Fiscal Treaty Megathread [Poll Reset]

tomasdoyle

If you vote no... be prepared to not emigrate... if you vote no and fub off then you are leaving the rest to secure the sinking ship. I agree vote no but I'm not in Ireland. I still reckon Ireland should take back the punt and take the hit now and suffer.... better than when it all falls apart.. we would have a head start.

squod

tomasdoyle wrote: »

If you vote no... be prepared to not emigrate... if you vote no and fub off then you are leaving the rest to secure the sinking ship. I agree vote no but I'm not in Ireland. I still reckon Ireland should take back the punt and take the hit now and suffer.... better than when it all falls apart.. we would have a head start.

Missing the weather so tomasdoyle. Prolly rained for all of your entire life when you were here. It's not now!

Noreen1

Scofflaw wrote: »

But sovereign lending - outside of Greece - wasn't the major problem. And the confidence of the markets that it would be the case was in no way actually a feature of the euro - on the contrary, the euro rules, as well as the EU rules, were opposed to what the markets believed - Article 125 TFEU, for example, is the one that prohibits EU countries from taking on each others' debts.

That these are the same markets who believed that Anglo had found a totally new and totally great business model - and before that that dotcom companies with no actual revenues were worth billions, is probably not beside the point.



I'm not getting on your case about this in support of the euro as a great thing (my love of euros is in fact limited primarily to euros that are mine), but because I think that we're very much at risk of allowing the analyses of the finance industry to dominate understanding of a crisis primarily caused by loose regulation of that industry - and, as I say, the one conclusion they're not going to come to is that they should have been more tightly regulated.

cordially,
Scofflaw

Genuine question, Scofflaw.

I agree that the markets got their analysis spectacularly wrong.

So why on earth are Governments in the Eurozone
A: Still listening to their predictions
B: Pandering to the markets to the point of grovelling?

I am aware that the markets control the cash flow. Having said that - should Eurozone Countries not actively engage in limiting the power of the (unelected) markets - rather than bending the knee, as they are currently doing?

Wibbs

Scofflaw wrote: »

Wibbs says the problems in eurozone countries are basically the fault of the euro, with a large contribution from the banks. I say they're basically the fault of deregulating the banks, with a small contribution from the euro.

Nope, I'm afraid not S. What I'm saying is a fixed currency exchange rate system is most likely to fan the flames of other pressures. The banks were adding firewood and indeed the spark in this case, but the introduction of the Euro added large quantities of petrol to that mix. Never mind that a system like that removes from individual economies many of the tools to check such an addition.

I reckon that if Wibbs is right, we should see the kind of problems we're both talking about - rapidly booming bank lending, rapid property price rises - coinciding with the introduction of the euro, so they should all start pretty much together in the affected eurozone countries. Why they should start in non-eurozone countries is something I don't think Wibbs explains at all.

We're not talking about non Euro countries so that's an expected deflection from you. Again look inside the Eurozone and again I ask you to show me an example of a Eurozone country in positive growth, with high interest rates and expensive credit at the time of the Euro's introduction that is now in trouble. K-9 grasping at straws offered up Finland, but that's a remarkably easy one to discount. You would think that given the number of the non PIIGS out there the definitive burn to my question would be swift in coming, but it seems not.

Of the two arguments, Wibbs would be the more generally accepted. I would say, though, that my view is not a view we'll ever see from the financial analysts and media like the FT, Bloomberg etc who dominate the commentary on the crisis - but it is to be found in reports like those of Honohan, Regling etc, who put most of the blame where I do.

While I do take that on board and unlike you who absolves all blame from the fixed currency Euro, I do agree that the financial sector fcuked up in a monumental way, I'm going back to economic history and pretty obvious "good sense" that applying a single currency across different economies is going to result in winners and losers and the more one applies that fixed exchange rate the more those winners and loser diverge. The advantage I have over your position is that the results are plain to see and those results have come before when such a system was in place.

Scofflaw

Noreen1 wrote: »

Genuine question, Scofflaw.

I agree that the markets got their analysis spectacularly wrong.

So why on earth are Governments in the Eurozone
A: Still listening to their predictions
B: Pandering to the markets to the point of grovelling?

I am aware that the markets control the cash flow. Having said that - should Eurozone Countries not actively engage in limiting the power of the (unelected) markets - rather than bending the knee, as they are currently doing?

