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Only solution is for Ireland to leave the euro

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  • Registered Users Posts: 1,478 ✭✭✭kaymin


    From todays Sunday Business Post:
    http://www.sbpost.ie/news/ireland-named-in-group-posing-real-risk-to-euro-future-47418.html

    In its 2010 report on the European economy, to be published on February 23, CESifo singles out Ireland as one of just two eurozone members, along with Finland, for which eurozone membership is ‘‘not optimal’’, because of our heavy reliance on trading with a non-eurozone country, namely Britain, and an inability to devalue to help exports.

    It said that the ‘‘very large’’ fall in the value of sterling against the euro, and a similar problem faced by Finland - which exports heavily to Sweden, whose currency has also declined against the euro - ‘‘certainly plays some role in the fact that Finland and Ireland are the two euro area countries where the recession has been most severe’’.

    The report says that, while eurozone membership helped to maintain financial stability in Ireland, it also made the recession worse than it would otherwise have been.

    ‘‘While membership of the euro area is favourable for financial stability . . . it may make the actual contractionary impact of the crisis more severe by preventing a quick adjustment of the exchange rate," according to CESifo.

    The group also names Ireland and Greece as the two ‘‘most exposed countries’’ that markets have identified as being most likely to suffer a sovereign default - when a country is unable to raise borrowings - or to leave the euro.

    ‘‘While euro membership provides an insurance against currency and financial crises, its real effects on peripheral countries may lead to such large imbalances that they may end up in crisis despite the safe haven effect," it said.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    kaymin wrote: »
    , for which eurozone membership is ‘‘not optimal’’, because of our heavy reliance on trading with a non-eurozone country, namely Britain, and an inability to devalue to help exports.

    for the second time in this thread i will post this link
    http://www.cso.ie/statistics/botmaintrpartners.htm
    UK is in 4th largest destination for our exports
    will people stop call it "the largest" that just has no grounding in reality



    also the strong euro hurt the UK exports much more than it hurt Irish exporters, see for yourself
    http://www.cso.ie/releasespublications/documents/external_trade/current/extrade.pdf
    our exports have stayed remarkably strong despite the worst recession in living history, theirs have tumbled


    as an owner of an "exporting" business, i tell you this if i hear of such an event about to occur, ill be out of here in no time, so will my savings
    the stampede that would occur out of the irish economy will alone kill quite alot of healthy businesses
    theres no way in hell that an event of such scale could be kept secret


  • Closed Accounts Posts: 457 ✭✭hiorta


    Wouldn't other countries be ultra wary of accepting your money and avoid any credit transactions with Ireland.
    Your current situation is self-inflicted, so who would trust you?


  • Registered Users Posts: 1,478 ✭✭✭kaymin


    ei.sdraob wrote: »
    for the second time in this thread i will post this link

    http://www.cso.ie/statistics/botmaintrpartners.htm

    UK is in 4th largest destination for our exports



    also the strong euro hurt the UK exports much more than it hurt Irish exporters, see for yourself
    http://www.cso.ie/releasespublications/documents/external_trade/current/extrade.pdf
    our exports have stayed remarkably strong despite the worst recession in living history, theirs have tumbled


    as an owner of an "exporting" business, i tell you this if i hear of such an event about to occur, ill be out of here in no time, so will my savings
    the stampede that would occur out of the irish economy will alone kill quite alot of healthy businesses
    theres no way in hell that an event of such scale could be kept secret

    Yes, I read it the first time - 56% of our exports go to non-Euro countries.

    I expect that imports from the UK are down is more a symptom of lower spending by Irish people.

    Yes perhaps our exports are remarkably strong - is this driven by the multi-nationals? Is it at prices that are making Irish companies loss making? If everything was going so remarkably well considering the recession then why is Ireland one of the countries worst affected in the world.

    Out of interest what countries do you export to?


