Euro Killing Half of Europe ?

Dub13

I found this interesting article in the times,about the Euro.

The Times wrote:

Hungarians marked the brutal suppression of their democracy by Soviet tanks 50 years ago by rioting against their elected Government. In Italy, the Government’s credit rating was reduced to the same level as Botswana’s, and Romano Prodi seemed on the verge of losing a vote of confidence, just six months after sweeping his reviled and derided predecessor, Silvio Berlusconi, from power. The British Home Secretary welcomed Bulgarians and Romanians into the European Union by restricting their ability to seek jobs.

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The strength or weakness of a country is its economy. The EU economy is in the doldrums.The Economies are not in line and what is right for one ( Germany) is not what is required for all.IMO the next couple of years are critical for the European project.

silverharp

if (when) there is a property crash in Ireland, then there will be alot of blame put on the Euro. The long term future of the euro will be facinating to watch, my guess is some countries may pull out of it eg Italy.

arbeitsscheuer

The Godfather of the Euro was Robert Mundell, an American. He devised the Euro as a battering ram to destroy the entire structure of employee protection and eliminate business taxes that support the welfare state. As Greg Palast put it; "The euro and free market economics are as inseparable as flies and faeces."

Mundell said; "Monetary discipline forces fiscal discipline on the politicians as well."
What he means is that every Euro nation must adhere to strict limits on borrowing and deficits. Furthermore, nations will no longer have their own central banks printing money. This is all quite extraordinary, really. No govt of an EU nation may now call upon the key tools used to pull a nation out of a recession (increased govt spending to create jobs, lowering interest rates to boost investment, printing more money to create demand through liquidity).

The Euro castrates European national parliaments - their power to affect their nation's economic destinies are cut off. Isn't that a bit, uh, un-democratic?

So, yeah, of course the Euro is killing half of Europe. That's practically what it was designed to do...

Akrasia

arbeitsscheuer wrote:

The Godfather of the Euro was Robert Mundell, an American. He devised the Euro as a battering ram to destroy the entire structure of employee protection and eliminate business taxes that support the welfare state. As Greg Palast put it; "The euro and free market economics are as inseparable as flies and faeces."

Mundell said; "Monetary discipline forces fiscal discipline on the politicians as well."
What he means is that every Euro nation must adhere to strict limits on borrowing and deficits. Furthermore, nations will no longer have their own central banks printing money. This is all quite extraordinary, really. No govt of an EU nation may now call upon the key tools used to pull a nation out of a recession (increased govt spending to create jobs, lowering interest rates to boost investment, printing more money to create demand through liquidity).

The Euro castrates European national parliaments - their power to affect their nation's economic destinies are cut off. Isn't that a bit, uh, un-democratic?

So, yeah, of course the Euro is killing half of Europe. That's practically what it was designed to do...

Yep. And the most depressing thing is, that most Irish people voted to join the euro because it would be convenient for when they went on holidays.

mike65

This is all very 2000-2001. Back then all the talk from sceptics was of the euro crashing and burning in no time at all and its value being permenently low against the USD, Sterling and Yen

The main grumbling in Italy is by the Northern League who have a very particular agenda. The German economy is finally on the up with usual bumps along the way and Frances' is also in slightly better shape.

Anatole Kaletsky who wrote that article is deffo anti-euro, just google his name or scroll through this list http://www.byliner.com/writer/?id=2768&p=1

Mike.

constitutionus

people tend to forget that the reason interest rates were so low for so long is because germany and frances economys are buggered which allowed irresponsibe lending by financial institutions in both mortages and credit card lenging. were doing all right at the moment (comparatively) but if germany and france get their economies up to our level the ECB will raise rates massively to prevent what happend here to those two founding countries. the result? were ****ed.

to those who think im scarmongering ask yourself this. if we werent in the euro do you think the central bank wouldve kept interest rates so low over the last 5 yrs? no, so its a very real threat to our country. look at it this way the last 4 rate increases were done to slow down the german economy which over took the USA this year in terms of its activity.and its still in the ****ter compared to us so just imagine what'd happen when it really takes off. or more worrying, when several major EU countries econoies take off.

word to the wise, minimise your debt now while its still cheap to do so. it wont fully insulate you but it'd put you ahead of the pack. especially considering the credit card debt we have (over 2 billion now:eek: )

silverharp

arbeitsscheuer wrote:

No govt of an EU nation may now call upon the key tools used to pull a nation out of a recession (increased govt spending to create jobs, lowering interest rates to boost investment, printing more money to create demand through liquidity).

While the worst excess of fiscal mismanagement have been taken out by the Euro (where was the Euro when Lynch et al were in power), if you see the monetary stats you will see that M3 money supply in the Euro area is growing by more then 10%, this is well in excess of economic growth. The salient point to remember is that central banks care more about the perception of inflation even though it is central banks that create inflation.

Victor

constitutionus wrote:

were doing all right at the moment (comparatively) but if germany and france get their economies up to our level the ECB will raise rates massively to prevent what happend here to those two founding countries. the result? were ****ed.

