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Greece's economic outlook, from the streets of Athens

Tue, 2015-07-14 13:00

Although immediate danger of an economic collapse has passed, Greece and its people have a long way to go before things feel comfortable, or even normal.

In Athens, the attitude about Greece’s future is a mixed bag. There are citizens like Olga Karastathi, on the one hand. Karastathi opened up Chemin Bakery in Athens just as Greece was getting into economic trouble despite the turmoil, and she’s still optimistic.

“We don’t have any profit, but we keep going and hoping for the best,” she says.

For Karastathi, staying in Greece was never up for debate. 

“I don’t want to leave, I want to stay and try to make things better,” Karastathi says. 

Nick Voglis, owner of Trends Subs and Salads in Greece, shares Karastathi’s optimism. He was abroad for 20 years before coming back to Greece 16 years ago.

“I came here to create this into a franchise,” Voglis says about Trends Subs and Salads. “Unfortunately we were not able to do this.”

Voglis says that his restaurant has downsized significantly in the past several years: “Our business has fallen since the peak of 2007 by about 40 to 50 percent. We are barely making money.”

Still, he too remains optimistic that things can return to a level of stability in Greece.

“This is the biggest experiment in the Western World,” Voglis says. “I believe it’s going to work eventually. Every time you have a major problem you find solutions if you want to find a solution.”

On the other hand, there are Greeks like Tonia Korka. She’s juggling multiple jobs to support her son. Unlike Olga and Nick, Korka’s view of Greece’s future is bleak. She has no savings or bank account. Korka says her thirteen year old son isn’t as shaken by the economic downturn as she is.

“He’s not complaining because he’s a kid of the crisis, so he’s used to it, let’s say. He knows that this is the way things have to be,” she says.

Korka wants to get a job outside of Greece to support her family. She explains, “I would leave right now. If I had a job outside of here…I believer that here we’re lost, we’re done as a country”

Then, somewhere in the middle there are college students like Efie Garavela. Garavela has grown up dealing with this economic crisis. She still has two years left in school before she enters the job market, but even now she’s doubtful of her job prospects in Greece.

“My dreams are kind of crushed right now,” she says. “I’m really nervous about my future, to be honest. I just feel that I’m so young and I have so many dreams, and I want them to come true. And this country doesn’t offer me the chance to do so.”

The people living and working in Greece aren’t the only ones thinking about Greece. There’s also the flocks of tourists. One tourist, Sangeeth Perui, brought his family to Athens for a family vacation.

“The main thing I noticed is what you see in the press is a lot different than when you get here. It doesn’t seem like people here are nearly as worried as the press. It’s kinda like in California, you know, you go anywhere else and they think we have no water and we’re dying of dehydration, but California things seem find when you live there,” Perui says.

Other tourists, like Gail Allen, noticed that the lack of crowds seemed unusual. “You can tell there’s something different because it’s not busy on the streets and stuff. I’m hoping the tourist season will bring back the economy a little bit.”

Three jobs, a family and uncertainty

Tue, 2015-07-14 12:59

Kai Ryssdal is reporting live from Athens. He talks with Tonia Korka, a mother and research associate at the Hellenic Institute of International and Foreign Law, about her job prospects in the future.

 

Sandwich shop owner keeps the optimism alive in Greece

Tue, 2015-07-14 12:59

Kai Ryssdal is reporting live from Athens. He talks with Nick Voglis, owner of Trends Subs and Salads in Greece, about what it's like trying keep a small sandwich shop afloat during economic turmoil.

Little Athens has to cope with the crisis, too

Tue, 2015-07-14 12:59

The Greek debt crisis has consequences for businesses outside of Greece too. In the Astoria neighborhood of Queens, New York  — also known as Little Athens — some store owners have higher prices for many products, which is hurting business. 

Dianna Loiselle of Telly's Taverna says the products she buys from Greece have spiked since the economic crisis began.

“The olives we buy were about $28, $29, and now they’re $52,” she says. 

Antony Fidanakis of Titan Foods has also been experiencing price hikes at his store.

