Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
WESTERN DIGITAL WDC Stock Trend Analysis - CHIA! - Risk 1 - 23rd Jun 21
AMC Is the Best-Performing Stock in America: Don’t Buy It - 23rd Jun 21
Stock Market Calling the Fed‘s Bluff - 23rd Jun 21
Could Bitcoin Price CRASH Target A Bottom Below $7500? - 23rd Jun 21
Bitcoin and cryptos: Your 'long-term investment'? - 23rd Jun 21
Unlocking The Next Stage Of The Hydrogen Boom - 23rd Jun 21
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Germany Can Save Greece and the EU

Politics / Eurozone Debt Crisis Feb 20, 2015 - 05:38 PM GMT

By: Investment_U

Politics

Ryan Fitzwater writes: The European debt crisis has been chugging along for six years. But until recently, the financial media was more concerned with volatility in the U.S. markets.

Now our focus has finally turned back to our neighbors across the Atlantic. Specifically, the debt crisis in Greece.

Here’s what’s going on.


The Populist Party Has Spoken

At the end of January, Alexis Tsipras - the leader of Greece’s far-left Syriza party - was elected as the country’s 186th prime minister.

The election sent a clear message to the world that Greece is fed up with austerity measures imposed on them by the European Union (EU).

Tsipras has been calling for a “European debt conference” since 2012, with the goal of reducing Greece’s debt obligations along with those of other troubled euro-region countries.

That conference has yet to take place. And as a result, today the Greek government submitted a request for a six-month loan extension. Germany immediately rejected the request.

Clearly Greece is still having trouble paying its bills.

Greece: The Poster Child for Bailouts

Euro-area members and Greece have been at odds over terms that would allow the country to extend its $247 billion rescue plan beyond February.

If they can’t decide on a compromise, Europe’s most debt-ridden state will be left standing without a financial backstop.

As a result, Greece will likely start defaulting on some of its liabilities as early as next month.

With debt-to-gross domestic product (GDP) over 176%, Greece has long been the center of Europe’s debt crisis conversation.

That should come as no surprise, seeing as it’s received multiple bailout packages over the last few years.

Unfortunately for Greece, those packages were bundled with structural reforms calling for the privatization of government assets and, the most detrimental part, aggressive austerity measures.

Too Harsh?

In theory, austerity is used to reduce budget deficits during adverse economic conditions. This is accomplished by cutting spending, increasing taxes, or a mixture of the two.

Yes, cutting spending is important for reining in debt. (Uncle Sam, please take notes.) Increasing revenue - through tax collection and/or boosting GDP - also helps. But, as you’ll see in a moment, history has proven that tightening the belt too hard and seizing too much income from citizens does more harm than good.

Fact is, the austerity measures put on Greece are excessive. They haven’t helped the country pay its debts. And any resulting GDP growth has been too slow.

As you saw in the chart above, the debt load dipped after bailout programs began. But since then the load has increased steadily. The measures are not working. In fact, they have made the problem worse.

One in four working-age adults in Greece is unemployed. And some estimates have almost half the population living in poverty.

The Greek government is certainly at fault for running up deficits in the first place. But the bigger issue here is the way the EU - Germany in particular - has been dealing with debt-saddled countries.

In fact, it’s a little ironic...

Germany... Look in the Mirror!

After World War II, Germany was in economic ruins. Its debt-to-GDP was estimated to be around 280% (significantly higher than where Greece stands today).

Luckily Germany’s creditors were smart. They realized that forcing Germany to repay its debt would make restoration nearly impossible and could derail all of Europe.

They also understood that getting paid $0.50 on every dollar they lent was better than getting nothing. So in 1953, they agreed to forgive roughly half of West Germany’s debt.

The rest of the debt would be subject to economic performance.

Fast-forward six decades... Germany is now the EU’s most powerful creditor. Cleary the debt relief and provisions worked.

If only Germany would look to its past and realize that the solution for Greece is right under its nose: Cut Greece a big break on its debt. Allow it to pay back loans based on how well its economy is performing.

The Debt Merry-Go-Round

Does Germany want to be remembered decades from now as the one that botched the infamous euro project? Or does it want to be the country that saved the EU and put Greece back on track?

Another bailout with harsh austerity measures would just kick the can further down the road. (It might also be the final straw that breaks the camel’s back.)

Debt forgiveness, on the other hand, coupled with pro-growth economic reform, can pull Greece off the debt merry-go-round.

Good investing,

Ryan Fitzwater

Source: http://www.investmentu.com/article/detail/43677/debt-forgiveness-how-germany-can-save-greece-eu

http://www.investmentu.com

Copyright © 1999 - 2015 by The Oxford Club, L.L.C All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Investment U, Attn: Member Services , 105 West Monument Street, Baltimore, MD 21201 Email: CustomerService@InvestmentU.com

Disclaimer: Investment U Disclaimer: Nothing published by Investment U should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Investment U should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Investment U Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in