Why are the British so anti Europe?

The Corinthian · 29-01-2013 10:31AM

NAP123 wrote: »

A lot of commentary over the weekend about the scare stories being propagated by the European Federalists.

Links?

One thing is certain after Camerons speech, the EU needs to change from a duopoly to an actual fair and equal Union of Sovereign States, if it is to survive.

That the EU needs to reform and change is pretty much agreed by everyone. What is not agreed is how this reform and change will look like or, as has been repeatedly claimed by some, that it inevitably will result in a collapse or abandonment of the EU.

NAP123 · 29-01-2013 12:39PM

The Corinthian wrote: »

Links?

That the EU needs to reform and change is pretty much agreed by everyone. What is not agreed is how this reform and change will look like or, as has been repeatedly claimed by some, that it inevitably will result in a collapse or abandonment of the EU.

48 Industry Chiefs in the UK signed a public letter endorsing Camerons speech including Diageo Chief Paul Walsh, Aidan Heavey of Tullow Oil, Ocado Chairman Sir Stewart Rose and Xtrata's Mick Davis.

Also getting endorsements from the likes of the L.S.E's Gwydion Prince and other eminent economists.

The reason some of us think that the EU or the Euro has a high liklihood of disintegration is based on the fact that the difference between the British point of view and that of the French/ German point of view are polar opposites.

One side is for a Federal States of Europe or a progression toward a Federal States of Europe and the other side is for a return to a Common Market/ Free Trade Zone.

My problem with our stance in this, is that our perilous economic condition and especially the quagmire that is our financial Industry, is being used to coerce us and even blackmail our Govts into supporting decisions, I do not think they would support if the banking system was not insolvent.

My opinion on the stance our Govt is taking differs to a lot of people here, purely because I believe in a certain way of dealing with bullies and others believe that they can be negotiated with.

For instance the ECB are refusing to write off the 31 billion promissory note and people say that they will refuse funding to the private Irish banking system as a punishment, if we just refused to repay.

The ECB are into to the private Irish Banking system for about 200 billion.

The private Irish Banking system is into the private European Banking system for about 1 trillion.

I doubt the ECB would risk the domino effect, for the sake of 31 billion.

But hey, that,s just my opinion.

View · 29-01-2013 01:01PM

NAP123 wrote: »

The reason some of us think that the EU or the Euro has a high liklihood of disintegration is based on the fact that the difference between the British point of view and that of the French/ German point of view are polar opposites.

None of whic points towards an EU or Euro disintegration. It may point to a UK withdrawal because the UK today can't accept that the EU is actually serious about trying to achieve its objectives - Objectives which the UK & other member states agreed the Union should pursue and which have not been altered in over 20 years (See Article 3 TEU).

NAP123 wrote: »

For instance the ECB are refusing to write off the 31 billion promissory note.

Those are the Promisory Notes owed to the Central Bank of Ireland? The ones which if not repaid will result in someone - almost certainly the Irish tax-payer - needing to bail out the CBI?

The Corinthian · 29-01-2013 01:04PM

I asked for some links so I can see this "lot of commentary over the weekend about the scare stories being propagated by the European Federalists" you cited. Unsurprisingly, no links forthcoming, so I'll just presume that it's another porkie until I see some evidence.

NAP123 wrote: »

48 Industry Chiefs in the UK signed a public letter endorsing Camerons speech including Diageo Chief Paul Walsh, Aidan Heavey of Tullow Oil, Ocado Chairman Sir Stewart Rose and Xtrata's Mick Davis.

Yes, they're endorsing the position that the EU needs to decrease the amount of red tape and regulation which they contend is harming enterprise. I can understand and don't actually entirely disagree with their or even Cameron's position. But their position isn't actually for exiting the EU, but for reform of the EU, with an exit representing only a final option, if all else fails.

The reason some of us think that the EU or the Euro has a high liklihood of disintegration is based on the fact that the difference between the British point of view and that of the French/ German point of view are polar opposites.

Are these popular views or government views? In both cases you'll find that they're not all that different.

One side is for a Federal States of Europe or a progression toward a Federal States of Europe and the other side is for a return to a Common Market/ Free Trade Zone.

I hate to mention it, but this was the express ultimate aim of the EEC when Britain joined in 1973. No one made any secret about it in Europe - so if Britain was contrary to this, why did she join in the first place?

My opinion on the stance our Govt is taking differs to a lot of people here, purely because I believe in a certain way of dealing with bullies and others believe that they can be negotiated with.

Yet you seem to have little problem with Britain's threat to leave the EU if the rest of the bloc do not agree to the British vision for the bloc, as opposed to the aforementioned vision that pre-dates Britain's entry.

So German or French bullying is bad, but British bullying is good?

NAP123 · 29-01-2013 02:28PM

View wrote: »

None of whic points towards an EU or Euro disintegration. It may point to a UK withdrawal because the UK today can't accept that the EU is actually serious about trying to achieve its objectives - Objectives which the UK & other member states agreed the Union should pursue and which have not been altered in over 20 years (See Article 3 TEU).

Those are the Promisory Notes owed to the Central Bank of Ireland? The ones which if not repaid will result in someone - almost certainly the Irish tax-payer - needing to bail out the CBI?

On your first point.

Treaties, throughout history have been made, changed and broken. Circumstances, Governments, ideologies, change all of the time. So there is absolutely nothing to prevent the EU or the Euro from disintegrating.

Just as some in Europe are trying to use the current financial crisis to coerce others into further Union, opposition parties and even anti Europe parties are growing in popularity.

On your second point.

The Irish taxpayers are already paying for the prommisory notes invented to bailout private bondholders in a private merchant bank.

NAP123 · 29-01-2013 02:34PM

The Corinthian wrote: »

I asked for some links so I can see this "lot of commentary over the weekend about the scare stories being propagated by the European Federalists" you cited. Unsurprisingly, no links forthcoming, so I'll just presume that it's another porkie until I see some evidence.

Yes, they're endorsing the position that the EU needs to decrease the amount of red tape and regulation which they contend is harming enterprise. I can understand and don't actually entirely disagree with their or even Cameron's position. But their position isn't actually for exiting the EU, but for reform of the EU, with an exit representing only a final option, if all else fails.

Are these popular views or government views? In both cases you'll find that they're not all that different.

I hate to mention it, but this was the express ultimate aim of the EEC when Britain joined in 1973. No one made any secret about it in Europe - so if Britain was contrary to this, why did she join in the first place?

Yet you seem to have little problem with Britain's threat to leave the EU if the rest of the bloc do not agree to the British vision for the bloc, as opposed to the aforementioned vision that pre-dates Britain's entry.

So German or French bullying is bad, but British bullying is good?

Whether you believe me or not does not bother me, to be honest.

As for Britain threatening to leave the EU if it does not agree to Britains vdersion of the future of the EU, I don,t think you actually listened to David Camerons speech.

Or maybe you just did'nt believe him because he did'nt supply you with a sufficient amount of links?

Scofflaw · 29-01-2013 02:58PM

NAP123 wrote:

The ECB are into to the private Irish Banking system for about 200 billion.

The private Irish Banking system is into the private European Banking system for about 1 trillion.

I doubt the ECB would risk the domino effect, for the sake of 31 billion.

But hey, that,s just my opinion.

It does appear to be, certainly in the matter of the figures. Have you a source for those, or are they off the top of your head?

Last data available (end November), the covered banks were into the ECB for €55bn of support, and their eurozone holdings were about €10bn - Central Bank figures. Those are tiny dominoes.

cordially,
Scofflaw

The Corinthian · 29-01-2013 02:58PM

NAP123 wrote: »

Whether you believe me or not does not bother me, to be honest.

I don't really care if it bothers you or not. But I'm not going to stay silent while you repeatedly make dubious claims that you refuse to back up and let others be taken in by such soapboxing.

As for Britain threatening to leave the EU if it does not agree to Britains vdersion of the future of the EU, I don,t think you actually listened to David Camerons speech.

I did, the threat was pretty clear:

"There are always voices saying: "Don't ask the difficult questions." But it's essential for Europe - and for Britain - that we do because there are three major challenges confronting us today.

"First, the problems in the eurozone are driving fundamental change in Europe. Second, there is a crisis of European competitiveness, as other nations across the world soar ahead. And third, there is a gap between the EU and its citizens which has grown dramatically in recent years. And which represents a lack of democratic accountability and consent that is - yes - felt particularly acutely in Britain.

"If we don't address these challenges, the danger is that Europe will fail and the British people will drift towards the exit."

That's a pretty clear threat that if Britain does not get it's way on a number of issues it will likely seek to leave.

View · 29-01-2013 03:26PM

NAP123 wrote: »

On your first point.

Treaties, throughout history have been made, changed and broken. Circumstances, Governments, ideologies, change all of the time. So there is absolutely nothing to prevent the EU or the Euro from disintegrating.

They do indeed change - in the case of the EU Treaties roughly once a decade or so as it seeks to define its various "operating mechanisms" (as opposed to its objectives).

None of which makes the case for the EU disintegrating because all we have so far is the UK has a vague but undefined discontent at the EU pursuing objectives the UK agreed it should pursue. A problem whose solution lies in the UK's court as it is up to them to either figure out a mutually agreeable solution or pursue an exit.

