EU proposes 'banking union'

Scofflaw · 30-05-2012 03:47PM #1

EU calls for 'banking union' to ease crisis

The European Union's executive office on Wednesday called on the 17 countries in the eurozone to create a "banking union" that can centrally oversee and — if needed — bail out the sector, which has become a weak link in the continent's financial system.

Bank failures have already overwhelmed the public finances of Ireland, forcing it to take an international bailout, and some fear Spain could be next. The European Commission, while recommending that Spain be given an extra year to meet its deficit targets, suggested that regulation of the entire eurozone banking sector be done centrally.

In its recommendations on how to deal with the financial crisis which has pushed the shared single currency to the brink, the Commission said it wants to boost cross-border management of banks, which are currently overseen by a patchwork of national regulators with different rules.

Part of that would see the eurozone's permament bailout fund, the ESM, charged with paying for bank bailouts. That would protect individual governments from having their public finances overwhelmed by the cost of rescuing a bank.

EU Commission President Jose Manuel Barroso said the ESM should be better able to help out troubled banks across national borders if need be. In the future, "the building blocks could include a banking union with integrated financial supervision and a single deposit guarantee scheme."

"Direct recapitalization by the ESM might be envisaged," the Commission's report said.

http://www.google.com/hostednews/ap/article/ALeqM5jzJH4H8Qmkh62X3XWBWZjNt9cN_w?docId=6780423279bf402c857be2ce96a611f5

No time frame given, and it's not clear in the article whether this recommendation will be considered in June.

Whether it will be retrospective or not is something that would need to be settled, but it would certainly be an improvement in future banking crises - at the cost of moral hazard for national banking regulation.

cordially,
Scofflaw

antoobrien · 30-05-2012 04:07PM

In its recommendations on how to deal with the financial crisis which has pushed the shared single currency to the brink, the Commission said it wants to boost cross-border management of banks, which are currently overseen by a patchwork of national regulators with different rules.

That's the biggest problem right there, which should have been addressed first when the crisis came up. The fact say Rabbo or RBS can operate under different rules here than they do in the Netherlands or UK leaves the various systems open for exploitation.

Hell HBOS coming into Ireland with cheep credit is a what kicked off the credit boom here. The competition in itself was not bad, but resulted in (credit check=no previous defaults, no checks on ability to pay) was catastrophic.

However I don't think that the 17 counties is enough. If we're in an open market situation we need the entire market playing off the same rules. If not, it opens the door to a repeat of HBOS in Ireland.

later12 · 30-05-2012 04:52PM

The idea has been around for a while and has been proposed by Barosso in the past. In many ways we already have a banking union, it just hasn't been formalised and tends to operate either via sovereign intermediaries or extraordinary ECB operations like LTRO and ELA.

I don't see any problem in formalizing the system by allocating responsibility to the ESM, I think it ought to be reasonably un-controversial - certainly less so than fiscal union.

But there must be some sort of realistic procedure for determining what banks can be allowed to fall, and how, and what Europe's obligations will be.

The document in which this and other proposals are made is available here
http://ec.europa.eu/europe2020/pdf/nd/swd2012_euroarea_en.pdf

I would just point out this is still just an EU Commission suggestion - it seems to be a personal favourite of Barosso himself. However, Barosso is also keen on Eurobonds and lots of other proposals that are facing difficult political opposition in the strongest European economies. So I would be reluctant to call this an EU proposal.

golden lane · 30-05-2012 04:56PM

Scofflaw wrote: »

http://www.google.com/hostednews/ap/article/ALeqM5jzJH4H8Qmkh62X3XWBWZjNt9cN_w?docId=6780423279bf402c857be2ce96a611f5

No time frame given, and it's not clear in the article whether this recommendation will be considered in June.

Whether it will be retrospective or not is something that would need to be settled, but it would certainly be an improvement in future banking crises - at the cost of moral hazard for national banking regulation.

cordially,
Scofflaw

no!!!!...please.

_Kaiser_ · 30-05-2012 05:09PM

Sounds like another layer of administration to me that won't achieve much more than is already possible (as per later12's post)

Most likely another sop for "the markets" to try and take pressure off Spain, but no doubt one that will be ignored as most of the other "measures" have been.

