Ray Kinsella - Leave the Euro

Duke Leonal Felmet · 08-08-2011 09:27AM #1

Or so he said in the news recently. I would be inclined to agree except for two crucial points.

If we leave:

1) How do we replace the liquidity that the ECB has been providing to our crippled banks?

2) How do we pay our Euro-denominated debt, even if we apply a restructuring of, say, 30%?

and more loosely:

3) Should we peg to/join the sterling?

Answers on a SAE.

irishh_bob · 08-08-2011 10:25AM

Duke Leonal Felmet wrote: »

Or so he said in the news recently. I would be inclined to agree except for two crucial points.

If we leave:

1) How do we replace the liquidity that the ECB has been providing to our crippled banks?

2) How do we pay our Euro-denominated debt, even if we apply a restructuring of, say, 30%?

and more loosely:

3) Should we peg to/join the sterling?

Answers on a SAE.

the man is dead right in saying we should leave the euro , its speeding quicker towards a fiscal union by the day , the crisis is now so serious that in order to bail out italy , spain and the already existing bankrupt countrys , germany will demand on having a direct say in the econmys of theese countrys , if we leave the euro or if we dont leave the euro , we are facing a whole lot of austerity , stay in the euro and have the germans set our tax code and budget , goodbye corporation tax ( multinationals ) and public sector wages and wellfare which is miles ahead of germany etc , we might aswell be poor with our future in our own hands + a return to the punt will give us a huge boost competitivley

Duke Leonal Felmet · 08-08-2011 10:57AM

Yeah, the fiscal union does put me off. I would ordinarily have argued against leaving for the above reasons, but there is a limit and having our budget decided in Berlin is one of them.

Manach · 08-08-2011 11:01AM

Unfortunately, the Punt-nua would be backed by .... ? And also administered by the same state that was behind the decisions to leave the euro and also to cease pegging the Irish punt to sterling in the 70s. We've already lost our future.

grumpymunster · 08-08-2011 11:04AM

I would have thought anything along the lines of a fiscal union would require a referendum here in Ireland. After the way the French have been going on and the whole way the bail out has worked I dont know if ever there will be a referendum on Europe ever passed again in this country.

Duke Leonal Felmet · 08-08-2011 11:10AM

Manach wrote: »

Unfortunately, the Punt-nua would be backed by .... ? And also administered by the same state that was behind the decisions to leave the euro and also to cease pegging the Irish punt to sterling in the 70s. We've already lost our future.

With the exception of the 1955 currency crisis, the Irish punt was successfully pegged to the Sterling for most of its existence, with something like a 95% correlation. My only concern would be a lack of currency reserves required to regulate the value of a pegged currency, does anyone know the state of foreign reserves at the Central Bank?

How about simply joining the sterling?

Debtocracy · 08-08-2011 12:05PM

Duke Leonal Felmet wrote: »

How about simply joining the sterling?

"Permit me to control the currency of a nation and I care not who makes its laws"

It would be difficult to maintain sovereignty if we became dependent on the Bank of England for liquidity.

irishh_bob · 08-08-2011 12:05PM

grumpymunster wrote: »

I would have thought anything along the lines of a fiscal union would require a referendum here in Ireland. After the way the French have been going on and the whole way the bail out has worked I dont know if ever there will be a referendum on Europe ever passed again in this country.

i suspect germany and france would engage in a spot of revisionism in terms of what the lisbon and niece treatys entailed , runty sarkozy would be the man for that :mad:

Duke Leonal Felmet · 08-08-2011 12:12PM

Debtocracy wrote: »

"Permit me to control the currency of a nation and I care not who makes its laws"

It would be difficult to maintain sovereignty if we became dependent on the Bank of England for liquidity.

It would also be difficult to maintain a pegged currency with low foreign reserves (if this is the case). Floating the currency would leave us at the mercy of international markets, which again leaves us with no 'sovereignty' and finally pegging to a precious metal will, again, leave us at the mercy of markets.

Is there another route?

View · 08-08-2011 12:57PM

Manach wrote: »

Unfortunately, the Punt-nua would be backed by .... ?

... hot air, at a guess.

Chucky the tree · 08-08-2011 01:21PM

When you look at the mess Ireland and Greece have made of cutting their deficit and getting there finances in order it's not surprising Germany aren't happy giving money to Italy and Spain without having a direct say in their finances.

SupaNova · 08-08-2011 02:47PM

Chucky the tree wrote: »

When you look at the mess Ireland and Greece have made of cutting their deficit and getting there finances in order it's not surprising Germany aren't happy giving money to Italy and Spain without having a direct say in their finances.

And on that point, if our politicians struggle reducing our deficit under severe pressure from the EU, what on earth would make anyone think we could do it in an over night fashion, whilst setting up and managing our own currency.

RichardAnd · 08-08-2011 02:59PM

SupaNova wrote: »

And on that point, if our politicians struggle reducing our deficit under severe pressure from the EU, what on earth would make anyone think we could do it in an over night fashion, whilst setting up and managing our own currency.

