Four illegal ways to sort out the Euro finance crisis

Saving the euro isn't the easiest of things: solving the current problems actually would be quite easy, if expensive, except for all the laws and regulations that rule out all of the easy ways. The basic problem is well explained here. Don't worry too much about what the Taylor Rule is: just accept that if you're going to have …

[Anonymous Coward]

Thanks.

Interesting article.

(This dull comment therefore being required by Hunter's interpretation of compound interest.)

[Andy Pellew]

Why should the Euro be any different?

What I have never understood is why people thing the Euro should be any different to the Pound of the Dollar?

There are parts of the UK for which 0.5% interest rates are too low (south, south east, etc) and parts for which it's about right (north west, scotland, etc). The same with parts of the US.

Why should the Euro area be any different?

[Mme.Mynkoff]

Devaluation for one

Fair point, but once countries are in the Eurozone they can't do alot of things normal countries can. They can't devalue to boost their exports, and they can't inflate their way out of debt. Tim mentioned a few more, but they are the main ones.

It was a great idea for only 5-6 countries, but once the Euro-fanatics decided on "enlargement at any cost", and bent their own rules to get Greece in (its application had already been rejected once) it was bound to fail.

[Richard Gadsden]

The title is required, and must contain letters and/or digits.

<i>once countries are in the Eurozone they can't do alot of things normal countries can</i>

But the same is true, except more so, for states in the USA or regions within the UK or Germany.

You'll note that East Germany can't devalue relative to West Germany, for instance, nor set a different interest rate.

It's a classic functionalist tactic - create a situation where more integration (massive subsidies from rich countries to poor ones in this case) is the solution to a problem created by the previous bout of integration.

Functionalists see the job of the EU as solving economic problems, and, to them, this crisis just highlights how much the EU is needed.

Democracy? Gets in the way of the brilliance of the Enarques running everything.

The annoying thing is that when the federalists try to do things that shift power away from the Enarques to people who are actually democratically elected, like the constitution, they get rejected for being too centralising. All the centralising stuff in the constitution went through in Lisbon anyway - but the democratising stuff got thrown out. Greatest victory for the functionalists over the federalists since the Treaty of Rome, and the bloody Eurosceptics helped the functionalists.

[Tim Watts]

What did they expect...

It would be a good idea for a few like minded countries - but once you let the lazy and the feckless join (the ones with corruption as a way of life), then it's pretty much game over before it's even started.

[martin burns]

Unitary States

If the Euro were a unitary state, it would be exactly the same.

However, it seems that the Eurozone has the tough bits of being a unitary state (ie you can't leave, and you can't treat different parts differently) but doesn't have the benefits that go along with it (ie you can't cross-subsidise areas that suffer from a single interest rate)

(and for history fans: the UK govt/BoE has been setting interest rates to suit the SE of England regardless of the effect elsewhere for decades. It's one of the economic drivers for Scottish independence)

[tas]

EFSF/CDO guarantees put German on the hook

@Andy Pellew, Because you're talking about entire countries with completely different structural issues (e.g. banking, housing market, law, benefit systems), no possibility of regular fiscal transfers between countries, no real free movement of working labor (different languages for a start, education standards), there is linked monetary policy but not fiscal/government budget policy, etc.!

----

Back on topic:

Of the four solutions (Euro breakup, Fiscal Transfers, CDO, Euro debt monetization aka the "Fed" solution), this is likely the least painful *up-front* and buys the most time.

What the CDO solution ultimately relies on are its state-backed guarantees to pay out in the future. For the new expanded vehicle, if you do the sums (and Bernstein has) and include cover for Belgium and Italian sovereign debt, the fund would need Euro 1.5 *trillion* backed by 1.7 trillion in guarantees.

Since the vehicle includes the very states that are currently experiencing the biggest problems and whose guarantees are considered worthless by the market, this puts the core EU countries on the hook, in particular Germany. The German guarantee becomes worth Euro 790 billion or 32% of their GDP! If for any reason France is downgraded, Germany's pro-rata share of funding jumps to 1.385 trillion or 56% of GDP!!

Of course, what is the likelihood of any German government or population paying out that much money in order to keep funding Greece, its creditors and their population's lifestyle? As you can imagine, if the Fiscal Transfer/Political Union solution was unpalatable, this would be inconceivable! Bond vigilantes may decide to go straight for the jugular and start parking themselves at the German sovereign debt desk as well ...

However, as the author stated, the CDO solution does not change anything about the underlying Euro situation. While the inflationary Fed solution was not pursued, you still have an ECB which chooses not to concern itself with the state of periphery nations as well as huge structural imbalances between members of the EMU.

In short, watch this space ...!

[Anonymous Coward]

Currency union implies political union

The EU isn't truly one country with the same law, taxes etc everywhere.

[Throatwobbler Mangrove]

well...

"The EU isn't truly one country with the same law, taxes etc everywhere."

True, but the UK, US and (I'd guess) most federal countries don't have the same law and taxes everywhere either. IIRC, Scottish Parliament can vary income tax by +/- 3%; variation in laws and taxes between US states is obviously much more significant.

[Dave Handley]

@Andy Pellew

It is very simple really, and the author dealt with it in his article.

If we look at the 2 largest currency unions in the world (excluding the Euro).

The Dollar works because of federal intervention. The successful states are forced to send vast amounts of money, via the federal government, to the unsuccessful states. For example, despite New York having 3 of the largest 5 non-federal debts in the US (New York City, New York State and the Metropolitan Transport Authority are all in the top 5 borrowers list), New York still has a massive economy, so it is forced to send money to poor states in the Mid-West or South in order to flatten out the economy. This is no different to the South East of the UK massively subsidising the rest of the country.

The African French Franc works simply by being tied to a much larger economy (the Eurozone now, and the French Franc before that). For this to work though you need orders of magnitude difference.

The Euro has none of these mechanisms. To a certain extent it started working for the periphery economies simply because they were tied to a much bigger economy (franco-german centre). Unfortunately, as they got access to huge euro lending markets at very low interest rates, the economies became much bigger, without the substance behind them to support them. They are now no longer small compared to France or Germany (especially when you look at Portugal, Ireland, or even Spain, Italy. They could mirror the USD by Germany, France and the other northern economies flooding money south, but that won't wash politically. We are stuck with some pretty miserable other options. Even the writing off 50-70% of the debt of Greece option that the author talks about won't really help because Greece is in Primary Deficit - it cannot pay its way even if it defaults. The usual way countries deal with this is the combination of 3 things. Austerity, default and devaluation. The Eurozone is trying to force Greece to deal with it using only austerity. That is doomed to failure, and to be honest, even if we let them deal with it using default as well, it is probably too late. The only way to devalue though is to leave the Eurozone.

If I were a betting man I would say there is as much as a 50% chance that Greece falls out of the Eurozone. This is not dissimilar to the UK falling out of the ERM, and the funny thing is economically, that was really good for Britain!

[PT]

@Dave Handley

Your point about the productive states in the US subsidizing the unproductive is quite topical here, given that the unproductive states are mostly governed by strident ideologues screaming about reducing the Federal budget. We should make a start with these states' welfare. But it will be interesting to see how it plays out in the EU. There's an alternative to leaving the Eurozone, which is to run the productive economy on an unofficial parallel currency and to hell with the central banks. That's what will happen anyway, in the event the austerity measures get too harsh, whether the alternative is drachma, dollars, gold, bitcoins or bottle caps. Of course that will also be illegal, but unlike the other illegal options, it will be popular.

[Colin Millar]

@ PT - and unlike the other illegal options

It will be run mostly by bona fide criminals

But hey - thats what politicians do best - ignore reality until it threatens to swamp them and then declare war on it.

[Macoute]

Why should Euro be any different (P.94)

Good point @Andy Pellew, and even transfers within national currency areas deemed necessary to overcome different economic circumstances are becoming controversial eg England to Wales/Scotland and within Belgium, from richer Dutch-speaking Flanders to French-speaking wallonia.

Re subsequent posts, some transfers between EU countries already happen through the EU Regional Fund. This could be expanded or provide a template for another instrument. The problem is not technical, but political. On what basis can northern countries impose their style of social contract on southern ones? The limit of the EU is that it's still a club of countries and suffers from a democratic deficit. Given low voter turnout, the European Parliament has not solved this.

[Neal 5]

Hmmmmm, 4 other illegal ways could be used

1) The mass killing of everyone of pensionable age.

2) The mass killing of anyone ill.

3) Tthe mass killing of the unemployed

4) Ethnic cleansing of the USA by anyone who feels like it. (won't save the euro, but it will take all the press attention away from the problem)

[Matt Bryant]

RE: Hmmmmm, 4 other illegal ways could be used

"1) The mass killing of everyone of pensionable age....." On a State pension, you mean? Surely the ones on private pensions are actually going to be needed to keep the banks solvent?

".......2) The mass killing of anyone ill....." The NHS already have that one covered. Private healthcare would seem a good idea, then?

".......3) The mass killing of the unemployed......" Bring back National Service for the unemployed, start more foreign wars = job done!

"......4) Ethnic cleansing of the USA by anyone who feels like it. (won't save the euro, but it will take all the press attention away from the problem)" Yeah, but the US is actually a big consumer market we would be targetting if Labour and the unions hadn't spent years destroying our industrial base, so why don't we just leave the EU, send anyone vaguely leftwing to live on the Continent with their socilaist bretheren, and let them f*ck up someone else's country for a change?

[Marcus Aurelius]

Plan

Mass killing of the unemployed.

I thought that was often the whole point of 19th century armies; put your surplus odds and sods in the army/ navy and send them off to fight a foreign war, and reward the (very) few who came back, preferably using your newly conquered territory as the reward.

