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Why don't we leave the EU? Join the Swiss in EFTA
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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
In that report the late polish finance minister wrote of the benefits poland has by keeping currency flexibility.0 -
BetterLisbon wrote: »In that report the late polish finance minister wrote of the benefits poland has by keeping currency flexibility.
And as we all know, finance ministers never get things wrong. This is the kind of comparison I mean - from a US government paper :
Real GDP per capita (average annual rates of change):
Country|1979-2008|1979-1990|1990-1995|1995-2000|2000-2008|2002-2003|2003-2004|2004-2005|2005-2006|2006-2007|2007-2008
Non-European|2.8|3.38|2.82|2.82|1.97|2.17|3.72|2.62|2.85|2.53|-0.5
US|1.8|2|1.2|2.9|1.2|1.6|2.7|2|1.8|1|0.2
Canada|1.6|1.5|0.6|3.2|1.3|0.9|2.1|1.9|2.1|1.6|-0.7
Australia|1.9|1.7|1.5|3|1.7|1.7|2.7|1.4|1.4|2.1|0.4
Japan|1.9|3.3|1.2|0.8|1.2|1.2|2.7|1.9|2|2.3|-0.7
Korea|5.3|6.5|6.7|3.5|3.9|2.3|4.2|3.7|4.8|4.8|1.9
Singapore|4.3|5.3|5.7|3.5|2.5|5.3|7.9|4.8|5|3.4|-4.1
EFTA|||||||||||
Norway|2.4|2.3|3.2|3.1|1.6|0.4|3.3|2|1.5|2.1|0.9
EU-EURO|1.75|2|1.35|2.6|1.14|0.23|1.66|1.4|2.5|2.03|0.04
Austria|1.9|2|1.4|2.8|1.6|0.4|1.9|2.2|2.8|2.7|1.3
Belgium|1.8|2.1|1.2|2.5|1.3|0.6|2.5|1.3|2.3|2|0.5
Denmark|1.7|1.8|2|2.4|0.9|0.1|2|2.2|3|1.2|-1.7
France|1.5|1.8|0.7|2.4|1|0.4|1.7|1.1|1.5|1.7|-0.1
Germany|1.6|1.9|1.5|1.9|1.2|-0.3|1.2|0.8|3.1|2.6|1.4
Italy|1.5|2.4|1.2|1.9|0.2|-0.8|0.5|-0.1|1.5|0.8|-1.9
Netherlands|1.9|1.6|1.6|3.4|1.5|-0.1|1.9|1.8|3.2|3.2|1.7
Spain|2.1|2.4|1.2|3.5|1.4|1.5|1.6|1.9|2.6|2|-0.9
EU-NONEURO|1.95|2|0.75|3.15|1.9|1.95|3|2.15|2.95|2.1|-0.3
Sweden|1.8|1.9|0.1|3.2|1.9|1.5|3.7|2.9|3.7|1.8|-1
UK|2.1|2.1|1.4|3.1|1.9|2.4|2.3|1.4|2.2|2.4|0.4
Now if the euro is some kind of terrible straitjacket, we should be seeing some kind of evidence in that table, but I don't see it there. Also, if you leave out Korea & Singapore, which are much younger economies, the non-European results don't look very different from the euro-area results:
Country|1979-2008|1979-1990|1990-1995|1995-2000|2000-2008|2002-2003|2003-2004|2004-2005|2005-2006|2006-2007|2007-2008
Non-European|1.8|2.13|1.13|2.48|1.35|1.35|2.55|1.8|1.83|1.75|-0.2
EU-EURO|1.75|2|1.35|2.6|1.14|0.23|1.66|1.4|2.5|2.03|0.04
cordially,
Scofflaw0 -
From the same paper, growth rates of real GDP per capita:
Decade|US|Canada|Australia|Japan|Korea|Singapore|Austria|Belgium|Denmark|France|Germany|Italy|Netherlands|Norway|Spain|Sweden|UK
1960s|3.33|3.44|2.94|9.13|5.67|6.18|3.83|4.16|4.31|4.56|3.46|5.01|3.79|3.57||3.72|2.25
1970s|2.18|2.7|1.55|3.9|6.46|7.65|4.03|3.27|1.98|3.49|2.92|3.5|2.57|3.85|2.7|2.04|2.27
1980s|2.1|1.81|1.87|3.11|6.37|5.32|1.84|2.03|1.87|1.76|1.67|2.49|1.39|2.41|2.31|2.03|2.3
1990s|1.86|1.34|2.05|1.21|5.26|4.37|2.09|1.79|2.04|1.44|1.76|1.38|2.55|3.02|2.36|1.26|1.95
2000s|1.36|1.62|1.72|1.36|4.33|3.19|1.77|1.58|1.16|1.22|1.43|0.62|1.72|1.68|1.69|2.19|2.05
Ratio 2000/1990|0.73|1.21|0.84|1.12|0.82|0.73|0.85|0.88|0.57|0.85|0.81|0.45|0.67|0.56|0.72|1.73|1.05
Again, I'm not sure what the difference is supposed to be here - it looks to me like there's relatively little evidence that being in EFTA would have been of great benefit to us. While I can see evidence for the slowdown in GDP growth Klaus is talking about, I'm unsurprised to note that it's a feature of all the developed economies, not just the euro area.
