Cyprus bailout deal #2

Scofflaw

clairefontaine wrote: »

I find it hard to believe teh EU does not bear some responsibility here. They have a regulation for everything, even how much a postman can carry in his postbag yet they allowed this to happen.

You might simply be wrong about them having a regulation for everything, then. While there is quite a lot of "Europe", there's a lot less than people often think.

It's worth bearing in mind that the way Europe is set up is as a framework for joint action and as a referee for mutual commitments by the EU Member States, and that the Member States retain political control over this framework through the Council. There is, therefore, more or less only a regulation for what the Member States want there to be a regulation for. Member States did not want anyone else regulating their banking, so the EU did not regulate their banking.

cordially,
Scofflaw

Scofflaw

Since I'm in general agreement, I'll only address certain points here:

KyussBishop wrote: »

At entry to the single currency there were big issues with the size of their banking sector relative to GDP, as Wibbs pointed out:
http://i50.tinypic.com/n6yivd.gif

Well, no, there weren't - or, rather, that doesn't form any part of the entry criteria. As it happens, the Cypriot banks were regarded in 2008, as "sitting pretty", because they were only deposit-driven rather than being dependent on the money markets. They only bought into Greek debt (which made the hole) in 2010-11, having been warned not to.

KyussBishop wrote: »

You don't need the German government to provide the money, it could easily be implemented with centralized bonds which are sold on the market (and more controversial options involving money creation), but Germany contributes in blocking solutions like this, which keeps them in the role as the biggest EU creditor, exerting significant power over other countries.

So that reinforces my point about the power they have at the moment, driven by economic conditions (giving them significant political power in the process).

Eurobonds would not stop Germany being the biggest creditor (or contributor), it would simply remove from them their ability to object to further uses of their credit. That's a huge difference, and why Germany resists it.

KyussBishop wrote: »

It really just sets the tone for the use of German power; they are exerting quite enormous political power in the EU, and it's all weighted towards enforcing austerity, crippling debtor nations, and thus far (what looks like) protecting their role as creditor (all of which seem favourable to the German parliament).

As I said, it protects their ability to protect the use of their credit. I don't doubt it would be convenient for the rest of Europe to use the credit of the currently solvent nations as they liked, but can't really see what right we would have to force that on them against their wishes.

We want their money, and currently we have to agree to their conditions in order to get it. Your suggestions don't change the fact that we'd be getting their money, only that we'd be able to do so without them setting conditions or being able to disagree. I appreciate that you might deny this, by saying that we'd all be collectively liable, but that doesn't change the fact that the Germans would still be carrying the largest collective liability, and that the operation of their domestic government finances would be constrained by that liability.

KyussBishop wrote: »

Yes but with politics, where politics decides the law, focusing only on legalities (as important as they are) is very narrow; omitting wider political and moral obligations/responsibilities, is a very bad way of placing responsibility.

It's perfectly valid (essential even), since the law is decided by the member states, to assign responsibility first and foremost, based on morals and political responsibilities.

If the EU member states collectively put in place bad or inadequate laws, their responsibility should not be judged within the limitations of those laws, but on their collective moral and political culpability, for putting in place such inadequate laws, and for not rectifying them.

I don't disagree, except where the Member States are themselves limited by their own constitutions.

KyussBishop wrote: »

Well, fair enough on me not being clear there; with the member states being responsible for setting the roles of the EU institutions, and while those institutions are not responsible for collective member state failures, it still makes sense to consider them interchangeable.

It's not that important a distinction (particularly for this discussion), because judging responsibilities based on the EU institutions alone, would inherently be quite narrow itself (allowing only a focus on legalities, not the wider political/moral context member states work in).


I think they should be held responsible for their past failures, and that this should be accounted for today and also rectified today; this goes all the way back, to the fact that the EU should have had recovery policies in place from the beginning (and every day that member states fail to rectify this, is a continued failure they aught to be held responsible for).

The EU (as in member states collectively) had and do have the power/capability of rectifying all these problems, and always had all through the run-up to the crisis and up to now.

I agree - but while I can see your argument regarding the distinction, the Member States and the institutions are not interchangeable in assigning responsibility, essentially because of the way people perceive semantic distinctions.

Casting the blame on the Member States' failure to design the EU correctly to both prevent and ameliorate crises has an obvious corollary - that they should redesign it appropriately.

Casting the blame on the EU institutions for the same design faults suggests that instead, the thing to do is to abandon/abolish the EU institutions, because it treats the EU as responsible for its own design faults, which is incorrect, and which suggests the EU is hopelessly irredeemable.