Facts are that the EU/Euro is a busted flush. There's too many fundamental flaws in the "one size fits all" approach they've tried to maintain, "austerity for the masses" (but not the elite/political classes of course!) is being rejected by those same masses, and there's too many internal/national agendas at play here for the concept to EVER work as it stands now.

The "market" knows it, the masses know it, and even the politicians know it.. but seeing as the latter group are the ones who benefit most from the status, power and untouchability of the setup - of course they're going to try to keep things going till the bitter end, regardless of what it does to their countries by then.

It's just a matter of when, not if, the whole house of cards comes down at this stage in my opinion. Sooner the better I say so we can all get on with the task of rebuilding rather than trying to kick the can a bit further down the road.. because we're rapidly running out of that road and heading for the cliff!

kennyb3 · 31-05-2012 04:05PM

Absolutely no chance of this happening - Merkel will tell them where to go.

Joint and several liability - i think not.

Euro bonds dressed up in another manner.

lmimmfn · 01-06-2012 10:55PM

has to happen including euro bonds, control over interbank flows of cash, followed by centrol control of taxes( i.e. the harmonisation we dread ). Otherwise the euro experiment is doomed.

hatrickpatrick · 03-06-2012 02:12PM

*facepalm*

When will the world stop trying to repair a ship which has never been structurally sound to begin with?

Scofflaw · 04-06-2012 10:09AM

hatrickpatrick wrote: »

*facepalm*

When will the world stop trying to repair a ship which has never been structurally sound to begin with?

What's "structurally unsound" about the euro, though? And please don't just say "several countries involved" or "different economic cycles", because frankly those aren't explanations in themselves.

I've asked in a number of threads what the supposedly obvious problems with the euro are, and so far the responses haven't impressed me. There's a crisis - OK, but you can't simply say "there's a crisis, some of the euro countries are in crisis, therefore there's a problem with the euro". That's not logic. And, yes, the euro undeniably had no crisis plan, lacking even the often self-defeating options open to national currencies and requiring public, ongoing and fraught multinational horsetrading, but that's an issue of response to the crisis.

The only really relevant points I've seen so far are: (a) a common interest rate created bubbles in some countries where the rate was inappropriately low; and (b) the market's appreciation of risk allowed sovereigns to borrow at inappropriately rates.

The second explanation, as far as I can see, really only applies to Greece (although one could perhaps argue it for Italy?),and isn't a feature of the euro itself, but an inappropriate market response to it.

The first explanation is highly popular and explains issues in more countries, but ignores the question of how countries could have responded to common interest rates, something which was hardly a surprise feature of the euro.

What am I missing?

cordially,
Scofflaw

forfuxsake · 04-06-2012 12:57PM

Scofflaw wrote: »

What's "structurally unsound" about the euro, though? And please don't just say "several countries involved" or "different economic cycles", because frankly those aren't explanations in themselves.

I've asked in a number of threads what the supposedly obvious problems with the euro are, and so far the responses haven't impressed me. There's a crisis - OK, but you can't simply say "there's a crisis, some of the euro countries are in crisis, therefore there's a problem with the euro". That's not logic. And, yes, the euro undeniably had no crisis plan, lacking even the often self-defeating options open to national currencies and requiring public, ongoing and fraught multinational horsetrading, but that's an issue of response to the crisis.

The only really relevant points I've seen so far are: (a) a common interest rate created bubbles in some countries where the rate was inappropriately low; and (b) the market's appreciation of risk allowed sovereigns to borrow at inappropriately rates.

The second explanation, as far as I can see, really only applies to Greece (although one could perhaps argue it for Italy?),and isn't a feature of the euro itself, but an inappropriate market response to it.

The first explanation is highly popular and explains issues in more countries, but ignores the question of how countries could have responded to common interest rates, something which was hardly a surprise feature of the euro.

What am I missing?

cordially,
Scofflaw

That nations who use it cannot devalue it(through QA) to become more competitive in economic recession.

coolshannagh28 · 04-06-2012 01:00PM

Scofflaw wrote: »

hatrickpatrick wrote: »

*facepalm*

When will the world stop trying to repair a ship which has never been structurally sound to begin with?