NAP123 wrote: »

Just as some in Europe are trying to use the current financial crisis to coerce others into further Union, opposition parties and even anti Europe parties are growing in popularity.

There is a fundamental difference between opposition parties growing in popularity and anti Europe parties growing in popularity. Most of those are and remain fringe parties.

NAP123 wrote: »

On your second point.

The Irish taxpayers are already paying for the prommisory notes invented to bailout private bondholders in a private merchant bank.

The reason why they were invented isn't relevant at this stage as that is past history.

The taxpayer is on the hook as this is how the current payments go:

The State -> (State owned) IBRC -> (State owned) CBI

And, the CBI would need bailing out by the tax-payer if that transaction doesn't happen.

NAP123 · 30-01-2013 01:47AM

Scofflaw wrote: »

It does appear to be, certainly in the matter of the figures. Have you a source for those, or are they off the top of your head?

Last data available (end November), the covered banks were into the ECB for €55bn of support, and their eurozone holdings were about €10bn - Central Bank figures. Those are tiny dominoes.

cordially,
Scofflaw

If they are that small, why should we be worried about them?

Are they the current deposits in the covered banks?

Any word on the replacement of the corporate deposits that fled the country in 2009/2010?

Don,t tell me that all of those deposits have come flooding back and we have not been told, by a Govt that only survives on propaganda.

If the banks owe the ECB 50 billion and our Govt can default on 64 billion of private bank debt, surely we have the upper hand and not the ECB?

But you know that is not the case, don't you?

SiegfriedsMum · 30-01-2013 07:45AM

NAP123 wrote: »

One thing is certain after Camerons speech, the EU needs to change from a duopoly to an actual fair and equal Union of Sovereign States, if it is to survive.

Certainly the EU needs to change if it is to survive and/or progress, and the Euro fiasco has shown how it is unfit to lead anything with its disasterous introduction of the Euro and its disasterous inability to resolve the issues crippling the EU due to the flaws in the Euro.

Scofflaw · 30-01-2013 09:34AM

NAP123 wrote: »

If they are that small, why should we be worried about them?

Who was worrying about them?

NAP123 wrote: »

Are they the current deposits in the covered banks?

What? No, they're the extent that the covered banks are into the ECB, and their eurozone holdings in general. The figures you quoted were off the wall.

NAP123 wrote: »

Any word on the replacement of the corporate deposits that fled the country in 2009/2010?

Don,t tell me that all of those deposits have come flooding back and we have not been told, by a Govt that only survives on propaganda.

If the banks owe the ECB 50 billion and our Govt can default on 64 billion of private bank debt, surely we have the upper hand and not the ECB?

But you know that is not the case, don't you?

Well, yes, it's not the case, but that seems to be down to you using made-up figures and stating things I haven't said - which does leave you with a pretty open goal on that score.

Currently, deposits in the covered banks stand at €219.4bn, of which the majority (€159.75bn) is now Irish. The rest is eurozone (€2.8bn) and rest of world (€56.86bn). There are bonds outstanding worth €36.5bn, with, again, the majority Irish (€21.6bn), the rest eurozone (€7.8bn) and rest of world (€7.1bn).

I'm not sure what you're claiming we could default on. Are you saying we could stiff the non-Irish depositors? If so, why is that going to bother the ECB?

cordially,
Scofflaw

McDave · 31-01-2013 09:05PM

SiegfriedsMum wrote: »

Certainly the EU needs to change if it is to survive and/or progress, and the Euro fiasco has shown how it is unfit to lead anything with its disasterous introduction of the Euro and its disasterous inability to resolve the issues crippling the EU due to the flaws in the Euro.

Disastrous? Hardly!

First of all, it was a pretty nifty piece of political manouevring to get a single currency onto the agenda though Maastricht. Getting countries to actually sign up was a massive vote of confidence as well.

Even with the extent of the crisis, the Euro has fared pretty well to date, and public authorities are playing a sophisticated game.

I wouldn't be pessimistic about its prospects at all. Indeed I think the Euro is being forged under circumstances which will ensure it endures.

SiegfriedsMum · 01-02-2013 08:23AM

McDave wrote: »

Disastrous? Hardly!

First of all, it was a pretty nifty piece of political manouevring to get a single currency onto the agenda though Maastricht. Getting countries to actually sign up was a massive vote of confidence as well.

Even with the extent of the crisis, the Euro has fared pretty well to date, and public authorities are playing a sophisticated game.

I wouldn't be pessimistic about its prospects at all. Indeed I think the Euro is being forged under circumstances which will ensure it endures.

I hope you are right that the authorities are playing a sophisticated game, although the evidence for that is pretty thin.

The structural flaws in the Euro have not been addressed, and until they are resolved the problems will continue. Simply pretending the Euro has fared well to date ( tell that to the Greeks and the Spanish etc etc) seems to not face up to the evidence. Its obvious you are not a pessimist and are something of an optimist. I hope I am more of a realist.

Scofflaw · 01-02-2013 09:23AM

SiegfriedsMum wrote: »

I hope you are right that the authorities are playing a sophisticated game, although the evidence for that is pretty thin.

The structural flaws in the Euro have not been addressed, and until they are resolved the problems will continue. Simply pretending the Euro has fared well to date ( tell that to the Greeks and the Spanish etc etc) seems to not face up to the evidence. Its obvious you are not a pessimist and are something of an optimist. I hope I am more of a realist.

What are the "structural flaws" in the euro that haven't been addressed? Is it the shielding from market discipline, or were you thinking of something else?

cordially,
Scofflaw

SiegfriedsMum · 01-02-2013 12:41PM

Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline

Fatal Flaw #2: Profits Are Private, Losses Are Public

Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital

Thats three for starters. Are you really serious by asking, or are you really saying that your view is that the Euro is pretty good, and has no serious flaws as a currency?

Scofflaw · 01-02-2013 01:28PM

SiegfriedsMum wrote: »

Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline

Fatal Flaw #2: Profits Are Private, Losses Are Public

Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital

Thats three for starters. Are you really serious by asking, or are you really saying that your view is that the Euro is pretty good, and has no serious flaws as a currency?

The former - I have my own fairly frequently-stated views on the euro's flaws, but I'm wary of the current wisdom that there must be something wrong with the euro because, well, there's "obviously something wrong".

Taking the above list, #1 looks like two separate issues - toothless fiscal discipline is certainly the case, but I'm not sure why you've put it in with "expanded private credit", or why that's a euro thing, or a problem.

#2 is nothing to do with the euro, and is a reflection of bank failures, which would be true with or without the euro - I would have thought that was rather obvious, given that the UK is in exactly the same position.

#3 is very popular - perhaps the most popular - but falls down on a couple of grounds. First, real interest rates were low everywhere, not just the eurozone. Second, even high interest rates don't prevent misallocation of capital, as per Iceland. Third, although interest rates were - by definition - the same across the eurozone, not every eurozone country went on to misallocate capital.

It's common to refer to a "eurozone crisis" or "euro crisis", but it's highly misleading, because there isn't a specific eurozone crisis - there's a general crisis, with countries both in and out of the eurozone hit in very similar ways, Iceland and the UK being the most obvious examples, with the US so obvious it almost doesn't get mentioned, while some eurozone countries either aren't in crisis, or are only, like Italy, in the same position as they always are, but affected by contagion. And the form which problems have taken even within the eurozone varies very much from country to country, from Greece's massive sovereign fraud to Ireland's massive bank rescue - which suggests that much of what gets put down to "the euro" is actually a set of disparate national problems.

What's particular about the eurozone is the shape of crisis response rather than crisis, because many of the traditional monetary response levers are in joint hands rather than available to individual governments or national central banks, while the joint responsibility and interconnectedness has produced joint sovereign rescue efforts - although, again, those would almost certainly have happened even without the euro. The necessity and inevitability of a joint response has also highlighted the complete absence of any original crisis plan for the eurozone, which to my mind remains the biggest 'structural flaw', and one which is not really being properly addressed.

cordially,
Scofflaw

Solair · 01-02-2013 01:43PM

I think though we all need to be a bit more pragmatic about the EU.

Ireland's historically been a bit over-enthusiastic about it (especially our political classes) and the UK's been a bit hysterically Euro-sceptic at times.

We needs something in the middle where we're involved, but not at any cost and ask all the right questions and insist on democratic accountability.

FF, FG and Labour tend not to really see any downsides to some of what the EU does.

I would describe myself as pragmatically pro-european (with a small e). There's no doubt though that it needs reform in terms of making it less remote and more accountable (directly) to the electorate.

We seem to be moving towards a federation by function creep instead of by proper consent.

As over the top as the UK can be about Euroscepticism, at least it is making people think about what direction it's going and if that's really where and how we want to do things.

getz · 01-02-2013 01:52PM

why am i not suprised that no one on this thread has picked up on french minister michel sapins statement that france is totally backrupt, a poll in the le figaro showed that 80% of its readers agreed with him,all is not well in the EU and it is in need of a real change,

SiegfriedsMum · 01-02-2013 01:54PM

Scofflaw wrote: »

Taking the above list, #1 looks like two separate issues - toothless fiscal discipline is certainly the case, but I'm not sure why you've put it in with "expanded private credit", or why that's a euro thing, or a problem.

