Why don't we leave the EU? Join the Swiss in EFTA

sirromo

maggy_thatcher wrote:

Neither of which was because of the euro

Both were related to our membership of the euro and if we hadn't joined the euro our hard landing would not have been as hard. The build up of foreign debt is mostly related to the collapse of the housing market. If the ECB had not kept interest rates so low over the last decade then our economy would not have been flooded with so much cheap credit and the housing bubble would not have become as big as it did. Just as the Federal Reserve's policy of keeping interest rates low played a major role in fueling the housing boom in the US, the ECB's policy of keeping interest rates low played a role in fueling the housing boom in Ireland.

Our loss of competitiveness was related to the increase in the cost of living. Although our membership of the euro was not directly responsible for our increased inflation, our surrender of our power to set our own interest rates meant that we weren't able to bring inflation under control once it became obvious that it was a problem. If we had managed to bring inflation under control then the unions would not have as strong a case for demanding wage increases.

maggy_thatcher wrote:

our "massive foreign debt" was the second lowest in the EU15 just 5 years ago

We were in the middle of an unsustainable housing boom 5 years ago.

maggy_thatcher wrote:

- so we've piled it on since then.

The reason we piled it on was because of the collapse of the housing boom and the resulting fall in tax revenues and increases in welfare payments.

maggy_thatcher wrote:

The major increase in the cost of doing business in Ireland is primarily due to the very high minimum wage in Ireland which drives inflation.

It's the other way around. It's the increase in inflation that drives the increase in the minimum wage. If we had the power to bring inflation under control over the last ten years then we wouldn't have seen our minimum wage increase by as much.

maggy_thatcher

sirromo wrote: »

If the ECB had not kept interest rates so low over the last decade then our economy would not have been flooded with so much cheap credit and the housing bubble would not have become as big as it did. Just as the Federal Reserve's policy of keeping interest rates low played a major role in fueling the housing boom in the US, the ECB's policy of keeping interest rates low played a role in fueling the housing boom in Ireland.

There was nothing stopping the Irish banks having higher interest rates than the ECB rates. The fact that they chose not to is not the ECB's fault. Note that now the banks are already starting to do this; they should've just done it a little earlier.

sirromo wrote: »

The reason we piled it on was because of the collapse of the housing boom and the resulting fall in tax revenues and increases in welfare payments.

Which is due to bad tax management (the government heavily taxed house transfers -- as long as people kept on moving, the tax kept coming in)...again not the fault of the euro, just bad (Irish) government that could have had other ways of collecting tax without being affected by the housing bubble.

sirromo wrote: »

It's the other way around. It's the increase in inflation that drives the increase in the minimum wage. If we had the power to bring inflation under control over the last ten years then we wouldn't have seen our minimum wage increase by as much.

That's true only if wage hikes were at or below inflation, but the pay-deals struck with the unions meant that the payrises were running above inflation for many people. This drives inflation further. If the payrises were stuck rigidly to inflation (or below it to settle things down), the effect would be greatly reduced. Unfortunately the unions in this country are too strong to allow that kind of thing.

K-9

Poorly managed economies are in the minority in the Euro. People are looking at our bubble and blaming the Euro.

marco_polo

sirromo wrote: »

Both were related to our membership of the euro and if we hadn't joined the euro our hard landing would not have been as hard. The build up of foreign debt is mostly related to the collapse of the housing market. If the ECB had not kept interest rates so low over the last decade then our economy would not have been flooded with so much cheap credit and the housing bubble would not have become as big as it did. Just as the Federal Reserve's policy of keeping interest rates low played a major role in fueling the housing boom in the US, the ECB's policy of keeping interest rates low played a role in fueling the housing boom in Ireland.

Our loss of competitiveness was related to the increase in the cost of living. Although our membership of the euro was not directly responsible for our increased inflation, our surrender of our power to set our own interest rates meant that we weren't able to bring inflation under control once it became obvious that it was a problem. If we had managed to bring inflation under control then the unions would not have as strong a case for demanding wage increases.




We were in the middle of an unsustainable housing boom 5 years ago.




The reason we piled it on was because of the collapse of the housing boom and the resulting fall in tax revenues and increases in welfare payments.




It's the other way around. It's the increase in inflation that drives the increase in the minimum wage. If we had the power to bring inflation under control over the last ten years then we wouldn't have seen our minimum wage increase by as much.

