Any future for Spain?

jonniebgood1

Spain has 24% unemployment.
Approx 50% of under 25's are unemployed.

What do they do about this?
Answer in this story-

conditions imposed by euro zone partners, widely revealed by Spanish media, will force the government to reform its financial sector in the wake of a banking crisis that is threatening to drag Madrid into a full-blown bailout.

he European Union had demanded a VAT rise along with a series of other tough measures even as it gave Spain an extra year to bring its bulging public deficit back to agreed limits.

Among the new measures announced by Rajoy:

- VAT goes up to 21% from 18%, and the reduced rate on some products such as food goes up to 10% from 8%. A special 4% rate on basic needs such as bread is untouched.

- Public administration is reformed to save €3.5 billion, including a drastic cut in the number of publically owned enterprises and a 30% cut in the number of local councillors.

http://www.rte.ie/news/2012/0711/spain-to-announce-more-austerity-measures-business.html

Will this type of measure help Spain?

oscarBravo

jonniebgood1 wrote: »

Will this type of measure help Spain?

Not picking on you, but I'm getting a little tired of that sort of question being posed in isolation, whether it's about Greece, Spain or Ireland.

The question implies that Spain (or Greece, or Ireland) had the option to flip a coin and choose between making ends meet, or continuing to borrow in order to allow a structural deficit to continue to exist.

If you are not collecting enough taxes to fund your public expenditure, you have to increase taxes, cut expenditure and/or continue to borrow the difference. When the point comes where the markets won't lend at a sustainable rate, your list of choices is narrowed by one.

The question of whether or not it will help Spain is moot. It will help Spain get its public finances on a manageable footing. If a country can't finance itself, all its other problems take a back seat. This isn't something Spain is doing in the hope that it might help; this is something Spain has no choice but to do.

jonniebgood1

oscarBravo wrote: »

Not picking on you, but I'm getting a little tired of that sort of question being posed in isolation, whether it's about Greece, Spain or Ireland.

I would have no problem with being picked on!!

oscarBravo wrote: »

The question implies that Spain (or Greece, or Ireland) had the option to flip a coin and choose between making ends meet, or continuing to borrow in order to allow a structural deficit to continue to exist.

The standard, 'you got yourself into this problem, you get yourself out of it' answer is basically repeating the policy of the leading European nations. Thats the policy that is currently proving unsuccessful incase that implication is missed.

oscarBravo wrote: »

The question of whether or not it will help Spain is moot. It will help Spain get its public finances on a manageable footing. If a country can't finance itself, all its other problems take a back seat. This isn't something Spain is doing in the hope that it might help; this is something Spain has no choice but to do.

You may be getting tired of the question (as per your stated position) but your answer is pretty trying also in terms of solutions to the problem. Stating the obvious, i.e. that one must only spend what one has, is something that most if not all people would agree with, however it fails to acknowledge that sometimes even in private life people need some legroom to make good their situation. In international finance that would generally have been granted in situations where countries need to address this type of issue with currency devaluation, which they could do themselves before the Euro. Now thats changed and the controllers of this are not democratically responsible in the countries that have the problem hence they have no quangs about harsh measures there. The standard slap on extra VAT so we all dig ourselves out of the hole together does not take regard of the fact that a small (in relative terms) number of people fed the problem in the first place. Take in terms of the Spanish situation many of their problems relate to unsustainable bank loans, similar to here. If the Spanish banks loaned 2 much money they were getting it from somewhere, not from Spanish tax payers. All of which goes against the suggestion that Spain has no choice. They are following the troika roadmap with a few changes if you recall the Irish measures but my initial thoughts are that the government decisions in Spain will not share the problem equally, rather it will widen the divide between the rich and poor.

oscarBravo

jonniebgood1 wrote: »

The standard, 'you got yourself into this problem, you get yourself out of it' answer is basically repeating the policy of the leading European nations. Thats the policy that is currently proving unsuccessful incase that implication is missed.

The inherent logical fallacy is that if the current policy isn't working, then a different policy automatically will. There's little point criticising a country for taking steps to balance its budget unless you can convincingly demonstrate that an alternative policy - involving not balancing the budget - will have a better outcome.

Stating the obvious, i.e. that one must only spend what one has, is something that most if not all people would agree with, however it fails to acknowledge that sometimes even in private life people need some legroom to make good their situation.

And even in private life, if you borrow yourself into a black hole, you're not going to be able to borrow your way out of it unless you can convince your creditors that you're serious about living within your means.

In international finance that would generally have been granted in situations where countries need to address this type of issue with currency devaluation, which they could do themselves before the Euro. Now thats changed and the controllers of this are not democratically responsible in the countries that have the problem hence they have no quangs about harsh measures there.

Yet again, you're implying that there's a way out of this that involves a country having the luxury of continuing to spend way beyond its means. I'm not saying there is no such way out; I'm saying that those who criticise the current approach really ought to start explaining how borrowing your way out of a debt crisis is more sustainable than austerity.

The standard slap on extra VAT so we all dig ourselves out of the hole together does not take regard of the fact that a small (in relative terms) number of people fed the problem in the first place.

Not buying that narrative, sorry. The electorates of Ireland, Spain, Greece et al voted for governments who promised high-quality public services with a narrow tax base, and we're reaping what we have sown.

Take in terms of the Spanish situation many of their problems relate to unsustainable bank loans, similar to here. If the Spanish banks loaned 2 much money they were getting it from somewhere, not from Spanish tax payers. All of which goes against the suggestion that Spain has no choice.

Great. Now all you have to do is explain how Spain can continue to fund public services that cost vastly more than they're taking in tax, without having to close that structural deficit through spending cuts and tax increases.

Permabear

This post has been deleted.

jonniebgood1

oscarBravo wrote: »

The inherent logical fallacy is that if the current policy isn't working, then a different policy automatically will. There's little point criticising a country for taking steps to balance its budget unless you can convincingly demonstrate that an alternative policy - involving not balancing the budget - will have a better outcome.