Hmm, sounds like a plan; if we could get all the unemployed youth and over 60s into the Territorial Army and send them to Afghanistan maybe we would be on to something here...

[Anonymous Coward]

@Marcus Aurelius

Afghanistan WTF? Let's reclaim the colonies - send them to 'merica!

[Colin Bain]

merica

I had a bizaaro moment when I mis read merica as Mercia. What makes it worse is that I now live temporarily in ancient Mercia. (I Yield, theres a joke there, but its obscure!)

[Anonymous Coward]

@Matt Bryant

"if Labour and the unions hadn't spent years destroying our industrial base"

You STILL haven't opened that history book, have you? You appear to be completely ignorant of events both before and during your own lifetime. We have seen the failure of Right wing fantasy economics (Thatcherite, New Labour, Orange Book, US Republican) in the shape of social decline in the affected countries and a massive recession whose arrival surprised NOBODY with any wit, judgement or understanding.

[Matt Bryant]

RE: @Matt Bryant

"You STILL haven't opened that history book, have you?....." Some of us have direct knowledge, rather than what we read secondhand, through rose-tited glasses, in Socialist Weekly. Studies in the UK showed British bosses in the '60s and '70s spent four times as much time dealing with union issues than any other country (including the US and their infamous Teamsters). All that time and energy wasted playing shopfloor politics meant less on R&D, marketting, and just simple production planning. Why do you think the Japanese (Honda in 1985 and Nissan in 1986) didn't bring production to the UK until after the power of the unions had been broken by Thatcher? If all they wanted was unencumbered access to the European market, why didn't they pick a country like Spain or Greece? The answer is because they planned a lot further ahead than the idiotic unions ever managed. The unions have been in decline both here and in the US for decades because the workers have realised they were largely a complete waste of time and did nothing to save jobs, quite the opposite.

The Greek economic mess is the perfect example of popularist socialist policies running beyond the means of a country. We have almost as dire a case here in the UK, thanks to Broooooon and NuLabour. I can predict with absolute certainty you next response will be the same as always from the socialist camp - "tax the rich more" - which ignores the fact that the rich will simply move their money and businesses to less-taxed countries, which will mean less local investment and less jobs. Sucks to be a socialist in a globalised economy, eh? I'm told by people in the City that the smart and rich Greeks have already ensured their money is safely out of Greece.

[Anonymous Coward]

No.

You can't blame the unions for the lack of money spent on R&D, new plant, decent design or market research. The lack of productivity (in the low tax, low wage UK!) was a result of poor, lazy and complacent management. Strange that Germany with board level employee representation has so consistently outperformed the UK throughout the period from the 1970s to the present day.

Suck up to the rich all you like; they won't thank you for it, I can assure you! True, the unions were a nuisance and democracy is not always comfortable to watch or take part in, but you really do need to wake up and see that the alternative is likely to be much, much worse.

[Matt Bryant]

RE: No.

"You can't blame the unions for the lack of money spent on R&D, new plant, decent design or market research....." You can if you think about the time and money wasted on just dealing with the unions. If you think the unions were so great, please point out just one of the millitant union morons that didn't completely kill off the industry they championed "for the workers"? Steel? Yeah, go ask people in Sheffield how that worked out. Cars? Mining? Shipbuilding? All just about completely dead. Nationalisation policies brought in by Labour and the completely illogical demands of the unions made any chance of competition unlikely.

Comparing to Germany is hilarious - the Germans saw early on the effects of socialism, both when they faced an attempted Communist-backed "revolution" in the post-WW1 years and then during Hitler's reign (remember, Nazi = National Socialist? - how quickly you lot conveniently forget that). Post-WW2 German so-called worker representation was just a sop to keep the socialists in line - please try and show a single example where the workers' rep was anything other than window dressing? Please provide an example, say from Mercedes or BMW, where the workers' rep actually had a comcrete say in planning rather than just rubber-stamping it? If so, please explain why BMW and Mercedes have been happilly moving their manufacturing abroad for years if the German workers' reps are so all-powerful? You also forgot to admit that German workers didn't make the same stupid demands the unions did in the UK, but that's because the Germans were generally a lot less tolerant of the same type of extreme socialism.

".....democracy is not always comfortable to watch or take part in ...." The unions were nothing to do with democracy, in fact they were the exact opposite of democracy. Scargill is the perfect example - his stated aim was to force the majority-elected government to fail through the actions of his minority rabble. The mechanisms the unions used to control and direct their members were also totally undemocratic - secret ballots, bussing in pickets from other industries and areas to hide the low representation they had in certain businesses, and the complete joke of how they "elected" their officials with closed lists. "Democracy" - you haven't a clue.

[Matt Bryant]

RE: No.

PS: Forgot to laugh at your prime bit of living-in-the-past class war idiocy; "......Suck up to the rich all you like; they won't thank you for it...." No, they PAY me a wage to work for them. That allows me to live a lot better than those stuck in the "socialist wonderlands" of places like North Korea. If I don't like the wages or conditions under which they employ me, I leave to find another job. No sucking up required, just some common sense and application, rather than an illogical belief that everything should be given to me on a plate because I somehow "deserve it". Which seems to be the core of the Greek problem.

[Anonymous Coward]

a much better way

The mass killing of politicians and economist

[John Smith 19]

AC@11:45

"The mass killing of politicians and economist"

Too little.

Too late.

[Anonymous Coward]

Robert Heinlein said it a long time ago......

Ref: The Day They Hung All The Lawyers.... makes sense, kill two or more birds with one stone since 99% of politicians are lawyers and make the world a happier place once the leeches are gone.

Ever notice that even though lawyers never produce anything, they win whether YOU win or lose and are worth millions?

[John Smith 19]

AC@12:58

"Ever notice that even though lawyers never produce anything, they win whether YOU win or lose and are worth millions?"

As do book makers, casino operators, accountants and banks.

[Anonymous Coward]

@John Smith 11:50GMT

Ah, but you're not forced to interact with book makers, casino operators, accountants, and banks. You need a damn lawyer to cross the street without being sued by some other fucking lawyer... I'm STILL trying to get 527 hours of overtime out of some bastards who screwed me from almost a year ago. Federal labor laws be damned, they have copious amounts of cash with lawyers on staff, I don't. Guess who is broke and just lost his truck to the bank? It's not them.

[John Smith 19]

@Neal 5

"4) Ethnic cleansing of the USA by anyone who feels like it. (won't save the euro, but it will take all the press attention away from the problem)"

This used to be handled by ex members of the US Postal Service.

Currently it seems to being conducted by various disaffected high school students.

[Anonymous Coward]

It won't pass

This "EMF" now has to be ratified by 27 countries, and the German voters have to agree to make their grandchildren poorer for the next few generations so they can bail out the lazy Greeks, etc, with money they worked very hard to earn.

They've had enough.

Leave the useless economies to it. This view harsh but probably fair:

http://blogs.forbes.com/billfrezza/2011/07/19/give-greece-what-it-deserves-communism/

[Anonymous Coward]

Cause and effect

If they want German standards of living, they'll have to get a Germanic level of work ethic!

[Anonymous Coward]

Doing things properly is a fairly obvious strategy

I'm not sure the Germans see that as a work ethic. They might just say, "But, why wouldn't you?"

The whole "marks for effort" thing is, perhaps, more of an Anglo-Saxon speciality. Or as George Bernard Shaw said, "An Englishman thinks he is moral when he is only uncomfortable."

[Anonymous Coward]

Re: Cause and effect

"If they want German standards of living, they'll have to get a Germanic level of work ethic!"

Or alternatively elect a madman, start a massive global conflict. Kill the weak and infirm, and have all your healthy young people blown to bits. Have a couple of your biggest cities torn to shreds by firebombs, wiping out thousands of all ages. Then have half your country turned into a pseudo-communist police state.

All this will result in a low population and in particular a very low welfare bill. If you do the warfare thing well, it will result in development in the industrial engineering sector, as your gun factories become pipeworks, your tank factories produce luxury cars and your aeroplane factories service the burgeoning tourist sector.

Personally, I think that Germany paid a pretty high cost to get where it is today, and I wouldn't wish Germany's success on my worst enemy!

[Steve Foster]

Too much debt?

This may be too simplistic (and since they haven't done it is almost certainly the case):

Part of the PIGS (and others) mountain of debt is intra-EU debt. Why not net off all the intra-EU debts for a start? This wouldn't make any practical difference to their debt servicing costs, but would reduce the headline numbers (and might just be enough to bring some of the ratios back into "sustainable" territory).

[John G Imrie]

You cant do that.

We need the interest payments on the books in order to stop it looking like we are about to default.

[A J Stiles]

What I really don't understand is,

Who do Greece actually owe this money *to*?

That's the $64 000 question. Or even the €100 000 000 000 question.

Bonus question, why don't they just do what everyone who owes me money seems to do, and fob them off with excuses and sob stories?

[Evil Auditor]

Re fob them off

That's what they did for years! Problem is, it doesn't work forever.

[Anonymous Coward]

Bonds or the owners of bonds anyway

The Greek people owe the money to owners of Greek Government bonds. National governments generally borrow money by selling bonds to pretty well anybody. A bond is typically a contract to pay a fixed rate of interest for a defined period of time and repay the capital at the end of the fixed period of time.

Buyers of bonds include for example the general public, banks, pension funds and other countries. These are the same bonds that your granny may have bought you when you were born, and also in the UK have a special case of premium bonds (don’t pay interest as such but are entered in a lottery instead).

