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Should Greece abandon the euro?

WriterSelbe
Posts: 410
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6/12/2012 10:24:07 PM
Posted: 4 years ago
I need to know the pros and cons of Greece abandoning the euro. Also, would the alternative of Germany abandoning the euro help the eurozone. I read the following on a site that was talking about Greece leaving the euro and need to know how accurate this comment is:

"Greece needs to have a currency that reflects it's own worth, and makes it more ecconomically viable. Currently the only option for Greece in achieving this is to leave the euro, however a better option, which would benefit not only Greece but also most of the countries of the eurozone, would be for Germany to leave the euro. Germany is the only beneficiary of the continuation of the euro in it's present form, whilst all other EZ countries suffer due to the disproportionate strength of Germany, keeping the value of the euro too high for most, whilst those countries like Greece keep the euro low in value for Germany, which fuels their export boom to countries such as China."
innomen
Posts: 10,052
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6/13/2012 3:35:16 AM
Posted: 4 years ago
At 6/12/2012 10:24:07 PM, WriterSelbe wrote:
I need to know the pros and cons of Greece abandoning the euro. Also, would the alternative of Germany abandoning the euro help the eurozone. I read the following on a site that was talking about Greece leaving the euro and need to know how accurate this comment is:

"Greece needs to have a currency that reflects it's own worth, and makes it more ecconomically viable. Currently the only option for Greece in achieving this is to leave the euro, however a better option, which would benefit not only Greece but also most of the countries of the eurozone, would be for Germany to leave the euro. Germany is the only beneficiary of the continuation of the euro in it's present form, whilst all other EZ countries suffer due to the disproportionate strength of Germany, keeping the value of the euro too high for most, whilst those countries like Greece keep the euro low in value for Germany, which fuels their export boom to countries such as China."

I think that over simplifies the problem. Greece may benefit from having a currency that better reflects the countriy's true worth, but it does nothing to solve the inherent problems that exist in Greece, and it is quite possible that a drachma minus other influences could result in run away inflation, but that very well could be an acceptable risk in the hope of managing their own currency within the context of Greece only, but it again does nothing to solve their inherent problems. Germany may benefit from a strong euro because the demand for German products world wide remains strong and they are able to import products cheaply. The problem that Germany faces is, it's turning out to be the sole stabilizing force in the EZ. Expectations of France are being diminished with it's new government, and problems throughout the EZ keep mounting. All efforts made by Germany are truly temporary in effect, again the inherent problems of failing countries are not being adequately addressed. Countries like Ireland have made efforts in reducing their costs, but still face great difficulties in the banking system. Ireland has benefited greatly by being part of the Euro, but truly they are not an asset.

There are two things going on in the EZ. One is the governments that are facing debt levels that reduce their credit rating, which reduces investment, and the second falls within the banks of the respective countries that are also dealing with devalued assets (mostly loans). The bank situation is viewed as less problematic, but still quite dangerous to the economy, and the government debt is considered less solvable. Greece is governmental, and Spain is banking. The EZ is evaluating all of this, and they understand that Spain cannot go, for if it does the EZ will fall apart, whereas the smaller countries such as Greece, Ireland and Portugal are more acceptable losses.

Personally I think the Euro should return to their former currencies, but I don't live in Europe, so it's a little unfair for me to judge. I am traveling to Europe in July and look forward to speaking with some people to get a first hand impression of what should be done. However different countries will have very different perspectives.
Greyparrot
Posts: 14,199
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6/13/2012 6:35:03 PM
Posted: 4 years ago
There is no real authoritative board to enforce all the Euro countries from taking advantage of Germany. I think Germany should just take its toys and go home.
WriterSelbe
Posts: 410
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6/13/2012 7:44:41 PM
Posted: 4 years ago
At 6/13/2012 3:35:16 AM, innomen wrote:


What exactly is the banking situation? I don't understand how the economy is really falling when it comes to banking.

