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Admit Euro failure....Europewide.

  • 22-11-2010 3:38pm
    #1
    Registered Users, Registered Users 2 Posts: 9,770 ✭✭✭


    First off I think Ireland leaving the Euro would be a disaster.

    I don't think punt nua would do us any favours if the Euro was still around.

    So essentially countries can't leave the euro on an individual basis as their new currency would be worthless.

    Perhaps this is a discussion for economists who know their stuff but to me the eurozone as a concept is ludicrous.

    How can economies like Portugal, Ireland and Slovenia use the same currency and interest base rates as France/Germany without major problems occurring when they are still sovereign nations.

    The euro would only be sensible if the eurozone was one sovereign nation, virtually nobody wants that so surely the logical approach is to get rid of the euro.

    Am I wrong or missing something major?
    Tagged:


Comments

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


    My problem with the euro is slightly more that in its present form it allows for what is perhaps an excessively free movement of capital, and that it's therefore a bad idea in itself. However, that's a thought that's still being being born.

    I don't think the question of the euro participants being sovereign countries is relevant in the abstract. There seems to be some conflict, though, between the loss of policy freedom looked at one way, and the excess of policy freedom looked at another. There's obviously a tension there, and currently it's being resolved in favour of increased policy coordination. Whether that's the right way to go - leaving aside, again, the political issue of sovereignty - is something that bears thinking about.

    cordially,
    Scofflaw


  • Registered Users, Registered Users 2 Posts: 9,770 ✭✭✭Bottle_of_Smoke


    I probably should have elaborated a bit more.

    The reason I'm linking sovereignty and the euro is the interest base rate control.

    The most relevant scenario was ourselves during the housing boom. Low interest rates decided by the ECB, cheap credit for all in Ireland.

    What will happen if the big countries decide rates need to go up but smaller nations are still in recession? People can't afford their mortgages and the their recessions get worse.

    If the Eurozone was a sovereign nation like the UK or the US they can subsidize the relevent states if interest rates need to be changed for the overall good, that can't be done for individual sovereign states in the Eurozone in the same manner - that's where I see the problem. Are there any other shared currency zones between independent nations?

    I'll say it again I probably don't know enough to be talking about this, so be as scathing or point out as many oversights in my post as you wish, I won't be offended.


  • Registered Users, Registered Users 2 Posts: 2,632 ✭✭✭ART6


    I'm with the OP on whether or not the Euro was a good idea -- personally I thought it was a very bad idea from the day that it was first proposed, for the reasons stated by the OP. I couldn't see how it could work without Europe becoming a federal state like the USA and Russia. If nothing else it took away from sovereign governments the most important financial control they had and effectively tied them to the needs of Germany and France.

    However, we now have a common currency whether we like it or not, and if it collapses then the world will, I believe, be plunged into financial turmoil. The Euro is, after all, a major international currency and Ireland particularly is stuck with it. Unfortunately Ireland could be the trigger that starts the collapse since it presents an opportunity in my view for financial speculators to attack the Euro. If they succeed by using sovereign bond interest rates then the next obvious targets would be Portugal and then Spain.

    Ireland can be bailed out by the IMF and the EU. So can Greece and Portugal, but Spain? Or even Italy? I would say no. Those economies are simply too big -- there isn't anywhere near enough bail out money available. So now we are at crunch point. We are in negotiations for a bail out that the funds can easily support, but to access those funds we must have a financial strategy that they find acceptable. They won't sign a blank cheque.

    If the Greens by their political posturing, and the independents by their bluster, succeed in defeating the forthcoming budget then the government will fall. Will the IMF continue to offer support then? If they don't then we could be forced out of the Euro and become bankrupt. The banks will fail and everyone will lose their money. Which party is in government is irrelevant I believe. What matters is the budget and it must be a tough one. Could FG or Labour come up with an alternative and acceptable budget within a time scale that satisfies the markets and the IMF? I sincerely doubt it.

    So. Budget vote lost and FF out of office. Celebration in the streets until the IMF pulls the plug. Then the speculators turn to Portugal. But why should they want the Euro to fail? Well, it seems to me that if all of the EU member states had to return to having their own currencies, the opportunities for currency speculation would return to what they were before the Euro.

    I know there's not supposed to be a mechanism for any member to be forced out of the Euro, or to leave it voluntarily, but surely there is one obvious way. That is that the EU/IMF decide that they cannot or will not fund unaffordable deficits. Irish bond interest rates then go through the roof and the country can no longer meet the stability requirements of the Eurozone by a country mile.

    Let's then suppose that the speculator's then turn their attention to Portugal, Spain, Italy. Then they are in the same position as Ireland. At that point what is to stop Germany and France deciding they they will establish their own single currency with some of the other stronger member states, and let the rest of us have the Euro if we want it. At that point it would be worth no more than the Punt would if we went back to that. We would be still in the Euro but it would no longer be stiffened by the financial muscle of Germany and France. In that scenario we might as well start calling our money Punts again as it would make no difference to its value. Ireland would simply not have any money whatever we called it.

    I don't know if any of the above makes any sense at all -- I am not an economist. But I am very, very uneasy and I am not at all convinced that any of our politicians in any of the parties have any idea what to do other than to concentrate upon the needs of their parties rather than those of the country (Cowen leaving the IMF negotiations to canvas in Donegal for God's sake!). Whatever any of them say about it, Ireland's financial sovereignty is now controlled by the EU and the IMF, and we had better start to get used to it. How we got to that is irrelevant now, and all the blaming and back stabbing and calling the Brian's idiots will not change that one bit.


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


    It is by its nature a fragile system and will inevitably collapse. However while the process of collapse will be extremely painful (more so than most imagine) in the long run a return to national currencies will be for the best, imo.


  • Registered Users, Registered Users 2 Posts: 5,570 ✭✭✭RandomName2


    The euro would only be sensible if the eurozone was one sovereign nation, virtually nobody wants that so surely the logical approach is to get rid of the euro.

    Unfortunately you are right. Single currency with the amount of sovereignty held by European states just doesn't make logical sense (unless the states are going to coordinate everything which is the practice of a federal system even while pretending to operate under a different one.)