“We used to be a store that was known for bargains,” he says. “We’ve actually become more and more expensive because all of those exports we’re buying from Greece have become less and less competitive.”

Tourism in an economic crisis

Tue, 2015-07-14 12:59

Marketplace host Kai Ryssdal is reporting live from Athens. He spoke with several tourists at the Acropolis of Athens to get their reactions to the crisis in Greece.

Promise, risk await post-sanction Iran

Tue, 2015-07-14 12:58

Iran today is young.  Sixty-four percent of the population is under 34 years old. 

Iran today is also getting older.  Its “youth bulge,” as demographers refer to the spike in births in the '80s and early '90s, is starting to think about “bread and butter issues – jobs, getting married, getting your own apartment,” says Kevan Harris. He's the Associate Director of Princeton University's Mossavar-Rahmani Center for Iran and Persian Gulf Studies. 

“Twenty percent of adults in Iran have some form of higher education, and among Iranians of college age now, 50 percent are going into higher education,” Harris says. Harris says Iran today is also highly educated.   

Ian Bremmer, head of Eurasia Group, says the country and its population are uniquely situated among its regional neighbors. “The country is relatively open, it’s a relatively diverse economy, and that you have a fairly globally-oriented young people in it ... means the ability of Iranians to take advantage of sanctions relief is much greater.”

Iran today is also frustrated, observers say.

“After going out of the universities they expect to find good jobs, but it is very difficult to find good jobs, or jobs at all,” says Hossein Bastani with BBC’s Persian Service.  “Many are qualified but cannot find jobs so it leads to frustration.”

These young aspiring Iranians – and their government – are hanging a lot of their hopes on sanctions relief, says Princeton's Harris.

“This kind of deal represents for them, maybe over optimistically, a big chance for a change,” he says.  “They believe European investment, maybe even American investment, will upgrade the economy.”

For U.S. and European companies, Iran represents a market for imports currently dominated by Asian companies.

“Asia has captured Iran’s market,” explains Ebrahim Mohseni, research associate at the University of Maryland’s Center for International and Security Studies.  “Basically that means China.  But what you need to keep in mind is that opinion polls have also shown that people ... don’t like Chinese goods. They’re forced to buy them.”

American and European goods are available, he says, but they are luxury goods, bought through intermediaries at highly marked up prices. iPhones are not unheard of on the streets of Tehran. As sanctions are relieved and Iran’s dismal exchange rate improves, buying power will also increase, says Fariborz Ghadar, senior adviser at the Center for Strategic and International Studies and professor at Penn State.

“The GDP of Iran is twice that of Greece, and the population is seven times of Greece, much younger, much more entrepreneurial, and much more willing to buy stuff,” he says. 

 The associated expectations carry the possibility of disappointment, experts say, since foreign businesses may not trust that the deal will last, or they may not view Iran as a safe place to invest.

“Even before sanctions, a lot of oil and gas companies just kind of threw in the towel because they found it so difficult to operate with the Iranians,” says Keith Crane, senior economist at the RAND Corporation.  

If this occurs, foreign firms may simply view Iran as a market in which to sell goods “for fast, risk free cash,” says University of Maryland’s Mohseni.  “If this happens, there is going to be a rise in unemployment.  A lot of Iranian industry is likely to go bankrupt because they will not be able to compete, which would result in unemployment .”

It’s not simply the spending by foreign investors that is in the air.  Out of the hundred billion dollars in Iranian assets released by the U.S. government under the deal, the government that made the deal has limited discretion on how to spend it, analysts say. 

If that is not spent productively, he says, there is a risk that the government of President Hassan Rouhani will not be able to fulfill its promises of creating employment and development. “It’s not the only decision maker,” Hossein Bastani says.  “There are a lot of government institutions not controlled by the government, that do not report to the administration – I’m talking about state-run institutions under the control of supreme leader Khameini.  There will be competition among such institutions to have a bigger share of the released money.” 

“If young people believe that the speed of change is not sufficient, they will become angry," Bastani says. 