Do you see the difference?

cordially,
Scofflaw

hatrickpatrick

Scofflaw wrote: »

I wouldn't expect the UK Treasury to carry much weight, certainly, but I think Bundesbank influence on the ECB is far from paramount. We hear way too much of the Bundesbank complaining about ECB policy for that to be the case.

cordially,
Scofflaw

Such complaints seem to carry enough weight to worry people and that's where this comes from.
To take one example, remember all the headlines about "Irish bank deal thrown into confusion by Bundesbank objections"?
I wonder how many other Eurozone central banks could "throw a deal into confusion" by making a comment?

I know people will say that Germany has a right to more control since they have a bigger economy, but there's a fallacy there - one of the reasons their economy is doing so well is that the ECB's monetary policy has been conducive to that. I don't mean to sound too cynical, but in the recent past it's been a case of most of the Eurozone probably needing a currency devaluation but it not happening because it would upset Germany's economy.

Let's imagine the reverse. Suppose everyone else is doing well but Germany's economy badly needs a euro devaluation for whatever reason. Who do you reckon the ECB would side with?

It just seems to me that at the moment, one can almost use the words "ECB" and "Bundesbank" interchangably to a certain extent, and in a democratic system this is absolute bollocks.

Of course, it could simply be that the media attaches more hysteria to Bundesbank statements than the practical effect they actually have, in which case I wouldn't be too surprised considering the very large impact that hysterical misreporting has had on the EU in general over the last number of years. But is this really the case? The fact that you used to see Merkel and Sarkozy together acting like the king and queen of Europe in front of the camera would suggest that there is at least some fire to the smoke.

Scofflaw

hatrickpatrick wrote: »

Such complaints seem to carry enough weight to worry people and that's where this comes from.
To take one example, remember all the headlines about "Irish bank deal thrown into confusion by Bundesbank objections"?
I wonder how many other Eurozone central banks could "throw a deal into confusion" by making a comment?

I know people will say that Germany has a right to more control since they have a bigger economy, but there's a fallacy there - one of the reasons their economy is doing so well is that the ECB's monetary policy has been conducive to that. I don't mean to sound too cynical, but in the recent past it's been a case of most of the Eurozone probably needing a currency devaluation but it not happening because it would upset Germany's economy.

Let's imagine the reverse. Suppose everyone else is doing well but Germany's economy badly needs a euro devaluation for whatever reason. Who do you reckon the ECB would side with?

It just seems to me that at the moment, one can almost use the words "ECB" and "Bundesbank" interchangably to a certain extent, and in a democratic system this is absolute bollocks.

Of course, it could simply be that the media attaches more hysteria to Bundesbank statements than the practical effect they actually have, in which case I wouldn't be too surprised considering the very large impact that hysterical misreporting has had on the EU in general over the last number of years. But is this really the case? The fact that you used to see Merkel and Sarkozy together acting like the king and queen of Europe in front of the camera would suggest that there is at least some fire to the smoke.

I'd have to say that the media hysteria explanation covers a lot of the issue, although it's worth pointing out that the Dutch FinMin can apparently also generate hysteria. Often enough, it will simply be that the media are paying attention to what the Germans say, as opposed to, for example, what the Finnish say, which despite being similar, generates no such headlines, even though the Finns have as much voting power in the ECB. So there's an strong element of self-fulfilling prophecy there.

In general, Irish media reporting of the crisis has been dire - uncritically repeating popular myths, regurgitating misunderstood statistics, following domestic political agendas, and very rarely grasping what's going on in any way.

In respect of Germany "not needing a devaluation" - I'm not sure how you come to any such conclusion. Germany is the main exporter in Europe - such a devaluation would do their exports as much good as ours (and anyway, we're #2 or 3), and the more so by virtue of their greater export performance. Why is it they don't need a devaluation, and we do?

cordially,
Scofflaw

KyussBishop

Scofflaw wrote: »

Eurobonds would not stop Germany being the biggest creditor (or contributor), it would simply remove from them their ability to object to further uses of their credit. That's a huge difference, and why Germany resists it.

As I said, it protects their ability to protect the use of their credit. I don't doubt it would be convenient for the rest of Europe to use the credit of the currently solvent nations as they liked, but can't really see what right we would have to force that on them against their wishes.

We want their money, and currently we have to agree to their conditions in order to get it. Your suggestions don't change the fact that we'd be getting their money, only that we'd be able to do so without them setting conditions or being able to disagree. I appreciate that you might deny this, by saying that we'd all be collectively liable, but that doesn't change the fact that the Germans would still be carrying the largest collective liability, and that the operation of their domestic government finances would be constrained by that liability.

It wouldn't remove their ability to object at all, because it would be German market participants who decide whether or not they want to invest in Eurobonds, which is inherently the choice of those market participants (who can choose to simply not invest in them); it is regarded by many, that this is how things should have been setup in the first place (when the Euro was negotiated).

What it primarily removes, is the German governments ability to be able to position itself as a creditor, who can dictate the terms of any bailout.

