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Roubini: Greek Euro Exit Would Destroy the Euro

Economist Nouriel Roubini, the man who had been pushing Greece to exit the euro area for two consequent years, made a U-turn. “Stop supporting Greece would cause the euro zone to collapse” Roubini said in an interview to German daily BILD. He warned that a Greek exit would also trigger a bank run in Italy, Spain and Portugal. Who pulls the plug on Greece provokes a total euro  zone collapse.

Roubini’s solution proposal looks like that:

Roubini: “One should either financially support an orderly Euro exit for Greece, or one should keep Greece in the euro zone and finance the economic growth as one did 20 years ago with the German reunification. Both solutions would be cheaper for German tax payers  than letting  the Euro zone to break down.”

Roubini stressed the dangers for Germany, should the EZ fall apart.

Roubini: “Without the Euro Germany is an economic and political dwarf in comparison to USA and China. As an export country Germany needs the euro and the European countries as trade partners. Therefore, either swim together or sink together.”

Further, Nouriel Roubini proposes that the Euro has to be weakened in comparison to US-dollar in order to boost competitiveness in the European South. He oppposes the German ‘savings policies’.

Roubini exhausted by his own past proposals

 “Europe needs growth. Governments must lower taxes and increase salaries,” proposed Roubini overturning the German, EU and IMF austerity formula of tax increases and salary decreases.

Roubini: “German government should give every German household a 1,000-euro Vacation-Voucher. This voucher should be spent only for vacations in crisis-countries, in order to boost the economy there. There should also be a tax-bonus for everyone buying a vacation home in the countries of the South.”

PS solutions can be so easy under the Domino effect and threat… 🙂

 

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16 comments

  1. Roubini’s plan makes much more sense than extreme austerity that will crash southern European economies and increase their debt to GNP ratios… Maybe Merkel ought to listen to everyone who’s proposing a kinder, pro-growth alternative that makes economic sense and would be supported by most citizens of the so-called “PIIGS”

  2. Italians are against euro, so they hope that Greece will exit from euro as soon as possible.
    Greeks, revenge your humiliated Country.

  3. “Merkel” and “listen” are mutually incompatible concepts… that is a big part of the problem, if not the biggest.

  4. The northern Eurozone countries have huge trade surpluses while the southern countries have huge trade deficits. I believe Roubini is pointing in the right direction, however, I would prefer to see these capital transfers take the form of productive investments to create jobs, in addition to reducing the trade deficits

  5. What very few economists admit is that the euro is/was the cause of all the problems. It should have been obvious to the architects (and most sensible people)of the euro that a one size fits all interest rate was going to end this way. While countries who are receiving bailouts remain in the euro those bailouts will forever be propping up French & German banks with none going to the Greek people.

    The one good thing politicans of the UK has done for the UK since traitor Ted Heath, lied to the public and took us into the EEC, a supposed benign trading bloc, which has metamorped into nothing short of a dictatorship, was keep us out of the euro. Though after Heath, every politican has lied about the EU until their lies are no longer believed because Van Rompey, Merkel et al are now blatantly revealing their aims, that being all nations in the EU give up their economic & sovereign independence.

  6. keeptalkinggreece

    economists do not dare to admit what even my cat knows, meanwhile due to some cuts pet-budget. and yes, they blatantly reveal their aims because they feel they have the upper hand. and yet, elections will come for them too one day.

  7. I have some interesting inside info for you on this issue.

    The EU commissioned in the late 1990s world class economists to make a feasibility study of designing the euro system. I was informed in 1999 that the politicians of Europe (and the European Commission) had rejected their expert report, and decided never to publish it. Why? They didn’t like the recommendations for membership of the eurozone, describing them as “too restrictive” and excluding “countries like Greece and Portugal”.

    So, having employed the best economists in the field, the politicians of France and Germany made up their own rules, and invited Greece to join. In fact, they cooked a deal with Papademos, that if he got Greece into the euro without a political fuss, then he would be paid lots of money as Deputy Governor of the European Central Bank. This guy was part of the Pasok mafia, has very few publications, but so many appointments in universities and banks. By the way, he never studied economics — his training is in engineering.

    Germany and France (and the Commission) are directly responsible for Greece’s position now. They concealed an expert report advising them not to do certain things, they made terrible decisions, they bribed people with overpaid jobs, and they have fucked up the whole eurozone other than Germany. Surprise, surprise: Germany clearly has benefited massively from the euro system.

    This is not about economists: it is about how some economists with American right wing training are dominating the ECB, how politicians have lied and tricked everyone, and how the Germans are the biggest crooks in the EU. Greeks could learn a few tricks from them, even.

  8. keeptalkinggreece

    any document on this?

