re-animated punt?

swimtwobirds

Could the Euro be inherently unstable? Somebody (I know I'm supposed to source this stuff) wrote a while ago, that there are no historical examples of a federal currency functioning without a central exchequer. As in, me seeing a federal tax deduction beside my prsi. The gist being that a Euro unprotected by at least some measure of centralised taxation could never last more then a finite period, before centrifugal(?) forces tore it apart? Getting more political, I wonder just how much our political leaders, (pre the referendums), had quietly acquiesced to that reality. If we are heading away from the broader deeper EU model, can the currency survive a looser model? Anybody study economics?

mycroft

swimtwobirds wrote:

Could the Euro be inherently unstable? Somebody (I know I'm supposed to source this stuff) wrote a while ago, that there are no historical examples of a federal currency functioning without a central exchequer. As in, me seeing a federal tax deduction beside my prsi. The gist being that a Euro unprotected by at least some measure of centralised taxation could never last more then a finite period, before centrifugal(?) forces tore it apart? Getting more political, I wonder just how much our political leaders, (pre the referendums), had quietly acquiesced to that reality. If we are heading away from the broader deeper EU model, can the currency survive a looser model? Anybody study economics?

Model,

People think a currency is unstable.

They move their money from this currency.

Pretty soon it is unstable.

The euro hasn't really fluxiated in its four years of existance. The mutterings about the euro comes from (some) far right italians. italy is currently in recession and like most far righters they're quick to affix the blame on the easy/simple target to garner popular support.

Theres no evidence that the federal tax is coming in, and I doubt we'll seen one for decades because the EU is just too unpopular at the moment, and no one could sell their electorate a federal tax.

The Euro meanwhile has been the central thrust of the EU since the EEC, before for example the collaspe of the cold war and iron curtain. To suggest that Czechslokvia would be an EEC state to the people who drafted the Euro proposal would be absurd. The Euro makes sense for a common trading links.

I'm not sure what your entire point it, but the likelyhood of us withdrawing from the EURO is remote, a more plausible scenario is a massive EU wide recession and the collapse of the EURO and a necessary measure a new EU currency linked to a federal budget out of desperation, and even then its very very unlikely.

Stabshauptmann

Ive no idea what the link might be between the need for a federal tax and a stable euro. Anone able to enlighten me?

The problem with the euro is that some countries are experiencing rapid growth and others recessions. This has no effect on the euro, but the tried and trusted responses to both situations is to mess with A) interest rates and Ammount of money in the economy. No county has any control over eitther any more.

Believe it or not but this is IMO a good thing since countries like Ireland and Italy in particular would simply make the easy decisions needed for short term success at a great long term cost.

The challenge facing Europe is to either merge our economies more so we can have a one stop solution to all our combined problems; totally unfeasible IMO as it would require tax harmonisation (I mean on CPT, PAYE, VAT not just a new federal tax) and equality of oppurtunity (infrastructure, education, culture and attitudes) or we come up with new ways of "righting" ecomomic fluctuations.

swimtwobirds

I'm not too sure about the specifics.. (shock horror!):) I mean, my opener's bordering on vapid musings, buut all i meant I suppose was whether or not, in the bowels of brussels, at the time of the euro's inception, there might have been an understanding that other elements of fiscal & political integration would follow on and underpin the federal currency. You know: the EU is a train heading on in one direction type thing, and how long then, would the euro remain comfortable, with a semi-paralysed EU. Just for the record I'm pro EU, would vote yes for the constitution and I probably wouldn't freak if i did see some federal tax deductions on my pay packet.. (within reason that is..)

The Corinthian

swimtwobirds wrote:

Could the Euro be inherently unstable? Somebody (I know I'm supposed to source this stuff) wrote a while ago, that there are no historical examples of a federal currency functioning without a central exchequer.

The Belgian-Luxemburg Franc was. Another example might be the Swiss Franc (AFAIK, although bonkey could correct me on this) where each canton handles tax differently and passes on a share to the Swiss confederation.

Regardless, it’s fairly immaterial because ultimately all modern currencies are not actually backed up by anything.

As in, me seeing a federal tax deduction beside my prsi. The gist being that a Euro unprotected by at least some measure of centralised taxation could never last more then a finite period, before centrifugal(?) forces tore it apart? Getting more political, I wonder just how much our political leaders, (pre the referendums), had quietly acquiesced to that reality. If we are heading away from the broader deeper EU model, can the currency survive a looser model? Anybody study economics?

I did and what you wrote there makes very little sense. I suggest you find that article you spoke of.

mycroft wrote:

most far righters they're quick to affix the blame on the easy/simple target to garner popular support.

