Quote:
Originally Posted by jamesqf
I admit I'm pretty confused about that. If a country left the Euro, wouldn't it face pretty stiff expenses to start printing its own currency, and converting all the accounting - everything from prices in stores on up - to the new currency?
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All of the countries in the Euro had to switch notes and coins to join it, and all print / produce their own - the Euros you get in Spain have different "people" on them from the ones you get in France or Ireland.
The amount produced is controlled by the ECB - the European Central Bank.
Quote:
Originally Posted by jamesqf
Even apart from this expense, how would it help them recover?
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The problem is that there are a number of economies here which are moving at different speeds and in different directions. They all have to finance spending and debt on the international markets, like the US, and all have different ideas on how to best manage their finances. In some countries - Greece, Italy and Spain - tax "non-paying" is endemic so they have to borrow more, and are a higher risk of default so they are facing high interest rates for finance - and are "failing" because of this.
At the same time economies with low growth like the UK (mostly financial services) have cut back on spending - so markets know we will pay. Germany is growing due to their (sensible) concentration on manufacturing - so markets know they will pay. France has avoided issues with banks and is focussing on infrastructure - which is why their trains are about as good as the ones in Japan - but this is public spending so markets
think they will pay but charge a little more for the risk.
The Enigma here is Italy - it uses the Euro, it exports as much as Germany, it has manufacturing and also has excellent technology - yet the government there cannot control spending so all of that is wasted. So they are also in trouble.
The problem is that all of these countries moving in different directions at different speeds are tied together because they all use the same currency. If they were seperate the ones with more risk and lower growth could devalue, or have a slower growth in value, of their currency.
Think back to the past - before WW2 a UK pound Sterling was worth about $20, after WW2 (and we had to borrow from the US to finance it - what, you though all those weapons supplies you sent were free ?) was $10, by 1970 (after 3 wasted decades) it is was $3, and by 1990 it was $2 if we were doing good and LBJ was not standing behind uk.gov's international credit. I'm not complaining about this, it notes our decline in economic superpowerism vs the US growth and was unavoidable - the French Franc had the same issue, as did the Mark.
If you set countries like Greece free to have their own currency then they can devalue and they can compete on price with the rest of us as before, the same for Spain, and to some extent Italy. Their currencies can grow or decline respective to their economic growth or otherwise, setting each country free.
Worked example - Ford setup their factory in Spain (in Valencia) long before Spain was part of the EU and when anything exported from Spain to the EU attracted import duties. It was still cheaper for them to do so and the workers in that factory were paid well compared to the locals and contributed to the local economy. It was a win-win on both sides.
EDIT - Apologies for length of post - annoyance at southern European government shortcomings.