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Only solution is for Ireland to leave the euro

135

Comments

  • #102
    View
    Registered Users Posts: 3,872 ✭✭✭View


    Even if we all agreed that a new Irish floating currency was the way to go (and we don't), it still doesn't alter that we couldn't get one into general circulation in any sort of a reasonable time scale.

    In the meantime - even if you are totally convinced the Euro is dreadful - it will remain our currency for the forseeable future.

    We might as well discuss the introduction of the 3 metre high stone coins once used as the currency of Yap island as re-introducing the Punt...


  • #103
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Nate--IRL-- wrote: »
    To say that it is the solution to all our woes is simply wrong also.

    It does have benefits, it also has drawbacks. For Ireland, right now in our position, politically and economically, it is not possible without massive economic and political upheaval.

    Nate
    I don't think it is the solution to all our woes and the process of leaving will create further problems. However it is not clear whether we will have worse upheaval dragged out over a longer period by staying in a currency union we are not suited to, and I think it is fairly obvious at this stage that we are not suited to it.


  • #104
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    View wrote: »
    We might as well discuss the introduction of the 3 metre high stone coins once used as the currency of Yap island

    That's a good story, I should remember it the next time Mahatma Coat arrives in the Economics forum for his bi-monthly "What is fiat currency worth?" threads.


  • #105
    Nate--IRL--
    Registered Users, Registered Users 2 Posts: 2,229 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    I don't think it is the solution to all our woes and the process of leaving will create further problems. However it is not clear whether we will have worse upheaval dragged out over a longer period by staying in a currency union we are not suited to, and I think it is fairly obvious at this stage that we are not suited to it.

    That's a fairly concise summary of the argument I think.

    Nate


  • #106
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    SkepticOne wrote: »
    Not sure what point you are trying to make there. The assertion was that a floating currency is not an option for a small country. I provided an example of a small country (New Zealand) with one (which you seem to accept is a floating currency) thereby proving the assertion wrong.

    Er, what? When FlamedDiving said "a floating currency is not an option for a small country", did you take that to mean that it was literally impossible? If the answer to that is "yes", then please only tell me that, and I'll back slowly away!

    We obviously had a floating currency ourselves, a couple of decades back. The point I'm making is that for a small open economy a floating currency doesn't really offer any greater measure of control than being in the euro - and instead of relatively predictable changes (particularly predictable since Ireland is at the meetings) your currency can collapse overnight. It's clear from the attempts at intervention by the NZ government that their currency does things they don't want it to - other than that, comparing their economic situation with ours is almost completely pointless.

    a bit puzzled,
    Scofflaw


  • #107
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    Flamed Diving wrote: »
    This is interesting, but without the full report I am going to withhold judgement. Relying on the correct interpretation of an economic paper by a journalist would be foolish. Especially when I have seen so many deliberate misquotes and manipulations over the years.

    Still, it never ceases to amaze me how people will simply quote such newspaper reports as fact, without ever having seen the source material...

    Why is that so amazing? What is amazing to me is that so many people have to see an opinion expressed by 'experts' before they will actually give it proper consideration.


  • #108
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    kaymin wrote: »
    Why is that so amazing? What is amazing to me is that so many people have to see an opinion expressed by 'experts' before they will actually give it proper consideration.

    So do I, but as I said; I would like to see the report itself before I will pass judgement. I am interested though.


  • #109
    View
    Registered Users Posts: 3,872 ✭✭✭View


    SkepticOne wrote: »
    I think a common currency may well be good for some countries if their business cycle is reasonably in sync with their neighbours. What I'm not sure of is whether it suits every country. Not all countries respond to changes in interest rates the same way for example.

    Hold on - we didn't just wake up one morning and find we were in the Euro. We knew this was coming for years in advance.

    We knew that Germany (the largest economy in the EU) was obsessed with low inflation. We knew that by being in the Euro we would - in effect - be directly linked to them.

    That means we needed to keep a very close eye on what they were doing. Instead, what happened?

    German prices went up roughly 20% between 97 and 08. France's by roughly 25% (roughly the Eurozone average). The "crazy" Italian's by 30%. Ireland's by 50%. (Eurostat figures).

    How in hell did we expect not to pay for this sooner or later? Sure, you don't have to match the Eurozone average on a day-to-day basis but we didn't make any effort to try. Instead, we pursued policies which massively inflated one part of the economy (construction) and ignored everything in the economy and everyone else in the Eurozone.

    This was the economic equivalent of bungee jumping - great fun while it lasts but there is serious whip-lash there too.


  • #110
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    Scofflaw wrote: »
    The point I'm making is that for a small open economy a floating currency doesn't really offer any greater measure of control than being in the euro - and instead of relatively predictable changes (particularly predictable since Ireland is at the meetings) your currency can collapse overnight.

    I mentioned the following in an earlier post
    We did manage to cope well enough for the 20 years before the euro was introduced. Realignments in the EMS were fairly frequent, averaging about one a year in the 1980s, and the Irish pound depreciated steadily against the Deutsche Mark. These depreciations reflected wider weaknesses in the Irish economy in those years and prevented a loss of competitiveness from compounding those weaknesses.


  • #111
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    Flamed Diving wrote: »
    So do I, but as I said; I would like to see the report itself before I will pass judgement. I am interested though.

    Great, I look forward to some 'independent' thought on the matter.


