[dreamdu5t]

I'm surprised nobody has pointed out that the Euro is a tragedy of the commons.

"Pooling sovereign debt absolves the most irresponsible nations from confronting their unsustainable spending by forcing more responsible nations to pick up the tab. All of the incentives are weighted in favor of irresponsibility and none to responsibility. No pie-in-the-sky plan by the EU to dictate budgets to its members will ever work. The members will either ignore such interference or, as has already happened, cook the books to make it appear that they are doing so." – From Philipp Bagus' The Tragedy of the Euro

[arijo]

Unlike in the US, in europe the central bank can't lend to euro zone countries. Countries must borrow money from the banks and banks (like Goldman, Morgan Stanley, Deutsche Bank, etc) lend money to countries at highly speculative rates. If you had taken the time to inform yourself before opening your mouth you'd have known that countries like Portugal and Spain had relativley low deficits (much lower then the US) before the financial crisis. Please stop with this 'northern european countries superior monkey' narrative.

[dreamdu5t]

The ECB purchases member countries' debt. They move bad or weak assets off the balance sheets of the weak member banks into the balance sheets of the ECB. The stated purpose of the European Financial Stability Facility is to pool sovereign debt. The owners and shareholders of the european central bank are the central banks of member countries.

I didn't say anything about northern European countries being superior. It's a completely factual statement to say some countries are more solvent than others. It's not a value judgement.

[arijo]

The ECB buys souvereign debt incurred by countries that have no option but to borrow money from banks that demand very high interest rates - much higher than the interest rates the ECB charges comercial banks.

The purpose of the European Financial Stability Facility is to prevent german and french banks to go bankrupt in case any of the attacked countries default.

"It's a completely factual statement to say some countries are more solvent".

If by some countries you mean the northern countries, this is false: Spain had a superavit before the financial crisis - Germany did not.

Do not confuse opinions with facts.

[dreamdu5t]

I don't know what your trip is with "northern countries." I never brought up specific countries or mentioned Spain or Portugal.

I was simply pointing out a fact that the ECB pools sovereign debt, and because of that will suffer from the tragedy of the commons - perverted incentives.

[robrenaud]

For those confused readers, superavit is the Spanish and Portuguese word for surplus.