Should Ireland leave the Euro??

gerry28

Hi,

I was just listening to david mcwilliams on gerry ryan there.

He was saying that most other countries (USA, UK, Sweden, Finland, ourselves in 1993 and others) when faced with a financial crisis like this devalue their currency.

It sounded like a fairly good idea, but i'd say there is some major reason why it would not be quite as simple as that.

Maybe we should have never joined it in the first place.

The pros would be increases exports and an increase in employment... what would the cons be??

Riskymove

gerry28 wrote: »

... what would the cons be??

Iceland?

ei.sdraob

how would you feel if I took 30% of everything you own (thats what happened in UK)

your house, your bank accounts, value of your car, value of everything that everyone in the economy owns

if devaluation is such a great thing then why is Zimbabwe not the largest economy in world? why is UK still in recession??



devaluation makes EVERYONE poorer by an equal amount, in order to give an edge to FEW exporting businesses

out problem is not lack of exports, unlike UK Ireland is still a net exporter

our problem is debt

if we leave Euro and devalue, the debt will still be there as most loans are in Euro (see Iceland for an example)


also how would you feel about imposing a 30% on someone on:
* welfare
* min wage
* average wage
* high wage (pat Kenny)

which of the above would be hit hardest by a straight tax?

Alcatel

gerry28 wrote: »

Hi,

I was just listening to david mcwilliams on gerry ryan there.

He was saying that most other countries (USA, UK, Sweden, Finland, ourselves in 1993 and others) when faced with a financial crisis like this devalue their currency.

It sounded like a fairly good idea, but i'd say there is some major reason why it would not be quite as simple as that.

Maybe we should have never joined it in the first place.

The pros would be increases exports and an increase in employment... what would the cons be??

Well, I'm in a business that's seeing some impact from the fluctuations of the pound that is still going, and I'd have to say that they're being pretty well screwed over by that, week in, week out. Last night a euro bought you 89p, a week or two ago nearly 1 pound. That's a big difference.

Iceland, a small economy, that is scrambling to get to join the euro for stability. Small countries just can't survive with their own currencies.

There's a whole massive financial working beneath the hood of a currency and an economy, and interest rates and currency valuations are just one of them.

The euro puts us in a common market with stability as our watchword. In the UK, one week it's good for them, one week it's terrible. No stability.

KerranJast

gerry28 wrote: »

Hi,

I was just listening to david mcwilliams on gerry ryan there.

He was saying that most other countries (USA, UK, Sweden, Finland, ourselves in 1993 and others) when faced with a financial crisis like this devalue their currency.

It sounded like a fairly good idea, but i'd say there is some major reason why it would not be quite as simple as that.

Maybe we should have never joined it in the first place.

The pros would be increases exports and an increase in employment... what would the cons be??

Our current national debt is in Euros. If we leave the Euro and devalue our debt is still in Euros but now Euros (for us) are very much more expensive than our Punt Nua so our debt skyrockets overnight.

Gurgle

ei.sdraob wrote: »

how would you feel if I took 30% of everything you own (thats what happened in UK)

You obviously don't understand some of the words used.
Like 'devalue' and 'currency'.

But don't let that stop you.

Gurgle

gerry28 wrote: »

what would the cons be??

Cost of imports.

ei.sdraob

Gurgle wrote: »

You obviously don't understand some of the words used.
Like 'devalue' and 'currency'.

But don't let that stop you.

yes I understand quite well

your forgetting that Ireland is not completely 100% self reliant


that means the cost of material/services that need to be imported for the country to function would go up in price by as much as you devalue

think oil, food, chemicals, coal, services, minerals etc etc

the costs of goods and services are already highest in EU > http://www.independent.ie/business/personal-finance/surviving-the-recession/cost-of-goods-and-services-among-highest-in-the-eu-1934583.html


oh and once again, devaluing wont solve the underlying problem of debt which is mostly in Euro

/

harsea8

ei.sdraob wrote: »

yes I understand quite well

your forgetting that Ireland is not completely 100% self reliant


that means the cost of material/services that need to be imported for the country to function would go up in price by as much as you devalue

think oil, food, chemicals, coal, services, minerals etc etc

exactly...thats not to mention that some foreign owned banks (mostly UK ones) have entered the mortgages and loans markets over the last 5 years or so and will want the full euro amount paid off....people with mortgages and or loans with these banks would be well and truly f*cked overnight.