What's "structurally unsound" about the euro, though? And please don't just say "several countries involved" or "different economic cycles", because frankly those aren't explanations in themselves.

I've asked in a number of threads what the supposedly obvious problems with the euro are, and so far the responses haven't impressed me. There's a crisis - OK, but you can't simply say "there's a crisis, some of the euro countries are in crisis, therefore there's a problem with the euro". That's not logic. And, yes, the euro undeniably had no crisis plan, lacking even the often self-defeating options open to national currencies and requiring public, ongoing and fraught multinational horsetrading, but that's an issue of response to the crisis.

The only really relevant points I've seen so far are: (a) a common interest rate created bubbles in some countries where the rate was inappropriately low; and (b) the market's appreciation of risk allowed sovereigns to borrow at inappropriately rates.

The second explanation, as far as I can see, really only applies to Greece (although one could perhaps argue it for Italy?),and isn't a feature of the euro itself, but an inappropriate market response to it.
Relevant
The first explanation is highly popular and explains issues in more countries, but ignores the question of how countries could have responded to common interest rates, something which was hardly a surprise feature of the euro.

What am I missing?

cordially,
Scofflaw

The relevant points you have noticed in themselves will be enough to destroy the euro .
The euro has no mechanism to deal with peripheral imbalances, by the time they are in place the markets will have brought the euro down . If the markets have not, national tensions will destroy it .
Whether the euro is structurally unsound is really irrelevant, when perception is what matters right now .

Scofflaw · 04-06-2012 02:14PM

forfuxsake wrote: »

That nations who use it cannot devalue it(through QA) to become more competitive in economic recession.

Devaluation is a two-edged sword, though - in our case, it would make all our imports more expensive. Given that we import virtually all out energy at a time of already high oil prices, devaluation is unlikely to have been a route we would voluntarily have taken - but membership of the euro has, on the other hand, protected us from a currency crisis and forced devaluation.

More to the point I was making, though, is the fact that devaluation is, again, a crisis response (and one that can be made, although not by Ireland alone), when I was asking what features of the euro led us to the crisis.

cordially,
Scofflaw

Scofflaw · 04-06-2012 02:38PM

coolshannagh28 wrote: »

The relevant points you have noticed in themselves will be enough to destroy the euro .
The euro has no mechanism to deal with peripheral imbalances, by the time they are in place the markets will have brought the euro down . If the markets have not, national tensions will destroy it .
Whether the euro is structurally unsound is really irrelevant, when perception is what matters right now .

I'd certainly agree with the last point, but the points about 'market forces' and 'national tensions' have been being made repeatedly for,what, nearly 5 years now? Is the euro closer to breakup now than it was, and if so, how?

The 'peripheral imbalances' sound interesting - what are these, how do they build up, and how or why would they cause the destruction of the euro?

And, of course, same point as to forfuxsake - is this a feature of the euro that led us to where we are, as opposed to an outcome of the crisis and a feature of the response?

cordially,
Scofflaw

Amberman · 08-06-2012 12:42PM

Scofflaw wrote: »

What's "structurally unsound" about the euro, though?

What am I missing?

cordially,
Scofflaw

"Thatcher called the concept of the Euro - “perhaps the greatest folly of the modern era”. As Peter Osborne noted in the Telegraph back in 2010:

Right back in 1990, Mrs. Thatcher foresaw with painful clarity the devastation it was bound to cause. Her autobiography records how she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would “devastate their inefficient economies”.
It is as if, all those years ago, the British prime minister possessed a crystal ball that enabled her to foresee the catastrophic events of the past year or so in Ireland, Greece and Portugal. Indeed, it is one of the tragedies of European history that the world chose not to believe her."

There you go....you're now up to speed.

Edited to say: One thng that Thatcher missed was that Ireland is now among the top tier in Europe as Irish productivity has soared in the last 4 years in Ireland...we are now more productive than Germany and the Netherlands...but she couldn't have forseen Irelands radical transformation since 1990. This is one key metric which will help Ireland weather the storm better than most "PIIGS" and perhaps the reason we havent seen large scale social upheaval, tax collectors getting letter bombs...or banks fire-bombed like in other countries.