Surely the inherent logical fallacy is pursuing a policy that has never worked in the past. I don't suggest not balancing the budget as an alternative policy. What I would suggest is doing so over a longer period of time.

oscarBravo wrote: »

And even in private life, if you borrow yourself into a black hole, you're not going to be able to borrow your way out of it unless you can convince your creditors that you're serious about living within your means.

At which point the bank gets sensible and works out a way where it can realistically work out a solution with its debtor.

oscarBravo wrote: »

Yet again, you're implying that there's a way out of this that involves a country having the luxury of continuing to spend way beyond its means. I'm not saying there is no such way out; I'm saying that those who criticise the current approach really ought to start explaining how borrowing your way out of a debt crisis is more sustainable than austerity.

Take examples from history and you usually have devaluing of currency. Debtors won't consider that as they stand to lose out- this is the dreaded break up of the euro. Well fine then if they won't contemplate this they should be willing to put more into saving the currency. If there was a series of countries that devalued then it would make the good produced by the richer countries unaffordable to the devalued countries. At the same time the products of the poorer countries gets more affordable and therefore also more popular. This boosts unemployment and allows them to grow. Not straightforward or painfree I know but more equitable on a pan european basis.

oscarBravo

jonniebgood1 wrote: »

Surely the inherent logical fallacy is pursuing a policy that has never worked in the past.

As opposed to all the tried and tested solutions to global debt crises in the context of a monetary union? We're in uncharted waters here; I don't think there's a useful historic precedent anyone can point to and say "that worked; let's do that".

I don't suggest not balancing the budget as an alternative policy. What I would suggest is doing so over a longer period of time.

In the meantime, they continue to have to borrow to fund the deficit. The markets won't lend to them at a sustainable rate, and the lenders of last resort have imposed these conditions.

The idea that a country should be able to continue to run up a massive deficit while still borrowing at a favourable rate is all too reminiscent of the idea that a country can have a narrow tax base while still maintaining high levels of public expenditure. It's an appealing thought, but it doesn't add up.

At which point the bank gets sensible and works out a way where it can realistically work out a solution with its debtor.

Yes. That's what's happened here. The debtor may be unhappy about not being able to maintain the lifestyle to which he is accustomed, but that's not the creditor's primary concern.

Take examples from history and you usually have devaluing of currency. Debtors won't consider that as they stand to lose out- this is the dreaded break up of the euro. Well fine then if they won't contemplate this they should be willing to put more into saving the currency. If there was a series of countries that devalued then it would make the good produced by the richer countries unaffordable to the devalued countries. At the same time the products of the poorer countries gets more affordable and therefore also more popular. This boosts unemployment and allows them to grow. Not straightforward or painfree I know but more equitable on a pan european basis.

I wonder why the Germans - the ones everyone wants to foot the bill - don't see it in quite those terms?

KINGVictor

Permabear wrote: »

This post had been deleted.

While I am not offering any opinion about the need for a gradual reduction of unemployment benefit in Ireland, it is important that we understand the difference between the system in Ireland and Spain.

AFAIK, in Spain, you get 3/4 of your last salary as unemployment benefit which is unlike Ireland where there is a standard unemployment benefit rate irrespective of your previous income. I would imagine that the Spanish would have a minimum rate but applicants are dealt with on a case by case basis.

jonniebgood1

oscarBravo wrote: »

Take examples from history and you usually have devaluing of currency. Debtors won't consider that as they stand to lose out- this is the dreaded break up of the euro. Well fine then if they won't contemplate this they should be willing to put more into saving the currency. If there was a series of countries that devalued then it would make the good produced by the richer countries unaffordable to the devalued countries. At the same time the products of the poorer countries gets more affordable and therefore also more popular. This boosts unemployment and allows them to grow. Not straightforward or painfree I know but more equitable on a pan european basis.

I wonder why the Germans - the ones everyone wants to foot the bill - don't see it in quite those terms?

Do you think they don't. I would contend that they do see it like this and that is why they are drip feeding the poorer nations in the hope that they can retain their economic strength. The alternative where devalued currency nations can't buy their goods would bring the type of problems that Ireland, Greece, Portugal and Spain have to Germany.

poeticseraphim

Spain has a banking crisis and had one before it had a deficit crisis.

It exprienced a property bubble and it's baning regulations became ridiculously lax and over relaxed.

It has unusual accounting standards that hide the volatilty of losses and earnings. Theses standards were apparantly supposed to spread earnings over the ntir business cycle. But thy misled regulators and analysts. It's caused 'Dynamic Provisioning' it violated accounting standards. It obscured capital and gave the impression of solvency as th problems mounted.

Most of their senior politicians have like twenty properties in the industry. All major political partis are heaviloy indebted to banks and there is an alliance between the Govt and banks.

The employment situation is weird.. It's a two tier system the privelged permannt workers have 'Iron clad contracts' and the secon tir are temps which get contracts renewed and they are usually young they are fired whilst the other class of workr legally has to still get raises etc.

The labour market did not crat the crisis the banking sector and property sector did but the labor market did not help. They have much much more rigid labour laws than us.

The deficit was fine in the early 2000's ..but when the property boom ended they lost a lot of tax revenue and the banking sector soaked up a lot of pubic funding. And their bond yeilds rose.

Th problem with the EU solutions and national solutions is that they do not correct the problems causing the crisis.

Their needs to b a separation between bank Govt and th property sector and a total redo of accounting standards and banking regulation.


It is one thing that annoys me with this crisis they do not tackle the actual problems in the systm that caused the figures ..they just aim to get the figures looking healthy.

But it does not tackle the issues at the ruut cause.

And what happened it ach country is different

It differs from Ireland's situation..what is appropriat for one is not necessarily going to solve a different problem in th other.

Italy's problem's are different and maybe worse even.

McDave

I think Spain is serious enough about its future. It sees its future very much within the EU and most probably within the EZ. After a couple of decades of pretty lax politics and economics, it's starting to tackle its problems head on. From that perspective, it very much has a future.

More generally, as a country it has a lot going for it. And a positive attitude to life. Once they get their economic basics right, and deal with vested interests and anti-competitive practices, I think Spain will slowly claw its way back to normalcy.