There is a high rate of surplus savings within the EU, which can be reinvested with such a centralized bond program, to fund stimulus spending all over the EU, including in Germany; it's one of the major required steps for getting out of the crisis (it would be a huge boost), and without it (or an alternative through money creation) the single currency likely won't survive.

With a centralized bond and investment program, countries can obtain sustainable funding and return to recovery relatively quickly, and the debts can be repaid over time (the EU would all be in it together, and would all mutually benefit); as things are now, the cure (obtaining funding) is almost worse than the disease (due to the crippling terms attached).

There is no liability either, as those bonds would be guaranteed (and would help ensure the gradual recovery of the EU).

Scofflaw wrote: »

I don't disagree, except where the Member States are themselves limited by their own constitutions.

Fair enough, though worth pointing out that even those constitutions have been modified in referendums, where there is collective responsibility for those texts not containing the necessary safeguards and recovery policies.

Scofflaw wrote: »

I agree - but while I can see your argument regarding the distinction, the Member States and the institutions are not interchangeable in assigning responsibility, essentially because of the way people perceive semantic distinctions.

Casting the blame on the Member States' failure to design the EU correctly to both prevent and ameliorate crises has an obvious corollary - that they should redesign it appropriately.

Casting the blame on the EU institutions for the same design faults suggests that instead, the thing to do is to abandon/abolish the EU institutions, because it treats the EU as responsible for its own design faults, which is incorrect, and which suggests the EU is hopelessly irredeemable.

Do you see the difference?

I see what you mean, and the latter is definitely not what I've had in mind while I don't have much hope now for adequate reform of the EU taking place, I don't view the EU institutions themselves as inherently irredeemable, even where I'm critical of their handling of parts of the crisis.


I still think there's maybe something not touched on that we still disagree on, as this debate has come up a couple of times, but we agree enough on stuff here that I think I'll leave this part at that

Scofflaw

KyussBishop wrote: »

It wouldn't remove their ability to object at all, because it would be German market participants who decide whether or not they want to invest in Eurobonds, which is inherently the choice of those market participants (who can choose to simply not invest in them); it is regarded by many, that this is how things should have been setup in the first place (when the Euro was negotiated).

What it primarily removes, is the German governments ability to be able to position itself as a creditor, who can dictate the terms of any bailout.

There's a huge difference between market participants being able to decide whether or not to invest, and democratic control.

Removing the German government's "ability to be able to position itself as a creditor" - or rather, the ability of the German parliament to force the German government to position itself as a creditor - is removing German control over German finances, because it creates the possibility that German public finances can be put on the hook for liabilities acquired by other countries without any German agreement. I can't see how you can argue otherwise, because that's the whole point of what you're proposing.

KyussBishop wrote: »

There is a high rate of surplus savings within the EU, which can be reinvested with such a centralized bond program, to fund stimulus spending all over the EU, including in Germany; it's one of the major required steps for getting out of the crisis (it would be a huge boost), and without it (or an alternative through money creation) the single currency likely won't survive.

With a centralized bond and investment program, countries can obtain sustainable funding and return to recovery relatively quickly, and the debts can be repaid over time (the EU would all be in it together, and would all mutually benefit); as things are now, the cure (obtaining funding) is almost worse than the disease (due to the crippling terms attached).

There is no liability either, as those bonds would be guaranteed (and would help ensure the gradual recovery of the EU).

Of course there's a liability, because the guarantee is provided by the Member States themselves, and their ability to guarantee determines their liability.

KyussBishop wrote: »

Fair enough, though worth pointing out that even those constitutions have been modified in referendums, where there is collective responsibility for those texts not containing the necessary safeguards and recovery policies.

Fair point, but at that stage the responsibility of the Member States, which we usually think of as governments, devolves yet further to the national parliaments and then their voters, or in our case directly to the people. The ability of governments to create correct architecture for the EU (in any area) is not unlimited.

KyussBishop wrote: »

I see what you mean, and the latter is definitely not what I've had in mind while I don't have much hope now for adequate reform of the EU taking place, I don't view the EU institutions themselves as inherently irredeemable, even where I'm critical of their handling of parts of the crisis.

Which makes sense, because as long as the Member States dictate their form, the EU institutions are plastic, and can be moulded to the shape required.

KyussBishop wrote: »

I still think there's maybe something not touched on that we still disagree on, as this debate has come up a couple of times, but we agree enough on stuff here that I think I'll leave this part at that

We seem to disagree at least over whether removing German control over German finances for everyone else's benefit is in any sense acceptable!

cordially,
Scofflaw

KyussBishop

Scofflaw wrote: »

There's a huge difference between market participants being able to decide whether or not to invest, and democratic control.

Removing the German government's "ability to be able to position itself as a creditor" - or rather, the ability of the German parliament to force the German government to position itself as a creditor - is removing German control over German finances, because it creates the possibility that German public finances can be put on the hook for liabilities acquired by other countries without any German agreement. I can't see how you can argue otherwise, because that's the whole point of what you're proposing.