    But SkepticOne, look at the force with which Constitution/Lisbon was pursued by the EU states. Do you really believe that they would be prepared to sacrifice the euro? If sovereignty is the cost of maintaining the currency, so be it; it would after all be in accordance with the goal of ever closer union. The poorer EU governments are not really in a position to argue, and the stronger EU governments are not really in a position to ignore the serious financial liabilities that are PIGS, Italy, Slovenia and Latvia.


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  • Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 60,183 Mod ✭✭✭✭Wibbs


    The most relevant scenario was ourselves during the housing boom. Low interest rates decided by the ECB, cheap credit for all in Ireland.
    Exactly. we had a boom, but the Euro made it a bubble.
    What will happen if the big countries decide rates need to go up but smaller nations are still in recession? People can't afford their mortgages and the their recessions get worse.
    That already happened to a small degree. The EU central bank rate went up just before the US financial wobble and house prices here took a hit. An out of proportion hit, which would have been more proportional if we still had control of our currency in say 2001 and had raised interest rates then. A bubble would have been significantly less likely.
    If the Eurozone was a sovereign nation like the UK or the US they can subsidize the relevent states if interest rates need to be changed for the overall good, that can't be done for individual sovereign states in the Eurozone in the same manner - that's where I see the problem. Are there any other shared currency zones between independent nations?
    Even within independent nations it can be an issue depending on the size of the nation. Look at the US and look at the difference in wealth between say California and Arkansas. And that's one nation, one language, one government. Trying same over an entity like Europe with quite different local needs and its one helluva balancing act and someone or several someones will fall.

    Rejoice in the awareness of feeling stupid, for that’s how you end up learning new things. If you’re not aware you’re stupid, you probably are.



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


    Wibbs wrote: »
    Exactly. we had a boom, but the Euro made it a bubble.

    That already happened to a small degree. The EU central bank rate went up just before the US financial wobble and house prices here took a hit. An out of proportion hit, which would have been more proportional if we still had control of our currency in say 2001 and had raised interest rates then. A bubble would have been significantly less likely.

    Even within independent nations it can be an issue depending on the size of the nation. Look at the US and look at the difference in wealth between say California and Arkansas. And that's one nation, one language, one government. Trying same over an entity like Europe with quite different local needs and its one helluva balancing act and someone or several someones will fall.

    Again, I have to disagree with the idea that the euro made the boom a bubble. Bubbles are an almost inevitable consequence of unrestrained lending, not interest rates - access to money, not cost of money as such.

    Reposted from the other thread:
    Banks - and the financial markets more generally - have a fundamental role to play in a capitalist economy, which is matching people's spare money against investment opportunities. Without them, only individual capitalists with sufficient resources can really become investors on anything other than a very local basis. That means, in turn, that fruitful enterprises - that is, human endeavours that will lead to greater prosperity overall - are starved of the capital they need to take place or grow. In turn, that means economies grow slowly.

    However, the banks don't do this out of the goodness of their hearts - they simply seek the maximum return on investment for their clients' money, and that, not investment in fruitful enterprises, is their main driver. That means that it's extremely easy for bank lending to become diverted into assets rather than enterprises if assets offer greater returns - and once bank lending starts to be so diverted, asset prices will rise, and assets become yet more attractive, causing more lending to be diverted into assets. Assets are, to some extent, inherently more attractive than enterprise - there is no uncertainty over return (bar the bubble bursting), and no waiting period. You can 'flip' assets in a way that you cannot 'flip' enterprises, which means that you can realise immediate gains. Unfortunately, asset-based 'wealth' is effectively meaningless to the wider economy, because it creates nothing new - the asset does not become more useful no matter what its price. The creation of new assets at least generates some real input to the economy, but whenever the bubble bursts, those assets will lose all value.

    Booms regularly start after a period of prosperity that results from growth in the real economy. People have disposable wealth, and seek a return on it. Invariably, some of them will seek to become rentiérs rather than entrepreneurs, by putting their money towards assets rather than enterprise - cashing out of the game, if you like. It's a perfectly reasonable thing to do, but it tends to push those asset prices up. Above a certain level of prosperity, asset prices will be rising fast enough for them to become more attractive than enterprise, and the bubble effect kicks in.

    So the nature of the banking system is such that it tends to create asset bubbles. All that is required is that lending is largely unrestrained, which is why we have so many rules about bank lending. Unfortunately, there is a both a philosophical/policy bias against restraining lending, and a practical difficulty in doing so, which is the opacity of many financial transactions. However, for the sake of the wider economy, restraint is required - since the bust that follows the boom has the practical effect of cancelling out much of the boom caused by unrestrained lending, but with much more misery, and even the boom is less useful than it first appears, because it is not an enterprise boom but after a certain time almost invariably an asset boom.

    The answer, therefore, seems to me to be to require transparency in financial instruments - and it is perfectly possible to ban certain types of financial instruments - so that due diligence can be done effectively, so that lending can be restrained.

    What we had was an initial enterprise boom, which turned into an asset bubble once people were wealthy enough to have disposable money sloshing around looking for a decent return and asset prices started rising. Higher interest rates would have slowed things down a little, but not sufficiently to prevent a bubble. Nor does the pain associated with the bursting of the bubble have much to do with the euro at this point - again, it has to do with inadequate bank regulation, because the value of the assets the banks claimed they had has collapsed dramatically - but those assets should never have been valued at bubble prices.

    cordially,
    Scofflaw


  • Registered Users Posts: 432 ✭✭eire2009


    A currency trashed on the exchange would do Ireland wonders..

    Exports would rise

    Companies would move in with cheaper service`s and labour with the difference in the rates

    More tourists would visit as it wouldnt be as expensive to holiday in.

    More Irish people would holiday at home as it would be more expensive to travel abroad

    Thats if we never joined the euro as now we need to be bailed out because of it. For repaying our debts we will have to stick with it because our repayment could double if the punt was trashed..


  • Registered Users, Registered Users 2 Posts: 2,632 ✭✭✭ART6


    eire2009 wrote: »
    A currency trashed on the exchange would do Ireland wonders..

    Exports would rise

    Companies would move in with cheaper service`s and labour with the difference in the rates

    More tourists would visit as it wouldnt be as expensive to holiday in.

    More Irish people would holiday at home as it would be more expensive to travel abroad

    Thats if we never joined the euro as now we need to be bailed out because of it. For repaying our debts we will have to stick with it because our repayment could double if the punt was trashed..

