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Wednesday, February 27, 2013

Periphery is doomed to fail?

Below is an update from my British friend who has lived/worked in Greece off and on for about 40 years and permanently in the last 10 years (married to a Greek). So far, he has been spot-on with his predictions except for the one that Greece would exit the Eurozone on Friday, January 11 at 22 hrs. Well, you can miss one every once in a while...

Is he spot-on with this?

"The bigger picture of the Eurozone is, in my view, going to be the crux issue of 2013 and, unfortunately for Greece, going to relegate our local issues to the sidelines. ....and even the re-established Eurozone crisis has no chance of any solution before the German election in September. My scenario of the Drachma returning could well be swept in with an overall breakup of the Euro any time after that. Thus Germany remains the lynchpin to all that will happen eventually - but I don't feel that Germany is the criminal player depicted in some of the writings you linked me to. Germany suffers from having been too successful and responsible economically - but its approach has to be admired not damned. Others should have tried to do something similar rather than just acting like irresponsible basket cases! Of course, the austerity straightjacket in which the offenders have been placed - without matching growth policies - is aggravating the crisis of economic decline, unemployment, etc. but, without a Eurozonewide fiscal plan to match monetary policy, the mess will continue. One should also say that, without the ability to devalue, the periphery is doomed to fail!!!!!"

1 comment:

  1. To my mind the whole point of having low interest rates was to encourage the sort of investment that would head off these very problems.

    Instead people used the chance to build bridges across remote valleys at great expense - and now have to pay for these unused megaliths.

    The problem for the US and UK is that they are both using their precious printed money (QE) to prop up banks - not to invest against a situation like this happening to them! They are caught in the same trap.