As you say, it's about the markets' control of government funding (if you like to think about it starkly). And the ratings agencies, despite having called things completely wrong on a regular basis, are still important because the ratings they issue are used as dividing lines for risk-averse investors like pension funds.

What that means, unfortunately, is that while they can, and to some extent are, engaged in limiting the power of the markets, doing so obviously also upsets the markets, making borrowing from them more expensive, particularly for those countries already at risk.

A "big bang" re-regulation of the sovereign markets, say, where the governments basically rewrote the way the markets can work to give themselves the power rather than the markets, would result in a lot of investors flooding out of the sovereign markets, because the potential gains wouldn't be worth it to them. Same goes for sovereign debt write-downs - why put your money in government bonds if the governments are going to write half of it off on their own behalf? And governments cannot force people to put their money into sovereign debt.

That wouldn't drive everybody out of the sovereign markets, but it would leave behind those who were prepared to accept the risk in return for a higher interest rate, driving state borrowing costs up. And at the end of the day, that's something that counts hugely for governments - states don't pay back debt, they just pay the interest, roll it over, and wait for growth and inflation to erode it to something trivial.

So the governments, whatever their preferences - and I don't doubt they would dearly love to have tame bond markets - can only proceed by baby steps, at a rate which will do little to diminish the starring role of the markets in the current drama.

cordially,
Scofflaw

Scofflaw

Wibbs wrote: »

Nope, I'm afraid not S. What I'm saying is a fixed currency exchange rate system is most likely to fan the flames of other pressures. The banks were adding firewood and indeed the spark in this case, but the introduction of the Euro added large quantities of petrol to that mix. Never mind that a system like that removes from individual economies many of the tools to check such an addition.

And that's nice rhetoric, but doesn't actually prove anything.

Wibbs wrote: »

We're not talking about non Euro countries so that's an expected deflection from you.

It's hardly a deflection. You're like a doctor looking at a couple of sick people in your hospital and trying to come up with a theory of how they might have become ill, while dismissing the fact that the Black Death is raging everywhere as an irrelevant deflection, even though their symptoms are exactly the same as other plague victims.

If eurozone countries have similar problems to non-eurozone countries, as is the case, then an explanation in terms of the euro is clearly insufficient - unless, as you want to do, you pretend they don't exist. Obviously, I'm not going to pretend that.

Wibbs wrote: »

Again look inside the Eurozone and again I ask you to show me an example of a Eurozone country in positive growth, with high interest rates and expensive credit at the time of the Euro's introduction that is now in trouble. K-9 grasping at straws offered up Finland, but that's a remarkably easy one to discount. You would think that given the number of the non PIIGS out there the definitive burn to my question would be swift in coming, but it seems not.

Even Ireland doesn't fit your picture there: http://larrywillmore.net/blog/wp-content/uploads/2011/12/BBCfigure.jpg

We went into the euro with rates only marginally higher than France and Germany - 8.4% to France's 8% and Germany's 7.6%.

Wibbs wrote: »

While I do take that on board and unlike you who absolves all blame from the fixed currency Euro, I do agree that the financial sector fcuked up in a monumental way, I'm going back to economic history and pretty obvious "good sense" that applying a single currency across different economies is going to result in winners and losers and the more one applies that fixed exchange rate the more those winners and loser diverge. The advantage I have over your position is that the results are plain to see and those results have come before when such a system was in place.

"Economic history" and "pretty obvious good sense" isn't proof, Wibbs. So far, you haven't shown a single piece of evidence that actually supports your position - all you've done is reiterated that position, and claimed it's so "plain to see" as not to need proof. On the contrary, I've shown you that banking booms in the affected countries are tied, in terms of timing, to banking deregulation - Nineties for those countries that deregulated earlier, 2004 on for Iceland, which only deregulated in 2001 - and shows no particular relationship with euro entry, even for those countries in the euro. I've provided evidence to back up my position, you haven't provided any, relying instead on repeated claims that it's "obvious good sense", which, given the number of things that's been claimed for down the years, I find entirely unimpressive.

If the relationship is supposed plain to see, why aren't you able to demonstrate it? Why the rhetoric rather than the evidence?

cordially,
Scofflaw

snaps

Trying to get my head together so I know what to vote. My head is saying no, but still unsure.
Is a yes vote basically us saying yes to tax increases and budget cuts, so a much harder life.
Is also a no vote saying the same?
Need some info/link that sums it up.
Being a family man with wife and 2 kids, we've cut back as much as we can. Every cent I earn goes straight out again. Any more wage deductions will be the end and we will be spending more than we earn. We have nothing to cut back on now.

