Admit Euro failure....Europewide.

ei.sdraob

The failure of the euro is not the currency, that did its job well

the failure is with the state governments ignoring the stability and growth pact.
& no eurozone wide deposit protection to provide reassurance to depositors

K-9

ei.sdraob wrote: »

The failure of the euro is not the currency, that did its job well

the failure is with the state governments ignoring the stability and growth pact.
& no eurozone wide deposit protection to provide reassurance to depositors

Exactly, it's an experiment, albeit a badly designed one! The test is going to be over the next year or 2 to see if the political will is there to learn from this and make it stronger. Mr. Farage would love to see it fail.

People forget that if we had 15 different currencies, we'd have probably devalued a couple of times at this stage, as would another 4/5 currencies.

SkepticOne

ei.sdraob wrote: »

The failure of the euro is not the currency, that did its job well

the failure is with the state governments ignoring the stability and growth pact.
& no eurozone wide deposit protection to provide reassurance to depositors

There's always going to be two ways of looking at this:

a) The Euro failed the countries it was designed to serve or;
b) the countries failed the Euro.

In a way both are true. These things come down to your values and priorities. Personally I put the countries and their people first, but others are entitled to put the Euro first as the thing that must be served.

View

SkepticOne wrote: »

There's always going to be two ways of looking at this:

a) The Euro failed the countries it was designed to serve or;
b) the countries failed the Euro.

In a way both are true. These things come down to your values and priorities. Personally I put the countries and their people first, but others are entitled to put the Euro first as the thing that must be served.

A nice false dichotomy but it remains a false one irrespective.

It should also be pointed out that "the Punt failed us" many times in the past, so the logical conclusion would be to abandon using money altogether.

sirromo

View wrote:

It should also be pointed out that "the Punt failed us" many times in the past

Are you sure about that? The wikipedia entry on the punt doesn't list any major problems with the currency.
http://en.wikipedia.org/wiki/Irish_pound

It does point out that the currency fluctuated in value during the 20 year period after we joined EMS, but apart from that, it doesn't point to any other major failures. And even if our own currency did cause us problems in the past, I would be very surprised if those problems came anywhere close to the problems we're now having to deal with as a result of our euro membership.

View

sirromo wrote: »

Are you sure about that? The wikipedia entry on the punt doesn't list any major problems with the currency.
http://en.wikipedia.org/wiki/Irish_pound

It does point out that the currency fluctuated in value during the 20 year period after we joined EMS, but apart from that, it doesn't point to any other major failures. And even if our own currency did cause us problems in the past, I would be very surprised if those problems came anywhere close to the problems we're now having to deal with as a result of our euro membership.

Try the 1950s or the 1980s - an 18%+ unemployment, mass emigration, every penny of income tax going to pay the interest on the national debt and a really possibility that the state would need to borrow to pay that interest.

Stupid economic policies gets you into trouble - irrespective of what currency you are using.

sirromo

View wrote:

Try the 1950s or the 1980s - an 18%+ unemployment, mass emigration, every penny of income tax going to pay the interest on the national debt and a really possibility that the state would need to borrow to pay that interest.

You can't blame the punt for those problems. I've never heard any economist point to the punt as being one of the things that contributed to our economic problems in the 1950s or 1980s.

I have seen several economists (Paul Krugman, David McWilliams etc) point to our euro membership as being one of the things that has contributed to our current problems.

View

sirromo wrote: »

You can't blame the punt for those problems. I've never heard any economist point to the punt as being one of the things that contributed to our economic problems in the 1950s or 1980s.

Why not? SkepticOne, after all, is trying to lay the blame for our problems on an inanimate object - the currency.

Presumably then we should lay the blame for ALL our economic problems on our currencies - their nothing to do with the political and economic decisions we make, it is all the fault of small pieces of metal and paper.

sirromo wrote: »

I have seen several economists (Paul Krugman, David McWilliams etc) point to our euro membership as being one of the things that has contributed to our current problems.

As the saying about economist goes, with 3 economists in a room, you have 4 differences of opinion. It is nothing to do with pumping up the property market with tax-breaks, then is it? Perfectly sane thing to do a property boom - right?

SkepticOne

View wrote: »

A nice false dichotomy but it remains a false one irrespective.