Of course there's the other issue of the regions. It's not beyond the realms of possibility that one or more regions might break away from Spain. Were the Basque Region and Catalonia to become independent, that would impoverish the other regions somwhat and would constitute a real challenge for a Castillian dominated rump.

The Corinthian

poeticseraphim wrote: »

The employment situation is weird.. It's a two tier system the privelged permannt workers have 'Iron clad contracts' and the secon tir are temps which get contracts renewed and they are usually young they are fired whilst the other class of workr legally has to still get raises etc.

This is not uncommon in continental Europe, as Italy, France and even Germany have similar employment protection that are designed to protect the ideal of 'a job for life' and can lead to situations whereby you cannot fire someone no matter how incompetent they are and to get a job, either you have to be 'recommended' and/or wait for someone to retire (some of the ridiculously low retirement ages were designed to tackle unemployment).

This is further tied into social welfare and how unemployment is dealt with.

Broadly speaking there are four models for security of occupation versus unemployment benefits, that have developed for various social and historical reasons:

• The Southern Model. Typically low unemployment benefits and high employee protection. Generally considered to be the worst of all Worlds as it more often than not ends up leading to bloated public sectors. Found in countries like Spain, Greece and Italy.
• The Scandinavian Model. Typically high unemployment benefits and low employee protection. People can get hired and fired easily, but there's a good safety net. Downside is it's expensive and leads to high taxes. Found in countries like Sweden and Denmark.
• The Central European Model. A mix of typically medium to high unemployment benefits and high employee protection. Very expensive, leading to high taxation. Found in countries like Germany, France and Belgium.
• The Anglo-Saxon Model. Typically low unemployment benefits and low employee protection. What Ireland and (especially) the UK have.

Of all of these, the Southern Model is the one most recognized as the worst and most difficult to reform, while the EU is split on whether the Scandinavian or Anglo-Saxon models are best to pursue.

With regards to employee protection reform, Germany has done the most to reform this over the last decade, as have Italy and France, to a much lesser extent. Spain, AFAIK, only started to do so fairly recently. Greece has done SFA.

poeticseraphim

The Corinthian wrote: »

This is not uncommon in continental Europe, as Italy, France and even Germany have similar employment protection that are designed to protect the ideal of 'a job for life' and can lead to situations whereby you cannot fire someone no matter how incompetent they are and to get a job, either you have to be 'recommended' and/or wait for someone to retire (some of the ridiculously low retirement ages were designed to tackle unemployment).

This is further tied into social welfare and how unemployment is dealt with.

Broadly speaking there are four models for security of occupation versus unemployment benefits, that have developed for various social and historical reasons:

• The Southern Model. Typically low unemployment benefits and high employee protection. Generally considered to be the worst of all Worlds as it more often than not ends up leading to bloated public sectors. Found in countries like Spain, Greece and Italy.
• The Scandinavian Model. Typically high unemployment benefits and low employee protection. People can get hired and fired easily, but there's a good safety net. Downside is it's expensive and leads to high taxes. Found in countries like Sweden and Denmark.
• The Central European Model. A mix of typically medium to high unemployment benefits and high employee protection. Very expensive, leading to high taxation. Found in countries like Germany, France and Belgium.
• The Anglo-Saxon Model. Typically low unemployment benefits and low employee protection. What Ireland and (especially) the UK have.

Of all of these, the Southern Model is the one most recognized as the worst and most difficult to reform, while the EU is split on whether the Scandinavian or Anglo-Saxon models are best to pursue.

With regards to employee protection reform, Germany has done the most to reform this over the last decade, as have Italy and France, to a much lesser extent. Spain, AFAIK, only started to do so fairly recently. Greece has done SFA.

I have family who have experienced the Danish and Swedish system. They seem to be of he opinion that over there most people on top of going to Uni after secondary school will at one point need to return later in life to train for something else as careers change so much and at a rapid pace and the career enviroment evolves quickly. People end up with mutiple degrees and are encouraged to study when they become unemployed by the Govt.

I have a few relatives in the uk and there it very much seems to be dependant on your employer and your individual contract. It is more to do with the way that business and company does i and how much they want you and value you. If you have been head hunted they may want to keep you etc. It is to do with keep valued senior people whilst leaving flexibilty to deal with
less skilled workers. I get the impression though that they have a tradition of strong trade unions in the UK and what happens oftendepends on what can be negotiated.

The upside in Sweden is that there is good social mobiliy and poplprogrss upwards through change in their job as they gain qualifications, experience and more senority. Also people are rarely 'fired'as such, i think it is more that their contract runs out etc.

But it is interesting to compare models and business cultures. The EU should do more of this and really look at differences in EU countries.

daesu

The Corinthian wrote: »

• The Anglo-Saxon Model. Typically low unemployment benefits and low employee protection. What Ireland and (especially) the UK have.

Low unemployment benefits ? In Ireland ?

I've been out of the country since well before the economy took a nosedive but from accounts of people back home I know it hasn't changed that much. What is low about unemployment benefits in Ireland ? They are not low, they are ridiculously high.

Unemployment benefits in Ireland, and to a lesser extent the UK, have bred a culture of life-long dole junkies who have no intention of ever dreaming about working. Add to that people who are pretty much better off on the dole when other benefits are taken into account and I'd say we have one of the worst systems. I'm not saying there aren't genuine people on welfare so don't throw that at me.

I'm speaking as someone who had to live on the dole and who has family currently on the dole because they cannot find work. The Irish unemployment benefits system is funtamentally flawed, it doesn't need reform, it needs a complete overhaul.

poeticseraphim

daesu wrote: »

[/LIST]
Low unemployment benefits ? In Ireland ?

I've been out of the country since well before the economy took a nosedive but from accounts of people back home I know it hasn't changed that much. What is low about unemployment benefits in Ireland ? They are not low, they are ridiculously high.

