When will Ireland default?

dlouth15

McDave,

Well I stand to be corrected and indeed would like to be proved wrong on this, but I don't see the political will being there. Yes, the German elections will be held and this will free up some thinking on the matter, but the "wait until after the German elections" argument has been used for at least the last two years. How long after the next German elections will we start hearing it again? And I think the attitude of the German electorate is perfectly understandable here. You get the same very understandable views in Finland, the Netherlands etc.

In Europe it looks like the worst of the acute financial crisis is over but we've now got the more intractable problem of high unemployment in the EZ generally and extremely high in certain countries. What I think is going to happen is that there will be a fairly weak recovery in Europe generally but continued problems in the programme countries even after they've exited. Greece will continue indefinitely as a programme country. The integrity of the currency itself will be maintained as failing to do this would bring sudden problems throughout the region (although really just exposing problems that are already there) but not addressing problems in national economies due to the shared currency itself. The situation will just become the new normal.

McDave

dlouth15 wrote: »

Yes, the German elections will be held and this will free up some thinking on the matter, but the "wait until after the German elections" argument has been used for at least the last two years. How long after the next German elections will we start hearing it again? And I think the attitude of the German electorate is perfectly understandable here. You get the same very understandable views in Finland, the Netherlands etc.

It's not so much an argument that's been used, but more a realistic timeframe for problem countries to get their houses in better order.

Had the problem countries like ourselves not bothered to make significant adjustments, I think we would have seen the break-up of the EU as is, and the evolution of a new European core around an EZ excluding the messers. There's no way in the world creditor countries were going to throw good money after bad with the GIPS carrying as if nothing had happened.

The creditor countries were always going to play for time. And as Germany is the biggest creditor country, it obviously need democratic endorsement of a policy decision to help refinance a rebalancing. And the opportunity for that endorsement is this election, where the German voter can choose to endorse Merkel or not, better informed on where the likes of ourselves, Greece and Italy are going.

And the way the opinion polls are going in Germany, it looks like Merkel's approach is being vindicated.

As to when there will be investment movement, my guess is 12 to 18 months from now. First we will need agreement on structural changes to the management of the Euro, and regulation of banking and finance. In parallel to this, we will see the elaboration by the Commission and Council (read member state governments) of a major development of European transport, communications and energy infrastructure, and a programme for the development of enterprise. This will be financed by the EU through transfers, and national resources. I expect it to total at least a trillion over a programme period of five years.

It's also possible that the EZ will find some way to relieve cooperating GIPS of the worst of their debts, such as a proportion of 'our' 'promissory note' debt. This will help GIPS to move more quickly towards the Maastricht criteria, and will ultimately be in the interests of all concerned, whether they be creditors or debtors.

McDave

dlouth15 wrote: »

In Europe it looks like the worst of the acute financial crisis is over but we've now got the more intractable problem of high unemployment in the EZ generally and extremely high in certain countries. What I think is going to happen is that there will be a fairly weak recovery in Europe generally but continued problems in the programme countries even after they've exited. Greece will continue indefinitely as a programme country. The integrity of the currency itself will be maintained as failing to do this would bring sudden problems throughout the region (although really just exposing problems that are already there) but not addressing problems in national economies due to the shared currency itself. The situation will just become the new normal.

Unemployment is at appalling levels in some countries. However, if the EU investment programme I speak of comes to pass, and those countries remove some of their anticompetitive and protectionist practices, they should slowly but surely improve.

I agree on one point. I also think certain countries will improve more anaemically than others, in particular Greece and southern Italy, both of which have severe cultures of corruption. But then again, those part of the world have in modern times always been tail-end Charlies. However I would expect Ireland, Portugal and Spain to enjoy better recoveries. But that's just guesswork on my part.

McDave

Incidentally, I didn't pull the trillion figure out of thin air. It has been mooted at European level, and repeated in recent enough press sources and sources like this: http://faei.ie/IBEC/DFB.nsf/vPages/European_affairs~Key_issues~investing-in-the-eu's-infrastructure-14-11-2011?OpenDocument

It's also my view that were the EU not to exist in its current form, Germany alone would be capable of investing in infrastructure in its own direct interests to the tune of a trillion over a decade.

Hootanany

McDave wrote: »

Incidentally, I didn't pull the trillion figure out of thin air. It has been mooted at European level, and repeated in recent enough press sources and sources like this: http://faei.ie/IBEC/DFB.nsf/vPages/European_affairs~Key_issues~investing-in-the-eu's-infrastructure-14-11-2011?OpenDocument

It's also my view that were the EU not to exist in its current form, Germany alone would be capable of investing in infrastructure in its own direct interests to the tune of a trillion over a decade.

Link not working.

Scofflaw

Hootanany wrote: »

Link not working.

http://faei.ie/IBEC/DFB.nsf/vPages/European_affairs~Key_issues~investing-in-the-eu%27s-infrastructure-14-11-2011?OpenDocument

The European Commission estimates that to upgrade the EU’s infrastructure it will need to spend about €1 trillion up to 2020. That is why it has proposed the ‘European Infrastructure Package’ to stimulate the investment necessary in infrastructure for the EU to restore growth and competitiveness to its economy and to reach its climate and energy goals as outlined in the Europe 2020 strategy.

It consists of a new budgetary instrument, the Connecting Europe Facility, and revised guidelines for transport, energy and ICT. The Connecting Europe Facility (CEF) will be the common financing instrument of this package providing €50 billion to invest in developing the infrastructure of the EU’s transport, ICT and energy sectors.

Implication(s):
The CEF foresees an investment of €31.7 billion in the transport sector with €10 billion to be set aside from the cohesion fund for transport projects in cohesion countries. It will allocate €9.1 billion and €9.2 to the energy and ICT sectors respectively. This is an important initiative to help Member States, including Ireland, to invest in important infrastructure.

Current Position:
The Irish Presidency has brokered a deal with the European Parliament and Commission on the CEF. This means that almost €30 billion in EU funding will be available for crucial EU infrastructure projects in transport, energy and telecoms networks.

cordially,
Scofflaw