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  • #112
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Scofflaw wrote: »
    Er, what? When FlamedDiving said "a floating currency is not an option for a small country", did you take that to mean that it was literally impossible? If the answer to that is "yes", then please only tell me that, and I'll back slowly away!
    With respect, I don't think New Zealand is persuing some weird experiment with a floating currency. You are aware that floating currencies are fairly common in the world? You seem to be making out that I have chosen an extreme example here.
    We obviously had a floating currency ourselves, a couple of decades back. The point I'm making is that for a small open economy a floating currency doesn't really offer any greater measure of control than being in the euro - and instead of relatively predictable changes (particularly predictable since Ireland is at the meetings) your currency can collapse overnight. It's clear from the attempts at intervention by the NZ government that their currency does things they don't want it to - other than that, comparing their economic situation with ours is almost completely pointless.
    Again as I suggested, I don't think many from Ireland would be willing to go to New Zealand and tell them they are making a mistake with having a floating currency and that they should look to Ireland. We have trained ourselves to pretend that interest rates have little or no influence over an economy despite the evidence to the contrary but I don't think they would have that view there.


  • #113
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    Flamed Diving wrote: »
    That's nice, would those be the same experts who said that Argentina's Peso was overvalued throughout the nineties? "All" the experts got it right! Or do you simply pay attention to the experts that verify your already chosen conclusions? But if that was the case then "all" wouldn't be "all" now, would it? The point about Argentina was that they simply had no choice in devaluing because they let the currency float. A floating currency is something only larger nations can afford to do, it is not an option for Small Open Economies. Also, Argentina only enjoyed a return to growth because of major debt restructuring. You are simply assuming that Ireland will be gifted the same package. In fact, you are assuming a lot of things. Ireland and Argentina are not comparable cases..
    I'm just quoting from the paper that I linked to in my original post when I said the experts got it wrong. I'm comfortable I'm not bias with the views I consider. Can you explain why you are so adamant Ireland and Argentina are not comparable (in the context of the issues they face) especially when the writer of the paper sees fit to compare the Latvian situation to the Argentinian situation? I'm aware there are distinct differences between the countries but surely you can admit there is at least one valid reason to compare each countries situation! (cue open your mind).
    Flamed Diving wrote: »
    Having an open mind is all well and good, but knowing that square pegs don't fit round holes is important.
    Insightful


  • #114
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    kaymin wrote: »
    I'm just quoting from the paper that I linked to in my original post when I said the experts got it wrong. I'm comfortable I'm not bias with the views I consider. Can you explain why you are so adamant Ireland and Argentina are not comparable (in the context of the issues they face) especially when the writer of the paper sees fit to compare the Latvian situation to the Argentinian situation? I'm aware there are distinct differences between the countries but surely you can admit there is at least one valid reason to compare each countries situation! (cue open your mind).
    Apparently Thailand and Ireland are comparable to the extent that you can substitute Ireland for Thailand in a paragraph by Krugman. See post #33.


  • #115
    The Corinthian
    Closed Accounts Posts: 19,777 ✭✭✭✭The Corinthian


    Nate--IRL-- wrote: »
    But were are not just talking about de-valuation. What is proposed is...

    -Creating a new currency.
    -Doing so in compete secrecy.
    -Locking down the financial system to partially prevent Capital flight.
    -Devaluing An Punt Nua with respect to the Euro
    -Defaulting on current debts (Public and Private)
    This is what is known as a soft currency. This is naturally going to cause us problems as no one (internationally) will really be interested in reserves in a currency that is propped up artificially or could be devalued at a moment's notice.

    Domestically, I'd imagine many would not be too interested in a soft currency either, and I'd expect capital flight regardless in the run-up to any changeover, not to mention hyper-inflation, unless this too is dealt with with price fixing measures - which in turn would further weaken the reputation of the Punt Nua as a soft currency.

    Truth is, you don't introduce a new currency just as you are about to default on debts, directly or through currency devaluation, as the value of a currency is essentially based upon people's confidence in the issuer.

    I just wonder how many here are arguing in favour of a so-called Punt Nua for nostalgic or nationalistic rather than economic reasons.


  • #116
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    @SkepticOne

    explain this

    1: graph devaluation of sterling oct08 to now
    r9pqno.png
    source


    2: graph of uk balance of trade in same timeframe
    qyiber.gif
    source

    3a: graph of uk exports of goods in same timeframe
    15noshg.png
    source

    3b: table of total uk trade balance
    6p5av6.png



    and since your so fond of unemployment figures in this thread (which has little to do with devaluation)

    4: uk unemployment in similar timeframe
    2r4q6o8.gif
    source


    how do you explain the above?

    or this UK exports in biggest fall since 1947

    what exactly did devaluation in UK accomplish??





    lets remember that UK had its own currency to begin so their devaluation didnt involve slashing and burning whole economy, like it would involve here

    if anything it seems devaluation in UK has had a negative impact it seems....

    and there has been no improvement in their exports

    what exactly was the point of making everyone in UK poorer? what did it accomplish?? the whole exercise is a failure, especially now that euro is loosing its value wiping out any "theoretical" gains the UK had

    for second time in this thread ive yet to see a good argument backed by figures or models which will show that devaluation/default by leaving the euro would be "good for ireland", just alot of opinion & theory and little in the way of facts or comparisons to support the arguments for devaluation/default

    /


  • #117
    View
    Registered Users Posts: 3,872 ✭✭✭View


    kaymin wrote: »
    I mentioned the following in an earlier post
    We did manage to cope well enough for the 20 years before the euro was introduced. Realignments in the EMS were fairly frequent, averaging about one a year in the 1980s, and the Irish pound depreciated steadily against the Deutsche Mark. These depreciations reflected wider weaknesses in the Irish economy in those years and prevented a loss of competitiveness from compounding those weaknesses.