The money that comes for investment comes from the markets, so no government/nation is a creditor, and the paying back of the bonds can be managed on a case-by-case basis, where it can either be paid back by the country benefiting from the loan (like national debt, except much lower and more stable interest), paid back by a bloc of countries benefiting from a particular investment program, or paid back by the EU as a whole (including Germany).

This would not put Germany as liable for the whole credited sum as things are now (which gives them enormous political power in deciding terms), but liable only for a portion of EU-wide debt repayments, where that is agreed, and with that shared by the rest of the EU; completely different scenario, where the Germans are perfectly capable of participating in deciding the role (and extent) the European Investment Fund should then take, and where countries actually recover (thus are better able to pay) instead of cratering under the terms of their loans.

This puts all EU nations together, as liable for the recovery of the entire EU, and all benefiting from it too (which is how it should have been setup to begin with); without something like this, many nations in the EU are just going to continue to crater, until the single currency breaks up.

If they are not going to agree to something like that, they should simply call it quits on the Euro (since it doesn't look sustainable without that), instead of leveraging their role as creditor, and stringing-along the hope that recovery will eventually come.

Scofflaw wrote: »

Of course there's a liability, because the guarantee is provided by the Member States themselves, and their ability to guarantee determines their liability.

I was misreading earlier, where I thought you meant member states would be ponying up the initial investment money, where that would be sourced from the markets; all member states would be liable for the repayments of the bonds, yes, but the rate at which different members repay this depends upon the configuration of the investment program for these bonds (as explained above, the bonds can be set to be repaid by individual member states, a bloc of member states, or all of the EU).

It should be noted too, that you can supplement or avoid Eurobonds completely, and thus shared liabilities, by using money creation directly as well; with this limited by inflation targets, Germany does not pay anything, and can directly benefit from its funds too.

Scofflaw wrote: »

Fair point, but at that stage the responsibility of the Member States, which we usually think of as governments, devolves yet further to the national parliaments and then their voters, or in our case directly to the people. The ability of governments to create correct architecture for the EU (in any area) is not unlimited.

True, the responsibility is shared more widely there, and it is a big practical issue in making changes; more and more I don't view this as a problem that can be overcome, such as with Germany, so I think it's long past time for making it clear, that recovery policies will never come, and moving on to discussing (what looks like) an inevitable breakup.

Scofflaw wrote: »

We seem to disagree at least over whether removing German control over German finances for everyone else's benefit is in any sense acceptable

Well, I don't view it all as a loss of German control over their finances (even if there is a voluntary ceding of it in some sense); in fact, it's arguable that other countries are losing more control over their own finances to Germany and the EU, as well as (through the purse-strings) their own politics and society.

I guess that's becoming a moot issue at this stage, since it looks like Germany will never agree to any recovery policies; the way I view the Eurobonds and other potential solutions like money creation, is that (at least the former) should have been in place to begin with (it was, from what I can tell, supposed to eventually be done regardless of the crisis), and not doing that was a failure of responsibility in putting together the Euro, and failing to agree to that now is a further failure in responsibility.

Scofflaw

KyussBishop wrote:

This would not put Germany as liable for the whole credited sum as things are now (which gives them enormous political power in deciding terms), but liable only for a portion of EU-wide debt repayments

Germany is not currently liable for the whole credited sum, though - it is responsible only for its agreed proportion already, so eurobonds don't reduce German liabilities for all-eurozone bonds. Where a group of other countries or a single country goes guarantor for the eurobonds, Germany would currently not have any liability anyway, so again, that's not a positive for them.

The only advantage to Germany in the proposal is if they repeatedly wind up on the hook for other countries' debts anyway, in which case eurobonds might offer a mechanism for preventing that debt being raised originally - except that Germany winds up on the hook only in emergencies, so, again, that's not really useful.

cordially,
Scofflaw

KyussBishop

True indeed, yes; where it would be an additional positive for them though, is the ability to make use of such funds themselves, and their own economy plus exports, would benefit from the EU recovery it would generate too.

I guess it all goes back to how the Euro should have been put together in the first place, and that without recovery mechanisms it's likely to fall apart; if Germany, for whatever reason (objections to Eurobonds and other policies), do not want to rectify the problem of not having these policies in place, it really seems past time to move on to discussing dissolution of the single currency.

If it is as inevitable as it looks, ending it sooner rather than later may well be better, as instead of taking just the damage from the breakup, countries will take the damage from the wait plus the breakup, and will not reach true recovery for longer after waiting; there could be many more years of damage taken still, while waiting for it to breakup.

marienbad

KyussBishop wrote: »

True indeed, yes; where it would be an additional positive for them though, is the ability to make use of such funds themselves, and their own economy plus exports, would benefit from the EU recovery it would generate too.