Unemployment benefits in Ireland, and to a lesser extent the UK, have bred a culture of life-long dole junkies who have no intention of ever dreaming about working. Add to that people who are pretty much better off on the dole when other benefits are taken into account and I'd say we have one of the worst systems. I'm not saying there aren't genuine people on welfare so don't throw that at me.

I'm speaking as someone who had to live on the dole and who has family currently on the dole because they cannot find work. The Irish unemployment benefits system is funtamentally flawed, it doesn't need reform, it needs a complete overhaul.

In what way ??? Do you think it should be lower ?

I have never been on it ..so what was your experience on it like? And what in your experience needs to be changed?

People say this but are never specific.

Apart from separating out longterm unemployed and getting rid of fraud what should be done?

daesu

poeticseraphim wrote: »

In what way ??? Do you think it should be lower ?

There should be a system to discourage long-term reliance on it like they have in other countries. For example;

Payments should continuously decrease every 6 months or so from a high level (the current payment) to a low level, perhaps half or less of what it currently is. As actual monetary payments decrease, a 'food stamp' system could provide the difference.

I should take account of people in differing circumstances; single people, families, younger vs older, etc.

It should also take into account people who have worked and paid taxes in the past. The longer you worked, the longer you stay on the high level.

I'm not talking about getting rid of welfare for anyone, including long-term beneficeries. I'm talking about trying to nudge people away from state reliance and towards providing for themselves by making welfare an uncomfortable position to be in.

I know many people who turn up their noses at certain kinds of jobs, fastfood for example, and a large factor involved is that the dole is comfortable for them.

jonniebgood1

poeticseraphim wrote: »

In what way ??? Do you think it should be lower ?

I have never been on it ..so what was your experience on it like? And what in your experience needs to be changed?

People say this but are never specific.

Apart from separating out longterm unemployed and getting rid of fraud what should be done?

Gradually reducing benefits for a start.

Currently a person just unemployed gets paid from their RSI payments, a person that is 20 years unemployed gets paid by others. Both people get same amount. I understand it reduces in some other european countries. I don't expect Burton has the gumption or courage to sort that out.

The Corinthian

poeticseraphim wrote: »

But it is interesting to compare models and business cultures. The EU should do more of this and really look at differences in EU countries.

They've been doing so for a long time; my previous post is actually based largely on an excellent article that the Economist did about the debate that's been taking place in the EU on this, from back in 2005.

daesu wrote: »

What is low about unemployment benefits in Ireland ? They are not low, they are ridiculously high.

You're confusing unemployment benefits with assistance; that is long term payments with the shorter term payments of fully insured employees.

In both Ireland and the UK there's very little difference between the two; in Ireland about the only difference is one is means tested and the other is not. Beyond that a person who's just lost their job after paying tax for twenty years will essentially be entitled to much the same as some scumbag who's never worked a day in their lives.

Unemployment insurance in countries like Germany, on the other hand, are a very different story; you get 60% (more, with dependents) of your previous salary for 12 months when you lose your job and are paid up, for example. Once you are unemployed beyond this, you'll fall back to a level comparable to Ireland or the UK.

I'm speaking as someone who had to live on the dole and who has family currently on the dole because they cannot find work. The Irish unemployment benefits system is funtamentally flawed, it doesn't need reform, it needs a complete overhaul.

There are various problems with the Dole in Ireland, but I honestly don't think they're principally to do with how much is paid, but with a combination of Irish culture and lack of political will.

That there is no real unemployment insurance doesn't help the culture though; you can pay tax for years, lose your job and find that you're not any better off than someone who never paid a penny of tax is unlikely to reenforce the Hobsian contract.

poeticseraphim

The Corinthian wrote: »

They've been doing so for a long time; my previous post is actually based largely on an excellent article that the Economist did about the debate that's been taking place in the EU on this, from back in 2005.

Interesting ...erm Linky? :P

I actually think psychogical cultural studies in the EU need to be done in general.

The Corinthian

poeticseraphim wrote: »

Interesting ...erm Linky? :P

Can't say if there's an online copy - I read it in the actual magazine; old fashioned, I know.

If memory serves, Germany, Benelux and France favoured the Scandinavian model while the UK, predictably, and Ireland preferred the Anglo-Saxon model.

I actually think psychogical cultural studies in the EU need to be done in general.

European writers have been trying to do that for centuries. I suggest you read 'The Europeans' by Luigi Barzini; a bit dated now, but still has some good insights.

jonniebgood1

The Corinthian wrote: »

Unemployment insurance in countries like Germany, on the other hand, are a very different story; you get 60% (more, with dependents) of your previous salary for 12 months when you lose your job and are paid up, for example. Once you are unemployed beyond this, you'll fall back to a level comparable to Ireland or the UK.

What rate do you fall back to?

The Corinthian

jonniebgood1 wrote: »

What rate do you fall back to?

http://en.wikipedia.org/wiki/Hartz_concept

jonniebgood1

The Corinthian wrote: »

http://en.wikipedia.org/wiki/Hartz_concept

The German rate translates as €84 per week (with housing and medical expenses considered separately). This is €104 less than the Irish rate which also considers housing and medical expenses separately.

The Corinthian

jonniebgood1 wrote: »

The German rate translates as €84 per week (with housing and medical expenses considered separately). This is €104 less than the Irish rate which also considers housing and medical expenses separately.

Firstly Rent Allowance in Ireland is a supplement; it does not cover the full rent, Sozialhilfe does. Secondly (AFAIK, although I could well be wrong), an Irish medical card won't cover a visit to a GP, the German system will. Third of all, with the exception of perhaps a few cities like Frankfurt, cost of living in Germany is a lot lower than in Ireland.

Which is besides the point, because it is the unemployment insurance that I was citing and this is considerably better than what you'll get in Ireland.

jonniebgood1

The Corinthian wrote: »

Secondly (AFAIK, although I could well be wrong), an Irish medical card won't cover a visit to a GP, the German system will.

Medical card covers GP visits.

There was a piece on RTE a few weeks ago comparing Irish with several European countries welfare systems. The european systems were all lower than the Irish but it is not comparing like with like. Also comparing Germany with Ireland is false as Germany is not spending more than it has in the same manner as Ireland and say Spain to get back to OP.

