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Why stabilise the euro, isnt a falling euro good for Ireland?

  • 29-05-2012 4:56pm
    #1
    Stabshauptmann
    Registered Users, Registered Users 2 Posts: 4,885 ✭✭✭


    Two days left to the referendum and I have a few more questions I'd like some help with.

    The treaty is designed at bring stability to the euro, its very much a eurozone agreement. But isnt a falling euro good for Ireland?

    The US accounts for a quarter of all Irish exports, the UK 15%. Why isnt a falling euro good for Ireland?


Comments

  • #2
    RandomName2
    Registered Users, Registered Users 2 Posts: 5,570 ✭✭✭RandomName2


    Surely a falling Euro and failing Euro are two different things? :pac:


  • #3
    TheChizler
    Registered Users, Registered Users 2 Posts: 9,474 ✭✭✭TheChizler


    Stabshauptmann wrote: »
    Two days left to the referendum and I have a few more questions I'd like some help with.

    The treaty is designed at bring stability to the euro, its very much a eurozone agreement. But isnt a falling euro good for Ireland?

    The US accounts for a quarter of all Irish exports, the UK 15%. Why isnt a falling euro good for Ireland?

    I'm not sure of the exact specifics but stability is about having some amount of control on the rate of fall, in engineering terms if something is unstable just a small influence can tip the balance and send it crashing to extremes. It's about preventing exponential inflation like pre-war Germany or Zimbabwe.


  • #4
    Cracker_Jack
    Banned (with Prison Access) Posts: 15 ✭Cracker_Jack


    A falling Euro is not good. In Ireland, we need a strong Euro to buy raw materials we don't have and to keep our industry working. We also need a strong Euro to buy petroleum which we also don't have. A falling Euro does not help Ireland because it pushes up the price of Irish exports as evident by higher raw materials costs. Inflation also increases because it pushes up the costs of imports. This is text book stuff, I'm sure the O.P will be able to research this - Google is your friend.


  • #5
    Stabshauptmann
    Registered Users, Registered Users 2 Posts: 4,885 ✭✭✭Stabshauptmann


    Cracker_Jack wrote: »
    In Ireland, we need a strong Euro to buy raw materials we don't have and to keep our industry working.
    The primary sector constitutes about 5% of Irish GDP, and 8% of Irish employment.
    A falling Euro does not help Ireland because it pushes up the price of Irish exports as evident by higher raw materials costs.
    The raw materials is one point, it affects both products produced for domestic and international consumption, but a falling Euro makes our exports more affordable actually. As I said, most of our exports are to non-euro countries, a falling euro is a boost to our exports.
    Inflation also increases because it pushes up the costs of imports.

    You've made a leap there. Inflation is an issue, particularly as there are many products like oil that we must import, but you are ignoring substitutes. Yes we must import new cars, but the rising cost of imported cars creates an increased demand for second hand cars.

    This is text book stuff, I'm sure the O.P will be able to research this - Google is your friend.
    It is. And would you believe, I've read more than the one textbook on economics - enough to know that we are a nation dependent on FDI and exports and it is my opinion that a weak euro is good for Ireland.

    We export twice as much as we import, and we import and export to the same countries in roughly the same proportions.
    Exports: $114bn, of which UK 15%, US 25%
    Imports: $60bn, of which UK 32.1%, US 14.1%
    On the balance, its better to have a weak euro.

    I think TheChizler has made the case quite succinctly. A weak Euro may be good, an unstable euro is not.


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