Euro Area

[Philippus Flavius Homovallumus]

So William Hague was right in 1998 when he said Britain shouldn't join the Euro?

Wow, and everybody was Soooooo mean!

[Childishness - off]

If Britain had joined the Euro we would probably be Spain, and Spain would be Ireland, and Ireland would be a minor irritant by comparison.

The problem is structural to the EU project, and it's the forseeable result of arse-backwards attempts at political union under the theory that monetary union will lead to the ultimate goal of - The Project.

[Beskar]

The Euro isn't faulty. It was the economical ministers of various countries who didn't use the opportunity of the Euro to reform and invest, opposed to blowing it all on partying.

[Husar]

If the Euro is faulty, then how come Germany, France etc. are doing just fine and can afford to bail all the others out?
People are blaming the Euro for all sorts of things but the truth is that the change towards the Euro was used by greedy people to fool a lot of other people into very unfortunate positions, and it worked splendidly, because most people blame the Euro instead of the greedy people, yeah, we should really lock that Euro up and then the world will be Utopia again as it was before...

[rory_20_uk]

It might be greedy people at fault, but the Euro has aided them.

Ideally I'd not lock my front door, nor have passwords on my online banking, as only thieves are going to try to steal things. Well, seeing as how I live in the real world I have to factor in things to prevent events occurring.

Although the whole world living under one set of rules and one currency might be the utopia that some want, that does not mean it'd work. Saying the Euro would work if it were not for Europeans isn't much use.

[Louis VI the Fat]

It might be greedy people at fault, but the Euro has aided them.

Ideally I'd not lock my front door, nor have passwords on my online banking, as only thieves are going to try to steal things. Well, seeing as how I live in the real world I have to factor in things to prevent events occurring.

Although the whole world living under one set of rules and one currency might be the utopia that some want, that does not mean it'd work. Saying the Euro would work if it were not for Europeans isn't much use.

That's a fun angle. Truth in there.

[Beskar]

Although the whole world living under one set of rules and one currency might be the utopia that some want, that does not mean it'd work. Saying the Euro would work if it were not for Europeans isn't much use.

That isn't correct. There is nothing fundamentally wrong with a shared law and currency. If anything, the benefits of such a set-up would greatly outweigh those of having separate currencies and rules, especially on the practical scale.

The problem is those who sought to exploit others, and found out that they can't simply run away from the problem. Having your own currency means you can decide to become the next inter-war Germany and Zimbabwe to 'pay' off your debts. The benefits of having a single currency, is that those bad partners cannot run away and be held accountable for their actions. Even though this is deemed a 'crisis', what will eventually happen, is that those held accountable will be held accountable, the social arena of those within Europe will change. People will now save, people will now honestly earn money. In short, people are getting fixed.

[rory_20_uk]

A unified currency does prevent inflation, but doesn't prevent the movement of individuals. What is happening is that emigration is again starting in Ireland as many are not prepared to wait the economy rebalancing and putting up with years of austerity. These are not the dockworkers, but graduates who are leaving for stabler climes. And with them goes the money that they could earn the economy.

Who can blame them?

Ireland is then left with the debt with a population which has been skimmed of the most able people. I don't see how a single currency is helping fix this problem. Theoretically it should prevent it happening, and it definitely didn't help do that.

[Philippus Flavius Homovallumus]

In short, people are getting fixed.

Heaven save us all from being "fixed".

Stalin believed he could "fix" people Beskar, such a belief stems from the conviction one is not oneself broken and therefore knows better than those needing to be "fixed."

In any case, those suffering most are those most likely to be fiscally responsible (because they are poor) while those suffering least are the ones who created the mess. This is not an acceptable price to pay for creating your own particular type of European Uberman.

[Beskar]

Heaven save us all from being "fixed".

Stalin believed he could "fix" people Beskar, such a belief stems from the conviction one is not oneself broken and therefore knows better than those needing to be "fixed."

Jesus believe he could "fix" people, Philipvs Vallindervs Calicvla.

Though you are incorrect about your assumption, I know I am imperfect myself, and I attempt to make myself better. I am not that egotistic to assume I am perfect.

In any case, those suffering most are those most likely to be fiscally responsible (because they are poor) while those suffering least are the ones who created the mess. This is not an acceptable price to pay for creating your own particular type of European Uberman.

Actually, you are incorrect there. You know me well enough to know that wouldn't be the case, if I was in control of things.

