Admit Euro failure....Europewide.

Bottle_of_Smoke

First off I think Ireland leaving the Euro would be a disaster.

I don't think punt nua would do us any favours if the Euro was still around.

So essentially countries can't leave the euro on an individual basis as their new currency would be worthless.

Perhaps this is a discussion for economists who know their stuff but to me the eurozone as a concept is ludicrous.

How can economies like Portugal, Ireland and Slovenia use the same currency and interest base rates as France/Germany without major problems occurring when they are still sovereign nations.

The euro would only be sensible if the eurozone was one sovereign nation, virtually nobody wants that so surely the logical approach is to get rid of the euro.

Am I wrong or missing something major?

Scofflaw

My problem with the euro is slightly more that in its present form it allows for what is perhaps an excessively free movement of capital, and that it's therefore a bad idea in itself. However, that's a thought that's still being being born.

I don't think the question of the euro participants being sovereign countries is relevant in the abstract. There seems to be some conflict, though, between the loss of policy freedom looked at one way, and the excess of policy freedom looked at another. There's obviously a tension there, and currently it's being resolved in favour of increased policy coordination. Whether that's the right way to go - leaving aside, again, the political issue of sovereignty - is something that bears thinking about.

cordially,
Scofflaw

Bottle_of_Smoke

I probably should have elaborated a bit more.

The reason I'm linking sovereignty and the euro is the interest base rate control.

The most relevant scenario was ourselves during the housing boom. Low interest rates decided by the ECB, cheap credit for all in Ireland.

What will happen if the big countries decide rates need to go up but smaller nations are still in recession? People can't afford their mortgages and the their recessions get worse.

If the Eurozone was a sovereign nation like the UK or the US they can subsidize the relevent states if interest rates need to be changed for the overall good, that can't be done for individual sovereign states in the Eurozone in the same manner - that's where I see the problem. Are there any other shared currency zones between independent nations?

I'll say it again I probably don't know enough to be talking about this, so be as scathing or point out as many oversights in my post as you wish, I won't be offended.

ART6

I'm with the OP on whether or not the Euro was a good idea -- personally I thought it was a very bad idea from the day that it was first proposed, for the reasons stated by the OP. I couldn't see how it could work without Europe becoming a federal state like the USA and Russia. If nothing else it took away from sovereign governments the most important financial control they had and effectively tied them to the needs of Germany and France.

However, we now have a common currency whether we like it or not, and if it collapses then the world will, I believe, be plunged into financial turmoil. The Euro is, after all, a major international currency and Ireland particularly is stuck with it. Unfortunately Ireland could be the trigger that starts the collapse since it presents an opportunity in my view for financial speculators to attack the Euro. If they succeed by using sovereign bond interest rates then the next obvious targets would be Portugal and then Spain.

Ireland can be bailed out by the IMF and the EU. So can Greece and Portugal, but Spain? Or even Italy? I would say no. Those economies are simply too big -- there isn't anywhere near enough bail out money available. So now we are at crunch point. We are in negotiations for a bail out that the funds can easily support, but to access those funds we must have a financial strategy that they find acceptable. They won't sign a blank cheque.

If the Greens by their political posturing, and the independents by their bluster, succeed in defeating the forthcoming budget then the government will fall. Will the IMF continue to offer support then? If they don't then we could be forced out of the Euro and become bankrupt. The banks will fail and everyone will lose their money. Which party is in government is irrelevant I believe. What matters is the budget and it must be a tough one. Could FG or Labour come up with an alternative and acceptable budget within a time scale that satisfies the markets and the IMF? I sincerely doubt it.

So. Budget vote lost and FF out of office. Celebration in the streets until the IMF pulls the plug. Then the speculators turn to Portugal. But why should they want the Euro to fail? Well, it seems to me that if all of the EU member states had to return to having their own currencies, the opportunities for currency speculation would return to what they were before the Euro.