Scofflaw · 08-06-2012 01:27PM

Amberman wrote: »

"Thatcher called the concept of the Euro - “perhaps the greatest folly of the modern era”. As Peter Osborne noted in the Telegraph back in 2010:

Right back in 1990, Mrs. Thatcher foresaw with painful clarity the devastation it was bound to cause. Her autobiography records how she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would “devastate their inefficient economies”.
It is as if, all those years ago, the British prime minister possessed a crystal ball that enabled her to foresee the catastrophic events of the past year or so in Ireland, Greece and Portugal. Indeed, it is one of the tragedies of European history that the world chose not to believe her."

There you go....you're now up to speed.

Edited to say: One thng that Thatcher missed was that Ireland is now among the top tier in Europe as Irish productivity has soared in the last 4 years in Ireland...we are now more productive than Germany and the Netherlands...but she couldn't have forseen Irelands radical transformation since 1990. This is one key metric which will help Ireland weather the storm better than most "PIIGS" and perhaps the reason we havent seen large scale social upheaval, tax collectors getting letter bombs...or banks fire-bombed like in other countries.

In fact, Thatcher's comment is nothing like what happened at all - the "inefficient economies" were anything but devastated. On the contrary, they enjoyed perfectly reasonable growth in the euro. It seems likely that you're back-casting from the effects of the global crisis on a couple of these countries to claim the "devastation" in question, but without relating it to the euro other than through the quote.

But perhaps you can explain Mrs Thatcher's comment rather better? Show, perhaps, the devastation she envisaged in terms of depressed pre-crisis growth in the euro countries? Because, you know, looking at the growth rates of eurozone countries rather suggests that the "industrial powerhouses" like Germany had the least growth.

cordially,
Scofflaw

coolshannagh28 · 08-06-2012 02:55PM

Scofflaw wrote: »

coolshannagh28 wrote: »

The relevant points you have noticed in themselves will be enough to destroy the euro .
The euro has no mechanism to deal with peripheral imbalances, by the time they are in place the markets will have brought the euro down . If the markets have not, national tensions will destroy it .
Whether the euro is structurally unsound is really irrelevant, when perception is what matters right now .

I'd certainly agree with the last point, but the points about 'market forces' and 'national tensions' have been being made repeatedly for,what, nearly 5 years now? Is the euro closer to breakup now than it was, and if so, how?

The 'peripheral imbalances' sound interesting - what are these, how do they build up, and how or why would they cause the destruction of the euro?

And, of course, same point as to forfuxsake - is this a feature of the euro that led us to where we are, as opposed to an outcome of the crisis and a feature of the response?

cordially,
Scofflaw

Id say the euro must be very close to breakup much closer than 5 years ago . The volume of capital required to bail out Ireland Spain and Italy should ensure that . We may have a fudged 2 speed euro but it will not be the euro as we know it .
On peripherality ,it has been there for a couple of thousand years ,the euro project was an attempt to correct it by flooding the regions with cheap credit ,however we did not have the wit to invest it wisely and are now in a bind . If the core insists on getting its money back and it is not forthcoming how can the currency union survive unless the core takes a massive financial hit .
This would achieve the original aim of smoothing out peripherality but in an converse process to the intended, ie slowing the core .

antoobrien · 08-06-2012 03:04PM

coolshannagh28 wrote: »

On peripherality ,it has been there for a couple of thousand years ,the euro project was an attempt to correct it by flooding the regions with cheap credit

Couldn't be further from the truth. The cheap credit (3%-6%) happened because the French & German economies were sluggish. When they started picking up the interest rates started rising towards 6%.

The fact that Ireland needed 6% 3 years earlier to cap growth and inflation was irrelevant because we are such a small part of the whole.

The trick to the Euro is to have the correct monetary tools to correct these imbalances, without affected the value of the Euro.

Scofflaw · 08-06-2012 04:27PM

coolshannagh28 wrote: »

Id say the euro must be very close to breakup much closer than 5 years ago . The volume of capital required to bail out Ireland Spain and Italy should ensure that .