cordially,
Scofflaw0 -
Scofflaw wrote:This is the kind of comparison I mean - from a US government paper :
Real GDP per capita (average annual rates of change):
Those figures are interesting but a quick glance shows that the list of countries is incomplete. There are 12 countries who have been the eurozone from the start but only 8 are included above. There are 4 countries in the EFTA but Norway is the only one included in the list.
The country whose economic performance should concern us the most is not included in the list either.Scofflaw wrote:And as we all know, finance ministers never get things wrong.
Are you suggesting that the Polish finance minister might have got it wrong when he claimed that there was a drastic fall in competitiveness among peripheral euro members during the decade of the euro?
Whatever about the other PIGS, Ireland's loss of competitiveness is undeniable
http://www.finfacts.ie/irishfinancenews/article_1017372.shtmlIreland has become less competitive in the last decade, with the Harmonised competitiveness indicator (deflated by consumer prices) increasing by 25.5% between 1999 and 2008 which indicates a significant deterioration in price competitiveness for Ireland vis-a-vis our main trading partners (Table 1.16). Appreciation of the Euro against other major currencies contributed to this decline (Table 1.15).Scofflaw wrote:Again, I'm not sure what the difference is supposed to be here - it looks to me like there's relatively little evidence that being in EFTA would have been of great benefit to us. While I can see evidence for the slowdown in GDP growth Klaus is talking about, I'm unsurprised to note that it's a feature of all the developed economies, not just the euro area.
A eurosceptic would look at those figures and ask a different question. Instead of asking whether the alternatives would have left us better off, I would ask why the euro hasn't left us better off. If the best that can be said of the euro is that it has left us no better or worse off than countries without the euro, then what does that say about the success of the currency? Is there reason to believe that the countries now using the euro would not have performed as well over the last decade if they had stuck with their own currencies?
Now that we're in a position where having the euro is seriously hampering our economic recovery, I think it's worth asking whether the benefits of the euro membership over the last ten years were really worth the costs that we're now having to pay.0 -
Now that we're in a position where having the euro is seriously hampering our economic recovery, I think it's worth asking whether the benefits of the euro membership over the last ten years were really worth the costs that we're now having to pay.
Now that I've woken up and I'm in a position to realise that being hungover is seriously affecting my ability to go to work, I have to ask myself was the laugh I had last night with the lads really worth the costs of missing a days pay.
I don't know how many times it has to be said, what happened wasn't because of the euro or being in the EU, it was because of the choices that were made by the Irish government, the Irish banks and the Irish people.
The following is from a bbc article in 1998:
But economists say that there are a number of advantages in signing up to the euro:
Currency stability
A single currency should end currency instability in the participating countries (by irrevocably fixing exchange rates) and reduce it outside them.
Because the euro would have the enhanced credibility of being used in a large currency zone, it would be more stable against speculation than individual currencies are now.
An end to internal currency instability and a reduction of external currency instability would enable exporters to project future markets with greater certainty. This could unleash great potential for growth.
Tourism
Consumers would not have to change money when travelling within the euro zone, and would encounter less red tape when transferring large sums of money across borders.