Given that Government policy almost certainly played an even bigger part in fuelling the boom, what make you think that with a standalone currency, interest rates would have been the one and only thing managed correctly?

The problem of cheap credit was a worldwide phenomenon not unique to the eurozone.

SkepticOne

marco_polo wrote: »

Given that Government policy almost certainly played an even bigger part in fuelling the boom, what make you think that with a standalone currency, interest rates would have been the one and only thing managed correctly?

The problem of cheap credit was a worldwide phenomenon not unique to the eurozone.

Interest rates are hugely important as they play a large part in your ability to repay a loan. The overriding factor for a bank in deciding how much to lend is your ability to pay it back.

It is true that this is the case for every country, however in Ireland we already had the beginnings of a bubble in Ireland with fast upward movement of house prices. We also had a long-standing predisposition to own our own homes and to use property as an investment. The last thing we needed was low interest rates at that time.

Of course on top of this, government policy did not help but it is certainly not the case that government policy was solely to blame. In my opinion it would have taken an extremely anti-populist government to have gone against the trend and imposed draconian measures at that point it time and our electoral system tends to lend itself to electing populist governments.

Flamed Diving

SkepticOne wrote: »

Interest rates are hugely important as they play a large part in your ability to repay a loan. The overriding factor for a bank in deciding how much to lend is your ability to pay it back.

It is true that this is the case for every country, however in Ireland we already had the beginnings of a bubble in Ireland with fast upward movement of house prices. We also had a long-standing predisposition to own our own homes and to use property as an investment. The last thing we needed was low interest rates at that time.

Of course on top of this, government policy did not help but it is certainly not the case that government policy was solely to blame. In my opinion it would have taken an extremely anti-populist government to have gone against the trend and imposed draconian measures at that point it time and our electoral system tends to lend itself to electing populist governments.

That is a shame, alright. Chile chose the anti-populist (i.e. sensible economics) approach during the boom, and was able to use the savings to smooth the cycle, despite the severity of global conditions.

http://rodrik.typepad.com/dani_rodriks_weblog/2009/04/when-textbook-macro-pays-off.html

As a result, they have one of the lowest public debts in the world, and have experienced only minor contractions:

https://www.cia.gov/library/publications/the-world-factbook/geos/ci.html

The Chilean government conducts a rule-based countercyclical fiscal policy, accumulating surpluses in sovereign wealth funds during periods of high copper prices and economic growth, and allowing deficit spending only during periods of low copper prices and growth. As of September 2008, those sovereign wealth funds - kept mostly outside the country and separate from Central Bank reserves - amounted to more than $20 billion. Chile used $4 billion from this fund to finance a fiscal stimulus package to fend off recession. The economy was starting to show signs of a rebound in the fourth quarter, 2009, although GDP still fell more than 1% for the year.

If only...

bonkey

sirromo wrote: »

And yet after 10 years of euro membership we've ended up with a massive foreign debt and we've seen a major increase in the cost of doing business in Ireland.

That's also nigh on 40 years after I was born. Obviously, then, had I not been born, Ireland wouldn't have these problems.

Or perhaps correlation and causation aren't the same thing.

K-9

bonkey wrote: »

That's also nigh on 40 years after I was born. Obviously, then, had I not been born, Ireland wouldn't have these problems.

Or perhaps correlation and causation aren't the same thing.

Nigh on 20 years after your birth we had huge Government debt and the threat of the IMF. It's the Euros and ECB's fault though.

Barring 10/15 years at a stretch, this country has a record of economic failure. I can see correlation and causation there alright! Going on our previous record. Others managed to do well with the Euro, we didn't.

sirromo

maggy_thatcher wrote:

There was nothing stopping the Irish banks having higher interest rates than the ECB rates. The fact that they chose not to is not the ECB's fault.

The banks are blame for their own reckless lending practices but the ECB is our central bank and so it has to bear some of the responsibility as well. One of the jobs of a central bank is to prevent an economy over-heating by controlling the flow of credit. The ECB didn't do this for reasons that have to do with its remit and also because of it is more heavily focused on the performance of the bigger economies like Germany and France than it is on the performance of the smaller peripheral countries.

