Should Ireland leave the Euro??

gerry28

Hi,

I was just listening to david mcwilliams on gerry ryan there.

He was saying that most other countries (USA, UK, Sweden, Finland, ourselves in 1993 and others) when faced with a financial crisis like this devalue their currency.

It sounded like a fairly good idea, but i'd say there is some major reason why it would not be quite as simple as that.

Maybe we should have never joined it in the first place.

The pros would be increases exports and an increase in employment... what would the cons be??

Riskymove

gerry28 wrote: »

... what would the cons be??

Iceland?

ei.sdraob

how would you feel if I took 30% of everything you own (thats what happened in UK)

your house, your bank accounts, value of your car, value of everything that everyone in the economy owns

if devaluation is such a great thing then why is Zimbabwe not the largest economy in world? why is UK still in recession??



devaluation makes EVERYONE poorer by an equal amount, in order to give an edge to FEW exporting businesses

out problem is not lack of exports, unlike UK Ireland is still a net exporter

our problem is debt

if we leave Euro and devalue, the debt will still be there as most loans are in Euro (see Iceland for an example)


also how would you feel about imposing a 30% on someone on:
* welfare
* min wage
* average wage
* high wage (pat Kenny)

which of the above would be hit hardest by a straight tax?

Alcatel

gerry28 wrote: »

Hi,

I was just listening to david mcwilliams on gerry ryan there.

He was saying that most other countries (USA, UK, Sweden, Finland, ourselves in 1993 and others) when faced with a financial crisis like this devalue their currency.

It sounded like a fairly good idea, but i'd say there is some major reason why it would not be quite as simple as that.

Maybe we should have never joined it in the first place.

The pros would be increases exports and an increase in employment... what would the cons be??

Well, I'm in a business that's seeing some impact from the fluctuations of the pound that is still going, and I'd have to say that they're being pretty well screwed over by that, week in, week out. Last night a euro bought you 89p, a week or two ago nearly 1 pound. That's a big difference.

Iceland, a small economy, that is scrambling to get to join the euro for stability. Small countries just can't survive with their own currencies.

There's a whole massive financial working beneath the hood of a currency and an economy, and interest rates and currency valuations are just one of them.

The euro puts us in a common market with stability as our watchword. In the UK, one week it's good for them, one week it's terrible. No stability.

KerranJast

gerry28 wrote: »

Hi,

I was just listening to david mcwilliams on gerry ryan there.

He was saying that most other countries (USA, UK, Sweden, Finland, ourselves in 1993 and others) when faced with a financial crisis like this devalue their currency.

It sounded like a fairly good idea, but i'd say there is some major reason why it would not be quite as simple as that.

Maybe we should have never joined it in the first place.

The pros would be increases exports and an increase in employment... what would the cons be??

Our current national debt is in Euros. If we leave the Euro and devalue our debt is still in Euros but now Euros (for us) are very much more expensive than our Punt Nua so our debt skyrockets overnight.

Gurgle

ei.sdraob wrote: »

how would you feel if I took 30% of everything you own (thats what happened in UK)

You obviously don't understand some of the words used.
Like 'devalue' and 'currency'.

But don't let that stop you.

Gurgle

gerry28 wrote: »

what would the cons be??

Cost of imports.

ei.sdraob

Gurgle wrote: »

You obviously don't understand some of the words used.
Like 'devalue' and 'currency'.

But don't let that stop you.

yes I understand quite well

your forgetting that Ireland is not completely 100% self reliant


that means the cost of material/services that need to be imported for the country to function would go up in price by as much as you devalue

think oil, food, chemicals, coal, services, minerals etc etc

the costs of goods and services are already highest in EU > http://www.independent.ie/business/personal-finance/surviving-the-recession/cost-of-goods-and-services-among-highest-in-the-eu-1934583.html


oh and once again, devaluing wont solve the underlying problem of debt which is mostly in Euro

/

harsea8

ei.sdraob wrote: »

yes I understand quite well

your forgetting that Ireland is not completely 100% self reliant


that means the cost of material/services that need to be imported for the country to function would go up in price by as much as you devalue

think oil, food, chemicals, coal, services, minerals etc etc

exactly...thats not to mention that some foreign owned banks (mostly UK ones) have entered the mortgages and loans markets over the last 5 years or so and will want the full euro amount paid off....people with mortgages and or loans with these banks would be well and truly f*cked overnight.