I know there's not supposed to be a mechanism for any member to be forced out of the Euro, or to leave it voluntarily, but surely there is one obvious way. That is that the EU/IMF decide that they cannot or will not fund unaffordable deficits. Irish bond interest rates then go through the roof and the country can no longer meet the stability requirements of the Eurozone by a country mile.

Let's then suppose that the speculator's then turn their attention to Portugal, Spain, Italy. Then they are in the same position as Ireland. At that point what is to stop Germany and France deciding they they will establish their own single currency with some of the other stronger member states, and let the rest of us have the Euro if we want it. At that point it would be worth no more than the Punt would if we went back to that. We would be still in the Euro but it would no longer be stiffened by the financial muscle of Germany and France. In that scenario we might as well start calling our money Punts again as it would make no difference to its value. Ireland would simply not have any money whatever we called it.

I don't know if any of the above makes any sense at all -- I am not an economist. But I am very, very uneasy and I am not at all convinced that any of our politicians in any of the parties have any idea what to do other than to concentrate upon the needs of their parties rather than those of the country (Cowen leaving the IMF negotiations to canvas in Donegal for God's sake!). Whatever any of them say about it, Ireland's financial sovereignty is now controlled by the EU and the IMF, and we had better start to get used to it. How we got to that is irrelevant now, and all the blaming and back stabbing and calling the Brian's idiots will not change that one bit.

SkepticOne

It is by its nature a fragile system and will inevitably collapse. However while the process of collapse will be extremely painful (more so than most imagine) in the long run a return to national currencies will be for the best, imo.

RandomName2

Bottle_of_Smoke wrote: »

The euro would only be sensible if the eurozone was one sovereign nation, virtually nobody wants that so surely the logical approach is to get rid of the euro.

Unfortunately you are right. Single currency with the amount of sovereignty held by European states just doesn't make logical sense (unless the states are going to coordinate everything which is the practice of a federal system even while pretending to operate under a different one.)

But SkepticOne, look at the force with which Constitution/Lisbon was pursued by the EU states. Do you really believe that they would be prepared to sacrifice the euro? If sovereignty is the cost of maintaining the currency, so be it; it would after all be in accordance with the goal of ever closer union. The poorer EU governments are not really in a position to argue, and the stronger EU governments are not really in a position to ignore the serious financial liabilities that are PIGS, Italy, Slovenia and Latvia.

Wibbs

Bottle_of_Smoke wrote: »

The most relevant scenario was ourselves during the housing boom. Low interest rates decided by the ECB, cheap credit for all in Ireland.

Exactly. we had a boom, but the Euro made it a bubble.

What will happen if the big countries decide rates need to go up but smaller nations are still in recession? People can't afford their mortgages and the their recessions get worse.

That already happened to a small degree. The EU central bank rate went up just before the US financial wobble and house prices here took a hit. An out of proportion hit, which would have been more proportional if we still had control of our currency in say 2001 and had raised interest rates then. A bubble would have been significantly less likely.

If the Eurozone was a sovereign nation like the UK or the US they can subsidize the relevent states if interest rates need to be changed for the overall good, that can't be done for individual sovereign states in the Eurozone in the same manner - that's where I see the problem. Are there any other shared currency zones between independent nations?

Even within independent nations it can be an issue depending on the size of the nation. Look at the US and look at the difference in wealth between say California and Arkansas. And that's one nation, one language, one government. Trying same over an entity like Europe with quite different local needs and its one helluva balancing act and someone or several someones will fall.

Scofflaw

Wibbs wrote: »

Exactly. we had a boom, but the Euro made it a bubble.

That already happened to a small degree. The EU central bank rate went up just before the US financial wobble and house prices here took a hit. An out of proportion hit, which would have been more proportional if we still had control of our currency in say 2001 and had raised interest rates then. A bubble would have been significantly less likely.

Even within independent nations it can be an issue depending on the size of the nation. Look at the US and look at the difference in wealth between say California and Arkansas. And that's one nation, one language, one government. Trying same over an entity like Europe with quite different local needs and its one helluva balancing act and someone or several someones will fall.

