[poeticseraphim]

Originally Posted by jonniebgood1

Do you contend that the European systems are more beneficial to their unemployed. For example would working parents in Germany be better off on the welfare than by working as reported in the suppresed ESRI report?

That is largely because Germany's welfare state extends into the employed for instance they give good child allowance better time off for mothers and father just havinng a baby, money to support childcare. And they give public healthcare policies to all ...not just unemployed.

They offer support accross society that is why taxation is not resented as it is here ...it helps the middle classes as well.

An employed couple is better off compared to an unemployed couple in Germany they also also better off than an employed couple here due to the benefits and social services they recieve.

[The Corinthian]

What's wrong with Ireland's social welfare system has spun OT somewhat, but OK...

There is a tendency, not unlike a reflex reaction, to point to the level of social welfare in Ireland and claim that this is the largest problem.

This certainly can be the case, if one considers the Byzantine and accumulative tapestry of benefits that one can claim, especially if one has dependants, which can genuinely result in one being better off than if working at market rates (or at least the little extra a market rate salary brings does not justify a 40+ hour week). I do think there is some serious space for reform there.

At it's most basic level though (single person renting, no dependants), it's not really exaggerated. €188 shrinks once that part of rent not covered by Rent Allowance is taken out, to begin with. Arguably there's space for trimming fat even there, but realistically not all that much.

The principle problems with the system, IMHO, are cultural, administrative and political. Top of the list of these is the presumption that it is perfectly normal to be long-term unemployed. This isn't simply the attitude of those who are often long-term unemployed, but also of the social welfare offices; little or no encouragement, support or even pressure is put on jobseekers to find a job or take up training. There's some nominal 'ticking of boxes', but otherwise they're left alone.

The worst example of this is probably LPA, where up until recently it was presumed that motherhood was the full-time job until the youngest child was 18 or, if they continued in full-time education, 23. When this was lowered to a child's early teens, there was an outcry, with the usual claims of "won't someone think of the children" being used. I'm not suggesting that single parents need to be 'forced' to find full-time jobs that are not suitable, but that there is no pressure for them to even try to find something, even part-time, is bizarre.

Added to this is the attitude that working for a living gains you few, if any, advantages; the only time it makes a difference is if you lose your job and have over €20k in the bank; means testing only begins to kick in at that level. Otherwise paying taxes all your life does not benefit you at all - even where it comes to state pensions.

Unlike other counties like Germany, Austria or Holland, long-term unemployment is still considered a viable alternative lifestyle in Ireland, and that is the principle problem. It's not simply scumbags from council estates who fall into this category; almost all of us will know one or two who are like this, living their 'Bohemian' lifestyles on social welfare indefinitely, despite having masters degrees. That we accept their choices and this is also part of the problem.

Meanwhile the relevant government departments accept this lifestyle and make no effort to interfere in how they live. There is no pressure to apply for a minimum number of jobs, or monitoring if you are, let alone obligation to take up offers of employment or training. The worst that can happen to you is if you get caught fiddling the system, in which case you'll get docked a few Euro a week.

And successive governments have avoided changing this culture time and time again, fearing the voting power of those in that lifestyle demographic. Decreasing payments is an easy win with voters, but putting in place regulations that would better monitor and put pressure on reluctant jobseekers has been all but ignored, with almost proposals to do so still at discussion level. Which is progress; we didn't even have any such proposals for reform up until recently and the system had remained the same for decades.

So yes, there's room for cuts where it comes to accumulated benefits, however the largest area for reform is in how we view and administer jobseekers, so that it is no longer an alternative lifestyle choice that is left to its own devices.

[The Corinthian]

Originally Posted by poeticseraphim

That is largely because Germany's welfare state extends into the employed for instance they give good child allowance better time off for mothers and father just havinng a baby, money to support childcare. And they give public healthcare policies to all ...not just unemployed.

This might be a factor, but genuinely it's not the principle reason. Germanic culture has a much stronger work ethic than Irish culture; your job is what defines you to a great extent, and being without such a definition disenfranchises you to a great extent. In Ireland, being long-term unemployed is considered an acceptable alternative 'occupation' and thus definition - Germans would never admit to long-term unemployment.