Without the EU, we wouldn't have a choice about closing the gaps in our spending, the money simply wouldn't be there to keep it open.

Of course, whether or not the whole thing could be managed without the country blowing up is another matter...

meglome · 08-08-2011 03:10PM

Duke Leonal Felmet wrote: »

Yeah, the fiscal union does put me off. I would ordinarily have argued against leaving for the above reasons, but there is a limit and having our budget decided in Berlin is one of them.

We did some incredibly stupid things fiscally and ended up begging the EU and IMF for help.

I'm really tired of hearing how a new currency would fix anything, a new currency backed by nothing and managed by a country that have proven they can't run a sweetie shop. Personally given the Germans know how to run a country I'm all for losing some of this magically 'sovereignty'.

Scofflaw · 08-08-2011 03:10PM

RichardAnd wrote: »

Without the EU, we wouldn't have a choice about closing the gaps in our spending, the money simply wouldn't be there to keep it open.

Of course, whether or not the whole thing could be managed without the country blowing up is another matter...

So the only way most, if not all of us believe that our government will implement fiscal discipline is through external pressure - and the main differences between us are whether we feel it's best done by cooperation with the other EU members or by making it impossible to do anything else through not cooperating with anyone?

cordially,
Scofflaw

beeftotheheels · 08-08-2011 04:06PM

Scofflaw wrote: »

So the only way most, if not all of us believe that our government will implement fiscal discipline is through external pressure - and the main differences between us are whether we feel it's best done by cooperation with the other EU members or by making it impossible to do anything else through not cooperating with anyone?

cordially,
Scofflaw

On the bright side we're not the US so we don't have the option of creating our own internal pressure while actually achieving very little (besides that downgrade).

Chuck Stone · 08-08-2011 04:16PM

Maybe we could back a new currency with beef?

The beef standard?

No?

No?

*gets coat*

maggy_thatcher · 08-08-2011 04:23PM

In order for Ireland to leave the euro, it would have to keep it one hell of a secret until changeover day in order to somehow prevent a complete run on the banks! Grab everything you can out of the bank in cash form, so that 3 months after all your internal loans have been converted into punts you can go in and pay them off with the spare €5 that you kept in your wallet.

johnnyskeleton · 08-08-2011 04:29PM

irishh_bob wrote: »

the man is dead right in saying we should leave the euro , its speeding quicker towards a fiscal union by the day , the crisis is now so serious that in order to bail out italy , spain and the already existing bankrupt countrys , germany will demand on having a direct say in the econmys of theese countrys , if we leave the euro or if we dont leave the euro , we are facing a whole lot of austerity , stay in the euro and have the germans set our tax code and budget , goodbye corporation tax ( multinationals ) and public sector wages and wellfare which is miles ahead of germany etc , we might aswell be poor with our future in our own hands

That's a refreshingly honest answer. So, anyone who would rather be poor and independent should advocate leaving the Euro. Everyone else (i.e. those who wish to retain a basic standard of living, even if it means complying with our treaty obligations) should advocate remaining in the Euro.

Also inconsistent in your argument is that if we are poor outside the Euro, what benefit is it to control our corporation tax rate?

irishh_bob wrote: »

+ a return to the punt will give us a huge boost competitivley

Like it did for Zimbabwae? Seriously though, that would only work if you are a strong exporter of physical goods. If you export money, like we do, an unstable currency is not a good thing.

View · 08-08-2011 04:52PM

Scofflaw wrote: »

So the only way most, if not all of us believe that our government will implement fiscal discipline is through external pressure...

I wouldn't share that view. My belief is that we will eventually learn to manage our finances in a proper and prudent fashion without blowing them up every couple of years. I do admit that that is a belief I hold despite considerable evidence to the contrary based on past performance.

Sovereignty, after all, is ultimately the right to make a decision. Being in the EU or outside the EU doesn't alter that decisions need to be made and the important point is to try and make smart ones - or, failing that, to avoid making dumb ones.

Scofflaw · 08-08-2011 05:49PM

beeftotheheels wrote: »

On the bright side we're not the US so we don't have the option of creating our own internal pressure while actually achieving very little (besides that downgrade).

In crude outline, the two crises have similar shapes, though. Both are essentially the result of internal wrangling over the politics of funding deficits internal to the currencies.

cordially,
Scofflaw

Sticky_Fingers · 08-08-2011 06:19PM

maggy_thatcher wrote: »

In order for Ireland to leave the euro, it would have to keep it one hell of a secret until changeover day in order to somehow prevent a complete run on the banks! Grab everything you can out of the bank in cash form, so that 3 months after all your internal loans have been converted into punts you can go in and pay them off with the spare €5 that you kept in your wallet.

I'd have thought that the ECB would just print up new bank notes with a different design if some country was kicked out of the Euro. I'd also suspect that the government would try and pull some stroke where any old Euro notes you have would only be converted at the rate the Punt Nua was floated at.