Again, I have to disagree with the idea that the euro made the boom a bubble. Bubbles are an almost inevitable consequence of unrestrained lending, not interest rates - access to money, not cost of money as such.

Reposted from the other thread:

Banks - and the financial markets more generally - have a fundamental role to play in a capitalist economy, which is matching people's spare money against investment opportunities. Without them, only individual capitalists with sufficient resources can really become investors on anything other than a very local basis. That means, in turn, that fruitful enterprises - that is, human endeavours that will lead to greater prosperity overall - are starved of the capital they need to take place or grow. In turn, that means economies grow slowly.

However, the banks don't do this out of the goodness of their hearts - they simply seek the maximum return on investment for their clients' money, and that, not investment in fruitful enterprises, is their main driver. That means that it's extremely easy for bank lending to become diverted into assets rather than enterprises if assets offer greater returns - and once bank lending starts to be so diverted, asset prices will rise, and assets become yet more attractive, causing more lending to be diverted into assets. Assets are, to some extent, inherently more attractive than enterprise - there is no uncertainty over return (bar the bubble bursting), and no waiting period. You can 'flip' assets in a way that you cannot 'flip' enterprises, which means that you can realise immediate gains. Unfortunately, asset-based 'wealth' is effectively meaningless to the wider economy, because it creates nothing new - the asset does not become more useful no matter what its price. The creation of new assets at least generates some real input to the economy, but whenever the bubble bursts, those assets will lose all value.

Booms regularly start after a period of prosperity that results from growth in the real economy. People have disposable wealth, and seek a return on it. Invariably, some of them will seek to become rentiérs rather than entrepreneurs, by putting their money towards assets rather than enterprise - cashing out of the game, if you like. It's a perfectly reasonable thing to do, but it tends to push those asset prices up. Above a certain level of prosperity, asset prices will be rising fast enough for them to become more attractive than enterprise, and the bubble effect kicks in.

So the nature of the banking system is such that it tends to create asset bubbles. All that is required is that lending is largely unrestrained, which is why we have so many rules about bank lending. Unfortunately, there is a both a philosophical/policy bias against restraining lending, and a practical difficulty in doing so, which is the opacity of many financial transactions. However, for the sake of the wider economy, restraint is required - since the bust that follows the boom has the practical effect of cancelling out much of the boom caused by unrestrained lending, but with much more misery, and even the boom is less useful than it first appears, because it is not an enterprise boom but after a certain time almost invariably an asset boom.

The answer, therefore, seems to me to be to require transparency in financial instruments - and it is perfectly possible to ban certain types of financial instruments - so that due diligence can be done effectively, so that lending can be restrained.

What we had was an initial enterprise boom, which turned into an asset bubble once people were wealthy enough to have disposable money sloshing around looking for a decent return and asset prices started rising. Higher interest rates would have slowed things down a little, but not sufficiently to prevent a bubble. Nor does the pain associated with the bursting of the bubble have much to do with the euro at this point - again, it has to do with inadequate bank regulation, because the value of the assets the banks claimed they had has collapsed dramatically - but those assets should never have been valued at bubble prices.

cordially,
Scofflaw

eire2009

A currency trashed on the exchange would do Ireland wonders..

Exports would rise

Companies would move in with cheaper service`s and labour with the difference in the rates

More tourists would visit as it wouldnt be as expensive to holiday in.

More Irish people would holiday at home as it would be more expensive to travel abroad

Thats if we never joined the euro as now we need to be bailed out because of it. For repaying our debts we will have to stick with it because our repayment could double if the punt was trashed..

ART6

eire2009 wrote: »

A currency trashed on the exchange would do Ireland wonders..

Exports would rise

Companies would move in with cheaper service`s and labour with the difference in the rates

More tourists would visit as it wouldnt be as expensive to holiday in.