    Most of those realignments occured when the Irish Pound:UK Pound rate went outside a narrow band. Basically, all the City Traders looked at the rate and went "Ireland can't survive being that far out of line with the UK", bet billions against us and drove the rate down, thus forcing a realignment. In other words, we had a self-fulfilling prophecy on the part of the City Traders.

    Over the years though, the UK's share of our exports vis-a-vis those of the rest of the EU has steadily declined, so it doesn't make sense to go back to a situation where we tie ourselves back to the UK.

    And that, of course, is to ignore that we would need to leave the EU to "unadopt" the Euro which would mean we'd face tariffs on all our exports to the EU (including the UK).


  • #118
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    kaymin wrote: »
    Great, I look forward to some 'independent' thought on the matter.

    And yet you trust the journalist who wrote that article. Hmm...


  • #119
    Scofflaw
    Registered Users, Registered Users 2 Posts: 23,283 ✭✭✭✭Scofflaw


    SkepticOne wrote: »
    With respect, I don't think New Zealand is persuing some weird experiment with a floating currency. You are aware that floating currencies are fairly common in the world? You seem to be making out that I have chosen an extreme example here.Again as I suggested, I don't think many from Ireland would be willing to go to New Zealand and tell them they are making a mistake with having a floating currency and that they should look to Ireland. We have trained ourselves to pretend that interest rates have little or no influence over an economy despite the evidence to the contrary but I don't think they would have that view there.

    I'm sure they wouldn't, and I'm sure nobody here does either. None of what you're saying is really relevant to the point I've made - small countries with floating currencies don't have a great deal of government control over their currency value. That's pretty much a tautology, since the definition of a floating currency is that its value is determined primarily by the market.

    Since the issue is the lack of control over our currency that being in the euro implies, I just find it a bit bizarre that you think the solution is to have a different lack of control, that's all.

    Nobody needs to go and ask the New Zealanders anything about it, and nobody has suggested that except you - the New Zealanders aren't weighing up the costs and benefits of a floating currency versus monetary union, and don't have sufficiently close economic integration with any other country to make such a thing meaningful - with the possible exception of Australia, with whom they are extremely unlikely to enter such a union, for good and chauvinistic reasons.

    cordially,
    Scofflaw


  • #120
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    I don't know how many times I have to say the term "Small Open Economy" before it begins to sink into peoples minds. I am aware that certain minds are simply impenetrable, but I do hold onto the belief that some may take it in:
    A small open economy, abbreviated to SOE, is an economy that participates in international trade, but is small enough compared to its trading partners that its policies do not alter world prices, interest rates, or incomes. Thus, the countries with small open economies are price takers. This is unlike a large open economy, the actions of which do affect world prices and income.

    For example; if the U.S. economy is in recession then the world economy is likely to suffer. On the other hand, a recession in a small open economy like Norway will likely not impact the world economy to a great extent.

    The assumption of a small open economy is used in the study of macroeconomics to model a price-taking economy, allowing exogenous assumptions of the conditions in the rest of the world.

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


    The bit I highlighted is the most important and has a subtle corollary: since the SOE cannot affect international interest rates, any deviation from such rates are likely to lead to capital flight and/or currency fluctuations. Whether we choose to float or fix, the end result is the same, because our currency will be dominated by our biggest neighbours and trading partners. Fixed or float, we are not free, tough luck.

    I am surprised that the authors of the above paper would compare Argentina's case to Latvia's. If I attempted such a move with a supervisor I would have the notion flung out on the above grounds. That said, it isn't peer-reviewed and published in an academic journal. What do you expect?

    Cue ignorant, childish comments about academia.


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  • #121
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    Scofflaw wrote: »
    I'm sure they wouldn't, and I'm sure nobody here does either. None of what you're saying is really relevant to the point I've made - small countries with floating currencies don't have a great deal of government control over their currency value. That's pretty much a tautology, since the definition of a floating currency is that its value is determined primarily by the market.

    Since the issue is the lack of control over our currency that being in the euro implies, I just find it a bit bizarre that you think the solution is to have a different lack of control, that's all.

    Nobody needs to go and ask the New Zealanders anything about it, and nobody has suggested that except you - the New Zealanders aren't weighing up the costs and benefits of a floating currency versus monetary union, and don't have sufficiently close economic integration with any other country to make such a thing meaningful - with the possible exception of Australia, with whom they are extremely unlikely to enter such a union, for good and chauvinistic reasons.
    You seem to be tying yourself up in knots here. The point that is being refuted is whether or not a floating currency (you seem to understand what that is) is an option for a small open economy. The answer is: yes it is.

    You seem to be arguing against positions that have not been made.


  • #122
    Flamed Diving
    Closed Accounts Posts: 6,609 ✭✭✭Flamed Diving


    It's sad that you continue with your childish little game. I am honestly sitting here and feeling embarrassed for you while reading your posts, like watching David Brent in The Office. Scofflaw has hit the nail right on the head with what he has been saying, which any reasonable person would be able to. But you seem to be clinging to this one thing with all your might, carrying on, page after page. I seem to have rattled you badly, since you are this obsessed with my posts. Your behaviour has all the hallmarks of a person who was whipped and is trying anything they can to score a tiny point. Recall the "your studying a masters" remark.