Travellers will no longer be forced to change money and pay banks the commission charges.
A consumer might wish to make one large purchase or transaction across a European border such as buying a holiday home or a piece of furniture. A single currency would help such transactions pass smoothly.
Business benefits
Likewise, businesses would no longer have to pay hedging costs which they do today in order to insure themselves against the threat of currency fluctuations.
Businesses, involved in commercial transactions in different member states, would no longer have to face the costs of accounting in different currencies.
Surprisingly, small firms stand the most to gain. Experts estimate that currently the currency cost of exports is ten times higher for small companies than for multi-nationals, who can offset sales against purchases and command the best rates.
Cheaper mortgages, lower interest rates
A single currency should also result in lower interest rates as all member countries if the new European Central bank takes on the monetary credibility of Germany's Bundesbank.
The stability pact (the main points of which were agreed at the Dublin summit of European heads of state or government in December 1996) will force EU countries into a system of fiscal responsibility which will enhance the euro's international credibility. This should lead to more investment, more jobs, lower interest rates - and for home owners to lower mortgages.
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Interesting article by Nobel laureate Paul Krugman in the New York Times about the Euro with reference to the Greek situation (but obviously it applies to us too). Like many he sees the intrinsic problems with the Euro but the prevailing view until recently was that although the Euro may have been a bad idea, leaving it may be even worse than staying in it. We've already had Harvard's Feldstein suggesting similar. I think we're going to see more along this line in the future.For a long time my view on the euro has been that it may well have been a mistake, but that bygones were bygones — it could not be undone. I was strongly influenced by the view expressed by Barry Eichengreen in a classic 2007 article (although I had heard that argument — maybe from Barry? — long before that piece was published): as Eichengreen argued, any move to leave the euro would require time and preparation, and during the transition period there would be devastating bank runs. So the idea of a euro breakup was a non-starter.
But now I’m reconsidering, for a simple reason: the Eichengreen argument is a reason not to plan on leaving the euro — but what if the bank runs and financial crisis happen anyway? In that case the marginal cost of leaving falls dramatically, and in fact the decision may effectively be taken out of policymakers’ hands.
Actually, Argentina’s departure from the convertibility law had some of that aspect. A deliberate decision to change the law would have triggered a banking crisis; but by 2001 a banking crisis was already in full swing, as were emergency restrictions on bank withdrawals. So the infeasible became feasible.
Think of it this way: the Greek government cannot announce a policy of leaving the euro — and I’m sure it has no intention of doing that. But at this point it’s all too easy to imagine a default on debt, triggering a crisis of confidence, which forces the government to impose a banking holiday — and at that point the logic of hanging on to the common currency come hell or high water becomes a lot less compelling.0 -
Join Date:Posts: 9866
SkepticOne wrote: »Interesting article by Nobel laureate Paul Krugman in the New York Times about the Euro with reference to the Greek situation (but obviously it applies to us too). Like many he sees the intrinsic problems with the Euro but the prevailing view until recently was that although the Euro may have been a bad idea, leaving it may be even worse than staying in it. We've already had Harvard's Feldstein suggesting similar. I think we're going to see more along this line in the future.
Good points certainly while he has always has been less than fully convinced about the overall merits of the Euro, he has previously argued that smaller open European European economies are better off inside the single currency.http://www.diis.dk/graphics/Publications/Briefs2009/B09_Small_open_euro_economies.pdf
“I think the lesson of the crisis is that one should join the euro…. For good or evil should probably all the small European countries join.”
Paul Klugman, Nobel Prize for Economics, Sydsvenskan 16th November 2008.
There are currently four main economic ar-guments put forwards by leading economists such as Krugman related to the global eco-nomics crisis and new evidence emerging from studying the past 10 years of the Euro: (1) that membership of the Euro provides protection from the worst effects of the global financial crisis, (2) that the positive trade effects are conclusive, (3) that Foreign Direct Investment (FDI) has been effected by the Euro and (4) that relative Euro-zone economic performance has been understated over the last 10 years.0 -
SkepticOne wrote: »Personally I think we've already hit the iceberg. The situations that Euro mechanisms like the stability and growth pact were supposedly designed guard against have now occurred. It is hard to see how, for example, Greece are going to get out of their current difficulties no matter what course of action they now adopt. Likewise when the contagion spreads to Ireland there will be nothing we can do. The only question now is do we get in the lifeboat or do we go down with the ship.
eh we came before Greece. are they likely to have another go?