It is the answer to the second question that is perhaps the real crux of the crisis. If the Greek Government don’t honour their bonds, and as you say ‘fob them off with excuses and sob stories’ this causes a reduction in confidence in Greek Bonds (*). The long and the short of this is that new Greek Bonds are harder to sell, and attract a much higher rate of interest.

But unlike your debtors who could probably survive without borrowing national governments struggle at this point. This also knocks onto the other owners of the bonds they have to all intents lost the money represented by the bond. Banks start to go bankrupt, more people lose money, other countries bonds devalue and so on.

(*) This is perhaps what is happening on a smaller scale anyway.

[John Smith 19]

@A J Stiles

"Bonus question, why don't they just do what everyone who owes me money seems to do, and fob them off with excuses and sob stories?"

Because that's what they have *been* doing for the last few decades?

[Anonymous Coward]

money-go-round

Greece owes most of this money to banks and other financial institutions who yet again made huge loans with apparently few checks(*). The large majority of the European creditor banks etc are based in France and Germany (in that order), hence their politicians are particularly insistent on a fix that does not involve a large scale default - at least not on their watch. So the bottom line is that money will continue to flow from tax payers to banks to cover their losses, plus ca change.

(*) ironically other financial institutions, or even different parts of the same institutions, were paid to obfuscate less helpful details to ensure the loans went through - I guess following the example of our old friends at Goldman who were charged with getting Greece into the Euro in the first place.

[Matt Bryant]

RE: money-go-round

Oh, the familiar excuse of the socilaist politician (as typified by our Ed The Puppet) - "It's all those nasty bankers' fault!" Despite the banks only operating to the rules set by the socialist politicians, and depsite it being those same politicians that spent all the money in the first place.

[Anonymous Coward]

Mr Bryant

1) Most of the deficit is accounted for by the cost of the recession caused by inept banks, an idiotic belief in infallible markets, oh, and corrupt ratings agencies.

2) Destroying a large financial organistion, eg: a bank, just because 'the rules allow you to' is NOT somebody else's fault.

3) The overlap between the rich and the clever is nothing like as large as your fond imaginings would presume it to be.

[Matt Bryant]

RE: Mr Bryant

"......inept banks....." So, that would be largely the Fwench banks in the Greek case then? Strange, but I don't see many Fwench or even British bankers wandering round homeless, but I see plenty of poor people here in the UK and US struggling to pay their mortgages.

If you're referring to the UK recession, that was the fault of Dummicrat politicians in the US that allowed the sham of sub-prime mortgages to continue even after the warnings signs had become so clear (Dubyah Bush warned as far back as 2003). The Dummicrats saw the sub-prime mortgage market as a vote-winner with lower-paid voters, but all it did was sell them into massive debts they had no chance of repaying. Due to the massive size of the US mortgage market, the risk was spread globally, so when the US caught a cold it was UK banks that sneezed. Just to make that clear for you in a language you may understand - nasty capitlaist rich people warned the Chamipions of The Poor that their socialist agenda was putting the nation's economy at risk (true, the US warnings were pretty US-centric), and the socilaists ignored them, the problems came home to roost, and it was the poor people that suffered most. Nothing to do with inept bankers, a lot of them made plenty of money, quite legally, from the mess created by socialist economic meddling. The fun bit was the reaction by the socialists to the mess they created - blame it ont he bankers, spend more money in bailouts, and ensure that our grandchildren will be saddled with massive debts too!

".....Destroying a large financial organistion, eg: a bank, just because 'the rules allow you to' is NOT somebody else's fault...." Que? Who's talking about destroying banks? Personally, I'm not too against the idea of a bank or two failling. Banks have failed before. In fact, it might be a good thing, as at the moment the bankers are doing the sums and thinking they can make risky bond buys with the virtual guarantee that the Germans will provide a backstop. All legal.

"......The overlap between the rich and the clever is nothing like as large as your fond imaginings would presume it to be....." I always measure cleverness by application rather than just intelligence. I know a lot of very intelligent people form "good" backgrounds that work in relatively low-paid work. But I also know another guy in a financial institution that left school with no formal qualifications, started in the mailroom, and ended up a CEO. On paper, he is less "clever", but he's the one with the private jet, yatch and holiday home in Barbados. From what I heard, he didn't have an easy time during his climb, and he didn't get there without treading on some people, but do I resent him for working very hard to get what he's got? Nope. He applied what he had and made his fortune. Mind you, I also know a dealer that gave it all up after five hard years on the trading floor and bought out a diving school in Antigua. He is happier now even though he lives in a beach shack, but who's to say which one is the "cleverer"? Maybe if you stopped following the politics of envy you might see mroe "cleverness" too.

[The elephant in the room]

...and, for that matter,

what on earth did they spend it all on?

Is this what it it costs for an entire country to replace all its plates after smashing them at the end of every meal? They should just stop doing that.

[Mark 65]

What they spent it on

Presumably all those plates were broken in celebration at retirement parties for 50-year olds who'd never paid any tax all their working life.

[John Smith 19]

@The elephant in the room

"what on earth did they spend it all on?"

Well it seems it was a mix of living expenses (living on your credit card for years) and property speculation (getting a mortgage and relying on the rise of value of the property and your job to handle it).

After all it was all *easy* money.

"Is this what it it costs for an entire country to replace all its plates after smashing them at the end of every meal? They should just stop doing that."

Careful now you wouldn't want to be accuses of ethnic profiling, would you ?

[Andrew Ducker]

Why the Europ is different

@Andy Pellew - the Euro is different because in the UK the SE can funnel money to the NE (and does so, a lot). This cannot happen across different countries because of European law. See Option 2 in the article.

[Steven Jones]

All about faulty risk asssessment

I'm not sure I wholly agree with this. The US has a system that allows individual states to go broke and default within a single currency area and default without upsetting the whole. What happened here is that institutions (private and state) have been happily buying Greek bonds on the basis that the Euro area would not allow a default. Pretty well everybody who has looked at the Greek situation will realise that some form of default is inevitable, however it's how it is dressed up. The Greek national debt has simply reached unsustainable levels compared to its GDP. When the bond markets finally cottoned onto this fact and that a default is most certainly possible, then this triggered the current crisis.

If those responsible for buying Greek bonds in the first place had properly factored in the risks involved several years ago, then the Greek deficit would not have been allowed to grow to these levels, simply because the bond markets would have acted as a control as the costs of state borrowing would have increased. That (mostly) Eurozone-based institutions thought they could treat Greek bonds in much the same way as German government ones was a serious mistake and is at the heart of this mess. More generally, it was loose credit control that was at the heart of the financial crisis which we are currently in. That institutions thought they could immunise themselves against these risks using increasingly complex financial instruments (like the dreaded credit default swaps) served to produce a horrible interconnected, yet opaque finance system almost designed to produce the current crisis.

What is surely required is a much less interconnected system where the risks are more easily assessed and contained.

As for the idea that there can be several percent of the northern states' GDP to subsidise the south, then that is surely never going to be sustainable. If we look at these sort of transfers in the UK it has essentially just made some parts of the country state subsidiaries. That's simply not viable for whole countries.

[crowley]

Credit Default Swaps

You say dreaded, but Greece had quite a lot on their bonds.

The PM sold 1.3Bn worth of CDSs to private investors (his falafel eating chums), taking I think a 43Mn cut, just before announcing the trouble Greece was in.

Those CDSs shot up to be worth 27Bn. [1]

I recall an FT article likening most of the CDS market to insuring someone else's house before burning it down (greek pinyata party or something? ah - [2]), but thought it important to show that they have a proper use as well.

And that George Papandreou is a cunt.

[1] http://fromthetrenchesworldreport.com/greek-prime-minister-is-accused-of-treason-%E2%80%93-major-european-and-us-banks-could-be-involved/4508

[2] http://www.ft.com/cms/s/0/e7168fc6-1740-11df-94f6-00144feab49a.html#axzz1Sq3Iv7NH

[Mark 65]

@Steven Jones

"If those responsible for buying Greek bonds in the first place had properly factored in the risks involved several years ago, then the Greek deficit would not have been allowed to grow to these levels, simply because the bond markets would have acted as a control as the costs of state borrowing would have increased."

Those bond buyers correctly factored in that Germany effectively backstops every sovereign bond issuer in the group and, when they were all receiving dirt cheap Germanic lending rates, every sovereign issuer and the EU politicos were ecstatically happy with the success of their grand scheme whilst this was happening. When the music stopped and Greece looked like defaulting those buyers were then bailed out. Thus they were proved correct in their assumptions. It is what happens when you have rules effectively stating that an issuer cannot default or leave the grand scheme - someone ends up footing the bill for that constraint.

[Steven Jones]

@Mark65

I understand the point, but it's not quite true that some current bond holders won't suffer a loss. That is part of the new deal, albeit nothing like as bad as it could have been (and might yet be). That France is notably keener on assisting Greece than is Germany might be something to do with the former's banks being particularly exposed to Greek sovereign debt (albeit German banks are the second largest creditors).

In any case, the notion that all state-issued bonds in the Eurozone are equally sound has now been disproved, the importance of that being that it should be possible to contain risks in the future. However, we are where we are, so there's an awful lot of reckless lending to be unwound. For instance, the UK banking sector is particularly exposed to Irish sovereign debt.

[Anonymous Coward]

@Why should the Euro be any different?

Think the difference is that while 0.5% is the right/wrong rate in different parts of the UK its all still the same economy so other fiscal measures can be taken to address this and spending can be directed to where its needed. In the Eurozone the situation is different as there's a collection of seperate economies all on the same currency ... when Greece is finding it tough with a higher interest rate its more contentious to say that taxes raised in Germany where things are going better will be used to pay the bills than in the UK to say taxes raised in the more prosperous SE will be used to pay the bills in the NW.