Sweet treats in the midst of economic fallout

Tue, 2015-07-14 12:58

Marketplace host Kai Ryssdal is reporting live from Athens. He spoke with Olga Karastathi, owner of Chemin Bakery, about how she started her business during the economic crisis, and why she’s still hopeful.

College students feel the weight of the Greek crisis

Tue, 2015-07-14 12:58

Marketplace host Kai Ryssdal is reporting live from Athens. He talked with Efie Garavela, a twenty-year-old college student in Athens, about how she feels entering Greece’s job market.

One last moment from our trip to Athens

Tue, 2015-07-14 12:56

We're on our way home tomorrow, after two days of live broadcasting our show from Athens. 

Saturday morning, we were talking to Vassilis and his boss at Bairaktaris Taverna, when someone else wanted to hop on the mic and say her piece about Greece.

It's worth a listen for the historical perspective, if nothing else. Hear the bit of tape in the audio player above.

We made it to Pluto. Now what?

Tue, 2015-07-14 03:00

After more than 9 years, and 3 billion miles, NASA’s New Horizons probe flew by the dwarf planet Pluto Tuesday morning.

The project cost somewhere in the neighborhood of $700 million.

But John Logsdon, Professor Emeritus at the Space Policy Institute at George Washington University, says the cost is worth it when you think about what has just been accomplished.

"We sent this little spacecraft — it's just the size of a piano, about 1,000 pounds — 3 billion miles. Hit a 60 by 90 mile target," he says. "We're seeing things that humans have never seen before. If that can't excite people, what will?"

Click the media player above to hear more.

 

PODCAST: A date with Pluto

Tue, 2015-07-14 03:00

First up, we'll talk about how the lifting of sanctions on Iran could affect the global oil market. Next: the apparel industry is looking to Africa as its next manufacturing base for cheap clothing. Ethiopian wages are one third those in Bangladesh. All that needs to happen is to persuade manufacturers to build factories there, install an infrastructure, train a workforce, and solve shipping challenges. Plus, we'll talk about the New Horizons probe and its date with dwarf planet Pluto.

Oculus Rift could help people with vision problems

Tue, 2015-07-14 02:00

The Oculus Rift, a virtual reality headset that makes users feel like they're in another space by filling their field of vision with 3D video, doesn't have a price tag yet.

The consumer headset will probably set gamers back a few hundred dollars when it goes on sale early next year. But gamers won’t be the only customers. Scientists have also been exploring virtual reality with the Oculus Rift. 

Felipe Medeiros, an eye doctor at UC San Diego, has been using the Oculus Rift to help his visually impaired patients. 

One of them is Melinda Person. Last summer, she was walking to her neighborhood grocery store. She crossed the street and stepped onto a familiar curb. At least, she thought she did.

"I'm seriously telling you, I thought I was stepping on the curb," she says. "You know, it bothers me to think about it right now."

The curb was actually a step away. She tripped and lost her balance.

"I stepped and the next thing I knew, I was down on the street."

Person didn't sustain any major injuries, but falls like these can be devastating for people with glaucoma. Person has lost 86 percent of her peripheral vision to the disease. Now, she doesn’t go anywhere without a cane.

"I only have what I can see in front of me," she says, describing her tunnel vision. "When I'm looking at you, you're pretty much all I see."

Medeiros says right now, eye doctors don’t have very good ways of spotting balance problems in glaucoma patients.

“We need to have tests that are more realistic," he says. "I wanted to actually have an immersive environment that would better simulate the challenges that patients face.”

In a recent study, Medeiros used the Oculus Rift to immerse patients inside a virtual spinning tunnel. Participants felt like they were moving, and they tried to compensate by swaying. Mederios noticed that glaucoma patients swayed more than normal — and those who swayed the most had the greatest history of falls.

"It performed better than the conventional test that we use in clinical practice," Medeiros says.

Medeiros thinks the Oculus Rift could spot balance problems earlier so patients can get help on preventing falls. Melinda Person says when she first strapped on this headset, she didn’t even realize it was designed for video games.

