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11/06/2011

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Mitchell K.

The EU has a unified currency but lacks unifying leadership. Internationalists in Europe probably hoped that a unified Europe would follow the Euro. They may have put the cart (the Euro) before the horse (political unity).

an observer

A much better analysis appears at the link, below

http://www.newyorker.com/online/blogs/johncassidy/2011/11/wynne-godley-eurosceptics.html

The Euro's problem was a failure to form a true Federal Government, in connection with the adoption of the currency. Hayek once again stood in the doorway of progress.

What should Greece do now.

Get out, while Obama is still President and the Fed can help. We have an entire world at stake here, all of southeastern Europe.

Does anything think Romney will honor the commitments we have to Greece,

PADRAEG

It is disappointing to read that Mr Becker hesitated in his skepticism. Euro can't survive across so diverse economies. Greece should leave now, or be pushed out, along with all the PIIGs, including Ireland ;((( It is up to those nations to correct for the problems noted. Else they all fall, and then China! India could be a winner, USA if Obama is booted in favor of someone who wants to create real jobs!

Jack

I though both wrote very good essays this week.

But...... I wonder:

"But Greece should seriously contemplate pulling out of the euro zone later on, especially if by staying in Greece is forced to continue to undergo a painful and prolonged depression of its economy."

By staying they likely face the bitter meds of living up to lending requirements and as Becker points out suffering a bit because of it. But they'd have the, perhaps unwelcome, advantage of having their feet held to the fire with little choice but to fight corruption and institute a far more efficient tax collection system. And the EU tends to hang together.

On the other hand they could bail, default, devalue and still suffer by getting little for their exports, paying dear for their imports and having the "freedom" to continue with irrational policies that would make it unlikely for them ever to rejoin the EU or be a first rate nation.

With the export advantage of cheap currency, would Greece begin the "beggar thy nation" trend of the late 20's of nation after nation attempting to export their unemployment and other problems via devalued currencies?

Tough call, and one I suppose they'll have to make. But left to the voters should we bet on a policy of pain now winning over pain later?

Mitchell: Yeah, that has seemed the problem from the beginning -- "sovereign nations" of a single currency, but perhaps enough benefits to justify hewing to agreed upon standards? Maybe?

Padre: I'm curious. Do you see anyone on the candidate's bench who appears to have a better (or any) jobs policy than that proposed by the current admin? Also....... it strikes me that Europe's ONLY hope is that of integrating and drawing advantage from diverse economies. One of the major problems of the USSR was the failure of "Russiafication" of the unwilling satellite nations, but the EU has the tailwind at its back of the nations having agreed to join and make it work. Let's hope they can as the alternative doesn't sound good at all.

NEH

Greece is always portrayed as the poor and sick man of Europe. But is this really true? Let's put up some numbers and see. According to the World Bank, it has the 37th largest purchasing power in the World, the 31st Purchasing Power Parity, the 33rd largest gross GDP. Not shabby by any means. It's main industries are, Tourism, Shipping, Industrial Production, Food, Textiles, Chemicals, Metal Products, Mining and Petroleum. A fairly diversified economy. As for the breakout of the percentage of the economy these industries represent, Service Industries (tourism and the like) is 78.8%, Public Service sector 40%, Industry 17.9%, Agriculture 3.3%.

So why is Greece having problems with it's Loan repayment schedule? It's called "Trade Balance". Between January of 2009 and September of 2011 it's trade balance has been in negative territory month on month. From an approximate low of -3,250 mil. euros to a high of -1,580 mil. euros. One can't make loan payments when the cash flow is negative. What Greece needs is not more loans, but to increase its export rates and bring in more tourists dollars. All badly hit by the world wide economic down turn. Business, Industry and the Consumer are all going to have to open their pocket books again and begin to spend. Otherwise, the downward spiral is going to continue.

On the Socio-political front, Greece does have some systemic problems that need too be addressed. Such as, its bureauocracy, the rampant and flagrant tax evasion, general corruption and low international competiveness. Given some changes here, it would help the overall general problem.

Emilywismer

What impact would Greece's leaving the Euro Zone have on France and Germany?

NEH

Emily, If you're Greek, France and Germany can go and take a leap. They're part of the problem by being major exporters to Greece. The Eurozone as a fair trade paradise with Economic Parity? Think again. ;)

NEH

Whoops! Stats correction. The sector percentages are correct. That Public Sector percentage ought to be dropped and restated as the Public Sector represents 40% of Total Economic Output.

I apologize for that... Now everything adds up correctly. ;)

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Shaf

This article is very interesting! I do wonder what the correct answer is. Here's an article that you might find interesting that asks the very same question. Except it's from the perspective of some Greek business students


http://www.businessbecause.com/making-the-headlines/mba-students-should-greece-exit-the-euro-article81156.htm

Jack

Shaf: It's good to consider that in the US some states run net deficits to the Federal purse for years while others return more money to the Feds than they receive. Ha! I'm not suggesting we toss Texas, my own wealthy state of Alaska or any of the other, mostly "red" states typically running deficits to our Treasury.

http://taxprof.typepad.com/taxprof_blog/2004/09/red_states_feed.html

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Jack, dont you think it would be possible that it could actually come to that, states breaking off from the United States because of what the federal government is doing.

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