I guess it all goes back to how the Euro should have been put together in the first place, and that without recovery mechanisms it's likely to fall apart; if Germany, for whatever reason (objections to Eurobonds and other policies), do not want to rectify the problem of not having these policies in place, it really seems past time to move on to discussing dissolution of the single currency.

If it is as inevitable as it looks, ending it sooner rather than later may well be better, as instead of taking just the damage from the breakup, countries will take the damage from the wait plus the breakup, and will not reach true recovery for longer after waiting; there could be many more years of damage taken still, while waiting for it to breakup.

For a guy that is fond of quoting the political dimension you are doing a great job of ignoring politics !

You can take it from me that if you are waiting for a euro break up then you are in for a long long wait. It is not going to happen.

And that is coming from someone who knows sweet f/a about economics.

It seems to me that you are guilty of the wish being father to the thought.

KyussBishop

marienbad wrote: »

For a guy that is fond of quoting the political dimension you are doing a great job of ignoring politics !

You can take it from me that if you are waiting for a euro break up then you are in for a long long wait. It is not going to happen.

And that is coming from someone who knows sweet f/a about economics.

It seems to me that you are guilty of the wish being father to the thought.

In the current political climate it's not going to happen, no, but conditions are worsening in many EU countries (and not looking to get better for many), and this is leading to the gradual rise of anti-austerity parties, some of which (like in Italy) are open to the idea of leaving the Euro; when one country leaves, it is likely to bring the rest with it.

It's not a dead-set inevitability, but it is looking more and more likely (especially in the absence of real recovery policies), and we have a long way to go yet with the crisis.


I don't wish for there to be a breakup (if it happens, it's going to be incredibly damaging for most involved), I'd much rather the EU stays with the single currency, and implements the necessary recovery policies; I just don't see countries like Germany ever agreeing to those policies at this stage.

marienbad

KyussBishop wrote: »

In the current political climate it's not going to happen, no, but conditions are worsening in many EU countries (and not looking to get better for many), and this is leading to the gradual rise of anti-austerity parties, some of which (like in Italy) are open to the idea of leaving the Euro; when one country leaves, it is likely to bring the rest with it.

It's not a dead-set inevitability, but it is looking more and more likely (especially in the absence of real recovery policies), and we have a long way to go yet with the crisis.


I don't wish for there to be a breakup (if it happens, it's going to be incredibly damaging for most involved), I'd much rather the EU stays with the single currency, and implements the necessary recovery policies; I just don't see countries like Germany ever agreeing to those policies at this stage.

Never going to happen- you are just looking short term. We may be in the midst of a terrible recession, but only depending on how you look at it. Despite all the misery we are still far better off all over Europe than we were in say 2000 - and everyone over 30 knows this.

This is not to deny that there is incredible hardship in pockets all over the place but I half heard on the radio today a teachers representative going on about protecting 65k salaries ! The problem today is not solely recession it is inequity.

KyussBishop

marienbad wrote: »

Never going to happen- you are just looking short term. We may be in the midst of a terrible recession, but only depending on how you look at it. Despite all the misery we are still far better off all over Europe than we were in say 2000 - and everyone over 30 knows this.

This is not to deny that there is incredible hardship in pockets all over the place but I half heard on the radio today a teachers representative going on about protecting 65k salaries ! The problem today is not solely recession it is inequity.

It's not Ireland that's going to lead towards a breakup of the Euro, it's far more likely to be a country such as Italy (where anti-austerity parties are rising), or the next country subject to crippling bailout terms, if exiting the single currency looks preferable to the 'cure'.

Many countries in the EU are in a bad place right now, and likely to get worse before the end of the crisis; this already is leading to the rise of parties that would seek to leave the Euro.

You can't say with confidence that no such parties are going to come to power in other countries, especially seeing as there's at least half a decade left to come in this crisis.

marienbad

KyussBishop wrote: »

It's not Ireland that's going to lead towards a breakup of the Euro, it's far more likely to be a country such as Italy (where anti-austerity parties are rising), or the next country subject to crippling bailout terms, if exiting the single currency looks preferable to the 'cure'.

Many countries in the EU are in a bad place right now, and likely to get worse before the end of the crisis; this already is leading to the rise of parties that would seek to leave the Euro.

You can't say with confidence that no such parties are going to come to power in other countries, especially seeing as there's at least half a decade left to come in this crisis.

But you are just using emotive language here .

What is '' a bad place right now'' ? Compared to what ?

You can't say with confidence that such parties will come to power . The history of the last 50 years would seem to disagree with you. What ''such parties '' have achieved power ?

Is Cyprus not a unique case and can anything really be inferred from it ?