The Corinthian

jonniebgood1 wrote: »

Medical card covers GP visits.

I stand corrected.

There was a piece on RTE a few weeks ago comparing Irish with several European countries welfare systems. The european systems were all lower than the Irish but it is not comparing like with like.

Only if you ignore cost of living and, more importantly, unemployment insurance.

Also comparing Germany with Ireland is false as Germany is not spending more than it has in the same manner as Ireland and say Spain to get back to OP.

I was not attempting any comparison on that basis.

jonniebgood1

The Corinthian wrote: »

Originally Posted by jonniebgood1
There was a piece on RTE a few weeks ago comparing Irish with several European countries welfare systems. The european systems were all lower than the Irish but it is not comparing like with like.

Only if you ignore cost of living and, more importantly, unemployment insurance.

Do you contend that the European systems are more beneficial to their unemployed. For example would working parents in Germany be better off on the welfare than by working as reported in the suppresed ESRI report?

The Corinthian

jonniebgood1 wrote: »

Do you contend that the European systems are more beneficial to their unemployed. For example would working parents in Germany be better off on the welfare than by working as reported in the suppresed ESRI report?

I never contended anything of the sort; pro or against.

I put forward the broad models that are used in Europe to deal with unemployment benefits and employment protection and suggested that a large measure of Ireland's problem in this regard is due probably to a combination of culture and lack of political will. Nothing else.

jonniebgood1

The Corinthian wrote: »

I never contended anything of the sort; pro or against.

I put forward the broad models that are used in Europe to deal with unemployment benefits and employment protection and suggested that a large measure of Ireland's problem in this regard is due probably to a combination of culture and lack of political will. Nothing else.

Fair enough. It was a question more than trying to make an argument. It seems that the rate of welfare at €188 here is high on the face of it but sometimes people make a case that other services are not provided here. My own opinion having been on it for approx 2 years was that it was easy to manage on it, i.e. I could have managed with less quite easily. I was still keen to work while on it but from a financial point of view I understand how it makes no sense for some to work.

Talking about Welfare on Vincent browne at the moment to anyone who is on now.

daesu

There are various problems with the Dole in Ireland, but I honestly don't think they're principally to do with how much is paid, but with a combination of Irish culture and lack of political will.

That there is no real unemployment insurance doesn't help the culture though; you can pay tax for years, lose your job and find that you're not any better off than someone who never paid a penny of tax is unlikely to reenforce the Hobsian contract.

Yes absolutely couldn't agree more regarding it being a problem with culture and political will.

In my experience people in Germany, France & Austria generally view someone on welfare very differently from Irish and people. They seem to view it very negatively, almost shamefully.

What I'd like to see is actual monetary amount drop but there been some kind of voucher system for groceries, maybe even clothes etc to take up the difference.

I want the system to try to nudge people put of the hole that welfare traps them in. They shouldn't be thinking about free money every month that they can use to go on the piss with, they should be thinking about welfare as temporary and undesirable. A way to survive, not a way to live.

poeticseraphim

jonniebgood1 wrote: »

Do you contend that the European systems are more beneficial to their unemployed. For example would working parents in Germany be better off on the welfare than by working as reported in the suppresed ESRI report?

That is largely because Germany's welfare state extends into the employed for instance they give good child allowance better time off for mothers and father just havinng a baby, money to support childcare. And they give public healthcare policies to all ...not just unemployed.

They offer support accross society that is why taxation is not resented as it is here ...it helps the middle classes as well.

An employed couple is better off compared to an unemployed couple in Germany they also also better off than an employed couple here due to the benefits and social services they recieve.

The Corinthian

What's wrong with Ireland's social welfare system has spun OT somewhat, but OK...

There is a tendency, not unlike a reflex reaction, to point to the level of social welfare in Ireland and claim that this is the largest problem.

This certainly can be the case, if one considers the Byzantine and accumulative tapestry of benefits that one can claim, especially if one has dependants, which can genuinely result in one being better off than if working at market rates (or at least the little extra a market rate salary brings does not justify a 40+ hour week). I do think there is some serious space for reform there.

At it's most basic level though (single person renting, no dependants), it's not really exaggerated. €188 shrinks once that part of rent not covered by Rent Allowance is taken out, to begin with. Arguably there's space for trimming fat even there, but realistically not all that much.

The principle problems with the system, IMHO, are cultural, administrative and political. Top of the list of these is the presumption that it is perfectly normal to be long-term unemployed. This isn't simply the attitude of those who are often long-term unemployed, but also of the social welfare offices; little or no encouragement, support or even pressure is put on jobseekers to find a job or take up training. There's some nominal 'ticking of boxes', but otherwise they're left alone.

The worst example of this is probably LPA, where up until recently it was presumed that motherhood was the full-time job until the youngest child was 18 or, if they continued in full-time education, 23. When this was lowered to a child's early teens, there was an outcry, with the usual claims of "won't someone think of the children" being used. I'm not suggesting that single parents need to be 'forced' to find full-time jobs that are not suitable, but that there is no pressure for them to even try to find something, even part-time, is bizarre.

Added to this is the attitude that working for a living gains you few, if any, advantages; the only time it makes a difference is if you lose your job and have over €20k in the bank; means testing only begins to kick in at that level. Otherwise paying taxes all your life does not benefit you at all - even where it comes to state pensions.

Unlike other counties like Germany, Austria or Holland, long-term unemployment is still considered a viable alternative lifestyle in Ireland, and that is the principle problem. It's not simply scumbags from council estates who fall into this category; almost all of us will know one or two who are like this, living their 'Bohemian' lifestyles on social welfare indefinitely, despite having masters degrees. That we accept their choices and this is also part of the problem.

Meanwhile the relevant government departments accept this lifestyle and make no effort to interfere in how they live. There is no pressure to apply for a minimum number of jobs, or monitoring if you are, let alone obligation to take up offers of employment or training. The worst that can happen to you is if you get caught fiddling the system, in which case you'll get docked a few Euro a week.

