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Euro-PIGS In Deep Trouble, And So Is The EU
#1
Euro-land is teetering on the brink of economic disaster, and really leading the way, with regards to the US. Europe's PIGS, which is an acronym for Portugal, Ireland, Greece, and Spain, are in the process of running their economy into the ground. Ireland once had the right idea, but they have fallen victim to the welfare-state/Collectivist way of dealing with success, which is about to drown them.

Why are they all in trouble? As much as I am skeptical of Patrick Buchannan, I think he is on to something this time, and it covers a wide array of problems.

Quote:What brought the PIGS to the edge of the abyss?

All are neo-socialist states that provide welfare for poor people, generous unemployment, universal health care, early retirement and comfortable pensions. Most consume 40 percent to 50 percent of their gross domestic product annually, a crushing burden on the private sector.

Dying populations is a second cause. After two world wars, the Europeans lost their faith and embraced hedonism and materialism, la dolce vita. Large families fell out of favor. Women put off marriage and babies, and went to work. Birth control and abortion were made readily available in every country and, if not, just across the border.

For 30 years, the fertility rate of Europe has been below the 2.1 children per woman necessary to replace a population. In Russia and Ukraine, a million people disappear yearly. In Western Europe, the passing of the native-born goes on quietly, as Third World peoples come to fill the empty spaces left by the aborted and unconceived.

As the Washington times, in European economies facing grim times states:

Quote:As Greece's deficit and debt crises take a big turn for the worse, Zurich economists and bankers agree that several eurozone countries are mired in difficult times with no easy solutions.

Already, Greece is in the frying pan and so-called "weak sisters" - Spain, Portugal, Italy and Ireland - are on a potential-disaster list. The main advice is to cut borrowing and get budgets under control. That's no easy task in an outlook that remains uncertain and calls for continuing economic contraction in 2010 for Greece, Spain and Ireland.

Buchannan continues:

Quote:Is there a way out?

One option is for the EU to bail out Greece with a huge loan. But if Greece cannot meet her debt obligations now, how could she pay back the loan? And if the EU cannot compel Greece to make deep budget cuts today, what leverage would the EU have after bailing out Athens and removing today's pressure on the government?

A second option is to call in the International Monetary Fund, which imposes tough conditions on nations receiving IMF loans - the Third World therapy. But problems would arise here, too.

First, it would be an admission that the EU cannot manage its own household. Second, the largest contributor to the IMF is Uncle Sam.

Why should America bail out Greece, when the EU is larger and richer and did not help bail out California in 2009? The stimulus bill did that in 2009, to which Europe contributed nothing.

Where Greece is at today, however, we shall all arrive tomorrow.

In every Western nation, government is growing beyond the capacity of taxpayers to bear. Deficits and debt are surging. Not enough children are being born to replace parents. The immigrant poor who consume more than they contribute are coming to take the empty places. Seniors and elderly are growing as a share of the population. Companies are saying goodbye to the West and moving offshore to low-wage lands.

The West begins to look like yesterday, while the East begins to look like tomorrow.

The West is approaching a crisis of solvency and of democracy. We shall see if democracy, which grew popular lavishing benefits upon all, is strong enough to start clawing them away. Or will democracy try to keep piling the burden on the producers until they rebel or depart?

The point here, which is easy to see, if only one can look properly, is to realize that Traditional Values, Classic Economics, along with Fiscal, and nometary, policy that makes sense, is the only long term answer. And that means doing away with all the "spending our way into prosperity" thinking. Keynesian economics will have to be scrapped for the failure it really is.

In the US, it is the Progressive Movement, which is the real danger of bringing down the US economy, because they are not interested in building on the traditions we have prospered under. Rather, they want to tear down the system, and rebuild it on the very failed policies that are eating up Euroland. And all one has to do is just look there, and open one's eyes.
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#2
Ireland was one of the great success stories of the last 20 years,did they implode this fast????
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#3
Palladin Wrote:Ireland was one of the great success stories of the last 20 years,did they implode this fast????

My understanding is that the party responsible for the miracle, were voted out, because they did not take the new wealth, and turn it into Nanny State redistribution. It's sort of like working hard, and being rewarded with a big raise. Then the recipient immediately goes out and spends him/her self into debt, in order to celebrate. It works every time doesn't it.

Just ask Iceland, where they did exactly the same thing.
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#4
PIGS == Portugal, Italy, Greece, and Spain.

These are the countries that are most affected by the deficits right now. (Ireland is not in the best shape, but not at a risk of defaulting).

In general, South Europe has a tradition of inflating out of deficits... they did this for decades, but they cannot inflate Euro easily.
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#5
mv Wrote:PIGS == Portugal, Italy, Greece, and Spain.

These are the countries that are most affected by the deficits right now. (Ireland is not in the best shape, but not at a risk of defaulting).

In general, South Europe has a tradition of inflating out of deficits... they did this for decades, but they cannot inflate Euro easily.

Correct. I read somewhere, last week, that this is one of the reasons why the Euro is going to fail. Countries are going to drop it, and this is probably one of the reasons why.
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#6
What is happening is VERY interesting.

Greece (most affected) et al leaving Euro is one possibility.