[martin burns]

All one economy?

"while 0.5% is the right/wrong rate in different parts of the UK its all still the same economy"

Umm no. So very much no.

The SE of England is nearly always at a different point of the cycle to Scotland, so when the MPC (and previously the Chancellor) set rates to cool 'the overheating economy' it was only thinking of the SE of England economy. Usually at that point, the Scottish economy is only just emerging from the freezer, with disastrous results.

[Mark 65]

@martin burns

It is a case of being between a rock and a hard place for the MPC. Given the SE of the UK and London, in general, subsidise the rest of the economy of the UK and contain the largest part of the economy it makes sense to target rates for that area.

Would you rather they kept rates low to support Scotland and, at the same time, allow the SE to go absolutely batshit crazy on easy credit? I doubt you would so we arrive at the unfortunate situation whereby the bit that makes the most money gets pandered to whilst the bit in shit-street cops a kicking. I doubt the NE of England is any different in this regard.

[dak]

@Mark 65 et al

Before we get too hung up about the philanthopists in the SE of England keeping the rest of us alive, let's not forget that public spending in London far outstrips anything in any other part of the UK, and that much of the earnings ascribed to London are due the location of companies' head offices, not where the money is actually made.

[The Indomitable Gall]

@ Mark 65: Chicken and egg

"It is a case of being between a rock and a hard place for the MPC. Given the SE of the UK and London, in general, subsidise the rest of the economy of the UK and contain the largest part of the economy it makes sense to target rates for that area."

Why does SE England subsidise the rest of the UK? Because it earns more money. But could it be that the only reason they earn more money is that the economy revolves around them? If the economy in Newcastle or Manchester or Cardiff or Belfast or Glasgow or Inverness is constantly being battered by changes made to suit London and its neighbours, then other parts of the Union aren't going to be given the opportunity to pay their way.

Except that this subsidy stuff is a bit of a myth anyway. Which makes me wonder -- is SE England actually holding back the UK? Is it actually the *least* productive part, and if we controlled the economy to suit the rest of the country, might we all be richer...? (And we wouldn't all have to emigrate to London to look for a decent job.)

[Diskcrash]

All doomed to failure

All these plans and ideas are doomed to failure as long as countries such as Greece are allowed t participate in the Eurozone and not be held accountable for their failure to enforce basic monetary sanity.

If I give my daughter a credit card and keep paying it off every month there is no incentive for her to stop spending or to develop a budget. In Greece almost every tax payer under reports their income to the point of absurdity and the government turns a blind eye. Worse it has now become an accepted way of living any attempts to make people actually pay for their public transportation and infrastructure costs are seen as attempts to oppress their rights to not have to pay for anything.

It is all just good money being poured down a Greek sewer. Ireland, Italy, Spain and Portugal have some of the same issues but at least make an effort to run their countries properly.

[Field Marshal Von Krakenfart]

Accountability

Since you want to talk about accountability why not look at the real source of the problem?

There is a fundamental problem with Greece, they were borrowing huge amount of money to finance the day to day running on the country. Practically everything in Greece is nationalised, and as such, important infrastructure became playthings to be run for the benefit of politicians, Greece’s state run enterprises are overstaffed, overpaid, and very inefficient (even by our standards). Tax evasion is endemic in Greece, for example, 324 swimming pools registered in Athens yet more than 16,000 have been counted on google maps. Doctors in upmarket Athens suburbs declaring incomes so low that they did not pay any tax on them at all. The list goes on and on.

Ireland and Spain have similar problems; they have a property bubble that has popped. Ireland’s economy is reasonably healthy; however drinky (cowen) and the brian (lenihan) have sold the family silver to bail out the banks.

So where did all this money come from? The biggest source was the German banks. German people have a greater tendency to save than anyone else in Europe, see fractional reserve banking for how that worked.

The second source was the low interest rate that Germany wanted to fund the reunification of Germany. At a time when the ECB rate should have been higher that it was to control inflation, the so-called “European” central bank was setting a rate that suited Germany. This enabled a lot of European financial institutions (mostly French and German) to borrow cheaply, and to lend on to banks in Spain and Ireland which funded a property bubble in these countries.

This problem should have been addressed years ago, unfortunately Nickolouse Shortasrekey and Angina Mirthhill did what politicians did best, they ignored the problem hoping it would go away or that somebody else would fix it and paid more attention to local politics, or as it’s more popularly known, getting re-elected.

So yes Diskcrash, lets hold the responsible people accountable, but they are not Greek, Irish or Spanish[1], they are the idiot bankers who lent all this money to Greece, Ireland and Spain in the first place. It’s banker’s greed that led to all this in the first place, and until we tackle the problems of unregulated greed driven banking, then this problem is not going to solved and will probably reoccur.

The regan/thatcher light touch free market policies have failed, just as communism has failed, Georges Clemenceau said “War is too serious a matter to entrust to military men”, the time has come to realise that “Banking is too serious a matter to entrust to bankers”. Banks need to be run for the benefit of countries and economies[2] and not just for the benefit of fat cat bankers and the chosen few.

[1] Haven’t mentioned the Italians, haven’t a clue what is happening there

[2] As in the ECB should operate for the benefit of Europe, not just France and Germany.

[Ken Hagan]

er, what's failed, exactly?

"until we tackle the problems of unregulated greed driven banking, then this problem is not going to solved and will probably reoccur. The regan/thatcher light touch free market policies have failed, just as communism has failed,"

If we'd taken the light touch approach, the greedy bankers would have gone bust. Instead, we took the "massive state intervention" approach, plonking a multi-trillion dollar debt on our grandchildren in order to bail out the bastards and pretend the system was working.

For added irony, the UK PM who screwed the next two generations of working classes in order to bail out the plutocrats called himself a socialist and fancied himself as a bit of a economics whizz.

[Mark 65]

Re:Accountability

The problem was not that of greedy banks but of complacent politicians. Banks figure that Germany was the backstop to the EU project and the politicians did nothing to dissuade them of this as the low rates that it led to for the periphery made the whole project viable. Those cheap rates turned out to be a pull-forward of future earnings as they are now finding out.

[Field Marshal Von Krakenfart]

Blame??????

I agree that a significant part of the problem is complacent politicians; however it is not the root cause of the problem. In fact complacent is not the word I would use, but the word I would use also begins with ‘C’ (no it’s not 4 letters either). German politicians wanted a low interest rate to fund german reunification at a time when a lot of countries needed a higher rate to control inflation. The ECB was being run for the benifit of Germany and to a lesser extent, France.

Back in 2004, the Wall St companies, including Goldman Sachs, then led by Henry Paulson, lobbied the U.S. Securities and Exchange Commission to remove the “net capital rule”[1] that ensured that brokerages hold sufficient reserve capital which in turn limited their leverage and risk exposure. The rule required companies to value assets at market vale and then apply a ‘haircut’ to that value to ensure the company had sufficient reserves to meet requirements should there be any sort of problem in liquidating those assets.

The US also applied pressure on the EU to not

This also enable companies to rely more on mortgage-backed securities (MBS, a claim on the cash flows from mortgage loans through securitisation and collateralised debt obligations (CDOs) are a type of asset-backed security collateralised by debt obligations such as bonds and loans.

Sadly it turned out that so of these so-called assets were sub-prime American mortgages.

Not only that but Goodman-sachs then sold mortgage backed securities in the market and then took a short position on them in the market, betting that the vale of the securities would fall. G-S made $4Billion on that.

In 2006 dubya nominated Paulson as Treasury Secretary.

So when the sh-one-dot-t hit the fan, Paulson was ideally placed to bailout G-S and scupper Lehman's

So the next time you hear a politician say that the collapse of Lehmans caused the financial crises, remember that it was actually “the Wall St bankers lead by Goodman Sachs and their CEO Paulson got the net capital rule revoked to allow them to short their own securitised mortgages in the market so that they could make money when the market crashed and Paulsons (now head of the US treasury) refusal to bailout one of Goodmans Sachs biggest rivals caused Lehmans to enter chapter 11 bankruptcy and which started the run on the banks that caused the financial crises”

If you want to get into the area of conspiracy theories you cold also look at some of the announcements by Paulson about his concern about the sub-prime market prior to the collapse. Go research it yourself!

[1] http://en.wikipedia.org/wiki/Net_capital_rule, and while you’re at it, read up on credit default swaps as well http://en.wikipedia.org/wiki/Credit_default_swaps

[Field Marshal Von Krakenfart]

A bit of amangled edit in the middle

"The US also applied pressure on the EU to not"

should have read

The US also applied pressure on the EU to not exanine foreign firms' reserve holdings if the SEC was doing so.... except for teh fact that the parent holding company of the big American brokerages were already beyond SEC oversight due to the Financial Services Modernization Act of 1999, which repealed the law preventing any one financial institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.

[Burkhard Kloss]

Accountability

> It’s banker’s greed that led to all this in the first place, and until we tackle the problems of unregulated greed driven banking, then this problem is not going to solved and will probably reoccur.

Because the bankers FORCED the Greeks and Spanish and Portugese governments to borrow all that money? Or the Irish to invest like mad in property? [The Irish are a different kettle of fish from the others... they just made a monumentally stupid decision by not letting their banks fail and instead guaranteeing them with taxpayer money]

> The regan/thatcher light touch free market policies have failed, just as communism has failed

Ah yes, Thatcher was famous for running up huge government deficits wasn't she? [ Reagan did actually run up a huge deficit, despite talking about a smaller state, but then he was trying to outspend the Soviets]

Such a long post... and so short on logic.