And successive governments have avoided changing this culture time and time again, fearing the voting power of those in that lifestyle demographic. Decreasing payments is an easy win with voters, but putting in place regulations that would better monitor and put pressure on reluctant jobseekers has been all but ignored, with almost proposals to do so still at discussion level. Which is progress; we didn't even have any such proposals for reform up until recently and the system had remained the same for decades.

So yes, there's room for cuts where it comes to accumulated benefits, however the largest area for reform is in how we view and administer jobseekers, so that it is no longer an alternative lifestyle choice that is left to its own devices.

The Corinthian

poeticseraphim wrote: »

That is largely because Germany's welfare state extends into the employed for instance they give good child allowance better time off for mothers and father just havinng a baby, money to support childcare. And they give public healthcare policies to all ...not just unemployed.

This might be a factor, but genuinely it's not the principle reason. Germanic culture has a much stronger work ethic than Irish culture; your job is what defines you to a great extent, and being without such a definition disenfranchises you to a great extent. In Ireland, being long-term unemployed is considered an acceptable alternative 'occupation' and thus definition - Germans would never admit to long-term unemployment.

The infamous expression "Arbeit macht frei" is still used by Germans, albeit more sarcastically nowadays. Originally it was meant to denote the belief that having a job, working, was a positive thing; it gave you economic freedom, a purpose and helped one deal with personal problems.

So while I certainly agree that Germans have greater support from the system and are rewarded for their work (unemployment insurance being an example), it really comes down to a different mindset where it comes to the importance of work. TBH, most other Europeans are far more defined by their work that the Irish. Even southern Europeans.

jonniebgood1

Back to the topic of the thread

Ten-year Spanish government bond yields hit their highest levels since the euro was created, above the 7 percent danger level, on growing doubts that the euro zone's fourth largest economy will be able to avoid a direct bailout. http://in.reuters.com/article/2012/07/20/markets-bonds-euro-idINL6E8IKFZX20120720

The austerity has not solved the problem- what a surprise!!!

McDave

jonniebgood1 wrote: »

Back to the topic of the thread



The austerity has not solved the problem- what a surprise!!!

Spain gets 'bailout'. Pays lower interest rate. 'Bailout' fund gets substantial interest on repayments. Everyone's a winner. Except the markets of course. Unless Spain defaults on the 'bailout'. Which it won't.

RichardAnd

Just an update on the Spanish situation.

http://www.rte.ie/news/2012/0727/spain-denies-full-bailout-discussed-with-germany-business.html

Unemployment there has reached 24.6%. Needless to say, that's one in every four people without a job and I thin it's ~50% for those under 25. I think the great depression once say unemployment of 30% in certain parts of the world, seems we may see it again.

poeticseraphim

McDave wrote: »

Spain gets 'bailout'. Pays lower interest rate. 'Bailout' fund gets substantial interest on repayments. Everyone's a winner. Except the markets of course. Unless Spain defaults on the 'bailout'. Which it won't.

The latest figures on Spain bailout are that 300billion would be needed.they are about to get 100 billion but are in deficit of 9 billion in order to meet the requirements needed to get it...thats just for Spain and the money is not there..this is partly if it does get a bailout it would like us need to exit the markets for some time.If Spain is bailed out Italy will need to be too....and that will cost about somewhere in the same ball park if not more ...some have put a figure of 300billion to 500 billion on it
And of course we are assuming that we would see reform....in both these countries...however i am doubtful

France will be unable to help even if it itself does not need funding ( i am assuming for the moment it does not i am unsure)

Germany does not have this kind of money. The Whole EU does not have this kind of money.Germany (Bundesbank actually) again rejected any notions of eurobonds dept pooling or even buying more govt bonds.The ECB can't make them.

If we can't afford Greece what makes people think we can afford Spain and Italy?The answer always seems to be well we can't afford to lose them. That does not mean the money is there to keep them.

I think there are three options. Debt default or allowing Spain and Italy to burn or write off some debt. And a partial bailout. This option i don't think will work in the long term though.As Spain has a Conservative Govt at the moment and they have NOT made reform. Now this is even in terms reforms needed to meet requiremets in order to get the current funding promised that they are waiting for. Spain is 9billsion short of meeting the requirements needed to qualify for the cash funding promised. This is turning into another Greece scenario.

Merkel and Spain also have another hurdle to surmount. Although plans had called for the ESM to succeed the EFSF on July 1, this has been blocked by a temporary injunction imposed by the German Federal Constitutional Court. The court is hearing a case brought by plaintiffs who argue the ESM and fiscal pact will force Germany to give up too much sovereignty and undermine the power of its democratically elected parliament to determine what happens with taxpayers money.

The second Scenario i see as a possibility is that Germany breaks away from the Euro ...and polls have shown recently that the majority of Germans favour a break up of the Euro rather than providing more money.

But polls are polls ..the Question is which would be cheapest ....a Break up or providing more money to the Eurozone....so far we have thought funds woud be cheaper than a break up however this is only true if reforms and targets are met......and they are not being met by key countries.

The majority feel in the far left in Germany and many accross Europe that it is pointless to save the Euro. That it just cannot be done ...it cannot be saved.I think they are right. It cannot be saved the reform is not there the institutins are not there and the money is not there to keep funding Eu countries.

What is interesting was a speech recently by Mario Draghi stating besides his comitment to save the Euro (well why woud he not he loses his job if it goes) that one of the problems with saving the Euro zone was that money and investment seemed to stay in national borders even with regulation reform.

People looking at the figures forget ..money is linked if not lead by politics and nationhood...

Greece cannot be saved not just because of figures but really because of leadership lack of reform and society ..it is the same with Spain..they have a sense of entitlement that is not met with responsibility..if you want socialized healthcare...that is great...BUT YOU HAVE TO PAY FOR IT COLLECTIVELY....and commit to that and accept the economy that comes with those socialized structures and the working hours and employment structures and taxation that goes with it.

The EU has to realize it is not just about numbers it is about completely reversing attitudes and societal norms....