    That's the point. It's like losing your house because your debts are too high and you can't pay the mortgage. You don't run up any further debts because no-one will lend to you any more, but the original debt less the (lowered) value of the house still remains and will be held against you. So you go into social housing and welfare while you try to get by on a dramatically reduced income.

    The trouble with that is that it works for the individual but it doesn't work that way for a country. There isn't social housing and welfare for Ireland Inc.

    As a mortgage defaulter you might be forced into bankruptcy, at which point you will need to agree a financial plan and surrender a major slice of your income and your underwear to the creditors. Free of debts you might be able to obtain gainful employment and actually start to make some money, but you still have to service the original debt. As a country you can simply default and not repay anything. Trouble with that is that as a member of the Eurozone you cannot do that. Outside of the Eurozone you can, but then you have to print your own money, like Zimbabwe dollars.


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


    eire2009 wrote: »
    Thats if we never joined the euro as now we need to be bailed out because of it. For repaying our debts we will have to stick with it because our repayment could double if the punt was trashed.
    This is a very widespread view but I don't think it is totally correct. If your currency devalues then, sure in terms of the devalued currency, is larger. But that is just a number. You actually service your debts by exporting more than you import and in this sense the currency that is used doesn't matter. Competitiveness is what is important.

    It is true that your debts come down with the currency. They stay the same in international terms, but they don't go up in those same terms.. What does comes down with the currency is wages, prices, costs etc, the things that have to come down anyway. These are too high in Ireland but lowering across the board through deflation is extremely damaging as it leads to bankruptcies and redundancies.

    What is much harder is to service your debts when you have an overvalued currency for the economy. We are seeing this right now.


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


    SkepticOne wrote: »
    This is a very widespread view but I don't think it is totally correct. If your currency devalues then, sure in terms of the devalued currency, is larger. But that is just a number. You actually service your debts by exporting more than you import and in this sense the currency that is used doesn't matter. Competitiveness is what is important.

    It is true that your debts come down with the currency. They stay the same in international terms, but they don't go up in those same terms.. What does comes down with the currency is wages, prices, costs etc, the things that have to come down anyway. These are too high in Ireland but lowering across the board through deflation is extremely damaging as it leads to bankruptcies and redundancies.

    What is much harder is to service your debts when you have an overvalued currency for the economy. We are seeing this right now.

    Yes, but your imports also cost more.

    Inflation also becomes a danger which would erode any competitiveness gains as pressure would grown on wages.

    We devalued in the early 90's and by 96/97, the punt was worth more than sterling. We had relatively low costs though and were able to trade out of it.

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



  • Registered Users Posts: 432 ✭✭eire2009


    K-9 wrote: »
    Yes, but your imports also cost more.

    Inflation also becomes a danger which would erode any competitiveness gains as pressure would grown on wages.

    Imports will cost more and thats the idea of producing more of what we can in Ireland and spending less on imported goods.. It the only way we will get this country going again..

    As for the IMF it is probably a good thing it will put a bit of business sense back into the public service. Although I realise that in the public service the less you do the more you get paid and they will probably target the underpaid and understaffed sectors like the health and education..

    The likes of the Guards and P.O`s are paid nearly three times what there European counter parts are.. 26k in UK and 68k in Ireland for a PO its crazy
    I know recently they have put extra taxes and levies on the salaries, but they are still way out of line and so is the dole..

    But reducing the amount of any money being paid out in salaries will create more job losses as our market isnt competitive enough for outside influence to invest in.

    The euro is basically strangling us we need a depreciated currency if Germany or France were in the same position as us the euro would depreciate enough to get the ball rolling but the so called PIGS arnt effecting the exchange rate enough.

    I recon the euro will fail eventually in 2-3 years when they realise they cant keep carrying countries who are still not out of recession


  • Registered Users, Registered Users 2 Posts: 78,537 ✭✭✭✭Victor


    The reason I'm linking sovereignty and the euro is the interest base rate control. The most relevant scenario was ourselves during the housing boom. Low interest rates decided by the ECB, cheap credit for all in Ireland.
    No, the problem was that interest rates dropped and we continued to give tax credits for property loans - in the middle of a property bubble. Hence ghost estates and zombie hotels. Reducing / removing TRS and Section 23/27-type schemes and introducing a property tax would have worked wonders, then and now.
    K-9 wrote: »
    We devalued in the early 90's and by 96/97, the punt was worth more than sterling. We had relatively low costs though and were able to trade out of it.
    Sterling and the punt split in 1978, we devalued a few times in the 1980s and last in 1993 when the punt was above sterling, we revalued (twice?) slightly in about 1998/9. It is only in the last 2-3 years that the punt (in euro amounts) has exceeded sterling.


  • Registered Users, Registered Users 2 Posts: 10,673 ✭✭✭✭senordingdong


    Ok, but if Ireland and an short sighted govt. hadden brought us to this point, would the euro still be going strong?


  • Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 60,183 Mod ✭✭✭✭Wibbs


    Scofflaw wrote: »
    What we had was an initial enterprise boom, which turned into an asset bubble once people were wealthy enough to have disposable money sloshing around looking for a decent return and asset prices started rising.
    It had other factors too. A population "bubble" was coming online too. We had a mini baby boom in this country in the late 60's early 70's and those people were coming to the settling down, lets buy a gaff stage which fueled the initial market. We also had lower house prices here than in the rest of Europe so some adjustment was gonna happen. Then our traditional need to rent not buy, fueled it more.

    I have no problem seeing the other factors, but to deny the Euro and EU fiscal policy had little or nada to do with it strikes me as strange. Doubly so when you graph the "PIGS" runaway madness to the introduction of the currency and associated valuations and overnight interest rate drop(compare it to the EU nations were it didn't drop). Look at Portugal's economic trajectory since it's introduction. Many look to the introduction of the Euro by Portugal and especially the unrealistic exchange rate at the time for that.

    Rejoice in the awareness of feeling stupid, for that’s how you end up learning new things. If you’re not aware you’re stupid, you probably are.



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


    How can economies like Portugal, Ireland and Slovenia use the same currency and interest base rates as France/Germany without major problems occurring when they are still sovereign nations.

    The answer to your question is that once a common rate is set all member states need to make adjustments based on that. That obviously means they need to keep a very close eye on the common rate and the policies that the other member states - particularly the larger ones - are pursuing based on that rate.

