It’s rant time!
Lars Christensen has written a must read rant on how bad the Euro has been for Europe:
“Do you think we would have seen the kind of hostilities among European nations as we are seeing now?
Do you think we would have seen the rise of political parties like Golden Dawn and Syriza in Greece or Podemos in Spain?
Do you think anti-immigrant sentiment and protectionist ideas would have been rising across Europe to the extent it has?
Do you think that the European banking sector would have been quasi paralyzed for seven years?
And most importantly do you think we would have had 23 million unemployed Europeans?
The answer to all of these questions is NO!
We would have been much better off without the euro. The euro is a major economic, financial, political and social fiasco.”
Then Steve Waldman has something awesome to behold over at Interfluidity. He points out everyone knew Greece was a comically bad credit rating for the last 100 years, but supposedly prudent German lent to Greece anyway.
“Germany and France may have missed their Stability and Growth commitments now and again, but they are not fucked up like Greece is. Greek governments — not the current, much maligned Syriza, but decades of its predecessors — treated the state like a teat from which clients and friends of electoral victors might suck. The Greek state has been a shady, opportunistic borrower, no doubt, the kind of character no one would lend money to with any great expectation of seeing it back.
And yet, that’s precisely what bankers in the relatively not-fucked-up Eurozone countries did! These people were not naïfs. They knew the Greek state was sketchy. But precisely because it was sketchy, prior to the financial crisis its debt paid slightly higher interest rates than that of safer Eurozone sovereigns. European banking regulations attached zero risk weights to all EU sovereigns, rendering it nearly costless for banks to simply manufacture deposits to purchase sovereign debt.”
Germany bailed out their banks with 646 Billion euros. Why did they need so much money? It was a huge program compared to the United States. German GDP is about 25% of the U.S., and the Euro has been worth more than the USD for a long time. This would be like spending $2.3 Trillion to bail out the banking system here in the United States.
It’s hard to square the claims German banks were responsible either as banks or as a sales force for Greek debt.
The history is murky on what happened with European debt. It is instructive to look at total figures – because Greek debt is largely held by the EFSF. This debt was purchased from someone. Who? Undoubtedly German and French Banks.