More Irish people would holiday at home as it would be more expensive to travel abroad

Thats if we never joined the euro as now we need to be bailed out because of it. For repaying our debts we will have to stick with it because our repayment could double if the punt was trashed..

That's the point. It's like losing your house because your debts are too high and you can't pay the mortgage. You don't run up any further debts because no-one will lend to you any more, but the original debt less the (lowered) value of the house still remains and will be held against you. So you go into social housing and welfare while you try to get by on a dramatically reduced income.

The trouble with that is that it works for the individual but it doesn't work that way for a country. There isn't social housing and welfare for Ireland Inc.

As a mortgage defaulter you might be forced into bankruptcy, at which point you will need to agree a financial plan and surrender a major slice of your income and your underwear to the creditors. Free of debts you might be able to obtain gainful employment and actually start to make some money, but you still have to service the original debt. As a country you can simply default and not repay anything. Trouble with that is that as a member of the Eurozone you cannot do that. Outside of the Eurozone you can, but then you have to print your own money, like Zimbabwe dollars.

SkepticOne

eire2009 wrote: »

Thats if we never joined the euro as now we need to be bailed out because of it. For repaying our debts we will have to stick with it because our repayment could double if the punt was trashed.

This is a very widespread view but I don't think it is totally correct. If your currency devalues then, sure in terms of the devalued currency, is larger. But that is just a number. You actually service your debts by exporting more than you import and in this sense the currency that is used doesn't matter. Competitiveness is what is important.

It is true that your debts come down with the currency. They stay the same in international terms, but they don't go up in those same terms.. What does comes down with the currency is wages, prices, costs etc, the things that have to come down anyway. These are too high in Ireland but lowering across the board through deflation is extremely damaging as it leads to bankruptcies and redundancies.

What is much harder is to service your debts when you have an overvalued currency for the economy. We are seeing this right now.

K-9

SkepticOne wrote: »

This is a very widespread view but I don't think it is totally correct. If your currency devalues then, sure in terms of the devalued currency, is larger. But that is just a number. You actually service your debts by exporting more than you import and in this sense the currency that is used doesn't matter. Competitiveness is what is important.

It is true that your debts come down with the currency. They stay the same in international terms, but they don't go up in those same terms.. What does comes down with the currency is wages, prices, costs etc, the things that have to come down anyway. These are too high in Ireland but lowering across the board through deflation is extremely damaging as it leads to bankruptcies and redundancies.

What is much harder is to service your debts when you have an overvalued currency for the economy. We are seeing this right now.

Yes, but your imports also cost more.

Inflation also becomes a danger which would erode any competitiveness gains as pressure would grown on wages.

We devalued in the early 90's and by 96/97, the punt was worth more than sterling. We had relatively low costs though and were able to trade out of it.

eire2009

K-9 wrote: »

Yes, but your imports also cost more.

Inflation also becomes a danger which would erode any competitiveness gains as pressure would grown on wages.

Imports will cost more and thats the idea of producing more of what we can in Ireland and spending less on imported goods.. It the only way we will get this country going again..

As for the IMF it is probably a good thing it will put a bit of business sense back into the public service. Although I realise that in the public service the less you do the more you get paid and they will probably target the underpaid and understaffed sectors like the health and education..

The likes of the Guards and P.O`s are paid nearly three times what there European counter parts are.. 26k in UK and 68k in Ireland for a PO its crazy
I know recently they have put extra taxes and levies on the salaries, but they are still way out of line and so is the dole..

But reducing the amount of any money being paid out in salaries will create more job losses as our market isnt competitive enough for outside influence to invest in.

The euro is basically strangling us we need a depreciated currency if Germany or France were in the same position as us the euro would depreciate enough to get the ball rolling but the so called PIGS arnt effecting the exchange rate enough.