    I honestly feel sorry for you.

    Really.


    Anyway, I'm out of this mess. I would be the bigger fool to carry on this dance.


  • #123
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    Flamed Diving wrote: »
    And yet you trust the journalist who wrote that article. Hmm...

    Not necessarily - I don't know anything about that journalist. But they've come to similar conclusions that I have. I'll consider all views and assess them for myself. It's good to keep an open mind.


  • #124
    imitation
    Registered Users, Registered Users 2 Posts: 1,815 ✭✭✭imitation


    The title of this thread is the most jarring part, its not the only solution, recessions aren't permanent, its just a cycle, talk to anybody over 40 and they`ll tell you the same. Ireland will pull out of this without leaving the euro, leaving would give little to no benefit for alot of long term damage. The euro or by the extension the EU isnt a revolving door system, and if its felt to be heading that way examples would be set.


  • #125
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    imitation wrote: »
    The title of this thread is the most jarring part, its not the only solution, recessions aren't permanent, its just a cycle, talk to anybody over 40 and they`ll tell you the same. Ireland will pull out of this without leaving the euro, leaving would give little to no benefit for alot of long term damage. The euro or by the extension the EU isnt a revolving door system, and if its felt to be heading that way examples would be set.

    No I agree it's not necessarily the only solution - I used that heading to get some interest.

    I doubt the generation that bought over inflated properties with mortgages they'll be repaying for the rest of their lives would agree its just a short term issue. Small countries such as Ireland have paid and will continue to pay a heavy price for an unsuitable monetary policy. Personally I don't think we'll come out of this recession without taking drastic action. I think there are plenty of benefits to leaving the euro per my original post and very little benefit to staying in it. The whole euro project could fall apart in the coming months in any case


  • #126
    imitation
    Registered Users, Registered Users 2 Posts: 1,815 ✭✭✭imitation


    kaymin wrote: »
    I doubt the generation that bought over inflated properties with mortgages they'll be repaying for the rest of their lives would agree its just a short term issue.

    Unfortunately thats a choice they made, the only silver lining is that while they maybe in negative equity now in ten years time they wont be.
    Small countries such as Ireland have paid and will continue to pay a heavy price for an unsuitable monetary policy. Personally I don't think we'll come out of this recession without taking drastic action.

    We are paying the price for our own mistakes though, if we had regulated ourselves more carefully we would have held on to alot more of the benefit of the low interest rates that foreign investment and the euro brought, and will probably bring again.
    I think there are plenty of benefits to leaving the euro per my original post and very little benefit to staying in it.

    I think your opinion is too narrow and you haven't considered all the consequences. Do we really want a return to the days of 14% interest ? The current recession will end, and if we leave we`ll be left out cold when there is an upturn in the eurozone. The eurozone has the largest GDP in the world, by leaving the euro we would effectively be cutting ourselves out of this market. I dont think being able to deflate our own currency could ever possibly counter this. Then again I think one of your major points is that we can always renage on our debt by trying to cover it up as a currency change over. It just doesnt work like that, look at Iceland, they are getting hammered by both the EU and IMF for the 3 billion there banks owe.
    The whole euro project could fall apart in the coming months in any case

    I think this is the crux of your debate, that the euro isnt a real currency and its just a big experiment. I`m much reminded of the first few years, when my parents described it as monopoly money and its exchange rate was quiet weak. I think that stage is long gone, psychologically most people are used to the currency now. Its replacing the dollar as a hard currency in many developing countries. I think it will be an interesting few months / years for the euro, but I dont see it failing.


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  • #127
    View
    Registered Users Posts: 3,872 ✭✭✭View


    kaymin wrote: »
    Small countries such as Ireland have paid and will continue to pay a heavy price for an unsuitable monetary policy.

    Yeah, that's it. It's all the ECB's fault - next you'll be telling us about how smart and clever the fiscal policies that FF and the PDs pursued over the last decade or so were. Sure, the property market would still be going up if it wasn't for the ECB failing to see the virtues of the property ladder... :rolleyes:
    kaymin wrote: »
    I think there are plenty of benefits to leaving the euro per my original post and very little benefit to staying in it.

    Yeah, the "benefits" of leaving the EU would no doubt keep you happy - there wouldn't be many in our exporting industries who'd appreciate tariffs on the 62% of our exports that are currently tariff free but let's sacrifice their jobs to keep you happy...


  • #128
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    ei.sdraob wrote: »
    @SkepticOne

    explain this

    how do you explain the above?

    or this UK exports in biggest fall since 1947

    what exactly did devaluation in UK accomplish??
    With figures for one country it doesn't prove much. The same figures could equally be used to argue that the the devaluation wasn't sufficient for the UK's purposes. They also don't show what would have happened if the UK was unable to devalue.


  • #129
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    View wrote: »
    Yeah, the "benefits" of leaving the EU would no doubt keep you happy - there wouldn't be many in our exporting industries who'd appreciate tariffs on the 62% of our exports that are currently tariff free but let's sacrifice their jobs to keep you happy...
    I don't think you've shown that leaving the Euro would necessarily mean leaving the EU or for that matter the EEA.


  • #130
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    View wrote: »
    Yeah, that's it. It's all the ECB's fault - next you'll be telling us about how smart and clever the fiscal policies that FF and the PDs pursued over the last decade or so were. Sure, the property market would still be going up if it wasn't for the ECB failing to see the virtues of the property ladder... :rolleyes:

    Surely you agree that interest rates in Ireland were too low during our boom years - please comment on what I've said and not on what you suppose I'm thinking.