[Field Marshal Von Krakenfart]

title

Funny you should mention logic, where did I say anything about thatcher (or regan) running up a huge deficit. My point is about the light touch regulation that allowed financial corporations to reduce the level of assets backing them. Essentially, there is nothing wrong with high levels of gearing, however when you have G-S shorting those assents in the market place it's the free market gone mad.

I don't think the Spanish and Portuguese grubberments borrowed that much relatively speaking, like Ireland it was the privately owned banks that borrowed the money. The Greek grubberment are a different case in that they did borrow huge amounts of money to fund day to day spending.

Neither do I think that anybody will pay much attention to a childish argument that the banks FORCED the Greeks or anyone else to borrow all that money.

As for the Irish investing like mad in property, you only have to check out the constant stream of good news propaganda coming from the fianna fail(ure) led grubberment of the time. There was constant talk of get on the property ladder now or else you won't be able to afford it later and how strong the Irish economy was. When economists were making warnings about an Irish property bubble and unstainable growth Bertie Ahern, in July 2007, responded to his critics as follows:

<SNIP>

"Sitting on the sidelines, cribbing and moaning is a lost opportunity. I don’t know how people who engage in that don’t commit suicide"

</SNIP>

That's Bertie Ahern, one time leader of fianna fail(ure), a political party where several party members were implicated and convicted of corrupt dealings particularly in the re-zoning of agricultural land for development purposes, who now charges USD40K+ on the washington speakers bureau for talks on how to create economic success.

Yes the monumentally stupid decision by the fianna fail(ure) led Irish grubberment was bailing out the Irish banks, specifically Anglo Irish Bank, but then, Anglo was primarily a development bank and it funded the developers, and the developers funded fianna fail.

That's the same Anglo Irish bank that were hiding circa €100M worth of directors loans by moving them from Anglo Irish Bank to Irish Life and Permanent to avoid them appearing on the year end financial statements. The same bank that recorded (€7Billion ???) of inter-bank deposits as ordinary deposits in order to hide a run on the bank and to boost the banks ratios, and at the same time engaged in a share price support scam by giving loans to "the golden circle " of investors to buy shares in the bank and accepting the banks own shares as collateral for the loans.

That why I blame light touch regulation for the current economic mess.

[Lee Dowling]

Well,

Looks like Gordon Brown actually got something right for once:

http://en.wikipedia.org/wiki/Five_economic_tests

Shame they are no longer policy, but I think it would be political suicide to suggest entering the Euro in the next 5-10 years anyway.

[Tony Rogers]

Communist Traitors

Gordon Brown and the rest of the Labour / Socialist / Communist card carriers should be

tried in the highest courts for acts against The United Kingdom.

The actions taken by the left have been of such that we are no longer fully able to manage

our country without the forces of our old enemies say so.

We managed to stay out of the Euro...just !

Now let us fight a battle to leave the the ECC once and for all.

No chance of a vote on this I suppose?

[Anonymous Coward]

(untitled)

1) Can you name any of these 'actions'?

2) Why would you want a 'vote' on anything? That's very left wing: one vote each no matter how much money you have? You old Socialist, you!

3) Above all, you forgot to say, "Simple Simon says...".

[poohbear]

Can't see the wood for the trees

The REAL problem is that all governments (and "economists" and thus everyone else who listens to them) have been suckered into believing that Governments have to borrow money from someone else.

They don't. They can create it themselves. Some states, like North Dakota, do, and they don't have the problems that the rest of the US has.

So the real solution is for states to stop trying to find someone to buy their 'government debt' and to just create what they need. Google "Ellen Brown" and her writings.

[Anonymous Coward]

You mean....

....like the banks do ?

They create money from nothing, and lend to those with less....the "cash in the bank" is only a few percent of that loaned....they are all, literally, insolvent. None have sufficient cash to pay their liabilities.

It's called Fractional Reserve Banking.

[Tim Worstal]

No

They're illiquid, not insolvent.

They can't pay everyone immediately: illiquid. They can pay everyone eventually, when everyone who has a 25 year mortgage has paid it of. So they're not insolvent, just illiquid.

[sleepy]

No, they are insolvent.

The banks create the money by inventing it and lending it, but they demand interest in addition to repayment. But the total amount of money they've invented is all there is; it's quite impossible for everyone to repay their loans with interest; the money doesn't exist.

Only two eventual possibilities: banks write off and foreclose and end up owning all the real assets, or: endless asset price inflation financed by bigger new loans putting more money out than the repayment and interest on the old loans.

You'd be forgiven for thinking fractional reserve banking is simply legalized theft.

[Russ Williams]

Insolvancy test

If they cannot pay their debts as they fall due, they are insolvent.

That's the only test that can reasonably be applied to a country, since the net present value of its assets are based on too many fudgeable assumptions (interest rates, tax rates and population growth for half a century, for example).

[M Gale]

Any country can "create" money.

They just have to print more notes.

Problem is, the more money in circulation, the lower the value of each currency unit. Money creation is not the same as wealth creation, and if you confuse the two then you can well end up with hyperinflation and people taking their weekly wages home in wheelbarrows because you're paying ($£€)200 on a loaf of bread.

[Tim Worstal]

Well, yes

Except that that's out too in the euro. National central banks aren't allowed to create more money. Only the ECB can do that. And they're not allowed to create more money in order to pay down national debts (aka, monetising the debt).

[Anonymous Coward]

yeah but

The advantage of a country/state creating their own money rather than borrowing from the market (which has itself created the money out of nothing) is that while there may be an inflationary effect there is no interest charge, i.e. it does not create yet more debt.

This in turn reduces the growth requirement and is generally a better way to handle things.

Except that the finance industry does not makes lots of money for nothing if countries do this, so it doesn't happen.

[Charles 9]

And in truth...

Wealth is a finite resource. It's never CREATED--it's only FOUND.

[Anonymous Coward]

Zimbabwe?

http://lee.org/blog/wp-content/uploads/2009/04/zimbabwe-100-trillion-dollar-bill-obverse.jpg

[Scott Broukell]

AARRRRRGH!

The expansion of Europe was driven and lobbied hard for by the investors and banks that are now crying to mummy that they need help for the results of their woeful, money-grabbing greed.

They weren't doing this for the betterment of Europeans, they drove the expansion because they wanted to reach more punters to hook up to their scams (lending and betting). And they were right in predicting that many new member states would take the bait - sadly one or two or three had eyes far larger than their fiscal stomachs could handle and took a wee bit too much of the magical never-ending money the banks were peddling. Markets, traders, hedge-funds and bankers - CRASH AND BURN the lot of you! - together with the politicians who were/are just too DUMB.

The little people end up paying for the fookin mess again as usual, makes me sick it does.

Money certainly does make the world go round - but money like this makes it spin round too fast until folk can't hold on any more and fly off hitting a wall (collateral banking damage).

Whilst those in the middle of the merry-go-round count their big fat wads and may glance up periodically to witness the spectacle with dead inhuman eyes.

There are alternative ways to facilitate banking / lending - ways that don't make BIG profits, aren't short-sighted and can bring greater benefit to the larger majority of ordinary folk.

[Anonymous Coward]

Banks to blame?

The markets didn't want Greece in the Euro. They knew what would happen. The politicians bent the rules to bundle Greece into the Eurozone.

"The little people end up paying for the fookin mess again as usual, makes me sick it does."

Yes but the little people have votes - but they kept voting for an unsustainable debt, a public sector which took the piss, and nobody paid any tax.

You blame the banks for the debt but not the socialist economics that demanded the money from the banks. Weird.

[Mickey Finn]

Keynes is the N in the W….

"...an attempt to make sure that nothing like this ever happens again. Might work, might not: for they've still not solved the basic underlying problem. The eurozone just isn't (and is unlikely to be for many decades to come) an optimal currency area…"

In the same vein, I believe that the USA did not have a unified single currency until quite recently c1930's… around the time that Keynes became popular there… And just look where that got them!

[Anonymous Coward]

correction

It was actually the mid-19th century. You're confusing it with the creation of the Federal Reserve Bank.

[PyLETS]

@Mickey Finn

"... USA ... c1930's… around the time that Keynes became popular there… And just look where that got them!" .

Out of the great depression to become the most active economy the world has ever seen, which played the lions share in winning WW2 (with some help from us), which bankrolled the rebuilding of Europe afterwards, and which then went on to put a man on the moon ?

Not the single currency which they had had for decades before, and which didn't prevent the 1929 crash.

Pity about how much things started going wrong when Thatcher and Reagan listened to the monetarists and Keynsian economics went out of fashion in the eighties. Pity also that much economic drivel which was tagged against his name (Keynsianism) after Keynes' death, was never supported by his writings when he was alive. Interesting also that the policies which stabilised economies to a large extent after the 2008 crash put Keynes' conceptual framework back onto the map.

http://en.wikipedia.org/wiki/New_Deal

[Turtle]

No no. . .

"Pity about how much things started going wrong when Thatcher and Reagan listened to the monetarists and Keynsian economics went out of fashion in the eighties."

Well I seem to recall that both Thatcher and Reagan were elected *well after* the economies of their respective countries were hobbled and decaying due to policies that had already been in place for years and years. . .

[Anonymous Coward]

Ancient prophecy

Europe will never be united. The Euro WILL fail.

Daniel 2:43 - And whereas thou sawest iron mixed with miry clay, they shall mingle themselves with the seed of men: but they shall not cleave one to another, even as iron is not mixed with clay.

Hitler tried - and failed.

Napoleon tried - and failed.

Kaiser Wilhelm tried - and failed.

History tells us that all efforts to unite Europe failed.

And it will remain so even until the last day.