Or not, depending on what estimates one uses. I think a lot of people are guilty of taking the Irish bailout and scaling it up to the size of other economies.

coolshannagh28 wrote: »

We may have a fudged 2 speed euro but it will not be the euro as we know it .
On peripherality ,it has been there for a couple of thousand years ,the euro project was an attempt to correct it by flooding the regions with cheap credit ,however we did not have the wit to invest it wisely and are now in a bind . If the core insists on getting its money back and it is not forthcoming how can the currency union survive unless the core takes a massive financial hit .
This would achieve the original aim of smoothing out peripherality but in an converse process to the intended, ie slowing the core .

One could look at it another way, and suggest that perhaps core and peripheral countries need to respond differently, using a rather more imaginative toolbox. The problem seems to have been that countries could no longer reach for the interest rate lever, and failed to substitute anything else for it.

Actually, in a sense, that does highlight a particular problem, which is that the institutional architecture that governs national currencies has evolved to suit circumstances which are no longer the case.

Central bank independence is the result of the painful recognition that politicians in government will not act responsibly with monetary policy - they are liable to follow loose monetary policy in booms in order to achieve even greater growth rates, and print money like billy-ho in downturns. So the traditional main monetary growth-affecting tool - interest rates - was taken out of the hands of politicians and put into the hands of unelected officials in a central bank. Central banks, with their eyes on each other rather than the credit-hungry electorate, then pursued policies aimed at stability rather than popularity.

Come the euro, and this tool was removed from national control. Unfortunately, the reaction to this was inappropriate, because while there are other tools in the fiscal toolbox that could be used to stimulate or calm the economy, such as taxation arrangements, those tools were still in the hands of politicians. As we saw here in Ireland, that meant they were used in the traditional way politicians use such tools - to stimulate growth when growth was already high, and in inappropriate ways.

I don't know whether the Central Bank here thought about trying to assemble an alternative toolbox - I've seen no evidence that they did so during the Tiger - but they do appear to be doing so now. And I think that's vital, because the failure to change those national arrangements meant that national control of the economy's growth shifted back into political hands, reversing a shift born from painful previous experiences.

cordially,
Scofflaw

rumour · 08-06-2012 08:29PM

Scofflaw wrote: »

and (b) the market's appreciation of risk allowed sovereigns to borrow at inappropriately rates.

This is a very untypical ambiguous statement, but nonetheless insightful.
Do you think their appreciation was right considering socialisation of debt has to a large extent been the outcome?

golden lane · 08-06-2012 08:41PM

another stupid idea......europe is composed of different country's....they have not the same governments or people......they do not even care about each other...

their social costs are completely different......

thjere is now way on earth they are ready for such a drastic step.....

Godge · 08-06-2012 08:51PM

golden lane wrote: »

another stupid idea......europe is composed of different country's....they have not the same governments or people......they do not even care about each other...

their social costs are completely different......

thjere is now way on earth they are ready for such a drastic step.....

Which idea are you talking about that is stupid?

What drastic step do you mean?

In attempting to be clever with disconnected musings linked by ....... you make no sense.

coolshannagh28 · 08-06-2012 09:09PM

antoobrien wrote: »

coolshannagh28 wrote: »

On peripherality ,it has been there for a couple of thousand years ,the euro project was an attempt to correct it by flooding the regions with cheap credit

Couldn't be further from the truth. The cheap credit (3%-6%) happened because the French & German economies were sluggish. When they started picking up the interest rates started rising towards 6%.

The fact that Ireland needed 6% 3 years earlier to cap growth and inflation was irrelevant because we are such a small part of the whole.

The trick to the Euro is to have the correct monetary tools to correct these imbalances, without affected the value of the Euro.

Interest rates fell from 4.5 % in 2000 rapidly to 2% oneuro entry in 02 and remained at 2 % until 06 this may partly have been a result of 9.11 but at the time the euro was sold as a stable low interest currency. It suited everyone but we certainty went on a binge .
As far as tools to correct the imbalances there are none except capital transfers which are happening the hard way at the minute .

_Kaiser_ · 08-06-2012 09:18PM

Godge wrote: »

Which idea are you talking about that is stupid?

What drastic step do you mean?

