>> The reality, as the author describes, is that Syriza’s call for debt relief
should have been granted.<p>But that is 100% the failure of Syriza, not the Europeans. Syriza took this
perfectly sensible, perfectly legitimate demand and turned it into a circus
act, backed by a farcical Referendum [1] and fronted by the clownish antics of
Yanis Varoufakis.<p>A unique opportunity to reason with our European partners was squandered, just
so that Varoufakis could burnish his personna of the maverick economics
professor. And because Tsipras, who was in way over his head, an inexperienced
young prime minister trying to negotiate with the heavy-weights of European
politics, did not have the courage or the honesty to accept reality for what
it was: that no, we didn't hold all the aces, no, the EU would not shed a tear
if we jumped off the Grexit cliff no matter how loudly Varoufakis proclaimed
it to be the divine truth; that, no, you cannot play chicken with frau Merkel,
you silly little boy.<p>And that the Europeans were not even out to get us. They needed something they
could present to their own citizens as a viable option. We gave them an
Aristophanean comedy instead, a shadow play of Karagiozis with all the bells
and whistles. And we paid the price, for the populism of our leaders, their
lack of seriousness and their incompetence.<p>And we still do.<p>_________<p>[1] The referendum question regarded an offer by the EU that had already been
withdrawn before the referendum was called. The text of the question itself
was so vague and complex that on the one hand it immediately became a running
joke with various memes, and on the other, allowed all sides in the debate to
claim victory and only served to muddle the waters even further on what "The
Will of the People" really was.
Australia has about 25 million people and about five economic centres of more than a million people. The reserve bank has to set one rate. At times, it gives compromise rates that are a tradeoff between a mining boom on one side of the country, and a downturn on the other.<p>The European central bank has a much larger version of the same problem. Iceland was able to use rates to help it out of its economic collapse. Greece can't do this.<p>The quality of consumer FX has steadily improved over the decades. Access to technology has given tighter spreads and convenience. If the Euro goes, I hope there is some consideration given to running regional currencies rather than national. Imagine if a "Bank of Italy" maintained independent northern, central, and southern notes.
An often overlooked point is that euro is not just an economic tool but also a social one, as being able to travel and pay freely in the whole continent is an important unifying point.
This is a really, really valuable post (and book).<p>The topic of the euro's effects on Greece, and the influence of Germany, appears to be at a wide consensus amongst academic economists.
Stiglitz, Krugman, and even people like Navarro agree.
<a href="https://krugman.blogs.nytimes.com/2017/02/01/germany-the-euro-and-currency-manipulation/" rel="nofollow">https://krugman.blogs.nytimes.com/2017/02/01/germany-the-eur...</a>
<a href="https://www.forbes.com/sites/timworstall/2016/09/11/the-euro-is-a-disaster-stiglitz-krugman-milton-friedman-and-james-tobin-agree/#2e67a756063d" rel="nofollow">https://www.forbes.com/sites/timworstall/2016/09/11/the-euro...</a><p>I remember back 20 years ago that macroeconomists were talking about how the lack of fiscal coordination was going to break the euro. And so it has come to pass, it seems.<p>Edit: or what PaulHoule says with more detail in another reply.
I hope that we will see a different and more rational handling in italy's case. In fact we should allow countries to leave the EU if their economy is not strong enough. It just doesn't make sense for anyone to have the same currency. Right now, everyone treats the "dropping out of the EU zone" as a failure and a stepping stone into a complete EU collapse, but the EU shouldn't be a prison. Having the same currency and no option to devalue for a country leaves you strangled and tied to the big guys (Germany, France,...). Let italy, portugal, spain and finnland drop out if they want, let them devalue their currency and let them get back on their feet, otherwise we stumble deeper and deeper into uncharted dark territory.<p>Ofc it's not as easy as I'm stating it here, if they drop out of the EU, Germany and others would be in deep trouble due to the massive credits they gave everyone to make them stay and dependent
It has been pointed out (I forget where) that part of the reason the US works as a monetary union is that people are not very attached to where they live. When one area of the country becomes much more successful than another, many people are often willing to move, which acts as a countervailing force to regional productivity differences.<p>One of the problems with the EU is that Germans like to live in Germany and Greeks like to live in Greece.