[John Smith 19]

AC@ 11:35

I feel that your post calls for a temperate and coherently argued series of rebuttals to your points.

But actually what I'm thinking is

"Arse"

[Anonymous Coward]

And what I'm thinking is...

"But actually what I'm thinking is "Arse"

You haven't addressed the AC's argument, so he wins by default.

Tell me: how do you think Europe is going to be "unified" now? The Greeks suddenly turn into dynamic low debt economies?

Pigs will fly before the PIGS economies modernise.

[John Smith 19]

AC@ 22:21

"You haven't addressed the AC's argument, so he wins by default."

Wrong. If you have to open a post with a quote from the Bible (Written in the Middle East > 2000 years ago) they (you?) are already raising a "I am a religious nut" flag.

That's not usually a sign of coherent thinking.

As for the rest I'll note the Roman empire if not all at least most of what is the eurozone for centuries.

*All* listed attempted *military* conquest, not the *willing* joining of sovereign nations for mutual benefit (well that's the theory anyhow).

I'll also note that my post polled 8/2 versus the OP 4/5. I'll guess you and the OP being the down votes. I'll leave you to think about what that says about peoples views of my post and the OP.

[Field Marshal Von Krakenfart]

title

The reason Hitler, Napoleon and the Kaiser failed is that they tried to use military force to complete the task. What they should have done is to create the ECB instead.

[BristolBachelor]

Taylor Rule

The basic principle of the Taylor Rule is that increasing inflation can be cooled by increasing interest (and also that if interest does not stay ahead of inflation, then you are effectively loosing the money that you lend)

The linked article talks about testing the Euro zone against the Taylor Rule, but their rule suddenly has unemployment in it!? Where did that come from? Is anything is a Taylor rule if it includes interest and inflation? Can I also include global temperature to make the rule fit (or not fit) anything I want?

The problem in Greece is that the government spent (a lot) more money than it's income. People do it too and did it long before the Euro; it's not the Euro's fault. To be honest, the lenders lent them the money in order to make more money; just like when you borrow money from the bank, it is the bank's job to assess the risk that they won't get their money back. If Greece cannot pay back all of the money then the lenders loose out. The fact that Greece is in the Euro makes no difference. The other Euro states do not have to help out Greece because they are in the Euro (they might do so out of charity, but do not have to).

[EWI]

Glibertarianism a go-go

Needs to be said

[Jonathan 10]

I know!

Can't we just consolidate the debt into a single managable monthly paymet plan from Ocean Finance? Unless Carol Vordie was lying too me....

[Anonymous Coward]

ocean finance

Isn't that exactly what they've done? Save Greece from debt by lending it even more money?

I'm off to pay my AmEx bill with my Visa card...

[John Smith 19]

Their plan appears to involve inflicting some pain on large banks who will have to write stuff off.

Good.

I think bankers need to be re-connected with the consequences of the positions they support.

[Spoobistle]

Banks don't suffer pain...

...the bankers will simply connect our pensions and savings with the consequences of their positions.

[John Smith 19]

Spopnbistle

"...the bankers will simply connect our pensions and savings with the consequences of their positions."

And will continue to do so until regulation finds a way to punish the *decision* makers, not the institutions.

laws are aversion therapy for organizations. The tough part is to find some that discourage *both* personal and institutional behavior

A case in point is that when banks in the UK called in an accountants to assess if a company was insolvent and they should be shut down (UK banks have preferred creditor status) the accountants who did the audit *also* got the contract to shut the company down.

*Except* at the Royal Bank of Scotland, which tendered the insolvency administration.

Curiously this was the also the bank with the *lowest* number of companies going into receivership.

Good choice of customers or recognition that the firm involved was not going to make *easy* money. BTW It's SOP in insolvency to secure the insolvency fee *first* from the assets of the company you're shutting down.

[Ken Hagan]

Re: Banks don't suffer pain

Well, not if you bail them out they don't.

However, you could let the bank fail, letting the central bank collect the repayments on outstanding debts and guarantee the savings of existing investors. That preserves the pensions and life savings of the man in the street but doesn't preserve the massive salaries of the bankers who failed.

Even within the financial sector, the majority of players *didn't* overstretch themselves. They choose the path of lower returns because they knew the risks and didn't want the pain. We've now penalised *them* by bailing out the idiots. They will learn from this. The next crash will be worse.

[Anonymous Coward]

Unicorn economics

As Spoobistle says, it's us who'll pay with lower pensions, lower interest on any savings we were stupid enough to make, and general economic retardnesses. Banks can't create the money out of nothing.

[John Smith 19]

AC@22:21

"Banks can't create the money out of nothing."

I did not know that.

So could you explain what interest is then?

[Anonymous Coward]

Interest is...

Interest is the Time value of money. That is, it's what you'll pay to have it now, not later.

[Mark 65]

@John Smith 19 - Interest

Interest is your cut of the profits from them risking your money in a loan to Greece with the Greek debt being backstopped by the Germans and your money being backstopped by you as a taxpayer.

Nice.

[John Smith 19]

@Mark 65

My point exactly.

[Anonymous Coward]

How about the legal solution?

Chase down the greek tax dodgers, make them pay up, use the money to pay off the country's debts. I seem to remember seeing figures somewhere that indicated they'd have money left over.

[web_bod]

down with rates

What would be the consequences of scrapping the idea of a 'national' interest rate - wouldn't local rates encourage money to slosh around between the regions - or is that the idea - to stop speculation at the expense of regional economies?

[Anonymous Coward]

rules?

In England (and i think in Germany) we love rules and regulations, we follow them no matter what, however Greece is quite corrupt, Spain is totally corrupt and ignores most EU rulings that are handed down, not sure about Italy ... why is it that their lack of modernisation in economic transparency should be paid for by everyone else.

It is going to be harsh on us northern european taxpayers no matter what, so why not fu*k off the failing euro countries, let them devalue their currency and accept the fall out, its not like its going to be much less painless to keep propping them up.

[James Micallef]

Italy too

Italy's as bad as Greece and Spain. Probably worse in terms of governance, rule of law, tax evasion etc but they at least have some super-high achievers that keep them afloat, notably fashion, food and high-end engineering

[Stratman]

title

Read Terry Pratchett's "Making Money". It tells you everything you need to know about how money works.

Really.

[James Micallef]

Thanks Tim

Nice summary of the options there, very clear.

One thing to add on core vs periphery is that on the periphery (especially Italy, Greece and Spain), these problems were compounded by lack of oversight. Not only were interest rates too low for these countries, which encouraged people and businesses to borrow money to either speculate or to spend what they couldn't afford, but governments had no apparent interest in other ways to restrain their economies from overheating (eg by limiting planning permission on development, since building was one of the prime movers of the bubbles).

In the case of the Greek government I believe they were also <st>falsifying<\st> creatively accounting their reports to the ECB

[Big Sausage Investors]

Ding dong

It's hilarious this past two days. All the financial commentators - including some of those who were previously very bearish on Europe - are now going around singing for joy like the Munchkins after Dorothy's house landed on the witch. Come Monday morning they will all have worked out that it's not the end-all solution they were looking for, the worst witch is still sending out flying monkeys, and Dorothy's ruby slippers have Toto's shit on the bottom.

[Identity]

Too late now, but...

I said from the inception that the Euro was misconceived, because it would lead to exactly the problem faced today. It would have been far better to create the Euro as an overlay currency, backed by the underlying currencies. That way, exchange rates between, say, the drachma and the Euro could fluctuate, bringing poor management home to roost and making the Euro a more stable currency.

[Tim Worstal]

Amazingly

This was exactly John Major's solution.

A good one, too, you're right.

[TopOnePercent]

Subsidy? My @rse.

"We'd be talking about the sort of sums that the south east of England sends to the north east, the sums that west Germany has been sending to the east: several percentage points of GDP"

*yawn* That old chestnut again... If I had a dollar....

In national terms the sums you describe used to flow in reverse for hundreds of years, when the north east was the workshop of the world massively subsidising not only the south east, but also the Empire. It's only since the 50's that cash has flowed north east from the south east.

In another 400 years, once we've got our money back, I'll be happy to hear such complaints, but until then, zip it and get some graft done.

[SkippyBing]

Well it is

It's still a subsidy, irrespective of the historical situation the South East currently subsidises the rest of the country (I don't live there, thank God). You appear to be missing the point due to some perceived regional bigotry.

For the Euro to work sums of money would have to flow across it equivalent to the percentage of GDP the SE currently sends to the NE or if you prefer the NE used to send to the SE. That's the point, not some grievance about subsidising the colder bits of the UK but that for the Euro to actually work the northern countries are going to have to send a large chunk of their GDP to the South.

Considering the industrial quantities of bile that produces between citizens of the same country does anyone think that's going to work when the Germans are paying for the Greeks to retire a decade before them? And that's the EU's main failing, countries work when there's a shared language, culture, history etc. or at least tend to. You can't force that in fifty years or so, even Bismark and Garibaldi were working from a starting point of a common language and culture (ish for Garibaldi).

If you force cultures together unsuccessfully you get Yugoslavia, why? Because people are still apes who don't like strangers and however much we'd like that not to be true it is and we need to work with it rather than ignoring it because it's inconvenient.

[Burkhard Kloss]

You subsidised the empire up north?

> the north east was the workshop of the world massively subsidising not only the south east, but also the Empire

You'll want to have a word with the rest of the empire to get some of your subsidies back

[Anonymous Coward]

@rse

Just another way of making the poor give what little they have to the rich. Tell the bond holders to fcuk off. use the payments you are not now paying to pay your workers and start again.

They won't do this because the politico's _are_ part of the rich, along with the press who report how paying more and taking of the ordinary worker is the only way.