Basically, we are so much more linked into European and world economy now than we were in 1993, so we don't really have the option of trying to "go it alone"

ei.sdraob

despite devaluing its currency by almost 30%

the UK balance of trade is still negative




and they are about to print more money (except that printing money costs money so they just add 0s to certain bank accounts)

http://news.bbc.co.uk/2/hi/business/8344189.stm

gurramok

And there would be serious capital flight. I myself would not want my euro savings seriously devalued into a pittance of a new currency.

So yeh, we all get alot poorer Argentinian style or Turkish style.

ardmacha

This State is just about the only place on the planet that the UK has a trade surplus with, as so many consumer goods pass through there on their way here.

For all the problems with the Euro our trade situation is not disastrous. This year imports have fallen much more than exports.



We cannot leave the Euro. That's it.
We just need to grow up and behave like a mature country and stop this obsession with houses that they have in Britain.

ei.sdraob

gurramok wrote: »

And there would be serious capital flight. I myself would not want my euro savings seriously devalued into a pittance of a new currency.

So yeh, we all get alot poorer Argentinian style or Turkish style.

^ exactly ^

if the government announce a switch to a "New Punt"

and they have to announce as something like that would be hard to keep under wraps and not tell ECB etc

all of the money in current and savings accounts would simply move to the stronger/stable currency, it be harder to liquidate other assets like cars/houses

and there surely would be riots (see Argentina)


modern currency is nothing more than fancy paper and only works because the population has some degree of trust in the government/issuing body

would anyone here trust "Cowen's Rubble" :P

gerry28

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

KerranJast

ardmacha wrote: »

This State is just about the only place on the planet that the UK has a trade surplus with, as so many consumer goods pass through there on their way here.

For all the problems with the Euro our trade situation is not disastrous. This year imports have fallen much more than exports.



We cannot leave the Euro. That's it.
We just need to grow up and behave like a mature country and stop this obsession with houses that they have in Britain.

+1. We need landlords to stop taking the piss with rental valuations. It's still nearly cheaper to buy a nice house than to rent a nice house which is a ludicrous situation.

KerranJast

gerry28 wrote: »

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

The very fact that we are in the ECB (thank you Euro) and Iceland weren't saved us from their woeful fate.

ei.sdraob

gerry28 wrote: »

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

thats called inflation (and we just lived thru a huge housing asset inflation)
it happened due to the low interest rates releasing money into the economy
and if it makes you feel better the rates were lower in US and UK

but just because money is "cheap" doesnt mean it need to be wasted as happened here, the Germans used the low rates to invest heavily in renewable's and are now a world leader, we used the money to build shoeboxes



printing money to devalue is effectively a negative interest rate, and means even more money being added to the system


do you see the problem now? devaluation as you propose would cause a bigger issue down the road than the one you identified

Diarmuid

gerry28 wrote: »

As soon as it came in prices started to rise sharply

seamus

ei.sdraob wrote: »

^ exactly ^

if the government announce a switch to a "New Punt"
....
all of the money in current and savings accounts would simply move to the stronger/stable currency, it be harder to liquidate other assets like cars/houses

...and you'd probably find that lenders would invent some loophole that allows them to keep our debt to them valued in euros, so instead of a €200,000 mortgage and a house that will sell for half that, people are saddled with a IEP£300,000 mortgage and a house that will sell for a quarter of that. So mortgage payments increase and the chances of ever moving home or getting out of negative equity effectively become nil.