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    2py8iuq.png
    i posted this in recent thread
    thanks to Greece the euro lost between 8% and 2% of its value against major currencies

    according to your logic @kaymin the exporters here should be better off (hey and we didn't even have to leave the euro)
    and we will see if that was the case in few months once we have data to check


    kaymin wrote: »
    But if your product costs €1 to make one day and the equivalent of 80c to make the next day (due to a 20% devaluation) then you are more competitive immediately
    theres a hole in your reasoning, almost every product being exported from ireland at one stage or another relies on imports which will shoot up in value under devaluation/default

    take farming for example, the cost of fertilizers and farm diesel (which has to be imported) would go up, and this will have knock on effect on exports of course, rinse and repeat for other products

    you quoted China earlier but you forgot to mention that China manages to keep its import costs down (raw materials) by either having the resources within its borders (quite a bit of oil) or by securing lucrative contracts

    we have none of that


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  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    kaymin wrote: »
    Yes perhaps our exports are remarkably strong - is this driven by the multi-nationals?

    yes its driven by multinationals, devaluing wont help them, since most of these have to import most of their materials that go into the products being made (medical devices lets say)

    the only people who could profit from devaluation is any new business starting up once the dust has settled, but remember they will have a terrible time accessing credit (no one will lend to this country if it defaults) so that would make it hard to start up

    kaymin wrote: »
    If everything was going so remarkably well considering the recession then why is Ireland one of the countries worst affected in the world.

    a huge amount of money was mis-allocated into property and construction

    kaymin wrote: »
    Out of interest what countries do you export to?
    right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter


    @kaymin

    one question for you, our neighbors in UK have devalued by 20-30%, their economy is much bigger and self-contained, after all of that what have they got to show for it?


    real competitiveness is gained by productivity gains not by fiddling around with units of currency, whether we use euro, pound, dollar or gold that would not change the fact that a huge amount of money was wasted/misalocated and that bubble will have to wind down one way or another

    /


  • Registered Users Posts: 1,478 ✭✭✭kaymin


    ei.sdraob wrote: »
    tho your missing one huge hole in your thinking almost every product being exported from ireland at one stage or another relies on imports which will shoot up in value under devaluation/default

    take farming for example, the cost of fertilizers and farm diesel (which has to be imported) would go up, and this will have knock on effect on exports of course, rinse and repeat for other products

    Depends on what industry of course - if we focus on the knowledge economy and export financial services then all of the costs are 'in-house'.

    Perhaps there are substitute inputs available from Irish producers which will cost lower than the imported inputs following a devaluation thereby boosting the sales of other Irish companies.

    If you are referring to the multi-nationals - one of the biggest contributors to Irish exports - I don't think your argument is valid since most multi-nationals will incur the same input costs (based on transfer pricing rules - i.e. sales and purchases between subsidiaries of the multinational group) and sell for the same prices no matter where they are located. Input costs which arise in Ireland only - labour, electricity, water, taxes etc should be low if the multi-national is to remain in Ireland longterm.

    Devaluation worked for us before - I don't see why it won't work for us again.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    kaymin wrote: »
    Devaluation worked for us before - I don't see why it won't work for us again.

    as many have pointed out

    this time any attempt at devaluation would mean all money and credit draining out of economy, theres already little confidence in the economy of this country, any move to devalue (and default) would cause panic

    that act alone would cause a total meltdown which would affect and hurt healthy companies, wiping out any potential gains to be made by devaluing

    businesses need stability not a meltdown

    anyways once again let me point at UK where devaluation has worked out "great" for them


  • Registered Users Posts: 1,478 ✭✭✭kaymin


    ei.sdraob wrote: »

    right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter
    /

    So you're hedged - many Irish owned exporting businesses aren't hedged. A devaluation would help many Irish businesses though clearly not yours.
    ei.sdraob wrote: »
    @kaymin

    one question for you, our neighbors in UK have devalued by 20-30%, their economy is much bigger and self-contained, after all of that what have they got to show for it?/

    Unemployment is at only 8% - that's a good result in my view. Okay they've devalued peoples savings but maybe that's a price worth paying.
    ei.sdraob wrote: »
    real competitiveness is gained by productivity gains not by fiddling around with units of currency, whether we use euro, pound, dollar or gold that would not change the fact that a huge amount of money was wasted/misalocated and that bubble will have to wind down one way or another
    /

    And the easiest way of doing this in my view is to reduce everyone's 'wealth' and high salaries by a devaluation. We're not productive enough to justify our high salaries and that's evident when we try to sell our produce abroad.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    kaymin wrote: »
    So you're hedged - many Irish owned exporting businesses aren't hedged. A devaluation would help many Irish businesses though clearly not yours.

    over the last few years i have gained and lost equal amounts due to currency fluctuations, the end result is more or less the same, for me to make more money i have to become more productive

    you missed the part about savings being in euro, if Ireland leaves the euro i can kiss goodbye to savings and reserves, thats money that can be used to invest or/and survive another bad patch of trading
    kaymin wrote: »
    Unemployment is at only 8% - that's a good result in my view.