[I ain't Spartacus]

If only life were as simple as a Volkswagon (or a commentard)

>>>>Just another way of making the poor give what little they have to the rich. Tell the bond holders to fcuk off. use the payments you are not now paying to pay your workers and start again.

The Greeks can't. They can't even raise enough tax to run their government without borrowing, and that's before interest payments on their debts. Who's going to lend them the money to pay for healthcare / social security etc?

If they could balance the books with tax, then they could do this, but seeing as they owe £60bn to French banks - and more to German ones, the French might not be too chuffed... So they might have to leave the euro or even the EU.

This would almost certainly bankrupt all Greek banks and pension funds as well. Thus totally trashing what's left of their economy, at a time when no-one would lend to them, because of what they'd just done. They also might find German and French tourists so pissed off, as not to be willing to visit, tourism is their biggest earner iirc.

Still sounding like a good idea?

[teebie]

Huh? Not following.

"The basic problem is well explained here"

That is not a use of the work 'explain' that I am used to.

("Interest rates ..are about right now for the eurozone as a whole. But they were waaaaay too low for the periphery" is an explanation, is that what the linked article was saying?)

[I ain't Spartacus]

Option 4

Could the ECB not lend money to Greece, for the Greeks to buy back their debt on the secondary market? Then they can cancel it - or if that counts as a legal default - keep paying the interest to themselves, and therefore have the same net effect.

This would however leave the ECB in for even more Greek debt, and a few billion knocked off the debt isn't enough. So might just leave European taxpayers liable for even more. Unless there's enough discounted debt out there to make a significant difference.

Greece's problem is that it needs to leave the euro, as it needs tourists to come to spend a lovely new cheap currency, and more of a chance to compete. As well as some inflation to lower the debt. But that is very hard to do, and might lead to some kind of domino effect that destroys the eurozone banking industry. It's a death embrace. The Greeks can't leave the euro without help from the other members, as defaulting will destroy their economy - and the others are scared that if they let them, that might lead to some sort of euro failure cascade, and certainly vast (€200bn-€300bn) bills to prop up their banks - again.

Another solution is EU aid, so the Greek government doesn't have to cut too much. Even a few billion each might help stop the Greek, Irish and Portuguese government finances going into some kind of death-spiral. Probably a lot cheaper than more bail-outs too.

As an interesting aside, I was reading about the Austro-Prussian War in 1866. During an Austrian cabinet meeting, they were discussing whether to back down, as there was a very good chance of losing. The Finance Minister's contribution was that if they lost a war with Prussia, this would give them an honourable excuse to default on their national debt, which they would almost certainly have to do in 2 or 3 years anyway...

Perhaps a general European war is the solution?

[druck]

Re: @rse

Socialist bloody claptrap. Those bond holders you are telling to fuck off, include YOUR pension company, and probably a hundred other entities which you rely on, and would be well and truly screwed if they went under.

[Burkhard Kloss]

yes but

.. all those people investing your pension money are being paid handsomely for allegedly knowing what they're doing

[Field Marshal Von Krakenfart]

Yes

and charging me 3% for loosing half my pension fund. What a wunch of bankers.

[h4rm0ny]

What if...

countries had two currencies. They could stay in the Euro but re-create their old ones in parallel, Then you could set interest rates locally for one, and keep the other Eurozone wide.

[Anonymous Coward]

Errr. We had that before

Didn't Europe have a synthetic currency, the ECU prior to the €?

The € is a political instrument, the purpose of which was to bludgeon the Europeans into a centralised (perhaps federal) state - it is doomed to failure.

Monet claimed that the only way to succeed in unifying Europe would be to do it surrepticiously. I fear the € was not subtle enough.

[heyrick]

It isn't the currency, it is the mindset

The French work fairly hard, the Germans are notorious for their efficiency, the Scandinavians get on with the job. Spain, however, is noted for the mañana approach, and Radio 4 reports from Greece imply corruption, laziness, and avoiding taxes are a way of life. How do we know the latest bail-out isn't just going to be pissed away?

The fault isn't with the euro, the fault is with the attitudes of some in the euro zone. These attitudes must change, or it'll be a cycle of rinse&repeat...

[Anonymous Coward]

One logical solution...

I never know whether to take you guys and girls seriously or not; because if I do take you seriously then I hope that the folks that advocate killing or destroying never end up anywhere near me in real life; you are a total waste of brain power.

Anyway, instead of illegal solutions to man-made problems, how about man-made legal solutions? They are much easier and much more human friendly; and the last time I looked you lot are mostly human.

The four solutions mentioned in the article are “illegal” under the terms of the system constructed by humans to govern the process of amalgamating the Euro Zone in monetary terms. That is the only terms of reference by which they are “illegal”. The act of changing the rules to protect or resurrect the, obviously, failing system is to fail to admit that the system itself is at fault.

Therefore the logical solution is to change the underlying system. However, that’s a conclusion that you cannot reach because you are unable to think beyond the learned “fact” that the system is “inherently” human and omnipresent. You are unable to conceive of a different way.

So the vast majority of logical and wonderful minds in this forum turn to trying to fix the system, which we note is broken, in terms of the system, as opposed to turning their time to constructing a better, more pro-human, system. Your illogical conclusions would be funny if it were not that you lot are supposed to be the most logical folks on the planet. Fault diagnostics. Programming. Infrastructure design. Project management ( ermm…okay.. ;) )

When you understand the system is the problem, and that is laid bare here, http://www.realityinfo.org if you follow the arrows, then solutions follow. Solutions that are “not illegal”, are not “anti-human” and that do not server to prop up a system that is inherently flawed until the next time it breaks down.

Whatever you choose to do, do it with peace.

Peace.

PS. Sorry to the moderator for, again, donating this link as an aid to rational thinking. I hope you forgive the intrusion. We sell nothing there. All is free. It is Open Source and it is only an information portal.

PPS. Blue face because this one may need you to think a bit....Though maybe it'd help if you were not degree educated...

[John Smith 19]

AC@22:20

Read your site.

Basically form a collective.

Nothing in any greater depth.

That's 10 minutes of my life I won't be getting back.

[Anonymous Coward]

A good synopsis of the Euro area's inherent problems....

But what does this have to do with tech/IT/science?

While the goal of European solidarity and peace is extremely laudible, I feel sorry for anyone stuck in the EU because the way it is and has been run practically assures that even EU subjects (and I use "subjects" intentionally) outside the Euro will end up feeling cheated and robbed.

[John Smith 19]

@Marketing Hack

"But what does this have to do with tech/IT/science?"

Well I'd guess as quite a lot of Reg readers live in various bits of Europe it could have substantial knock on effects to companies banks supply funding to. Bankrupt companies don't need IT staff.

Personally I don't have a problem with a few banks going down the pan. There will be an auction for their assets and their *real* worth will be discovered (demonstrating who *really* earned their last staggering large bonus) and "New Bank" will open for business.

Meanwhile money will still continue to be paid into (and out of) the *customer* accounts and customer swill continue to pay off their loans until the new buyer takes over the "loan book"

As for it affecting pension funds I'd wonder if *any* of them are still holding bank shares. It would seem a pretty stupid thing to do.

[amanfromMars 1]

And there are always lamp-posts too ........

"Well, yes .... Except that that's out too in the euro. National central banks aren't allowed to create more money. Only the ECB can do that. And they're not allowed to create more money in order to pay down national debts (aka, monetising the debt)." .... Tim Worstal Posted Friday 22nd July 2011 12:24 GMT

Oh please, Tim Worstall, you cannot be serious. "Not allowed to"? Isn't that exactly what the plonkers have done, and twice for Greece, to the tune of €200,000,000,000. It is the creation of debt, which is renamed and disguised as credit to lead the ignorant masses to believe that they are being done a great favour, rather than them doing the banking system a great favour and actually creating their business, which creates currency.

And the stupid bankers think to abuse their creators with their perverse games which would demand repayment with added crippling interest? Whenever their scam is widely known, and the internet is the great anonymous educator of the people, might the hanging space beneath the likes of a Blackfriars bridge be a much sought after premium spot market to settle outstanding business.

And now we wait to see what Uncle Sam does about lowering their debt , which of course, they can't and won't , and are actually planning to raise, and hope against hope that they can be thought of as being too big to fail, whenever they have been in a failed pariah terrorist nation state for ages already ........ trusting in the fogs of wars to hide that fact and the fact that they have no intelligence services to fix it with a radically New World Order agenda.

There are though others who would have cunning and canny plans which would help them and others similarly lost in the perverse depths of subversive despair of their own arrogant making.

[M Gale]

Holy Crap

I can tell when you're angry.

You start speaking English.

+1 anyway.

[John Savard]

Auxilliary Currency?

Couldn't the Greek central bank continue to deal in Euros, while a subordinate bank deals in Drachmas, with laws forcing landlords to accept Drachmas, and with people getting ration coupons to use Drachmas (otherwise non-convertible) to buy necessary imports like citrus fruits?

So people working in successful export businesses would be paid in Euros, and civil servants and anyone whose job has to be propped up with government subsidies would be paid in Drachmas. Given a non-convertible Drachma, no irresponsibility would be involved if the government printed as many of them as it liked.

[Charlie Clark]

Or did I miss something?

Surely the Torygraph has more enough space for this kind of polemic? But if you are going to quote The Econmist, today's Bagehot post is an interesting read. http://www.economist.com/blogs/bagehot/2011/07/britain-and-eu

[John Smith 19]

Everyone has missed the obvious.

When PIGS get their snouts in the trough trouble follows.