  • #131
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    imitation wrote: »
    I think your opinion is too narrow and you haven't considered all the consequences. Do we really want a return to the days of 14% interest ? The current recession will end, and if we leave we`ll be left out cold when there is an upturn in the eurozone. The eurozone has the largest GDP in the world, by leaving the euro we would effectively be cutting ourselves out of this market. I dont think being able to deflate our own currency could ever possibly counter this. Then again I think one of your major points is that we can always renage on our debt by trying to cover it up as a currency change over. It just doesnt work like that, look at Iceland, they are getting hammered by both the EU and IMF for the 3 billion there banks owe.

    I think this is the crux of your debate, that the euro isnt a real currency and its just a big experiment. I`m much reminded of the first few years, when my parents described it as monopoly money and its exchange rate was quiet weak. I think that stage is long gone, psychologically most people are used to the currency now. Its replacing the dollar as a hard currency in many developing countries. I think it will be an interesting few months / years for the euro, but I dont see it failing.

    Euro is as real as any other currency first of all.

    I'm not suggesting we attempt to cover up a default by a currency change (seems an absurd comment to me) - I just think a default would have to go hand in hand with a currency change.

    Default worked for Argentina - why can't it work for Ireland?

    Are we really re cutting ourselves off from EU markets by leaving the euro - isn't there a possibility of negotiating a status similar to that of the UK?


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  • #132
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    SkepticOne wrote: »
    With figures for one country it doesn't prove much. The same figures could equally be used to argue that the the devaluation wasn't sufficient for the UK's purposes. They also don't show what would have happened if the UK was unable to devalue.

    thats figures for one country more than you provided :rolleyes:

    im still waiting on any evidence to back your proposition
    kaymin wrote: »
    Default worked for Argentina - why can't it work for Ireland?

    you should really do readup on history of what happened in Argentina when they defaulted

    anyways Argentina had its own currency it was just pegged to the dollar

    we dont have own currency


  • #133
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    ei.sdraob wrote: »
    you should really do readup on history of what happened in Argentina when they defaulted

    anyways Argentina had its own currency it was just pegged to the dollar

    we dont have own currency

    What is it about the Argentinian situation that you'd like to point out?

    At the end of 2001, the Argentinian government defaulted on its debt and by January 2002 it abandoned the peg.

    We don't have our own currency - true but isn't that what we're talking about here - leaving the euro.

    After the Argentinian default and currency collapse in January 2002, the Argentine economy contracted for only one quarter. Mostly the devaluation enabled the government to pursue the macroeconomic policies that were needed for recovery.


  • #134
    cson
    Registered Users, Registered Users 2 Posts: 14,478 ✭✭✭✭cson


    So you're proposing the Argentinian default as a model for Ireland to follow?


  • #135
    View
    Registered Users Posts: 3,872 ✭✭✭View


    SkepticOne wrote: »
    I don't think you've shown that leaving the Euro would necessarily mean leaving the EU or for that matter the EEA.

    I've explained this to you before. Try reading the EU Treaties sometime.

    The EU Treaties say the EU member states will adopt the Euro as their common currency (Only the UK has an opt-out in a protocol and their official policy remains that they will adopt it at some time in the future).

    There is no mechanism for any EU member state that has adopted the Euro to unadopt it. N - O - N - E.

    To do so, would be an absolute breech of the Treaties which would leave the member state in question liable to direct fines by the ECJ for failing to honour the Treaties. In such a case the ECJ is not going to impose light fines. And, it has in fact, handed down fines in the past which run to millions of Euro per day.

    In addition, it would also almost definitely result in the other member states regarding, and treating, the state in breech of the Treaty as - in effect - a non-member of the EU and treating them as such (i.e. tariffs etc). That would also be a breech of the EU Treaties by the other member states but what do you think the response of the ECJ would be when the member state - which originally breeched the EU Treaties - complains about the other member states being in breech of the EU Treaties?

    As such it would be simpler for that member state to negotiate its withdrawal from the EU right from the start. Let's face it, there would be no basis for that member state continuing as a member state of the EU if it refuses to accept the Treaties that it itself signed up to.

    The aim of the EU Treaties is "an ever closer union amongst the people of Europe", not an a la carte menu.


    As for the EEA, it is certainly true that all EU member states and the EU are signatories of this agreement. So also are Norway, Iceland and Lichtenstein. However, if you read the EEA Treaty, it is written on the basis that the EU negotiates and deals with each of those 3 states on what is essentially a bilateral basis (i.e. EU-Norway etc.). The EU, in other words, negotiates and acts on behalf of its member states, when it deals with the 3 non-EU members.

    So, if an EU member state suddenly decides that it wants out of the EU, and the EU no longer acts for it, then the EEA processes would in effect no longer apply to it as there is no basis in the EEA for EU-former EU Member state negotiations within the EEA Treaty.

    And, oddly enough, it is difficult to see why the remaining EU member states would go out of their way to help a departing Euro-sceptic state.


  • #136
    View
    Registered Users Posts: 3,872 ✭✭✭View


    kaymin wrote: »
    Surely you agree that interest rates in Ireland were too low during our boom years - please comment on what I've said and not on what you suppose I'm thinking.