KyussBishop

There's nothing really emotive about anything I've said; there are a lot of (particularly southern) EU member states that are in a much worse condition compared to how they were 5 years ago, and for many of them they are held in a position where the situation politically, socially and economically, is getting worse.

There's Beppe Grillo in Italy (and Berlusconi is also taking an anti-austerity bent), Syriza in Greece (though I don't believe they are looking to leave the Euro), and there are further economic hurdles to come for many EU economies down the line.

I didn't say any of these parties will come to power, I've pointed out that they are gaining in influence, and that absent recovery policies they are likely to keep on gaining influence; if they do come to power and leave the Euro, it is likely to bring the rest of the EU with them.

ads20101

KyussBishop wrote: »

I didn't say any of these parties will come to power, I've pointed out that they are gaining in influence, and that absent recovery policies they are likely to keep on gaining influence; if they do come to power and leave the Euro, it is likely to bring the rest of the EU with them.

I agree with you but I would like to go further.

The influence that you quite correctly point out can affect national policy of the government. Those anti austerity parties don't need to gain an office to make changes.

Policies that may well develop could well create a financial cascade that could force certain countries to exit the common currency whether it is in their intrests or not.

marienbad

KyussBishop wrote: »

There's nothing really emotive about anything I've said; there are a lot of (particularly southern) EU member states that are in a much worse condition compared to how they were 5 years ago, and for many of them they are held in a position where the situation politically, socially and economically, is getting worse.

There's Beppe Grillo in Italy (and Berlusconi is also taking an anti-austerity bent), Syriza in Greece (though I don't believe they are looking to leave the Euro), and there are further economic hurdles to come for many EU economies down the line.

I didn't say any of these parties will come to power, I've pointed out that they are gaining in influence, and that absent recovery policies they are likely to keep on gaining influence; if they do come to power and leave the Euro, it is likely to bring the rest of the EU with them.

I notice you say 5 years ago , how about compared to 10 years ago ? After all it is a recession so 5 years is hardly reasonable .

Again it is all emotive . ''politically socially economically getting worse '' - compared to what or when ?

5 years ago the prophets of doom were saying exactly as you are now and yet we are all still here !

The only examples you are coming up with are Italy Greece and Cyprus. And one could argue that they are sui generis. Logic tells us that Italy has been a basket case since WW2 , but yet in their own convoluted way they somehow seem to function . Greece were admitted to The EU and the Euro for emotional and political reasons and are now paying the price for that. It would appear that emotion will only carry so far. And Cyprus , a bit like us I suppose they and we got a bit too big for our boots and now we have to swallow the medicine.

Everyone else , Spain Portugal Ireland included seems to be managing ok all things considered. As I say I know sweet f/a about economics so where am I getting it wrong ?

KyussBishop

ads20101 wrote: »

I agree with you but I would like to go further.

The influence that you quite correctly point out can affect national policy of the government. Those anti austerity parties don't need to gain an office to make changes.

Policies that may well develop could well create a financial cascade that could force certain countries to exit the common currency whether it is in their intrests or not.

Indeed yes; it would take a lot to bring an existing party to the point of an exit, but then, who knows what is going to happen as the crisis continues to unfold.

KyussBishop

marienbad wrote: »

I notice you say 5 years ago , how about compared to 10 years ago ? After all it is a recession so 5 years is hardly reasonable .

Again it is all emotive . ''politically socially economically getting worse '' - compared to what or when ?

5 years ago the prophets of doom were saying exactly as you are now and yet we are all still here !

The only examples you are coming up with are Italy Greece and Cyprus. And one could argue that they are sui generis. Logic tells us that Italy has been a basket case since WW2 , but yet in their own convoluted way they somehow seem to function . Greece were admitted to The EU and the Euro for emotional and political reasons and are now paying the price for that. It would appear that emotion will only carry so far. And Cyprus , a bit like us I suppose they and we got a bit too big for our boots and now we have to swallow the medicine.

Everyone else , Spain Portugal Ireland included seems to be managing ok all things considered. As I say I know sweet f/a about economics so where am I getting it wrong ?

I say 5 years ago, because that was the start of the crisis, and everything has been downhill from there.
There is nothing emotive about pointing out that for many countries, things are socially/economically/politically worse than 5 years ago; that's factually true, not emotive.

It doesn't matter if Italy, Greece or Cyprus is unique; if one goes (leaves the Euro), they're likely to drag the rest of Europe with.

It also doesn't matter if these countries aren't as bad relative to Somalia or whatnot, because it's the mindset of the population of those countries, that determines whether an anti-austerity party comes to power, and evidently some of those countries populations are supporting anti-austerity parties in greater numbers.

marienbad

KyussBishop wrote: »

Indeed yes; it would take a lot to bring an existing party to the point of an exit, but then, who knows what is going to happen as the crisis continues to unfold.

Would it be fair to say though that we have passed '' the high water mark'' of the crisis ?

