The European crisis

[loseless]

Yes, this could be a Financial Times article title, but it's not.

There are certainly many people from several countries in this forum. So let's discuss the current European crisis, from each one's perspective.

To trigger the "hate" I'll start by saying that I come from Portugal with love. So, if there are any Greeks around here, worry not. My life-rack is big enough for both of our countries.

[Imperial]

Lettuce ketchup to realties.

[hellheaven1987]

Greece, Italy, Spain and Portugal need an EU-appointed governor to rule them, problem solve.

[Manuel I Komnenos]

Greece, Italy, Spain and Portugal need an EU-appointed governor to rule them, problem solve.

Wait, aren't you aware that this is actually the case for the last 2 years? I'm sure you are also aware that the measures imposed by the EU have only led to continuous deficits of the Greek budget and there are no signs of recovery yet.

[Condottiere 40K]

Greece, Italy, Spain and Portugal need an EU-appointed governor to rule them, problem solve.

Don'tyoumean German?

The solution calls for a stimulus package, competently administrated and not half-heartedly applied and riddledwith political earmarks.

[loseless]

Well, I'm a politician, so I have no idea whatsoever to what may solve the problem (lulz), but I have the firm idea that:

Germany and the other northern Europe countries are afraid that allowing the ECB to print money will have a negative effect on the inflation and will cause another problem on it's own: if the southern, irresponsible countries, have that possibility, then they'll never do the necessary reforms and that will lead to the downfall of the Euro.

Eventually they'll need to print money, as if Italy and Spain need a bail-out, there's not enough money in EU, IMF or in both combined for that (we're talking about way over 2 billion euros...) If this happens, 1/3 of the euro zone GDP will be in crises, and the Euro will be a thing of the past.

It's just a matter of stalling.


Greece has no solution. They're doomed to an organized default. Portugal has a thin margin for error, but the country is committed to the cause and has shown great signs in terrible circumstances. Now it's all about the waiting...

[bushbush]

the only solution is for Bank of Europe (and the Germans) to suck up and act like a central bank for any country in the world --- giving full backing to bonds issued by member countries. It will stink politically but eventually, all the stalling tactics they use now will run out.

[hellheaven1987]

the only solution is for Bank of Europe (and the Germans) to suck up and act like a central bank for any country in the world --- giving full backing to bonds issued by member countries. It will stink politically but eventually, all the stalling tactics they use now will run out.

Ya, another solution would be creating a more centralized EU and allows the rich states giving interest-free aid to poor states and help poor states to develop into an acceptable level, kindly like Yugoslavia's policy to use revenue of Croatian provinces to support poor Serbian provinces. Of course, that is assumed rich states would not act arrogantly as Croatians.

Wait, aren't you aware that this is actually the case for the last 2 years? I'm sure you are also aware that the measures imposed by the EU have only led to continuous deficits of the Greek budget and there are no signs of recovery yet.

I don't know Greece lost its sovereignty in past two years; did you fight another independent war last year?

[Stívarðr Reynitré]

Fiscally, Europe is bereft. Culturally, Europe is bereft. Politically, Europe is bereft.

We are becoming a faceless, apathetic entity. Merely an incidental folly in the echelons of history. At least feudalism and Imperialism guaranteed investment and cultural stimulation.

Now we're more likely to see states punished for being ambitious. It's rather disappointing.

[Their Law]

Fiscally, Europe is bereft. Culturally, Europe is bereft. Politically, Europe is bereft.

We are becoming a faceless, apathetic entity. Merely an incidental folly in the echelons of history. At least feudalism and Imperialism guaranteed investment and cultural stimulation.

And slavery, oppression, ethnic cleansing. But hey it was worth the "cultural stimulation" that we're apprently so bereft of today.

Now we're more likely to see states punished for being ambitious. It's rather disappointing.

Define ambitious.

[Ahlerich]

Define ambitious.

ambitious in reaching the livestyle of adam and eve before their deportation.

