FX – Greece

The economic dustup in Greece is far from over. While an agreement was reached, it looks a lot like earlier agreements – which did little to solve Greece’s problems. Here’s what you should be reading/listening to:

6 key things to understand about Greece’s crisis and what’s next

Greek Defiance Has a History

From NPR’s Here & Now show:

Under Austerity, Greece Still Faces Difficult Path To Growth

This one is key, and why the crisis is far from over:

Europe’s dirty little secret is Greece will never pay back its debt

The way individual countries and the Euro work (or not) together has much to do with the situation. For that there are the following article:

Greek Crisis Dulls Appetite for Euro in Countries Waiting to Adopt It

Krugman – Europe’s Impossible Dream

Mankiw – They Told You So – Economists Were Right to Doubt the Euro

Irwin – Finland Shows Why Many Europeans Think Americans Are Wrong About the Euro

Irwin and Mankiw are on the list of economists/economic columnists you should know.

I do take issue with Mankiw on one point – that the Euro was a political rather than economic decision. I took a course at CU on Europe shortly before the Euro was established; one point the professor made really stuck out to me: If you started with US $100, and went from EU country to EU country, doing nothing but changing your currency into whatever was used in that country, you would have less than $25 left when you got to the final country. Keep in mind that you hadn’t purchased anything at all – just paid currency exchange fees each time you converted to the local currency.

Much of the reason for the Euro was commercial – the ability to cross national borders and do business without currency conversion fees, and the bookkeeping hassles multiple currencies made for. With a single currency, and the ability to move goods and services from place to place with financial ease, the EU could be more competitive with the US economic behemoth. For a long time this was sufficient to outweigh the structural problems built in to the Euro that the Greek crisis exposed – but not any longer. The articles do a decent job of describing the structural problems exposed by the ongoing Greek crisis. Those problems are the reason no immediate solution is likely – just a continuation of the current situation.


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