The Eurozone Crisis and Slovakia

Greek default is just a matter of time

Slovakia holds up European bailout plan

Euro stability fund is a mirage (European Financial Stability Facility)

Slovakia gives OK to Europe bailout plan

This first thing we have to know is that the whole thing going around here is related to Greece default. The debt level of Greece is not sustainable and they will surely go into default - a condition where they cannot pay their creditors. The large debt is due to its economic recession for years. 

On Tuesday, October 11, Slovakia government has not approved the plan to overhaul the bailout fund, or the European Financial Stability Facility (EFSF). Since it was tied to a vote of confidence of Slovak Prime Minister Iveta Radicova, she has resigned. 

The EFSF is a company which was agreed by the 16 countries that share the euro on May 9th 2010 (Slovakia was not a member of European Union back then), to function by its objective to preserve financial stability of Europe's monetary union by providing temporary financial assistance to euro area member states in difficulty. The plan Slovakia has rejected was a plan to enhance the magnitude of the EFSF, to give the fund more flexibility to stabilize shaky government finances and provide money for banks that need to raise capital - and that would be the banks of Greece.

The bill Slovakia has rejected is suggesting to increase the amount of bailout fund to €440 billion, which means the member states have to pay more to the EFSF. 

What will EFSF do with this money? One of the many scenarios tells that the EFSF could buy €440 billion worth of bonds issued by Greece government and use those securities as collateral to borrow from banks in the private sector. The proceeds could then be used to buy even more government bonds.

The High Cost of Market Failure

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The protest in the wall street is now entering its fourth week. One of the many reasons why Americans protest is that executive pay is rising strongly while share prices are down and returns to shareholders falling. The article is pointing out that while people have worker's pay rising roughly 3% a year, executive salaries put on double digit returns. "The market is broken", they say, because supply and demand are not intersecting efficiently. There is no credible evidence that paying more to CEOs result in better profit. For example the CEOs of America's Big Four banks are paid $10 million salaries despite presiding over corporations that cannot go bust. And it's unfair since no small business in the country is afforded the same protection and guarantee.

To me, the wall street protest doesn't make sense. People are violently joining and enlarging the protest and are marching here and there. They are disturbing local business that relies on tourism. To me, they don't look angry on greedy wall street CEOs; they are happy because finally they found a place where they could exert their anger that's simply based on their inability and ineptness, not the market structure or the "greedy" CEOs. CEOs taking so much salary is NOT the sole reason why the economy is trembling and people losing jobs, but now they are blaming the CEOs because they are jealous that they are jobless while CEOs earn so much more. Of course, they might be angry of the thought that the increased interest rate is burdening them while feeding the CEOs and other high rank officers of the bank. Then why are they begging their jobs in the protest? People who don't have income thus who don't have money to invest or to save in banks have no right to protest against banks, and blame banks of their unemployment. People with better skills and better degrees have no trouble in getting jobs - people who love to blame other for their failure, they are the ones who fail to have jobs or get paid higher salaries. They should go back home and think what they've done wrong. 

Lee Says Korea's Economy Faring Well Despite Global Crisis

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President Lee Myung-Bak said Korea's economy is faring well despite the global fiscal crisis. He said that the country's national debt represents 33% of its GDP, only a third of the average 98% of the members of the rich nations' club of the OECD. Korea's liabilities in foreign exchange market has drastically improved after going through the crisis. Also, Korea's trade volume is expected to reach $1 trillion this year. He also emphasized that the psychology of the people also matters. He said "It would not be desirable for the nation to be overwhelmed by a crisis mentality", and that the government will closely monitor the domestic and external economic situation, with special emphasis on ensuring fiscal and external financial soundness.

In fact, since I don't live in my home country, generally I have no idea of the economic situations in Korea. When I visited Korea this summer, I felt no difference in the change of price level compared to the prior year's summer. But my friends, who have been living in Korea, said that they were experiencing rising price level. Recently I read the news that said the government would increase public transportation fees, upto 20% of the current fees. 20% is a huge increase in price I think, thus I think that no people could elude the impacts of it. However, I am glad to hear that the overall trade volume is stable and that the government is trying to lessen the magnitude of future fiscal crisis.

Climate Change 'Could Hit Canada GDP'

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The article is warning Canada of its vulnerability of increasing world climate. Higher temperatures could kill Canadian forests, flood low-lying coastal areas and spread disease. The damages resulting from this could cost Canada the equivalent of 1% of its GDP by 2050 and 2.5% by 2075, about 41 billion Canadian dollars! The proposed measures in reducing the damage included enhanced forest fore protection, pest control and an effor to forster the growth of climate-resilient trees.

After I read this article, I recalled some of the documentaries I've watched about global warming and island countries which are suffering from it. Many island countries were suffering from rising sea levels, including islands such as the Maldives. I felt pity for them because they weren't emitting much of carbon gases while other highly developed countries were causing most of the harms.

That's why I found this article a little surprising - I never thought the highly developed countries could someday become a victim of global warming. That also reflected the disastrous impact of global warming on our lives - and to Canada GDP.

Recalling from what I've learned from class, GDP (Gross Domestic Product) refers to the market value of all final goods and services produced within a country in a given period. The possibility of decline of GDP as 1% means huge, since in economy, a change of a percent of tenth of a decimal is a news. As shown in the map above, Canada has high GDP as the U.S. The map also shows the vulnerability of Canada of climate change, since Canada is located in the northern hemisphere and is surrounded by big bodies of water.