It should also be pointed out that "the Punt failed us" many times in the past, so the logical conclusion would be to abandon using money altogether.

Well a dichotomy, false or otherwise, is a situation where it is either one thing or the other that is true but not both. What we're talking about here is a situation where both are true in their own way. It simply comes down to your values and priorities. You could have a blended view if you wanted where, although the idea of a shared currency is flawed, with a lot of shoehorning and fixes of various kinds, it can be made to work.

Obviously the ideologies are very different but the same sort of thing might have been said about communism back when that was considered a viable system. Its detractors might have said it was doomed to failure due to its failure to take into account the way people actually work, whereas its defenders would argue that the system is fine but it is up to people to change in order to fit the system.

It is really comes down to different ways of looking at the same thing.

View

SkepticOne wrote: »

Well a dichotomy, false or otherwise, is a situation where it is either one thing or the other that is true but not both.

That is not what a false dichotomy is - it is a narrowing down a range of choices to a overly-simplistic either-or choice, when there are many more choices available in reality (e.g. either you support war against "the enemy/the terrorists" or you are a supporter of "the enemy/the terrorists").

Thus, in your case, you deliberately try to reduce this to a simplistic either/or choice in relation to the Euro, while totally ignoring that the economic policies followed here would have gotten us into a large mess irrespective of what currency we had.

And, yes, we can have wonderful theoretical arguments about the "large mess" we'd have gotten into if we had the Punt instead, but those are essentially like trying to make out if you crashed head-on into a tree at point X, you are much better off than if you had a comparable head-on crash at point Y.

SkepticOne

View wrote: »

That is not what a false dichotomy is - it is a narrowing down a range of choices to a overly-simplistic either-or choice, when there are many more choices available in reality (e.g. either you support war against "the enemy/the terrorists" or you are a supporter of "the enemy/the terrorists").

Thus, in your case, you deliberately try to reduce this to a simplistic either/or choice in relation to the Euro, while totally ignoring that the economic policies followed here would have gotten us into a large mess irrespective of what currency we had.

You are correct in your understanding of what a false dichotomy is: a false either-or choice, where only one choice can be valid. Either one or the other but not both. However that is not what I'm saying with the idea that the shared currency can be viewed in two different ways both of which are valid in their own way depending on your perspective.

And, yes, we can have wonderful theoretical arguments about the "large mess" we'd have gotten into if we had the Punt instead, but those are essentially like trying to make out if you crashed head-on into a tree at point X, you are much better off than if you had a comparable head-on crash at point Y.

I don't have a problem with speculations about what might have happened had we the punt. I might disagree with them but is the nature of discussion forums.

McDave

It's too early to say that the Euro has been a success. EMU has been around as a formulated idea for 40 years now. The basis for the Euro's actual establishment has been tested and found to be flawed, but not beyond redemption. If it is to prove its endurance, it has a long, long way to go.

However, it's certainly too early to say the Euro has failed. Many of the Euro's critics assert that without a fully fledged EU state or full fiscal union the currency is doomed. However, the architects of monetary union were probably aware that neither of these scenarios were coming anytime soon. The Maastricht criteria are obviously too weak, but were the best that could be negotiated politically at the time. In the grander scheme of things maybe there is an intermediate solution which allows essential national sovereignty while upgrading the controls and oversights which are needed for the running of the currency.

IMO, the Euro is treading a third path (the two others being cohesive small economies and larger diverse unitary or federal states) in which sovereign states can indeed share a common currency. Who's to say it can't be done? The EU has confounded its critics at pretty much every turn. It's structure seems opaque and labyrinthine, but the problem-solving competition between the larger states combined with political will nevertheless seems to produce the necessary results.

johnnyskeleton

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.

Just the same as economies like California, New York and Florida can use the same currency. Just as the RMB is linked the the dollar. Just as many other countries use the dollar as their primary reserve.

The Euro is only a problem if you have internally strict but externally forgiving countries like Germany running their own country properly but letting Ireland get away with mayhem.

Longer term, the currency that you use is largely irrelevant, the problem is when some states want to devalue their currency but can't. IMO that is not a problem, and we are just going to have to learn to run our country properly from now on.