"I'm not really a video gamer," Person says. She's played a few video games with her grandchildren, but she says, "they're not playing anything like this!"

Virtual reality is not new in medical research, but it used to be very expensive. Today’s headsets are priced with gamers in mind. And that means a lot more scientists are getting to play too. 

Comcast courts cord-cutters with new streaming service

Tue, 2015-07-14 02:00

In August, Comcast's new T.V. streaming service called Stream will launch in Boston. Marketplace Tech host, Ben Johnson, talks with Lindsey Turrentine, Editor-in-Chief at CNET.com, about the cable's company entry into the streaming market.

Click the media player above to hear more.

Turrentine says the new service "is obviously aimed at cord cutters." She maintains the cable giant's move to debut Stream in Boston is just as strategic as it is transparent: "It seems pretty obvious that they're trying to figure out what college students will do," alluding to the number of colleges in the Boston area. 

Comcast's Stream will be available to Xfinity customers and will give them access to about a dozen T.V. channels on their tablets, phones, and laptops. Stream also provides a DVR option to record shows onto the cloud. Turrentine believes that it "feels more like television." Apart from the fact that "it's not available on your television." 

In a time of expansion in the streaming service industry with services from Dish, HBO, Showtime, CBS, and more, Turrentine says Comcast "has got to have an answer" because "customers who are never onboarding as cable television subscribers will be totally lost to these services if cable companies do not figure out how to keep them."     

The test for college-aged Bostonians is whether they would want to add an extra monthly fee for 12 stations and a DVR. This is sounding a lot more like bunny ears and a VCR than a multi-platform video streaming experience. 

 

Agreement struck between Iran and major world powers

Tue, 2015-07-14 02:00

After years of negotiations, Iran and six major world powers — the US, UK, France, China, Russia and Germany — have reached a deal over the country's nuclear program.

The agreement aims to curb Iran's production of nuclear weapons — In return, the US, United Nations and European Union will lift sanctions. The deal still has to make it through Congress, but if it goes ahead, Iran will start ramping up its oil exports.

Click the media player above to hear Barbara Shook, senior reporter-at-large with the Energy Intelligence Group, talk about how the global oil market could be affected.

From our partners at the BBC:

President Barack Obama said that with the deal, "every pathway to a nuclear weapon is cut off" for Iran.

His Iranian counterpart, Hassan Rouhani, said it opened a "new chapter" in Iran's relations with the world.

In a televised address, Mr. Obama said the deal would make the world "safer and more secure", and provided for a rigorous verification regime. "This deal is not built on trust - it is built on verification," he said.

He said the deal would lead to the removal of all sanctions, adding: "The sanctions regime was never successful, but at the same time it had affected people's lives.''

After 12 years, world powers had finally "recognised the nuclear activities of Iran", he said.

Big bank outlook: slow and steady

Tue, 2015-07-14 02:00

Bank earnings for Q2 2015 are up this week: JP Morgan Chase and Wells Fargo report their revenues and profits on Tuesday, July 14; Bank of America on Wednesday, July 15; and Goldman Sachs and Citigroup on Thursday, July 16.

Over the past several years, the biggest U.S. banks have been through financial crisis, massive bailouts and multi-billion-dollar lawsuits over their mortgage-lending and investment practices. 

Now, banks face significantly more regulation and scrutiny than before, restricting how much risk they can take with their own and other people’s money. They have cut back on formerly lucrative proprietary trading as well as investment banking and deal-making activity.

All of which is keeping earnings potential low, says banking equity analyst Erik Oja at S&P Capital IQ. “It’s like it had a neutering effect on a wild animal,” says Oja. “They will certainly not be capable of the explosive growth they were capable of in a previous era. They will be much safer, much slower-growing.”

Oja predicts that the big banks will increase their profits in Q2 2015 by 2.2 percent over Q2 2014. That is after taking account of several huge legal settlements that banks paid out one year ago. Oja says the biggest potential legal liabilities are now largely behind the banks. 