Sure, treat it as two issues if you prefer. I put them together because part of the flaws we have seen with the Euro was greatly expanded private credit which was encouraged and made vastly worse by toothless fiscal discipline.

Scofflaw wrote: »

#2 is nothing to do with the euro, and is a reflection of bank failures, which would be true with or without the euro - I would have thought that was rather obvious, given that the UK is in exactly the same position.

It may well be you judge the ECB did not oversee the system where private debt was transferred to the public purse in an effort to save the Euro and save the banking system.

To me, that's a major flaw. You may judge otherwise.

Scofflaw wrote: »

#3 is very popular - perhaps the most popular - but falls down on a couple of grounds. First, real interest rates were low everywhere, not just the eurozone. Second, even high interest rates don't prevent misallocation of capital, as per Iceland. Third, although interest rates were - by definition - the same across the eurozone, not every eurozone country went on to misallocate capital.

It was the inability of individual states to control their own interest rates which was a large contributor to the problem we now see in Greece and Spain and Italy and Ireland etc. The "one size fits all" interest rate demanded by the Euro doesn't work, as we have seen, hence it must be judged a structural flaw.

Scofflaw wrote: »

It's common to refer to a "eurozone crisis" or "euro crisis", but it's highly misleading, because there isn't a specific eurozone crisis - there's a general crisis, with countries both in and out of the eurozone hit in very similar ways, Iceland and the UK being the most obvious examples, with the US so obvious it almost doesn't get mentioned, while some eurozone countries either aren't in crisis, or are only, like Italy, in the same position as they always are, but affected by contagion. And the form which problems have taken even within the eurozone varies very much from country to country, from Greece's massive sovereign fraud to Ireland's massive bank rescue - which suggests that much of what gets put down to "the euro" is actually a set of disparate national problems.

Again, you seem to not consider that the flaws in the euro had any bearing on the problems, and not recognice it was the inability of member states to cool their economies, because the introduction of the Euro deprived individual countries of the ability to use interest rates to dampen their individual economies.

Scofflaw wrote: »

What's particular about the eurozone is the shape of crisis response rather than crisis, because many of the traditional monetary response levers are in joint hands rather than available to individual governments or national central banks, while the joint responsibility and interconnectedness has produced joint sovereign rescue efforts - although, again, those would almost certainly have happened even without the euro. The necessity and inevitability of a joint response has also highlighted the complete absence of any original crisis plan for the eurozone, which to my mind remains the biggest 'structural flaw', and one which is not really being properly addressed.

Unfortunately, when it comes to interest rates, there is no joint response because the interest rates which are right for Germany are not right for Greece, and vice versa. No amount of joint hands can square that circle, as we have seen, hence its a structural problem which seems to have no resolution.

View · 01-02-2013 02:45PM

Solair wrote: »

I think though we all need to be a bit more pragmatic about the EU.

Ireland's historically been a bit over-enthusiastic about it (especially our political classes) and the UK's been a bit hysterically Euro-sceptic at times.

We needs something in the middle where we're involved, but not at any cost and ask all the right questions and insist on democratic accountability.

FF, FG and Labour tend not to really see any downsides to some of what the EU does.

Well, those comments are incorrect.

Ireland, for instance, bitterly opposed efforts to develop a "single European mortgage market" when that idea was mooted by the Commission a decade or so ago. Our existing mortgage system was hailed by our government as being better for us (although the "us" may not have been the tax-payer I suspect). That worked out well, didn't it?

Likewise, just mention the phrase "Common Consolidated Tax Base" and our political reaction is akin to that of a rabid dog (never mind that a "Base" is not the same as a "Rate" with VAT being a perfect example of the difference between the two).

Solair wrote: »

As over the top as the UK can be about Euroscepticism, at least it is making people think about what direction it's going and if that's really where and how we want to do things.

A debate founded on active misrepresentation of the EU is, by definition, not going to be an accurate one nor is it likely to draw correct conclusions.

View · 01-02-2013 03:02PM

SiegfriedsMum wrote: »

It may well be you judge the ECB did not oversee the system where private debt was transferred to the public purse in an effort to save the Euro and save the banking system.

To me, that's a major flaw. You may judge otherwise.

Given, that the non-Euro EU member states pursued the same strategy, it is hard to see how the ECB is supposed to be blame for this. Is the Bank of England a front for the ECB or something?

SiegfriedsMum wrote: »

It was the inability of individual states to control their own interest rates which was a large contributor to the problem we now see in Greece and Spain and Italy and Ireland etc. The "one size fits all" interest rate demanded by the Euro doesn't work, as we have seen, hence it must be judged a structural flaw.

A great theory, if we discount:

1) the UK which has managed to have the fourth (or fifth) worst budget deficit in the EU despite having the magic "control our own interest rate" option as its disposal, and,

2) all the Eurozone member states which have managed to run smaller deficits than the UK despite the lack of the interest rate "magic option", and,

3) provided we forget about Iceland, Hungary, Romania and Latvia, all of whom with the "magic option" at their disposal, have had the IMF in over the last few years...

Scofflaw · 01-02-2013 03:13PM

SiegfriedsMum wrote: »

Sure, treat it as two issues if you prefer. I put them together because part of the flaws we have seen with the Euro was greatly expanded private credit which was encouraged and made vastly worse by toothless fiscal discipline.

I don't think the two are related - fiscal discipline doesn't prevent private credit expansion, and I'm not sure how one might come to link those in that way? Ireland, for example, was extremely fiscally disciplined prior to the crash by all the usual indicators, but obviously had a huge expansion of private credit.

SiegfriedsMum wrote: »

It may well be you judge the ECB did not oversee the system where private debt was transferred to the public purse in an effort to save the Euro and save the banking system.

To me, that's a major flaw. You may judge otherwise.

The ECB had a hand in that as its price for some support, certainly, but the vast majority of it was standard national operating procedure for bank rescues. As I said, the UK is in the same boat, and for the same reasons as us - nothing to do with the ECB. In our case, the ECB seems to have insisted on us honouring the last remaining bits of senior debt on our books come the bailout, but we'd already paid off 85%+ under our own steam (under our own guarantee), and, to be honest, the information we have to hand about the negotiations there suggests that it wasn't so much a case of the ECB making a reluctant Ireland take on the last €8bn or so in senior debt as making it clear that Ireland wouldn't get to hide behind the ECB to burn it.

So, yes, I judge differently, because bank rescues have worked out pretty much the same wherever they've been, ECB or no ECB, and in line with the historical behaviour of each country - neither we nor the UK have ever let banks fail, and indeed, neither country even had (or in our case has) a bank resolution mechanism. The main exceptions have been very small banks, which have been let go to the wall in a few cases, and Iceland, which couldn't save its banks even though it did want to.

SiegfriedsMum wrote: »

It was the inability of individual states to control their own interest rates which was a large contributor to the problem we now see in Greece and Spain and Italy and Ireland etc. The "one size fits all" interest rate demanded by the Euro doesn't work, as we have seen, hence it must be judged a structural flaw.

Er, no, the common interest rate has nothing to do with the problems in Greece. Greece didn't have a property bubble, nor a banking crash - it quite simply borrowed more than it should have done, and on false pretences. The euro-related failures that highlights are actually the failure of markets to treat euro members separately in risk terms (the "euro convergence"), which was a choice on the part of the markets, and the very weak insight into national accounts involved in euro entry.

SiegfriedsMum wrote: »

Again, you seem to not consider that the flaws in the euro had any bearing on the problems, and not recognice it was the inability of member states to cool their economies, because the introduction of the Euro deprived individual countries of the ability to use interest rates to dampen their individual economies.

Unfortunately, when it comes to interest rates, there is no joint response because the interest rates which are right for Germany are not right for Greece, and vice versa. No amount of joint hands can square that circle, as we have seen, hence its a structural problem which seems to have no resolution.

Sure - but I view things differently for quite a few reasons, which lead to me to one main point of difference.

First, there was a global property boom, not just a eurozone one (and not even a eurozone-wide one, even in those countries with low real interest rates), which suggests that the expansion of credit was a global phenomenon which probably would have affected eurozone countries even in the absence of the euro.

Second, as it turns out since the property crash, there were all kinds of things that the government (and Spain's government) could have done, and are now talking about doing. Spain, for example, has suggested lowering the loan to value ratios on mortgages during booms, automatically limiting the extension of credit - and our own central bank has suggested the same. These measures were not unavailable during the bubble, they just weren't even thought of.

Third, and building on the second, those tools that were in the hands of the Irish government were all used to stoke the bubble, not to cool it. Planning laws could have been tightened - they weren't, they were loosened, and government TDs mounted a media campaign against bodies like An Taisce who were seen as getting in the way of development. Tax breaks could have been directed away from property - they weren't, they were relentlessly directed into property, from FTB grants to mortgage relief to seaside development breaks. Policy and public statements all encouraged people to get on the property ladder, to get into property, with no apparent recognition that there might be problems down the line.