I recon the euro will fail eventually in 2-3 years when they realise they cant keep carrying countries who are still not out of recession

Victor

Bottle_of_Smoke wrote: »

The reason I'm linking sovereignty and the euro is the interest base rate control. The most relevant scenario was ourselves during the housing boom. Low interest rates decided by the ECB, cheap credit for all in Ireland.

No, the problem was that interest rates dropped and we continued to give tax credits for property loans - in the middle of a property bubble. Hence ghost estates and zombie hotels. Reducing / removing TRS and Section 23/27-type schemes and introducing a property tax would have worked wonders, then and now.

K-9 wrote: »

We devalued in the early 90's and by 96/97, the punt was worth more than sterling. We had relatively low costs though and were able to trade out of it.

Sterling and the punt split in 1978, we devalued a few times in the 1980s and last in 1993 when the punt was above sterling, we revalued (twice?) slightly in about 1998/9. It is only in the last 2-3 years that the punt (in euro amounts) has exceeded sterling.

senordingdong

Ok, but if Ireland and an short sighted govt. hadden brought us to this point, would the euro still be going strong?

Wibbs

Scofflaw wrote: »

What we had was an initial enterprise boom, which turned into an asset bubble once people were wealthy enough to have disposable money sloshing around looking for a decent return and asset prices started rising.

It had other factors too. A population "bubble" was coming online too. We had a mini baby boom in this country in the late 60's early 70's and those people were coming to the settling down, lets buy a gaff stage which fueled the initial market. We also had lower house prices here than in the rest of Europe so some adjustment was gonna happen. Then our traditional need to rent not buy, fueled it more.

I have no problem seeing the other factors, but to deny the Euro and EU fiscal policy had little or nada to do with it strikes me as strange. Doubly so when you graph the "PIGS" runaway madness to the introduction of the currency and associated valuations and overnight interest rate drop(compare it to the EU nations were it didn't drop). Look at Portugal's economic trajectory since it's introduction. Many look to the introduction of the Euro by Portugal and especially the unrealistic exchange rate at the time for that.

View

Bottle_of_Smoke wrote: »

How can economies like Portugal, Ireland and Slovenia use the same currency and interest base rates as France/Germany without major problems occurring when they are still sovereign nations.

The answer to your question is that once a common rate is set all member states need to make adjustments based on that. That obviously means they need to keep a very close eye on the common rate and the policies that the other member states - particularly the larger ones - are pursuing based on that rate.

Now, it may seem unfair that in practice a smaller state will need to make more adjustments than a larger one but such is life. Were there no EU, that would be the case, as the larger states very much "set the stage" for the overall European economic situation and the smaller states need to react accordingly.

That - it should be pointed out - was the case when we had the Punt. Then, Irish interest rates were set largely wrt to British ones (and the driving factor in UK interest rates was very often the inflation rate arising out of the peformance of the housing market in Kent and Surrey).

Lastly, having said all that, it should be remembered that we are where we are largely as a result of the policies of our Eurosceptic-lite "Boston instead of Berlin" politicians who opted to ignore what was going on elsewhere in the Eurozone and instead use excessive property-based tax-breaks to encourage massive over-investment in the property sector. Sadly, we will all pay a heavy price - irrespective of what policies we pursue - for their stupidity...

SkepticOne

View wrote: »

The answer to your question is that once a common rate is set all member states need to make adjustments based on that. That obviously means they need to keep a very close eye on the common rate and the policies that the other member states - particularly the larger ones - are pursuing based on that rate.

I think you've just described the disadvantages of the common currency for small countries very well there.

Now, it may seem unfair that in practice a smaller state will need to make more adjustments than a larger one but such is life. Were there no EU, that would be the case, as the larger states very much "set the stage" for the overall European economic situation and the smaller states need to react accordingly.

It is not unfair; it is simply reality. It is true that small countries need to adjust the changes in policy of larger ones. However one of the tools, monetary policy, has been taken away. Now it is not the only tool. I think the Irish housing bubble could possibly have been burst by the full implementation of the Bacon recommendations. Once it got beyond a certain point, however, there was very little a government could do that would have had much effect.