The rating agencies are losing clout with investors. The only clout they have left is with the media and even that's wearing thin. These are the same crowd that saw nothing wrong with sub prime lending yet now we are supposed to take them seriously? I'm not saying Greece aren't in trouble, but they are in trouble because they really are in trouble if you know what I mean. We were in worse trouble than we should have been due to negative speculation. I don't think they get to have a 2nd go at us to be honest.0 -
All the data people require can be found at these sources:
http://pwt.econ.upenn.edu/
or
http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/index.aspx
Knock yourselves out. But remember, I will be watching for naughtiness.0 -
Those figures are interesting but a quick glance shows that the list of countries is incomplete. There are 12 countries who have been the eurozone from the start but only 8 are included above. There are 4 countries in the EFTA but Norway is the only one included in the list.
The country whose economic performance should concern us the most is not included in the list either.
Those were the 17 countries compared in the source. It is, even incomplete, a huge advance on the comparisons that have been offered on the thread so far.Are you suggesting that the Polish finance minister might have got it wrong when he claimed that there was a drastic fall in competitiveness among peripheral euro members during the decade of the euro?
I'm pointing out that I'm not about to take it on faith simply because a finance minister says it - and were the positions reversed, I suspect you wouldn't either.Whatever about the other PIGS, Ireland's loss of competitiveness is undeniable
http://www.finfacts.ie/irishfinancenews/article_1017372.shtml
Yes - and so? This is again a simple statement of correlation which you are holding up as causation. We were in the euro and we lost competitiveness through rises in the cost of living, wage inflation, and other issues - and perhaps you attribute all those to the euro, but you really do need to show that they wouldn't have happened anyway.A eurosceptic would look at those figures and ask a different question. Instead of asking whether the alternatives would have left us better off, I would ask why the euro hasn't left us better off. If the best that can be said of the euro is that it has left us no better or worse off than countries without the euro, then what does that say about the success of the currency? Is there reason to believe that the countries now using the euro would not have performed as well over the last decade if they had stuck with their own currencies?
Whatever about the other countries, our time in the euro has certainly left us better off.
Year|GDP - real growth rate|Date of Information|Cumulative
2003|5.20%|2002 est.|105.2
2004|1.40%|2003 est.|106.67
2005|5.10%|2004 est.|112.11
2006|5.50%|2005 est.|118.28
2007|6.00%|2006 est.|125.38
2008|6.00%|2007 est.|132.9
2009|-3.00%|2008 est.|128.91
2010|-7.50%|2009 est.|119.24Now that we're in a position where having the euro is seriously hampering our economic recovery, I think it's worth asking whether the benefits of the euro membership over the last ten years were really worth the costs that we're now having to pay.
I don't think you've established that the euro is "seriously hampering our economic recovery" compared to the situation if we had a free-floating national currency.
cordially,
Scofflaw0 -
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SkepticOne wrote: »Interesting article by Nobel laureate Paul Krugman in the New York Times about the Euro with reference to the Greek situation (but obviously it applies to us too). Like many he sees the intrinsic problems with the Euro but the prevailing view until recently was that although the Euro may have been a bad idea, leaving it may be even worse than staying in it. We've already had Harvard's Feldstein suggesting similar. I think we're going to see more along this line in the future.
Well Mr Krugman is, of course, entitled to his views and we should certainly pay attention to them.
However, we could well ask the various American commentators why they don't advocate that California and the other US states going through similar economic crises don't abandon the US dollar and allow their own (state) currencies to depreciate against the (US) dollar?
It would be a shame to deny those US states the benefits of free-floating currency, wouldn't it?0 -
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Should not the more accurate start date be 1992, when we joined the EMU? Being part of a fixed exchange rate system is all but having the same coins and notes.0
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SkepticOne wrote: »Although it can always be argued that factors other than the Euro played a part, we're much more of a basket case economy now than we were in 2000 before we joined the Euro.