    they didn't have a quarter of their economy & large chunk of workforce tied directly or indirectly to construction
    kaymin wrote: »
    Okay they've devalued peoples savings but maybe that's a price worth paying.
    thats money gone that could be used for savings (banks surely need them now) and investments (in business ventures or stocks)

    kaymin wrote: »
    And the easiest way of doing this in my view is to reduce everyone's 'wealth' and high salaries by a devaluation. We're not productive enough to justify our high salaries and that's evident when we try to sell our produce abroad.

    as i said before in a recent thread, devaluation makes everyone poorer by an equal amount

    that hits the poorer harder, theres a reason why we have a progressive taxation system

    devaluation is akin to the taxman sticking a hand into everyones pockets and stealing an equal percentage out of their wallets (and the value of everything they own)

    needless to say people are not stupid and will try to avoid the above if they hear about devaluation, possibly triggering bank collapses,

    the very thing we were trying to avoid last 2 years


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  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ei.sdraob wrote: »
    right now most costs and profit is in us dollars, devaluation wouldn't make much difference to the trading of the business but would wipe off any savings/reserves of the business which are in euro, its these savings that helped to survive the last terrible winter.
    So preserving the value of savings is your overriding concern. I can see that from your particular point of view a devaluation of the Euro could be an issue particularly when your costs are in Dollars.

    But devaluation of the currency is about competitiveness of domestically operated businesses whose costs are generated in Ireland.

    It is great that you have a sucessful business but what is not clear is why Irish economic policy should be bent to your requirements. After all, you have the option of storing your money in other forms.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    SkepticOne wrote: »
    So preserving the value of savings is your overriding concern. I can see that from your particular point of view a devaluation of the Euro could be an issue particularly when your costs are in Dollars.

    But devaluation of the currency is about competitiveness of domestically operated businesses whose costs are generated in Ireland.

    It is great that you have a sucessful business but what is not clear is why Irish economic policy should be bent to your requirements. After all, you have the option of storing your money in other forms.

    yes i see it now


    sarcasm

    lets wipe out the savers, investors and businesses that survived the recession
    in order to recover from an economic recession caused by excessive debt and mis-allocation of money by gamblers
    no moral hazard at all and it has worked out great before in other places

    /sarcasm


    as i said earlier this idea has several holes in it, first being wealth draining right out of the economy the moment any news of devaluation surfaces
    its not something that can be kept under rock and will wipe out sound businesses for the sake of bad ones, and of course the banks into whom we poured so much money into

    .


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ei.sdraob wrote: »
    as i said earlier this idea has several holes in it, first being wealth draining right out of the economy the moment any news of devaluation surfaces
    its not something that can be kept under rock and will wipe out sound businesses for the sake of bad ones, and of course the banks into whom we poured so much money into
    anyways i wont be sticking around to see such an event i tell you if it happens :)
    But all you are doing is storing money you have made in other countries the form of Euros. Maybe you employ a load of people in Ireland in which case my apologies.


  • Registered Users Posts: 3,872 ✭✭✭View


    Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.

    As a non-EU member state we would then be liable to Import Tariffs on all our exports to the EU. In other words, the 62% of our exports that are now tariff-free would become liable to tariffs. Offhand, I doubt that would benefit our export industries.

    In addition, even if we were to decide to leave the Euro, we would need to replace all banknotes and coins in circulation. There is no way this could be done overnight and word would (almost definitely) get out about it. At which point, financial traders would send our bonds interest rates through the roof and anyone with a brain would drive for the border and either put their Euro into a newly-opened Euro account or sell it for Sterling and lodge it into a Sterling account. And there would be nothing the Government could do to stop this...


  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    View wrote: »
    Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.

    As a non-EU member state we would then be liable to Import Tariffs on all our exports to the EU. In other words, the 62% of our exports that are now tariff-free would become liable to tariffs. Offhand, I doubt that would benefit our export industries.

    In addition, even if we were to decide to leave the Euro, we would need to replace all banknotes and coins in circulation. There is no way this could be done overnight and word would (almost definitely) get out about it. At which point, financial traders would send our bonds interest rates through the roof and anyone with a brain would drive for the border and either put their Euro into a newly-opened Euro account or sell it for Sterling and lodge it into a Sterling account. And there would be nothing the Government could do to stop this...

