The Euro, are we really better off?

djsomers

I am not sure if this is the right place for this one, but, How do people think we would be if the Euro was never brought in and we were still using the Punt? On a personal level, and IMHO, I believe that people have less bang for their buck.

oppenheimer1

djsomers wrote: »

I am not sure if this is the right place for this one, but, How do people think we would be if the Euro was never brought in and we were still using the Punt? On a personal level, and IMHO, I believe that people have less bang for their buck.

It is likely that the punt would have become severely overvalued during the boom times consequently it would have gone the same way as the Icelandic Krona afterwards. We simply wouldn't have had enough reserves to defend it, in any case we would have had to devalue.

The euro has provided a stable base for us, now we have to build on it. That said because we can't devalue we have to make politically tougher decisions like wage cuts in order to have the same effect.

nesf

It's both a good and bad thing to be in the Euro. The positives are complex, the biggest one is absolutely no currency risk for companies trading in the Eurozone which is non-trivial, we've seen substantial changes in how our exports to France, Germany etc behave on a technical level (i.e. the amount we sell there is less sensitive to downturns in the target economy than when we had the Punt). We're protected from currency attacks and the other nastiness associated with a small sovereign country having it's own currency.

The bad side is not having control over interest rates and devaluation. This forces us to have fiscal discipline and not just devalue our currency if we run up too much Government or personal debt. Then again, this can be viewed as a good thing as "in theory" it encourages more responsible Government behaviour.

thebman

nesf wrote: »

It's both a good and bad thing to be in the Euro. The positives are complex, the biggest one is absolutely no currency risk for companies trading in the Eurozone which is non-trivial, we've seen substantial changes in how our exports to France, Germany etc behave on a technical level (i.e. the amount we sell there is less sensitive to downturns in the target economy than when we had the Punt). We're protected from currency attacks and the other nastiness associated with a small sovereign country having it's own currency.

The bad side is not having control over interest rates and devaluation. This forces us to have fiscal discipline and not just devalue our currency if we run up too much Government or personal debt. Then again, this can be viewed as a good thing as "in theory" it encourages more responsible Government behaviour.

This.

I don't think I'd trust FF or any of the Irish political parties with the power to devalue at this stage. Not while its party before country/people.

ChocolateSauce

I think the advantages vastly outweigh the disadvantages.

woodseb

Those who advocate the Punt suggest that having control of our interest rates would have prevented the boom/bubble - in theory, yes but i have serious doubts given their performance in recent times, whether our central bank and govt would have had the prudence to rein in the expansion....

The icelandic krone is a perfect example of why the euro was good for us

ei.sdraob

woodseb wrote: »

Those who advocate the Punt suggest that having control of our interest rates would have prevented the boom/bubble - in theory, yes but i have serious doubts given their performance in recent times, whether our central bank and govt would have had the prudence to rein in the expansion....

The icelandic krone is a perfect example of why the euro was good for us

Iceland had its own currency didnt prevent them from imploding, if anything it made their fall much more spectacular

like someone said earlier in this thread, i would not trust the government or any of the opposition with the power to print money, thankfully that power now lies with the more responsible europeans who have long grown up and have solid economies that came out relatively quickly and unscratched from this recession and are now dragging us out

whether we use euro, punt, gold, sea shells that would not have changed the underlying issues caused by banks, government and the people who voted this government in and then played to the property bubble tune

djsomers wrote: »

I believe that people have less bang for their buck.

this pesky thing called inflation, if anything youll be getting **** all "bang" for your punt (especially on any products/services that are imported or relying on imports) now since its would have been next to worthless, ask Icelanders how much "bang" they are getting for their currency now

UltimateMale

ei.sdraob wrote: »

whether we use euro, punt, gold, sea shells that would not have changed the underlying issues caused by banks, government and the people who voted this government in and then played to the property bubble tune

Too true.

Red_Marauder

Yes I think the Euro has saved Ireland's skin, it is totally without question that the cost of our borrowing would be much more expensive due to a lower credit rating in the absence of the common currency, something the Baltics have felt to their cost.
Compounding the effect the Euro has had to help us maintain our credit rating, as well its impact on our exports market, there is no doubt that we are better off with it.

I think the interesting question, however, is whether all of the good it has done us in the past up until now, will do us as much good in the future. Particularly in terms of ECB interest rates in the coming years.