It will be argued that an Irish central bank probably wouldn't have done any better, and maybe it wouldn't, but I think it would at least have been more responsive to problems specific to the Irish economy. Our membership of the euro means that when a problem happens, a good ECB is as much use to the Irish economy as a bad ICB. At least if we had our own central bank with the power to set interest rates we would be able to hold people accountable when things go wrong and we would be able to learn the lessons that might prevent the problem happening again. Being in the eurozone and having our interest rates set by the ECB means that nobody is held accountable because the people who are responsible for setting our interest rates are not responsible for preventing our economy over-heating.

The ECB's role was similar to the role of a parent who gives their teenage children credit cards with very low interest rates. They can stand back when they those children build up massive debts but they can't claim that they aren't to blame for giving them the means to build up those debts in the first place.

maggy_thatcher wrote:

Which is due to bad tax management (the government heavily taxed house transfers -- as long as people kept on moving, the tax kept coming in)...again not the fault of the euro, just bad (Irish) government that could have had other ways of collecting tax without being affected by the housing bubble.

Nobody is saying that the Irish government isn't to blame for our problems. I'm just pointing out that of all the factors that led to our economy over-heating, the fact that we low interest-rates set by ECB meant that we had an abundance of cheap credit in our economy and that led to the massive over-investment in housing.

Ask any American economist to list the factors that led to the American housing bubble and, among other things, he will list Alan Greenspan's decision to keep interest rates lower than they needed to be during the last decade. I don't see why we can't be as honest in pointing the role of our monetary authority in contributing to our own housing bubble.

You just have to type in causes of the Irish property bubble or causes of the Irish recession in google and you'll find plenty of references to the ECB's role in fueling our housing boom.

For example, this is from the wikipedia entry on the Irish property bubble

Interest rates set by the ECB are only guided by low inflation targets in the Eurozone. Some feel this too narrow an objective, leading to decisions on interest rates that are inappropriate, eg. in a country with record levels of employment, rising house prices and consumer spending. The Irish economy has fallen down the global competitiveness table from fourth to thirtieth in the past three years due to the rising costs of doing business.

This is from the entry on the Irish financial crisis:

The Irish economy expanded rapidly during the Celtic Tiger years up to 2007 due to low ECB interest rates among other causes. This led to an expansion of credit and included a property bubble which began to end in 2007. Irish banks, already over-exposed to the Irish property market, came under severe pressure in September 2008 due to the global financial crisis of 2007–2010.

maggy_thatcher wrote:

That's true only if wage hikes were at or below inflation, but the pay-deals struck with the unions meant that the payrises were running above inflation for many people. This drives inflation further.

It does drive inflation further which is why even small increases in inflation can have such damaging knock-on effects. The power to control inflation by setting interest rates is a very important tool in keeping an economy in healthy shape. No country should ever surrender that power if it is serious about remaining competitive.

It can't be claimed that our politicians weren't aware of this problem either. I remember seeing conservative politicians in Britain pointing to Ireland's inability to control inflation as being as being a perfect example of the downsides of euro membership.

marco_polo wrote:

Given that Government policy almost certainly played an even bigger part in fuelling the boom, what make you think that with a standalone currency, interest rates would have been the one and only thing managed correctly?

I don't know for sure that they would have performed any better but I believe an Irish Central Bank would have been more responsive to problems specific to the Irish economy. They would have been held accountable when things went wrong and so that would have given them an incentive to try to make sure things didn't go wrong.

As I've said above, when the problems happen, a good ECB is as much use to the Irish economy as a bad ICB.

bonkey wrote:

That's also nigh on 40 years after I was born. Obviously, then, had I not been born, Ireland wouldn't have these problems.

Or perhaps correlation and causation aren't the same thing.

In the case of our euro membership there is a causal relationship between the low-interest rates set by the ECB and the growth of the Irish property bubble in the last decade.

I'm sure if it was the other way around though, and Ireland today had a low foreign-debt and topped the league for competitiveness, I'm sure people would lose no time in pointing to the EU and our euro membership as being key contributory factors. Just as nobody uses the correlation/causation argument when discussing the good things that happened ot Ireland in the decades following EU membership, I'm sure people wouldn't be too bothered about pointing out the difference between correlation and causation if it turned out that our economy was in good shape following ten years of euro membership.

maggy_thatcher

sirromo wrote: »

The ECB's role was similar to the role of a parent who gives their teenage children credit cards with very low interest rates. They can stand back when they those children build up massive debts but they can't claim that they aren't to blame for giving them the means to build up those debts in the first place.