    No, no, no! You don't get it. You can't let facts get in the way of competitiveness.

    Nate


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    SkepticOne wrote: »
    But all you are doing is storing money you have made in other countries the form of Euros. Maybe you employ a load of people in Ireland in which case my apologies.

    theres a difference of storing money, and keeping a reserve for a bad day.
    this practice allowed to survive thru few few very bad months, otherwise the company would have had to go under since the banks wouldn't lend back then
    alot of businesses are learning the above lesson the hard way now :(


    by wiping out savings your wiping out money that can be used to help survive bad patches and/or be invested elsewhere, in this manner you will endup killing more companies, just what need now
    anyways once the dust has settled from any devaluation you would quickly realize that many of the issues that caused such a deep recession here are still there and have little to do with the currency being used


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    View wrote: »
    Legally, there is no mechanism within the EU Treaties that allow an EU member state that adopts the Euro to "unadopt" it. Therefore, if we want to "leave the Euro" that means we must leave the EU.
    There was no mechanism for the bailout that Greece is now getting until recently.


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ei.sdraob wrote: »
    theres a difference of storing money, and keeping a reserve for a bad day.
    this practice allowed to survive thru few few very bad months, otherwise the company would have had to go under since the banks wouldn't lend back then
    There is the problem of wealth preservation and there is the problem of competitiveness. The problem facing Ireland right now as opposed to, say, Germany is competitiveness. Yes, there may be a disincentive to operate a business if the money you then store is eroded by devaluation but this needs to be balanced by the problem of businesses going under because they can't compete. For these businesses preserving wealth that they make is not an immediate concern since they aren't making any! They are merely trying to stay afloat.
    alot of businesses are learning the above lesson the hard way now :(
    Again I think the problem is not that their wealth is being eroded (if they have any) but that they can't compete due to costs generated in Ireland.
    by wiping out savings your wiping out money that can be used to help survive bad patches and/or be invested elsewhere
    But merely holding your money in a bank in Ireland in Euros doesn't guarantee it will be lent to businesses in Ireland. Even if the bank was willing to lend it can only do so to businesses that are competitive.
    once the dust has settled from any devaluation you would quickly realize that many of the issues that caused such a deep recession here are still there and have little to do with the currency being used
    I don't think devaluation solves all problems either. The only thing it really solves is that it brings about a competitive situation with less social disruption than the alternative.


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    SkepticOne wrote: »
    The only thing it really solves is that it brings about a competitive situation with less social disruption than the alternative.

    less social disruption? that what the meltdown that would happen here be called?

    i fail to see how causing banks to fail and have people and companies get out of the country with suitcases full of money (or electronic transfers) would not cause any social destruction

    or for that matter how would welfare and public services be paid for? you honestly think the public sector unions would take it lying down being paid in zimdollars?


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ei.sdraob wrote: »
    less social disruption? that what the meltdown that would happen here be called?

    i fail to see how causing banks to fail and have people and companies get out of the country with suitcases full of money (or electronic transfers) would not cause any social destruction

    or for that matter how would welfare and public services be paid for? you honestly think the public sector unions would take it lying down being paid in zimdollars?
    Except that most of what you are talking about is a product of your fevered imagination. There are examples of other European countries that have devalued. None of them have ended up with zimdollars or the sort of disruption you are talking about. You don't help your case by arguing in this way.


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  • Registered Users Posts: 2,219 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    Except that most of what you are talking about is a product of your fevered imagination. There are examples of other European countries that have devalued. None of them have ended up with zimdollars or the sort of disruption you are talking about. You don't help your case by arguing in this way.

    But were are not just talking about de-valuation. What is proposed is...

    -Creating a new currency.
    -Doing so in compete secrecy.
    -Locking down the financial system to partially prevent Capital flight.
    -Devaluing An Punt Nua with respect to the Euro
    -Defaulting on current debts (Public and Private)

    Nate


  • Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    SkepticOne wrote: »
    Except that most of what you are talking about is a product of your fevered imagination. There are examples of other European countries that have devalued. None of them have ended up with zimdollars or the sort of disruption you are talking about. You don't help your case by arguing in this way.

    yes its all my imagination :rolleyes:

    you should checkout what socially happened in Russia and Argentina when they defaulted, keep in mind that both countries weren't part of currency union and have large natural resources to fall back on

    Ireland leaving euro would be akin to one of the US states leaving the dollar (lets say Louisiana or South Carolina, both having similar sized populations) and the Union

    if you think people & businesses would be stupid enough to not realize what is happening or think that any capital flight can be prevented then your mistaken


  • Registered Users Posts: 43,274 ✭✭✭✭K-9


    But were are not just talking about de-valuation. What is proposed is...

