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Economical Crisis

Posted Jun 11, '12 at 6:16am

mariosgeo

mariosgeo

25 posts

I am from Greece.As most of u know about Crisis
The Coutry tries to find a way to solve this problem!!!!!!
Lets hope we will have a government to solve this ********** problems

 

Posted Jun 11, '12 at 6:34am

nichodemus

nichodemus

11,853 posts

Knight

I sure as hell hope you guys don't vote in more Golden Dawn nincompoops. An economic crisis is bad enough without stirring the xenophobic pot and portraying all migrants as evil and parasitic.

 

Posted Jun 11, '12 at 8:02am

nichodemus

nichodemus

11,853 posts

Knight

Increasing government debt. Members of the European Union signed the Maastricht Treaty in 1992, under which they pledged to limit their deficit spending and debt levels. However, this was always not the case because, The Greeks and Italians were able to mask their credit levels; i.e the debt their governments had accumulated through vast expenditure, in the Greeks case, on huge welfare largesse and military spending. 

For example, a daughter of a Greek civil worker, if she is not married, can continue to withdraw his pension even after he is dead. Which is excessive and idiotic fiscal irresponsibility. US economist Paul Krugman named Greece as the only country where fiscal irresponsibility is at the heart of the crisis.

Also, a rising trade deficit caused by importing far more than exporting to other countries; this can be due to the the loss of competitiveness in Europe, such as the vast subsidies given to farmers. Also, the high wages compared to low wages in other countries, would relocate plants overseas, and lower your exports, since your production has moved away. This, in the defense of low cost countries, is not their fault; much of Greece, Italy, Spain etc, also capitalized on low wages vis a vis the US and more developed European states in the 1960s-1970s.

Structural problems within the EU. The EU dictates a common monetary policy, which means the supply of Euros is controlled by the EU, however each government can decide their own fiscal policy, i.e whether to deliberately increase/decrease government expenditure and increase/decrease tax when they are needed. This feature brought fiscal free riding of peripheral economies, especially represented by Greece, as it is hard to control and regulate national financial institutions.

Bad financial loans. There was easy credit in the early 2000s that encouraged high-risk lending and borrowing practices by banks that were actually structurally weak, and by investors who were not sound.

Lastly, loss of confidence as the crisis worsens, essentially a self-fulfilling prophecy.

 

Posted Jun 11, '12 at 10:41am

nichodemus

nichodemus

11,853 posts

Knight

Explanation on what fiscal free-riding is, Italicised chunks are my own elaborations:

Each member state of the Euro-zone is caught between two alternatives: to engage in fiscal free-riding or to be the sucker, the victim of free riding by the others. The reason is easy to grasp. When a country has its own currency, fiscal profligacy when expansionary fiscal policy/excessive government spending is carried out, carries its own punishment. Interest on the national debt rises more than proportionately to the debt, both because the country's own capital market gets overstretched, and because the risk attaching to its currency increases. Default on the debt and devaluation of the currency (coming after a flight into inflation to water down the debt), though perhaps still remote, start looking less improbable as the whole zone uses the same currency, hence the effects are distributed, rather than having say the Greek drachma taking a hit if the Greek government did not accept the Euro. The repercussions of a fiscal policy where each government uses their own national currency, rather than a regional currency renders a loose fiscal posture more and more difficult to hold, and in due course tend to impose some discipline on the government.

As a member of the Euro-zone, the same government running a large deficit is spared most of these disciplinary consequences. No member country, with the possible exception of Germany, is big enough in the zone as a whole, for its deficit financing to represent a significant strain on the zone's capital market. Currency risk subsists only relative to currencies outside the zone, in practice only the dollar and the yen, but it is eliminated within the zone; there is no Greek Euro and no Spanish Euro, so one cannot weaken relative to the other. Fiscal irresponsibility by one country still has adverse consequences for the zone as a whole, but only a small fraction of them is borne by the irresponsible country in question, with the bulk spread over all the other member countries. This is the classic breeding ground for free riding.

Under these circumstances, fiscal vice is not punished but fiscal virtue is. This is not to say that budget deficits are always evil if some of their negative consequences are shifted to other countries, as they in fact are in the Euro-zone. In the short run, occasional deficits may be justifiedâ€"or would be if they were not habit-forming.  However, Greece has been overspending for years, and this causes a problem.

Thanks de Jasay.

 

Posted Jun 11, '12 at 12:53pm

partydevil

partydevil

5,090 posts

Greece as the only country where fiscal irresponsibility is at the heart of the crisis.

greece and iceland that is =)

and lower your exports, since your production has moved away.

i just want to say that this is a possitive point for the netherlands because we have now more import and export then befor.
were even working on growing the rotterdam harbor wich already is the largest in the world.

Bad financial loans. There was easy credit in the early 2000s that encouraged high-risk lending and borrowing practices by banks that were actually structurally weak, and by investors who were not sound.

this isn't europe only it worked that way world wide. and in 2009 and 2010 people went against it the loans have been lowered. but since 2011 it seems like nothing has changed from befor 2009. everything is back to normal again it seems and it's just waiting for another crisis like this.

No member country, with the possible exception of Germany

-germany
-finland
-sweden
-netherlands
-france

these 5 countrys are about 75% of the european financials.

for example, greece is only 2%

(but i had little problems reading your 2nd post. not sure this is even relevant to your point.)

 

Posted Jun 11, '12 at 12:59pm

nichodemus

nichodemus

11,853 posts

Knight

Sweden doesn't use the Euro.

It was explaining what fiscal free riding, i.e what Greece does.

 

Posted Jun 11, '12 at 1:27pm

partydevil

partydevil

5,090 posts

ah yea i always switch those scandinavian countries up.

i know it are only 2 of the 3 but always forget witch 1 hasn't the euro. then i ment norway and finland =)

 

Posted Jun 11, '12 at 5:17pm

goumas13

goumas13

4,486 posts

i know it are only 2 of the 3 but always forget witch 1 hasn't the euro. then i ment norway and finland =)

Norway isn't even in the European Union. The only Scandinavian country that has the Euro is Finland.:)

 

Posted Jun 11, '12 at 5:43pm

thepunisher93

thepunisher93

1,858 posts

In a nut shell:
Too generous, government, infrugal spending by public,trade unions BS,and risky investments brought greeks down

 

Posted Jun 11, '12 at 6:58pm

partydevil

partydevil

5,090 posts

Norway isn't even in the European Union. The only Scandinavian country that has the Euro is Finland.:)

gimme a few days to find the source back, i guess it wasn't euro based but economicly based then. as i'm sure 2 of the 3 countrys belong in the list. carry on in the meanwhile.

 
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