What ever happened to this thing called personal responsibility? Anybody who got into debt was an adult supposedly capable of making their own decisions. If they made bad ones, it's nobody's fault but their own.

sirromo wrote: »

It does drive inflation further which is why even small increases in inflation can have such damaging knock-on effects. The power to control inflation by setting interest rates is a very important tool in keeping an economy in healthy shape. No country should ever surrender that power if it is serious about remaining competitive.

So give the Financial Regulator more power to control minimum selling interest rates. This way you get the advantage of being in the euro, while at the same time not giving consumers the dirt cheap credit.

sirromo wrote: »

Just as nobody uses the correlation/causation argument when discussing the good things that happened ot Ireland in the decades following EU membership, I'm sure people wouldn't be too bothered about pointing out the difference between correlation and causation if it turned out that our economy was in good shape following ten years of euro membership.

That's because before we had the euro, the Irish economy generally performed poorly (in cycles). If after the euro this stopped, there would be a very obvious link. It didn't, so the euro didn't save us, but it didn't sink us.

Also - what interest rates would you prefer the ECB set us at? If we were to withdraw from the euro and then went bankrupt, I'd imagine we'd be closer to Iceland's rate - that's currently at 9%. Add about 2% for the banks themselves, and that's an 11% interest rate. Introduce that here, and we'll suddenly have a lot of homeless people!

marco_polo

SkepticOne wrote: »

Interest rates are hugely important as they play a large part in your ability to repay a loan. The overriding factor for a bank in deciding how much to lend is your ability to pay it back.

It is true that this is the case for every country, however in Ireland we already had the beginnings of a bubble in Ireland with fast upward movement of house prices. We also had a long-standing predisposition to own our own homes and to use property as an investment. The last thing we needed was low interest rates at that time.

Of course on top of this, government policy did not help but it is certainly not the case that government policy was solely to blame. In my opinion it would have taken an extremely anti-populist government to have gone against the trend and imposed draconian measures at that point it time and our electoral system tends to lend itself to electing populist governments.

Oh if only bank lending had been based on ability to pay back loans :pac:

Those are fair points however as you have alluded to yourself I cannot imagine a weak populist government would have allowed interest rates to go too far out of line with generally low rates internationally, not good for gaining mortgage holders votes.

There were plenty of warning signs that the economy was overheating and none of the other available tools that could have been used to averts the possible dangers were applied, so I don't see how interest rates would have bucked the trend. Our love of property and other factors are exclusive of eurozone membership.

Hell even the greeks are blaming the Euro for their crisis, not the fact that they lied to get into it and then hid their obscene spending.

Flamed Diving

Indeed. I'm sure a hefty range of property taxes would have skimmed the cream off our coffee, with no need for ECB rate hikes. But alas, the political (and public) will was not there. Instead, some prefer to blame people in Frankfurt.

sirromo

It seems to have become impossible to discuss the negative consequences of either mass immigration or euro membership without one side accusing the other of blaming the immigrants or blaming the EU.

Saying that our membership of the euro helped contribute to our problems is not the same thing as blaming the Europeans for our problems. It was an Irish government that decided to bring us into the euro. Our politicians are the people to blame for our problems, not the people in Europe.

maggy_thatcher wrote:

So give the Financial Regulator more power to control minimum selling interest rates.

I hadn't realised that was possible. Are you sure the ECB would allow it?

maggy_thatcher wrote:

Also - what interest rates would you prefer the ECB set us at?

No particular rate. Interest rates should fluctuate based on the performance of the economy. When the economy is performing badly they should be set low enough to help stimulate demand. When the economy shows signs of over-heating they should be set higher to prevent further over-heating.

bonkey

sirromo wrote: »

I'm sure people wouldn't be too bothered about pointing out the difference between correlation and causation if it turned out that our economy was in good shape following ten years of euro membership.

Much of this thread seems to stem from people being sure of what would happen in hypothetical situations.

Either people can make a valid argument for their posiiton, or they can't. I was pointing out that people were making claims and not bothering to make the argument. I'm not saying there is no causal link...just that those asserting its existence haven't bothered to establish same.