  9. Sadly, no. The Commission insisted on absolute secrecy. This is the appalling way that the EU has been run for well over a decade — dirty deals, illegal acts, concealed reports, corruption.. the list is endless.

    I am even reluctant to give the name of the chair of the commission (a personal and professional friend), because there is no democratic or legal accountability of anything now in the EU.

  10. Roubini’s ideas are obviously based on the premise that Greece is yet another typical European nation that is temporarily suffering under the crisis. No mention of the myriad of problems plaguing that state, the result of decades of misguided politics and elayed decisions. Greece had three years on borrowed money and hasn’t made much, if any progress towards moderniziation yet. There’s no reason to believe this will change in the medium term future and no reason to believe there can be sustainably growth under these conditions. Roubini simply doesn’t know enough about the details or else he would see that Greece is a burden for the Eurozone a constant source of negative headlines, and that a Grexit would be better for everybody else. The impact on the banks can be controlled and is less severe than a continuation of the status quo which is driving investors away from Europe in droves.

  11. Quite obviously, Roubini hasn’t been in the formerly communist Germany in they early years after the reunification. Despite the dire economic changes putting a severe hardship on the people, they actively engaged in the reforms and succesfully managed to overcome the commmunist structures and create new, democratic ones within a short time. Greece, on the other hand, enjoyed EU subsidies for modernization for decades and still has virtually nothing to show for that. And the last three years, when everybody had to be aware of the need for reforms, didn’t produce any real improvements, neither. Quite obviously, most Greeks simply want to keep their screwed up system and expect that the rest of the EU subsidizes this for them. There’s no real drive for reforms, only complaints that the Troika is too stingy. You simply can’t compare this with the German reunification, it’s like apples and olives.

  12. Other nations have profitted much more. Just look at the economic data of the first years! It wasn’t Germany who was leading in growth, we were lagging behind and even ridiculed by nations like Spain. Where was that big profit for us, why should anyone conclude we wouldn’t have had the same, lousy growth with the DM? The UK and some other nations who didn’t join the Euro didn’t suffer from this, neither, after all.

    Also, don’t forget that the French blackmailed us to join the Euro, as a condition for their “qui” to the reunification deal. This wasn’t our project at all, and the public opinion was very much against that change.

  13. keeptalkinggreece

    odd enough, the proposal to establish a Greek …”Treuhand” for example had initially come by German politicials – again lol . just too lazy to search for link in KTG. google it.

  14. keeptalkinggreece

    Germany in DM while the rest in EU in EZ? hm… DM would have to compete against Euro & US-Doll first of all and to be competitive one has to be ‘cheap’ as the Troika says. even to export to south america or else where in the world.
    where is the profit? Germany borrows with even 0.05 (If I remember correctly) interest rates and lents the money with much higher. Alone this difference makes profit.
    Reunification was a ‘must’ after the collapse of the UDSSR and not only from France, don’t you think?

  15. You make the mistake that politicians and bad economists always make — thinking that GDP growth means the same across countries. If the growth is at least partly the result of production increases (and preferably exports)as well as consumption expenditure, the growth is probably good. It is even better if the growth finances investment for the future, such as R&D, capital costs, labour force training, education. Germany did those things in the last decade.

    In the rest of the eurozone, the access to cheap money led the private sector into disastrous debt for consumption and property speculation (and in Greece also to state increased debt). Much of that increased consumption was for imports from Germany, and led to current account imbalances. Thus, in Spain, Italy, Greece, Ireland etc the growth in GDP was dangerous, potentially inflationary and actually debt-financed. It also destroyed much productive capacity with import substitutions.

    These things were obvious in advance to any competent economist. The issue is why politicians did not accept expert advice and chose a path that benefited only Germany in the long run. If Germany had stayed with the DM, its export markets would most certainly not have grown both outside the EU and within — owing to the weaker euro versus the DM.

    Even if I do concede that initially Germans did not want to lose the DM, the reality now is that the accumulated moneys from the last decade are the result of the euro system. Morally and politically (but not legally) that money does not belong to Germany. This is the point: it is belongs to the eurozone in total and should be used for the eurozone. Stupid arguments about hardworking Germans and lazy Greeks are religious-style morality tales to justify not accepting Germany’s obligations to Europe.

  16. Look, Greece is a basket-case economy. It is in the eurozone because German and French politicians put it there. Greece needs massive reforms, but they need to be intelligent and appropriate. The Troika reforms are mostly a disaster, with tried and tested policy failures because the neoliberal assholes in the ECB and Germany can’t think of anything else to do.

    I will personally back any serious reforms in Greece, and have been professionally involved in a few minor changes. This is all about where political power resides, accepting professional guidance, and national politicians who are both interested and able to reform. So far, all that the Troika has done is support useless corrupt Greek political parties and plunge Greece further into debt with stupid austerity programmes that no serious economist supports.