Fourth, following from third, there's no evidence that, had the government had control of interest rates, it would have used them to cool the bubble - the evidence points directly the other way.

Fifth, control over our own interest rates almost certainly wouldn't have prevented the bubble, because there are a variety of bubble drivers in addition to cheap credit. The most rational one is rising employment and income expectations, the most irrational one is that people only use a 2-3 year window for gauging asset price movement as well as income expectations. This can be seen in Iceland's case, where there was a property bubble despite quite high real interest rates.

Sixth, again, control over our own interest rates probably wouldn't have resulted in adequately high interest rates anyway, because interest rates are a very blunt tool which impact everybody, whether they're borrowing for a house or borrowing for business expansion.

Overall, then, I'd agree that the single interest rate produces a disparity in real interest rates, and that low real interest rates are a driver of credit expansion and, that, in turn, produces the risk of credit misallocation such as property bubbles. Where we differ is in viewing the eurozone member states as helpless to respond to that. What I see is that Ireland, like several other states, failed to respond properly to a perfectly well signposted outcome of the euro. Not only did Ireland fail to respond properly, it responded in perverse ways that made the problem worse, not only in respect of the boom, but in respect of the bust - as a vote-chasing exercise, the government progressively balanced the tax take on consumption taxes and in particular on property-related stamp duty.

The single interest rate is certainly a structural property of the euro - and an ineradicable one, too - and, seeing as the euro doesn't seem to have dissolved as expected, it looks like one we're stuck with. That means that national governments have to work out how to respond in such a way that the single interest rate doesn't have a negative impact - and suddenly they are finding they do have ways to do that. Not new ways, either, but tools that have been available all along, had anyone been looking for them. Importantly, though, nobody was.

That, in turn, implies very simply that they could have responded properly from 1999 onwards, but didn't - and that, in turn, implies that the problems you identify aren't the result of the single interest rate, but the result of inadequate national responses to the challenges it poses.

As I've said elsewhere, there's a strong danger that simplistic narratives about the crisis are clouding the important lessons to be learned. Thus the idea that the single interest rate is a problem in itself, and one which needs to be "solved" in itself, by some distant agreement somewhere we bear no responsibility for, then, is to me a very dangerous one, because it completely ignores the importance of government response to the single interest rate. The single interest rate is an integral part of the euro, the euro doesn't seem to be going away, and we, as citizens, therefore need to pay attention to whether our government is responding to it properly, rather than believing it's something we, and they, can do nothing about.

cordially,
Scofflaw

SiegfriedsMum · 01-02-2013 06:33PM

Scofflaw wrote: »

I don't think the two are related - fiscal discipline doesn't prevent private credit expansion, and I'm not sure how one might come to link those in that way? Ireland, for example, was extremely fiscally disciplined prior to the crash by all the usual indicators, but obviously had a huge expansion of private credit.

I am somewhat daunted by the length of your response, but will do my best to reply.

In the example of Ireland, the fiscal policy of the banks was to borrow money cheaply abroad, and then lend it here, increasingly to worse and worse risks. Nothing in the fiscal policy, or fiscal practice, of either the Irish authorities, the ECB or the EU acted to prevent this, and in face we all remember the words of the former Taoiseach who effectively tried to silence any criticism of that lack of action.

To judge that Ireland was extremely fiscally disciplined prior to the crash seems unusual, although you don’t specifically say it’s in relation to policy or practice regarding bank lending.

Scofflaw wrote: »

The ECB had a hand in that as its price for some support, certainly, but the vast majority of it was standard national operating procedure for bank rescues. As I said, the UK is in the same boat, and for the same reasons as us - nothing to do with the ECB. In our case, the ECB seems to have insisted on us honouring the last remaining bits of senior debt on our books come the bailout, but we'd already paid off 85%+ under our own steam (under our own guarantee), and, to be honest, the information we have to hand about the negotiations there suggests that it wasn't so much a case of the ECB making a reluctant Ireland take on the last €8bn or so in senior debt as making it clear that Ireland wouldn't get to hide behind the ECB to burn it.

So, yes, I judge differently, because bank rescues have worked out pretty much the same wherever they've been, ECB or no ECB, and in line with the historical behaviour of each country - neither we nor the UK have ever let banks fail, and indeed, neither country even had (or in our case has) a bank resolution mechanism. The main exceptions have been very small banks, which have been let go to the wall in a few cases, and Iceland, which couldn't save its banks even though it did want to.

Whatever happened, under the Euro private debt has become public debts. We are told this was necessary to save the Euro and save the banking system, but it is unheard of anywhere outside the Eurozone.

In the USA, countless banks have been let fail in recent years with no suggestion that their debts should be transferred to the public purse. The USA banking system is in rude good health, and probably in better health than the European banking system. The difference is, we are told, we need to transfer private debt to the taxpayers to save the Euro and the banking system.

Scofflaw wrote: »

Er, no, the common interest rate has nothing to do with the problems in Greece. Greece didn't have a property bubble, nor a banking crash - it quite simply borrowed more than it should have done, and on false pretences. The euro-related failures that highlights are actually the failure of markets to treat euro members separately in risk terms (the "euro convergence"), which was a choice on the part of the markets, and the very weak insight into national accounts involved in euro entry.

Greece is not the only country in the Euro. If it’s your judgment that the brake of interest rates is not a useful tool to prevent, in the case of Ireland and Spain, runaway property bubbles, then that’s your view. However, it is a tool used successfully by governments across the world for many decades. Due to being members of the Euro, individual countries gave up the ability to control their own interest rates.

Hence it’s a structural flaw which has not yet been addressed.

Scofflaw wrote: »

Sure - but I view things differently for quite a few reasons, which lead to me to one main point of difference.

First, there was a global property boom, not just a eurozone one (and not even a eurozone-wide one, even in those countries with low real interest rates), which suggests that the expansion of credit was a global phenomenon which probably would have affected eurozone countries even in the absence of the euro.

Again you miss the point. What was important was not a rise in house and land prices, but the amount of the increase. In Ireland the increase was vastly higher than in most other countries, and that’s the point you seem to miss. Ireland as a country was powerless to stop it because (a) it couldn’t control its interest rates thanks to the Euro (b) it made the mistake of not regulating the banks lending criteria more strictly and (c) the government was getting fat on the taxes it all generated and was openly hostile to criticism.

Scofflaw wrote: »

Second, as it turns out since the property crash, there were all kinds of things that the government (and Spain's government) could have done, and are now talking about doing. Spain, for example, has suggested lowering the loan to value ratios on mortgages during booms, automatically limiting the extension of credit - and our own central bank has suggested the same. These measures were not unavailable during the bubble, they just weren't even thought of.

Every time after a boom governments make the same suggestion. In an open market it’s probably not possible or even desirable for a government to dictate lending criteria to banks. Governmenst generally tend to make a mess of things, and in any case it’s possible to borrow from a bank which is offshore and avoid any government attempts to restrict borrowing at home. Banks tend to be quite clever about that sort of thing.

Besides, when the boom is past, the government always tend to become more lax again about this sort of suggestion, and off it all goes again.

Historically, interest rates were the best lever to use to dampen the economy, and if you knew you have to pay interest rates of 10 or 15%, then that’s a very good method of stopping you paying €1.5 million for a 3 bed house, when the interest bill alone every year will be €150 000 on the property.

Scofflaw wrote: »

Third, and building on the second, those tools that were in the hands of the Irish government were all used to stoke the bubble, not to cool it. Planning laws could have been tightened - they weren't, they were loosened, and government TDs mounted a media campaign against bodies like An Taisce who were seen as getting in the way of development. Tax breaks could have been directed away from property - they weren't, they were relentlessly directed into property, from FTB grants to mortgage relief to seaside development breaks. Policy and public statements all encouraged people to get on the property ladder, to get into property, with no apparent recognition that there might be problems down the line.

That’s exactly my point, governments are great at talking the talk after booms, but not before or during them.

Scofflaw wrote: »

Fourth, following from third, there's no evidence that, had the government had control of interest rates, it would have used them to cool the bubble - the evidence points directly the other way.

I’m afraid that’s where you are incorrect. There are decades of evidence of interest rates being used to dampen the economy in times when it’s judged necessary. It is extraordinary that you seem to believe that interest rates are of no use to a government when trying to prevent an overinflated economy. If its your position that, for example, Alan Greenspan, or Nigel Lawson never used interest rates in that way, then that’s your position. However they would differ with you.

I am actually astonised that someone of you otherwise apparent intelligence would apparently try to make such an argument, that interest rates have no place to play for a government to help dampen an overheating economy.

Scofflaw wrote: »

Fifth, control over our own interest rates almost certainly wouldn't have prevented the bubble, because there are a variety of bubble drivers in addition to cheap credit. The most rational one is rising employment and income expectations, the most irrational one is that people only use a 2-3 year window for gauging asset price movement as well as income expectations. This can be seen in Iceland's case, where there was a property bubble despite quite high real interest rates.

I remember interest rates of 15% for mortgages in the 1970’s in Ireland. That had precisely the effect of preventing a bubble and taking the heat out of the property market. No one sane would suggest that it’s the only factor, but try paying 15% interest on a large mortgage and you’ll see the stupidity of what you are saying.