The other is a German bailout. Germany is healthy and the relative size of the economies allows

Germany needs to decide if they want to waste a large amount of money or allow Euro to weaken, perhaps die.

Stratfor believes that (1) Germany will go for a bailout and (2) As the price of the bailout they will insist on running the Greek economy.

In other words, EU will move in the direction of the 4th Reich.

The problem is that Germany is powerful enough to bail out Greece, but not to bail out all the PIGS and several more countries that are badly deficiting as well... including France.
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#7
mv Wrote:In other words, EU will move in the direction of the 4th Reich.

One more reason why the EU is destined to failure. It is Not going to work. When will they learn?

Quote:The problem is that Germany is powerful enough to bail out Greece, but not to bail out all the PIGS and several more countries that are badly deficiting as well... including France.

Well, they had better be careful about it. They did that in the early 90s with the DDR, which was a bunch of undereducated/trained Collectivists, and it almost did W. Germany in economically.

Greece thinks Collectivist, lives Collectivist, sleeps Collectivist, Breathes Collectivist, and is not going to change it's stripes. Everything free market is 'Greek' to them, and it shows. Why would the Germans want to throw a bunch of money at a bunch of Kooks, who haven't the slightest idea how to run themselves? I wouldn't touch Greece with a ten foot vaccinated crowbar.
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#8
Right. DDR was a 10-year setback.... but if I were a German, I'd think it was worth it (albeit it brought Kohl down). But a massive investment into some Greece should get lots of people unhappy with Merkel.
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#9
mv Wrote:Right. DDR was a 10-year setback.... but if I were a German, I'd think it was worth it (albeit it brought Kohl down). But a massive investment into some Greece should get lots of people unhappy with Merkel.

You think maybe they could start importing Greeks, to offset all the Turks there? That would be interesting. Wink1
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#10
This Buchanan is right on the principle but wrong on the analysis and it must be said, has little knowledge of the reasons of the PIGS problems. Or he intentionaly discarded this knowledge.

Ireland didn't fall off a cliff nor did she became a nanny state overnight from ultra-free the day before. Ireland got crushed in the economic crisis and had to bail out some of its private banks like the UK and the US. But I think everybody knows this.
What is more specific to Ireland is that this country was hit by the crisis just at the end of its booming cicle. Booms never last forever and Ireland had had an economy growing like crazy for 15 years thanks to a very low tax regime, the lowest in all europe.
And so did Portugal.
It seemed it fell from a cliff, not only because of the crisis but because the euphory of the boom eroded, the economy reached a point from which it couldn't boom anymore. Absent of financial crisis it would not be a problem.
It should be noted that Ireland is still in relatively good shape economicaly and remains a destination of choice for East European immigrants even today.

Spain, Italy and Greece had an economy slightly more advanced than Portugal and Ireland and didn't live throught such rapid expension. For these three, the problem is more cultural: habits for corruption and black market combined with populism and socialism and high taxations. It's more the culture than the crisis I'd say, eventhought the crisis just made it worse.

The specific problem with Greece is not insolvency or an urgent need of a bail out.
Greece is not insolvent and won't be in the foreseable future. Greece is not Argentina or a banana republic. Greece is not Merril Lynch or Bears Stern neither.
But it had a deficit growing at an alarming rate which if not stopped, could make Greece look like Argentina soon. Fortunately the deficit growth has been stopped since January and she has enacted a spending plan challenged by the public sector union but supported by the population.

The real problem with Greece is that it breaks the most important rule in the euro currency zone: Deficit should not exceed 3% of GDP. It now stands at 12%.
By comparison the US deficit is 10% but it's not an issue since the US is not member of the EU's eurozone and don't have such a rule. Greece is.
Technicaly Greece should part with the euro and use the drachme again as national currency. In practice it's out of question thought. Yet by breaking this rule it destabilizes the whole euro currency. That's why it must act quickely.

Making the matter worse is that many, if not all save a few, countries of the euro zone are above 3% of GDP. The PIGS by such a high margin that it became worrying.

Moreover the EU eurozone treaty forbid the bail out of one state by the others. The EU had a special meeting to decide what to do with Greece, indicating that it may lend money but that would be as a last option. So far it's still believed that Greece won't need it.

So talks about IMF participation are ridiculous. The ECB has of course enough resource to bail out or pay down the entire debt of Greece. But the author is found of likening Greece to failed developed nation and the EU a non performing entity.
He is the kind of writer who is not afraid of telling non-sens if it meets what his audience wants to read.
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#11
JohnL Wrote:You think maybe they could start importing Greeks, to offset all the Turks there? That would be interesting.

Arbeit Macht Frei again 8) LMAO


Fred, Greek problem is urgent. I don't have time to get into this, but expect some developments or action within days.
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#12
How does the PIG population compare to the rest of the EU? Could they be kicked out of the euro deal for example to save it?
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#13
I guess they can afford kicking Greece (small, newer member) off Euro, but they cannot do this with Italy (50 mil pop, founding member).

Debt woes in Europe could infect U.S.recovery.

Yes, this too, but US economy is not much better off than Greek.