I don't see it as a tragedy for Germany. You would have to feel the euro has a lower value than the duetchmark would have today? That rather helps Germany in their position as one of the worlds top exporters. Germany ous growing and has a budget surplus.<p>I think as others have noted the idea of a single currency is always going to be partly political. What kind of state makes all of its decisions based on economic theory?<p>The euro zone as a whole right now is out-growing the UK, and according to my fx dealer are deliberately playing down their growth to keep the euro weak.<p>I think criticising the idea of the euro as 'political' is a bit rich from someone whose opposition to it seems too also be ideological.<p>Personally I like the easy trade it facilitates. FX risk is dreary to manage. Only having to hedge GBPEUR makes it much simpler than the old days. Maybe the mistake, if there was one, was letting Greece et al join before they were ready
What I find strange about it there was almost a universal consensus among economists that the Euro couldn't work. The UK was fortunate enough to drop out of the Euro as the Pound/Euro was mispriced in the transition phase.<p><a href="https://en.wikipedia.org/wiki/Impossible_trinity" rel="nofollow">https://en.wikipedia.org/wiki/Impossible_trinity</a><p>Unlike many ideas in economics, the "impossible trinity" has proven itself again and again. It's not one of the usual right wing tropes like "raising the minimum wage will tank the economy".<p>Different monetary zones allow price levels to adjust. For instance I was in Montreal and looking at the price of package tours to different parts of Europe and Greece turned out to be the most expensive place to go. If it wasn't for the Euro, price levels would drop in Greece as denominated in USD, it would be more attractive to go on vacation there, manufacturing would become more profitable there, and the Greek economy will recover.<p>It is true that the Eurozone and the E.U. are different but I am not sure that Brexit voters really know that. What they have seen is Eurocracy has a "democratic deficit" and and inability to handle problems (for better or worse government legitimacy is more impacted by effectiveness than by process or ideology.)
Seems to me its doesn't make sense to have a gov sell bonds in a currency that it doesn't have control of. This includes countries outside of the EU that use the Euro. When buying bonds of a country, there should mean the investor believes in the direction of the country / the governance there / believes it is low risk that the bonds would lose value or the strength of the economy would collapse. That's the risk that gets taken by the investor. It doesn't make sense to peg it to an external countries' performance. Of course it sweetens the deal but makes things confusing too.
It's scary and terrible how people think of this. That this was somehow Greece's fault, or even Greece's doing. Or worse yet: Syriza's fault.<p>Politicians are experts at this. This morning there was a discussion on ozzie radio with the secretary of the treasury on radio. There, the government decried the lack of innovation in the Australian business community. Specifically why there aren't any Australian businesses that operate online 2-sided marketplaces like Amazon or Ebay. Similar discussions have been happening in Europe.<p>Now of course, when you analyze the argument (and I assure you these government people at that level aren't morons, they know this) it turns out these government people are psychopaths.<p>You see, the reason there is no Australian 2-sided online marketplace is ... tax. The Australian government has chosen not to impose either import tax, rules or GST/VAT on imported goods with a value < $1000.<p>So after years of imposing a ~18% cost disadvantage on Australian businesses compared to international businesses, a senior government representative comes on public radio, and eloquently decries the fact that it must be Australian's inadequacy that has prevented them from competing with international companies WHILE IMPOSING AN 18% PRICE HANDICAP ON THEM. Therefore, it is only fair that customers punish them. They called up a few of them that were clearly preselected for their utter lack of rhetorical abilities to make them completely ridiculous (they were cut off halfway through the argument too).<p>In other words, this guy has been pursuing a policy of openly sabotaging Australian businesses for at least half a decade, blames them, wide open in public for not performing well, and then picks the worst of them to "say a few words".<p>Now this sort of thing happens a LOT in discussions. For instance, when it comes to immigrants, ... I must say it makes it VERY clear why these people want to censor (sorry, I mean "eliminate fake news for the good of the people").<p>For the record, I am a socialist and I hate the business practices of these businessmen, but hearing that radio discussion I must say, I got a newfound respect for them and a deep hatred of the Australian treasury/government. I mean I would respect someone who just stood there and said "I'm screwing you and there's nothing you can do" more than this lying asshole.<p>Thing is, I'm absolutely sure 90% of people listening (at least) fell for it.<p>You should learn to look at European governments actions as very similar to this. You will understand far more about the situation by assuming any government spokesman/woman (including of course such papers as Der Spiegel) are at best leaving out viewpoints, usually outright lying, and sometimes directly falsifying their argument.