[Louis VI the Fat]

José Christos O'Donnel: Wow, what nice Mercedes you've got
Heinz: Yes, it was a lot of hard work, years of saving
MCoD: Want
Heinz: Sure. You can have it. You need savings. A solid job. A strong, stable currency.
MCoD: Want
Heinz: Sure, you can share my currency. But with it comes responsibility. You shall have to save, maintain the value of it, be disciplined.
MCoD: Yes, yes. I shall be disciplined.
Heinz: Okay, have my currency. Your purchasing power will increase. But with a strong currency comes tremendous responsibility. So you shall have to be careful, disciplined. You shall have to save, keep an eye on your spending.
MCoD: I will! I will! I'll be disciplined, I swear!
Heinz: Oookaay...here you go. Here's your currency, your economy is now tied to mine.
MCoD: Woot woot! I'm rich! I'm going to buy a mercedes right away! And a second home too! There's more money were that came from! I'm the king of the world! And look mama: no taxes!


....and crash.

[Philippus Flavius Homovallumus]

If the Euro is faulty, then how come Germany, France etc. are doing just fine and can afford to bail all the others out?
People are blaming the Euro for all sorts of things but the truth is that the change towards the Euro was used by greedy people to fool a lot of other people into very unfortunate positions, and it worked splendidly, because most people blame the Euro instead of the greedy people, yeah, we should really lock that Euro up and then the world will be Utopia again as it was before...

The idea is not bad per se, but the implementation is at fault. As you say, Germany's economy was used by Ireland etc. to buy cheap dept, and this was encouraged (lets not pretend otherwise) as a way of increasing the size of these economies and levelly living standards.

the problem is that the dept was not cleared before the crash, or was too large to clear.

The problem is structural to the project.

[Louis VI the Fat]

The idea is not bad per se, but the implementation is at fault. As you say, Germany's economy was used by Ireland etc. to buy cheap dept, and this was encouraged (lets not pretend otherwise) as a way of increasing the size of these economies and levelly living standards.

the problem is that the dept was not cleared before the crash, or was too large to clear.

The problem is structural to the project.

The problems are tied to the project indeed. But then, it is a 'project', work in progress. The idea is to work towards economical unity through a common currency.

One can however question the wisdom of having a common currency before a common economical policy. Human nature and the short-sighted nature of contemporary politics being what they are, no adjustments will be made unless forced too. Now Europe's periphery shall have to reform in a crisis atmosphere, with painful austerity measures that punish the ones least responsible for any of this mess.


The stronger economies should not be too smug. Like the periphery, when push came to shove, they chose their own interests over those of others. Germany has done what is good for Germany, with disregard for the smaller economies tied to its currency and economic policy.

Even in the bailouts, first on the mind of Europe's core has been its own interest.


There must be an ultimate test for all policy: it must serve a concrete good for concrete people over an abstract principle. This is one of the key aspects of a democracy. One forfeits a lot of strategical planning, but it puts the human first, which is the ultimate goal of democracy. I question whether the interest of the Irish pensioner, the unemployed Greek, have been foremost in the mind of Brussels.

[Adrian II]

[...] most people blame the Euro instead of the greedy people [...]

In a Husarly way, I think that sums it up. Like all social forces, markets create their own problems if left unchecked.

In this case we are dealing with the result of a policy of worldwide financial liberalisation that started in the late seventies and gained full force in the eighties. The reallocation of production to low income countries coupled with rising oil prices caused a steep drop in purchasing power in the West around 1980. Our answer to that has been a horrific expansion of credit, usually based on overvalued real estate. In Japan this credit bubble burst in 1991 when their real estate market collapsed. The same happened in the US in 2007 when their housing market collapsed. As a result, all over the West we had to bail out major banks with taxpayer money. Now states like Greece and the US are going bankrupt and they have to be bailed out, too, with paxpayer money from richer, more stable nations like Germany and China. No nation is exempt from this trend, because of the high degree of interdependence in the global financial system. Britain may well think it is safe, but a recent Channel 4 news documentary has shown that in the present eurocrisis it is exposed to an amount of 399 billion dollars, due to its holdings in CDS (Credit Default Swaps). For comparison: that's one-third of British GNP...

In the end we wil have to curb credit and speculation worldwide. This is going to take a while, maybe a few more shocks to the system will help our leaders to smarten up quicker. Fair markets, as opposed to free markets, are the wave of the future. I will probably not live to see that new Keynesian wave, but hopefully my children will.

AII

[gaelic cowboy]

Oh I forgot to post this a while back, remember how defaulting on the likes of AIB's bank debt would bring down the Euro

hmm didnt happen even with a 90% reduction in the bonds, must be some flaw in the great ECB crystal ball there.

