The rule is well known: If a country falls into the debt trap and its debt rises above 90% of gross domestic product, there is no escape: default appears on the horizon as the spectre that will keep society, the economy and politics on tenterhooks from then on. This is what is currently happening with the eurozone. With the introduction of the euro, southern Europe in particular fell into the credit trap, as the markets regarded Germany's creditworthiness as the general benchmark from day one of its introduction. As a result, interest rates in southern Europe fell dramatically and government debt continued to rise. Today we see France, Italy and Spain as the absolute problem children, basically the entire south of the eurozone.
What can happen when the markets turn their attention to the rising debts of these countries is something we saw last week: the euro in free fall, the flight of capital to safe havens such as German or US government bonds and the Swiss franc was a clear vote against the stability of the eurozone. If you look at the current debt figures for southern European countries, it is clear that a deeper recession than the current one will lead to a fiscal catastrophe if unemployment figures rise, tax revenues collapse and capital seeks its way out.
Portuguese Public Debt Ratio: Level and Decomposition of Change | In Percent and Percentage Points of GDP
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In addition, a large part of this debt was bought by the ECB, so the free market rejects this junk per se. Interest rates would therefore have to be much higher and the debt crisis would have been on fire long ago.
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63 sats \ 0 replies \ @398ja 18 Jun
On a related note, this is what Le Pen and her acolytes will inherit after the next parliament elections in France. Macron, who had already previously said publicly that he wants to piss off the French people, is reported to have recently said, allegedly, that he's thrown an unpined hand grenade into the political arena to create chaos and weaken the opposition (Le Pen) who will neither have the time, nor the human resources to meet the tight deadline for the next financial budget, or the preparation of the Paris Olympic Games. It's premeditated economic, political and social chaos at the expense of the French people for personal political gains...
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Yikes, The worst part about this all - is the healthy run countries will have to step in and subsidize the unhealthy countries (financially).
To prevent freefall, they need to lend a hand. Curious if they each maintained their own central banks how this would look differently. Remember - Europe is pretty interconnected.
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There literally are no winners. It's a lose-lose
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Why are those countries so bad with money? Did something happen that l am not seeing?
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That's the democratic mechanism during a demografic collapse and in a corrupt system of buying votes with social benefits
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They need to be able to support themselves. This bailout stuff isnt working. Each country should manage their own money.
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We need some patience. But this union is going down and the transition phase will be tough
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I dont think it needs to be a hard transition, though. If each country cobtrolled their own currency and bought euro with it, it would work fine.
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the problem is, for example, that the southern european countries, which actually need a devaluation of their currency by at least 30 to 40% compared to the euro exchange rate, would be insolvent the moment they introduced their own currency. that means the entire credit market there would collapse, which would lead to the collapse of the entire fiat system. life in southern europe is much more complex, economically divided and tense than in the north. that would be social chaos. Don't think there will be a rational simple transformation phase here
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I realize each place has its own difficulties, but the cant forever be chained to the north.
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the problem with the eurozone and the euro is that the much more competitive north has established a kind of neo-mercantilism here. with an artificially low valued currency and a labor market for cheap labor, the south has been played against the wall, especially in the industrial sector.
Wow, Italy's really going for it. It's a race to the bottom and they're aiming to win.
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In addition, a large part of this debt was bought by the ECB, so the free market rejects this junk per se. Interest rates would therefore have to be much higher and the debt crisis would have been on fire long ago.
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I thought a lot of the southern places brought in tourists.
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20 sats \ 1 reply \ @TomK OP 19 Jun
Tourism is an important economic factor in southern Europe, no question about it. But it would not be able to compensate for this economic shock
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I guess just tourism isnt a dependable way to bring up the gpd.
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