StoneColdAtheist: The unmentioned 800-lb gorilla sitting quietly in the corner of the room is the aftereffects of even one Euro country defaulting on its loans. If, for instance, Greece defaults and stiffs the banks it owes money to, every sub-Saharan African country will do the same, followed immediately by all the wobbly countries in South America and Asia.

THEN we're really farked on our side of the pond.

I doubt they would do so, since it would make it more difficult to get IMF money in the future (the sub-Saharan African nations and the South American nations). Actually, South America's doing pretty well right now. I would be surprised if a breakup of the EU or a weakening of the Euro was complemented by a strengthening of Mercosur (not as a direct consequence, just a coincidence).

The EU itself will under no circumstances allow Greece to default. However, any additional money given to Greece is going to cause resentment in the stronger European economies, because they don't view themselves as a unified economy, they view themselves as lots of regional economies. If money from California goes to help Mississippi, no one gets really up in arms and threatens to leave the Union (well, stupid people do), because California and Mississippi are viewed as the same country, same culture, same America (by most people). In Europe, no one thinks "I'm European before I'm French/German/Greek/whatever".

Anyway, Greece won't be allowed to default; the EU will step in. What that will mean ten years from now I don't know, but neither the Eurozone nor the EU as a whole (yes, I know one is not a perfect superset of the other) will be breaking up any time soon.

vinnybang: Lord Dimwit: StoneColdAtheist: The unmentioned 800-lb gorilla sitting quietly in the corner of the room is the aftereffects of even one Euro country defaulting on its loans. If, for instance, Greece defaults and stiffs the banks it owes money to, every sub-Saharan African country will do the same, followed immediately by all the wobbly countries in South America and Asia.

THEN we're really farked on our side of the pond.

I doubt they would do so, since it would make it more difficult to get IMF money in the future (the sub-Saharan African nations and the South American nations). Actually, South America's doing pretty well right now. I would be surprised if a breakup of the EU or a weakening of the Euro was complemented by a strengthening of Mercosur (not as a direct consequence, just a coincidence).

The EU itself will under no circumstances allow Greece to default. However, any additional money given to Greece is going to cause resentment in the stronger European economies, because they don't view themselves as a unified economy, they view themselves as lots of regional economies. If money from California goes to help Mississippi, no one gets really up in arms and threatens to leave the Union (well, stupid people do), because California and Mississippi are viewed as the same country, same culture, same America (by most people). In Europe, no one thinks "I'm European before I'm French/German/Greek/whatever".

Anyway, Greece won't be allowed to default; the EU will step in. What that will mean ten years from now I don't know, but neither the Eurozone nor the EU as a whole (yes, I know one is not a perfect superset of the other) will be breaking up any time soon.

And what of Italy? THey are hanging on by a thread and their bonds are trading at over 7%, which I understand is very bad. The IMF is saying they cannot possibly bail out the zones' third largest economy and the European central bank is giving them the finger.

Unless the Eurozone pulls a proverbial rabbit out of its collective asses in some form of fiscal unity, it's a wrap...I I honestly think it is too late for even that.

Italy won't be allowed to default either. Not at this point. The economy won't be bailed out necessarily, but massive currency inflation combined with incredibly severe austerity measures, isn't out of the picture. And Italy will take it, the inflation and austerity, because they know they're really boned if they're forced out of the Eurozone.

krusader3z: No.

http://online.wsj.com/article/SB1000142405297020369940457704417275444 6 162.html?mod=googlenews_wsj

I do fully expect this crisis to result in more economic integration, not less.

However, any rosy future is less likely unless the Europeans solve their demographic time bomb. There simply aren't enough babies being born to support an aging population.

StoneColdAtheist: Lord Dimwit: Italy won't be allowed to default either. Not at this point. The economy won't be bailed out necessarily, but massive currency inflation combined with incredibly severe austerity measures, isn't out of the picture. And Italy will take it, the inflation and austerity, because they know they're really boned if they're forced out of the Eurozone.

I think you're indulging in wishful thinking. The EC cannot compel a member country to not default. If Greece/Portugal/Italy default...and they CAN--not saying they WILL...the (Euro) game is up and the world goes into another Great Depression.We'll know in another month or two.

Right, I don't think they can literally force a member to avoid default, but they can be very persuasive. For example, despite what a lot of people are crowing, the members of the Eurozone know it's in their best interest to remain members, so being threatened with removal from the Eurozone if they default would probably be sufficient to keep them from defaulting.