You should never underestimate the slyness of the government, they'll no doubt find some way to shaft the people who decided that keeping their life savings in a bunch of failed institutions was not such a good idea.

View · 08-08-2011 06:35PM

Scofflaw wrote: »

In crude outline, the two crises have similar shapes, though. Both are essentially the result of internal wrangling over the politics of funding deficits internal to the currencies.

cordially,
Scofflaw

That's true but in the case of the US it should also be mentioned that the individual states have also faced budget deficits (of varying severity) in many cases. I believe that something like 47 out of the 50 have had to have cut-backs in public services, (mandatory) lay-offs of state employees, higher state taxes etc. etc. - all the stuff that sounds familiar here at this stage.

Oddly enough though, I don't think any of those 47 states have concluded that the best thing for them to do is to abandon the US Dollar and launch (or re-launch in some cases) their own currency. Perhaps, it is because the 47 states realise that financial crisis come and go and that balancing your budget is a fundamental task of government irrespective of what currency you choose to use?

irishh_bob · 08-08-2011 06:58PM

johnnyskeleton wrote: »

That's a refreshingly honest answer. So, anyone who would rather be poor and independent should advocate leaving the Euro. Everyone else (i.e. those who wish to retain a basic standard of living, even if it means complying with our treaty obligations) should advocate remaining in the Euro.

Also inconsistent in your argument is that if we are poor outside the Euro, what benefit is it to control our corporation tax rate?

Like it did for Zimbabwae? Seriously though, that would only work if you are a strong exporter of physical goods. If you export money, like we do, an unstable currency is not a good thing.

your comparing ireland to a third world country led by a despot who has starved half his population into relying on foreign aid

FreudianSlippers · 08-08-2011 07:05PM

Sigh. The major problem I see on boards threads regarding leaving the Euro is simply that the logic is this:

Step 1: Leave the Euro
Step 2: ???
Step 3: Profit

Scofflaw · 08-08-2011 07:12PM

View wrote: »

I wouldn't share that view. My belief is that we will eventually learn to manage our finances in a proper and prudent fashion without blowing them up every couple of years. I do admit that that is a belief I hold despite considerable evidence to the contrary based on past performance.

I respect your optimism, but I admit I don't really share it.

View wrote: »

Sovereignty, after all, is ultimately the right to make a decision. Being in the EU or outside the EU doesn't alter that decisions need to be made and the important point is to try and make smart ones - or, failing that, to avoid making dumb ones.

Or at least not spectacularly dumb ones. You're right about sovereignty, though - much of the "we're losing our sovereignty" arguments rely on equating sovereignty with "freedom of action without consequences", which is why none of them would stand up in a constitutional court.

cordially,
Scofflaw

Tora Bora · 08-08-2011 07:37PM

Thing I notice is, that the only sector of Irish society, which advocates leaving the euro as a good option for Ireland, is the academic sector.
These guys live in a cosseted world, far removed from the reality of the real world.
Havent yet heard a senior business executive, in the internationally traded sector, mention the possibility.
I would tend to give mote credence to guys from the real world.

PhatPiggins · 08-08-2011 08:14PM

Duke Leonal Felmet wrote: »

Yeah, the fiscal union does put me off. I would ordinarily have argued against leaving for the above reasons, but there is a limit and having our budget decided in Berlin is one of them.

All thoughts of sovereignty and nationalism aside, would that be so terrible? Yes I know Germany will do whats best for Germany but we haven't exactly covered ourselves in glory setting our own budgets the past 80 years.

astrofool · 08-08-2011 09:07PM

I don't get all the love some people seem to have for leaving the euro. We either take a 30% cut to our spending/raise our taxes by a few % over 4 years and stay in, or we take an immediate 90% cut in our purchasing power, and cripple our banks and economy by going out.

irishh_bob · 08-08-2011 09:30PM

astrofool wrote: »

I don't get all the love some people seem to have for leaving the euro. We either take a 30% cut to our spending/raise our taxes by a few % over 4 years and stay in, or we take an immediate 90% cut in our purchasing power, and cripple our banks and economy by going out.

you think the punt would devalue by 90 % , nonesense

Voltex · 08-08-2011 09:41PM

If one State leaves the €, wouldnt it stand to reason that the markets would use that single incident to percipitate a full break up..with a collapse of the FX market and a mass dumping of euro reserves held by Central Banks which would feed into every other market?

We're talking about a currency that is considered the Worlds second reserve currency...it would be like the State of Arizona deciding to leave the US dollar and go it alone.

I think we are going to go through a significant period of debt reduction programs, a long, long period where we aim to create a fiscal union with further centralisation of decision making to Europe, balanced budgets will be legal requirements (which will give confidence to populations), eurobonds for states that can-not meet immediate budget corrections, german will be taught instead of Irish to school children and we all wear blue armbands with stars on it.

Ray Kinsella - Leave the Euro

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