It can be argued that the euro played little or no part, or that we're in a better position than we otherwise would be without the euro. Just pointing at dates (and not even the right dates, as Flamed Diving has pointed out) is meaningless without some kind of logical argument linking the two - otherwise we are in realms where the Icelandic eruption can be blamed on the poll success of the Lib Dems (clearly the gods are angry with Nick Clegg!). Previous generations were, of course, extremely fond of exactly that sort of 'logic', but one likes to think we have moved on since then.
Having said that, economics is of course a sufficiently inexact 'science', and the options presented by whatiffery so great, that the argument cannot really be settled without recourse to a handy parallel universe. You are, I think, free to continue to believe as you wish, but I will say that mere coincidence is not a convincing argument without a predisposition towards the putative conclusion.
cordially,
Scofflaw0 -
I'm just correcting your "facts". We're not in a better position than before the Euro. You are free to say that the Euro has little nothing to do with it if you wish, but the basic fact remains.It can be argued that the euro played little or no part, or that we're in a better position than we otherwise would be without the euro. Just pointing at dates (and not even the right dates, as Flamed Diving has pointed out) is meaningless without some kind of logical argument linking the two - otherwise we are in realms where the Icelandic eruption can be blamed on the poll success of the Lib Dems (clearly the gods are angry with Nick Clegg!). Previous generations were, of course, extremely fond of exactly that sort of 'logic', but one likes to think we have moved on since then.
Having said that, economics is of course a sufficiently inexact 'science', and the options presented by whatiffery so great, that the argument cannot really be settled without recourse to a handy parallel universe. You are, I think, free to continue to believe as you wish, but I will say that mere coincidence is not a convincing argument without a predisposition towards the putative conclusion.0 -
Better ask Krugman that then. I suspect he'd point to several differences that make the comparison not really valid e.g. mobility of the workforce.Well Mr Krugman is, of course, entitled to his views and we should certainly pay attention to them.
However, we could well ask the various American commentators why they don't advocate that California and the other US states going through similar economic crises don't abandon the US dollar and allow their own (state) currencies to depreciate against the (US) dollar?
It would be a shame to deny those US states the benefits of free-floating currency, wouldn't it?0 -
Join Date:Posts: 9866
SkepticOne wrote: »Although it can always be argued that factors other than the Euro played a part, we're much more of a basket case economy now than we were in 1999 before we joined the Euro.
Why is it that other factors are of great importance to you only when somebody highlights the positive aspects of eurozone membership?0 -
I was disputing the notion that we're in a better position now than when when we joined.marco_polo wrote: »Why is it that other factors are of great importance to you only when somebody highlights the positive aspects of eurozone membership?
My mention of "other factors" is to allow for the fact that many factors not merely membership of the Euro may have played their part (which I think is reasonabl), though if you want to dispute that and say that the Euro was solely to blame then go ahead; it is not central to my point.0 -
SkepticOne wrote: »I'm just correcting your "facts". We're not in a better position than before the Euro. You are free to say that the Euro has little nothing to do with it if you wish, but the basic fact remains.
Apart from the point marco_polo raises, that's a claim that rests on the idea that in 2001 the banks weren't making questionable loans, development frenzy was non-existent, Fianna Fáil weren't bloating the public sector through hiring and benchmarking, creating tax incentives for development, producing pro-cyclic budgets, and dismantling the regulatory framework.
None of those is the case - we were already on track for where we are, we just either didn't know it or ignored it. House prices were already spiralling (see here), the benchmarking body was already preparing its outrageous recommendations, McCreevy was pulling off pro-cyclic gambler's budgets and deploying pseudo-patriotic bluster against warnings from the EU Commission, introducing a special low rate of tax for developers, etc etc.
In short, you're ignoring virtually every piece of evidence that points to systemic issues unrelated to the euro, and that were already in place before we joined the euro, while claiming the mere correlation of dates damns the euro. Not much of an argument in my book - or indeed anywhere outside the eurosceptical playbook.
To put that briefly - we were already swimming naked before we joined the euro, but now the tide has gone out and everyone can see it.
cordially,
Scofflaw0 -
SkepticOne wrote: »Better ask Krugman that then. I suspect he'd point to several differences that make the comparison not really valid e.g. mobility of the workforce.