By the way, none of the anti-common currency arguments are particularly controversial outside of the Eurozone. You often get the feeling that you are committing heresy by putting them forward here, such is the emotion invested in the continuance of the Euro among its adherents.

Bottle_of_Smoke

View wrote: »

The answer to your question is that once a common rate is set all member states need to make adjustments based on that. That obviously means they need to keep a very close eye on the common rate and the policies that the other member states - particularly the larger ones - are pursuing based on that rate.

Now, it may seem unfair that in practice a smaller state will need to make more adjustments than a larger one but such is life. Were there no EU, that would be the case, as the larger states very much "set the stage" for the overall European economic situation and the smaller states need to react accordingly.[/quote]

The flaw here is that it is impossible to predict what is going to happen in other large states. And these things don't happen over the course of a gvernment. Fine Gael can't take responsibility for the previous coaltion not adjusting. Whereas if a currency is kept within a sovereign nation each government can make their own adjustments.

That - it should be pointed out - was the case when we had the Punt. Then, Irish interest rates were set largely wrt to British ones (and the driving factor in UK interest rates was very often the inflation rate arising out of the peformance of the housing market in Kent and Surrey).

Largely linked yes but currency adjustments could be made then which can't be done now.

Lastly, having said all that, it should be remembered that we are where we are largely as a result of the policies of our Eurosceptic-lite "Boston instead of Berlin" politicians who opted to ignore what was going on elsewhere in the Eurozone and instead use excessive property-based tax-breaks to encourage massive over-investment in the property sector. Sadly, we will all pay a heavy price - irrespective of what policies we pursue - for their stupidity...

That was my point earlier. We pay for what the past did and have no real way of amending the situation

Scofflaw

Wibbs wrote: »

It had other factors too. A population "bubble" was coming online too. We had a mini baby boom in this country in the late 60's early 70's and those people were coming to the settling down, lets buy a gaff stage which fueled the initial market. We also had lower house prices here than in the rest of Europe so some adjustment was gonna happen. Then our traditional need to rent not buy, fueled it more.

I have no problem seeing the other factors, but to deny the Euro and EU fiscal policy had little or nada to do with it strikes me as strange. Doubly so when you graph the "PIGS" runaway madness to the introduction of the currency and associated valuations and overnight interest rate drop(compare it to the EU nations were it didn't drop). Look at Portugal's economic trajectory since it's introduction. Many look to the introduction of the Euro by Portugal and especially the unrealistic exchange rate at the time for that.

But I don't disagree that the euro had a role in the problem. I've only disagreed that it was "the euro that turned our boom into a bubble" - an argument that, to me, ignores the very large role of our pro-cyclic policies in doing so. That's why we repeatedly had warnings from the EU and from our own central bank pointing out the unsustainability of what we were doing.

cordially,
Scofflaw

Amtmann

Rather than start a new thread, I'll post my questions here.

Suppose that David McWilliams, writing in in today's Independent, is correct in stating that the financial crisis has already spread to Portugal and Spain. Suppose too that Spain is too large to bail out, and the EU reaches the point where the euro is fatally undermined and collapses.

How would such a 'collapse' be likely to happen?
How would the currency disappear, and what currencies would replace it? More basically, how would people buy bread in the meantime?

And finally, would the collapse of the euro signal the breakup of the European Union?

SkepticOne

Furet wrote: »

Rather than start a new thread, I'll post my questions here.

Suppose that David McWilliams, writing in in today's Independent, is correct in stating that the financial crisis has already spread to Portugal and Spain. Suppose too that Spain is too large to bail out, and the EU reaches the point where the euro is fatally undermined and collapses.

How would such a 'collapse' be likely to happen?
How would the currency disappear, and what currencies would replace it? More basically, how would people buy bread in the meantime?

And finally, would the collapse of the euro signal the breakup of the European Union?

