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  1. #1
    Tyrael's Avatar
    Tyrael is offline Style & coordination Administration
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    Germany Could Leave Euro, Because No Bailout Clause Shattered

    Maybe Germany should turf itself out of euro zone
    ERIC REGULY

    Published Thursday, Jul. 15, 2010 6:00AM EDT
    Last updated Wednesday, Sep. 22, 2010 10:38AM EDT

    ..........

    Before the financial crisis hit in 2008, Germans had grown to accept the euro, partly because the European Central Bank, which is based in Frankfurt, was stuffed with old Bundesbankers, and partly because they believed the euro zone’s “no bailout” clause was ironclad. If countries like Greece couldn’t pay their debts, they would be given no opportunity so shake down foreign taxpayers to fix their problems.

    Of course the “no bailout” clause proved to be fiction. In the spring, when Greece could no longer fund itself, and bond yields were soaring in Portugal and Spain, the euro zone countries agreed to set up a €750-billion “shock and awe” package to stabilize the currency and debt markets. The package is dominated by the €440-million sovereign rescue fund, whose biggest contributor is Germany.


    Germans have since gone from tolerating the euro to disliking it, in spite of Chancellor Angela Merkel’s belated support for the rescue package. In an opinion poll published on June 30 in Germany’s Bild newspaper, 51 per cent of respondents called for a return to the deutsche mark. Before the financial crisis hit in 2008, only a third of respondents wanted their old currency back.

    There is no chance the euro will disappear any time soon, opening the door for the deutsche mark’s relaunch. German business and industry like the euro and the way it greases the export machine – exports make up more than 40 per cent of the country’s gross domestic product. The euro’s recent slump has pumped up the foreign sales of BMWs, industrial tools, solar panels and other goods, lifting the share prices of the companies that make them.

    Voters don’t share the same view. What is good for exporters is not necessarily good for them. The sovereign debt fund might have to be tapped in the next economic shock, even though both Portugal and Greece conducted successful bond auctions this week. The debt sales didn’t change the fact that Greece is buried in a financial black hole. Its budget deficit is 13.6 per cent of GDP and its debt to GDP ratio is 115 per cent. As New York University economist Nouriel Roubini noted, the corresponding figures in Argentina when it defaulted in 2001 were 3 per cent and 50 per cent.

    Greece has already accepted a €110-billion bailout package from the European Union and the International Monetary Fund. If it needs more, and Portugal and Spain follow with expensive bailout demands of their own, German voters would recoil in horror at the thought of deadbeat countries draining the German (and French) treasury, all for the sake of keeping the euro twitching.

    At that point, one of three things could happen. Germany could demand, and get, full fiscal union among the euro zone countries; the countries on life support could be invited to leave the euro zone; or Germany could pull out of the common currency and bring back the deutsche mark.

    The first option would be preferable, but might not happen fast enough to prevent the second or third scenarios from happening. In a recent economics report, UBS said: “In the long term, we do not think the common currency can survive.”

    Could the euro survive without Germany? Unlikely. The better question is whether German taxpayers can afford to keep the euro floating in a sea of unbalanced economics. The deutsche mark must look awfully appealing to Germans at the moment.
    Link.

    All EU member countries with bad economies and bad economic policies should be removed from the Euro-zone. Only a smaller core of healthy economic countries can keep the Euro alive as a strong currency.
    Germany can't pay more to bail out other bad EU economies like Portugal, Ireland, and Spain in the future.
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  2. #2
    RebelliousVanilla's Avatar
    RebelliousVanilla is offline Established Member
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    Re: Germany Could Leave Euro, Because No Bailout Clause Shattered

    Why keep the Euro at all? Monetary union without fiscal union is idiotic for a myriad of reasons. To make it workable though, the Euro must be used only in Germany, Benelux and Scandinavia and have Euro 2 for the rest. The region I mentioned is saving, exporting and doesn't have ridiculous deficits and debt, so it should have a strong currency. Still, the currency thing is a race to the bottom.

    Why would Germany want full fiscal union though? The only way that would happen is if other people would vote on how to tax Germans or if Germans would vote on how the budgets of other countries would look. But again, since Turks already vote on how to tax Germans, who cares? We're all equal and all humans are the same. /sarcasm

  3. #3
    nevosopelo's Avatar
    nevosopelo is online now Long standing member
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    Re: Germany Could Leave Euro, Because No Bailout Clause Shattered

    The euro is not only a currency, it is also a discipline which must be followed by all countries. It is a way to stop politicians behaving badly with their countries economy, e.g. promising something the country can not afford just to get elected is one of the commonest sins committed by politicians. The Euro should stay and crooked politicians should be removed from government.

    Can't pay? too bad, go bankrupt!

    NEVO

  4. #4
    Tyrael's Avatar
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    Re: Germany Could Leave Euro, Because No Bailout Clause Shattered

    Quote Quote from nevosopelo View Post
    the country can not afford just to get elected is one of the commonest sins committed by politicians. The Euro should stay and crooked politicians should be removed from government.

    Can't pay? too bad, go bankrupt!
    NEVO
    Recent event such as the Bailout of Greece is a prime example that not all EU countries follow the discipline rules outlined in treaties, and this is an invitation for other countries to want bailouts for their weak economies. Germany doesn't want to pay for bailouts anymore of other weak EU member countries, and there is No money to bail out even worse EU countries after Greece.

    Brussels uses the Euro as tool to enforce it's will upon all EU members, but if the majority of people are unhappy with the euro and bailouts as currrently, then it cannot survive in the long term.

    Other problem is that Brussels is actually undemocratic, so it gradually loses support from the people. The EU constitution is inherently undemocratic. The EU president is not chosen by the people, and not accountable for any actions. Brussels can create and enact laws, policies without majority approval of the EU citizens too.

    So if the Euro and EU wants to survive, it must make major changes to become democratic and accountable, perhaps make a two-tier euro zone, no bailouts, fiscal discipline, austerity measures, free economy (or face complete breakup of the EMU), to keep majority support of the people and legitimacy.

    Brussels can make endless laws and rules, but if most people don't want Brussels or the EU then it will stop.
    Last edited by Tyrael; 3rd-October-2010 at 02:01 PM.
    ~ Support Fathers & Families for Father's Rights and Equal Parenting! Go to fathersandfamilies.org ~

    ~ Fathers & FamiliesTM improves the lives of children and strengthens society by protecting the child’s right to the love and care of both parents after separation or divorce. ~

    ~ Feminism = Every bad thing any man has ever committed highlighted and exaggerated; every bit of good systematically undermined, vilified or ignored. ~

    ~ A man needs a woman like a lion needs a stove. ~

    ~ Women deserve only equal opportunity, not equal outcomes. ~

    ~ Men are not collectively "guilty" of anything. ~

    ~ Never needing to be pregnant is a blessing. ~

    ~ Feminist ideology “men have to respect women, but women have no reason to respect men” ~

    ~ Everybody makes choices, and nobody should be entitled to special treatment because of those choices.
    Equal results based on unequal treatment amounts to no kind of equality at all. ~


 

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