Basically, we are so much more linked into European and world economy now than we were in 1993, so we don't really have the option of trying to "go it alone"

ei.sdraob

despite devaluing its currency by almost 30%

the UK balance of trade is still negative




and they are about to print more money (except that printing money costs money so they just add 0s to certain bank accounts)

http://news.bbc.co.uk/2/hi/business/8344189.stm

gurramok

And there would be serious capital flight. I myself would not want my euro savings seriously devalued into a pittance of a new currency.

So yeh, we all get alot poorer Argentinian style or Turkish style.

ardmacha

This State is just about the only place on the planet that the UK has a trade surplus with, as so many consumer goods pass through there on their way here.

For all the problems with the Euro our trade situation is not disastrous. This year imports have fallen much more than exports.



We cannot leave the Euro. That's it.
We just need to grow up and behave like a mature country and stop this obsession with houses that they have in Britain.

ei.sdraob

gurramok wrote: »

And there would be serious capital flight. I myself would not want my euro savings seriously devalued into a pittance of a new currency.

So yeh, we all get alot poorer Argentinian style or Turkish style.

^ exactly ^

if the government announce a switch to a "New Punt"

and they have to announce as something like that would be hard to keep under wraps and not tell ECB etc

all of the money in current and savings accounts would simply move to the stronger/stable currency, it be harder to liquidate other assets like cars/houses

and there surely would be riots (see Argentina)


modern currency is nothing more than fancy paper and only works because the population has some degree of trust in the government/issuing body

would anyone here trust "Cowen's Rubble" :P

gerry28

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

KerranJast

ardmacha wrote: »

This State is just about the only place on the planet that the UK has a trade surplus with, as so many consumer goods pass through there on their way here.

For all the problems with the Euro our trade situation is not disastrous. This year imports have fallen much more than exports.



We cannot leave the Euro. That's it.
We just need to grow up and behave like a mature country and stop this obsession with houses that they have in Britain.

+1. We need landlords to stop taking the piss with rental valuations. It's still nearly cheaper to buy a nice house than to rent a nice house which is a ludicrous situation.

KerranJast

gerry28 wrote: »

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

The very fact that we are in the ECB (thank you Euro) and Iceland weren't saved us from their woeful fate.

ei.sdraob

gerry28 wrote: »

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

thats called inflation (and we just lived thru a huge housing asset inflation)
it happened due to the low interest rates releasing money into the economy
and if it makes you feel better the rates were lower in US and UK

but just because money is "cheap" doesnt mean it need to be wasted as happened here, the Germans used the low rates to invest heavily in renewable's and are now a world leader, we used the money to build shoeboxes



printing money to devalue is effectively a negative interest rate, and means even more money being added to the system


do you see the problem now? devaluation as you propose would cause a bigger issue down the road than the one you identified

Diarmuid

gerry28 wrote: »

As soon as it came in prices started to rise sharply

seamus

ei.sdraob wrote: »

^ exactly ^

if the government announce a switch to a "New Punt"
....
all of the money in current and savings accounts would simply move to the stronger/stable currency, it be harder to liquidate other assets like cars/houses

...and you'd probably find that lenders would invent some loophole that allows them to keep our debt to them valued in euros, so instead of a €200,000 mortgage and a house that will sell for half that, people are saddled with a IEP£300,000 mortgage and a house that will sell for a quarter of that. So mortgage payments increase and the chances of ever moving home or getting out of negative equity effectively become nil.

I don't know about anyone else, but I'm pretty sure that I'd stop paying my mortgage and say "so sue me" to the lenders at that point.

Alcatel

gerry28 wrote: »

Yeah, its probably too late to leave it now with our current debt levels. But, I dont think its been good for this country.

As soon as it came in prices started to rise sharply - we didn't seem to have a grasp on the value of money anymore.

I remember if someone talked about quarter of a million punts for a house jaws would drop... a couple of years later quarter of a million euro seemed like nothing.

That was us, not the Euro.

We're an export led economy, with the Eurozone as our biggest collective market. Being on the same currency as them makes a whole lotta sense.

Leaving the Euro is economic jingoism and protectionism will surely follow from people of the same mind. Let's go back to DeVelera economics, because that worked so well for us.

SkepticOne

seamus wrote: »

...and you'd probably find that lenders would invent some loophole that allows them to keep our debt to them valued in euros, so instead of a €200,000 mortgage and a house that will sell for half that, people are saddled with a IEP£300,000 mortgage and a house that will sell for a quarter of that. So mortgage payments increase and the chances of ever moving home or getting out of negative equity effectively become nil.