Its 1% in the EU between the member states, 3% in the US between the states. A difference yes but certainly not one so huge that you make decisions on what currency to have based on it. As it is, I suspect that Mr Krugman wouldn't be very convinced of the wisdom of the more economically troubled US states pursuing a policy of devaluation...0 -
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Could you provide a link for those figures? The figure is quite high for the US, imo.Its 1% in the EU between the member states, 3% in the US between the states. A difference yes but certainly not one so huge that you make decisions on what currency to have based on it. As it is, I suspect that Mr Krugman wouldn't be very convinced of the wisdom of the more economically troubled US states pursuing a policy of devaluation...0 -
No, the claim that we're worse off now than in 1999 not rest on any such ideas. It rest on things like the unemployment statistics, the budget deficit, public and private debt etc, the existance of NAMA etc. What caused this situation is a matter for debate but the fact that we're in the situation is not, imo.Apart from the point marco_polo raises, that's a claim that rests on the idea that in 2001 the banks weren't making questionable loans, development frenzy was non-existent, Fianna Fáil weren't bloating the public sector through hiring and benchmarking, creating tax incentives for development, producing pro-cyclic budgets, and dismantling the regulatory framework.
So long as we include the inappropriate low interest rates that the government imposed on us at a very bad time, I'm happy to include these other things as additional factors.None of those is the case - we were already on track for where we are, we just either didn't know it or ignored it. House prices were already spiralling (see here), the benchmarking body was already preparing its outrageous recommendations, McCreevy was pulling off pro-cyclic gambler's budgets and deploying pseudo-patriotic bluster against warnings from the EU Commission, introducing a special low rate of tax for developers, etc etc.
But you were trying to show that the Euro has helped Ireland and that we're now in a better state at the than we were when we joined. The figures you produced were GDP growth for a number of years in the eurozone. However these GDP figures were boosted by these same procyclical policies that you (and I) condemn. The only difference is that I am not contradicting myself.In short, you're ignoring virtually every piece of evidence that points to systemic issues unrelated to the euro, and that were already in place before we joined the euro, while claiming the mere correlation of dates damns the euro. Not much of an argument in my book - or indeed anywhere outside the eurosceptical playbook.0 -
SkepticOne wrote: »No, the claim that we're worse off now than in 1999 not rest on any such ideas. It rest on things like the unemployment statistics, the budget deficit, public and private debt etc, the existance of NAMA etc. What caused this situation is a matter for debate but the fact that we're in the situation is not, imo.So long as we include the inappropriate low interest rates that the government imposed on us at a very bad time, I'm happy to include these other things as additional factors.But you were trying to show that the Euro has helped Ireland and that we're now in a better state at the than we were when we joined. The figures you produced were GDP growth for a number of years in the eurozone. However these GDP figures were boosted by these same procyclical policies that you (and I) condemn. The only difference is that I am not contradicting myself.
Goodness me, but this is exactly the kind of post that makes these discussions so wearisome! I am most certainly not claiming we are in a better position than we were ten years ago - the main thrust of my argument is very simply that we were on the road to where we are now ten years ago, not that we were there then. I did include as a throwaway the point that our GDP per capita is still larger than a decade ago, and you appear to have fastened on this point like a man clutching a lifeline, because you cannot refute the main point - but it's the main point the discussion is about, not whether our GDP/capita is larger than when we joined (as it still is).
Let me reiterate - my point is that everything that has turned out to be wrong with the Irish economy - lost competitiveness, broken banks, over-reliance of the economy and tax on the construction sector, galloping house price inflation, bloated public sector, weak regulation, was all in train before we joined the euro. Even the house prices, which are commonly attributed to the euro, were rising just as fast before we joined - indeed, if you look at the link I've provided, you'll see that house prices were growing faster before we joined, not after, which means that the claim the housing bubble can be laid at the feet of the euro doesn't stand up either (although, of course, you could claim that the faster growth before we joined was somehow rational and organic, while the growth after, though slower, was irrational and forced on us by the euro - but it's a value of 'could' that involves you looking pretty silly).
