Germany and Greece. Today. 1:30 PM CST.
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| Photo courtesy of www.thegamehunter.co.uk website |
Not a soccer fan? Shame on you. It's the Beautiful Game and is arguably the most popular sport on the planet. Maybe even the universe! The Delasol Group loves a good competition (*rimshot* that was a wonkish econ joke).
But what makes this particular match so intriguing is the background noise these two economies have been making for some time now. If Germany and Greece are just a fraction as exciting about soccer as they are about bailouts, expect fireworks today!
Here's the skinny on the EuroZone Crisis: Greece is broke. Yes, the whole nation. There are years of data showing that the government takes perverse pleasure in spending beyond its means (America too) which means deficits, debt and very painful deleveraging. Greece joined the European Union (EU) in the eighties which gave it hope, but it didn't change its behavior. Nor is the EU a political machine. Economically, it allows member-states to enjoy the benefits of it's "common market" where people, goods, services and capital can move freely across borders. But if it were politically and economically united, the EU could impose laws on countries who mismanage their finances. That, however, would require EU nations ceding some sovereignty, so that's a bust.
In the early 2000s, Greece phased out its drachma and began to use the euro as currency. Mind you, Greece was still spending beyond its income, so its debt continued to rise. The introduction of the euro meant Greeks were required to make deep cuts in public spending and bring inflation under control. Below is a chart showing the Greek deficit since joining the euro. Spoiler: it didn't get better.
So the money ran out and Greece had to appeal to other European nations for a bailout. A year ago, Greece received its first bailout (approx. $140 billion). In March, the Greeks restructured their incomprehensible debt which amounted to the largest sovereign default in history. But it was just a band-aid on an amputation. A second bailout just last month to the tune of $163 billion isn't even helping internal funding issues, but is paying off the interest from the first bailout!
By and large, France and Germany are most exposed to Greek debt. Their taxpayers have made loans to help and now they want their money back. Germany in particular. This is a fiscally solvent, historically relevant nation when it comes to austerity polices. Put simply the Germans go hard with money management. So much so that they're dictating to the Greeks (and everyone else) how they can and can't behave. You can buy this. Not this. Save this. Invest this. Jump! Tsk, tsk...you didn't ask how high! The bailout came with many strings attached, and with Germany at the head of an international, paternalistic, Big Brother handout, there's lots of tension ahead.
So winning today's match may be Greece's only way to stick it to the (wo)Man-in-charge, German chancellor Angela Merkel and her unwelcome (though well-deserved) austerity-for-money schemes.
And what of France? Not surprisingly, they've softened their austerity rhetoric considerably since the euro economic crisis has spilled over to the doorsteps of its allies Spain and Italy, and yes, to its own doorstep as well.
The Euro crisis will continue as debt levels and unemployment continue to rise across the region (except in Germany). Without political unity, the Eurozone economy will crumble. Without sovereignty, member-states will not agree on political unification.
If only real life were as beautiful as the game. Here's to Greece getting some sunshine in today's quarterfinal match!
Prosperity,
@RogueEconomista
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