The Fed Will Buy Bond ETFs Now

Re:The Fed Will Buy Bond ETFs Now by vasco on Tuesday May 12, 2020 @04:34PM (#23159359)

This friction as you call it, is happening again during the current crisis, again between southern european countries and mostly Netherlands and Germany, specifically on the topic of coronabonds which has been widely debated and made lots of headlines. The way the euro works the main direct benefits go to the largest exporting economies, with the weaker ones pretty much losing out. Then the idea is that this is offset by the stronger economies helping the weaker ones in the form of EU grants but there's always a big push back as these direct funds are seen as handouts while the benefits of the common currency are dismissed. This pressure is seen clearly in demands for harsher and harsher austerity. It doesn't help that some officials from northern economies keep showing how they really feel about the situation, going as far as providing quotes like southern countries "spending all their money on women and wine" and the whole PIIGs designation. It's a tough thing to try and rationalise for someone who largely believes in the EU project but who is originally from one of these southern countries and has felt the direct effects of the whole post-2008 period.

[ Parent | on HN ]

Re:The Fed Will Buy Bond ETFs Now by nelaboras on Wednesday May 13, 2020 @12:59AM (#23163622)

I think the narrative has changed quite a bit since the initial austerity policies of the 2009 crisis. Arguably some of the enforced changes were long overdue, while others went far beyond the reasonable. But it's also how they were implemented that mattered.

Portugal was under the troika but efficiently implemented things and quickly got out of it. Greek and Cypriot governments tried to game the system again and again, e.g. the troika imposed on Greece (or rather agreed with Greece, there's some nuance) an obligation to reduce it's overblown public sector by reducing the number of public servants. They did make a mistake though as they did not specify which public servants.

What does the Greek government do? They massively reduce the number of teachers, then turn around and ask the European social fund for money to cover annual replacement teacher contracts.

But the overblown administration has not shrunk much (and each time the government changes they do as before and rehire their allies...). Instead everyone curses the EU/troika/Germany/... for 'imposing' these cuts when the cuts per se are often not the issue, but rather the implementation.

You can also see why countries like Germany are scared of mutualised debt: Since the introduction of the euro, Italian debt has increased massively because it was so cheap. Easier to loan money and serve a few favors when the government will anyway change in 2 years and the current one doesn't have to bear responsibility for the long-term damage. It's of course a much more complex story, but there's no denying that irresponsible government spending is part of it. Italy is desperately hoping for inflation to shrink the debt:GDP ratio as it's become pretty impossible to pay it back anyway...

[ Parent | on HN ]