    Now, it may seem unfair that in practice a smaller state will need to make more adjustments than a larger one but such is life. Were there no EU, that would be the case, as the larger states very much "set the stage" for the overall European economic situation and the smaller states need to react accordingly.

    That - it should be pointed out - was the case when we had the Punt. Then, Irish interest rates were set largely wrt to British ones (and the driving factor in UK interest rates was very often the inflation rate arising out of the peformance of the housing market in Kent and Surrey).

    Lastly, having said all that, it should be remembered that we are where we are largely as a result of the policies of our Eurosceptic-lite "Boston instead of Berlin" politicians who opted to ignore what was going on elsewhere in the Eurozone and instead use excessive property-based tax-breaks to encourage massive over-investment in the property sector. Sadly, we will all pay a heavy price - irrespective of what policies we pursue - for their stupidity...


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


    View wrote: »
    The answer to your question is that once a common rate is set all member states need to make adjustments based on that. That obviously means they need to keep a very close eye on the common rate and the policies that the other member states - particularly the larger ones - are pursuing based on that rate.
    I think you've just described the disadvantages of the common currency for small countries very well there.
    Now, it may seem unfair that in practice a smaller state will need to make more adjustments than a larger one but such is life. Were there no EU, that would be the case, as the larger states very much "set the stage" for the overall European economic situation and the smaller states need to react accordingly.
    It is not unfair; it is simply reality. It is true that small countries need to adjust the changes in policy of larger ones. However one of the tools, monetary policy, has been taken away. Now it is not the only tool. I think the Irish housing bubble could possibly have been burst by the full implementation of the Bacon recommendations. Once it got beyond a certain point, however, there was very little a government could do that would have had much effect.

    By the way, none of the anti-common currency arguments are particularly controversial outside of the Eurozone. You often get the feeling that you are committing heresy by putting them forward here, such is the emotion invested in the continuance of the Euro among its adherents.


  • Registered Users, Registered Users 2 Posts: 9,770 ✭✭✭Bottle_of_Smoke


    View wrote: »
    The answer to your question is that once a common rate is set all member states need to make adjustments based on that. That obviously means they need to keep a very close eye on the common rate and the policies that the other member states - particularly the larger ones - are pursuing based on that rate.

    Now, it may seem unfair that in practice a smaller state will need to make more adjustments than a larger one but such is life. Were there no EU, that would be the case, as the larger states very much "set the stage" for the overall European economic situation and the smaller states need to react accordingly.[/quote]

    The flaw here is that it is impossible to predict what is going to happen in other large states. And these things don't happen over the course of a gvernment. Fine Gael can't take responsibility for the previous coaltion not adjusting. Whereas if a currency is kept within a sovereign nation each government can make their own adjustments.
    That - it should be pointed out - was the case when we had the Punt. Then, Irish interest rates were set largely wrt to British ones (and the driving factor in UK interest rates was very often the inflation rate arising out of the peformance of the housing market in Kent and Surrey).

    Largely linked yes but currency adjustments could be made then which can't be done now.
    Lastly, having said all that, it should be remembered that we are where we are largely as a result of the policies of our Eurosceptic-lite "Boston instead of Berlin" politicians who opted to ignore what was going on elsewhere in the Eurozone and instead use excessive property-based tax-breaks to encourage massive over-investment in the property sector. Sadly, we will all pay a heavy price - irrespective of what policies we pursue - for their stupidity...

    That was my point earlier. We pay for what the past did and have no real way of amending the situation


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


    Wibbs wrote: »
    It had other factors too. A population "bubble" was coming online too. We had a mini baby boom in this country in the late 60's early 70's and those people were coming to the settling down, lets buy a gaff stage which fueled the initial market. We also had lower house prices here than in the rest of Europe so some adjustment was gonna happen. Then our traditional need to rent not buy, fueled it more.

    I have no problem seeing the other factors, but to deny the Euro and EU fiscal policy had little or nada to do with it strikes me as strange. Doubly so when you graph the "PIGS" runaway madness to the introduction of the currency and associated valuations and overnight interest rate drop(compare it to the EU nations were it didn't drop). Look at Portugal's economic trajectory since it's introduction. Many look to the introduction of the Euro by Portugal and especially the unrealistic exchange rate at the time for that.

    But I don't disagree that the euro had a role in the problem. I've only disagreed that it was "the euro that turned our boom into a bubble" - an argument that, to me, ignores the very large role of our pro-cyclic policies in doing so. That's why we repeatedly had warnings from the EU and from our own central bank pointing out the unsustainability of what we were doing.

    cordially,
    Scofflaw


  • Closed Accounts Posts: 6,093 ✭✭✭Amtmann


    Rather than start a new thread, I'll post my questions here.

    Suppose that David McWilliams, writing in in today's Independent, is correct in stating that the financial crisis has already spread to Portugal and Spain. Suppose too that Spain is too large to bail out, and the EU reaches the point where the euro is fatally undermined and collapses.

    How would such a 'collapse' be likely to happen?
    How would the currency disappear, and what currencies would replace it? More basically, how would people buy bread in the meantime?

    And finally, would the collapse of the euro signal the breakup of the European Union?


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


    Furet wrote: »
    Rather than start a new thread, I'll post my questions here.

    Suppose that David McWilliams, writing in in today's Independent, is correct in stating that the financial crisis has already spread to Portugal and Spain. Suppose too that Spain is too large to bail out, and the EU reaches the point where the euro is fatally undermined and collapses.

    How would such a 'collapse' be likely to happen?
    How would the currency disappear, and what currencies would replace it? More basically, how would people buy bread in the meantime?

    And finally, would the collapse of the euro signal the breakup of the European Union?
    You should probably raise this as a thread in the Irish Economy forum as there's a lot of very knowledgeable people there.

    But anyway what I think will happen is not that the Euro will stop immediately being used as a currency but rather that certain countries within the Eurozone will default. One scenario then would be that it becomes recognised that these countries are better off (and the Eurozone is better off) if they had their own currency. Alternatively it might be considered for the best if the strong countries like Germany, Finland etc, broke off and formed their own currency allowing the Euro to devalue.

    The main difficulty is not what happens after the Euro is split up, imo, but what happens before that happens. For example, failure of the banking system and the national governments unable to save it or (such as Iceland with its own currency managed to do) put a system in place to replace it. In this scenario the country could well have "the euro" but nobody is able to get hold of actual euros to buy bread.