Quote:The government deficit in Greece stands at 12.7 percent of the nation's annual economic output as measured by gross domestic product. That's more than four times the limit allowed by the European Union, but it's not that much greater, proportionally, than the 10.6 percent deficit-to-GDP ratio in the United States.

If the Greeks are to be saved and managed by the Huns, who will manage the US?

Chinese reeducation camps are coming... Wink1
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#14
the response to this situation will be very controlled. The Euro had been so high for so long and it was killing EU exports especially Germany. I would expect them to fend off disaster but only to a degree with the hopes of getting the Euro down to parity with the Dollar or just below.
"And down through the centuries the robes have never failed to keep the public at a respectful distance, inspire a decent awe for the professions, and impart an air of solemnity and mystery that has been as good as money in the bank. The four faculties of theology, philosophy, medicine, and law have been the perennial seedbeds, not only of professional wisdom, but of the quackery and venality so generously exposed to public view by Plato, Rabelais, Molière, Swift, Gibbon, A. E. Housman, H. L. Mencken, and others. What took place in the Greco-Roman as in the Christian world was that fatal shift from leadership to management that marks the decline and fall of civilizations." - taken from a speech by Hugh Nibley
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#15
you need to remember that john's agenda is not to relieve your tax burden, you belonging to the middle or working class, but only to liberate big money from any responsibility and supervision. which has been tried and failed, it led to the recent crisis which is the biggest in living memory. if the capital is given the option not to be invested in times were the profits are lower, it will do it, and it did it in 2007 and the following years. all the economic stimulus programmes of governments around the world were merely attempts to compensate for the lack of private investment.
"You know, Paul, Reagan proved that deficits don't matter." Dick Cheney
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#16
TheMan Wrote:the response to this situation will be very controlled. The Euro had been so high for so long and it was killing EU exports especially Germany. I would expect them to fend off disaster but only to a degree with the hopes of getting the Euro down to parity with the Dollar or just below.

Don't make the mistake of thinking that exports are the only consieration to take into account on the Euro being high. It is a factor but when the Euro outstrips the USD the way it has there is no good reason why they would want it to fall that much. You're using an old talking point without understanding it completely. Parity with the USD is not in the gameplan any more.
If I can't read some people's posts and respond to their nonsense then is it fair to ask those people to stop reading my posts and not respond to them?And is it nice for some people to lie and say they don't read my posts? LOL
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#17
There is nothing urgent, only things started too late

What happened is that absentminded economists were distracted by the financial crisis their eyes turned to the north west toward Iceland more than to the south east. Then when they noticed it, they blame Greece's deficit on the bank meltdown. But Greece's problem are typical of mediterranean countries and Greece was not ht particularly hard by the crisis.
Greece's adhesion to the euro currency was already controversial. The country had already cheated on their book to access the euro.
Greece is also the most sociliaistic country of the block. No wonder it lies in the south of the Balkans.

When we created the euro nobody thought of a system to revert to ancient currencies if a memeber has to fail.
As all the banknotes are the same and all the bank account in euros, there is no way to know which euro is greek and which one is not. There must be a way to measure the total of money in circulation in Greece but no way to force a currency change on private bank accounts.

IMO it's impossible to do without causing havoc, upheavals and psychological trauma.
There must be some way of forcing Greece to gat back to drachmes even if it didn't want to, like blocking all fund transfers unles they are converted to the greek denomination. But do you imagine that? It's something we could do only in a quasi state of war or if Greece realy choose to dilapidate the euro and do nothing about its debt.

As for ejecting Italy and Spain out: This is utopical. We'd better create two currencies a Northern-Euro and a Southern-euro. Then europe would have two curencies like the US has the $ and Mexico has the pesos.
But this is still in the realm of economic-fiction and would cause huge distress on the financial market.
The situation is still very far from this extreme.

The ECB could bail out Greece in q mqtter of minutes and perhaps a big chunk of the PIGS (thought not in whole). Yet the current attitude is to make abundantly clear that we expect them to get their finances in order instead.
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#18
Angela Merkel dashes Greek hopes of rescue bid
Quote:Rather than bailing out Athens, Berlin is insisting on rigorous policing of the Greek austerity programme by a triple force from the commission, the ECB and the International Monetary Fund, an exercise never attempted in the eurozone.
Did she learn from watching the recent US bailouts or is she simply defending her own country, perhaps the most financially astute one in the EU?
Jefferson: I place economy among the first and important virtues, and public debt as the greatest of dangers. To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our choice between economy and liberty, or profusion and servitude. If we can prevent the government from wasting the labors of the people under the pretense of caring for them, they will be happy.
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#19
She's representing German interests,IMO.

Germans post WWI learned to avoid debt and inflation well.

If you could take away the 20th century from Germany,that nation has really a lot of positive aspects to it.

1)Great beer

2)Great education system

3)Pretty wise governance,prudence with the taxpayor's assets

4)dynamic economy especially considering post WWII statist moves.

5)Some of Christendom's greatest theologians and this is still happening today at the U of Tubingen.
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#20
Stratfor -- sees ascendant Germany and saved Euro
Daily Mail -- predicts breakup of Euro.

X-roads.
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