    -Creating a new currency.
    -Doing so in compete secrecy.
    -Locking down the financial system to partially prevent Capital flight.
    -Devaluing An Punt Nua with respect to the Euro
    -Defaulting on current debts (Public and Private)

    Nate

    Indeed, has this ever been done?

    While it pains me that we are so reliant on MNC's, what would they make of it?

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • Registered Users Posts: 3,872 ✭✭✭View


    SkepticOne wrote: »
    There was no mechanism for the bailout that Greece is now getting until recently.

    There still is no mechanism for any bailout. None whatsoever - that doesn't mean that the Member States are prohibited from creating (a) new mechanism(s) to do so on an ad-hoc basis. Such (a) mechanism(s) could be incorporated into the EU Treaties at a later date (much like many of the changes in Lisbon fell into that category).

    Theoretically, we could change the EU Treaties to allow a member state to "unadopt" the Euro while remaining a member of the EU. The problem with that though is: a) it would be contrary to the stated aims of the EU Treaties, b) the member states do not want to do this, and, c) it would take so long to do that the financial crisis would be long over by the time it was done.


  • Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    kaymin wrote: »
    All the experts got it wrong when Argentina experienced growth after their devaluation and default.

    That's nice, would those be the same experts who said that Argentina's Peso was overvalued throughout the nineties? "All" the experts got it right! Or do you simply pay attention to the experts that verify your already chosen conclusions? But if that was the case then "all" wouldn't be "all" now, would it? The point about Argentina was that they simply had no choice in devaluing because they let the currency float. A floating currency is something only larger nations can afford to do, it is not an option for Small Open Economies. Also, Argentina only enjoyed a return to growth because of major debt restructuring. You are simply assuming that Ireland will be gifted the same package. In fact, you are assuming a lot of things. Ireland and Argentina are not comparable cases.

    Having an open mind is all well and good, but knowing that square pegs don't fit round holes is important.


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    A floating currency is something only larger nations can afford to do, it is not an option for Small Open Economies.
    New Zealand.


  • Registered Users Posts: 23,283 ✭✭✭✭Scofflaw


    SkepticOne wrote: »
    New Zealand.

    I think he means "sensible option":
    The New Zealand dollar's value is often strongly affected by currency trading,[citation needed] and is among the 12 most-traded currencies.

    On 11 June 2007 the Reserve Bank sold an unknown amount of New Zealand dollars in an attempt to drive down its value. This is the first intervention in the markets by the Bank since the float in 1985.

    Two suspected interventions followed, but they were not as successful as the first: the first appeared to be initially effective, with the dollar dropping to approximately US$0.7490 from near US$0.7620. However, within little more than a month it had risen to new post-float highs, reaching US$0.8103 on 23 July 2007.

    After reaching its post-float record high in early 2008, the value of the NZD plummeted throughout much of the 2nd half of 2008 and the first quarter of 2009 as a response to the global economic downturn and flight by investors away from 'riskier' currencies such as the NZD. The NZD bottomed out at approximately US$0.50 on March 6, 2009. However, it rebounded strongly as the year progressed, reaching the US$0.75 range by November 2009.

    New Zealand doesn't come across there as in control of its currency - which is what the discussion is about.

    cordially,
    Scofflaw


  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Scofflaw wrote: »
    New Zealand doesn't come across there as in control of its currency - which is what the discussion is about.
    No, he said floating currency. What this means is that the market is the primary determinant of the value of the currency.

    Note that unemployment in New Zealand is about 7.5% (admittedly higher than it was) whereas ours is 13%.

    I don't think the New Zealanders will be pressing for a currency union with a larger country based on Ireland's great success in the Euro.


  • Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    SkepticOne wrote: »
    Note that unemployment in New Zealand is about 7.5% (admittedly higher than it was) whereas ours is 13%.

    Look, if you want me to engage in discussion you are going to have to make less obtuse comments than that.


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  • Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Look, if you want me to engage in discussion you are going to have to make less obtuse comments than that.
    You say that a floating currency is not an option for a small country.

    Go to New Zealand. Tell them you are from Ireland and that they have it all wrong with regard to how they operate their currency.


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