Liam Byrne

In still trying to figure out how bars of chocolate priced at 32p - 42p jumped to 80c - 90c.

ei.sdraob

Liam Byrne wrote: »

In still trying to figure out how bars of chocolate priced at 32p - 42p jumped to 80c - 90c.

what timeframe are we talking about? there was a bit of greediness going on by retailers at time of switch over, but these are fairly insignificant to the inflation we had in last decade

johnnyskeleton

djsomers wrote: »

I am not sure if this is the right place for this one, but, How do people think we would be if the Euro was never brought in and we were still using the Punt? On a personal level, and IMHO, I believe that people have less bang for their buck.

Ask people with lots of debts and they will say the Euro is a curse.

Ask those with lots of savings and they will say it is a godsend.

Competitive devaluations should not ever be considered as a proper government policy. A strong currency is a reflection of a strong economy, and vice versa. The idea behind devaluation is to temporarily make other countries think you are weak when you are really strong, thus gaining a competitive advantage over them. Over the long term and done on an international level, all competitive devaluations do are destroy savings and as a knock on effect discourage investment in favour of consumption.

The people who advocate leaving the euro do so almost entirely on the basis that we could then have a competitive devaluation. But this would only last in the short term and wouldn't work against any neighbours of ours who followed a similar policy.

The Euro puts a stop to this type of nonsense economics to a certain extent - it imposes German prudence on the rest of the Eurozone, but also it will be interesting to see what happens if the US/UK try to inflate their way out of trouble while the Eurozone stays put. In my view, this will cause a lot of investment to flow into Europe as a safe economy with a stable currency while other currencies go to pot.

hinault

I was in Germany recently and co-incidentally I spoke about this very issue with some German business people.

They were saying that the German people rue the day, when the Deutchmark was abandoned.
That;s the view from a nation who is at the opposite end of the spectrum to this basketcase of a country.

johnnyskeleton

hinault wrote: »

I was in Germany recently and co-incidentally I spoke about this very issue with some German business people.

They were saying that the German people rue the day, when the Deutchmark was abandoned.
That;s the view from a nation who is at the opposite end of the spectrum to this basketcase of a country.

On what basis?

hinault

johnnyskeleton wrote: »

On what basis?

On the basis that effectively our Germany friends suffered a devaluation to calibrate a pan-European Euro.

Their argument is that the Mark's value was appreciably higher than the Euro value : when they had the Mark, Germans GDP was significantly higher in Mark denomination than it is in Euro denomination.

Consequently their Mark was able to purchase significantly more than their Euro equivalent.

ei.sdraob

hinault wrote: »

On the basis that effectively our Germany friends suffered a devaluation to calibrate a pan-European Euro.

Their argument is that the Mark's value was appreciably higher than the Euro value : when they had the Mark, Germans GDP was significantly higher in Mark denomination than it is in Euro denomination.

Consequently their Mark was able to purchase significantly more than their Euro equivalent.

well at least your friends understand basic arithmetic

higher echange rate, means higher GDP measured in that currency, wow quick get the goldstar

my sand castle is worth 2 apples your sandcastle is worth 4 oranges, new currency called "tomato" is introduced now my sandcastle is worth 1 tomato and your sandcastle is worth 2 tomatoes :P (the exchange rate between apples<>tomato and oranges<>tomato is fixed btw)

sorry for sarcasm im just extremely amused by your friends comments by their line of thinking the Italians with their Lira (lemons?) must have had a monstrous GDP (measured in Lira) altogether



btw GDP is usually measured in dollars so in the end it makes **** all difference, especially considering all the local currencies exchange rates were frozen at a point in time for a period before euro came in

hinault

ei.sdraob wrote: »

well at least your friends understand basic arithmetic

higher echange rate, means higher GDP measured in that currency, wow quick get the goldstar

my sand castle is worth 2 apples your sandcastle is worth 4 oranges, new currency called "tomato" is introduced now my sandcastle is worth 1 tomato and your sandcastle is worth 2 tomatoes :P

sorry for sarcasm im just extremely amused by your friends comments by their line of thinking the Italians with their Lira must have had a monstrous GDP (measured in Lira) altogether

btw GDP is usually measured in dollars so in the end it makes **** all difference, especially considering all the local currencies exchange rates were frozen at a point in time for a period before euro came in

Good lad - you completely miss the point as usual.

The relative value of the Euro and the Mark, compared to other currencies is what the Germans are unhappy about.