That is unless something completely unexpected/unknown happens

KyussBishop

marienbad wrote: »

Would it be fair to say though that we have passed '' the high water mark'' of the crisis ?

That is unless something completely unexpected/unknown happens

I'm not sure really, and I think that's pretty unpredictable because it depends on the future actions politicians take.

If the EU (its members states) decided tomorrow, to implement recovery policies and stimulus spending, the crisis could be over entirely in a short amount of time; however, if the EU collectively keeps on the current course, it looks like slow-grinding austerity for another half decade at least, and there are still (as far as I know) big problems with bank solvency across the EU, which may cause serious problems later (though I don't know enough about that to be sure).

When you look at the social cost of things as well, high unemployment is a constant damage being applied to society and economies across the EU, and there is wider social damage from public service cuts too, which is compounded every day the crisis continues; that's only barely touching on the persistent damage that keeps on happening the longer the crisis goes on.

If you look solely at economic factors, like whether budgets have finally been balanced, it tends to ignore this kind of additional damage, but then that seems to be how a lot of people judge whether the crisis is getting 'better' or not (which doesn't make sense to me).

marienbad

KyussBishop wrote: »

I'm not sure really, and I think that's pretty unpredictable because it depends on the future actions politicians take.

If the EU (its members states) decided tomorrow, to implement recovery policies and stimulus spending, the crisis could be over entirely in a short amount of time; however, if the EU collectively keeps on the current course, it looks like slow-grinding austerity for another half decade at least, and there are still (as far as I know) big problems with bank solvency across the EU, which may cause serious problems later (though I don't know enough about that to be sure).

When you look at the social cost of things as well, high unemployment is a constant damage being applied to society and economies across the EU, and there is wider social damage from public service cuts too, which is compounded every day the crisis continues; that's only barely touching on the persistent damage that keeps on happening the longer the crisis goes on.

If you look solely at economic factors, like whether budgets have finally been balanced, it tends to ignore this kind of additional damage, but then that seems to be how a lot of people judge whether the crisis is getting 'better' or not (which doesn't make sense to me).

But could you not argue that before we got to any stimulus spending the austerity was absolutely essential ? Otherwise there wasn't a snowballs chance of making what are essential cuts. The problem with a lot of the cuts is that vested interests have ensured their own protection - particularly in Ireland.

KyussBishop

I agree that there's a lot of inefficiency and such in government and the public services, which should be tackled in its own right, but that's not really what austerity is for; if stimulus were an available option at the moment, choosing to go with austerity anyway in order to try and deal with government/public-sector inefficiency, would be imposing collective punishment on the population, when the inefficiencies could just be directly tackled themselves.

marienbad

KyussBishop wrote: »

I agree that there's a lot of inefficiency and such in government and the public services, which should be tackled in its own right, but that's not really what austerity is for; if stimulus were an available option at the moment, choosing to go with austerity anyway in order to try and deal with government/public-sector inefficiency, would be imposing collective punishment on the population, when the inefficiencies could just be directly tackled themselves.

Is that naïve though, look how difficult it has been in Ireland to eliminate such efficiencies even with austerity as the driving force .

Unions/Cartels/Quangos etc simply have no conscience beyond their own members .

K-9

KyussBishop wrote: »

If the EU (its members states) decided tomorrow, to implement recovery policies and stimulus spending, the crisis could be over entirely in a short amount of time; however, if the EU collectively keeps on the current course, it looks like slow-grinding austerity for another half decade at least, and there are still (as far as I know) big problems with bank solvency across the EU, which may cause serious problems later (though I don't know enough about that to be sure).

You think stimulus spending is a quick cure to the problems?

I think many people have been worried for quite some time about high welfare rates and pension promises into the future, aging populations, the stagnation of middle class incomes while the rich get richer, Governments borrowing more and more and expecting future generations to pay it, stuff like that. Personally I think in Ireland and the UK anyway, there is no appetite for increased borrowing to get us out of the mess. There seems to me to be a general acceptance that we were spending too much, less acceptance that we had relatively low taxation levels.

KyussBishop

marienbad wrote: »

Is that naïve though, look how difficult it has been in Ireland to eliminate such efficiencies even with austerity as the driving force .

Unions/Cartels/Quangos etc simply have no conscience beyond their own members .

If austerity is not good at tackling these inefficiencies, it doesn't seem to make sense to use that as an argument in favour of austerity? Half of austerity is increasing taxes in any case, which wouldn't make sense when using the above is its goal.

KyussBishop

K-9 wrote: »

You think stimulus spending is a quick cure to the problems?

I think many people have been worried for quite some time about high welfare rates and pension promises into the future, aging populations, the stagnation of middle class incomes while the rich get richer, Governments borrowing more and more and expecting future generations to pay it, stuff like that. Personally I think in Ireland and the UK anyway, there is no appetite for increased borrowing to get us out of the mess. There seems to me to be a general acceptance that we were spending too much, less acceptance that we had relatively low taxation levels.

