implications of losing economic sovereignty

nino1

so it looks like either the euro breaks up or we loose our economic sovereignty.

what impact do you think this will have on the ordinary person as regards public sector pay, social welfare payments etc etc???

cavedave

UBS give the figures of for a euro breakup

We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the first year. That cost would then probably amount to EUR3,000 to EUR4,000 per person per year over subsequent years. That equates to a range of 40% to 50% of GDP in the first year.

Presumably that loss would fall on those paid by the government more then on those who work in private industry.

You do hear an argument of "let the Germans run Ireland we only made a mess of it". I would counter that the really bad decisions made by the Irish. To borrow too much from Germans and to guarantee to pay back the money the Germans lent would have been also made by the Germans if they were in charge. If they would have made the same bad decisions we made it is harder to argue we would have been much better off with them in charge.

Scofflaw

cavedave wrote: »

UBS give the figures of for a euro breakup


Presumably that loss would fall on those paid by the government more then on those who work in private industry.

You do hear an argument of "let the Germans run Ireland we only made a mess of it". I would counter that the really bad decisions made by the Irish. To borrow too much from Germans and to guarantee to pay back the money the Germans lent would have been also made by the Germans if they were in charge. If they would have made the same bad decisions we made it is harder to argue we would have been much better off with them in charge.

I know I harp on about this, but that looks to me like yet another claim that the bonds in Irish banks were held by German banks, something which nobody has at any point offered relevant evidence for, and which all the available evidence says simply wasn't the case.

Do you have evidence for it? Everyone else uses the BIS figures, which aren't actually applicable as evidence because they contain the IFSC banks.

cordially,
Scofflaw

cavedave

Scofflaw

I know I harp on about this, but that looks to me like yet another claim that the bonds in Irish banks were held by German banks, something which nobody has at any point offered relevant evidence for, and which all the available evidence says simply wasn't the case.

The claim is that the bonds are owned by non Irish residents
http://lh6.ggpht.com/_iSagC8HPtNA/TbtXE97zuRI/AAAAAAAADCY/zCjpHIERLHs/s1600-h/Holders%20of%20Covered%20Bank%20Bonds2.png
and thus the loss of sovereignty could have resulted in similar decisions.

That the ECB in Frankfurt insisted that the bondholders were paid.

The leaked list of Anglo Bondholders is here

David McWilliams in episode 3 of the popes children 2006 here described the money being spent in Ireland on handbags as coming from the pension funds of Germans. So if it is a myth it is one that predates the financial crisis.

My argument is not about the Germans in particular it is that on two major decisions lending too much money and paying back that money anyone we have surrendered our sovereignty to now would have made similar decisions (with the possible exception of the IMF). The ECB were quite happy for Ireland to have cheap money at the time and for us to pay it back now so I find it hard to argue that with their role in the Troika happening earlier this would have run things differently.

irishh_bob

nino1 wrote: »

so it looks like either the euro breaks up or we loose our economic sovereignty.

what impact do you think this will have on the ordinary person as regards public sector pay, social welfare payments etc etc???

loose economic soverignty - have germany write our bugets and set our tax code = cuts to public sector pay and wellfare

withdraw from the euro = cuts to public sector pay and wellfare

nino1

what kind of effect will it have on the private sector?

Scofflaw

cavedave wrote: »

The claim is that the bonds are owned by non Irish residents
http://lh6.ggpht.com/_iSagC8HPtNA/TbtXE97zuRI/AAAAAAAADCY/zCjpHIERLHs/s1600-h/Holders%20of%20Covered%20Bank%20Bonds2.png
and thus the loss of sovereignty could have resulted in similar decisions.

Sure, the Irish banks were heavily into the international money markets, but as far as I can see, the US and UK ones. So, while the claim that the Irish banks owed money outside Ireland is true, the claim that the bailout recycles money through Irish banks back to German and French ones is false.

cavedave wrote: »

That the ECB in Frankfurt insisted that the bondholders were paid.

Also true, but because attempts to burn the bondholders, whether in Ireland or elsewhere, have huge knock-on costs for bank and sovereign borrowing across the rest of the eurozone.

cavedave wrote: »

The leaked list of Anglo Bondholders is here

And is rubbish - a carefully censored mix of senior and junior bondholders, with all the Irish bondholders removed. Some of the holders of junior bonds on that list hold exactly the same bonds as were held by Irish credit unions who don't appear on that list - and those bonds were subject to a heavy haircut. So it's a list with a very heavy agenda. The timing of the leak - just before Fianna Fáil took us into an IMF bailout - is also evidently political.

cavedave wrote: »

David McWilliams in episode 3 of the popes children 2006 here described the money being spent in Ireland on handbags as coming from the pension funds of Germans. So if it is a myth it is one that predates the financial crisis.

Yup, that's right - that's precisely why it's so persistent now. Unfortunately, McWilliams tells a good story, but doesn't ever seem to have offered any evidence for it. And, as I keep pointing out, there's a whole load of evidence pointing in the other direction.

cavedave wrote: »

My argument is not about the Germans in particular it is that on two major decisions lending too much money and paying back that money anyone we have surrendered our sovereignty to now would have made similar decisions (with the possible exception of the IMF). The ECB were quite happy for Ireland to have cheap money at the time and for us to pay it back now so I find it hard to argue that with their role in the Troika happening earlier this would have run things differently.

The ECB would always have argued for not burning the bondholders, but not for the simple reasons many people ascribe to them. And while the popular story is that the ECB were the ones who prevented the IMF from giving us a debt write-off on the bank debt, it seems increasingly likely that the intervention of Geithner from the US Treasury may have been more decisive - something that goes remarkably unremarked.

cordially,
Scofflaw

cavedave

it seems increasingly likely that the intervention of Geithner from the US Treasury may have been more decisive - something that goes remarkably unremarked.

This is something that is worth remarking and siting references on
Ireland's future depends on breaking free from bailout

The deal was torpedoed from an unexpected direction. At a conference call with the G7 finance ministers, the haircut was vetoed by US treasury secretary Timothy Geithner who, as his payment of $13 billion from government-owned AIG to Goldman Sachs showed, believes that bankers take priority over taxpayers. The only one to speak up for the Irish was UK chancellor George Osborne, but Geithner, as always, got his way. An instructive, if painful, lesson in the extent of US soft power, and in who our friends really are.

eigrod

nino1 wrote: »

what kind of effect will it have on the private sector?

Devastating - obviously. Take that amount of money out of public sector pay packets and social welfare recipients and shops and local businesses will crumble all over the country (well, signficantly more than they already are).