That you see fit to comment on such a critique is, in and of itself, somewhat bewildering....unless you're trying to suggest that its not entirely valid, without bothering to make the argument as to why its not valid. Ironically, that would be validating my critique rather than somehow undermining it.

K-9

sirromo wrote: »

Saying that our membership of the euro helped contribute to our problems is not the same thing as blaming the Europeans for our problems. It was an Irish government that decided to bring us into the euro. Our politicians are the people to blame for our problems, not the people in Europe.

And it was an Irish Government that made a mess of it. I think the problem is we haven't made enough out of the advantages the Euro offers, not leaving it. Multi nationals have made a success of it so why can't Irish exporters?

BetterLisbon

bonkey wrote: »

That's also nigh on 40 years after I was born. Obviously, then, had I not been born, Ireland wouldn't have these problems.

Or perhaps correlation and causation aren't the same thing.

Thats true but lets put the shoe on the other foot. Isnt the basic pro-EU argument that good things have happened during our tenure of EU membership therefore EU membership is a good thing.

Scofflaw

BetterLisbon wrote: »

Thats true but lets put the shoe on the other foot. Isnt the basic pro-EU argument that good things have happened during our tenure of EU membership therefore EU membership is a good thing.

The arguments are more that open access to European markets, financial support for Irish agriculture, financial assistance with Irish infrastructure, financial stability, reduction in our dependence on Britain, an additional eye/check on our politicians, and social progress are good things - and all of those are directly attributable to our EU membership.

cordially,
Scofflaw

dogbert27

BetterLisbon wrote: »

Thats true but lets put the shoe on the other foot. Isnt the basic pro-EU argument that good things have happened during our tenure of EU membership therefore EU membership is a good thing.

This sounds familiar!

"1. And what have the Romans ever given us in return?!
2. The aquaduct?
1. What?
2. The aquaduct.
1. Oh yeah, yeah, they did give us that, that's true.
3. And sanitation.
4. Yes, the sanitation, remember what the city used to be like, Reg.
1. Yes OK, I'll grant you, the aquaduct and sanitation are two things the Romans HAVE done.
5. And the roads!
1. Well yes obviously the roads, I mean the roads go without saying, don't they! But apart from the sanitation, the aquaduct and the roads...
6. Irrigation!
7. Medicine!
8. Education!
1. Yeah, all right, fair enough.
9. And the wine...
10. Yes, that's something we'd really miss if the Romans left.
11. Public baths!
4. And it's safe to walk the streets at night now Reg.
10. Yes, they certainly know how to keep order. Only ones who could in a place like this!
1. All right. But APART from the sanitation, medicine, education, wine, public order, irrigation, roads, a fresh water system and public health, what have the Romans ever done for us?!"

BetterLisbon

Scofflaw wrote: »

The arguments are more that open access to European markets, financial support for Irish agriculture, financial assistance with Irish infrastructure, financial stability, reduction in our dependence on Britain, an additional eye/check on our politicians, and social progress are good things - and all of those are directly attributable to our EU membership.

cordially,
Scofflaw

Access to markets could also have happened via bilateral treaties or the EEA. As i have said before CAP has crippled Irish agriculture with rich farmers creaming off the benefits. We did get structural funds i do adknowledge that. We arent seeing much financial stability at the minute. Replacing dependence on Britain with dependence on europe merely swaps one yoke for another. Fat lot of good the additional eye/check on our politicians has been. Social progress was happening anyway.
So again the shoe fits just as snugly on the other foot.

Scofflaw

BetterLisbon wrote: »

Access to markets could also have happened via bilateral treaties or the EEA.

And we could have discovered the world's largest oil field under Connemara. Or we could have rejoined the UK.

BetterLisbon wrote: »

As i have said before CAP has crippled Irish agriculture with rich farmers creaming off the benefits.

That has become the situation, and CAP undoubtedly needs reform, but it has not been the case throughout the history of our EU membership.

BetterLisbon wrote: »

We did get structural funds i do adknowledge that.

Would you like to give us your version of the amounts involved?

BetterLisbon wrote: »

We arent seeing much financial stability at the minute.

As a result of pro-cyclical policies pursued to the limit of their capabilities by our government, and supported by the electorate - do you not remember everybody (and particularly the eurosceptics) cheering the government's rebuff of the Commission's warning to us in 2002?