Unlike far left-wing groups that who would never do something like that :rolleyes:

mycroft

The Corinthian wrote:

Unlike far left-wing groups that who would never do something like that :rolleyes:

And where did I say they did or suggest they don't do that? Where have I defended the Spartacists or any other far left group?

However political history has taught us that in Western Europe Far right groups are quick to blame a social/religious grouping for all societies ills, and the italian far right are at the moment picking on a specific aspect of the EU to blame all their ills on.

Capt'n Midnight

mycroft wrote:

The mutterings about the euro comes from (some) far right italians. italy is currently in recession and like most far righters they're quick to affix the blame on the easy/simple target to garner popular support

Some background:
The Italians got a dose of Rip-Off Italy when the Euro came in. Thier smallest note used to be worth 50c (1000 Lira) and you could buy stuff with it. Then the smallest note became €5 so there was a huge psylogical impact.

Also it the past the Lira used to continually fall in value. Great for exports and the north of Italy has overtaken the midlands of England and the Rhur of Germany as the biggest manufacturing centre in Europe.

So people associate the Euro with some day to day price rises and can blame it for some exports.

Then again almost every country cheated when they joined.

Look at us now, non-brand name consumer goods have never been cheaper. 90% of EU trade is within the boarders so the stability of the rate is probably more important than the import/export out of the Eurozone.

Anyway if the UK joins the Euro there is no way we could go it alone because too many fingers in the pie and I don't trust our fat cats not to make a killing on currency speculation, like they did just before we joined the Euro.

swimtwobirds

"The Belgian-Luxemburg Franc was. Another example might be the Swiss Franc (AFAIK, although bonkey could correct me on this) where each canton handles tax differently and passes on a share to the Swiss confederation."
Ta, thats informative.

"I suggest you find that article you spoke of." -
A while back, it was. For all I know im might have tripped over & read the telegraph by mistake. Thanks for the info..

The Corinthian

mycroft wrote:

And where did I say they did or suggest they don't do that? Where have I defended the Spartacists or any other far left group?

By arguing that this was done by far right groups rather than extremist groups. You are placing a slant on what you’re saying through omission.

However political history has taught us that in Western Europe Far right groups are quick to blame a social/religious grouping for all societies ills

And there we go again with your slant on political history. Half the lesson you speak of teaches us little - history has taught us not that far right groups are quick to blame a social/religious grouping for all societies ills, but that extremist groups are quick to blame a social/religious grouping for all societies ills.

and the italian far right are at the moment picking on a specific aspect of the EU to blame all their ills on.

One ‘far’ right group - the Northern League. Oddly, the supposedly post-Fascist National Alliance, have actually defended the Euro as “Italy’s currency”. So it’s not as simplistic as you’re portraying it.

dermo88

In the worst case scenario you could see a dual circulation take place, with National currencies circulating alongside the Euro. However, the National currencies would be inherently unstable, whereas the Euro would be stable.

There is no way you would see a resurrection of any of the National currencies, although as a collector (my hobby), I would not mind seeing the revival of some of the currencies to liven things up a bit, because the Euro is a damn ugly looking currency, and a 5 year old could have designed better looking banknotes. I make no apologies to Robert Kalina when I say that.

But the Euro has been quite effective in doing its job.

Mycroft and TC-I don't want to see this thread develop into one on racism so please stay on topic.

The Corinthian

Earthman wrote:

Mycroft and TC-I don't want to see this thread develop into one on racism so please stay on topic.

Racism?

TC I was referring to the road that a recent thread went down when discussing Italy.
Call it a pre-emptive direction to stay on topic, rather than go that road.

dermo88

Currency Unions historically have been based on the use of precious metals, such as gold or silver. This is the first time in world history that we have had a major currency union with the use of fiduciary money (Money issued on the world of a government). The Euro is gaining my trust, since I know its under the control of the dour, singleminded beareaucrats who made the Deutschmark a success, and for an Irishman, I was always a bit sceptical about the Punt. Give me Sterling, thanks. When I was being sent abroad for my first time, my boss offered to pay me in Dollars, I choked. No thanks, Give me Sterling thanks. And, I only really trusted it from the early 90's onwards, when the Bank of England got their act together, and were not being interfered with by political masters.

I earned myself a metaphorical clatter on the face when I said I was born under Sterling in 1976. My mother, being fairly patriotic said I was born under the Punt. Thats until I produced a Pound note from the late 50's.

"Ta Punt Sterling Iniochta as an nota seo, le na sheilbhoir an na eileamh san do i lundain"

In Irish, thanks very much.....its a pound sterling. She reluctantly agreed. The same notes were in circulation when I was born in 1976, and a year later was replaced by some queen that looked like an algae ridden great famine victim. Not that I am any fan of Lizzy Windsor, but her money held its value better.