Scofflaw wrote: »

Sixth, again, control over our own interest rates probably wouldn't have resulted in adequately high interest rates anyway, because interest rates are a very blunt tool which impact everybody, whether they're borrowing for a house or borrowing for business expansion.

Lack of any control over our interest rates definitely didn’t result in adequately high interest rates. And that’s the structural flaw in the Euro.

Whether or not the Irish government would have done as they did in the 1970’s and had interest rates at 15% is speculation, but it’s really beside the point. The Euro isn’t just the Irish government, and we are talking about eh structural flaws in the Euro, not the structural flaws in the Irish government.

Scofflaw wrote: »

Overall, then, I'd agree that the single interest rate produces a disparity in real interest rates, and that low real interest rates are a driver of credit expansion and, that, in turn, produces the risk of credit misallocation such as property bubbles. Where we differ is in viewing the eurozone member states as helpless to respond to that.

The fact is all member states are helpless as they have no control over their interest rates which is a condition of joining the Euro and is a structural flaw in the Euro.

Scofflaw wrote: »

As I've said elsewhere, there's a strong danger that simplistic narratives about the crisis are clouding the important lessons to be learned. Thus the idea that the single interest rate is a problem in itself, and one which needs to be "solved" in itself, by some distant agreement somewhere we bear no responsibility for, then, is to me a very dangerous one, because it completely ignores the importance of government response to the single interest rate. The single interest rate is an integral part of the euro, the euro doesn't seem to be going away, and we, as citizens, therefore need to pay attention to whether our government is responding to it properly, rather than believing it's something we, and they, can do nothing about.

It seems impossible to resolve an issue which is why it’s a structural flaw of the Euro. Your faith that we can just be ignored is really at the root of the problem, as we have seen this is the response of the EU also.

The issue will not disappear as the problem causing the issue remains.

NAP123 · 01-02-2013 11:28PM

Scofflaw wrote: »

The former - I have my own fairly frequently-stated views on the euro's flaws, but I'm wary of the current wisdom that there must be something wrong with the euro because, well, there's "obviously something wrong".

Taking the above list, #1 looks like two separate issues - toothless fiscal discipline is certainly the case, but I'm not sure why you've put it in with "expanded private credit", or why that's a euro thing, or a problem.

#2 is nothing to do with the euro, and is a reflection of bank failures, which would be true with or without the euro - I would have thought that was rather obvious, given that the UK is in exactly the same position.

#3 is very popular - perhaps the most popular - but falls down on a couple of grounds. First, real interest rates were low everywhere, not just the eurozone. Second, even high interest rates don't prevent misallocation of capital, as per Iceland. Third, although interest rates were - by definition - the same across the eurozone, not every eurozone country went on to misallocate capital.

It's common to refer to a "eurozone crisis" or "euro crisis", but it's highly misleading, because there isn't a specific eurozone crisis - there's a general crisis, with countries both in and out of the eurozone hit in very similar ways, Iceland and the UK being the most obvious examples, with the US so obvious it almost doesn't get mentioned, while some eurozone countries either aren't in crisis, or are only, like Italy, in the same position as they always are, but affected by contagion. And the form which problems have taken even within the eurozone varies very much from country to country, from Greece's massive sovereign fraud to Ireland's massive bank rescue - which suggests that much of what gets put down to "the euro" is actually a set of disparate national problems.

What's particular about the eurozone is the shape of crisis response rather than crisis, because many of the traditional monetary response levers are in joint hands rather than available to individual governments or national central banks, while the joint responsibility and interconnectedness has produced joint sovereign rescue efforts - although, again, those would almost certainly have happened even without the euro. The necessity and inevitability of a joint response has also highlighted the complete absence of any original crisis plan for the eurozone, which to my mind remains the biggest 'structural flaw', and one which is not really being properly addressed.

cordially,
Scofflaw

At last something we agree on.

The euro is not the problem. The basis for it's foundation is a problem. The interest rate, by the way, is a problem.

But the biggest problem is the lack of infrastructure to deal with the problem.

The euro should not exist without the necessary planks to ensure it's fair and equal application.

The situation that exists at the moment is not fair and not equal and in my mind is therefore not legal under EU law.

Dionysius2 · 01-02-2013 11:41PM

thechanger wrote: »

And I'm not simply referring to just Daily Mail readers. I've noticed quite an anti Europe trend on more liberal papers like the Guardian recently.

I'm guessing the average man on the street couldn't explain the whole euro economic situation to a kid, so why do they want to leave the EU so badly?

Have you ever tried working with either/both ....the French or the Italians ?
No words can describe the experience.

Scofflaw · 02-02-2013 12:14AM

SiegfriedsMum wrote: »

I am somewhat daunted by the length of your response, but will do my best to reply.

Sorry, it sometimes happens that way!

SiegfriedsMum wrote: »

In the example of Ireland, the fiscal policy of the banks was to borrow money cheaply abroad, and then lend it here, increasingly to worse and worse risks. Nothing in the fiscal policy, or fiscal practice, of either the Irish authorities, the ECB or the EU acted to prevent this, and in face we all remember the words of the former Taoiseach who effectively tried to silence any criticism of that lack of action.

To judge that Ireland was extremely fiscally disciplined prior to the crash seems unusual, although you don’t specifically say it’s in relation to policy or practice regarding bank lending.

Well, no, I'm saying - correctly - that "fiscal discipline" is a term that has nothing to do with lending practices. It's a term that applies to public finances, not banks.

So to say that the eurozone had "toothless fiscal discipline" by reference to the banks is meaningless, because there was no fiscal discipline in relation to the banks, nor any intention that there be. Bank regulation was a national function, something which is now being changed - the ECB, or rather the ESCB, exercised nothing more than a communication and advisory function in relation to banking across Europe. It did not exercise a regulatory function at all.

So the statement that Ireland exercised "good fiscal discipline" up to the crisis is entirely true - it's just that "fiscal discipline" doesn't mean what you thought it meant. It means that Irish governments ran budget surpluses and had a low debt:GDP ratio, that's all.

SiegfriedsMum wrote: »

Whatever happened, under the Euro private debt has become public debts. We are told this was necessary to save the Euro and save the banking system, but it is unheard of anywhere outside the Eurozone.

In the USA, countless banks have been let fail in recent years with no suggestion that their debts should be transferred to the public purse. The USA banking system is in rude good health, and probably in better health than the European banking system. The difference is, we are told, we need to transfer private debt to the taxpayers to save the Euro and the banking system.

Eh, people have said that, but mostly as a cop-out, although it's true to some extent. It should be obvious that the UK is not letting banks fail, despite being outside the eurozone, and equally clearly it's not doing that to save the euro. Neither did we save our banks to "save the euro", that's political eyewash - we did it to save our banks, something that was clearly stated at the time, but which has become conveniently blurred since in order to shift the blame when the "cheapest bank bailout in the world" turned out to be one of the most expensive.

As far as the US goes, they present an almost entirely different picture to the situation in Ireland. If you look through a list of their bank failures in recent years (Wiki have one), there's a very obvious pattern. The banks that actually go into receivership are in a tiny minority, not only numerically but in terms of their value. They're not letting big banks fail, they're letting tiddlers fail. The others are acquired by other banks, often with the government's boot up their backsides to do so - the UK has done the same. We had no banks left over that could buy the others, and virtually all our covered banks are massive in comparison with our economy compared to those allowed actually fail in the US.

Have a look at that Wiki list - there are 465 banks on that list, worth a total of $687bn. Of them, the number allowed to actually fail, rather than being bought by another bank, is 24. That is 5%. As to their value, the biggest allowed fail was worth a measly $4.1bn, while the sum total of those allowed fail is $14.6bn - which is 2% of the value of banks that got into trouble. It's not even a vaguely comparable situation - we simply don't have little banks like that (unfortunately), and we don't have the number of banks to allow failing banks to be bought by others either. All our banks went to hell in the very same handbasket.

SiegfriedsMum wrote: »

Greece is not the only country in the Euro. If it’s your judgment that the brake of interest rates is not a useful tool to prevent, in the case of Ireland and Spain, runaway property bubbles, then that’s your view. However, it is a tool used successfully by governments across the world for many decades. Due to being members of the Euro, individual countries gave up the ability to control their own interest rates.

Hence it’s a structural flaw which has not yet been addressed.

Again you miss the point. What was important was not a rise in house and land prices, but the amount of the increase. In Ireland the increase was vastly higher than in most other countries, and that’s the point you seem to miss. Ireland as a country was powerless to stop it because (a) it couldn’t control its interest rates thanks to the Euro (b) it made the mistake of not regulating the banks lending criteria more strictly and (c) the government was getting fat on the taxes it all generated and was openly hostile to criticism.

Every time after a boom governments make the same suggestion. In an open market it’s probably not possible or even desirable for a government to dictate lending criteria to banks. Governmenst generally tend to make a mess of things, and in any case it’s possible to borrow from a bank which is offshore and avoid any government attempts to restrict borrowing at home. Banks tend to be quite clever about that sort of thing.