If Spain and Greece have no future then neither has Italy and then the EU and the euro as we know it is over.I imagine the Germans will go back to their beloved DM if the left socialistd get in and defeat Merkel. Lord knows what will happen in France.People have suggested until now that the cascade effect is enough to motivate Germany to cough up ...however what we have seen is that investors and money is staying in their own economies.

Ireland is doing better despite the partial EU meltdown..Germany has falling unemployment and it's econoomy is doing ok....money is staying national not international despite deregulation and the myth of Global friendly integration. People are staring to question whether we are integraed enough for it to destroy Germany and others if there was a break up or if it would cost more than funding. Germany has rejected the idea of buying Spannish Debt. They ar not afraid enough of EU or Euro break up to fund anymore or share debt it seems .Economies have stayed national more than we think. That is why the Euro problems seem so unequal and individual differing from country to country. The problems are different from country to country.

It is either federalization and direct sovereign and financial control or break up in the next few years and i don't think it will be all EU countries if it is a federal Europe maybe Germany and scandies and MAYBE France ...


But not Spain or Italy or us piigs....we have nothing really to offer and we darg it all down...and that in turn damages us more than being separate..

BKtje

What we offer (and have always offered along with other "weak" countries) is the weakening of the currency which is a good thing for strong economies with high exports (like germany). If only strong currencies were to remain then very quickly these countries exports would become too expensive causing their economies to falter. If we were to agree that parts of the Eu would be federalised I don't see why Ireland wouldn't be offered a spot considering the general international feeling that Ireland is now playing by the rules. Countries like Ireland who are willing to play ball would in fact be just as important as the European powerhouses.

As many have said on these forums, it's not whether the Euro can be saved it's whether there is the political will to save it. It's not so much a question of economics but politics. Quantitive Easing would ease much of the strain being felt but in exchange would destroy a large portion of savings due to massive inflation. This along with spending reforms (once more a political issue) could save the Euro overnight.

Not a question of can we save the Euro more of a do we want to make the sacrifices needed.

McDave

poeticseraphim wrote: »

But not Spain or Italy or us piigs....we have nothing really to offer and we darg it all down...and that in turn damages us more than being separate..

Interesting post. I'm not going to address all the points you raise other than to offer the following two observations:

1. Spain's actual debt pile is close enough to the actual Maastricht criteria. What it has to do is reduce its budget deficit to 3% and it is in pretty good shape. On its own it is an achievable objective. What's dragging Spain down is the perception that there's more bad news in them there regions, and the fear that banks need to be bailed out at the expense of the Spanish sovereign.

2. Italy's annual deficit is close to Maastricht criteria. Italy's primary problem is to eliminate the deficit and get into a position where it can whittle away its massive debt hangover. It's probably a bigger problem than Spain's to solve, and in reality depends on the resumption of growth rates of around 3% in the EZ.

With the right action and a bit of luck, both Spain and Italy can win back the markets. Once they do, they have a lot to offer the EZ. Greece I'm afraid is way off the slow pace set by both, and has nothing to offer the EZ, other than a sense that the EZ will do practically anything to keep a member on board in the hope that one day they'll get their act together and provide hope for the rest of the Balkan region.

That's my take on it anyway.

poeticseraphim

McDave wrote: »

Interesting post. I'm not going to address all the points you raise other than to offer the following two observations:

1. Spain's actual debt pile is close enough to the actual Maastricht criteria. What it has to do is reduce its budget deficit to 3% and it is in pretty good shape. On its own it is an achievable objective. What's dragging Spain down is the perception that there's more bad news in them there regions, and the fear that banks need to be bailed out at the expense of the Spanish sovereign.

2. Italy's annual deficit is close to Maastricht criteria. Italy's primary problem is to eliminate the deficit and get into a position where it can whittle away its massive debt hangover. It's probably a bigger problem than Spain's to solve, and in reality depends on the resumption of growth rates of around 3% in the EZ.

With the right action and a bit of luck, both Spain and Italy can win back the markets. Once they do, they have a lot to offer the EZ. Greece I'm afraid is way off the slow pace set by both, and has nothing to offer the EZ, other than a sense that the EZ will do practically anything to keep a member on board in the hope that one day they'll get their act together and provide hope for the rest of the Balkan region.

That's my take on it anyway.

I could be mistaken but my understanding is that countries wishing to avail of ESM funding must meet differing criteria and we must meet fiscal compact criteria which differs from masstricht i thought.

I could be wrong.


As regards Spannish banks and perception. EU banking regulation for years had regulation archetectured by the ISAB that ruled banks could not declare losses until the borrower got in touch to declare trouble. But in reality the time elapsing between when the financial problem first occured and the borrower getting in trouble could be years. But they legally could not include this in official audits. It was what happened here too. For years regulators were regulating based on unclean Audits. Here they channged the regulator and started ignoring the audits and got a grip on real figures. They did not in Spain. It is actually a huge problem throughout the EU except in countries with strong company law (which Ireland actually had but a weak regulator who did not enforce it) other countries enforced their own company spvreign law rather than eu regulation. The ISAB have admitted that their regulation structures where flawed and they are going through legal procedures in London and perhaps here and elsewhere too.

It is not just regular EU criteria that Spain has to meet they have to meet the criteria of the fiscal compact treaty and the ESM treaty to get funding as i understand it.

Same with Italy ....plus there is the issue of their banks debt becoming sovereign debt the cuts they will have to make and the effect that will have on their deficit and growth and what criteria/reform the Germany would insist upon.

Although the IMF did praise Spain recently.....but stressed as you have that they need less stress in the debt markets.

The question is will it need a full sovetreign bailout?..

'According to European officials, Spain conceded behind closed doors this week that it may need a state bailout but the Spanish government strongly denied any such possibility on Friday'

Spain has apparrantly discussed a 300billion bailout with Germany

The Spannish economy has contracted for the third quarter in a row..investors are worried it will need a full sovreign bailout.

And experts have warned that this bailout is impossible. The money is no there and the transfer too big despute what the country might have to offer.

But who knows...but what i am saying is it might just be impossible.

