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The Drachma, being a convertible currency, will be as hard as the Euro.  It just won't be worth as much, and that value will take a while to be established at a stable level.

The recession makes most tourists much more price sensitive which gives Greece with a radically devalued currency a huge advantage in capturing market share.

The housing boom would be caused by foreigners buying up holiday homes at (for them) knock down prices - and also by wealthy Greeks repatriating their money to buy up assets (of all kinds) at very cheap prices for their (Euro) assets.

One of the negative consequences of devaluation - at least in the short term - is to exacerbate the relative inequality between foreigners and Greeks, and between wealthy Greeks (with foreign assets) and local Greeks. However the repatriated wealth should increase the tax base available to a (progressive) Greek Government.

My suggestion is that the Euro Crisis also spells the end of of the dominance of EPP politics/Austrian economics.

I don't read much German media, but I would hope that Merkel is being excoriated even in Germany for her racist comments. Certainly there seems to be a shift away from the CDU for all sorts of reasons, one of which is the mishandling of Germany's relations with the rest of the EU...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 03:10:41 AM EST
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I don't read much German media, but I would hope that Merkel is being excoriated even in Germany for her racist comments. Certainly there seems to be a shift away from the CDU for all sorts of reasons, one of which is the mishandling of Germany's relations with the rest of the EU...
Well, there's that recent story from the Irish Times, which starts with
IF GERMAN chancellor Angela Merkel still reads the German newspapers, this was a good week to stop.

The bad reviews she has picked up around Europe in the first year of the euro zone crisis have finally begun to appear in the domestic media. "A boss without a vision" was the headline on a particularly bruising critique suggesting that, under Merkel, "Europe's largest and most economically successful country is afraid of a leadership role".

However, at the end, there's
It may be too late. Germany's relationship with the EU has deteriorated to such an extent that, among Berlin watchers, a popular parlour game is guessing who will try to scoop up Germany's new EU critical voters in the 2013 general election. A year into the euro zone crisis, the feeling around the continent is that Germany is falling out of love with Europe. But what if we are dealing with a problem of perception? Merkel has picked up the nickname "Madame Non" for her habit of stalling on bailout deals. At home critics could dub her "Frau Ja" for talking tough ahead of EU meetings and, in their eyes, returning home after apparently caving on every point.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 03:41:07 AM EST
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Yea - I read that piece - Derek Scally generally writes well - but my impressions of shifts in German political sentiment are based on too small an evidence base for me to make confident assertions (contrary to habit and rumour!)

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:52:44 AM EST
[ Parent ]
The Drachma, being a convertible currency, will be as hard as the Euro.

"Hard currency," in this context, means "foreign currency."

You buy your imports in foreign currency, and since you can't print it yourself, you have to trade for it. And at the moment, they're running a trade deficit.

Hence, "with what hard currency?"

The recession makes most tourists much more price sensitive which gives Greece with a radically devalued currency a huge advantage in capturing market share.

But in a shrinking market, as long as the recession drags on.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 03:56:39 AM EST
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Global tourism has been declining by 2-6% in the last couple of years, but Greek Tourism has been growing rapidly (even before devaluation) and now represents 15% of GDP and 16.5% of the workforce.

Tourism is a very dynamic market which can respond very quickly to changes in fashion or price competitiveness. Given the scale of the Greek devaluation I have envisaged, I wouldn't be surprised if Greek tourism grew by 50% (restricted primarily by transport capacity constraints) on a once off basis even in a declining global market.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue May 31st, 2011 at 04:49:00 AM EST
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before there was ibiza, there was greece as beacon magnet for low budget travellers.

europe needs more options for young people and small-pensioned retirees to go visit. if greece repicks up that role then a lot of american and european backpackers too will go fill their bars and beaches, who now go to asia.

zero snob value, but hey... it'll pay for a few wind turbines and solar panels.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Wed Jun 1st, 2011 at 01:22:11 PM EST
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Keynes on Hayek - "example of how, starting with a mistake, a remorseless logician can end up in Bedlam".
by rootless2 on Tue May 31st, 2011 at 11:03:46 AM EST
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