I can't see ECB rates rising to the rates Ireland experienced in the 1980s. However they will rise and cause pain in Ireland. The Irish government could have stopped subsidising property years ago, but didn't.

constitutionus

Victor wrote:

I can't see ECB rates rising to the rates Ireland experienced in the 1980s. However they will rise and cause pain in Ireland. The Irish government could have stopped subsidising property years ago, but didn't.

i agree i cant see it getting to 16% again either but even if it got to say 7% that would be enough to force a collapse in the housing market where people who maxed themselves out on a mortgage at 3% would have no hope in hell of making the repayments. i know people who've given up socialising now to put the money into their repayments. chuck in the people maxed out on credit cards to supliment their lifestyle and youve got trouble. i know the latter only have themselves to blame for over indulging on a credit card but as things stand now they could make repayments and pay it off. a steep series of interest rates hikes could negate the repayments they make by upping the amount they owe in interest. trapping them in a debt spiral

i for one am glad i dont have credit card debt and while i dont really like the idea of the government interfering with the financial sector i really am starting to think something has to be done to get the banks to start acting responsibly in regards to their lending practices. were actually in a situation now where people can be thousands of euro in debt, be dragged to the courts to pay it off . come to an arangement with the bank to do so and then have them turn around and offer the same person another credit card:eek: :eek: between this and 100% loans its no wonder the situations so precarious. the financial regulator should get of his arse and do something about this

Mad Finn

arbeitsscheuer wrote:

No govt of an EU nation may now call upon the key tools used to pull a nation out of a recession (increased govt spending to create jobs, lowering interest rates to boost investment, printing more money to create demand through liquidity).

When we had control over our own interest rates, they were much more volatile because our economy is so small compared to Europe as a whole. So interest rates would have gone up before now in response to our perceived 'over heating'. But although the exact timing of interest rate rises in the Euro zone may not be exactly what we want, neither will they be as sharp as they would have been were we still in control.

Remember what happened in the UK when they (supposedly) controlled their own rates? At one stage they went up three full percentage points in a day. Mind you, that was the day they finally gave up on ERM and pulled out. But the point is that no economy operates in isolation. Sometimes fiscal policy is forced on you by outside factors.

I think we will be steadier in the Euro zone. And it's never a good idea to get so totally in debt that an interest rate rise will flatten you. regardless of who controls the rates.

arbeitsscheuer wrote:

The Euro castrates European national parliaments - their power to affect their nation's economic destinies are cut off. Isn't that a bit, uh, un-democratic?

not as long as the central institutions are democratically accountable. But that's another argument.

Dub13

Mad Finn wrote:

not as long as the central institutions are democratically accountable. But that's another argument.

This may be true but what happens if 3 or 4 small member states need to kick start there economy with low interest rates and Germany/France need high interest rates to cool things down.You can bet your last dollar that the EU will look after the big states first.

I wounder if they have a Contingency Plan for a situation like this.

Thing is though, given the fact the punt was either pegged to sterling or part of the ERM until the introduction of the Euro, Ireland has never really had an independent monetary policy.

Time Magazine

And we're export-based, so if UK/Germany/France go bellies up we follow anyway.

Monetary integration ftw.

Mad Finn

Deleted User wrote:

Thing is though, given the fact the punt was either pegged to sterling or part of the ERM until the introduction of the Euro, Ireland has never really had an independent monetary policy.

Well, that's true as well but at least we had a little discretion over when and by how much we could adjust interest rates. Still I think the benefits of the modicum of independent fiscal and monetary authority we used to have are greatly offset by the stability of the euro. And given that most of our trade is with Europe as a whole, that's no bad thing.

The Corinthian

mike65 wrote:

This is all very 2000-2001. Back then all the talk from sceptics was of the euro crashing and burning in no time at all and its value being permenently low against the USD, Sterling and Yen

The main grumbling in Italy is by the Northern League who have a very particular agenda. The German economy is finally on the up with usual bumps along the way and Frances' is also in slightly better shape.

Anatole Kaletsky who wrote that article is deffo anti-euro, just google his name or scroll through this list http://www.byliner.com/writer/?id=2768&p=1

Indeed, it appears that the Euro is still a popular scapegoat for people who don't know anything about economics.

Colonel Sanders

The Corinthian wrote:

Indeed, it appears that the Euro is still a popular scapegoat for people who don't know anything about economics.

Maybe so but monetary union has taken the power away from the Irish central bank. Interest rates cannot be adjusted to combat problems in this country as they are decided centrally with the interests of the larger economic powers at heart.

mike65

Well we signed up after a referendum so its a done deal. The good news is that being part of the euro and tied to much larger economies means we can be damn near certain of steady fiscal macro policies and movements with regard to interest rates and currency valuation. The old days 'lurches' were always possible and governments were able to fcvk up the numbers and then devalue the currency to make amends which is like me maxing out the CC and signing up to another card account.

Mike.

The Corinthian

Colonel Sanders wrote:

Maybe so but monetary union has taken the power away from the Irish central bank. Interest rates cannot be adjusted to combat problems in this country as they are decided centrally with the interests of the larger economic powers at heart.

I once again refer you to my point about people who don't know anything about economics. Why don't you explain to us the merits of monetary policy with the Punt over the increased economies of scale afforded to us by the Euro?

You might also, as evidence, point to that period of golden economic growth, when the punt was not tied to either Sterling or the EMU, known as the eighties...

Victor

Colonel Sanders wrote:

Maybe so but monetary union has taken the power away from the Irish central bank. Interest rates cannot be adjusted to combat problems in this country

But taxation could have been, but no we had to have tax breaks (mortgage interest relief, section 23/27, no CGT, etc.) when interest rate were at 2%.

Mad Finn

Colonel Sanders wrote:

Maybe so but monetary union has taken the power away from the Irish central bank. Interest rates cannot be adjusted to combat problems in this country as they are decided centrally with the interests of the larger economic powers at heart.

Which for a small open economy like Ireland's was usually disastrous. Put up interest rates: stifle investment and consumer spending; Reduce interest rates/devalue currency: import inflation.

Membership of the euro gives much more stability.