    I have previously drawn the comparasion with economic bungee jumping which should leave you in little doubt as to my opinion of Ireland's (economic) actions over the last decade.

    I believe that the fiscal policies we followed during our so-called "boom years" (which in reality were bubble years) were totally and absolutely inappropriate for Ireland. They would have been stupid had we had interest rates that were 3-4% higher and were absolute lunacy when we didn't and knew in advance that we would have interest rates that were likely to amongst the lowest in the world after we had adopted the Euro.

    Also, since the policy you are advocating would involve Ireland either breeching the EU Treaties and/or leaving the EU, I think it pretty much tells us what you are thinking. There is no need to engage in a lot of supposition on the matter.


  • #137
    cson
    Registered Users, Registered Users 2 Posts: 14,478 ✭✭✭✭cson


    View wrote: »
    In addition, it would also almost definitely result in the other member states regarding, and treating, the state in breech of the Treaty as - in effect - a non-member of the EU and treating them as such (i.e. tariffs etc). That would also be a breech of the EU Treaties by the other member states but what do you think the response of the ECJ would be when the member state - which originally breeched the EU Treaties - complains about the other member states being in breech of the EU Treaties?

    I think the highlighted point is worth emphasising to those who are in favour of retreating to the punt. The likelihood is that our main trading partners would impose high tariff's thus negating any sort of competitiveness we could achieve by devaluing the currency. And that's if it was even a viable option - I think view has summised the legal perspective quite well.

    In reality a decision of that magnitude would according to our constitution have to be put to referendum of the Irish people. Can you really see the Irish people voting to effectively wipe out any savings they had? Especially after public sector unions fought so bitterly to avoid cuts to their pay. Pay which incidentally pays for quite a lot of foreign holidays I'd imagine which leads to my next point; You'd literally end our ability to travel in one fell swoop.

    I'm sure this has been mentioned but devaluing would also make our imports hugely exspensive - if you think the motor industry is bad now.... It'd pretty much force us back to the situation we were in the 1950's where the UK was our only tangible trading partner and we pretty much had to rely on domestic produce in every area. Needless to say, it's not a period that was marked down as the most prosperous in the annals of the Irish economy. But, sure we'd have no debt obligations! :rolleyes:

    The more I think about it, the more I think that you really have pushed the benchmark of ridiculousness to new boundaries.


  • #138
    K-9
    Registered Users, Registered Users 2 Posts: 43,311 ✭✭✭✭K-9


    kaymin wrote: »
    Surely you agree that interest rates in Ireland were too low during our boom years - please comment on what I've said and not on what you suppose I'm thinking.

    It's cause and effect again. You are automatically assuming low interest rates was the cause of the boom or rather bubble.

    Other countries in the Euro did not have property bubbles. Iceland outside the Euro had a bubble of a different kind and Sweden had a property bubble outside the Euro in the early 90's.

    Low interest rates did not result in property bubbles in other countries, Government policy did, both inside the Euro and out.

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • #139
    hiorta
    Closed Accounts Posts: 457 ✭✭hiorta


    Whether Ireland 'retreats' to an earlier currency or continues to work through the present difficulties is not going to sort or repair the problem.

    The lessons of mad self-indulgence must be learned and heeded - by the succeeding generations as well - or all the suffering will have been in vain. (to paraphrase the Furies).


  • #140
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    K-9 wrote: »
    It's cause and effect again. You are automatically assuming low interest rates was the cause of the boom or rather bubble.

    Other countries in the Euro did not have property bubbles. Iceland outside the Euro had a bubble of a different kind and Sweden had a property bubble outside the Euro in the early 90's.

    Low interest rates did not result in property bubbles in other countries, Government policy did, both inside the Euro and out.

    Oh come on. Interest rates would have been raised if there was signs of a property bubble in Germany or France. The fact that there wasn't isn't proof that low interest rates didn't cause or at a minimum contribute to the property bubble in Ireland.


  • #141
    cson
    Registered Users, Registered Users 2 Posts: 14,478 ✭✭✭✭cson


    kaymin wrote: »
    Oh come on. Interest rates would have been raised if there was signs of a property bubble in Germany or France. The fact that there wasn't isn't proof that low interest rates didn't cause or at a minimum contribute to the property bubble in Ireland.

    Christ I think you've broken the collective hole of the forum with laughter there to quote Archimedes. :eek:


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  • #142
    imitation
    Registered Users, Registered Users 2 Posts: 1,815 ✭✭✭imitation


    kaymin wrote: »
    What is it about the Argentinian situation that you'd like to point out?

    At the end of 2001, the Argentinian government defaulted on its debt and by January 2002 it abandoned the peg.

    We don't have our own currency - true but isn't that what we're talking about here - leaving the euro.

    After the Argentinian default and currency collapse in January 2002, the Argentine economy contracted for only one quarter. Mostly the devaluation enabled the government to pursue the macroeconomic policies that were needed for recovery.

    Honestly, if you think Ireland and Argentina are in the same boat, and that we should mimic there desperate actions, you`d want to take a deep breath and look outside the window.
    Argentine economic crisis (1999–2002)

    Several thousand newly homeless and jobless Argentines found work as cartoneros, or cardboard collectors. The 2003 estimation of 30,000 to 40,000 people scavenged the streets for cardboard to eke out a living by selling it to recycling plants. This method accounts for only one of many ways of coping in a country that at the time suffered from an unemployment rate soaring at nearly 25%

    http://en.wikipedia.org/wiki/Argentine_economic_crisis_%281999%E2%80%932002%29


  • #143
    K-9
    Registered Users, Registered Users 2 Posts: 43,311 ✭✭✭✭K-9


    kaymin wrote: »
    Oh come on. Interest rates would have been raised if there was signs of a property bubble in Germany or France. The fact that there wasn't isn't proof that low interest rates didn't cause or at a minimum contribute to the property bubble in Ireland.