I don't know about anyone else, but I'm pretty sure that I'd stop paying my mortgage and say "so sue me" to the lenders at that point.

Alcatel

gerry28 wrote: »

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

That was us, not the Euro.

We're an export led economy, with the Eurozone as our biggest collective market. Being on the same currency as them makes a whole lotta sense.

Leaving the Euro is economic jingoism and protectionism will surely follow from people of the same mind. Let's go back to DeVelera economics, because that worked so well for us.

SkepticOne

seamus wrote: »

...and you'd probably find that lenders would invent some loophole that allows them to keep our debt to them valued in euros, so instead of a €200,000 mortgage and a house that will sell for half that, people are saddled with a IEP£300,000 mortgage and a house that will sell for a quarter of that. So mortgage payments increase and the chances of ever moving home or getting out of negative equity effectively become nil.

If Ireland left the Euro then all loans to Irish operations of banks would be re-denominated in the new currency as would savings. This is part of the process of switching currency. These banks might like to continue owing them the euro amount but they would have no standing in Irish law to go after you for anything but the amount in the new currency.

An issue, however, would be inflation due to the increasign cost of imports and this would mean higher interest rates to combat it so borrowers would not get completely off the hook.

A genuine disadvantage is that the value of savings would go down relative to international buying power, however as pointed out, interest rates are likely to rise so the return on those savings within Ireland would increase.

SkepticOne

Alcatel wrote: »

Leaving the Euro is economic jingoism and protectionism will surely follow from people of the same mind. Let's go back to DeVelera economics, because that worked so well for us.

It don't think it follow that protectionism is the next step. I think most people realise that free trade has been hugely beneficial to Ireland.

Diarmuid

SkepticOne wrote: »

If Ireland left the Euro then all loans to Irish operations of banks would be re-denominated in the new currency as would savings. This is part of the process of switching currency. These banks might like to continue owing them the euro amount but they would have no standing in Irish law to go after you for anything but the amount in the new currency.

Ok, but the bank still owes their debt in Euros to the ECB. Now with the link broken, I'd imagine all mortgages would be variable rate against the new punt. What is the likelihood the bank would make up the difference in increased interest charges? ie you previously had a 4% variable rate mortgage, suddenly you are paying 12%....

SkepticOne

ei.sdraob wrote: »

and there surely would be riots (see Argentina.

I'm not sure Argentina is a good example. Their problem stemmed from trying to peg their currency to the dollar which they could not sustain. They solved their problem by allowing their currency to devalue.

SkepticOne

Diarmuid wrote: »

Ok, but the bank still owes their debt in Euros to the ECB. Now with the link broken, I'd imagine all mortgages would be variable rate against the new punt. What is the likelihood the bank would make up the difference in increased interest charges? ie you previously had a 4% variable rate mortgage, suddenly you are paying 12%....

You say Ireland still owes debts to the ECB in Euros. What would happen is that Ireland would tell the ECB that it now owes that debt in the equivalent of Punts.

I have already pointed pointed out that interest rate may rise however you have to remember that there's a large deflationary effect in the economy already that would mitigate against the inflationary effect of more expensive foreign goods.

Interest rate policy should be focussed at keeping inflation low. Let the markets determine the value of the currency.

Personally I don't think any government would actually implement the leaving of the Euro, but this would be for political rather than economic reasons. It would happen because Ireland is forced to do so due to not being able to afford to stay in the Euro.

ei.sdraob

SkepticOne wrote: »

You say Ireland still owes debts to the ECB in Euros. What would happen is that Ireland would tell the ECB that it now owes that debt in the equivalent of Punts.

the ECB would tell the government where to stick it

see Iceland for an example of country where debt is in non native currency

SkepticOne

ei.sdraob wrote: »

the ECB would tell the government where to stick it

But remember at that point the ECB is no longer Ireland's central bank. Their choice would be between taking Punts (for want of a better word) or nothing.