The infamous expression "Arbeit macht frei" is still used by Germans, albeit more sarcastically nowadays. Originally it was meant to denote the belief that having a job, working, was a positive thing; it gave you economic freedom, a purpose and helped one deal with personal problems.

So while I certainly agree that Germans have greater support from the system and are rewarded for their work (unemployment insurance being an example), it really comes down to a different mindset where it comes to the importance of work. TBH, most other Europeans are far more defined by their work that the Irish. Even southern Europeans.

[jonniebgood1]

Back to the topic of the thread

Ten-year Spanish government bond yields hit their highest levels since the euro was created, above the 7 percent danger level, on growing doubts that the euro zone's fourth largest economy will be able to avoid a direct bailout. http://in.reuters.com/article/2012/0...8IKFZX20120720

The austerity has not solved the problem- what a surprise!!!

[McDave]

Originally Posted by jonniebgood1

Back to the topic of the thread



The austerity has not solved the problem- what a surprise!!!

Spain gets 'bailout'. Pays lower interest rate. 'Bailout' fund gets substantial interest on repayments. Everyone's a winner. Except the markets of course. Unless Spain defaults on the 'bailout'. Which it won't.

[RichardAnd]

Just an update on the Spanish situation.

http://www.rte.ie/news/2012/0727/spa...-business.html

Unemployment there has reached 24.6%. Needless to say, that's one in every four people without a job and I thin it's ~50% for those under 25. I think the great depression once say unemployment of 30% in certain parts of the world, seems we may see it again.

[poeticseraphim]

Originally Posted by McDave

Spain gets 'bailout'. Pays lower interest rate. 'Bailout' fund gets substantial interest on repayments. Everyone's a winner. Except the markets of course. Unless Spain defaults on the 'bailout'. Which it won't.

The latest figures on Spain bailout are that 300billion would be needed.they are about to get 100 billion but are in deficit of 9 billion in order to meet the requirements needed to get it...thats just for Spain and the money is not there..this is partly if it does get a bailout it would like us need to exit the markets for some time.If Spain is bailed out Italy will need to be too....and that will cost about somewhere in the same ball park if not more ...some have put a figure of 300billion to 500 billion on it
And of course we are assuming that we would see reform....in both these countries...however i am doubtful

France will be unable to help even if it itself does not need funding ( i am assuming for the moment it does not i am unsure)

Germany does not have this kind of money. The Whole EU does not have this kind of money.Germany (Bundesbank actually) again rejected any notions of eurobonds dept pooling or even buying more govt bonds.The ECB can't make them.

If we can't afford Greece what makes people think we can afford Spain and Italy?The answer always seems to be well we can't afford to lose them. That does not mean the money is there to keep them.

I think there are three options. Debt default or allowing Spain and Italy to burn or write off some debt. And a partial bailout. This option i don't think will work in the long term though.As Spain has a Conservative Govt at the moment and they have NOT made reform. Now this is even in terms reforms needed to meet requiremets in order to get the current funding promised that they are waiting for. Spain is 9billsion short of meeting the requirements needed to qualify for the cash funding promised. This is turning into another Greece scenario.

Merkel and Spain also have another hurdle to surmount. Although plans had called for the ESM to succeed the EFSF on July 1, this has been blocked by a temporary injunction imposed by the German Federal Constitutional Court. The court is hearing a case brought by plaintiffs who argue the ESM and fiscal pact will force Germany to give up too much sovereignty and undermine the power of its democratically elected parliament to determine what happens with taxpayers money.

The second Scenario i see as a possibility is that Germany breaks away from the Euro ...and polls have shown recently that the majority of Germans favour a break up of the Euro rather than providing more money.

But polls are polls ..the Question is which would be cheapest ....a Break up or providing more money to the Eurozone....so far we have thought funds woud be cheaper than a break up however this is only true if reforms and targets are met......and they are not being met by key countries.

The majority feel in the far left in Germany and many accross Europe that it is pointless to save the Euro. That it just cannot be done ...it cannot be saved.I think they are right. It cannot be saved the reform is not there the institutins are not there and the money is not there to keep funding Eu countries.

What is interesting was a speech recently by Mario Draghi stating besides his comitment to save the Euro (well why woud he not he loses his job if it goes) that one of the problems with saving the Euro zone was that money and investment seemed to stay in national borders even with regulation reform.