  • Registered Users Posts: 1,412 ✭✭✭francie81


    ART6 wrote: »
    I'm with the OP on whether or not the Euro was a good idea -- personally I thought it was a very bad idea from the day that it was first proposed, for the reasons stated by the OP. I couldn't see how it could work without Europe becoming a federal state like the USA and Russia. If nothing else it took away from sovereign governments the most important financial control they had and effectively tied them to the needs of Germany and France.

    However, we now have a common currency whether we like it or not, and if it collapses then the world will, I believe, be plunged into financial turmoil. The Euro is, after all, a major international currency and Ireland particularly is stuck with it. Unfortunately Ireland could be the trigger that starts the collapse since it presents an opportunity in my view for financial speculators to attack the Euro. If they succeed by using sovereign bond interest rates then the next obvious targets would be Portugal and then Spain.

    Ireland can be bailed out by the IMF and the EU. So can Greece and Portugal, but Spain? Or even Italy? I would say no. Those economies are simply too big -- there isn't anywhere near enough bail out money available. So now we are at crunch point. We are in negotiations for a bail out that the funds can easily support, but to access those funds we must have a financial strategy that they find acceptable. They won't sign a blank cheque.

    If the Greens by their political posturing, and the independents by their bluster, succeed in defeating the forthcoming budget then the government will fall. Will the IMF continue to offer support then? If they don't then we could be forced out of the Euro and become bankrupt. The banks will fail and everyone will lose their money. Which party is in government is irrelevant I believe. What matters is the budget and it must be a tough one. Could FG or Labour come up with an alternative and acceptable budget within a time scale that satisfies the markets and the IMF? I sincerely doubt it.

    So. Budget vote lost and FF out of office. Celebration in the streets until the IMF pulls the plug. Then the speculators turn to Portugal. But why should they want the Euro to fail? Well, it seems to me that if all of the EU member states had to return to having their own currencies, the opportunities for currency speculation would return to what they were before the Euro.

    I know there's not supposed to be a mechanism for any member to be forced out of the Euro, or to leave it voluntarily, but surely there is one obvious way. That is that the EU/IMF decide that they cannot or will not fund unaffordable deficits. Irish bond interest rates then go through the roof and the country can no longer meet the stability requirements of the Eurozone by a country mile.

    Let's then suppose that the speculator's then turn their attention to Portugal, Spain, Italy. Then they are in the same position as Ireland. At that point what is to stop Germany and France deciding they they will establish their own single currency with some of the other stronger member states, and let the rest of us have the Euro if we want it. At that point it would be worth no more than the Punt would if we went back to that. We would be still in the Euro but it would no longer be stiffened by the financial muscle of Germany and France. In that scenario we might as well start calling our money Punts again as it would make no difference to its value. Ireland would simply not have any money whatever we called it.

    I don't know if any of the above makes any sense at all -- I am not an economist. But I am very, very uneasy and I am not at all convinced that any of our politicians in any of the parties have any idea what to do other than to concentrate upon the needs of their parties rather than those of the country (Cowen leaving the IMF negotiations to canvas in Donegal for God's sake!). Whatever any of them say about it, Ireland's financial sovereignty is now controlled by the EU and the IMF, and we had better start to get used to it. How we got to that is irrelevant now, and all the blaming and back stabbing and calling the Brian's idiots will not change that one bit.

    To be honest I would rather default right now and start from scratch with our own currency albeit at a price but we would regain our sovereignty.


  • Registered Users, Registered Users 2 Posts: 2,632 ✭✭✭ART6


    francie81 wrote: »
    To be honest I would rather default right now and start from scratch with our own currency albeit at a price but we would regain our sovereignty.

    I agree with your sentiment, and I believe with all of my heart that freedom and sovereignty are to most valuable things a person can have, particularly since so many people, your ancestors and mine, have fought and died for just that. The trouble is that a gang of incompetents and liars dragged all of us into a monetary system that favoured only a few big players and now we are stuck with it.

    To default on our bonds and loans would simply not be possible as long as we are in the Euro, I imagine, because we don't have control of our own fiscal policy. There isn't a mechanism for leaving the Euro or for being ejected from it. Meanwhile we have to eventually meet the conditions of the stability pact. If anyone thinks the current budget plan is tough, think again! The EU has no reason to care a damn about a tiny country on the edge of the empire.

    But no power on earth could stop the Irish people from insisting that we will no longer tolerate this interference in our right to self determination. We could refuse to accept the Euro any longer, and we could revert to our own currency. We would become the crack (if we already aren't) in the Euro edifice. Possibly the EU would, with great reluctance, allow Ireland to withdraw from the Euro by enacting yet another treaty without any public vote, but that would eventually mean our withdrawal from the EU.

    Victory! We now have a currency that's worthless but by God we are competitive. We have politicians with ambitions to form a government who keep winging about a "knowledge economy" when the Chinese, supposedly our ignorant third world competitors, are embarking on a space programme.

    Now we have it. Let's cover the country with concrete and houses that nobody wants, and let's have a few tents at race courses. that will fix it lads!:mad:


  • Registered Users, Registered Users 2 Posts: 1,558 ✭✭✭kaiser sauze


    francie81 wrote: »
    To be honest I would rather default right now and start from scratch with our own currency albeit at a price but we would regain our sovereignty.

    What do you mean "regain our sovereignty"?


  • Registered Users, Registered Users 2 Posts: 369 ✭✭Empire o de Sun


    the the ecb needs more bite in the future, the national central banks are now obsolete.


  • Registered Users Posts: 25 Mcwood


    In other words Thank you Nigel Farage for open the doors to common sense.:rolleyes:

    http://www.youtube.com/watch?v=2gm9q8uabTs&feature=aso


  • Registered Users, Registered Users 2 Posts: 7,980 ✭✭✭meglome


    Mcwood wrote: »
    In other words Thank you Nigel Farage for open the doors to common sense.:rolleyes:

    http://www.youtube.com/watch?v=2gm9q8uabTs&feature=aso

    So what did he say?

    You know I was genuinely surprised in the Lisbon debate that people would use a right wing British anti-EU guy like Farage as some sort of messiah. For me if I have to crawl into bed with the devil maybe it's not worth trying to win.


  • Registered Users, Registered Users 2 Posts: 7,980 ✭✭✭meglome


    What do you mean "regain our sovereignty"?