Besides, when the boom is past, the government always tend to become more lax again about this sort of suggestion, and off it all goes again.

Historically, interest rates were the best lever to use to dampen the economy, and if you knew you have to pay interest rates of 10 or 15%, then that’s a very good method of stopping you paying €1.5 million for a 3 bed house, when the interest bill alone every year will be €150 000 on the property.

That’s exactly my point, governments are great at talking the talk after booms, but not before or during them.

I’m afraid that’s where you are incorrect. There are decades of evidence of interest rates being used to dampen the economy in times when it’s judged necessary. It is extraordinary that you seem to believe that interest rates are of no use to a government when trying to prevent an overinflated economy. If its your position that, for example, Alan Greenspan, or Nigel Lawson never used interest rates in that way, then that’s your position. However they would differ with you.

I am actually astonised that someone of you otherwise apparent intelligence would apparently try to make such an argument, that interest rates have no place to play for a government to help dampen an overheating economy.

I remember interest rates of 15% for mortgages in the 1970’s in Ireland. That had precisely the effect of preventing a bubble and taking the heat out of the property market. No one sane would suggest that it’s the only factor, but try paying 15% interest on a large mortgage and you’ll see the stupidity of what you are saying.

I'll deal with those together because they contain the same mistake - I haven't said that interest rates can't be used to help control things like property bubbles. I've said that the Irish governments of the Celtic Tiger period wouldn't have wanted to use them that way, which you have implicitly agreed with at quite some length. As you pointed out, governments don't want to do these things, the Irish government definitely didn't want to cool down the bubble, and was, as you say, openly hostile to the idea. I'm not sure why you then go on to make out as if the Irish government would somehow obviously have used interest rates to cool the bubble when you're happy to state it patently didn't want to cool the bubble!

I can't really see the point of your complaints that the government lacked a particular tool when you're entirely aware that it didn't use any of the other tools it had to hand - which was my point. It's as if you're saying of someone who didn't fasten something together "he didn't have a hammer", and when anyone points out that he had several other tools that can be used to fasten something together, and not only didn't try them but deliberately hid them away, simply repeating "he didn't have a hammer", as if he would have used the hammer.

SiegfriedsMum wrote: »

Lack of any control over our interest rates definitely didn’t result in adequately high interest rates. And that’s the structural flaw in the Euro.

Whether or not the Irish government would have done as they did in the 1970’s and had interest rates at 15% is speculation, but it’s really beside the point. The Euro isn’t just the Irish government, and we are talking about eh structural flaws in the Euro, not the structural flaws in the Irish government.

The fact is all member states are helpless as they have no control over their interest rates which is a condition of joining the Euro and is a structural flaw in the Euro.

It seems impossible to resolve an issue which is why it’s a structural flaw of the Euro. Your faith that we can just be ignored is really at the root of the problem, as we have seen this is the response of the EU also.

The issue will not disappear as the problem causing the issue remains.

This is repetitive, doesn't strengthen your claim in any way, and is in parts bizarre. Interest rates are not the only tool to control housing bubbles, something that has been belatedly stated by our own central bank amongst others. You focus on them as if they were, and then use your own inability or unwillingness to see other possible tools to make out as if they are. You dismiss the other tools as something the government (actually the central bank) wouldn't use in a bubble, while completely failing to apply the same logic to interest rates.

Finally, I have no idea where "I]my[/I faith that we can just be ignored" comes from, when your view of the problem is such that we can't do anything about it as Irish voters bar leaving the euro, while my point is that we certainly can, and that not only that, but that we will have to, because the euro doesn't seem to be going away, and no Irish government is going to leave it. That the euro has a single interest rate is not going to change, and it is well past time that national governments and central banks adapted to it properly, rather than with the kind of perverse policy responses the Irish government indulged in during the bubble.

And that, it seems to me, is something that's up to us as voters to make it clear we want.

cordially,
Scofflaw

SiegfriedsMum · 02-02-2013 09:22AM

Scofflaw wrote: »

Sorry, it sometimes happens that way!

Really, its fine. It’s just I enjoy this as an occasional thing, whereas I am guessing from your posts here you have more time to devote to it.

Scofflaw wrote: »

Well, no, I'm saying - correctly - that "fiscal discipline" is a term that has nothing to do with lending practices. It's a term that applies to public finances, not banks.

Perhaps the it’s a matter of terminology.

What I said was

SiegfriedsMum wrote: »

Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline

Fatal Flaw #2: Profits Are Private, Losses Are Public

Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital

Thats three for starters. Are you really serious by asking, or are you really saying that your view is that the Euro is pretty good, and has no serious flaws as a currency?

What I meant about fiscal discipline was, partly, that individual governments have less control over their fiscal policy as a result of joining the Euro. One way of reducing the credit available is to use the fiscal tool of interest rates to make that credit more expensive.

Scofflaw wrote: »

Bank regulation was a national function, something which is now being changed - the ECB, or rather the ESCB, exercised nothing more than a communication and advisory function in relation to banking across Europe. It did not exercise a regulatory function at all.

Of course, any government is able to regulate their own banks. The problem comes when its citizens decided to borrow outside the regulatory area covered by the individual government. I already talked about that in a previous post, and banks are very clever about that sort of thing as a way to get around regulations.

Scofflaw wrote: »

So the statement that Ireland exercised "good fiscal discipline" up to the crisis is entirely true - it's just that "fiscal discipline" doesn't mean what you thought it meant. It means that Irish governments ran budget surpluses and had a low debt:GDP ratio, that's all.

There are many forms of truth, and yours is not the only one. Nor is mine.

Whether or not one judges the irish government exercised good fiscal discipline or not misses the point that the irish government was not able to use the necessary tool of increasing interest rates due to its membership of the Euro.

You seem to have some sort of mental block about this point, and the point is simple as that inability to use interest rates as a tool is one of the structural issues for the Euro.

Scofflaw wrote: »

Eh, people have said that, but mostly as a cop-out, although it's true to some extent. It should be obvious that the UK is not letting banks fail, despite being outside the eurozone, and equally clearly it's not doing that to save the euro. Neither did we save our banks to "save the euro", that's political eyewash - we did it to save our banks, something that was clearly stated at the time, but which has become conveniently blurred since in order to shift the blame when the "cheapest bank bailout in the world" turned out to be one of the most expensive.

Isn’t it curious how the USA have let so many banks fail and their banking system seems ok.

Our memory are clearly different as I remember all the talk was about saving the Euro. In any case, it’s not really relevant as the issue was the structural flaws in the Euro which led to the panic about the banks, particularly that the French & German banks were very exposed to the more than bankrupted irish banks.

The EU’s version of capitalism differes from the USA’s version in that the EU transferred the lossess of private banks on to the taxpayer, while the USA lets banks fail and lets their lossess be decided by the liquidator.

Scofflaw wrote: »

Have a look at that Wiki list - there are 465 banks on that list, worth a total of $687bn. Of them, the number allowed to actually fail, rather than being bought by another bank, is 24. That is 5%. As to their value, the biggest allowed fail was worth a measly $4.1bn, while the sum total of those allowed fail is $14.6bn - which is 2% of the value of banks that got into trouble. It's not even a vaguely comparable situation - we simply don't have little banks like that (unfortunately), and we don't have the number of banks to allow failing banks to be bought by others either. All our banks went to hell in the very same handbasket.

I think it’s a matter of policy, you think it’s a matter of size.

Not all “our” banks were implicated, and again even if that were true (and its not) it’s not a reason to pass on debts to taxpayers.

Scofflaw wrote: »

I'll deal with those together because they contain the same mistake - I haven't said that interest rates can't be used to help control things like property bubbles. I've said that the Irish governments of the Celtic Tiger period wouldn't have wanted to use them that way, which you have implicitly agreed with at quite some length. As you pointed out, governments don't want to do these things, the Irish government definitely didn't want to cool down the bubble, and was, as you say, openly hostile to the idea. I'm not sure why you then go on to make out as if the Irish government would somehow obviously have used interest rates to cool the bubble when you're happy to state it patently didn't want to cool the bubble!

I am afraid I never agree that the Irish government might or might not have used interest rates. The structural flaw is not about what the irish government might or might not have done. The structural flaw is about the fact that membership of the Euro denies every member the ability to use interest rates as one important tool in its fiscal armoury.

You seem to have, as I havbe said, a mental block about this and seem to keep reverting to speculating as to what one government might or might not have done if it had the option available (which it didn’t in any case).

Scofflaw wrote: »

I can't really see the point of your complaints that the government lacked a particular tool when you're entirely aware that it didn't use any of the other tools it had to hand - which was my point.

That much is obvious. I have made no complaint, as you suggest, and have no interest in speculating about what the irish government might or might not have done.

My point was about a structural flaw in the Euro which applies to all governments.

Scofflaw wrote: »

This is repetitive, doesn't strengthen your claim in any way, and is in parts bizarre. Interest rates are not the only tool to control housing bubbles, something that has been belatedly stated by our own central bank amongst others. You focus on them as if they were, and then use your own inability or unwillingness to see other possible tools to make out as if they are. You dismiss the other tools as something the government (actually the central bank) wouldn't use in a bubble, while completely failing to apply the same logic to interest rates.

