This article discusses the role that Yanis Varoufakis, Greece's finance minister, is playing in developing a plan to get Greece out of its crisis and the finance minister's opinion on the euro zone. (Link to Article)
The article states,
"Rather than concede any Greek missteps, Mr. Varoufakis wanted to assess the flaws of the euro zone that he said had been revealed by the 2008 global meltdown and its aftermath.
“There is no doubt that if we had a federal republic, if we had a United States of Europe, we would not be here discussing the Greek crisis, the euro zone crisis, banking union or anything of the sort,” he said in an onstage conversation with the Nobel laureate Joseph E. Stiglitz, at a conference of the Institute for New Economic Thinking. “Unfortunately,” he added, “the way we designed the euro zone, it was crying out for a crisis." "
Do you agree with Varoufakis? Do you believe that the euro zone was a ticking time bomb for a financial crisis? What do you think Varoufakis means by a United States of Europe?
Varoufakis was named finance minister in January by Prime Minister Alexis Tsipras. Varoufakis was brought onto the "team" to simulate change, but he believes Greece's real problem is the "politics of denial". This brings me back to a point I discussed earlier in the week and that appeared in Bernanke's book. That point is that the central bank/fed/finance minister should act independently of the government. The United States is able to accomplish this when electing its officials for the fed and the twelve central banks, and I think Greece needs to follow the U.S.'s lead in this case.
At the end of the article, Varoufakis is quoted saying, “I don’t believe anyone should have become a member of this eurozone, the way it’s designed,” Mr. Varoufakis said. “But, it’s one thing to say we should never have joined and another to say we should leave it.”
Do you think that the euro zone should exist? How could to euro zone be restructured to prevent similar future financial crises? Should Greece leave or stay?
In my opinion, Greece would be much worse off now if it left the euro zone. I believe it is receiving much more assistance than it ever could outside of the euro zone, but maybe Greece wouldn't be in this situation if they had never joined the euro zone? One way that the euro zone may be able to be restructured is by mimicking the U.S. in a way: each country in the euro zone has its own central bank, and then the European Central Bank acts as our Federal Reserve Bank does. Then officials from each central bank and the ECB could gather and discuss how to handle situations like a financial crisis.
I think it's interesting that the author of the article begins by saying that Varoufakis blamed the flaws of the Eurozone rather than admitting to missteps in Greece. As Bernanke stressed in his book, it's important to be transparent and acknowledge prior mistakes so they can be prevented in the future. I think that Greece's membership in the currency union decreased it's ability to respond to the crisis, but moving forward I don't think Greece would benefit from leaving the union.
ReplyDeleteI think Varoufakis has a point when talking about Greece's creditors and their "politics of denial." I think it is likely that the continued overestimation of Greece's ability to repay the money it owes was known by these creditors. I think it was poor of the creditors to supply money a second time especially when they have been so insolvent. It has left them in a worse position than before and one that will take awhile for them to recover from.
ReplyDeleteI agree, Greece's creditors were foolish to believe full repayment could be reached with the state of the Greek economy.
DeleteThis article brought up a good point about the inefficient structure of the euro zone and how financial problems could be avoided if it were converted into a federal republic. I thought this was a really interesting idea. It seems like the countries within the EU do not work together as well as they could to promote a strong euro zone. An example that came to mind was a couple months ago when the Swiss Central Bank without any warning unpegged the Swiss franc from the euro (appreciating the value of the franc, while depreciating the value of the euro). Maybe it would be wise for the euro zone to make some changes.
What I think he means by the "United States of Europe" is that each state is pulling for the overall success of the nation while the Eurozone, also pulling for collective success, is also much more focused on its on success. This notion mirrors that of which Wolf talks about Germany in the Eurozone. He basically says that Germany will help other countries out but only because it is mutually beneficial. I think it would be a terrible mistake for Greece to leave the Eurozone, especially since it is illegal, and it would force the entire eurozone to restructure, possibly jeopardizing the currency of the euro.
ReplyDeleteWhile the flaws of Greece's financial system are certainly to blame for its current state, I believe the author has a good point. There are many structural weaknesses to the European Union system. As we saw with the recession, it is not easy to keep finances and politics separate; so how can we expect a monetary union of various political systems (and cultures) to not be dysfunctional? If the economic experiment that is the EU is to continue after a Grexit, then it would certainly need to be more systemically integrated and would actually need to adhere to the qualifications for membership.
ReplyDeleteI think that blaming the Eurozone by saying that Greece should have never joined seems to be itself a way of being denial. At least of the fact that Greece took main charge of its own economics.But assessing past mistakes of the Eurozone and implementing changes are more necessary. I agree with Veronica's idea of restructuring the central bank system, and most importantly keeping it independent of the governments.
ReplyDeleteSo....how long do a country's people have to pay penance for the sins of past politicians? Haven't the Greeks paid enough?
ReplyDeleteSpeaking of how long a country's people should have to pay for the sins of past politicians, the Greece government is claiming that Germany owes them $303 Billion War Debt?
ReplyDeleteHere is the link discussing this developing story:
http://www.wsj.com/articles/germany-owes-303-billion-war-debt-greek-parliament-told-1428418697
I think this can definitely have an effect as to how long Greece will be a part of the Eurozone.The reason being, Greece is attempting to get out of the debt it owes to Germany by claiming the war debt. Also, I think Greece's claims will increase the existing tension between them and their major lenders. It appears that Greece may just have to exist the Eurozone in the near further because it is claiming war debt as a method to ask for a third bailout.