    Interest rates started rising in the Summer of 06 and what did the Govt. do? Double Mortgage Interest Relief.

    Look, nobody is saying they didn't play a factor in the property bubble. The fact there was a property bubble was our own fault.

    People paying 350k for one bedroom boxes? check.
    People saying property will always go up? check.
    Rent is dead money? check.
    Investors buying despite income returns being poor? check.
    Nobody factoring in the inevitable interest rate rises? check.
    Property tax breaks for developers and investors? check.
    Tax subsidies for home buyers? check.
    Irish property obsession? check.
    Low interest rates? check.
    Government and bankers believing their own hype? check.
    Exports, R&D and innovation ignored? check.
    Taoiseach telling nay sayers to commit suicide? check.

    Would all the above have happened anyway considering the Govt. we had, outside the Euro? Check.

    Mad Men's Don Draper : What you call love was invented by guys like me, to sell nylons.



  • #144
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    View wrote: »
    In addition, it would also almost definitely result in the other member states regarding, and treating, the state in breech of the Treaty as - in effect - a non-member of the EU and treating them as such (i.e. tariffs etc). That would also be a breech of the EU Treaties by the other member states but what do you think the response of the ECJ would be when the member state - which originally breeched the EU Treaties - complains about the other member states being in breech of the EU Treaties? As such it would be simpler for that member state to negotiate its withdrawal from the EU right from the start.
    So:

    1. Ireland defaults and leaves the Euro.
    2. Other states breach EU treaties and impose tariffs on Ireland even though technically Ireland is still in the Euro and at this stage entitled to free trade within the EU.
    3. The ECJ impose heavy fines on ireland (and presumably the other countries that have breached their treatie).
    4. Ireland negotiates leaving the EU.

    Please correct me if I have misunderstood what you are saying might happen.
    Let's face it, there would be no basis for that member state continuing as a member state of the EU if it refuses to accept the Treaties that it itself signed up to.
    I think the problem with what you are saying is that by the time step 3 occurs the EU has effectively ceased to exist since the member states (not just Ireland) have torn up the core treaties that define the EU. What is the EU without barrier free trade and turned it into something that the member states outside the authority of the EU can deny another member state because it has done something they are not happy with. For that reason and assuming these other member states want to continue with the EU I think the scenario you are outlining is unlikely.


  • #145
    View
    Registered Users Posts: 3,872 ✭✭✭View


    SkepticOne wrote: »
    So:

    1. Ireland defaults and leaves the Euro.
    2. Other states breach EU treaties and impose tariffs on Ireland even though technically Ireland is still in the Euro and at this stage entitled to free trade within the EU.
    3. The ECJ impose heavy fines on ireland (and presumably the other countries that have breached their treatie).
    4. Ireland negotiates leaving the EU.

    Please correct me if I have misunderstood what you are saying might happen.I think the problem with what you are saying is that by the time step 3 occurs the EU has effectively ceased to exist since the member states (not just Ireland) have torn up the core treaties that define the EU. What is the EU without barrier free trade and turned it into something that the member states outside the authority of the EU can deny another member state because it has done something they are not happy with. For that reason and assuming these other member states want to continue with the EU I think the scenario you are outlining is unlikely.

    Well we are talking about unlikely scenarios here because I don't believe that Ireland will breech the EU Treaties if only on the good grounds that if you breech one international treaty no one will take any of the other international treaties they have with you as being anything other than dodgy (at best) and more probably down right worthless.

    The EU Treaties are not a la carte documents. They do not just randomly appear. The EU is NOT just a barrier free trading area. It never was.

    The starting point for the EU (and the Treaties) is the desire for "an ever closer union". The objectives set the areas for this to be acheived in and all other parts of the treaties are essentially there to define how to do this - to fill in the rest of the picture if you will (Hence why the Treaties are so bl&*dy long). As such, we are talking about a deliberate long-term political process.

    If a member state deliberately breeches the Treaty then that action would be rightly regarded as a breech of the process ofcreating "an ever closer union". There is no way it could be viewed otherwise.

    What happens then?

    Well, first we'd have this politely (but firmly) pointed out to the relevant member state and they would be "invited" to consider their position.

    After that, if that member state adopt the attitude of "We are going to deliberately continue to breech the Treaty" then this forces the ECJ to act.

    It would probably force the other member states to act since if they just roll over, they would agree to allow the member state in breech of the Treaties to effectively tear up the "core treaties of the EU". The entire basis for the political process that is the EU would in that case cease to exist.

    If at that point, the member states decide to act ultra vires, so be it. By doing so, they might salvage some form of EU, albeit one shaped by such a decision. By failing to do so, they condemn it to death by a thousand cuts - after all, if it is okay for Ireland to breech the Treaties today by abandoning the Euro, then why would it not be okay for France to breech them tomorrow by imposing import tariffs on protectionist grounds?

    You can't condemn the second breech of the Treaties if you okay the first.


