The quarterfinal match between Germany and Greece was more than just a game. There was an invisible undercurrent of rivalry and it had got nothing to do with rivalry on the field but all of that was off it. Greece wanted to win and show Germany how hurt they are feeling inside on the measures proposed by later on the way the former has to be governed. Just as in economics, even on the field it was Germany which was dictating the terms. Though Germany had the last laugh at Arena Gdansk, it will be a while before we know if Germany is indeed laughing at its plight on the Euro crisis. Greeks feels that Germans are the root cause of all their woes and the Germans feels they are being penalized for something they are not responsible for.
Greek Elections, a keenly watched event by the entire world, an insignificant event under normal circumstances had attained a globe stopping event status. This was not about who was getting elected to govern the picturesque country but it was about what fallout it would have on the entire global economy. It was an event that could decide if Euro would break within the next few days and weeks or is it buying some more time for itself.
Euro is an idea who's time has already passed. It was to be a viable alternative to the green back but the way it was run right from the day of its inception was all but right. The Euro was run more for a political clout than economic. Germany, one of the most prominent members of currency wanted to exhibit supremacy over the entire region. A goal it was well on course to achieve suddenly got stunted because of the fiscal imprudence of the region's smaller members. The very goal it set out with, has now suddenly become an albatross around its neck. Germany is now being forced to pay for all the economic mismanagement displayed by its smaller peers. It has now come to such a point where Germany can't let the Euro fail and at the same time saving the Euro is costing it dearly.
To understand what actually led to all this mess we have to go a little back in time to early 2000s. When the Euro came into force the smaller nations like Ireland and Greece had access to cheap loans which they were not used to. This was primarily because Euro was much stronger than their local currencies. The irony is we do not understand the value of anything in life that comes easy or cheap. Which is exactly why these nations started borrowing left right and center and were splurging on non priority expenses and extending freebies to their citizens.
Ideally the debt should have been utilized to set up the infrastructure and increase capacities. This would have led to higher exports and more income and in the long run would have benefited the nation and in turn the region. In reality the debt they picked up fueled false demand. Added to it the speculative trading by banks and financial institutions caused an asset price bubble. Once the bubble got pricked the nations that were servicing huge debts saw the debt to GDP ratios bloat leading to huge fiscal deficits and newer loans to repay earlier ones. When the debt burden rose beyond their means these nations started defaulting. The banks that lent to these nations started to run into losses and a chain reaction had started.
Germany on the other hand had always been an export oriented economy and was not directly benefiting from the migration, as German Mark had always been stronger andso was its access to cheaper loans. However one willful error Germany committed was that it turned a blind eye towards all the fiscal imprudence displayed in the region. TO explain it in more simpler terms, for instance in a family one member is very prudent with the way money is spent and if rest of the members splurge the overall family budget takes a hit. This is exactly what happened with the Euro region.
So, what would have made the Euro work. When different economies embrace one single currency it call for strict fiscal discipline by all its members, periodic review and stiff penalties for non adherence. The problem with the Euro was not lack of guidelines but was the lack of commitment towards them. When the weaker nations flouted the guidelines stronger nations chose to just chide them and not impose stiff penalties. By the time the region woke up to the crisis the damage has already been done. What Germany is doing now was ought to be done at least a decade ago. This explains why the Greeks and the Germans feel what they feel today.
I am not singling out Germany and Greece as the only pair of nation that had exhibited this behavior. When I was watching the football match I could sense the invisible rivalry between these two countries. In fact this hypothesis is true in any pair of a strong and a weak Euro nation. The irony is a strong Euro nation is now non existent.
It is now left to be seen how much time has the Euro bought for itself, if at all it has bought any
Regards
SVJ
Disclaimer: The views expressed were purely my personal understanding and interpretation. These views were not made to demean any particular nation or any specific community or any single entity or any individual. Readers will do best to ignore all this as trash and choose to ignore any viewpoint they wish to disagree.
To understand what actually led to all this mess we have to go a little back in time to early 2000s. When the Euro came into force the smaller nations like Ireland and Greece had access to cheap loans which they were not used to. This was primarily because Euro was much stronger than their local currencies. The irony is we do not understand the value of anything in life that comes easy or cheap. Which is exactly why these nations started borrowing left right and center and were splurging on non priority expenses and extending freebies to their citizens.
Ideally the debt should have been utilized to set up the infrastructure and increase capacities. This would have led to higher exports and more income and in the long run would have benefited the nation and in turn the region. In reality the debt they picked up fueled false demand. Added to it the speculative trading by banks and financial institutions caused an asset price bubble. Once the bubble got pricked the nations that were servicing huge debts saw the debt to GDP ratios bloat leading to huge fiscal deficits and newer loans to repay earlier ones. When the debt burden rose beyond their means these nations started defaulting. The banks that lent to these nations started to run into losses and a chain reaction had started.
Germany on the other hand had always been an export oriented economy and was not directly benefiting from the migration, as German Mark had always been stronger andso was its access to cheaper loans. However one willful error Germany committed was that it turned a blind eye towards all the fiscal imprudence displayed in the region. TO explain it in more simpler terms, for instance in a family one member is very prudent with the way money is spent and if rest of the members splurge the overall family budget takes a hit. This is exactly what happened with the Euro region.
So, what would have made the Euro work. When different economies embrace one single currency it call for strict fiscal discipline by all its members, periodic review and stiff penalties for non adherence. The problem with the Euro was not lack of guidelines but was the lack of commitment towards them. When the weaker nations flouted the guidelines stronger nations chose to just chide them and not impose stiff penalties. By the time the region woke up to the crisis the damage has already been done. What Germany is doing now was ought to be done at least a decade ago. This explains why the Greeks and the Germans feel what they feel today.
I am not singling out Germany and Greece as the only pair of nation that had exhibited this behavior. When I was watching the football match I could sense the invisible rivalry between these two countries. In fact this hypothesis is true in any pair of a strong and a weak Euro nation. The irony is a strong Euro nation is now non existent.
It is now left to be seen how much time has the Euro bought for itself, if at all it has bought any
Regards
SVJ
Disclaimer: The views expressed were purely my personal understanding and interpretation. These views were not made to demean any particular nation or any specific community or any single entity or any individual. Readers will do best to ignore all this as trash and choose to ignore any viewpoint they wish to disagree.
