Archive for the ‘Euro’ category

The Greek Rathole

July 2, 2015

This weekend the future of Greece as a European country may be established. While the world’s geography will not change, the short sightedness of European Union leaders may drive Greece out of the Euro and subsequently the EU. The reasons for this fate are many, but at the end of the day, the reasons are based in why Europe is such a nice place to visit and why in the past it was always poised to war amongst itself.

European countries are comparatively monolithic, speak their own language, and enjoy all aspects of their heritages.

The modern construction, the European Union, lead by Germany’s economic strength, has insisted upon a number of fundamental changes in the Greek national economy in exchange for further EU economic support. Greece is bankrupt and desperately needs a further infusion of Euros. The problem is that the Greek economy is like a bucket with a hole.  The amount of tax revenues pouring in is less than the Euros than are leaking out through the hole. This picture does not get better without some fundamental changes by the Greek people.

Like many other third world (maybe second and a half is more apt) countries, the Greek wealthy are intelligent, sophisticated, and uninterested in paying taxes. The wealthy have a long history of avoiding tax payments and often justify this attitude by saying the government simply gives the money away and demonstrates little interest in fostering national economic growth.

The Greek Government (conservative or socialist) usually finds in oder to remain in power must placate the masses by generous entitlements such as pensions, early retirements, and bloated employment roles. The pleasant Greek lifestyle is simply not competitive on a European basis and not in the same universe as the global economy. Accordingly, unless the industry is focused upon the tourist, Greece does not compete.

The EU while in name representing all European countries is financed primarily by Germany. Accordingly, German influence wants an austerity approach in exchange for financial help. Austerity means less government workers and reduced pensions. The amount of the decrease would be determined by the amount of new tax revenues Greece raises. Fairly straight forward from the German perspective.

Democratic Governments, however, respond to the populous, even when the populous does not understand the situation it is in. Leaving the Euro and reintroducing the Drachma will allow Greece to inflate its currency and pay its debts with cheaper money. At first this looks attractive.

The problem with this approach is that again without more fundamental restructuring Greece will still be economically uncompetitive. The losers is situations like this are primarily the average person whose savings will evaporate and whose pension will become worth less and less each year. The wealthy will hide their money overseas or in assets somewhat immune to inflation.

Only when life gets so bad that the masses are about to rise up do countries finally make the tough fundamental changes. Fundamental changes, however, are not necessarily confined to the economy. Authoritarianism becomes popular too. And with this type of leadership, anything can happen.

The EU has called Greece’s bluff and in essence said take our offer or leave it. The “leave it” part will lead to Greece’s EU withdrawal and almost assuredly withdrawal from the Euro. I hope Germany has thought what this could cost Europe and that this amount is less than keeping the dialog open and the maybe restructuring the debt in some way.

Hmmm.

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Immigration – Take A Breath

May 8, 2015

The Tories won the election UK yesterday. Most pundits had written the conservatives off and at best predicted a minority government. Instead, for yet unexplained reasons, the Conservatives won an outright majority. So what does it mean?

Upfront it means Prime Minister Cameron will get to remain Prime Minister for as many as another 5 years. It also means he will have to fulfill his campaign pledge of letting Britain vote on whether to remain part of the European Union. Hmmm.

It has always made me scratch my head to hear English citizens speak of the UK and Europe, as if they were as distant as the US and China. While it is true Europeans drive on the left side of the road and their native languages are not english, there is a scant 20 or so miles separating England from the Continent. But many English see it differently.

The UK has avoided joining the Euro (the common currency) without any recognized damage to the pound. But being part of the EU has from time to time created great ire amongst the English. (It must be said that the European Parliament must be one of the largest bureaucracies in the world, maybe next to the UN.) The main argument with the EU is, immigration, or more specifically the apparent lack of EU effort in stopping unauthorized immigration into the US from Continental shores.

The EU has a rule which says no boarders can interfere with an EU resident seeking employment in any EU country. So workers from less well off EU countries can simple travel to London and look for work, all while taking advantage of the UK social safety net. That was hard to accept but there is an even bigger issue.

Economic refugees from all over (mainly the Middle East and Africa) are streaming into Southern Europe and then working their way towards the UK. The English Channel stands in their way so large camps have risen on the shores opposite England. Smuggling by any means available, these refugees attempt daily to enter the UK. Once in Britain, the refugees can stay as long as they wish, work if they wish, or just collect welfare.

The Brits don’t like this and by extension don’t like the lax EU.

These refugees in many cases really do not intend to return to the native countries, many of which are torn by war and fighting. For them, the UK represents a salvation of sorts.

The US has an immigration problem too. We have some 12 million undocumented aliens living in the US. The largest group with these 12 million has been Hispanic (mainly Mexican) but there is now an increasing number of Indians and Chinese. The Mexicans are good workers, have strong family values, and are religion centered people much like most Americans. Indian and Chinese immigrants while culturally different also are family centered and achievement oriented. These groups can be very additive to the current American fabric.

Listening to our politicians and some of our labor leaders you would never believe what I have just written. The world is going to end would be their predictions unless we send all these immigrants home.

But think about the problem the UK has and the so called one we have. Hmmm.

Immigration cannot be unlimited and the rate must be controlled in order to assure social order. But someone must have been absent when they were handing out brains to not see the immigration issue facing the US as quite different from that facing the UK.

Both need attention from fair minded and just leaders. For the US comprehensive immigration reform will be a 2016 election issue just as it was for Prime Minister Cameron.