[Manuel I Komnenos]

Greece has a solution. Raise the lower wages, lower taxes, allow the country to stop repaying the loans for the next 3 years, something that will help Greece save 50 billion euros in order to boost its economy and also lower the interest and extend the period for the expiration of the loans. So, easy, and I'm not even an economist.

[hellheaven1987]

Greece has a solution. Raise the lower wages, lower taxes, allow the country to stop repaying the loans for the next 3 years, something that will help Greece save 50 billion euros in order to boost its economy and also lower the interest and extend the period for the expiration of the loans. So, easy, and I'm not even an economist.

Ya, you may just ask Ron Paul be your next PM.

[loseless]

Greece has a solution. Raise the lower wages, lower taxes, allow the country to stop repaying the loans for the next 3 years, something that will help Greece save 50 billion euros in order to boost its economy and also lower the interest and extend the period for the expiration of the loans. So, easy, and I'm not even an economist.

Greece has a bigger problem. That country is falling apart. I was there last summer and I couldn't believe what I was seeing. I booked a room at a 4 stars hotel. When I arrieved, they told me that my room didn't had refrigeration, when I specifically told them I wanted a room with air conditioning. They said that they were sorry, but it wasn't "avaliable". When I asked them if I needed to call my lawyer, they responded: "Ah, you have a lawyer? Yes, sorry for the incovenience, we'll see what we can do". And that's how I got my room...

Then next day, I called a cab. I was surprised when the driver pulled to pick up other people while I was in the cab! When asked him if this was normal, he said that it was the company's policy.

Sorry, but I've never seen anything like that anywhere in Europe. Not even on central eastern Europe!


That country is broken. There's an elite that is above law and has it's own interests. The people make sacrifices, but the high classes in Greece has passed by them like nothing happened...

Sad, really. Greece should never have joined euro in the first place (nor should have Portugal, for that matter).

[Manuel I Komnenos]

Greece has a bigger problem. That country is falling apart. I was there last summer and I couldn't believe what I was seeing. I booked a room at a 4 stars hotel. When I arrieved, they told me that my room didn't had refrigeration, when I specifically told them I wanted a room with air conditioning. They said that they were sorry, but it wasn't "avaliable". When I asked them if I needed to call my lawyer, they responded: "Ah, you have a lawyer? Yes, sorry for the incovenience, we'll see what we can do". And that's how I got my room...

Then next day, I called a cab. I was surprised when the driver pulled to pick up other people while I was in the cab! When asked him if this was normal, he said that it was the company's policy.

Sorry, but I've never seen anything like that anywhere in Europe. Not even on central eastern Europe!


That country is broken. There's an elite that is above law and has it's own interests. The people make sacrifices, but the high classes in Greece has passed by them like nothing happened...

Sad, really. Greece should never have joined euro in the first place (nor should have Portugal, for that matter).

And what's this have to do with the economic crisis we are discussing? The plan I offered has a better chance of success than just destroying the society and economy with harsh economic measures that lead to a continuous decline of the Greek GDP.

[Sphere]

Ya, another solution would be creating a more centralized EU and allows the rich states giving interest-free aid to poor states and help poor states to develop into an acceptable level, kindly like Yugoslavia's policy to use revenue of Croatian provinces to support poor Serbian provinces. Of course, that is assumed rich states would not act arrogantly as Croatians.

The EU already has large development funds to do just that, behind the CAP it is the largest chunk of the EU budget IIRC.

But bushbush has it more or less right. The core crisis in Europe is one of confidence in the EU and ECB structure, more so than finances. The long held assumption that debt of Eurozone members was sacrosanct and the unity of the EU would never allow a sovereign default to occur within the Eurozone was broken when the door to a partial default on Greek Debt was opened up in the political rhetoric, and confirmed in later deals.

Once markets were given the signal that their previous assumptions were completely wrong, and individual sovereign defaults were very much on the table, they started to drive up the returns to match the new assessment of risk, which was deeply intertwined within the banking systems of Europe. Struggling small nations like Greece and Ireland couldn't stay solvent at these rates, and middle sized ones couldn't stay solvent if Greece and Ireland collapsed, and large nations like France couldn't stay solvent if the littles and mids collapsed etc. to the point that now we have a long line of domino's in the Eurozone.

