time, either.
And that would cause a huge amount of pain in the short-term.
But the euro never was a good idea in the first place. It was foolish to expect a monetary union to work smoothly in the absence of fiscal and political union.
And to be honest, the entire world would be a better place with less European integration. The EU has become a horrifying bureaucratic nightmare and it would be wonderful if the entire thing broke up.
But for now, the only thing that is in danger is the euro.
it is looking like
week, former Greek Prime Minister Lucas Papademos
admitted that the Greek government is considering making preparations
Not only that, Reuters is reporting that top officials in the eurozone are now working on "contingency plans" for a Greek exit from the euro....
euro zone country will have to prepare a contingency plan for the eventuality
Officials reached the consensus on Monday afternoon during an hour-long teleconference of the Eurogroup Working Group (EWG).
As well as confirmation from three euro zone officials, Reuters has seen a memo drawn up by one member state detailing some of the elements that euro zone countries should consider.
So obviously a Greek exit from the euro has become a very real possibility.
A recent Bloomberg article detailed how a Greek exit from the euro could play out during the 46 hours that global financial markets are closed over the weekend....
That’s how much time the country’s leaders would probably have to enact any departure from the single currency while global markets are largely closed, from the end of trading in New York on a Friday to Monday’s market opening in Wellington, New Zealand, based on a synthesis of euro-exit scenarios from 21 economists, analysts and academics.
Over the two days, leaders would have to calm civil unrest while managing a potential sovereign default, planning a new currency, recapitalizing the banks, stemming the outflow of capital and seeking a way to pay bills once the bailout lifeline is cut. The risk is that the task would overwhelm any new government in a country that has had to be rescued twice since 2010 because it couldn’t manage its public finances.
Right now, nobody is quite sure what is going to happen next and panic is spreading throughout the European financial system.
this point, everyone is afraid of what is going to happen if
tourism operators like TUI of Germany and Kuoni of
Britain are demanding the addition of so-called drachma clauses to contracts
with Greek hoteliers should the euro no longer be in use here. British
newspapers are filled with advice columns for travelers worried about the
wisdom of planning a vacation in Greece, or even Portugal and Spain, should the
euro crisis worsen. Large multinational companies like Vodafone Group, Reckitt
Benckiser and Diageo have taken to sweeping cash every day from euro accounts
Sadly, this is probably only a small taste of the financial anarchy that is coming.
At some point, a moment of crisis will arrive and a call will have to be made.
It will be interesting to see how all of this plays out.