Karen Petrou at Federal Financial Analytics says the new regulatory regime, plus tighter underwriting standards, have helped shore up banks’ balance sheets. “The banks are sound,” says Petrou. “They have a lot more capital, they’re holding a lot more liquidity.”

The challenge for banks now, say analysts, is to increase profits in an environment of moderate domestic economic growth and volatility in overseas markets like Europe and China, and with U.S. borrowers still paying rock-bottom interest rates.

#Pluto #nofilter

Tue, 2015-07-14 01:54

3 billion miles

That's how far New Horizons has traveled since 2006 in its journey towards Pluto. On Tuesday, the craft snapped photos as it passed the dwarf planet, which NASA posted to its Instagram account. As Buzzfeed reports, New Horizons came within 7,750 miles of Pluto, the closest a spacecraft has ever come to the planet's surface.

SNEAK PEEK of gorgeous Pluto! The dwarf planet has sent a love note back to Earth via our New Horizons spacecraft, which has traveled more than 9 years and 3+ billion miles. This is the last and most detailed image of Pluto sent to Earth before the moment of closest approach - 7:49 a.m. EDT today. This same image will be released and discussed at 8 a.m. EDT today. Watch our briefing live on NASA Television at: http://www.nasa.gov/nasatv The high res pic will be posted on the web at: http://www.nasa.gov. This stunning image of the dwarf planet was captured from New Horizons at about 4 p.m. EDT on July 13, about 16 hours before the moment of closest approach. The spacecraft was 476,000 miles (766,000 kilometers) from the surface. Image Credit: NASA #nasa #pluto #plutoflyby #newhorizons #solarsystem #nasabeyond #science

A photo posted by NASA (@nasa) on Jul 14, 2015 at 4:00am PDT

6

That's how many world powers reached an agreement with Iran to curb its nuclear program. In exchange, the U.S., United Nations, and European Union will lift sanctions placed on Iran. That leaves many experts wondering what will happen to the global oil market when Iran is able to ramp up its exports.

92 percent

That's the iPhone's share of total smartphone profits, which is up from the 65 percent it took in last year, according to a new report. And as the Wall Street Journal points out, that's an impressive take given that Apple only sells 20 percent of smartphones by unit.

250,000

Speaking of Apple, that's how many retail locations will offer Apple Pay in the UK, making it the first market outside of the U.S. to offer the digital-wallet system. But as Bloomberg reports, it will be a tougher sell than in the U.S., as the U.K. is much better set up with contactless pay systems — Apple pay requires users to hold a button, as well as correct positioning.

Africa starts to lure garment makers from Asia

Tue, 2015-07-14 01:30

The continent of Africa has historically struggled to grow its manufacturing base. That appears to be starting to change in the textile and garment industries. As the Wall Street Journal notes, Africa is now being viewed by some companies as a low-cost competitor to countries like China, Vietnam and Bangladesh.

According to the International Labor Organization, garment industry wages in Ethiopia run about $21 a month. That’s compared to $67 in Bangladesh and much higher in China.

Steve Lamar is with the American Apparel and Footwear Association. He says countries like Ethiopia and Kenya have been successful to integrating industries up and down the textile supply chain.

“The ability to transform from fiber through yarn and into fabric and garment,” Lamar says, “that will become an additional magnet for more sourcing from Africa."

Another driver of the growth in the African textile industry are rising costs in Asia.

“You know, costs in China, which is the world’s largest apparel manufacturer by far, have been going up," says Kimberly Elliot, a senior fellow with the Center for Global Development. "Wages in particular have been going up for several years now.”

China and Vietnam still account for over 50 percent of all U.S. clothing imports, and Elliot doesn’t expect that to change any time soon. “This shift is still pretty small, the numbers are still pretty small relative to the global textile and apparel market.”

Labor aside, Elliot notes that other costs, such as electricity, water and transportation, can be quite high in Africa.