People looking at the figures forget ..money is linked if not lead by politics and nationhood...

Greece cannot be saved not just because of figures but really because of leadership lack of reform and society ..it is the same with Spain..they have a sense of entitlement that is not met with responsibility..if you want socialized healthcare...that is great...BUT YOU HAVE TO PAY FOR IT COLLECTIVELY....and commit to that and accept the economy that comes with those socialized structures and the working hours and employment structures and taxation that goes with it.

The EU has to realize it is not just about numbers it is about completely reversing attitudes and societal norms....

If Spain and Greece have no future then neither has Italy and then the EU and the euro as we know it is over.I imagine the Germans will go back to their beloved DM if the left socialistd get in and defeat Merkel. Lord knows what will happen in France.People have suggested until now that the cascade effect is enough to motivate Germany to cough up ...however what we have seen is that investors and money is staying in their own economies.

Ireland is doing better despite the partial EU meltdown..Germany has falling unemployment and it's econoomy is doing ok....money is staying national not international despite deregulation and the myth of Global friendly integration. People are staring to question whether we are integraed enough for it to destroy Germany and others if there was a break up or if it would cost more than funding. Germany has rejected the idea of buying Spannish Debt. They ar not afraid enough of EU or Euro break up to fund anymore or share debt it seems .Economies have stayed national more than we think. That is why the Euro problems seem so unequal and individual differing from country to country. The problems are different from country to country.

It is either federalization and direct sovereign and financial control or break up in the next few years and i don't think it will be all EU countries if it is a federal Europe maybe Germany and scandies and MAYBE France ...


But not Spain or Italy or us piigs....we have nothing really to offer and we darg it all down...and that in turn damages us more than being separate..

[BKtje]

What we offer (and have always offered along with other "weak" countries) is the weakening of the currency which is a good thing for strong economies with high exports (like germany). If only strong currencies were to remain then very quickly these countries exports would become too expensive causing their economies to falter. If we were to agree that parts of the Eu would be federalised I don't see why Ireland wouldn't be offered a spot considering the general international feeling that Ireland is now playing by the rules. Countries like Ireland who are willing to play ball would in fact be just as important as the European powerhouses.

As many have said on these forums, it's not whether the Euro can be saved it's whether there is the political will to save it. It's not so much a question of economics but politics. Quantitive Easing would ease much of the strain being felt but in exchange would destroy a large portion of savings due to massive inflation. This along with spending reforms (once more a political issue) could save the Euro overnight.

Not a question of can we save the Euro more of a do we want to make the sacrifices needed.

[McDave]

Originally Posted by poeticseraphim

But not Spain or Italy or us piigs....we have nothing really to offer and we darg it all down...and that in turn damages us more than being separate..

Interesting post. I'm not going to address all the points you raise other than to offer the following two observations:

1. Spain's actual debt pile is close enough to the actual Maastricht criteria. What it has to do is reduce its budget deficit to 3% and it is in pretty good shape. On its own it is an achievable objective. What's dragging Spain down is the perception that there's more bad news in them there regions, and the fear that banks need to be bailed out at the expense of the Spanish sovereign.

2. Italy's annual deficit is close to Maastricht criteria. Italy's primary problem is to eliminate the deficit and get into a position where it can whittle away its massive debt hangover. It's probably a bigger problem than Spain's to solve, and in reality depends on the resumption of growth rates of around 3% in the EZ.

With the right action and a bit of luck, both Spain and Italy can win back the markets. Once they do, they have a lot to offer the EZ. Greece I'm afraid is way off the slow pace set by both, and has nothing to offer the EZ, other than a sense that the EZ will do practically anything to keep a member on board in the hope that one day they'll get their act together and provide hope for the rest of the Balkan region.

That's my take on it anyway.

[poeticseraphim]

Originally Posted by McDave

Interesting post. I'm not going to address all the points you raise other than to offer the following two observations:

1. Spain's actual debt pile is close enough to the actual Maastricht criteria. What it has to do is reduce its budget deficit to 3% and it is in pretty good shape. On its own it is an achievable objective. What's dragging Spain down is the perception that there's more bad news in them there regions, and the fear that banks need to be bailed out at the expense of the Spanish sovereign.