    Yeah that magic word that seems to mean whatever the person using it wants it to mean. I can't recall a specific word that I've ever seen abused more.


  • Registered Users Posts: 25 Mcwood


    meglome wrote: »
    So what did he say?

    You know I was genuinely surprised in the Lisbon debate that people would use a right wing British anti-EU guy like Farage as some sort of messiah. For me if I have to crawl into bed with the devil maybe it's not worth trying to win.

    No, you got the message wrong... I think he is been very honest to speak out on what is going on in Eu right now. The so called Eurocrats are going to mutilate our own democracy, just wait and see for yourself what is coming in our way....

    Of course Farage can't be called sort of messiah, he isn't a saviour of all causes, but speaks with common sense.


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  • Registered Users, Registered Users 2 Posts: 7,980 ✭✭✭meglome


    Mcwood wrote: »
    No, you got the message wrong... I think he is been very honest to speak out on what is going on in Eu right now. The so called Eurocrats are going to mutilate our own democracy, just wait and see for yourself what is coming in our way....

    Of course Farage can't be called sort of messiah, he isn't a saviour of all causes, but speaks with common sense.

    Oh Farage isn't a bad speaker at all. Though let's be very clear, this is a man with his own agenda. He's anti-EU and wants to take the UK out of the EU. That's what he's selling and like all snake oil salesmen he's good at selling it to those who want to believe it. But let's not get carried away and call what he's doing honest.


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


    The failure of the euro is not the currency, that did its job well

    the failure is with the state governments ignoring the stability and growth pact.
    & no eurozone wide deposit protection to provide reassurance to depositors


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


    ei.sdraob wrote: »
    The failure of the euro is not the currency, that did its job well

    the failure is with the state governments ignoring the stability and growth pact.
    & no eurozone wide deposit protection to provide reassurance to depositors

    Exactly, it's an experiment, albeit a badly designed one! The test is going to be over the next year or 2 to see if the political will is there to learn from this and make it stronger. Mr. Farage would love to see it fail.

    People forget that if we had 15 different currencies, we'd have probably devalued a couple of times at this stage, as would another 4/5 currencies.

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



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


    ei.sdraob wrote: »
    The failure of the euro is not the currency, that did its job well

    the failure is with the state governments ignoring the stability and growth pact.
    & no eurozone wide deposit protection to provide reassurance to depositors

    There's always going to be two ways of looking at this:

    a) The Euro failed the countries it was designed to serve or;
    b) the countries failed the Euro.

    In a way both are true. These things come down to your values and priorities. Personally I put the countries and their people first, but others are entitled to put the Euro first as the thing that must be served.


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


    SkepticOne wrote: »
    There's always going to be two ways of looking at this:

    a) The Euro failed the countries it was designed to serve or;
    b) the countries failed the Euro.

    In a way both are true. These things come down to your values and priorities. Personally I put the countries and their people first, but others are entitled to put the Euro first as the thing that must be served.

    A nice false dichotomy but it remains a false one irrespective.

    It should also be pointed out that "the Punt failed us" many times in the past, so the logical conclusion would be to abandon using money altogether. :)


  • Registered Users Posts: 156 ✭✭sirromo


    View wrote:
    It should also be pointed out that "the Punt failed us" many times in the past

    Are you sure about that? The wikipedia entry on the punt doesn't list any major problems with the currency.
    http://en.wikipedia.org/wiki/Irish_pound

    It does point out that the currency fluctuated in value during the 20 year period after we joined EMS, but apart from that, it doesn't point to any other major failures. And even if our own currency did cause us problems in the past, I would be very surprised if those problems came anywhere close to the problems we're now having to deal with as a result of our euro membership.


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


    sirromo wrote: »
    Are you sure about that? The wikipedia entry on the punt doesn't list any major problems with the currency.
    http://en.wikipedia.org/wiki/Irish_pound

    It does point out that the currency fluctuated in value during the 20 year period after we joined EMS, but apart from that, it doesn't point to any other major failures. And even if our own currency did cause us problems in the past, I would be very surprised if those problems came anywhere close to the problems we're now having to deal with as a result of our euro membership.

    Try the 1950s or the 1980s - an 18%+ unemployment, mass emigration, every penny of income tax going to pay the interest on the national debt and a really possibility that the state would need to borrow to pay that interest.

    Stupid economic policies gets you into trouble - irrespective of what currency you are using.


  • Registered Users Posts: 156 ✭✭sirromo


    View wrote:
    Try the 1950s or the 1980s - an 18%+ unemployment, mass emigration, every penny of income tax going to pay the interest on the national debt and a really possibility that the state would need to borrow to pay that interest.

    You can't blame the punt for those problems. I've never heard any economist point to the punt as being one of the things that contributed to our economic problems in the 1950s or 1980s.

    I have seen several economists (Paul Krugman, David McWilliams etc) point to our euro membership as being one of the things that has contributed to our current problems.


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


    sirromo wrote: »
    You can't blame the punt for those problems. I've never heard any economist point to the punt as being one of the things that contributed to our economic problems in the 1950s or 1980s.

    Why not? SkepticOne, after all, is trying to lay the blame for our problems on an inanimate object - the currency.

    Presumably then we should lay the blame for ALL our economic problems on our currencies - their nothing to do with the political and economic decisions we make, it is all the fault of small pieces of metal and paper. :)
    sirromo wrote: »
    I have seen several economists (Paul Krugman, David McWilliams etc) point to our euro membership as being one of the things that has contributed to our current problems.

    As the saying about economist goes, with 3 economists in a room, you have 4 differences of opinion. It is nothing to do with pumping up the property market with tax-breaks, then is it? Perfectly sane thing to do a property boom - right?


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


    View wrote: »
    A nice false dichotomy but it remains a false one irrespective.

    It should also be pointed out that "the Punt failed us" many times in the past, so the logical conclusion would be to abandon using money altogether. :)
    Well a dichotomy, false or otherwise, is a situation where it is either one thing or the other that is true but not both. What we're talking about here is a situation where both are true in their own way. It simply comes down to your values and priorities. You could have a blended view if you wanted where, although the idea of a shared currency is flawed, with a lot of shoehorning and fixes of various kinds, it can be made to work.

    Obviously the ideologies are very different but the same sort of thing might have been said about communism back when that was considered a viable system. Its detractors might have said it was doomed to failure due to its failure to take into account the way people actually work, whereas its defenders would argue that the system is fine but it is up to people to change in order to fit the system.