So, to be brief, the claim that the euro contributed to our current crisis is rubbish. Whether we would do better to leave now is another argument, albeit not one for sane men, but the claim that the euro is the cause of our problems is a bust - there isn't a single one of our chickens that wasn't on the wing before we joined, and it was simply a matter of when they came home to roost. Even the "euro made us buy houses!" claim is false, because house price inflation was greater before we joined (and that's leaving aside the point that low interest rates neither force you to borrow, nor to put the loans into housing rather than developing a business).
Now, I'll have a rest, and you can move the goalposts* to claiming, like Klaus, that the euro is a failure because it didn't make everything a lot better than it would have been in some imaginary world where the GDP growth of developed western nations suddenly rose to heights not seen since the 1960s, euro or no euro. Like Klaus, though, I advise you not to offer comparative statistics, since they're unlikely to suit your case.
cordially,
Scofflaw
*after all, it's not as if any amount of facts will make you change your belief that the euro is the problem, dammit...it must be!0 -
Let me reiterate - my point is that everything that has turned out to be wrong with the Irish economy - lost competitiveness, broken banks, over-reliance of the economy and tax on the construction sector, galloping house price inflation, bloated public sector, weak regulation, was all in train before we joined the euro. Even the house prices, which are commonly attributed to the euro, were rising just as fast before we joined - indeed, if you look at the link I've provided, you'll see that house prices were growing faster before we joined, not after, which means that the claim the housing bubble can be laid at the feet of the euro doesn't stand up either.
The strong euro has been instrumental in our loss of competitiveness especially in the UK market. David McWilliams has written in depth on this.
While the euro didnt force banks to overreach themselves it did provide them with access to cheap credit on the interbank market free of currency risk whereas previously banks had to be very careful in borrowing on the interbank market.
Overreliance on Construction was a self inflicted wound but it was helped by cheap mortgage credit making investment properties possible for the average punter on a decent wage.
It is true house prices were already rising faster but they were coming from a much lower level and interest rates were coming down with the preperations for the euro when they actually needed to go up to cool the market.
The bloating of the public sector would have devalued a floating punt or jeopardised a currency peg. With hard currency in the trough for sectional intererests to feed on this wasnt a problem.
Weak regulation was a self inflicted wound but again the euro magnified the problem for above reasons.
In short while the euro didnt force things to go wrong it did grease the path. Most of the aforemenioned problems would probably still have happened but with much reduced impact.
Even shorter: Fear of a speculative attack on the punt would have forced us to behave responsibly.0 -
This thread reminds me of the many PreLisbon threads here
many posters would go to great lengths with excellent posts to explain why something is good (or bad) idea
and the antagonist ignores them and continues on around the circle
:P0 -
This thread reminds me of the many PreLisbon threads here
many posters would go to great lengths with excellent posts to explain why something is good (or bad) idea
and the antagonist ignores them and continues on around the circle
:P
True - the Ian Bailey thread is another fine example.
cordially,
Scofflaw0 -
This thread reminds me of the many PreLisbon threads here
many posters would go to great lengths with excellent posts to explain why something is good (or bad) idea
and the antagonist ignores them and continues on around the circle
:P
Yup. Do you remember that McWilliams-leave the euro thread?
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Obviously low interest rates alone does not make someone buy a house but neither do these other factors (tax incentives etc.) "make" us do anything. All they do is provide incentives.So, to be brief, the claim that the euro contributed to our current crisis is rubbish. Whether we would do better to leave now is another argument, albeit not one for sane men, but the claim that the euro is the cause of our problems is a bust - there isn't a single one of our chickens that wasn't on the wing before we joined, and it was simply a matter of when they came home to roost. Even the "euro made us buy houses!" claim is false, because house price inflation was greater before we joined (and that's leaving aside the point that low interest rates neither force you to borrow, nor to put the loans into housing rather than developing a business).
If you stand back and analyse what you are saying you will see that you are arbitrarily excluding low interest rates as a causal factor for no other reason than they they came in with the Euro. If we had not entered the Euro but had lowered interest rates to the same level anyway, you would have no problem attributing that action to our current problem along with the other actions that you mention, but but for no other reason that these low interest rates are due to the Euro it cannot be permitted to be even considered.
Is that a fair assessment of your position? If so, do you consider it to be entirely rational?0
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