2. Italy's annual deficit is close to Maastricht criteria. Italy's primary problem is to eliminate the deficit and get into a position where it can whittle away its massive debt hangover. It's probably a bigger problem than Spain's to solve, and in reality depends on the resumption of growth rates of around 3% in the EZ.

With the right action and a bit of luck, both Spain and Italy can win back the markets. Once they do, they have a lot to offer the EZ. Greece I'm afraid is way off the slow pace set by both, and has nothing to offer the EZ, other than a sense that the EZ will do practically anything to keep a member on board in the hope that one day they'll get their act together and provide hope for the rest of the Balkan region.

That's my take on it anyway.

I could be mistaken but my understanding is that countries wishing to avail of ESM funding must meet differing criteria and we must meet fiscal compact criteria which differs from masstricht i thought.

I could be wrong.


As regards Spannish banks and perception. EU banking regulation for years had regulation archetectured by the ISAB that ruled banks could not declare losses until the borrower got in touch to declare trouble. But in reality the time elapsing between when the financial problem first occured and the borrower getting in trouble could be years. But they legally could not include this in official audits. It was what happened here too. For years regulators were regulating based on unclean Audits. Here they channged the regulator and started ignoring the audits and got a grip on real figures. They did not in Spain. It is actually a huge problem throughout the EU except in countries with strong company law (which Ireland actually had but a weak regulator who did not enforce it) other countries enforced their own company spvreign law rather than eu regulation. The ISAB have admitted that their regulation structures where flawed and they are going through legal procedures in London and perhaps here and elsewhere too.

It is not just regular EU criteria that Spain has to meet they have to meet the criteria of the fiscal compact treaty and the ESM treaty to get funding as i understand it.

Same with Italy ....plus there is the issue of their banks debt becoming sovereign debt the cuts they will have to make and the effect that will have on their deficit and growth and what criteria/reform the Germany would insist upon.

Although the IMF did praise Spain recently.....but stressed as you have that they need less stress in the debt markets.

The question is will it need a full sovetreign bailout?..

'According to European officials, Spain conceded behind closed doors this week that it may need a state bailout but the Spanish government strongly denied any such possibility on Friday'

Spain has apparrantly discussed a 300billion bailout with Germany

The Spannish economy has contracted for the third quarter in a row..investors are worried it will need a full sovreign bailout.

And experts have warned that this bailout is impossible. The money is no there and the transfer too big despute what the country might have to offer.

But who knows...but what i am saying is it might just be impossible.

Lets hope not but they really need to get a handle on this and not just SAY 'we will do everything possible' but come up with somehing to inspire confidence and actually do something politically and economically.

[McDave]

Originally Posted by poeticseraphim

I could be mistaken but my understanding is that countries wishing to avail of ESM funding must meet differing criteria and we must meet fiscal compact criteria which differs from masstricht i thought.

I could be wrong.


As regards Spannish banks and perception. EU banking regulation for years had regulation archetectured by the ISAB that ruled banks could not declare losses until the borrower got in touch to declare trouble. But in reality the time elapsing between when the financial problem first occured and the borrower getting in trouble could be years. But they legally could not include this in official audits. It was what happened here too. For years regulators were regulating based on unclean Audits. Here they channged the regulator and started ignoring the audits and got a grip on real figures. They did not in Spain. It is actually a huge problem throughout the EU except in countries with strong company law (which Ireland actually had but a weak regulator who did not enforce it) other countries enforced their own company spvreign law rather than eu regulation. The ISAB have admitted that their regulation structures where flawed and they are going through legal procedures in London and perhaps here and elsewhere too.

It is not just regular EU criteria that Spain has to meet they have to meet the criteria of the fiscal compact treaty and the ESM treaty to get funding as i understand it.

Same with Italy ....plus there is the issue of their banks debt becoming sovereign debt the cuts they will have to make and the effect that will have on their deficit and growth and what criteria/reform the Germany would insist upon.

Although the IMF did praise Spain recently.....but stressed as you have that they need less stress in the debt markets.

The question is will it need a full sovetreign bailout?..

'According to European officials, Spain conceded behind closed doors this week that it may need a state bailout but the Spanish government strongly denied any such possibility on Friday'

Spain has apparrantly discussed a 300billion bailout with Germany

The Spannish economy has contracted for the third quarter in a row..investors are worried it will need a full sovreign bailout.