    It is really comes down to different ways of looking at the same thing.


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


    SkepticOne wrote: »
    Well a dichotomy, false or otherwise, is a situation where it is either one thing or the other that is true but not both.

    That is not what a false dichotomy is - it is a narrowing down a range of choices to a overly-simplistic either-or choice, when there are many more choices available in reality (e.g. either you support war against "the enemy/the terrorists" or you are a supporter of "the enemy/the terrorists").

    Thus, in your case, you deliberately try to reduce this to a simplistic either/or choice in relation to the Euro, while totally ignoring that the economic policies followed here would have gotten us into a large mess irrespective of what currency we had.

    And, yes, we can have wonderful theoretical arguments about the "large mess" we'd have gotten into if we had the Punt instead, but those are essentially like trying to make out if you crashed head-on into a tree at point X, you are much better off than if you had a comparable head-on crash at point Y.


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


    View wrote: »
    That is not what a false dichotomy is - it is a narrowing down a range of choices to a overly-simplistic either-or choice, when there are many more choices available in reality (e.g. either you support war against "the enemy/the terrorists" or you are a supporter of "the enemy/the terrorists").

    Thus, in your case, you deliberately try to reduce this to a simplistic either/or choice in relation to the Euro, while totally ignoring that the economic policies followed here would have gotten us into a large mess irrespective of what currency we had.
    You are correct in your understanding of what a false dichotomy is: a false either-or choice, where only one choice can be valid. Either one or the other but not both. However that is not what I'm saying with the idea that the shared currency can be viewed in two different ways both of which are valid in their own way depending on your perspective.
    And, yes, we can have wonderful theoretical arguments about the "large mess" we'd have gotten into if we had the Punt instead, but those are essentially like trying to make out if you crashed head-on into a tree at point X, you are much better off than if you had a comparable head-on crash at point Y.
    I don't have a problem with speculations about what might have happened had we the punt. I might disagree with them but is the nature of discussion forums.


  • Registered Users, Registered Users 2 Posts: 2,398 ✭✭✭McDave


    It's too early to say that the Euro has been a success. EMU has been around as a formulated idea for 40 years now. The basis for the Euro's actual establishment has been tested and found to be flawed, but not beyond redemption. If it is to prove its endurance, it has a long, long way to go.

    However, it's certainly too early to say the Euro has failed. Many of the Euro's critics assert that without a fully fledged EU state or full fiscal union the currency is doomed. However, the architects of monetary union were probably aware that neither of these scenarios were coming anytime soon. The Maastricht criteria are obviously too weak, but were the best that could be negotiated politically at the time. In the grander scheme of things maybe there is an intermediate solution which allows essential national sovereignty while upgrading the controls and oversights which are needed for the running of the currency.

    IMO, the Euro is treading a third path (the two others being cohesive small economies and larger diverse unitary or federal states) in which sovereign states can indeed share a common currency. Who's to say it can't be done? The EU has confounded its critics at pretty much every turn. It's structure seems opaque and labyrinthine, but the problem-solving competition between the larger states combined with political will nevertheless seems to produce the necessary results.


  • Moderators, Entertainment Moderators, Politics Moderators Posts: 14,539 Mod ✭✭✭✭johnnyskeleton


    How can economies like Portugal, Ireland and Slovenia use the same currency and interest base rates as France/Germany without major problems occurring when they are still sovereign nations.

    Just the same as economies like California, New York and Florida can use the same currency. Just as the RMB is linked the the dollar. Just as many other countries use the dollar as their primary reserve.

    The Euro is only a problem if you have internally strict but externally forgiving countries like Germany running their own country properly but letting Ireland get away with mayhem.

    Longer term, the currency that you use is largely irrelevant, the problem is when some states want to devalue their currency but can't. IMO that is not a problem, and we are just going to have to learn to run our country properly from now on.


  • Registered Users, Registered Users 2 Posts: 1,184 ✭✭✭KINGVictor


    Just the same as economies like California, New York and Florida can use the same currency. Just as the RMB is linked the the dollar. Just as many other countries use the dollar as their primary reserve.

    The Euro is only a problem if you have internally strict but externally forgiving countries like Germany running their own country properly but letting Ireland get away with mayhem.

    Longer term, the currency that you use is largely irrelevant, the problem is when some states want to devalue their currency but can't. IMO that is not a problem, and we are just going to have to learn to run our country properly from now on.

    Are you for real? very wrong comparison to say the least. Those places you mentioned are states under one COUNTRY with the same constitution binding them, same national laws...wait a minute ...you could have an arguement that its the same with EU countries...but the difference is that the EU consists of sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc...you cannot simply equate that to the USA...very unsimilar...


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


    KINGVictor wrote: »
    Are you for real? very wrong comparison to say the least. Those places you mentioned are states under one COUNTRY with the same constitution binding them, same national laws...wait a minute ...you could have an arguement that its the same with EU countries...but the difference is that the EU consists of sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc...you cannot simply equate that to the USA...very unsimilar...

    A currency is a fiscal instrument - the fact that the EU consists of "sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc" doesn't seem particularly relevant as long as they agree to adopt similar levels of fiscal discipline. Unless that's a tacit way of saying that some countries' 'vision/direction' doesn't include fiscal discipline?

    cordially,
    Scofflaw


  • Registered Users, Registered Users 2 Posts: 2,398 ✭✭✭McDave


    Scofflaw wrote: »
    A currency is a fiscal instrument - the fact that the EU consists of "sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc" doesn't seem particularly relevant as long as they agree to adopt similar levels of fiscal discipline. Unless that's a tacit way of saying that some countries' 'vision/direction' doesn't include fiscal discipline?
    That's the trick. Having enforceable laws and guidelines which enable member states to partake in a single currency and retain essential sovereignty (pretty much a prerequisite of the EU model as it stands).

    The Euro is a unique experiment. It's not necessarily doomed to success. It was envisioned by some very intelligent people. But they are not gods. There is a certain element of a wing and a prayer about the effort. But the international economic, fiscal and currency experience of Germany and France over the last century gives me confidence that there are sound bases in theory for a currency arrangement among entities which do not constitute a single state. And, more importantly, that there is the political will to make the experiment succeed.