  • #146
    SkepticOne
    Closed Accounts Posts: 6,718 ✭✭✭SkepticOne


    View wrote: »
    If at that point, the member states decide to act ultra vires, so be it. By doing so, they might salvage some form of EU, albeit one shaped by such a decision. By failing to do so, they condemn it to death by a thousand cuts - after all, if it is okay for Ireland to breech the Treaties today by abandoning the Euro, then why would it not be okay for France to breech them tomorrow by imposing import tariffs on protectionist grounds?

    You can't condemn the second breech of the Treaties if you okay the first.
    Please note that I'm not condemning anything. I think it is unlikely that member states would tear up the free trade aspect of the EU in order to punish Ireland. They would be entitled to do that but I don't think it would be in their interests.

    A more realistic scenario would be that Ireland would first seek an opt-out from the Eurozone. You might say that there is no provision for this, but there doesn't need to be a provision or mechanism. All that is needed is that the other member states agree to allow Ireland to remove itself from the Eurozone. I'm aware it hasn't been done before.

    During this time Ireland the official stance of Ireland would not be opposed to the euro or closer union or anything like that. The official line would be that leaving the euro is a deeply regrettable but necessary move.

    If it did come to Ireland seeking an opt out of the eurozone for economic reasons then I don't think it is safe to assume that countries within the Eurozone or the EU in general would be automatically against it. The likes of Germany in particular might welcome the removal of some of the weaker countries that may be dragging the currency down.


  • #147
    ei.sdraob
    Closed Accounts Posts: 9,376 ✭✭✭ei.sdraob


    oh the fun continues....


    if the likes of UK (with their devaluations) are being savaged, god help if Ireland was "floating" along on its own now.....

    but of course lets continue to ignore facts and reality in this thread


    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100003763/britain-and-the-pigs/
    As of today, the British government must pay a higher interest rate to borrow money for ten years than either the Italian or the Spanish governments, despite the extraordinary ructions going on within the eurozone.

    The yields on 10-year British Gilts have risen to 4.06pc, compared to 4.05pc and 4.01pc for Spain. So if international bond markets are turning wary of Club Med sovereign bonds, they seem even more distrustful of British bonds.

    sterling1.jpg


  • #148
    Nate--IRL--
    Registered Users, Registered Users 2 Posts: 2,229 ✭✭✭Nate--IRL--


    SkepticOne wrote: »
    A more realistic scenario would be that Ireland would first seek an opt-out from the Eurozone..................

    In order to leave the Euro the change must be immediate and more importantly, secret. How does your proposal tie in with these requirements?

    Nate


  • #149
    fontanalis
    Closed Accounts Posts: 3,619 ✭✭✭fontanalis


    K-9 wrote: »
    Interest rates started rising in the Summer of 06 and what did the Govt. do? Double Mortgage Interest Relief.

    Look, nobody is saying they didn't play a factor in the property bubble. The fact there was a property bubble was our own fault.

    People paying 350k for one bedroom boxes? check.
    People saying property will always go up? check.
    Rent is dead money? check.
    Investors buying despite income returns being poor? check.
    Nobody factoring in the inevitable interest rate rises? check.
    Property tax breaks for developers and investors? check.
    Tax subsidies for home buyers? check.
    Irish property obsession? check.
    Low interest rates? check.
    Government and bankers believing their own hype? check.
    Exports, R&D and innovation ignored? check.
    Taoiseach telling nay sayers to commit suicide? check.

    Would all the above have happened anyway considering the Govt. we had, outside the Euro? Check.

    Well said, the country was like a teenager who found daddys credit card and went to Las Vegas for a few years. Ireland should be a textbook fo how not to do things for any developing country.
    Does it not also show arrogance to think that Ireland can compete with the punt?
    For god sake there is no internal economy!


  • #150
    ardmacha
    Registered Users, Registered Users 2 Posts: 7,476 ✭✭✭ardmacha


    Ireland has a major debt financing problem, the balance of trade is not the problem and we've improved in competitiveness by about 10% in one year against our nearest neighbour. We can improve trade, we are a very much more open economy than Greece. If we leave the Euro then all of the government debt in Euros and all of the interbank debt in Euros becomes more expensive to repay. I don't think some of the comments here about being thrown out of the EU are applicable, but if even they are not leaving the Euro would be enormously destabilising and would further aggravate the public finance problem, so that the government would have to default.


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  • #151
    kaymin
    Registered Users Posts: 1,551 ✭✭✭kaymin


    K-9 wrote: »
    Interest rates started rising in the Summer of 06 and what did the Govt. do? Double Mortgage Interest Relief.

    Look, nobody is saying they didn't play a factor in the property bubble. The fact there was a property bubble was our own fault.

    People paying 350k for one bedroom boxes? check.
    People saying property will always go up? check.
    Rent is dead money? check.
    Investors buying despite income returns being poor? check.
    Nobody factoring in the inevitable interest rate rises? check.
    Property tax breaks for developers and investors? check.
    Tax subsidies for home buyers? check.
    Irish property obsession? check.
    Low interest rates? check.
    Government and bankers believing their own hype? check.
    Exports, R&D and innovation ignored? check.
    Taoiseach telling nay sayers to commit suicide? check.

    Would all the above have happened anyway considering the Govt. we had, outside the Euro? Check.
    K-9 wrote: »
    Low interest rates did not result in property bubbles in other countries, Government policy did, both inside the Euro and out.

    Must have misunderstood you then....

    I don't think the property bubble would have arisen if we were outside the euro because I believe the central bank would have raised interest rates which should put a halt to property price rises.


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