The only way out is for the ECB to say that the previous assumption of EU unity was the correct assumption. There is a lender of last result and it is us. All the intergovernmental loans and rescue funds have half measure to this end, which the markets have seen correctly as only being half measures.

[Alcibiades429]

Europe is becoming a failed human experiment.

China is becoming a successful human experiment.

[loseless]

The markets do not care for balance or quality of life. As long as we are under the influence of markets, we have to accept that we play by rules that don't make sense for the common men.

I could go for the macro economy behind the rating agencies and the ratings, and which role they played in all this, but it would be too technical and too long.

In a nutshell, this is a political problem. Our economy didn't change that much in the last few years. Out finances are solid enough to withstand another crises. The problem is that a little problem like Greece (2% of euro's GDP) has managed to destroy the confidence on an entire continent.

And how did this happen? Because the various political ideologies fought amongst themselvs instead of trying to find an agreement. The nothern countries wanted (and still want) to punish Greece and the other southern countries for their irresponsibility. The southern countries want money so they don't have to starve their own people.

There's no right or wrong in this question. Just several perspectives. The commission has a view, the ECB has a view, Germany has a view, Scandinavian countries have their view, UK has another view, France another, Spain & Portugal another, Greece another one, and the eastern European countries also have their opinion.

The last time I was at the EU Parliament in Strasbourg, the aliment of the session was only one - the crisis. 4 hours later and we were in the same place as before.

Yes, this is a confidence problem, but that's how the newspappers keeps saying. Had we good political leaders, and this wouldn't had happened. But those that remain, care for little more than their own elections.


So, Manuel I Komnenos, your vision is correct, from a micro-economy perspective. When a country shares their coin with other countries, has now financial options in it's arsenal, has a huge recession, along with high unnenployment taxes, and a economy with more holes than a swiss cheese, sorry, but there's no political cience or economy manul in the world that has the answer to Greece's problem.

Doing what you said might have helped them, but the markets would destroy the eurozone next day. There's little margin for solutions outside the box.

[Vítor Gaspar]

So you tell me, Loseless, how would you solve this?

I am Portuguese, just like you (a propósito, bem vindo - passa no tópico português, se quiseres. Surgem discussões interessantes por lá). I come from a middle-class family and, fortunately, I can say that, so far, we haven't been affected as many Portuguese have been. I don't know what awaits us in 2012 but here are my prayers that it goes, at least, as well as 2011 went by.

It is late and I hope to come here tomorrow and hopefully make a more elaborated post but, regarding some of your comments in here:

I absolutely agree with the fact Portugal wasn't ready for the Euro. And so wasn't Spain, by the way, for similar but slightly different reasons. I have written quite lengthy posts, in the past, regarding this matter, so I'll try to get straight to point as well as I can:

Portugal has plenty of problems and there are plenty of reasons for why we're in the situation we're in right. One of the things that seems so obvious, when you think of it, but that is rarely mentioned is this: education.

Education has always been our problem. You could almost say that Portugal started it's downhill trip from one of the first Global Powers to a mediocre, relatively meaningless European nation after we created an exodus that took our finest minds - some of the greatest in History - from Portugal to Central and Northern Europe (I'm speaking, of course, of the Jewish exodus during the Inquisition), effectively establishing a pattern that would plague Portugal until the 21st century: our reliance on others to make profit and develop our country.

On our own, with our people, we do little. Our industrial machine has always been a poor one and the remnants of it were destroyed as soon as we got into the Euro. Agriculturally and industrially we've always been poor. Our country grew in power and in size with the goods we brought from our overseas colonies and which we would later sell to other Europeans. The day we lost them - and this got especially tricky after the independence of Brazil - was the day the "Portuguese Empire" died. On our own we've always been meaningless - at least compared to the power we had at one point.