Also, how would Germany leaving the EZ help it prosper? And the same question for Greece.
ConservativePolitico
Posts: 8,210
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6/13/2012 11:11:52 PM
Posted: 4 years ago
At 6/13/2012 7:44:41 PM, WriterSelbe wrote:
At 6/13/2012 3:35:16 AM, innomen wrote:


What exactly is the banking situation? I don't understand how the economy is really falling when it comes to banking.

Also, how would Germany leaving the EZ help it prosper? And the same question for Greece.

If Germany leaves, they save themselves from being dragged down by countries from Greece but it ultimately hurts the EZ.

If Greece leaves they then pose no further risk to countries like Germany but doom their economy in the long run.

In the EZ it really is every man for themself.
SuperRobotWars
Posts: 3,906
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6/15/2012 11:10:13 PM
Posted: 4 years ago
What I could never understand is why they don't make the Euro a secondary currency for the EZ and allow individual member nations to apply/maintain a native currency in order to deal with economic issues such as these.
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
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FREEDO
Posts: 21,057
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6/17/2012 4:44:31 AM
Posted: 4 years ago
I think the solution to Greece's fiscal problem are extremely clear. We've all known. Greece needs to form a union with Turkey and Hungary. Possibly even Chile.
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innomen
Posts: 10,052
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6/17/2012 5:19:52 AM
Posted: 4 years ago
At 6/13/2012 7:44:41 PM, WriterSelbe wrote:
At 6/13/2012 3:35:16 AM, innomen wrote:


What exactly is the banking situation? I don't understand how the economy is really falling when it comes to banking.

Also, how would Germany leaving the EZ help it prosper? And the same question for Greece.

Banks have too many loans for assets that do not equal the value for the debt owed. This impacts a bank in several ways, but most notably people are unable to pay off the loans and default, leaving the banks with assets that do not equal the money they spent for them. On an occasional basis a bank can absorb this sort of situation, but on a massive scale it's devastating. When the bank cannot absorb the loss of having paid for a property or venture in the form of a loan, and the borrower defaults (cannot pay, declares bankruptcy, abandons, etc.), and there is an overall devaluing of the product the bank paid for a loan, it has lost that money, and the bank itself is in danger of declaring itself insolvent - unable to function due to a lack of liquidity (cash on hand). This is the situation of Spain.
innomen
Posts: 10,052
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6/17/2012 5:33:01 AM
Posted: 4 years ago
At 6/13/2012 7:44:41 PM, WriterSelbe wrote:
At 6/13/2012 3:35:16 AM, innomen wrote:


What exactly is the banking situation? I don't understand how the economy is really falling when it comes to banking.

Also, how would Germany leaving the EZ help it prosper? And the same question for Greece.

It is interesting to consider that had there not been an EZ, or a euro, Germany would have been an even greater economic power in Europe. Consider the individual countries that if left to their own devices would have deteriorated their own currency, but perhaps have found an equilibrium at their own appropriate value. Meanwhile, Germany, without the burden of the other poorly managed and dependent countries would have soared above the others and would have become an economic powerhouse, perhaps second only to the U.S. But the EZ is only as strong as the sum of its parts.

Consider this. Some 5 years ago or so El Salvador abandoned their currency and went with the U.S. dollar. In the short term it created an inflation of household goods and food. It was a bit of a difficulty in transition, but in the long term it's provided a stability to the country that no other country south of us has. If El Salvador was a country the size of Mexico it would put the US in some potential jeopardy if Mexico's economy went the way of Europe, but it isn't so it won't. The government and banks of El Salvador manage their economy more responsibly than most countries in Europe.
Greyparrot
Posts: 14,199
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7/1/2012 9:17:49 AM
Posted: 4 years ago
I wonder if the true purpose of the euro is primarily for military purposes rather than economic. Forcing a more even quality of life across the EZ would help continue a peace that has allowed these countries to field relatively small armies. Guns for bread.