KINGVictor

johnnyskeleton wrote: »

Just the same as economies like California, New York and Florida can use the same currency. Just as the RMB is linked the the dollar. Just as many other countries use the dollar as their primary reserve.

The Euro is only a problem if you have internally strict but externally forgiving countries like Germany running their own country properly but letting Ireland get away with mayhem.

Longer term, the currency that you use is largely irrelevant, the problem is when some states want to devalue their currency but can't. IMO that is not a problem, and we are just going to have to learn to run our country properly from now on.

Are you for real? very wrong comparison to say the least. Those places you mentioned are states under one COUNTRY with the same constitution binding them, same national laws...wait a minute ...you could have an arguement that its the same with EU countries...but the difference is that the EU consists of sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc...you cannot simply equate that to the USA...very unsimilar...

Scofflaw

KINGVictor wrote: »

Are you for real? very wrong comparison to say the least. Those places you mentioned are states under one COUNTRY with the same constitution binding them, same national laws...wait a minute ...you could have an arguement that its the same with EU countries...but the difference is that the EU consists of sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc...you cannot simply equate that to the USA...very unsimilar...

A currency is a fiscal instrument - the fact that the EU consists of "sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc" doesn't seem particularly relevant as long as they agree to adopt similar levels of fiscal discipline. Unless that's a tacit way of saying that some countries' 'vision/direction' doesn't include fiscal discipline?

cordially,
Scofflaw

McDave

Scofflaw wrote: »

A currency is a fiscal instrument - the fact that the EU consists of "sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc" doesn't seem particularly relevant as long as they agree to adopt similar levels of fiscal discipline. Unless that's a tacit way of saying that some countries' 'vision/direction' doesn't include fiscal discipline?

That's the trick. Having enforceable laws and guidelines which enable member states to partake in a single currency and retain essential sovereignty (pretty much a prerequisite of the EU model as it stands).

The Euro is a unique experiment. It's not necessarily doomed to success. It was envisioned by some very intelligent people. But they are not gods. There is a certain element of a wing and a prayer about the effort. But the international economic, fiscal and currency experience of Germany and France over the last century gives me confidence that there are sound bases in theory for a currency arrangement among entities which do not constitute a single state. And, more importantly, that there is the political will to make the experiment succeed.

KINGVictor

Scofflaw wrote: »

A currency is a fiscal instrument - the fact that the EU consists of "sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc" doesn't seem particularly relevant as long as they agree to adopt similar levels of fiscal discipline. Unless that's a tacit way of saying that some countries' 'vision/direction' doesn't include fiscal discipline?

cordially,
Scofflaw

Scoff...let me make myself clearer. If we leave politics out of it for a minute, to have a common currency which you have rightly pointed out as fiscal instrument, some fundamental parameters must be in place ( going by the optimum currency area (OCA) criteria).

• Labour mobility
• Capital mobilty
• similar economic conditions- in terms of business cycles
• Fiscal transfer mechanism

While the EU has been able to formulate policies to ensure labour and capital mobility, there is still a problem with the other two elements. In terms of fiscal transfer, the EU historically used the EU stability funds to transfer funds to create some measure of equality in the region, however in light of the recent economic crises,the EU swiftly concocted a mechanism to allow for transfer of funds to countries that might need them .

You will agree with me that this mechanism is still in its infancy and the outcome of these transfers cannot be correctly predicted at the moment because of the ensuing speculative nature of the bond markets and the unpredictability of the effects of the contagion spreading to other vulnerable member nations. Another outcome of the fiscal transfer mechanism that the EU hurriedly set up is the disaffection it is causing in stronger economies like Germany, Britain , Austria etc and the fact that changes have to be made to the current Lisbon treaty to ensure the legality of the new fiscal transfer framework.

More importantly, however, is the fact that members of the economic region need to have similar business cycles. This, I believe is where the EU will have major stumbling blocks. A good arguement is that the USA that is acknowledged as an OCA has disimilarities in business cycles depending on regions in the country, but the approriation of funds in the US is made based on years on negotiations and carefully considered implications on their citizens. People in the New york do not see it as injustice that the current administration is trying to salvage what is percieved as a"dead" car industry in Michigan, probably because they have relatives/ friends that are working there or would benefit from such policies.