Lets hope not but they really need to get a handle on this and not just SAY 'we will do everything possible' but come up with somehing to inspire confidence and actually do something politically and economically.

McDave

poeticseraphim wrote: »

I could be mistaken but my understanding is that countries wishing to avail of ESM funding must meet differing criteria and we must meet fiscal compact criteria which differs from masstricht i thought.

I could be wrong.


As regards Spannish banks and perception. EU banking regulation for years had regulation archetectured by the ISAB that ruled banks could not declare losses until the borrower got in touch to declare trouble. But in reality the time elapsing between when the financial problem first occured and the borrower getting in trouble could be years. But they legally could not include this in official audits. It was what happened here too. For years regulators were regulating based on unclean Audits. Here they channged the regulator and started ignoring the audits and got a grip on real figures. They did not in Spain. It is actually a huge problem throughout the EU except in countries with strong company law (which Ireland actually had but a weak regulator who did not enforce it) other countries enforced their own company spvreign law rather than eu regulation. The ISAB have admitted that their regulation structures where flawed and they are going through legal procedures in London and perhaps here and elsewhere too.

It is not just regular EU criteria that Spain has to meet they have to meet the criteria of the fiscal compact treaty and the ESM treaty to get funding as i understand it.

Same with Italy ....plus there is the issue of their banks debt becoming sovereign debt the cuts they will have to make and the effect that will have on their deficit and growth and what criteria/reform the Germany would insist upon.

Although the IMF did praise Spain recently.....but stressed as you have that they need less stress in the debt markets.

The question is will it need a full sovetreign bailout?..

'According to European officials, Spain conceded behind closed doors this week that it may need a state bailout but the Spanish government strongly denied any such possibility on Friday'

Spain has apparrantly discussed a 300billion bailout with Germany

The Spannish economy has contracted for the third quarter in a row..investors are worried it will need a full sovreign bailout.

And experts have warned that this bailout is impossible. The money is no there and the transfer too big despute what the country might have to offer.

But who knows...but what i am saying is it might just be impossible.

Lets hope not but they really need to get a handle on this and not just SAY 'we will do everything possible' but come up with somehing to inspire confidence and actually do something politically and economically.

Once up and running, having been ratified by the member countries, it would be possible in theory to beef up the ESM to deal with bad Spanish and Italian scenarios.

However, I can't see this being allowed to happen politically. One objective will be to get Spain back to a position where they can borrow without putting pressure on the ESM (i.e. balance the budget including whatever provisions they make for the regions). The other will be to get Italy into the black on an annual basis.

As I see it, once these objectives are achieved, the stage will be set for an EZ-level resolution (including banking regulation) that will hopefully settle the bond markets.

I think the overall idea is to (i) get member countries to do their bit, (ii) put EZ regulation in place, (iii) establish the ESM not for current fire-fighting purposes but as a reserve instrument and (iv) attempt to stimulate growth in the EZ.

poeticseraphim

McDave wrote: »

Once up and running, having been ratified by the member countries, it would be possible in theory to beef up the ESM to deal with bad Spanish and Italian scenarios.

However, I can't see this being allowed to happen politically. One objective will be to get Spain back to a position where they can borrow without putting pressure on the ESM (i.e. balance the budget including whatever provisions they make for the regions). The other will be to get Italy into the black on an annual basis.

As I see it, once these objectives are achieved, the stage will be set for an EZ-level resolution (including banking regulation) that will hopefully settle the bond markets.

I think the overall idea is to (i) get member countries to do their bit, (ii) put EZ regulation in place, (iii) establish the ESM not for current fire-fighting purposes but as a reserve instrument and (iv) attempt to stimulate growth in the EZ.

How are they going to do that??

Countries are raising objections rather than doing there bit

There is no growth.

And Spain's and Italy's borrowing costs are still sky high.

They have not set about how...i don't think countries will stand for the measures put apon them.

It just seems slighty detached from the reality. And circular logic ...we need to wait until Spain and Italy are in order budget wise and can borrow without the ESM to construct an EZ resolution...but these things will be difficult to do if not impossible without an EZ resolution in place. Part of the reason the Spain has issues borrowing is because of EZ uncertainty...

Although it could be said that our performance with the markets suggests it could be done....but Spain is a totally different animal.

Not to mention that policticans in certain countries have election coming up and so are tied as to what they can do. support wise and budget wise.

I think the waiting is also damaging.

Franticfrank

Interesting discussion. I'd agree that the waiting is damaging and the figures aren't great - hopefully they'll come up with a solution soon. Anyhow with Germany maybe about to be downgraded, statistics show the real GDP growth rate has slumped entirely for the first quarter of the year in the eurozone.

McDave

poeticseraphim wrote: »

How are they going to do that??

Countries are raising objections rather than doing there bit

There is no growth.

And Spain's and Italy's borrowing costs are still sky high.

They have not set about how...i don't think countries will stand for the measures put apon them.

It just seems slighty detached from the reality. And circular logic ...we need to wait until Spain and Italy are in order budget wise and can borrow without the ESM to construct an EZ resolution...but these things will be difficult to do if not impossible without an EZ resolution in place. Part of the reason the Spain has issues borrowing is because of EZ uncertainty...

Although it could be said that our performance with the markets suggests it could be done....but Spain is a totally different animal.

Not to mention that policticans in certain countries have election coming up and so are tied as to what they can do. support wise and budget wise.

I think the waiting is also damaging.

There's no rush to ratify the ESM. Talk before was about getting it up and running earlier than planned (i.e. June/July). But I think they want to keep their powder dry. I wouldn't be too concerned about the legal challenges. I think the German courts will OK it and the ESM will come into force on schedule.

There is no positive growth across the EZ. But the main problem is with the areas with major budgetary problems. No-one can expect growth there until they square up fully. There'll then be growth off a lower base. But growth that will enable the EZ-wide figures to go into the black.

I guess what I was saying here was that the first problem to solve is budgetary overspend, then taking steps to reduce historic debt, and finally putting on a big push to get sustainable growth going again. We won't have credible growth until the likes of Spain and Italy get their houses in order.