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Thursday, March 11, 2010

The Ant and the Grasshopper

This is an interesting article from Der Spiegel, conveying a conservative German perspective on the debt crisis in Europe and the fate of the Euro.

http://www.spiegel.de/international/europe/0,1518,682432,00.html

On one side is the collapse of Greece and the ripple effect on the Euro and the other side is bail out, moral hazard, and eventual collapse of the Euro. Some choice...

The premise of the European union was that debts of poorer countries would not become debts of the Germans and French. However, if the Germans and French have no exit strategy other than bailing out Greece (and eventually Itlay, Spain, etc), those debts become their debts. Why be fiscally responsible if your reward is to bail out those who are not? This is not a new concept. It sounds like the parable of the ant and the grasshopper.

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