Stimulus isn't synonymous with unsustainable borrowing; all the necessary policies to provide it can be implemented at an EU level, but the political situation prevents it.

If EU member states agreed to implement Eurobonds, combined with funding directed to the European Investment Fund, which would provide the money as stimulus (for infrastructure programs and other investments, all around the EU), that could assist significantly with getting the EU back on track.

Even beyond that (though this would be far more difficult than Eurobonds), there is the ability to use funding directly from the ECB, which if implemented efficiently and limited by an inflation target, can also help in bringing full employment EU-wide.


None of the above looks like it will become politically possible in the EU though, due to countries like Germany being dead-set against it; we will likely remain in austerity until the Euro (probably) breaks up.

A good way to look at economics, is that it's really about resource management, i.e. efficiently using up available resources; when you have a lot of idle labour (unemployed people; a huge permanent waste of productive potential, every day this labour is not used), and idle industry or resources, there's something very inefficient and wrong with the economics behind that, when a lack of stimulus i.e. money, prevents putting the two together.

The EU happens to have a lot of idle money laying about in savings (that could be utilized by Eurobonds), and also has the ECB as well, and it is only really political issues preventing all of this coming together.

marienbad

KyussBishop wrote: »

If austerity is not good at tackling these inefficiencies, it doesn't seem to make sense to use that as an argument in favour of austerity? Half of austerity is increasing taxes in any case, which wouldn't make sense when using the above is its goal.

I don't think it is being used as an argument as such, the powers that be don't care how we divvy up the bail out dosh as long as we get within our limits.

That is why I said earlier we have a problem with inequity and not just austerity, And that is a self made conscious choice.

For example why are we still giving out sports grants and arts grants never mind the massive pay to td's and quangos etc.?

And that is also why the Europeans don't take us seriously , when in any EU meeting we are always the highest paid guys in the room , be it a government public service trade union meeting.

Austerity me arse !!

Noreen1

marienbad wrote: »

I don't think it is being used as an argument as such, the powers that be don't care how we divvy up the bail out dosh as long as we get within our limits.

That is why I said earlier we have a problem with inequity and not just austerity, And that is a self made conscious choice.

For example why are we still giving out sports grants and arts grants never mind the massive pay to td's and quangos etc.?

And that is also why the Europeans don't take us seriously , when in any EU meeting we are always the highest paid guys in the room , be it a government public service trade union meeting.

Austerity me arse !!

If by "we" you mean the majority of people, then that is not a self made choice at all. Rather, it is a choice made by successive governments, despite repeated promises of "reform".

marienbad

Noreen1 wrote: »

If by "we" you mean the majority of people, then that is not a self made choice at all. Rather, it is a choice made by successive governments, despite repeated promises of "reform".

That might well be the case, but who is carrying the greatest burden of austerity and why ?

As far as the EU is concerned the government is ''we'' . After all we do elect them.

Glengormanjay

clairefontaine wrote: »

nowanathiest wrote: »

I really don't know.

But that leaves 40% of the country being double taxed.

Personally I am probably paying 4 or maybe even 5 times for these services.
1, I recently paid 11k development fee to local council.
2, 20 years ago my community collected 500k to fund a sewerage scheme that was delivered by the CC. Scheme was only turned on last year but only services 75% of the village. Its now apparent that it was only ever designed to facilitate future housing development in order to facilitate large scale estate development fees. In essence the existing residents paid for sewerage scheme to directly enable the CC to tax future generations. But incredibly we the remaining 25% will have to pay again under a private scheme.
3, My planning stipulates that I must provide road drainage infrastructure for the public road in front of my house! (been a tax paying house on my site for the last 300 years)
4, All community improvement projects are lead and funded by our community association (annual household subscription), where the guys on the association consciously source private contractors as they are orders of magnitude cheaper and more efficient than the CC.
5, Although I officially live in an urban area, I pay directly for all my services (exception being road lighting).
6, Over the past 20 years the level of basic infrastructure maintenance (drain clearing etc) has gradually fallen off, to the point that it is now practically nonexistent.
7, Over the last 10 -15 years the number of CC employees has grown exponentially.
8, Our overall tax take is ridiculous – its comparable if not higher to other European countries yet our services are nowhere near the same.
9, We will pay for water purification yet up to 60% of that water is lost to leaks in our cities and towns.
10. Irish people paying for water is seriously like the Eskimos paying for ice. If we don't see that point because we are that far removed from our environment then we probably don't deserve our autonomy!

Glengormanjay

Hey guys what is the overall compounded and amalgamated tax (wealth) take per person as a percentage of money earned?

In Big Picture Reality we should each ask ourselves what we get in return!