Is it Monday morning quarterbacking to tell you I knew the euro was going come apart? They dont have quarterbacks in Europe so Im not sure what the equivalent figure of speech is. Monday morning corner-kicking? Monday morning beret knitting? Monday morning red wine decanting? Monday morning panini pressing? Monday morning nutella spreading?
Anyway, whatever European thingy you want to call it, Im telling you I knew it was gonna happen. Im no financial whiz. Not at all. But its just common sense, people. The euro is inherently unstable. Big chunks of greasy lamb meat and yogurt sauce wedged tight into folded pita? Everyone who has ever held a euro knows youve only got about five minutes before the pita soaks ups so much dripping fat and yogurt that it begins to crumble. Thats why they wrap them in tin foil.
And dont ever get me started on the mess euros makes when you put them in your wallet. Last time I went to Europe, I ruined two pairs of pants on the first day. Thank goodness for debit cards.
(Editor pulls columnist aside to explain mix-up).
Okay, so it appears I may have been slightly confused earlier about the precise nature of Europes currency crisis. The euro and the gyro are apparently two different things. This explains the annoyed look I kept getting from cashiers when I visited Vienna in 2007.
The euro crisis is actually about the viability of Europes common currency. Theres a growing likelihood some or all European countries will revert to their pre-euro national currencies.
Whys that? Because the Greek debt crisis has exposed fundamental flaws in Europes 16-nation currency union.
The short version of the Greek debt crisis: Greece spent way, way, way beyond its means during the first decade of this century. No one paid much attention because the world economy was growing and credit was easily available.
When the world economy tanked, however, Greeces deep debt became unignorable (is that even a word?). Private investors grew reluctant to finance Greeces runaway spending, or and re-finance its existing debt. The result, Greece was on the verge this Spring of defaulting on its debts.
Defaulting would have sucked under any circumstance, but Greeces currency union with the rest of Europe made the suckiness worse. Greeces debt is in euros, which means its payment (or default) directly effects even fiscally sound eurozone countries like Germany, Finland and Luxembourg. Instead of dragging down just its own currency, its dragging down the currency of 15 other nations.
Not to mention, many of the banks owed money by Greece are in Europe. Wait, I just mentioned it. Big bank losses would damage the European economy the same way it damaged the U.S. economy. Think of Greece as Europes AIG a giant company no one liked, but a company whose collapse would ripple out in very bad ways.
Another way of putting it, Greece is too big to fail. So, the European Central Bank and the International Monetary stepped-in with an enormous bailout to keep Greece from defaulting on its debts.
But heres the catch bailing out Greece may keep the euro stable, but it isnt Greece isnt necessarily the best thing for actual Greek people. The bailout came with the condition that Greece would sharply cut its government spending. Because government spending is such a huge part of the Greek economy, Greece will certainly go into a deep, long recession. Unemployment will skyrocket and wages will decline. Baklava will have fewer pistachios. Trojan horses will go unfed.
If Greece had its own currency, however, it could cushion much of the pain by letting its currencys value plummet. This would help boost exports (since Greek goods and services would be cheaper for foreigners) and help dampen inevitable rising unemployment.
Greek people know this. Thats why news of the EU/IMF bailout was greeted by riots in Athens. And since Greece is a democracy, its entirely possible someones gonna run for office saying Screw the euro and the IMF and austerity. Lets go back to our own currency and deal with the crisis ourselves.
The same thing could happen if Spain, Italy and Portugal end up in the same debt situation as Greece. Rather than abide by internationally imposed belt-tightening, they might just bail out of the euro.
Dont be surprised if a 16-nation currency ends up a 10 or 12 nation currency within a few years.
Newt Gingrich said something similar to this in the presidential primary. Maybe Jack will hop…
I applaud your correctly redirected call for action. People need to be protected from those…
"it's probably too much to hope that they do away with the entire poorly-written Blotter"…
Not surprising at all.. Most of America is a sprawling-strip mall dotted-suburbia speckled-freeway.
I had to look at Doria's Facebook page. While stalking as a practice should be…
Free lunch? 1. Capital gains tax relief 2. Walton grantor retained annuity trusts tax relief,…