You should probably raise this as a thread in the Irish Economy forum as there's a lot of very knowledgeable people there.

But anyway what I think will happen is not that the Euro will stop immediately being used as a currency but rather that certain countries within the Eurozone will default. One scenario then would be that it becomes recognised that these countries are better off (and the Eurozone is better off) if they had their own currency. Alternatively it might be considered for the best if the strong countries like Germany, Finland etc, broke off and formed their own currency allowing the Euro to devalue.

The main difficulty is not what happens after the Euro is split up, imo, but what happens before that happens. For example, failure of the banking system and the national governments unable to save it or (such as Iceland with its own currency managed to do) put a system in place to replace it. In this scenario the country could well have "the euro" but nobody is able to get hold of actual euros to buy bread.

francie81

ART6 wrote: »

I'm with the OP on whether or not the Euro was a good idea -- personally I thought it was a very bad idea from the day that it was first proposed, for the reasons stated by the OP. I couldn't see how it could work without Europe becoming a federal state like the USA and Russia. If nothing else it took away from sovereign governments the most important financial control they had and effectively tied them to the needs of Germany and France.

However, we now have a common currency whether we like it or not, and if it collapses then the world will, I believe, be plunged into financial turmoil. The Euro is, after all, a major international currency and Ireland particularly is stuck with it. Unfortunately Ireland could be the trigger that starts the collapse since it presents an opportunity in my view for financial speculators to attack the Euro. If they succeed by using sovereign bond interest rates then the next obvious targets would be Portugal and then Spain.

Ireland can be bailed out by the IMF and the EU. So can Greece and Portugal, but Spain? Or even Italy? I would say no. Those economies are simply too big -- there isn't anywhere near enough bail out money available. So now we are at crunch point. We are in negotiations for a bail out that the funds can easily support, but to access those funds we must have a financial strategy that they find acceptable. They won't sign a blank cheque.

If the Greens by their political posturing, and the independents by their bluster, succeed in defeating the forthcoming budget then the government will fall. Will the IMF continue to offer support then? If they don't then we could be forced out of the Euro and become bankrupt. The banks will fail and everyone will lose their money. Which party is in government is irrelevant I believe. What matters is the budget and it must be a tough one. Could FG or Labour come up with an alternative and acceptable budget within a time scale that satisfies the markets and the IMF? I sincerely doubt it.

So. Budget vote lost and FF out of office. Celebration in the streets until the IMF pulls the plug. Then the speculators turn to Portugal. But why should they want the Euro to fail? Well, it seems to me that if all of the EU member states had to return to having their own currencies, the opportunities for currency speculation would return to what they were before the Euro.

I know there's not supposed to be a mechanism for any member to be forced out of the Euro, or to leave it voluntarily, but surely there is one obvious way. That is that the EU/IMF decide that they cannot or will not fund unaffordable deficits. Irish bond interest rates then go through the roof and the country can no longer meet the stability requirements of the Eurozone by a country mile.

Let's then suppose that the speculator's then turn their attention to Portugal, Spain, Italy. Then they are in the same position as Ireland. At that point what is to stop Germany and France deciding they they will establish their own single currency with some of the other stronger member states, and let the rest of us have the Euro if we want it. At that point it would be worth no more than the Punt would if we went back to that. We would be still in the Euro but it would no longer be stiffened by the financial muscle of Germany and France. In that scenario we might as well start calling our money Punts again as it would make no difference to its value. Ireland would simply not have any money whatever we called it.

I don't know if any of the above makes any sense at all -- I am not an economist. But I am very, very uneasy and I am not at all convinced that any of our politicians in any of the parties have any idea what to do other than to concentrate upon the needs of their parties rather than those of the country (Cowen leaving the IMF negotiations to canvas in Donegal for God's sake!). Whatever any of them say about it, Ireland's financial sovereignty is now controlled by the EU and the IMF, and we had better start to get used to it. How we got to that is irrelevant now, and all the blaming and back stabbing and calling the Brian's idiots will not change that one bit.