There's a reason why we, the Portuguese, were the first ones to embark in the Discoveries adventure. In the Iberian Peninsula there was little to do: there was nothing else to conquer; our soils were mostly poor; our position was peripheral and away from the great trade centres, we, as a country, were limited in every front.

Skipping ahead into the 20th century and little did things change.

There's no point in telling Portuguese History when I'm talking with a Portuguese and about the EU, but ever sine the Independence of Brazil we've been in a mess. By the 20th century things were no better. Salazar paid our debts after the fall of the First Portuguese Republic but we continued to be Europe's poor because of the man's stubbornness (and interests) in not developing our industry.

For a number of (irrelevant) reasons things started to change in the 60's. Portuguese industry started to rise. Porto - and the whole Norte - became booming industrial regions, and so did Lisbon and its "subúrbios". The Estado Novo was, finally, leaving its autarcist ideology behind and adopting to the free market.

A shame the later Estado Novo relied its industrial growth in an uneducated, cheap workforce, that were to Central Europe what India is to us these days.

That was one of the (varied) reasons why Portugal was growing by +15% during Marcelo Caetano's regime. And little did things change after the Carnation Revolution:

The beginning of the Third Republic was marked by the rise of the living conditions of the Portuguese. We were becoming "Europeans". But our industry still relied on cheap, uneducated workforce. It was a basic one. And, from a distance, we could see things were changing. The Irish noticed it. They started to invest in their people's education so they wouldn't have to face the difficulties Portugal ended up facing later. And so did Spain, in a way or another (in some regions more than others).

The Portuguese Third Republic is contemporary to the Rise of Asia and the fall of the Soviet Union. And, out of sudden, Portugal's growth - which was based in the said basic industry - got in great peril. We were't competitive. We surely weren't.

So when, in the 90's, other European multinationals started to run away from Portugal to the new "Eastern Europe" and, later, to China/India, Portugal realized it was in a great screw up. We were trying to maintain - and develop - our living conditions while being based in a cheap, basic economic scheme, but others could do the same for a fraction of what we were paid.

And at the same time we were/are one of the least skilled nations in Europe. Things got even worse when, by the turn of the millennium, we started using the Euro. Now the Escudo - like the Lira and the Peseta - was a cheap-ass currency. It was our way of rivaling unrivaled nations like China in what was, now, their own game.

When we started using a highly-valued currency our trump card was no longer available. That's why we should have never adopted the Euro. Sure it was our fault for not having developed our industry to an higher level - but can you really expect more from a country that, from 1926 to 1974, brainwashed its people with Catholic propaganda and voluntarily restrained industrial development to an extent that, even these days, I still of know of people that could as very well be living in the 60's?

We were victims of the Time. Portugal's situation, for a long time, has been like a snowball. Many of the reasons why we're like this, today, are consequences of past times.

Sure others are also guilty for our situation: I am extremely critical of the EU's "aid programmes" because, to me, they're not "aid" at all - they're just hidden loans. And as long as German and French companies feasted on Portuguese and Spanish poverty they were fine with it. Then we started to grow and they, the ones who were supposed to help consolidate Europe - because they were also the ones profiting the most from it - moved to elsewhere, as soon as our wages rose.

I know that's how the market works - and it does look good on paper - but if we're trying to build a Political Union based on those premises then we're screwed. Things will never work.

In fact I'm not sure if this will really work... I have my doubts.

I could go on, and on, but I'm afraid I might be repeating myself. I do "envision" solutions for both Portugal and Spain in a mid/long-term but it's late and I'm really tired.

My closing comments, regarding to Portugal' future - these should be our priorities for the next 30 years:

Settle down our debts; Educate our people - CHANGE our culture (this is another big subject I could - and should - talk about but I'll leave it for another time); Look at the Atlantic and realize we, more than European, are an Atlantic nation.

[Imperial]

a propósito, bem vindo - passa no tópico português, se quiseres. Surgem discussões interessantes por lá

No Spanish on these forums, please.