ei.sdraob

SkepticOne wrote: »

But remember at that point the ECB is no longer Ireland's central bank. Their choice would be between taking Punts (for want of a better word) or nothing.

if the country defaults then good luck trying to borrow 400million a week or more to keep welfare/ps ruinning

that be something strikes and riots government overthrown and euro reinstated

you are also not addressing the issue of money draining away or how to pay for everything that gets imported

SkepticOne

ei.sdraob wrote: »

if the country defaults then good luck trying to borrow 400million a week or more to keep welfare/ps ruinning

that be something strikes and riots government overthrown and euro reinstated

you are also not addressing the issue of money draining away or how to pay for everything that gets imported

How sustainable do you believe that 400 million a week is at present? What happens when we can no longer service it because we are uncompetitive within the Euro?

jif

gerry28 wrote: »

I was just listening to david mcwilliams

theres the problem.

ei.sdraob

SkepticOne wrote: »

How sustainable do you believe that 400 million a week is at present? What happens when we can no longer service it because we are uncompetitive within the Euro?

not very sustainable but at least we have time to deal with that problem

switching currency would be like jumping of cliff

anyways as has been show earlier in thread (with data and figures) Irish exports are still strong and there has been a bigger drop of in imports

considering most of our trade is with EU...

King of Kings

i wish we left the euro. I rem I was against it in the beginning but I was only 22 at the time and nobody listened. I made my opinions known to many at the time....in fact they made me work loadsa extra hours ensuring the IT systems functioned with the euro.

It always seemed odd to me that we did most of our trade with the UK but wouldn't go with sterling over the euro. I guess the "Republican Party" wouldn't have liked it.

But i only work in IT what would I know compared to bertie, Mccrevey,O'Malley (I haven't forgot about you Des), Cowan....ah well......

SkepticOne

ei.sdraob wrote: »

not very sustainable but at least we have time to deal with that problem

switching currency would be like jumping of cliff

If we could actually deal with this problem in a timely matter, if wages (both private and public sector) as well as other costs adjusted immediately to changes in economic circumstances then essentially currency would not really matter. I think you will agree with me that the necessary adjustments are not happening in Ireland at anywhere near the appropriate pace and it is probably unrealistic to expect this to change.

anyways as has been show earlier in thread (with data and figures) Irish exports are still strong and there has been a bigger drop of in imports

Our reliance on foreign multinationals taking advantage of the 12% corporation tax exaggerates our import and export figures like it does our GDP and a number of other indicators. I would not rely on them to prove a point.

considering most of our trade is with EU...

What the consumer in the EU is interested in is value for money. He doesn't care whether the worker that made the product or provided the service is paid in Euros, punts or whatever.

ei.sdraob

King of Kings wrote: »

i wish we left the euro. I rem I was against it in the beginning but I was only 22 at the time and nobody listened. I made my opinions known to many at the time....in fact they made me work loadsa extra hours ensuring the IT systems functioned with the euro.

It always seemed odd to me that we did most of our trade with the UK but wouldn't go with sterling over the euro. I guess the "Republican Party" wouldn't have liked it.

But i only work in IT what would I know compared to bertie, Mccrevey,O'Malley (I haven't forgot about you Des), Cowan....ah well......

the punt was pegged to the pound

since that was removed and then we joined euro

we moved from being 60% to 120% as wealthy per capita


btw you really should get your facts straight

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

in millions

Great Britain and Northern Ireland - 15,864.3
Other EU Countries - 37,976.3
USA - 16,674.3
Rest of World - 15,879.5


we do more trade with US that UK

and more than twice more with other EU states than UK

Diarmuid

SkepticOne wrote: »

You say Ireland still owes debts to the ECB in Euros. What would happen is that Ireland would tell the ECB that it now owes that debt in the equivalent of Punts.

who pays to run Ireland then? 'cause we can't. And if we could then we wouldn't have to worry about leaving the Euro

Diarmuid

SkepticOne wrote: »

How sustainable do you believe that 400 million a week is at present? What happens when we can no longer service it because we are uncompetitive within the Euro?

not very. But at least it's a problem we can solve.