Scofflaw

snaps wrote: »

Trying to get my head together so I know what to vote. My head is saying no, but still unsure.
Is a yes vote basically us saying yes to tax increases and budget cuts, so a much harder life.
Is also a no vote saying the same?
Need some info/link that sums it up.
Being a family man with wife and 2 kids, we've cut back as much as we can. Every cent I earn goes straight out again. Any more wage deductions will be the end and we will be spending more than we earn. We have nothing to cut back on now.

Neither a Yes nor a No commits us to either more or less austerity. The rules are not being changed - what is being changed is the details of how they're monitored and enforced.

And whichever way we vote there will still be a recession, and we will still have to cut the deficit. The main practical consequence is on funding for the government if they cannot access the markets. Again, there's likely to be bailout funding made available to us if we need it whichever way we vote, but in the case of a Yes we know where it's coming from (and so does everybody else), while in the case of a No we don't know.

cordially,
Scofflaw

cena

why should I vote yes on thursday

Noreen1

Scofflaw wrote: »

As you say, it's about the markets' control of government funding (if you like to think about it starkly). And the ratings agencies, despite having called things completely wrong on a regular basis, are still important because the ratings they issue are used as dividing lines for risk-averse investors like pension funds.

What that means, unfortunately, is that while they can, and to some extent are, engaged in limiting the power of the markets, doing so obviously also upsets the markets, making borrowing from them more expensive, particularly for those countries already at risk.

A "big bang" re-regulation of the sovereign markets, say, where the governments basically rewrote the way the markets can work to give themselves the power rather than the markets, would result in a lot of investors flooding out of the sovereign markets, because the potential gains wouldn't be worth it to them. Same goes for sovereign debt write-downs - why put your money in government bonds if the governments are going to write half of it off on their own behalf? And governments cannot force people to put their money into sovereign debt.

That wouldn't drive everybody out of the sovereign markets, but it would leave behind those who were prepared to accept the risk in return for a higher interest rate, driving state borrowing costs up. And at the end of the day, that's something that counts hugely for governments - states don't pay back debt, they just pay the interest, roll it over, and wait for growth and inflation to erode it to something trivial.

So the governments, whatever their preferences - and I don't doubt they would dearly love to have tame bond markets - can only proceed by baby steps, at a rate which will do little to diminish the starring role of the markets in the current drama.

cordially,
Scofflaw

All fair points.
However, surely you agree that this situation needs to be addressed?
At the moment, the markets are dictating Government policy, whilst ignoring, or overcompensating for their own errors in the past.
Meanwhile, appeasing the markets has become the mantra for Government policy, while Governments also ignore the mistakes made by markets in the past.
Then there is the other elephant in the room - light touch regulation, by so many Governments - all at the same time!!
(Or, more pandering to a different group of moneylenders, if you like!)

How was it even possible for that to happen?
We essentially have a situation where an entire Continent is teetering on the brink of collapse, and the best thing our Governments can come up with, after four years, is more austerity, in perpetuity - whilst doing nothing to address the control held by either the bondholders, or the Banks.

Keynesian economics has failed the citizens of the EU, helped along by inept Governments.
Therefore, should we not seek to find a better economic model, whether that is adapting Keynesian economics, or introducing a different school of economics, that doesn't rely on perpetual growth, which we all know, cannot happen constantly, and certainly not when austerity measures continue to reduce the spending power of the consumer.

Such an adjustment would be difficult - yet, it is necessary.
Nevertheless, all we ever seem to hear is an analysis on how to attempt, unsuccessfully, for the most part, to appease the markets.

Anthony16

What kind of interest rates would we be looking at if borrowing from the markets if we reject the current austerity measures.

Scofflaw wrote: »

Neither a Yes nor a No commits us to either more or less austerity. The rules are not being changed - what is being changed is the details of how they're monitored and enforced.

And whichever way we vote there will still be a recession, and we will still have to cut the deficit. The main practical consequence is on funding for the government if they cannot access the markets. Again, there's likely to be bailout funding made available to us if we need it whichever way we vote, but in the case of a Yes we know where it's coming from (and so does everybody else), while in the case of a No we don't know.

cordially,
Scofflaw

Vita nova

cena wrote: »

why should I vote yes on thursday

There are many reasons but one that stands out for me is: access to the ESM permanent bailout fund.

