Interview with German Government Economic Adviser: Euro Zone 'Could Cope with Greek Bankruptcy' - SPIEGEL ONLINE - News - International
Greece is currently facing the prospect of bankruptcy, which could threaten the euro. In an interview with SPIEGEL ONLINE, Peter Bofinger, a prominent economic adviser to the German government, explains why he believes Europe's common currency would survive a Greek collapse and calls for a new global monetary order....SPIEGEL ONLINE: ... The financial problems of the southern European members are putting pressure on the entire euro zone. Some of your fellow economists fear a crash would trigger a domino effect and cause a rapid plunge in the value of the euro. Bofinger: Some of my fellow economists are going too far. Compared to other currency zones, the euro zone is doing a lot better than many claim. The national debts and new state borrowing is lower than in the United States. And in an emergency it could also cope with a Greek bankruptcy. The country produces just 2.6 percent of the euro zone's GDP.SPIEGEL ONLINE: Still, the loss of faith in the euro would be massive. And regarding national debt, debt within the euro zone is currently about 88 percent of its GDP. You call that figure low? Bofinger: It is not low, but it is lower than in the US. There, the national debt is 92 percent of GDP. In Japan, it is even 197 percent. And the United Kingdom's budget deficit is far worse than that of the euro zone. And as far as a possible loss of confidence is concerned, let me point out that the state of California has been on the verge of bankruptcy for months and its share of the US's GDP is about 13 percent. Viewed from that perspective, my fear of a domino effect is limited.
...SPIEGEL ONLINE: ... The financial problems of the southern European members are putting pressure on the entire euro zone. Some of your fellow economists fear a crash would trigger a domino effect and cause a rapid plunge in the value of the euro.
Bofinger: Some of my fellow economists are going too far. Compared to other currency zones, the euro zone is doing a lot better than many claim. The national debts and new state borrowing is lower than in the United States. And in an emergency it could also cope with a Greek bankruptcy. The country produces just 2.6 percent of the euro zone's GDP.
SPIEGEL ONLINE: Still, the loss of faith in the euro would be massive. And regarding national debt, debt within the euro zone is currently about 88 percent of its GDP. You call that figure low?
Bofinger: It is not low, but it is lower than in the US. There, the national debt is 92 percent of GDP. In Japan, it is even 197 percent. And the United Kingdom's budget deficit is far worse than that of the euro zone. And as far as a possible loss of confidence is concerned, let me point out that the state of California has been on the verge of bankruptcy for months and its share of the US's GDP is about 13 percent. Viewed from that perspective, my fear of a domino effect is limited.
Still, the loss of faith in the euro would be massive.
Yeah, yeah, and when the hysterical children on the ForEx markets have stopped Chicken Littleing we'll still be making the best trains, windmills and ball bearings on the planet.
So we care about the hysterical children because?
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
I mean, that line is from Spiegel.com, whose business it is to propagate Angloamerican talking points while making them look like they come from Germany. En un viejo país ineficiente, algo así como España entre dos guerras civiles, poseer una casa y poca hacienda y memoria ninguna. -- Gil de Biedma
I care about deconstructions because the economists nonsense will be used to push lower wages, pensions and benefits in the countries affected. A vote for PES is a vote for EPP! A vote for EPP is a vote for PES! Support the coalition, vote EPP-PES in 2009!