SkepticOne

ei.sdraob wrote: »

the punt was pegged to the pound

since that was removed and then we joined euro

we moved from being 60% to 120% as wealthy per capita

One thing that always irritated me during the boom is these statistics saying we're the third richest country per capita in the world or whatever. I would have hoped people would have stopped using them at this stage.

SkepticOne

Diarmuid wrote: »

who pays to run Ireland then? 'cause we can't. And if we could then we wouldn't have to worry about leaving the Euro

At the end of the day Ireland pays to run Ireland. No one else does. Any money from the ECB or wherever is temporary and has to be paid back. We can't have a policy that depends on forever building up debt. The ECB is going to stop at some point lending us money at cheap rates.

ei.sdraob

SkepticOne wrote: »

One thing that always irritated me during the boom is these statistics saying we're the third richest country per capita in the world or whatever. I would have hoped people would have stopped using them at this stage.

fine we ranked fairly high and above UK in alot of charts

take the HDI one

baalthor

Practically, it would be extremely difficult

For example, lets say you're a civil servant in the Dept of Finance and you know the govt is going to leave the Euro, what's the first thing you're going to do?

SkepticOne

ei.sdraob wrote: »

take the HDI one

The 2009 report where Iceland is third in the world, well above Ireland?

ei.sdraob

SkepticOne wrote: »

The 2009 report where Iceland is third in the world, well above Ireland?

The still have a decent standard of living there as shown by David McWilliams himself on last documentary, by the cost of anything that needs to be imported there went thru the roof, leading to businesses closing (like mcdonalds) and job losses


ill put it to you this way, despite the huge downturn

given a choice would you rather be on the dole in UK or Ireland?

dermo88

I think its unlikely that Ireland would leave the Euro, but that Ireland needs a restructuring of its political and economic system as a result of this crisis. It needs to be used as a lesson for the future.

I did consider if Ireland could leave the Euro and had a (crazy) theory that Ireland could have a "parallel" floating currency used for pensions, social welfare payments, taxes, for internal usage, but it could not be exchanged international, it would not have "pure" legal tender status, merely acceptance as a medium of exchange. Its status would be similar to that of Scottish and Northern Irish currency, and its backing would be the properties repossessed and under the trust of the Central Bank of Ireland/NAMA. I am aware that it would depreciate, but the depreciation would be controlled, and interest rates would compensate for that. There are parallels from economic history for this, such as the Rentenmark introduced by Germany after the 1923 hyperinflation.

. It is right wing of me to state the following, but we cannot continue to run an expensive government and social welfare system at boom time levels within a currency union. We cannot continue to tax and spend at boom time levels within a currency union. If we do, we will not only run out of our own money, but someone elses. We also run out of confidence in our economy, our leadership, our system, and that is a burden Ireland should not inflict on future generations.

The political system being revamped -

(a) 40% of votes are on a National Level for the Oireachtais.
(b) 60% of votes are on a Constituency Level.

(The explanation for this, it partially removes the most pernicious effects of parish pump politics)

The economic system being revamped -

(a) Encourage savings for the long term, rather than spending. Hong Kong is within a currency board, pegged to the US Dollar. Guess what, Hong Kong is the ONLY place I have ever seen prices drop, and between 2001 and 2008, they dropped, without adversely affecting living standards and economic growth.

(b) Build up Budget and trade surpluses for the long term, in order to provide a shield when bad times like this "hit"

(c) Have the former Central Bank act like a currency board, and allocate a certain amount of the tax revenue to be used as a "set aside reserve" fund for pensions, property taxation, etc. If house prices started going out of control again, an interest levy on loans would be made - say 2% on top of the ECB interest rate. This would be given back as a rebate in bad times. It would need to be seperately administered, but it would have the effect of "smoothing" out the madness of peaks and troughs, and enable the financial discipline required within a currency union to take effect.