In attempting to be clever with disconnected musings linked by ....... you make no sense.

He (I think) is referring to the point that this whole "single currency/single union" concept among a group of nations so socially, politically and economically diverse was flawed from the beginning.

Think about it.. most of Europe spent half of the last century blowing the other half up, and before that fighting to conquer the world ahead of their neighbors.
The whole idea that we are now "one big happy European family" is therefore relatively new and has proven to be unworkable in recent years as each nation looks out for their own interests - it's easy to be all buddy-buddy when times are good, but it's the tough times that show the strength of the relationships (or lack thereof), and on that score Europe has failed miserably in the past 4-5 years.

I do love the steadfast refusal of certain posters here to accept the reality that a "one size fits all" approach - politically, economically and socially - and the more recent "austerity for all some" demand hasn't and isn't working, especially when it's increasingly clear that that was never the real intention.

The last decade has been about keeping the major powers of Europe happy regardless of the needs of or impact to the "smaller weaker" members and now that things have gone pear shaped, those stronger members arrogantly insist the rest carry the can for those failed policies to save their own economies - it's like something you'd see Attenborough narrating when the runt of the litter is exiled/killed by his larger siblings or parents really... not very "happy family" though.

golden lane · 08-06-2012 09:22PM

Godge wrote: »

Which idea are you talking about that is stupid?

What drastic step do you mean?

In attempting to be clever with disconnected musings linked by ....... you make no sense.

you may not have noticed the state of the eu......or the euro....

stupid ideas....god ideas come to fruition...

mike65 · 08-06-2012 10:28PM

Tomorrow Spain will admit defeat and the Germans will be asked to bail out their banks. The government are denying it.

_Kaiser_ · 08-06-2012 11:29PM

mike65 wrote: »

Tomorrow Spain will admit defeat and the Germans will be asked to bail out their banks. The government are denying it.

No surprise really - our lot were still denying it as the IMF were walking around Dublin.

The funny thing is of course that neither they or the EU governing body are fooling anyone with this approach. The Euro is done and the sharks are circling.

Amberman · 08-06-2012 11:53PM

Scofflaw wrote: »

In fact, Thatcher's comment is nothing like what happened at all - the "inefficient economies" were anything but devastated. On the contrary, they enjoyed perfectly reasonable growth in the euro. It seems likely that you're back-casting from the effects of the global crisis on a couple of these countries to claim the "devastation" in question, but without relating it to the euro other than through the quote.

But perhaps you can explain Mrs Thatcher's comment rather better? Show, perhaps, the devastation she envisaged in terms of depressed pre-crisis growth in the euro countries? Because, you know, looking at the growth rates of eurozone countries rather suggests that the "industrial powerhouses" like Germany had the least growth.

cordially,
Scofflaw

Honestly...you are putting that graph forward to suggest that Greece, Italy and Spain had better growth than Germany? Did you even look at the graph?

OK...Thatchers waste land....I dont beleive she was talking about pre crisis....she foresaw the crisis itself...the current rate of unemployment? Does that count as bad? Im pretty sure she would have thought so.

Amberman · 09-06-2012 12:04AM

Scofflaw wrote: »

In fact, Thatcher's comment is nothing like what happened at all - the "inefficient economies" were anything but devastated. On the contrary, they enjoyed perfectly reasonable growth in the euro. It seems likely that you're back-casting from the effects of the global crisis on a couple of these countries to claim the "devastation" in question, but without relating it to the euro other than through the quote.

But perhaps you can explain Mrs Thatcher's comment rather better? Show, perhaps, the devastation she envisaged in terms of depressed pre-crisis growth in the euro countries? Because, you know, looking at the growth rates of eurozone countries rather suggests that the "industrial powerhouses" like Germany had the least growth.

cordially,
Scofflaw

"Devastation" = >20% youth unemployment. Maybe you have a different name for that level of unemployment?

If you are suggesting that uber efficient germany has lower than average productivity, I cordially (and hilariously) disagree!

However, if you are suggestigng that it has lower than average productivity growth, then I agree. A 4 minute mile man has less room for improvement than a 10 minute mile man...but even if the 10 minute mile man gets to 6, hes still way behind.