BetterLisbon wrote: »

Replacing dependence on Britain with dependence on europe merely swaps one yoke for another.

Except that we haven't - we have replaced dependence on Britain with a relationship with the EU.

BetterLisbon wrote: »

Fat lot of good the additional eye/check on our politicians has been.

See above point - see also the NAMA valuations, and see the EU's views on Anglo.

BetterLisbon wrote: »

Social progress was happening anyway.

No, it wasn't.

BetterLisbon wrote: »

So again the shoe fits just as snugly on the other foot.

As long as you're prepared to ignore the facts, but not otherwise.

regards,
Scofflaw

marco_polo

BetterLisbon wrote: »

Access to markets could also have happened via bilateral treaties or the EEA. As i have said before CAP has crippled Irish agriculture with rich farmers creaming off the benefits. We did get structural funds i do adknowledge that. We arent seeing much financial stability at the minute. Replacing dependence on Britain with dependence on europe merely swaps one yoke for another. Fat lot of good the additional eye/check on our politicians has been. Social progress was happening anyway.
So again the shoe fits just as snugly on the other foot.

I take it you are aware of how difficult it is to export agricultural goods into the EU when you are outside the circle, even as an EFTA / EEA member state?

Henry McConville

Scofflaw wrote: »

Ideally, you start with the view that we would be better off outside the EU. You then adduce every correlation that bolsters your argument, reject those that don't, and assume or disclaim causation as required.

cordially,
Scofflaw

Exactly

BetterLisbon

Scofflaw wrote: »

And we could have discovered the world's largest oil field under Connemara. Or we could have rejoined the UK.

That has become the situation, and CAP undoubtedly needs reform, but it has not been the case throughout the history of our EU membership.

Would you like to give us your version of the amounts involved?

As a result of pro-cyclical policies pursued to the limit of their capabilities by our government, and supported by the electorate - do you not remember everybody (and particularly the eurosceptics) cheering the government's rebuff of the Commission's warning to us in 2002?

Except that we haven't - we have replaced dependence on Britain with a relationship with the EU.

See above point - see also the NAMA valuations, and see the EU's views on Anglo.

No, it wasn't.

As long as you're prepared to ignore the facts, but not otherwise.

regards,
Scofflaw

Norway had a bilateral treaty with the EEC for decades pre-EEA.
I would argue like Ray Crotty that CAP always favoured rich farmers.
I accept we got lots of structural funds.
I would argue our euro-membership set the scene for the property bubble.
I would love to see your difference between "dependence" & "relationship".
Look at the mess. Why was the eye flooding us with cheap credit?
Pure speculation that EEC/EU membership led to changes. I say Televison.

Ahh the facts.

Flamed Diving

BetterLisbon wrote: »

I would argue our euro-membership set the scene for the property bubble.

As opposed the economic boom which preceded it. It seemed like a textbook case of an "under-performing economy experiencing a boom through growth in exports/productivity/whatever only for this to spill over into a property/asset bubble" to me, Euro or otherwise. It has happened before our experience, and will happen somewhere else again, in the future.

I sincerely doubt that your argument is correct, or that it is even your argument.

Open to correction.

dogbert27

BetterLisbon wrote: »

I would argue our euro-membership set the scene for the property bubble.

Argue away but Sweden and Finland were able to find themselves in a property bubble when they were outside the EU and with their own currency.

So using your favourite word "could", Ireland could still have had a property bubble outside of the EU and with the punt.

maggy_thatcher

BetterLisbon wrote: »

Norway had a bilateral treaty with the EEC for decades pre-EEA.

But doesn't export its agricultural products - the EU has tariffs in place to reduce its reliance on imports for agriculture, so if we were on the other side of the wall, we'd have great difficulty selling anything.

BetterLisbon wrote: »

I would argue like Ray Crotty that CAP always favoured rich farmers.

But without CAP, the small farmers would have nothing. And not being in the EU would mean they wouldn't be able to sell anything anyway, so it'd probably the lesser of two evils. I know CAP needs reform, but in a way, it's better than nothing.

BetterLisbon wrote: »

I would argue our euro-membership set the scene for the property bubble.

Only because our government had the taxes set up that way to encourage it.

BetterLisbon wrote: »

Look at the mess. Why was the eye flooding us with cheap credit?