And experts have warned that this bailout is impossible. The money is no there and the transfer too big despute what the country might have to offer.

But who knows...but what i am saying is it might just be impossible.

Lets hope not but they really need to get a handle on this and not just SAY 'we will do everything possible' but come up with somehing to inspire confidence and actually do something politically and economically.

Once up and running, having been ratified by the member countries, it would be possible in theory to beef up the ESM to deal with bad Spanish and Italian scenarios.

However, I can't see this being allowed to happen politically. One objective will be to get Spain back to a position where they can borrow without putting pressure on the ESM (i.e. balance the budget including whatever provisions they make for the regions). The other will be to get Italy into the black on an annual basis.

As I see it, once these objectives are achieved, the stage will be set for an EZ-level resolution (including banking regulation) that will hopefully settle the bond markets.

I think the overall idea is to (i) get member countries to do their bit, (ii) put EZ regulation in place, (iii) establish the ESM not for current fire-fighting purposes but as a reserve instrument and (iv) attempt to stimulate growth in the EZ.

[poeticseraphim]

Originally Posted by McDave

Once up and running, having been ratified by the member countries, it would be possible in theory to beef up the ESM to deal with bad Spanish and Italian scenarios.

However, I can't see this being allowed to happen politically. One objective will be to get Spain back to a position where they can borrow without putting pressure on the ESM (i.e. balance the budget including whatever provisions they make for the regions). The other will be to get Italy into the black on an annual basis.

As I see it, once these objectives are achieved, the stage will be set for an EZ-level resolution (including banking regulation) that will hopefully settle the bond markets.

I think the overall idea is to (i) get member countries to do their bit, (ii) put EZ regulation in place, (iii) establish the ESM not for current fire-fighting purposes but as a reserve instrument and (iv) attempt to stimulate growth in the EZ.

How are they going to do that??

Countries are raising objections rather than doing there bit

There is no growth.

And Spain's and Italy's borrowing costs are still sky high.

They have not set about how...i don't think countries will stand for the measures put apon them.

It just seems slighty detached from the reality. And circular logic ...we need to wait until Spain and Italy are in order budget wise and can borrow without the ESM to construct an EZ resolution...but these things will be difficult to do if not impossible without an EZ resolution in place. Part of the reason the Spain has issues borrowing is because of EZ uncertainty...

Although it could be said that our performance with the markets suggests it could be done....but Spain is a totally different animal.

Not to mention that policticans in certain countries have election coming up and so are tied as to what they can do. support wise and budget wise.

I think the waiting is also damaging.

[Franticfrank]

Interesting discussion. I'd agree that the waiting is damaging and the figures aren't great - hopefully they'll come up with a solution soon. Anyhow with Germany maybe about to be downgraded, statistics show the real GDP growth rate has slumped entirely for the first quarter of the year in the eurozone.

[McDave]

Originally Posted by poeticseraphim

How are they going to do that??

Countries are raising objections rather than doing there bit

There is no growth.

And Spain's and Italy's borrowing costs are still sky high.

They have not set about how...i don't think countries will stand for the measures put apon them.

It just seems slighty detached from the reality. And circular logic ...we need to wait until Spain and Italy are in order budget wise and can borrow without the ESM to construct an EZ resolution...but these things will be difficult to do if not impossible without an EZ resolution in place. Part of the reason the Spain has issues borrowing is because of EZ uncertainty...

Although it could be said that our performance with the markets suggests it could be done....but Spain is a totally different animal.

Not to mention that policticans in certain countries have election coming up and so are tied as to what they can do. support wise and budget wise.

I think the waiting is also damaging.

There's no rush to ratify the ESM. Talk before was about getting it up and running earlier than planned (i.e. June/July). But I think they want to keep their powder dry. I wouldn't be too concerned about the legal challenges. I think the German courts will OK it and the ESM will come into force on schedule.

There is no positive growth across the EZ. But the main problem is with the areas with major budgetary problems. No-one can expect growth there until they square up fully. There'll then be growth off a lower base. But growth that will enable the EZ-wide figures to go into the black.

I guess what I was saying here was that the first problem to solve is budgetary overspend, then taking steps to reduce historic debt, and finally putting on a big push to get sustainable growth going again. We won't have credible growth until the likes of Spain and Italy get their houses in order.