Access to the ESM fund is conditional on passing the Fiscal Stability Treaty. If we vote no and need another bailout or additional funding then we have to look elsewhere for that funding, there's no guaranteed source and it will almost certainly be more expensive than ESM funding in terms of the interest rate.
Think of it as an insurance policy, we hope we won't need it but if it's there we'll be safer, and others will feel safer lending or dealing with us.

Admittedly I'm biased, so a good place to go for independent information on the Treaty is the Referendum Commission website: www.referendum2012.ie

dvpower

Anthony16 wrote: »

What kind of interest rates would we be looking at if borrowing from the markets if we reject the current austerity measures.

I presume you mean if we reject the treaty, which is a different thing from rejecting austerity measures.

Our 9 year bond is currently at 7.38%, so that's an indication of the kind of rate we would be looking at. I'd expect this to widen after a No vote, since we would be turning down the backstop that ESM access gives us.

Anthony16

dvpower wrote: »

I presume you mean if we reject the treaty, which is a different thing from rejecting austerity measures.

Our 9 year bond is currently at 7.38%, so that's an indication of the kind of rate we would be looking at. I'd expect this to widen after a No vote, since we would be turning down the backstop that ESM access gives us.

No,i mean rejecting austerity as the greeks look like they will?

Who will lend to us and what interest rates?
Id imagine it would be significantly higher than the ESM interest rate if we required a second bailout.

dvpower

Anthony16 wrote: »

No,i mean rejecting austerity as the greeks look like they will?

Who will lend to us and what interest rates?
Id imagine it would be significantly higher than the ESM interest rate if we required a second bailout.

No bailout fund would lend to us if we reject austerity i.e we want the money, but were not going to sign up to the conditions.

In this circumstance, the bond markets would be looking for extortionate rates if they would lend at all. The Greek 10Yr rate is at over 30%.

SocSocPol

Just vote NO!

Anthony16

Thanks.
May i ask ,can/could we function as a country/balance our books if we were to let the whole thing collapse?
Reject all the threats from Europe and go out on our own.
Im guessing the pay(and pensions) of all public servants would be halved,along with social welfare dependants and pensioners.
Big increase in taxes also.
Could we balance the books with these severe spending cuts?
Cheers

dvpower wrote: »

No bailout fund would lend to us if we reject austerity i.e we want the money, but were not going to sign up to the conditions.

In this circumstance, the bond markets would be looking for extortionate rates if they would lend at all. The Greek 10Yr rate is at over 30%.

dvpower

Anthony16 wrote: »

Thanks.
May i ask ,can/could we function as a country/balance our books if we were to let the whole thing collapse?
Reject all the threats from Europe and go out on our own.
Im guessing the pay(and pensions) of all public servants would be halved,along with social welfare dependants and pensioners.
Big increase in taxes also.
Could we balance the books with these severe spending cuts?
Cheers

What do you mean by 'let the whole thing collapse'? Leave the Euro? Default on our debts? Balance our books overnight and continue to stay in the Euro and repay our debts?

I can't see any of these options leaving us in a better place than we are now.
The economy is very fragile - why would be want to subject it to more unnecessary shocks.

onemorechance

Enda's refusal to debate the Fiscal treaty is a sign that he knows he would lose the debate and thus cause a swing to the No vote.

It's sad, so sad
It's a sad, sad situation
And it's getting more and more absurd
It's sad, so sad
Why can't we talk it over

https://www.youtube.com/watch?v=SY0z-BKhefY

Anthony16

Yes,leaving the euro.
Some people seem to think we would be better off doing this.

dvpower wrote: »

What do you mean by 'let the whole thing collapse'? Leave the Euro? Default on our debts? Balance our books overnight and continue to stay in the Euro and repay our debts?

I can't see any of these options leaving us in a better place than we are now.
The economy is very fragile - why would be want to subject it to more unnecessary shocks.

onemorechance

Two-and-a-quarter billion tomorrow. Almost eight million on Wednesday, 50 million next Saturday, 57 million the following Monday

Sunday Indo

Enda should stand up for the people of Ireland in Europe. I don't see how a leader could be any more suppliant than Enda et al have been in Europe.

https://www.youtube.com/watch?v=wm7D5VRfaTI

Even a 10% haircut on the bonds been paid over the next 7 days would yield e261 500 000! :pac: In just one week!

dvpower

Anthony16 wrote: »

Yes,leaving the euro.
Some people seem to think we would be better off doing this.