[Furunculus]

one notes with some amusement that the EU has declared war on ratings agencies:

http://www.telegraph.co.uk/finance/e...-agencies.html

tragedy into farce!

[Ronin]

[Adrian II]

one notes with some amusement that the EU has declared war on ratings agencies:

http://www.telegraph.co.uk/finance/e...-agencies.html

tragedy into farce!

The big three ra's are big failures. They gave A-ratings to Enron till the day it imploded. They invented many of the financial instruments that gave rise to the 2007 US subprime crisis. They gave an A+ to Lehman till the last moment. They awarded Greece an A-rating until the very day in December 2009 when that country admitted it had doctored the books, something the EU finance ministers have known since 2000.

So these agencies are totally useless. Fitch for instance is just guy in a suit named Lacharrière who lives in Paris.

I don't think that replacing them with a useless EU rating agency would improve matters though. It would be better if EU governments decided not to mind the agencies anymore and make decisions based on their own analyses and commitments.

AII

[Furunculus]

The Euro isn't faulty. It was the economical ministers of various countries who didn't use the opportunity of the Euro to reform and invest, opposed to blowing it all on partying.

Rory has already beaten me to the punch: "Saying the Euro would work if it were not for Europeans isn't much use."

The euro, as presently constructed is at fault, having a monetary union without a fiscal union is quite frankly retarded.

Having a fiscal union only works if your collective peopleS will accept a transfer union, to prevent imbalances tearing your 'single' economy apart.

Anyone fancy asking a hard working german how keen they will be to bail out portugal before christmas, having already bailed out ireland and greece?

[Ronin]

Anyone fancy asking a hard working german how keen they will be to bail out portugal before christmas, having already bailed out ireland and greece?

while you are at it you can ask the German how he will handle not having the customers in those countries to buy those cars he makes.
an interesting follow up question is to ask why on the last month the German government seems intent on dumping gasoline on the fire...it seems every time Merkel or any other German government figure says something it's always the last thing that should be said at that moment.

[gaelic cowboy]

while you are at it you can ask the German how he will handle not having the customers in those countries to buy those cars he makes.
an interesting follow up question is to ask why on the last month the German government seems intent on dumping gasoline on the fire...it seems every time Merkel or any other German government figure says something it's always the last thing that should be said at that moment.

The reason Merkel is to use your own words "dumping gasoline on the fire" is she has probably copped too late that the nuclear scenario is now inevitable. We know from leaks in our own Department of Finance that "The ECB us" is the refrain repeated by the civil servants inside it, the ECB had hoped to ease Ireland into the bailout with out spooking investors in Spanish and Portuguese debt. It failed because she was saying the right thing for the long term health of the Euro but not the right thing for a short term view from Brussels with regard to Ireland or more corrrectly our Banks.

If we examine some of the statements from Euro finance ministers lately we can see a picture of a Europe that has copped that we have a spoofer in charge of monetary policy in the Euro Area. How do I know he is a spoofer pretty simple the ECB stressed tested out banks only a short while back and gave them a thumbs up, that has top be the biggest laugh ever I expect Germany will demand a head from the ECB soon.

[Fragony]

I really have no idea what's going on how, where and why. Glad I can read up here. For you who are better informed, what would be the consequence if we returned to the guilder. We are an export/trading nation is what they scream, but Europe is not the same thing as EU, wouldn't we benefit from fluxuations of the euro as long as our export stays intact, and it will, no country can compete with our capacity to produce and move stuff

[gaelic cowboy]

I really have no idea what's going on how, where and why. Glad I can read up here. For you who are better informed, what would be the consequence if we returned to the guilder. We are an export/trading nation is what they scream, but Europe is not the same thing as EU, wouldn't we benefit from fluxuations of the euro as long as our export stays intact, and it will, no country can compete with our capacity to produce and move stuff

It really is not possible for Netherlands to return to the Guilder as the fact is the smaller and some larger countries too will owe massive sums in Euro while using a different currency to pay back, basically it would be a disaster really as the debts would be worth more than the local currency.

However if Germany were to leave the Euro and create a strong D-mark upon leaving it then the poorer/smaller/whoever countries would now have a currency more suited to there needs. The key to leaving is the Euro is market confidence that the currency will be strong this would clearly be the case for Germany and that would practically end the Euro.

Over a period of some years one could imagine a process where certain countries opted out one after the other as they migrated into a new stronger currency of there own, eventually the club is small enough to either stick with the euro or finally break it completely.

This may sound apocalyptic but I see no way around this problem unless we fully integrate politically and that is not going to happen anytime soon.