[pp.int.general] [Pp-leaders.discussion] EU: ESM-treaty

[Amelia Andersdotter]

On 05.11.2011 21:45, Philip Hunt wrote:
> On 5 November 2011 20:16, Amelia Andersdotter<teirdes at gmail.com>  wrote:
>> The EFSF is a good thing :)
>> [...]
>> This type of stabilizing fund is meant to correct that. The fund can push
>> money into "poor" regions while their crisis sorts out.
> If that was what was being done, then I would support it. But the EFSF
> is a bank guarantee facility: if a country cannot pay its debts to a
> bank, the EFSF pays the bank. So the money doesn't go to people in
> poor regions, it goes to the bankers.

Sure. It's not a socially stabilizing fund, it's a financially 
stabilising fund. If one wants socially stabilising funds, I believe 
ones best shot is to have a re-distribution of wealth system, perhaps 
based on progressive incomes taxes and social welfare systems that 
secure for people health care and education. Like, some kind of 
permanent institution rather than a temporary fix crisis fund.

> But the banks already calculated the likelihood of a borrower
> defaulting when they lent the money (and set the interest rate
> accordingly). So why should we, the people, bail out the banks for
> making incompetent decisions?
>
>> The other (and much
>> better) alterantive could be to increase the European Union budget which is
>> currently 5% of EU GDP
> 1.1% according to Wikipedia.

They clubbed a big raise last spring if I'm not mistaken?

>>   to maybe 40-50% of the EU GDP.
> Politically, that's a non-starter, of course.

No shit.

> My solution would be that if some countries, for example Greece, are
> insolvent, let them default on their debts. They would then have to
> choose whether to say in the Euro or not; if they did stay in, they
> would have to have a balanaced budget, because no-one would lend to
> them. If they left, they would be able to finance a deficit by
> printing money (but obviously if they did too much, they would just
> get hyperinflation).

Greek banks and companies own huge resources in Eastern Europe - I'm not 
sure how they would be affected by this solution. Would it, for 
instance, be justified to give structural development funds to Greek 
companies in Romania to invest in Romanian development given that the 
Greek company itself is not guaranteed to remain solvent because of the 
situation "at home"? And should our solution in this case be to ignore 
the screaming needs of infrastructural development in Romania to 
accomodate for the inability or unwillingness of the Greek to balance 
their budgets?

Having Greece leave the monetary union, and economic union, currently 
may seem like an attractive option but it would also be sad.

sincerely,

A

> If some banks go bust, and this causes other banks to go bust, then
> let them go bust. If this causes deflation, the solution would be for
> the Eurozone to print money; the way it should be allocated would NOT
> be to just give it to the banks (as Britain has done in it's
> quantitative easing), but to give an equal amount to each person in
> the Eurozone.
>