If we left the Euro, our new currency would devalue leaving us, and companies that operate here, with a whole pile of euro debt that we / they could no longer afford to service.

The Economist have a piece this week looking at a possible break up of the Euro and outline some of the likely consequences. They come out in favour of saving it.

dvpower

dvpower wrote: »

If we left the Euro, our new currency would devalue leaving us, and companies that operate here, with a whole pile of euro debt that we / they could no longer afford to service.

The Economist have a piece this week looking at a possible break up of the Euro and outline some of the likely consequences. They come out in favour of saving it.

Just remember who would actually benefit from us all digging deeper into our pockets to bailout the system.

Outside of banking (& construction), the Irish economy is actually doing OK, so any devaluation will be quite modest. Germany has most to fear as their "Euro" would appreciate significantly without the PIIGS anchoring it down to its current value.

Scofflaw

Noreen1 wrote: »

All fair points.
However, surely you agree that this situation needs to be addressed?

Absolutely.

Noreen1 wrote: »

At the moment, the markets are dictating Government policy, whilst ignoring, or overcompensating for their own errors in the past.
Meanwhile, appeasing the markets has become the mantra for Government policy, while Governments also ignore the mistakes made by markets in the past.
Then there is the other elephant in the room - light touch regulation, by so many Governments - all at the same time!!
(Or, more pandering to a different group of moneylenders, if you like!)

How was it even possible for that to happen?

Simple enough, unfortunately. The banks are the creators of money, just as the markets are the distributors of it. More money looking for somewhere to go means more investment means more growth. It's extremely tempting as long as one forgets that cancer is also growth - that not all growth is either sustainable or desirable.

Noreen1 wrote: »

We essentially have a situation where an entire Continent is teetering on the brink of collapse, and the best thing our Governments can come up with, after four years, is more austerity, in perpetuity - whilst doing nothing to address the control held by either the bondholders, or the Banks.

It's no more "austerity in perpetuity" than it was a boom in perpetuity, although the one is a mirror of the other.

Noreen1 wrote: »

Keynesian economics has failed the citizens of the EU, helped along by inept Governments.
Therefore, should we not seek to find a better economic model, whether that is adapting Keynesian economics, or introducing a different school of economics, that doesn't rely on perpetual growth, which we all know, cannot happen constantly, and certainly not when austerity measures continue to reduce the spending power of the consumer.

Such an adjustment would be difficult - yet, it is necessary.
Nevertheless, all we ever seem to hear is an analysis on how to attempt, unsuccessfully, for the most part, to appease the markets.

That wasn't Keynesian economics! Keynesianism is anti-cyclic, that was pro-cyclic - spend it while you've got it and tomorrow be damned.

cordially,
Scofflaw

stonetrower

Sunday 27/05/2012 Merkel drops 6% in latest German poll and that was in just the past seven days www.ireland.com/breaking-news

jacquesbernis

Shane Ross..waits til the polls are in then goes with the likely losing side.
The man wouldn't know what to do if he got into power and had to make a decision with consequences.
Economist trying to make theory out of reality..always safer than the alternative..ask Jim Power

highcream

Do people not agree that an irish default is an inevitability anyway?
We are never going to be able to pay back those loans?
How can an economy grow if its hindered by cuts in all directions.
do u think The fear of a 50% cut in public spending is what is holding us back from default?
We all know the government are great buddies with the likes of jack o connor

squod

highcream wrote: »

Do people not agree that an irish default is an inevitability anyway?

It's not inevitable. Noonan is dead against the idea and will leave any decision making up to the boss in Brussels. Best that will happen is a write down of some debts.

GreenLady

If Shane Ross, Libertas and Sinn Fein are all on the same side I know which side I'm on. A No vote just gives more uncertainty to the markets and makes it certain we'll have to pay more for the money we need to borrow and that the investors we need will fight shy of putting more jobs into Ireland. I've got three kids I'd like to see able to stay home, not forced to move abroad

paddyandy

A 'yes' vote give us certainty and a no vote will give us new fears and great doubts .Sinn Fein is putting the party first with a gamble .We must not gamble with the nation's future .It is irreducibly that simple .