The value of the Mark relative to the value of the Euro, was far higher.
Consequently, our German friends earned far more from exports and could buy more imports with their Mark, relative to what they can buy with the Euro.

ei.sdraob

hinault wrote: »

Good lad - you completely miss the point as usual.

The relative value to the Euro and the Mark, compared to other currencies is what the Germans are unhappy about.

The value of the Mark relative to the value of the Euro, was far higher.
Consequently, our German friends earned far more from exports and could buy more imports with their Mark, relative to what they can buy with the Euro.

all the countries agreed to freeze the exchange rates at a point of time

no point complaining now, they could have manipulated the rate to their advantage

im sure whatever looses were made are nothing compared to the amount of money saved not paying exchange rates in trade etc

one thing that wasn't mention in this thread is that eurozone is one of our largest export destinations, the single currency (from personal experience) made trade much easier with less barriers, and that helps everyone

hinault

ei.sdraob wrote: »

all the countries agreed to freeze the exchange rates at a point of time

no point complaining now, they could have manipulated the rate to their advantage

im sure whatever looses were made are nothing compared to the amount of money saved not paying exchange rates in trade etc

one thing that wasn't mention in this thread is that eurozone is one of our largest export destinations, the single currency (from personal experience) made trade much easier with less barriers, and that helps everyone

We'll while we're carping about our economic woes, I just wanted to provide the members here with a German view of the Euro.
The view as expressed from my German colleagues is that Germany has sacrificed a portion of it's wealth creation in order to satisfy a Euro agenda.
Of course that was their decision : but I get the impression that the cost of the common currency, coupled with the reunification of Germany, has caused considerable strife (Germany's population increased by 22% on reunification).

For sure there has been an upside to the Euro : Euroland is a huge economic entity, it far easier to trade with countries in the common currency zone.

I am simply relating the German view as expressed to me.
They're pretty pissed off at having to potentially help to bailout Greece and possible our basketcase of a country.

ei.sdraob

hinault wrote: »

I am simply relating the German view as expressed to me.
They're pretty pissed off at having to potentially help to bailout Greece and possible our basketcase of a country.

do you blame them? would you want to bailout Greece or Ireland especially when so much warning about the craziness was given to both countries

i do see their point, tho in case of Germany the Reunification project set them back alot more than joining euro or for that matter this recession, whats impressive is how well they executed the reunification

like @johnnyskeleton said earlier on in the thread, the euro is setup almost like a gold standard currency and this benefits savers, investors and the prudent while hurting the reckless (and rightfully so) by making the face up to the fact that money they borrow needs to be paid back and not just defaulted on

@johnnyskeleton hit the nail on the head by saying this will make money flow in from other unstable regions (remember British savers moving money to euro? when they realized they are getting robbed by devaluation)


also if the people who claim that devaluation is a good thing (i doubt that) are correct, then do remember that the devaluation card has not been played by ECB, while BOE and Fed have used up all their ammo in this recession

johnnyskeleton

hinault wrote: »

On the basis that effectively our Germany friends suffered a devaluation to calibrate a pan-European Euro.

Their argument is that the Mark's value was appreciably higher than the Euro value : when they had the Mark, Germans GDP was significantly higher in Mark denomination than it is in Euro denomination.

Consequently their Mark was able to purchase significantly more than their Euro equivalent.

Fair enough. Interesting though that people in Germany apparently hate the Euro because it caused a devaluation while people in Ireland are calling for us to leave the euro to create a devaluation.

I'd chalk that up to a teething problem with the euro rather than a fundamental defect. Possibly it was due to Germany experiencing a deflating/stagnating economy while the PIGS economies were experiencing high growth/inflation. Perhaps this latter led to the devaluation they experienced, rather than the level at which the mark was set in Euro.

SkepticOne

No sympathy for the Germans if they hate the Euro. Did they think it was going to be run specifically for them?

K-9

SkepticOne wrote: »

No sympathy for the Germans if they hate the Euro. Did they think it was going to be run specifically for them?

Indeed, yet Some Irish seem to think it should be run specifically for us.

SkepticOne

K-9 wrote: »

Indeed, yet Some Irish seem to think it should be run specifically for us.

I think most Irish people realise that if we are to stay in the Euro we have to accept that it is going to be valued by the market according to the strength of the Eurozone as a whole of which Ireland is a tiny part. If we don't like it that then we should not have joined.