Two Northern European countries that have a historical memory of hyperinflation and currency instability have benefited most from a hard monetary policy. In fact, it is surprising, even 80 years and several generations AFTER the event (1923 runaway inflation), how much German, Dutch and Austrian economic policy revolved around one core issue. Control inflation, and to hell with anything else.

Its a brutal policy, but it works effectively.

Other European countries were particularly vile at mastering this art. The worst by far being the Greeks, followed by the Portuguese, then the Italians, Spanish, and French. Their currencies were constantly on the dive, inflation was high, and the government knew that if it wanted to keep the masses happy, they just had to shove on the printing press. Which is why, when I told my mother that a Euro was worth 15 shillings and 9 pence, converted on the Double, she nearly choked in horror. It was tiny and insubstantial compared to the incarnation that amount had when she was young, which was a big heavy lump of coins. The same Euro thats worth DM1.95, and if I did a few cross conversions, the Punt depreciated 4 fold compared to the German mark and Austrian Schilling since decimalisation.

Virtually all the latin european currencies were bastions of instability and chaos. Fair enough, the Italians had been dealing in bases of 1,000 once Mussolini ended up strung up and the Spanish in bases of 100 since the 50's, but if you were to compare the historical value of the Irish Pound, Deutchmark and Austrian Schilling, you'd find you'd be better off with the latter two under your mattress in pure cash terms alone.

The Italians are talking about pulling out, because they no longer have the access to the printing press they had under the Lira. They are getting a stiff dose of good old fashioned Teutonic financial stability and it hurts like hell.

The Germans are'nt getting better either. They need a mad Maggie to go in and kick some arse around. Its not going to be pleasant for them, and it will be painful for 7 years. But better take the medicine now, or suffer ten times worse later. Reward those who are working, reward enterprise, reward initiative, and make sure the cash you deal with is stable, so investors have confidence to invest, and create employment. A Virtuous circle. How much has changed in 25 years. We looked at them as an example, now they have to look to Ireland and the UK as the way forward.

The French. Well......I happen to agree with Blair. Agricultural subsidies are a cold war anachronism, and they should go. We have too many farmers in Ireland who work damn hard for a living, but would be far better employed in other sectors of the economy. The French belief in state molestation of the economy is costing them dearly. This was a nation at the forefront of technology in Europe. Now they are being strangled by state interference.

The Italians, well......a mixed bunch. Northern Italy is efficient, well functioning. Southern Italy, its their answer to Connaught. Corrupt, self serving, gombeenism, parish pump politics, gangsterism, cronyism. Fianna Fail could learn lessons from this bunch.

I just pray we never get a Taoiseach from west of the Shannon again, because they don't know how to run an economy. Pissups in breweries don't count, and have to be paid for.

The Corinthian

dermo88 wrote:

Currency Unions historically have been based on the use of precious metals, such as gold or silver. This is the first time in world history that we have had a major currency union with the use of fiduciary money (Money issued on the world of a government).

Not really, all the World’s currencies have been essentially free floating since the early Seventies when Nixon severed the link between gold and the US dollar; and by association made any currency linked to the US dollar free floating. Even prior to that, it could be argued that the World’s economy was already de facto fiduciary as the post-World War II money supply grew much faster than the gold supply, resulting in promissories that essentially said “this banknote is backed by X amount of gold... once we can dig it up”.

The Italians are talking about pulling out, because they no longer have the access to the printing press they had under the Lira. They are getting a stiff dose of good old fashioned Teutonic financial stability and it hurts like hell.

There’s an element of truth in that Italy long abused the money supply for economic ends, however to say the Italians want to pull out is an exaggeration. One political party wants to return to the Lira, the same party which incidentally declared the independence of Padania (the pseudo-state of Northern Italy) in the mid-Nineties. All the others, both left and right, are steadfastly behind it at present (I say ‘present’ because however unlikely you can never predict these things in Italy) and so can hardly be counted as Italy wanting to pull out.

My own commentary is that the Northern League are scoring a base but popular bit of political capital, quite possibly to protect their position in the government coalition. Bare in mind that the recent coalition problems there were as a reaction to the Northern League’s influence in respect to their size (originally negotiated by Umberto Bossi, who has today returned as its leader). Many of the smaller parties, in particular the Christian Democrats, felt that Northern League had gained too many concessions when compared to their size in the parliament. So the anti-Euro stance may well be as much a bargaining chip in any future coalition discussions as anything else.