The Euro introduced a discipline on economies to engage in sensible economic policies, rather than populist bull**** based on artificially high wages, high costs, high indirect taxation, amongst other bolloxology. Unfortunately, Ireland behaves like a truculent Southern European. It is institutionally corrupt at the top with its elite. After seeing the likes of Padraig Flynn, Jackie Healy Rae, Ray Burke, Charles Haughey, Gerry Collins, Michael Lowry, Beverley Cooper Flynn, and these were/are our leaders, I wonder if the racist comments by the likes of Robert Kilroy Silk had some foundation in reality.

"A land of peasants, priests and pixies"

It seems to be in the West of Ireland (sorry, I am very balanced in my views towards the West of Ireland, having a chip on both shoulders). Within East, there is a modicum of cynicism towards the system. Distrust for the establishment haunts Ireland once again, just as it always has.

I don't like quoting right wing double barrelled spawn such as the above, and I know Ireland is better than that.

The above are possibilities, very rough ideas, but some of it is worth a look.

todolist

McWilliams was right about the housing bubble.Ireland will leave the Euro.This process will begin in about 5 years and will be the eventual solution to the economic disaster Ahern/Cowan & Co lead this nation into.Those guys done more damage to this country than 800 years of London rule.How the hell are they still enjoying the Mercs and perks??!!

SkepticOne

ei.sdraob wrote: »

ill put it to you this way, despite the huge downturn

given a choice would you rather be on the dole in UK or Ireland?

I think the thing that you would want is not to be on the dole in the first place.

View

SkepticOne wrote: »

If Ireland left the Euro then all loans to Irish operations of banks would be re-denominated in the new currency as would savings. This is part of the process of switching currency. These banks might like to continue owing them the euro amount but they would have no standing in Irish law to go after you for anything but the amount in the new currency.

This would be classified - quite rightly - as defaulting on the terms of the loan agreement. If the Government or a business takes out a loan in US Dollars, then the loan gets paid back in US Dollars. Likewise, with Sterling, the Euro etc. etc.

It is a great pity you can't just switch the currency you pay back in. It'd have been fierce handy to have switched your mortgage to Icelandic Kronor just before it collapsed in value.

SkepticOne

View wrote: »

This would be classified - quite rightly - as defaulting on the terms of the loan agreement. If the Government or a business takes out a loan in US Dollars, then the loan gets paid back in US Dollars. Likewise, with Sterling, the Euro etc. etc.

It is a great pity you can't just switch the currency you pay back in. It'd have been fierce handy to have switched your mortgage to Icelandic Kronor just before it collapsed in value.

Euros owed to banks operating in Ireland under Irish regulations (it doesn't matter if they are foreign owned) would be re-denominated into the new currency as would savings. I am open to correction on this but I don't think there's a any fundamental problem with this legally. It is not terribly different to what happened when we joined the Euro, the only difference being that in the above scenario the Euro would continue to be a currency in other countries. The banks would not be happy with this but I don't think there's a lot they could do.

ei.sdraob

SkepticOne wrote: »

I think the thing that you would want is not to be on the dole in the first place.

me? not at all

i see the need for assistance if you loose a job

just not the current implementation, a system with "half life" be good


anyways what i was trying to say, despite the deep recession for the most part were still doing better than people in other countries

thanks to being able to borrow alot and being tied to more solid economies like germany and france

you propose to throw that away ane let us sink


to put it into perspective


we have a dirty room(s) in the house, we both agree they are dirty

* i want to clean them rooms out

* you want to knock down the house and rebuild the rooms

ei.sdraob

SkepticOne wrote: »