A street-level view of of the Greek debt crisis

Mon, 2015-07-13 13:01

Greece has finally settled on a deal that keeps the country in the eurozone and out of a sudden banking collapse. The agreement in Brussels on Monday calls for a lifeline from Europe’s wealthy powers in exchange for budget cuts and tax hikes; Greece must pass those reforms by Wednesday. Although Greece may have avoided total economic collapse, there will be a long period of adjustment for Greek citizens who already have been living with austerity measures for five years.

In Athens, there's no immediate sense of crisis. There are lots of crowds — window shoppers and people in cafes. But most of them are not Greek. They’re tourists. Look past them to the shop owners and local workers, and you find a lot of anger, resignation and the overwhelming sense of uncertainty about their post-bailout future. 

“It’s a very, very tough deal," says Anastasia Giamali, a Syriza party member who writes for the affiliate paper The Dawn. She is unhappy with the deal because it goes against the wishes of the Greek people, expressed in the July 5 referendum, when Greeks overwhelmingly rejected European creditors' bailout terms.

"It’s a product of blackmail. There was no consent by Syriza for such a thing,” she says. 

Spiros Koloniadis

Tommy Andres/Marketplace

However, she stands by Prime Minister Alexis Tsipras. “Our prime minister did his best to avoid the Grexit, and that’s all there is to it. He did his best to keep the country within the European Union.”

Syriza came to power at the beginning of the year with an anti-austerity stand and the motto, “Hope is coming.” Giamali isn’t sure if this has been achieved, but she knows they’ll keep trying.

“This is an ongoing battle. This is an ongoing war,” she says.

Spiros Koloniadis, who owns a flower shop beneath Parliament, also draws parallels to war, but is more circumspect about his own future. 

“I don’t think that we have a sovereign nation anymore," Koloniadis says. "I think that the historian of the future will have to write many pages about what happened actually in Greece.” He isn’t sure what his next steps are, but he thinks he will stay in the country.

“Migration is like escaping from the war," he says. "I really don’t know. Right now, I’m a little bit confused and very disappointed … very. I will fight … with my heart.”

Over at Zolotas Jewelry House, a 120-year old upscale jewelry store in Athens, business has gone from one extreme to the other. Marianne Le Clere Papalexis is the owner there. She is a posh Frenchwoman who married a Greek man 40 years ago and stayed in the country.

Business had been slow, she says, but everything changed after the banks closed. For the first three days, there were no people, no phone calls. It was like a cemetery or a desert, she says. Then, on the fourth day, people started showing up and buying like crazy. They wanted to get real assets — gold and art — for potentially worthless cash.

“They know that it’s going to be a real good investment for them. In a way it’s sad, because you see that people are really upset that they cannot touch their own money,” Papalexis says. She expresses concern for the Greek government.

“It’s the only thing we’re talking about,” she says. And yet, she believes that the real struggle will not be visible to most because of communication differences. “A Greek person … he will show when he’s happy. He’s going to dance and shout, but when there is a bad story, he will never show, never tell you.”

But Vassilis Anastassopoulos is a little more forthcoming about his predicament. Anastassopoulos is 32 years old, married, with a 10-year-old boy. He works at Bairaktaris Tavern, a restaurant in Monistiraki Square that has been around for 135 years, where he’s sliced gyro meat for a decade. At this point, he has basically given up.

“I hoped to make a future for my son, because I don't have a chance anymore," he says. "I stopped thinking about a pension. I stopped thinking about a better life. The only thing I hope for now is for my son to have a better life than me.

An ATM in Athens.

Tommy Andres/Marketplace

"Maybe he will not stand in the heat nine hours a day. Maybe he will not need to have two jobs to have a normal life … maybe,” Anastassopoulos says.

At a cash machine in Athens, Corinna Kozala is waiting in line to withdraw $66 for rent. It was her second ATM of the morning; the first one ran out of money. With banks low on cash, Greeks have been limited to $66 withdrawals per day since June 29.

“Even with an agreement, when the banks open, they cannot just give out money to everyone who wants it,” Kozala says. She wants Greece to stay in the eurozone but believes that either option will lead to the same results.

“It’s either we’re out and we will suffer, or we’re in and we will suffer.”