I don’t need to strengthen what you call is my claim, and no one has suggested that interest rates ar the only tool to control housing bubbles. Again the views of one central bank are of little importance.

The flaws I pointed out in the Euro have nothing to do with other fiscal tools available to governments. You asked for examples of structural flaws in the Euro and I gave you three.

I don’t “dismiss” other fiscal tools available to governments as they are not relevant to the structural flaws in the Euro, which is what I am talking about.

You seem to keep wanting to talk about the irish government, other fiscal tools available to them, and speculate what this one government might or might not have done had it the fiscal tool of interest rates at its disposal. To me that’s not relevant, and is of little interest, in a conversation about the structural flaws in the Euro.

Scofflaw wrote: »

Finally, I have no idea where "I]my[/I faith that we can just be ignored" comes from, when your view of the problem is such that we can't do anything about it as Irish voters bar leaving the euro, while my point is that we certainly can, and that not only that, but that we will have to, because the euro doesn't seem to be going away, and no Irish government is going to leave it. That the euro has a single interest rate is not going to change, and it is well past time that national governments and central banks adapted to it properly, rather than with the kind of perverse policy responses the Irish government indulged in during the bubble.

And that, it seems to me, is something that's up to us as voters to make it clear we want.

Your faith in the Euro comes from me – I said that in my last post and,

Your contention is the Euro will succeed come what may. You may be right, or not, but simply stating that as an article of faith doesn’t make it any more, or less, likely to happen.

While I admire your certainty, I am concerned about your inability to understand that the Euro has flaws which are structural, and which may if not resolved (however that might happen) bring long term problems for the members of the Euro and for the EU.

Scofflaw · 02-02-2013 11:19AM

SiegfriedsMum wrote: »

Really, its fine. It’s just I enjoy this as an occasional thing, whereas I am guessing from your posts here you have more time to devote to it.

Self-employment in the internet industry leaves one a lot of time in front of a computer, and discussion with human beings makes a nice change from coding. I shouldn't really do the long posts, though.

SiegfriedsMum wrote: »

Perhaps the it’s a matter of terminology.

What I said was

What I meant about fiscal discipline was, partly, that individual governments have less control over their fiscal policy as a result of joining the Euro. One way of reducing the credit available is to use the fiscal tool of interest rates to make that credit more expensive.

Fair enough - in that case, yes, it's a question of terminology, because "fiscal discipline" has a fairly standard meaning in the crisis of sticking to the Stability & Growth Pact limits on debt and deficit.

SiegfriedsMum wrote: »

Of course, any government is able to regulate their own banks. The problem comes when its citizens decided to borrow outside the regulatory area covered by the individual government. I already talked about that in a previous post, and banks are very clever about that sort of thing as a way to get around regulations.

I'm not aware, though, that Irish people did borrow much outside the Irish regulatory area - that's actually very rare. Nor can I see why they would have wanted to, really, given that Irish bank regulation and lending standards were amongst the weakest available anyway.

SiegfriedsMum wrote: »

There are many forms of truth, and yours is not the only one. Nor is mine.

Well, see earlier point. "Fiscal discipline" just has a very specific common meaning in the crisis.

SiegfriedsMum wrote: »

Whether or not one judges the irish government exercised good fiscal discipline or not misses the point that the irish government was not able to use the necessary tool of increasing interest rates due to its membership of the Euro.

You seem to have some sort of mental block about this point, and the point is simple as that inability to use interest rates as a tool is one of the structural issues for the Euro.

Er, no, again. I'll state it again - I agree that the Irish government were not able to use interest rates as a tool to combat a property bubble. As already said, my point is that they already knew they couldn't, that they did have other tools at their disposal, that they didn't use those tools, and that they will have to use those tools in future.

I don't think it's me who has the mental block - you're not even looking at what I'm saying!

SiegfriedsMum wrote: »

Isn’t it curious how the USA have let so many banks fail and their banking system seems ok.

Er, that's the point - they've let virtually no banks actually fail, and nothing bigger than a tiny one. Do you actually read what I post?

SiegfriedsMum wrote: »

Our memory are clearly different as I remember all the talk was about saving the Euro. In any case, it’s not really relevant as the issue was the structural flaws in the Euro which led to the panic about the banks, particularly that the French & German banks were very exposed to the more than bankrupted irish banks.

Your memory is indeed different, and not just on the question of "saving the euro". Indeed, in these matters I find it unwise to rely on memory, which is a great telescoper and back-caster of events and explanations. I invite you to rewind to 2008 - there was no talk of "saving the euro" when we saved out banks - on the contrary:

Yet Tuesday’s guarantee offered by the Irish government to its six national banks to safeguard €400bn ($563bn) of deposits and bank debt is causing ructions in Brussels, where there is concern the Irish move shatters any hope of pan-European regulatory response to the turmoil.

Brian Lenihan, finance minister, said he had notified the European Commission of the plan but “a member state is responsible for the stability of its own banking system and I am responsible for the stability of these particular banks.

“In the absence of a Europe-wide system, there is an onus on the Irish government as the sovereign body with responsibility in this state to take action.”

On Tuesday, he conceded that Ireland might be accused of reverting to economic nationalism and ignoring pan-European solutions to the market turmoil.

He said: “I accept it is a tendency towards economic nationalism but we’re on our own here in Ireland and the government had to act in the best interests of the Irish people”.

http://www.ft.com/intl/cms/s/0/b514c10a-8f2e-11dd-946c-0000779fd18c.html#axzz2FPPwqgoN

The whole "saving the euro" thing was added to the mix in 2010, to help spare FF's blushes over taking a bailout. It has now been mixed up with saving the banks, but it's never been the case - we took the bailout to save our own skins, just as we saved the banks to save the banks.

SiegfriedsMum wrote: »

The EU’s version of capitalism differes from the USA’s version in that the EU transferred the lossess of private banks on to the taxpayer, while the USA lets banks fail and lets their lossess be decided by the liquidator.

Er, no, that's complete twaddle. Please read the list of "failed banks" in the US I provided. Only a tiny minority, and the smallest banks, were allowed fail and had their losses decided by the liquidator.

SiegfriedsMum wrote: »

I think it’s a matter of policy, you think it’s a matter of size.

Not all “our” banks were implicated, and again even if that were true (and its not) it’s not a reason to pass on debts to taxpayers.

I'm not sure what that's even supposed to mean, or at what point it touches reality. Which of our banks didn't fail?

You've already simply ignored the fact that the US only let a tiny number of tiny banks fail, mind you, so I guess you could also pretend that we had some large bank that didn't fail, and which could have bailed out the others. I have no idea what bank you think you're talking about, though - the covered banks constituted 78% of the domestic banking sector, and it's rather hard to use a smaller bank to bail out a bigger one.

SiegfriedsMum wrote: »

I am afraid I never agree that the Irish government might or might not have used interest rates. The structural flaw is not about what the irish government might or might not have done. The structural flaw is about the fact that membership of the Euro denies every member the ability to use interest rates as one important tool in its fiscal armoury.

You seem to have, as I havbe said, a mental block about this and seem to keep reverting to speculating as to what one government might or might not have done if it had the option available (which it didn’t in any case).

Sigh. Yes, because the government already knew it couldn't change interest rates.

SiegfriedsMum wrote: »

That much is obvious. I have made no complaint, as you suggest, and have no interest in speculating about what the irish government might or might not have done.

My point was about a structural flaw in the Euro which applies to all governments.

I don’t need to strengthen what you call is my claim, and no one has suggested that interest rates ar the only tool to control housing bubbles. Again the views of one central bank are of little importance.

The flaws I pointed out in the Euro have nothing to do with other fiscal tools available to governments. You asked for examples of structural flaws in the Euro and I gave you three.

I don’t “dismiss” other fiscal tools available to governments as they are not relevant to the structural flaws in the Euro, which is what I am talking about.

You seem to keep wanting to talk about the irish government, other fiscal tools available to them, and speculate what this one government might or might not have done had it the fiscal tool of interest rates at its disposal. To me that’s not relevant, and is of little interest, in a conversation about the structural flaws in the Euro.

Your faith in the Euro comes from me – I said that in my last post and,

Your contention is the Euro will succeed come what may. You may be right, or not, but simply stating that as an article of faith doesn’t make it any more, or less, likely to happen.

While I admire your certainty, I am concerned about your inability to understand that the Euro has flaws which are structural, and which may if not resolved (however that might happen) bring long term problems for the members of the Euro and for the EU.

I'm concerned about your ability to actually read what I post - I'm sorry to be rude, but you clearly haven't - but I'll try again.

The euro has not gone away. That's an observation. We have not left the euro. That's another observation. The eurozone governments are doing their best to ensure that it doesn't go away. Again, an observation. The Irish government is doing its best to ensure we don't leave it. Again, an observation.

As such, as far as we can see at this point in time, the euro will continue, and Ireland will continue to be a member of it. There will, therefore, continue to be a single interest rate, over which Ireland does not exercise individual control. If we leave the euro, or the euro dissolves, that changes, but neither of those is currently planned, and if they come about, the question I am considering is redundant.