The problem I see is that Germans may "sympathise" with the Greeks and the English might have "wanted" this to happen to some other people than the Irish but is that enough motivation to continue to continue to shell out national capital to fund a very convoluted union?

Scofflaw

KINGVictor wrote: »

Scoff...let me make myself clearer. If we leave politics out of it for a minute, to have a common currency which you have rightly pointed out as fiscal instrument, some fundamental parameters must be in place ( going by the optimum currency area (OCA) criteria).

• Labour mobility
• Capital mobilty
• similar economic conditions- in terms of business cycles
• Fiscal transfer mechanism

While the EU has been able to formulate policies to ensure labour and capital mobility, there is still a problem with the other two elements. In terms of fiscal transfer, the EU historically used the EU stability funds to transfer funds to create some measure of equality in the region, however in light of the recent economic crises,the EU swiftly concocted a mechanism to allow for transfer of funds to countries that might need them .

You will agree with me that this mechanism is still in its infancy and the outcome of these transfers cannot be correctly predicted at the moment because of the ensuing speculative nature of the bond markets and the unpredictability of the effects of the contagion spreading to other vulnerable member nations. Another outcome of the fiscal transfer mechanism that the EU hurriedly set up is the disaffection it is causing in stronger economies like Germany, Britain , Austria etc and the fact that changes have to be made to the current Lisbon treaty to ensure the legality of the new fiscal transfer framework.

More importantly, however, is the fact that members of the economic region need to have similar business cycles. This, I believe is where the EU will have major stumbling blocks. A good arguement is that the USA that is acknowledged as an OCA has disimilarities in business cycles depending on regions in the country, but the approriation of funds in the US is made based on years on negotiations and carefully considered implications on their citizens. People in the New york do not see it as injustice that the current administration is trying to salvage what is percieved as a"dead" car industry in Michigan, probably because they have relatives/ friends that are working there or would benefit from such policies.

The problem I see is that Germans may "sympathise" with the Greeks and the English might have "wanted" this to happen to some other people than the Irish but is that enough motivation to continue to continue to shell out national capital to fund a very convoluted union?

I agree that the last question is the really important one, because if the EU member states are willing to accept fiscal transfers, then the question of business cycles becomes much less important, and the question of acceptable levels of mutual confidence in each others' fiscal controls becomes the dominant question. Given that there is a Franco-German push for the necessary changes to the EU Treaties to allow fiscal transfers to happen, and that crisis mechanisms that have been put in place in such a rush, it seems likely that the political will is there to make that happen. The enhanced mechanisms for ensuring fiscal discipline across the eurozone suggest the same.

It often seems to the eurosceptical that the EU advances towards closer integration by "taking advantage" of crises, somehow pushing the Member States or their electorates reluctantly along with it. I'd agree with the observation, that the EU tends to advance towards closer integration during crises, but not with the explanation. The euro is a very good example of what actually happens - it expresses both the willingness of the Member States themselves to engage in closer integration, and their inability or unwillingness to properly negotiate for the downside risks of such integration. The euro was a very typical European "plan A" without a plan B - the mechanisms to stabilise and dig it out if it ran into trouble were almost entirely lacking.

To be fair to the Member States, negotiating plan A is usually hard enough, and negotiating plan B is next to impossible unless everybody can see a pressing and present need for it - without that, as politicians are wont to do, they leave the hard decisions alone. Again, to be fair to politicians, it's often the case that if you want to achieve anything at all, you have to leave the hard decisions for another time, and hope they don't happen before the benefits of plan A make it something people prefer not to lose. As a result, the EU tends to move towards greater integration during crises because crises make it necessary to negotiate the hard decisions left out of the original plan if one is to keep it running, and the Member States and their electorates continue to favour integration over dis-integration, so the political will is usually there to make the hard decisions and accept the consequences of the original plan once it's a choice between that and stepping back.

So, to come round again to the question of the thread, I don't think there's any requirement to declare the euro a failure, unless that's what everybody wants - that it was inadequately planned, on the other hand, is so obvious as to not really require a declaration. The question is really whether the political will to keep it going is there, and the answer to that seems, despite some German grumbling, to be yes.

As for the 'very convoluted union' - the EU is not by a very long stretch the most convoluted union in European history.

cordially,
Scofflaw