If Ireland left the Euro then all loans to Irish operations of banks would be re-denominated in the new currency as would savings. This is part of the process of switching currency. These banks might like to continue owing them the euro amount but they would have no standing in Irish law to go after you for anything but the amount in the new currency.

An issue, however, would be inflation due to the increasign cost of imports and this would mean higher interest rates to combat it so borrowers would not get completely off the hook.

A genuine disadvantage is that the value of savings would go down relative to international buying power, however as pointed out, interest rates are likely to rise so the return on those savings within Ireland would increase.

SkepticOne

Alcatel wrote: »

Leaving the Euro is economic jingoism and protectionism will surely follow from people of the same mind. Let's go back to DeVelera economics, because that worked so well for us.

It don't think it follow that protectionism is the next step. I think most people realise that free trade has been hugely beneficial to Ireland.

Diarmuid

SkepticOne wrote: »

If Ireland left the Euro then all loans to Irish operations of banks would be re-denominated in the new currency as would savings. This is part of the process of switching currency. These banks might like to continue owing them the euro amount but they would have no standing in Irish law to go after you for anything but the amount in the new currency.

Ok, but the bank still owes their debt in Euros to the ECB. Now with the link broken, I'd imagine all mortgages would be variable rate against the new punt. What is the likelihood the bank would make up the difference in increased interest charges? ie you previously had a 4% variable rate mortgage, suddenly you are paying 12%....

SkepticOne

ei.sdraob wrote: »

and there surely would be riots (see Argentina.

I'm not sure Argentina is a good example. Their problem stemmed from trying to peg their currency to the dollar which they could not sustain. They solved their problem by allowing their currency to devalue.

SkepticOne

Diarmuid wrote: »

Ok, but the bank still owes their debt in Euros to the ECB. Now with the link broken, I'd imagine all mortgages would be variable rate against the new punt. What is the likelihood the bank would make up the difference in increased interest charges? ie you previously had a 4% variable rate mortgage, suddenly you are paying 12%....

You say Ireland still owes debts to the ECB in Euros. What would happen is that Ireland would tell the ECB that it now owes that debt in the equivalent of Punts.

I have already pointed pointed out that interest rate may rise however you have to remember that there's a large deflationary effect in the economy already that would mitigate against the inflationary effect of more expensive foreign goods.

Interest rate policy should be focussed at keeping inflation low. Let the markets determine the value of the currency.

Personally I don't think any government would actually implement the leaving of the Euro, but this would be for political rather than economic reasons. It would happen because Ireland is forced to do so due to not being able to afford to stay in the Euro.

ei.sdraob

SkepticOne wrote: »

You say Ireland still owes debts to the ECB in Euros. What would happen is that Ireland would tell the ECB that it now owes that debt in the equivalent of Punts.

the ECB would tell the government where to stick it

see Iceland for an example of country where debt is in non native currency

SkepticOne

ei.sdraob wrote: »

the ECB would tell the government where to stick it

But remember at that point the ECB is no longer Ireland's central bank. Their choice would be between taking Punts (for want of a better word) or nothing.

ei.sdraob

SkepticOne wrote: »

But remember at that point the ECB is no longer Ireland's central bank. Their choice would be between taking Punts (for want of a better word) or nothing.

if the country defaults then good luck trying to borrow 400million a week or more to keep welfare/ps ruinning

that be something strikes and riots government overthrown and euro reinstated

you are also not addressing the issue of money draining away or how to pay for everything that gets imported

SkepticOne

ei.sdraob wrote: »

if the country defaults then good luck trying to borrow 400million a week or more to keep welfare/ps ruinning

that be something strikes and riots government overthrown and euro reinstated

you are also not addressing the issue of money draining away or how to pay for everything that gets imported

How sustainable do you believe that 400 million a week is at present? What happens when we can no longer service it because we are uncompetitive within the Euro?

jif

gerry28 wrote: »

I was just listening to david mcwilliams

theres the problem.

ei.sdraob

SkepticOne wrote: »

How sustainable do you believe that 400 million a week is at present? What happens when we can no longer service it because we are uncompetitive within the Euro?

not very sustainable but at least we have time to deal with that problem

switching currency would be like jumping of cliff

anyways as has been show earlier in thread (with data and figures) Irish exports are still strong and there has been a bigger drop of in imports

considering most of our trade is with EU...