It treated everybody equally...it wasn't their fault we didn't know how to handle it.

sirromo

bonkey wrote:

I was pointing out that people were making claims and not bothering to make the argument. I'm not saying there is no causal link...just that those asserting its existence haven't bothered to establish same.

Would you say there is greater need to establish a causal link between low interest-rates and the property bubble than there is to establish a causal-link between the government's tax policies and the property bubble?

Nearly everything I've read or seen on the causes of Ireland's housing boom include both the tax policies and the low interest-rates in the list of factors that contributed to the housing boom. As an example, this is from the wikipedia entry on the financial crisis:

The Irish economy expanded rapidly during the Celtic Tiger years up to 2007 due to low ECB interest rates among other causes. This led to an expansion of credit and included a property bubble which began to end in 2007. Irish banks, already over-exposed to the Irish property market, came under severe pressure in September 2008 due to the global financial crisis of 2007–2010.

bonkey wrote:

That you see fit to comment on such a critique is, in and of itself, somewhat bewildering....unless you're trying to suggest that its not entirely valid, without bothering to make the argument as to why its not valid. Ironically, that would be validating my critique rather than somehow undermining it.

I wasn't trying to either validate or invalidate anything. I was just pointing to the likelihood of people ignoring the distinction between correlation and causation if ten years of euro membership had resulted in a different outcome for the Irish economy. Many europhiles are already falling for the post-hoc-ergo-procter-hoc fallacy in their constant attempts to link our avaoidance of an Icelandic-scale crash to our membership of the euro.

a. We're in the euro
b. We haven't had a crash as bad as Iceland's
c. Therefore, the euro saved us from a crash as bad as Iceland's

Arguments of this type are frequently made and are rarely challenged.

Scofflaw

A very large number of countries had a boom while we had a boom - and all those countries have had a crash just as we've had a crash. Some of them have been worse crashes, some of them were better booms. There's a wide spread of countries available, euro, non-euro EU, EFTA, and non-European, and a correspondingly wide spread of results.

If someone presents a comparison of all those countries, and shows that the net growth enjoyed by euro countries over the last decade is lower than that of non-euro countries, you would at least have a prima facie case that euro membership has had a negative outcome, instead of the anecdotal stuff that's currently being bandied about.

Does anyone have such a comparison?

cordially,
Scofflaw

sirromo

Scofflaw wrote:

Does anyone have such a comparison?

Yes, the Czech president Vaclav Klaus has compared (here) the growth rates of the eurozone during the decade of the euro with previous decades and with other parts of the world and he has demonstrated that that the euro has failed to help Europe achieve its economic potential.

Vaclav Klaus wrote:

The economic growth in the current member countries of the eurozone has been slowing down since the 1950s and 1960s and the euro hasn't altered this trend in any way. According to the European Central Bank data (ECB Statistics Pocket Book, March 2010), the average annual GDP growth in these countries was 3.4% in the 1970s, 2.4% in the 1980s, 2.2% in the 1990s, and only 1.1% in the "decade of the euro", more precisely between 2001 and 2009. Such dynamics doesn't take place in other regions of the world.

Of particular relevance for Ireland is a quote he produced from the former Polish finance minister on why his country was better off for not having joined the euro:

Vaclav Klaus wrote:

"One important reason for this is that, as a non-member of the euro, Poland has been able to profit from flexibility of the zloty exchange rate in a way that has helped growth and lowered the current account deficit without importing inflation." He adds that "The decade-long story of peripheral euro members drastically losing competitiveness has been a salutary lesson." I think that this sentence needs no further clarifications.

Scofflaw

sirromo wrote: »

Yes, the Czech president Vaclav Klaus has compared (here) the growth rates of the eurozone during the decade of the euro with previous decades and with other parts of the world and he has demonstrated that that the euro has failed to help Europe achieve its economic potential.

Of particular relevance for Ireland is a quote he produced from the former Polish finance minister on why his country was better off for not having joined the euro:

No, that's not anything like such a comparison, because he doesn't make any statistical comparison to non-euro economies. His comparison consists solely of that some other people have done better, and since they don't have the euro it must be the fault of the euro, even though his other point is that the euro hasn't changed the trend in GDP growth. We have plenty of that kind of claim already.

cordially,
Scofflaw