How do you pronounce Greece's favorite food?

Mon, 2015-07-13 13:00

Remember Vassilis Anastassopoulos, the restaurant worker we spoke with at the top of our first show in Athens? He talked to us a little about gyros.

"It's different kind of meat with pita bread, and it's the No. 1 most favorite food," he said.

Well, there was a little bit of the interview we didn't play for you, where he lets us know it's usually pronounced "gear-os" not "gy-ro."

Which is good to know, because I get that wrong all the time.

 

How the euro went from unifying force to divisive one

Mon, 2015-07-13 13:00

The euro hit the streets of Europe in 2002 with much fanfare. It was seen at the time by many as a tangible, unifying force.

Then things changed.

“The euro has been much more of a divisive force since the crisis,” says Carmen Reinhart, professor of international finance at Harvard, referring to the global financial crisis. 

The euro became divisive because the different economies of different countries needed the currency to do different things.

“Periphery Europe really needed a cheaper euro, a depreciation, whereas the creditor countries like Germany did not,” Reinhart says. 

The strain sent Europe’s economies in different directions and revealed the fissures between them. But this wasn’t because the euro had pulled them apart; rather it was that the currency wasn’t enough to hold them together. Currency unions need much more than currency to be successful.  

“The idea was that monetary union would only work if it led to banking union, fiscal union, and political union,” says Barry Eichengreen, professor of finance at University of California, Berkeley.  “The belief was that those other good things would follow.” But they didn’t. 

Campbell Harvey, professor of finance at Duke, says the motivation to do so wasn’t there. “Given that economies were growing, people didn’t think it was urgent to implement the next step.”

The banking systems are not fully integrated. At different times, fearful Europeans have taken deposits out of banks not only in Greece but also in Ireland, Spain, Portugal and Italy, says Harvard's Reinhart, out of fear that individual national banking systems might fail. 

Nor are there sufficient ways to cope with the fact that individual countries don’t have recourse to individualize monetary policy. An instructive comparison can be made with the United States. Fifty different states with different economic needs could theoretically benefit from having individual currencies and interest rates. Yet they all share the dollar without incident. 

“The key difference is that the U.S. also has a banking union and a fiscal union,” Reinhart says.

“In the U.S. we have the Fed,” says Harvey. “They set the monetary policy, whereas in the eurozone, you have all these individual central banks to get agreement from. The European Central Bank is really shackled by a decentralized system.” 

The federal government in the U.S. also reallocates resources between different parts of the country to create a buffer for economies suffering during a downturn. 

“Certain areas of the U.S. are at certain times net payers to other parts of the U.S.,” says Stephan Siegel, who teaches finance at the University of Washington in Seattle. Income taxes collected in one region may be used to support federal benefits somewhere else. 

In Europe, those "certain areas” are Germany and Greece, for example. That creates political tensions when it comes to moving resources. 

In the U.S., “we’ve created a lot of these [resource reallocating] institutions before it was clear which way the transfer and funds would go,” says Eichengreen. “So we have the FDIC to step in to use federal taxpayers' money to resolve a bad bank when there is a banking problem in Nevada or Florida. But when we set that fund up it wasn’t clear whether the transfers would go from Florida to Nevada or Nevada to Florida. Now in Europe everyone knows the transfers will go from Germany to Greece.” And that’s where things can get nasty.

“In Europe you don’t have this, where by default a German taxpayer would help out Greek or Spanish or Italian citizens hit by economic shocks,” says Siegel. “And you don’t have at least any type of European institution that could step into the market to raise funds to offer support. This is all left to the individual country in Europe, whereas in the U.S., it’s happening at the federal level. That federal level is absent in Europe.” 

Europe, despite its open borders, also lacks a degree of labor mobility, according to Duke’s Campbell. “So when you don’t have the mobility to relocate,” he says, “then it’s much more difficult to have a common currency.”

If you can’t move to a different economy, you want to change your own – which is exactly what European countries can’t do under the euro. In short, says Campbell, European unity requires much more than a currency.

 

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