Do you understand why?

stringed theory · 09-06-2012 11:04AM

Kaiser2000 wrote: »

He (I think) is referring to the point that this whole "single currency/single union" concept among a group of nations so socially, politically and economically diverse was flawed from the beginning.

golden lane is making the basic eurosceptic nationalist point: we have nothing in common with each other in Europe. A small farmer in Ireland has more in common with a stock broker in Dublin than with a small farmer in Brittany. However, the small farmer in Ireland is typically assumed to have a lot in common with anyone in the USA or Australia. It is just a question of cultural prejudice, which most people do not feel nearly as strongly about as the europhobe. At least he didn't wrap it up in economic arguments.

Kaiser2000 wrote: »

Think about it.. most of Europe spent half of the last century blowing the other half up, and before that fighting to conquer the world ahead of their neighbors.
The whole idea that we are now "one big happy European family" is therefore relatively new and has proven to be unworkable in recent years

There are very few nation states that have always been one big happy family, without civil war and internal revolution. It is interesting to note that the US first became a "transfer union" about sixty years after its civil war.

Kaiser2000 wrote: »

I do love the steadfast refusal of certain posters here to accept the reality that a "one size fits all" approach - politically, economically and socially - and the more recent "austerity for all some" demand hasn't and isn't working, especially when it's increasingly clear that that was never the real intention.

The single market is a "one size fits all" approach that micromanages trading conditions all over Europe - and it works very well. The currency union can also work, if regulated properly.
BTY one of the purposes of the euro is to preserve this single market, and its existence keeps the nationalist reflex of imposing trade restrictions in times of difficulty off the agenda.

Scofflaw · 09-06-2012 11:40AM

rumour wrote: »

This is a very untypical ambiguous statement, but nonetheless insightful.
Do you think their appreciation was right considering socialisation of debt has to a large extent been the outcome?

Yes and no, I suppose, although "socialisation of debt" isn't really applicable to sovereign debt, and the rates in question were the sovereign rates.

To have lent to Greece at nearly the same sovereign rates as Germany certainly required the markets to be under the impression that the other eurozone economies would stand over Greek debts. To some extent they have done so, and an outright default has been avoided - but there has been "private sector involvement", so the extent to which the other economies would stand over Greek debts was over-estimated.

cordially,
Scofflaw

Scofflaw · 09-06-2012 11:57AM

Amberman wrote: »

Honestly...you are putting that graph forward to suggest that Greece, Italy and Spain had better growth than Germany? Did you even look at the graph?

No, I'm suggesting that if Thatcher's prediction had come true, the pattern of growth would be completely different. As it is, it's obvious that her prediction was rubbish.

Amberman wrote: »

OK...Thatchers waste land....I dont beleive she was talking about pre crisis....she foresaw the crisis itself...the current rate of unemployment? Does that count as bad? Im pretty sure she would have thought so.

That's mildly hilarious and a little bit sad, because it's very obvious she's not predicting a crisis but talking about a process.

Amberman wrote:

"Devastation" = >20% youth unemployment. Maybe you have a different name for that level of unemployment?

If you are suggesting that uber efficient germany has lower than average productivity, I cordially (and hilariously) disagree!

However, if you are suggestigng that it has lower than average productivity growth, then I agree. A 4 minute mile man has less room for improvement than a 10 minute mile man...but even if the 10 minute mile man gets to 6, hes still way behind.

Do you understand why?

Obviously. It doesn't change the inconvenient fact that the "inefficient economies" weren't "devastated" as per Thatcher's prediction until a global crisis - caused largely by exactly the kind of financial industry deregulation show herself pioneered (this time) - intervened and caused devastation across a very wide range of economies.

So, once again, a quote from some authority, or parroted sloganonomic theories like "one size fits all can't work" claiming there is a special crisis caused by the euro, fails to offer any explanation, and fails the most obvious and basic tests against observation. The euro didn't create the current crisis - it has certainly helped shape it for eurozone countries, and it is equally certainly dominating the response to the crisis by the eurozone countries, but claims that it is the cause of it are highly questionable.

cordially,
Scofflaw

EU proposes 'banking union'

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