  • Registered Users, Registered Users 2 Posts: 1,184 ✭✭✭KINGVictor


    Scofflaw wrote: »
    A currency is a fiscal instrument - the fact that the EU consists of "sovereign nations with different peoples, languages, currencies, cultures/traditions, visions/directions etc" doesn't seem particularly relevant as long as they agree to adopt similar levels of fiscal discipline. Unless that's a tacit way of saying that some countries' 'vision/direction' doesn't include fiscal discipline?

    cordially,
    Scofflaw


    Scoff...let me make myself clearer. If we leave politics out of it for a minute, to have a common currency which you have rightly pointed out as fiscal instrument, some fundamental parameters must be in place ( going by the optimum currency area (OCA) criteria).
    • Labour mobility
    • Capital mobilty
    • similar economic conditions- in terms of business cycles
    • Fiscal transfer mechanism

    While the EU has been able to formulate policies to ensure labour and capital mobility, there is still a problem with the other two elements. In terms of fiscal transfer, the EU historically used the EU stability funds to transfer funds to create some measure of equality in the region, however in light of the recent economic crises,the EU swiftly concocted a mechanism to allow for transfer of funds to countries that might need them .

    You will agree with me that this mechanism is still in its infancy and the outcome of these transfers cannot be correctly predicted at the moment because of the ensuing speculative nature of the bond markets and the unpredictability of the effects of the contagion spreading to other vulnerable member nations. Another outcome of the fiscal transfer mechanism that the EU hurriedly set up is the disaffection it is causing in stronger economies like Germany, Britain , Austria etc and the fact that changes have to be made to the current Lisbon treaty to ensure the legality of the new fiscal transfer framework.

    More importantly, however, is the fact that members of the economic region need to have similar business cycles. This, I believe is where the EU will have major stumbling blocks. A good arguement is that the USA that is acknowledged as an OCA has disimilarities in business cycles depending on regions in the country, but the approriation of funds in the US is made based on years on negotiations and carefully considered implications on their citizens. People in the New york do not see it as injustice that the current administration is trying to salvage what is percieved as a"dead" car industry in Michigan, probably because they have relatives/ friends that are working there or would benefit from such policies.

    The problem I see is that Germans may "sympathise" with the Greeks and the English might have "wanted" this to happen to some other people than the Irish but is that enough motivation to continue to continue to shell out national capital to fund a very convoluted union?


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


    KINGVictor wrote: »
    Scoff...let me make myself clearer. If we leave politics out of it for a minute, to have a common currency which you have rightly pointed out as fiscal instrument, some fundamental parameters must be in place ( going by the optimum currency area (OCA) criteria).
    • Labour mobility
    • Capital mobilty
    • similar economic conditions- in terms of business cycles
    • Fiscal transfer mechanism

    While the EU has been able to formulate policies to ensure labour and capital mobility, there is still a problem with the other two elements. In terms of fiscal transfer, the EU historically used the EU stability funds to transfer funds to create some measure of equality in the region, however in light of the recent economic crises,the EU swiftly concocted a mechanism to allow for transfer of funds to countries that might need them .

    You will agree with me that this mechanism is still in its infancy and the outcome of these transfers cannot be correctly predicted at the moment because of the ensuing speculative nature of the bond markets and the unpredictability of the effects of the contagion spreading to other vulnerable member nations. Another outcome of the fiscal transfer mechanism that the EU hurriedly set up is the disaffection it is causing in stronger economies like Germany, Britain , Austria etc and the fact that changes have to be made to the current Lisbon treaty to ensure the legality of the new fiscal transfer framework.

    More importantly, however, is the fact that members of the economic region need to have similar business cycles. This, I believe is where the EU will have major stumbling blocks. A good arguement is that the USA that is acknowledged as an OCA has disimilarities in business cycles depending on regions in the country, but the approriation of funds in the US is made based on years on negotiations and carefully considered implications on their citizens. People in the New york do not see it as injustice that the current administration is trying to salvage what is percieved as a"dead" car industry in Michigan, probably because they have relatives/ friends that are working there or would benefit from such policies.

    The problem I see is that Germans may "sympathise" with the Greeks and the English might have "wanted" this to happen to some other people than the Irish but is that enough motivation to continue to continue to shell out national capital to fund a very convoluted union?

    I agree that the last question is the really important one, because if the EU member states are willing to accept fiscal transfers, then the question of business cycles becomes much less important, and the question of acceptable levels of mutual confidence in each others' fiscal controls becomes the dominant question. Given that there is a Franco-German push for the necessary changes to the EU Treaties to allow fiscal transfers to happen, and that crisis mechanisms that have been put in place in such a rush, it seems likely that the political will is there to make that happen. The enhanced mechanisms for ensuring fiscal discipline across the eurozone suggest the same.

    It often seems to the eurosceptical that the EU advances towards closer integration by "taking advantage" of crises, somehow pushing the Member States or their electorates reluctantly along with it. I'd agree with the observation, that the EU tends to advance towards closer integration during crises, but not with the explanation. The euro is a very good example of what actually happens - it expresses both the willingness of the Member States themselves to engage in closer integration, and their inability or unwillingness to properly negotiate for the downside risks of such integration. The euro was a very typical European "plan A" without a plan B - the mechanisms to stabilise and dig it out if it ran into trouble were almost entirely lacking.

    To be fair to the Member States, negotiating plan A is usually hard enough, and negotiating plan B is next to impossible unless everybody can see a pressing and present need for it - without that, as politicians are wont to do, they leave the hard decisions alone. Again, to be fair to politicians, it's often the case that if you want to achieve anything at all, you have to leave the hard decisions for another time, and hope they don't happen before the benefits of plan A make it something people prefer not to lose. As a result, the EU tends to move towards greater integration during crises because crises make it necessary to negotiate the hard decisions left out of the original plan if one is to keep it running, and the Member States and their electorates continue to favour integration over dis-integration, so the political will is usually there to make the hard decisions and accept the consequences of the original plan once it's a choice between that and stepping back.

    So, to come round again to the question of the thread, I don't think there's any requirement to declare the euro a failure, unless that's what everybody wants - that it was inadequately planned, on the other hand, is so obvious as to not really require a declaration. The question is really whether the political will to keep it going is there, and the answer to that seems, despite some German grumbling, to be yes.

    As for the 'very convoluted union' - the EU is not by a very long stretch the most convoluted union in European history.

    cordially,
    Scofflaw


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