Euros owed to banks operating in Ireland under Irish regulations (it doesn't matter if they are foreign owned) would be re-denominated into the new currency as would savings. I am open to correction on this but I don't think there's a any fundamental problem with this legally. It is not terribly different to what happened when we joined the Euro, the only difference being that in the above scenario the Euro would continue to be a currency in other countries. The banks would not be happy with this but I don't think there's a lot they could do.

your forgetting that when we joined the euro the punt (and other currencies) were pegged and the rate set in stone few years before the switch

it doesnt work the other way around

money and wealth would drain out of this country faster than a balloon popping causing its own issues

also any new currency would have to carry and extremely high interest rates to attract buyers, how would businesses/people go about getting loans when they are in double digits then? not to mention inflation on everything that needs to be imported

around this time last year half a trillion drained from US economy in 1 day via electronic accounts

View

SkepticOne wrote: »

Euros owed to banks operating in Ireland under Irish regulations (it doesn't matter if they are foreign owned) would be re-denominated into the new currency as would savings. I am open to correction on this but I don't think there's a any fundamental problem with this legally. It is not terribly different to what happened when we joined the Euro, the only difference being that in the above scenario the Euro would continue to be a currency in other countries. The banks would not be happy with this but I don't think there's a lot they could do.

I probably didn't express it well but I was actually referring to loans, such as Government or corporate bonds which are bought and sold on the international financial markets. If the Government or any company has sold Euro denominated bonds (to fund all the debt it is clocking up) then the legal agreement will be to redeem the bond in Euro (or Dollars or whatever currency the bond was issued in). One side unilaterally changing the terms of its agreement without rightly be regarded as defaulting on the agreement.

As to whether this is a good idea - look at Iceland. Icelandic banks found they would have major problems covering their UK and Dutch branches in the financial crisis. There was a phone call between the British and Icelandic Finance Ministers about this and during this the Icelandic Finance Minister said something like "I don't know if we can honour the debts of the (UK) bank branches, but we'll try". The British took this to mean that Iceland couldn't cover the debts and using anti-terrorism legislation, they moved in and unilaterally shut down the Icelandic banks UK branches. After that Iceland went into melt-down as who in their right minds would want to trade with them after that?

SkepticOne

View wrote: »

I probably didn't express it well but I was actually referring to loans, such as Government or corporate bonds which are bought and sold on the international financial markets. If the Government or any company has sold Euro denominated bonds (to fund all the debt it is clocking up) then the legal agreement will be to redeem the bond in Euro (or Dollars or whatever currency the bond was issued in). One side unilaterally changing the terms of its agreement without rightly be regarded as defaulting on the agreement.

They would stay in the original currency - dollar, euro, sterling etc, unless the country defaults.

As to whether this is a good idea - look at Iceland. Icelandic banks found they would have major problems covering their UK and Dutch branches in the financial crisis. There was a phone call between the British and Icelandic Finance Ministers about this and during this the Icelandic Finance Minister said something like "I don't know if we can honour the debts of the (UK) bank branches, but we'll try". The British took this to mean that Iceland couldn't cover the debts and using anti-terrorism legislation, they moved in and unilaterally shut down the Icelandic banks UK branches.

The icelandic banks were going to fail anyway just like the Irish banks failed (or would have had the country not stepped in). The problem in Iceland was that the banks grew to several times the size of the Icelandic economy and so the country could not save them. In Ireland the banks never got that big so the government guarantee was able to stave off outright collapse.

After that Iceland went into melt-down as who in their right minds would want to trade with them after that?

I've no problem buying their products. The only thing I would steer clear of is banking. As far as I know there hasn't been a pulling out of foreign investment from the area though I'm not sure the extent to which that existed before. I know they are trying to get into the data centre business and they also have fruit ripening operations both taking advantage of cheap energy. I doubt if they are gone.

The one thing people mention is McDonalds. I would suggest that is not a great loss to the country. The guy who owns the franchises there is staying in business but sourcing locally. If anything that will be of benefit to the country.