But if we stay in the euro, we will continue not to have individual control of interest rates. We both agree that individual control of interest rates is an important policy tool, and the Irish government will, if it continues in the euro, continue not to have it.

That means that the Irish government - and other eurozone governments - will have to find substitute tools for controlling economic acceleration and ensuring "fiscal discipline" (your meaning). Or, rather, their central banks will, because governments have not had control of interest rates for a while.

Our central bank, like other central banks, has begun the process of applying creative thought to this problem - something they should have done over a decade ago. They see options there that will allow them to deal with the problems we had, and in a far more targeted way than using interest rates, which affect everyone across the economy, not just the sector you're intending to hit. When interest rates are shoved up to cool the housing market, they make it harder for SMEs to operate, which is not what is wanted. If, on the other hand, the central bank enforces lower loan-to-value limits, or loan-to-income limits, or more prudential lending criteria, it targets only the housing market. That is a better outcome.

You, meanwhile, bluntly, are absolutely fixated on the fact that they don't have control of interest rates, and you dismiss all the other tools that are being thought of as alternatives to interest rate control, not because you know them not to work (you don't), but simply because they're not interest rates.

This is circular thinking. Fortunately, you're not in charge of the central bank, which allows me some measure of faith that further alternative tools will be found, and that they, and the others already identified, will be used.

The single interest rate is undeniably a structural feature of the euro, perhaps its most obvious and unavoidable one. You see it as a problem, and will continue to see it as a problem, because you are unwilling even to see there might be alternatives to its use - I don't, because I don't have that circle stuck in my head.

cordially,
albeit bluntly and perhaps rudely in parts,
Scofflaw

SiegfriedsMum · 02-02-2013 12:47PM

Scofflaw wrote: »

Fair enough - in that case, yes, it's a question of terminology, because "fiscal discipline" has a fairly standard meaning in the crisis of sticking to the Stability & Growth Pact limits on debt and deficit.

I think this is the difference, which seems to be we started talking about structural issues with the Euro, and that’s what I am still talking about.

You seem to want to keep taking the conversation away from that to the particular circumstances and actions or inactions of the irish Government, or to speculate about whether the Irish government might or might not have used the tool of higher interest rates if they has that particular tool available to them, which they didn’t.

Scofflaw wrote: »

I'm not aware, though, that Irish people did borrow much outside the Irish regulatory area - that's actually very rare. Nor can I see why they would have wanted to, really, given that Irish bank regulation and lending standards were amongst the weakest available anyway.

I never claimed they did. Again, you seem to prefer to talk about Ireland rather than about the structural issues with the Euro.

You suggested that the Irish government did not, and does not, need interest rates as a tool to help maintain stability in the irish economy, because it would be able to regulate the banks to stop them lending.

I pointed out that, if that happened, the banks are very clever at getting around such attempts by governments.

Scofflaw wrote: »

Er, no, again. I'll state it again - I agree that the Irish government were not able to use interest rates as a tool to combat a property bubble. As already said, my point is that they already knew they couldn't, that they did have other tools at their disposal, that they didn't use those tools, and that they will have to use those tools in future.

No matter how many times you state it, it’s of little interest to me what the irish government did or didn’t do.

I am talking about the structural issues with the Euro, not about the failures or successes of the irish government.

Scofflaw wrote: »

Your memory is indeed different, and not just on the question of "saving the euro". Indeed, in these matters I find it unwise to rely on memory, which is a great telescoper and back-caster of events and explanations. I invite you to rewind to 2008 - there was no talk of "saving the euro" when we saved out banks - on the contrary:

http://www.ft.com/intl/cms/s/0/b514c10a-8f2e-11dd-946c-0000779fd18c.html#axzz2FPPwqgoN

The whole "saving the euro" thing was added to the mix in 2010, to help spare FF's blushes over taking a bailout. It has now been mixed up with saving the banks, but it's never been the case - we took the bailout to save our own skins, just as we saved the banks to save the banks.

I’m really not sure what the point is of one article talking about Brian Lenihan to try to show that the Euro is not under threat dues to its inherent faults. Here is one from the Economist which is rather more recent which discusses the problems facing the Euro. You’ll probably disagree with it, but it should demonstrate that not everyone has your faith in the Euro, and there is a considerable body of opinion which thinks its structural flaws are irresolvable, and will hasten it end.

http://www.economist.com/node/21562206

Economist wrote: »

…His promise in July to “do whatever it takes” to protect the euro from speculation was enough to persuade traders to pack their bags and head for the Riviera. Yet the euro zone now looks woefully behind in its mission to save the single currency. That is partly because a rescue is genuinely complicated. But it is also because too many people think that time is on their side…

Scofflaw wrote: »

I'm not sure what that's even supposed to mean, or at what point it touches reality. Which of our banks didn't fail?

Rabobank.

You’ll probably now redefine “our banks” to only those with the name “Ireland” or “Irish” in their name J

Scofflaw wrote: »

You've already simply ignored the fact that the US only let a tiny number of tiny banks fail, mind you, so I guess you could also pretend that we had some large bank that didn't fail, and which could have bailed out the others. I have no idea what bank you think you're talking about, though - the covered banks constituted 78% of the domestic banking sector, and it's rather hard to use a smaller bank to bail out a bigger one.

I said it was a principle but you are, of course, correct that, for example, bank of America were given emergency funding by the USA. You’ll note the USA didn’t take Bank of America’s debts and tell the people of Ohio, or Nebraska that they had to take those debts on and repay them. Bank of America has to repay the loans, which it is doing.

Scofflaw wrote: »

I'm concerned about your ability to actually read what I post - I'm sorry to be rude, but you clearly haven't - but I'll try again.

The euro has not gone away. That's an observation. We have not left the euro. That's another observation. The eurozone governments are doing their best to ensure that it doesn't go away. Again, an observation. The Irish government is doing its best to ensure we don't leave it. Again, an observation.

As such, as far as we can see at this point in time, the euro will continue, and Ireland will continue to be a member of it. There will, therefore, continue to be a single interest rate, over which Ireland does not exercise individual control. If we leave the euro, or the euro dissolves, that changes, but neither of those is currently planned, and if they come about, the question I am considering is redundant.

That’s where we differ. You have faith that the Euro will continue, whereas I can see there are structural flaws in the Euro which mean there will be trouble ahead.

Scofflaw wrote: »

But if we stay in the euro, we will continue not to have individual control of interest rates. We both agree that individual control of interest rates is an important policy tool, and the Irish government will, if it continues in the euro, continue not to have it.

That means that the Irish government - and other eurozone governments - will have to find substitute tools for controlling economic acceleration and ensuring "fiscal discipline" (your meaning). Or, rather, their central banks will, because governments have not had control of interest rates for a while.

Our central bank, like other central banks, has begun the process of applying creative thought to this problem - something they should have done over a decade ago. They see options there that will allow them to deal with the problems we had, and in a far more targeted way than using interest rates, which affect everyone across the economy, not just the sector you're intending to hit. When interest rates are shoved up to cool the housing market, they make it harder for SMEs to operate, which is not what is wanted. If, on the other hand, the central bank enforces lower loan-to-value limits, or loan-to-income limits, or more prudential lending criteria, it targets only the housing market. That is a better outcome.

Governments around the world have been dealing with financial problems for hundreds of years, and to suggest that they don’t know at this stage how to pull the various levers, or that there are new levers which have never before been discovered and which we are just waiting for various central banks to find, seems far fetched. To suggest that it’s only now that central banks & governments around the world are starting to apply what you call “creative thought” to the problems of financial stabilisation is ludicrous, as they have been doing that for hundreds of years, and have not just started to do it now.

I wish you well with your thoughts that the government can control how much banks lend to individuals, to business men and to businesses and to others. I’ll bet you it wont work and will also bet you the banks will find ways around it, and in any case governments are pretty rotten at trying to run things as we see every day around the world.

Scofflaw wrote: »

You, meanwhile, bluntly, are absolutely fixated on the fact that they don't have control of interest rates, and you dismiss all the other tools that are being thought of as alternatives to interest rate control, not because you know them not to work (you don't), but simply because they're not interest rates.

It is a fact that a structural flaw of the Euro is that individual governments are denied the ability to control interest rates for their individual countries.

The right rate for Berlin is not the right rate for Madrid or Athens.

Scofflaw wrote: »

This is circular thinking. Fortunately, you're not in charge of the central bank, which allows me some measure of faith that further alternative tools will be found, and that they, and the others already identified, will be used.

The single interest rate is undeniably a structural feature of the euro, perhaps its most obvious and unavoidable one. You see it as a problem, and will continue to see it as a problem, because you are unwilling even to see there might be alternatives to its use - I don't, because I don't have that circle stuck in my head.

Again you have “faith” that after hundreds of years of governments, economists, central banks and other around the world examining the issue, that sometime soon someone is going to find some new and exciting alternative tools which have not yet been thought of.

Until one of those people in which you have “faith” finds the new tools which you are holding out for, this structural flaw in the Euro remains.

I am impressed by your belief and faith that some new tools will be found, but after so many hundreds of years looking, what leads you to think they might be found in time to save the Euro?

Why are the British so anti Europe?

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