tag:blogger.com,1999:blog-36227136.post2352235198943349063..comments2024-01-16T08:40:53.682+00:00Comments on <a href="http://www.openeurope.org.uk">Open Europe</a>: The ECB's herculean assumptions on GreeceOEhttp://www.blogger.com/profile/00556463374230498875noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-36227136.post-77815959574536655692011-02-16T18:24:03.412+00:002011-02-16T18:24:03.412+00:00Thanks BelgoBelg. We completely agree that even if...Thanks BelgoBelg. We completely agree that even if Germany was fully willing to fund Greece in the longer term the moral hazard would be massive. In some cases the markets have already refused to finance the weaker countries debt, only the ECB interventions have allowed them to carry on selling bonds or refinancing. This is another unsustainable practice. Plan B clearly needs to be considered, having no backup will just exacerbate the problem when Plan A falls apart.Open Europe blog teamhttps://www.blogger.com/profile/14476470353790515912noreply@blogger.comtag:blogger.com,1999:blog-36227136.post-81189998837369997382011-02-16T17:56:22.368+00:002011-02-16T17:56:22.368+00:00Excellent article. It goes into enough detail tha...Excellent article. It goes into enough detail that it is clear that Plan A will not work economically and is politically untenable. How long is Germany going to fund all of the efforts for Plan A? Assuming, quod non, they have the stomach for the full Greek bailout, what of the problem that if Greece was egregious, it was/is only the first in line?<br /><br />There is no way, with their feeble growth rates, Eurozone's weaker members are going to redress their finances. Doing so would create social and political cataclysm. <br /><br />Conceivably, the Euro will be a currency used as the means of exchange by a number of countries, but their public debt will be worth whatever the market says it's worth, and their borrowing rates will be at whatever they are. If it takes 1000 basis points more to sell the debt of the weakest issuers when compared to Germany, so be it. If the market decides that the risk on their debt is such that it is unacceptable at any price, and refuses to take it, then they simply cannot borrow. It is up to them what they do then.<br /><br />This is a long way from the economic convergence contained in the Maastricht Treaty, but as the article notes, they haven't been enforceable.BelgoBelgnoreply@blogger.comtag:blogger.com,1999:blog-36227136.post-83915066599531496392011-02-16T14:14:28.419+00:002011-02-16T14:14:28.419+00:00There are none so blind as those that will not see...There are none so blind as those that will not see. There is no plan A, because nothing that the EU or the Greeks can do will turn Greece into the Ruhr valley. The austerity required will destroy the greek economy, and with that the ability to start reducing their massive deficit. The only cure is to default, to adopt the Drachma, to repay debt at maybe 10cents in the euro; and from then on to sink or swim on their own terms. The continuing cost of their failure to stay in the Euro will eventually be far greater than the cost of defaultRollohttps://www.blogger.com/profile/18255460090580758354noreply@blogger.com