To be honest I would rather default right now and start from scratch with our own currency albeit at a price but we would regain our sovereignty.

ART6

francie81 wrote: »

To be honest I would rather default right now and start from scratch with our own currency albeit at a price but we would regain our sovereignty.

I agree with your sentiment, and I believe with all of my heart that freedom and sovereignty are to most valuable things a person can have, particularly since so many people, your ancestors and mine, have fought and died for just that. The trouble is that a gang of incompetents and liars dragged all of us into a monetary system that favoured only a few big players and now we are stuck with it.

To default on our bonds and loans would simply not be possible as long as we are in the Euro, I imagine, because we don't have control of our own fiscal policy. There isn't a mechanism for leaving the Euro or for being ejected from it. Meanwhile we have to eventually meet the conditions of the stability pact. If anyone thinks the current budget plan is tough, think again! The EU has no reason to care a damn about a tiny country on the edge of the empire.

But no power on earth could stop the Irish people from insisting that we will no longer tolerate this interference in our right to self determination. We could refuse to accept the Euro any longer, and we could revert to our own currency. We would become the crack (if we already aren't) in the Euro edifice. Possibly the EU would, with great reluctance, allow Ireland to withdraw from the Euro by enacting yet another treaty without any public vote, but that would eventually mean our withdrawal from the EU.

Victory! We now have a currency that's worthless but by God we are competitive. We have politicians with ambitions to form a government who keep winging about a "knowledge economy" when the Chinese, supposedly our ignorant third world competitors, are embarking on a space programme.

Now we have it. Let's cover the country with concrete and houses that nobody wants, and let's have a few tents at race courses. that will fix it lads!:mad:

kaiser sauze

francie81 wrote: »

To be honest I would rather default right now and start from scratch with our own currency albeit at a price but we would regain our sovereignty.

What do you mean "regain our sovereignty"?

Empire o de Sun

the the ecb needs more bite in the future, the national central banks are now obsolete.

Mcwood

In other words Thank you Nigel Farage for open the doors to common sense.:rolleyes:

http://www.youtube.com/watch?v=2gm9q8uabTs&feature=aso

meglome

Mcwood wrote: »

In other words Thank you Nigel Farage for open the doors to common sense.:rolleyes:

http://www.youtube.com/watch?v=2gm9q8uabTs&feature=aso

So what did he say?

You know I was genuinely surprised in the Lisbon debate that people would use a right wing British anti-EU guy like Farage as some sort of messiah. For me if I have to crawl into bed with the devil maybe it's not worth trying to win.

meglome

kaiser sauze wrote: »

What do you mean "regain our sovereignty"?

Yeah that magic word that seems to mean whatever the person using it wants it to mean. I can't recall a specific word that I've ever seen abused more.

Mcwood

meglome wrote: »

So what did he say?

You know I was genuinely surprised in the Lisbon debate that people would use a right wing British anti-EU guy like Farage as some sort of messiah. For me if I have to crawl into bed with the devil maybe it's not worth trying to win.

No, you got the message wrong... I think he is been very honest to speak out on what is going on in Eu right now. The so called Eurocrats are going to mutilate our own democracy, just wait and see for yourself what is coming in our way....

Of course Farage can't be called sort of messiah, he isn't a saviour of all causes, but speaks with common sense.

meglome

Mcwood wrote: »

No, you got the message wrong... I think he is been very honest to speak out on what is going on in Eu right now. The so called Eurocrats are going to mutilate our own democracy, just wait and see for yourself what is coming in our way....

Of course Farage can't be called sort of messiah, he isn't a saviour of all causes, but speaks with common sense.

Oh Farage isn't a bad speaker at all. Though let's be very clear, this is a man with his own agenda. He's anti-EU and wants to take the UK out of the EU. That's what he's selling and like all snake oil salesmen he's good at selling it to those who want to believe it. But let's not get carried away and call what he's doing honest.