[Johan Bastiaansen]

The real problem

The real problem is stupid people. People who don't know what they're doing, but they're getting paid for what they're doing, so they're professionals. Who must know what they're doing. They don't, they're still just stupid people who don't know what they're doing.

You see them everywhere. You see them when you're in traffic, you see them when you're at work (I'm in sales, quite successfully but the other day the big chief claimed sales is not a priority for our company), you also see them in politics and the economy.

The solution is not to convince these people about what should be done. The solution is of course to take stupid people out of the discussion, send them to the kiddie table and let grownups work out a plan to get us out of this mess.

So the question is: who are these stupid people? We'll, they're the ones who set up the euro zone. If all the solutions are "illegal", who made this illegal? Find out who. Put a rubber stamp on their forehead "stupid" and gag them for four years.

If they refuse the shut up, kill them.

Stupid people are the curse of the human race. They do much more harm than evil people, simply because there are so many of them.

[John Smith 19]

@Johan Bastiannsen

"So the question is: who are these stupid people? We'll, they're the ones who set up the euro zone. If all the solutions are "illegal", who made this illegal? Find out who. Put a rubber stamp on their forehead "stupid" and gag them for four years.

If they refuse the shut up, kill them.

Stupid people are the curse of the human race. They do much more harm than evil people, simply because there are so many of them."

A delightfully simple solution to the problem.

As always the issue is who decides who are the the *not* stupid people.

Other than that what could possibly go wrong with such a sensible arrangement?

[Field Marshal Von Krakenfart]

Stupid people

The trouble with political jokes is that they get elected....

As the Irish uber –idiot Bertie Ahern, probably chief architect of Irelands problems, once said “politics is the art of doing what is possible”.

Isn’t it sad to see anyone set their targets so low. That’s “what is possible” rather than “what needs to done”. If had that attitude I'd be sacked within two weeks for failing to deliver.

[Steen Larsen]

The real issue

The real issue is that the Southern European countries fought very hard to join the new hard currency, the Euro, BUT they failed to re-adjust their policies and way of living to match the new currency.

They were used to funny money and salaries and prices going up 10% every year and they failed to adjust this down to 1%. For example, since joining the Euro prices in Italy have gone up more than 40% compared to Germany. The result is a massive fall in competitiveness.

The Germans took some very hard medicine with almost no wage increases during the 90'ies and adjusted pension age, etc. I can understand that they are very unhappy to support the Greeks who doctored the books, went on a binge of spending and took their pension at 55 before the crisis began.

Bailing out everybody will not save the Euro. On the contrary it will turn it into a failed soft currency. The Euro law was set up to create a strong currency and that is why bailouts are not allowed. Pity that our politicians will not take the hard medicine: allow a default. But perhaps they are also afraid of another set of bank collapses.

It is wrong to call this a currency crisis. It is a problem of national debt and national economic policy that fails to take the new hard currency into account.

[Matt Bryant]

RE: The real issue

Unfortunately, it is clear that the Greek politicians thought they would get a free ride off of the Germans. They seem to have continued their vote-winning social policies, happilly bankrupting the country, with the idea that the Germans and French would not allow their precious Euro project to fail and would thus foot the bill. So far, it's working out exactly as the Greeks planned, with the Germans coughing up, the Greeks making and then failing to keep spending promises, and more money then being sent by the rest of Europe. Until someone steps in and says "Fix the spending or leave", the Greeks will continue doing the minumum required to get more and more bailouts. Never has a better reason to stay out fo the Euro-zone been so patently displayed.

Meanwhile, where's that twit Vince Cable? Hasn't he got any words of "wisdom" to spew? I swear the Torys only let him into the cabinet as a means of depressing the Liberal vote in the next election.

[Alan Firminger]

Ever closer union - would fail in court

Any contract freely made between two parties based on the Ecu phrase would be dismissed by a civil court because there is no substance to the phrase. We know what closer union means, but ever closer union has to be taken literally to where it ends, and no-one can describe that.

My imagined end point is a lewd image of the entire population of the EU forming one great circle in union, and an immoral contract falls.

I cannot imagine and endpoint if the phrase is limited to governments of member states, and of course all their local governments. Brussels could decide about paving stones and street names. But then there has to be even closer union.

[Ken Hagan]

Re: Ever closer union

A mathematician would have no such problems with the phrase. Ever closer union simply prohibits reversals. It appears to prohibit standstill, but if you allow infinitessimal progress then this can be made indistinguishable from standstill, so that's OK. (And since any contract can be renegotiated with the consent of both parties, it isn't even a long-term commitment.)

No. My problem with the phrase "ever closer union" is that I know full well what the authors *intended* by it -- ambiguity. They intended to slip it in on the understanding that it was a harmless form of words, and then after everyone had signed up to it they would turn round and tell us that it meant something of consequence.

The fact that all EU treaties are drafted in multiple languages merely simplifies this process of deception. They ought to be drafted in just one language (French, to prove that the choice doesn't matter) and written sufficiently clearly that everyone else feels "safe" signing them.

[Suboptimal Planet]

Let the market decide interest rates!

"Interest rates were about right in the boom and are about right now for the eurozone as a whole."

Interest rates should not be set for the country as a whole by a committee of central planners. The free market is perfectly capable of determining rates, according to the time preferences of borrowers and savers. Private lenders will naturally account for the varying ability of borrowers to repay.

Central banking is the problem.

[Grubby]

An 'If I where in charge' moment

It's a back to basics moment.

People not working should be made to plant crops etc. It may sound strange in a developed country but less reliance on outsources will reduce costs further.

The remaining people out of work should carry out other essential jobs that we currently rely on other countries to do, or private businesses, like laying roads. Basics that will keep the country operational.

Introduce some sort of passport tax, people will flee when times are hard, if you want a passport you should pay a passport tax, nothing massive but a enough to make people think twice about leaving and for those who do, for all the time they have a passport (which they can usually only get from their home country) they need to pay a tax on it.

Slash money spent on looking after prisoners, why should a killer doing life have Sky TV when we're going through the toughest times? Bed, Bread, Water. You get sick while you're inside, unlucky because we won't be wasting money making you better.

Ban smoking/drinking for none workers. My tax pays for bums to smoke, and then their bills when they're in hospital. Make cigarettes and alcohol licenced products. If you don't have a job you don't have a licence.

Finally, maybe harsh to say but lending money to 3rd world countries doesn't help them, there are individual cases where a few families are saved but the fact is there are too many people compared to the available food / water. Bring a homeless man a sandwich he'll live for a day more. We're buying a lot of sandwiches.

[M Gale]

Passport tax

Have you seen the price of UK passports lately? They still haven't come back down from when the New Labour govt was using them to subsidise ID cards. Is it right that, when capital can flow between borders as freely as water, people cannot also chase said capital?

If anything, I think a passport should be your right as a citizen of your country along with the right to not be arbitrarily tried for imaginary crimes or hounded out of your neighbourhood for having a relationship with someone of the "wrong caste". If there is a charge, make it simply to cover costs. Passports, five quid plus a photo, available from your local post office? Wouldn't that be nice?

[M Gale]

Also

"You get sick while you're inside, unlucky because we won't be wasting money making you better."

You're so compassionate. So what about the people in the US who have felony charges because they smoked the wrong type of plant? Not all people in a prison are psychopaths, however some people outside of prison most definitely are.

[Matt Bryant]

RE: Also

".....You're so compassionate....." Whilst I do agree that no healthcare for prisoners is wrong, I would support the idea that modern justice seems both too lenient and prison is far too soft. Me, I'm all for bringing back chain gangs.

".....So what about the people in the US who have felony charges because they smoked the wrong type of plant?....." Whilst I'm not so sure you go to jail for "smoking the wrong type of plant", at least not unless you're talking Saudi Arabia, at the end of the day those smokers chose to break a law for their own pleasure, no-one forced them to. What's next, letting off paedophiles because they say they "loved" their victims?

[M Gale]

Comparing pot smokers to child abusers

Because they're both the same thing, right?

[Matt Bryant]

RE: Comparing pot smokers to child abusers

"Because they're both the same thing, right?" Whilst it may be an extreme comparison, they are both criminal acts in certain juristictions. You obviously don't have a problem labelling paedophiles as deserving punishment, yet think pot smokers should not be punished, but the majority opinion in certain juristictions is going to be against you. That would be your viewpoint, based on your personal values, it's just their viewpoint is different. You may think those juristictions have a majority of mentally-backward people, but you still have to respect the laws there until you get enough support to get the laws changed. Personally, I think that if you need to smoke pot to have a good time then you're already sad enough to just deserve pity. And before you ask, no, I don't need alcohol to have a good time, so you can forget the cliche alcohol-is-worse-than-cannabis schpiel.

[kain preacher]

@John Smith 19

Because you don't believe in religion does not make some that does nuts. So do you actually have a valid point against AC@ 11:35 or are you just going to call him stupid cause he believes in religion .

[John Smith 19]

@kain preacher.

"Because you don't believe in religion does not make some that does nuts. So do you actually have a valid point against AC@ 11:35 or are you just going to call him stupid cause he believes in religion ."

I've known people who've found a deity before they were found by an ambulance. Their religion has given them the strength to overcome their problems. Their belief has kept them strong.

In *this* context the quote was irrelevant and "proved" nothing. Like everyone else I'll judge comments by their *content*. My *actual* points were in the post. But I'll repeat them.

The Roman empire unified most or all of what is the Eurozone for several *centuries*, which is rather better than any of the military conquerors listed.

The EU/euro is a coalition of *willing* parties to share a currency in the hopes of mutual support and greater stability.

One refuted the OP's list of military failures, the other points out that that the Euro is *not* an attempt to form a union by military means anyway.

I'd call those two valid points.