Such posturing is not unusual in Italian politics, which is why labels of left and right are largely meaningless in practice. Indeed, the aforementioned Bossi, leader of one of Italy’s far-right parties and firebrand of Northern Italian separatism, has a Sicilian wife.

Sand

Could the Euro be inherently unstable? Somebody (I know I'm supposed to source this stuff) wrote a while ago, that there are no historical examples of a federal currency functioning without a central exchequer. As in, me seeing a federal tax deduction beside my prsi. The gist being that a Euro unprotected by at least some measure of centralised taxation could never last more then a finite period, before centrifugal(?) forces tore it apart? Getting more political, I wonder just how much our political leaders, (pre the referendums), had quietly acquiesced to that reality. If we are heading away from the broader deeper EU model, can the currency survive a looser model? Anybody study economics?

Yes and no, as far as I know. In that it could be politically unstable - obviously a Euro wide rate is beneficial in that it removes distortions and allows for more stable investment decisions. But it also means that a region that might be crying out for some stimulus to encourage investment but wont get it because it is not significant to the euro zone - Ireland for example, should the UK remain out of the Euro and perhaps drastically change its exchange rates to the Euro at some point, will be in serious trouble competively regarding exports to the UK. Even though were far less dependant on the UK than we used to be theyre still our most important single trading partner. The Euro zone on the whole however mightnt view it as seriously as we would. The story is repeated all along the borders of the Euro Zone. Half the reason why all the new comers are trying to get their regional trading partners brought in.

Without redistribution of wealth to counter for these regions that are caught out of sync with the euro cycle, the euro could become very unpopular and economically damaging. National governments deal with economic imbalances between regions using stuff like social welfare and services. It would be quite the political reach to see a EU central body administering a social welfare state in the Euro zone regions though. But then half the reason for the Euro was to make it imperative that such a body be created.

I dont think this is really the case with Italy however - its simply having a tough time adapting to the fiscal responsibilities inherent in the Euro. Its not alone in that. France and Germany had those problems, as did the Netherlands and Portugal is also on its way to trouble with the EU over its budgeting.

Capt'n Midnight

The Corinthian wrote:

Such posturing is not unusual in Italian politics, which is why labels of left and right are largely meaningless in practice.

So many politicians chop and change parties during their career that they have a word for it.
ribaltoni?

Also Italian elections happen more often than in this part of the world so there are more reasons to posture.

The Corinthian

Capt'n Midnight wrote:

Also Italian elections happen more often than in this part of the world so there are more reasons to posture.

Actually certainly up until the early Nineties there were fewer general elections in Italy than in Ireland - changing governments does not imply that there was an election, after all. The posturing is in reality more Machiavellian than popularist.

dermo88

There were fewer elections in Ireland than Italy until that Haughey thing crawled out of the woodwork to screw the country and financially rape us all from top to bottom.

He had the bright idea of borrowing to get us out of trouble, misusing Keynesian economics in the worst example of inflationary populism ever seen in Ireland.

Garrett Fitzgerald and Dick Spring were voted in by the electorate to clean up the toilet, and the mess that Haughey left there with his uncontrolled economic diarrhoea. They made an even bigger mess of the job, looked over the pond at Maggie Thatcher, and because she was English, anti Irish, and pro unionist, I have theorised that the only thing we could do, was do the diametric opposite of what the evil whore in number 10 was doing.

Then the PD's came along, with a Thatcherite message, but toned down a bit for Irish conditions. Fianna Fail started talking the same language. We restructured the economy, paid down much of the National debt, cut taxes. People suffered, services suffered, it was not perfect. BUT compared to continuing down the road of freebie socialism and spend spend spend, the majority of us are better off than would otherwise be the case.

Europe will have to do the same thing. If they don't we will all be worse off. State interference and state borrowing causes interest rates for EVERYONE to rise. We saw that in Ireland when there was borrowing going on at the rate of 20% a year. Thats why the stability pact exists. Its to keep interest rates low, prevent state interference with market conditions, and ensure long term economic stability.

The day may well come a generation down the line, when Ireland is suffering badly, Germany and France are booming, and Euro interest rates are at 7-8%, with negative Irish economic growth. We were there before in 1992/3 when we were forced to devalue 10%.

Ireland is making hay while the sun shines. Lets not be complacent.

The Corinthian

dermo88 wrote:

There were fewer elections in Ireland than Italy until that Haughey thing crawled out of the woodwork to screw the country and financially rape us all from top to bottom.

Actually you seem to have ignored my previous point where I suggested that the opposite is true. If not, please feel free to back up your assertion. Coalitions chopped and changed in Italy more than in Ireland up until the early 1990’s, but there were actually fewer elections there than here.

Screwdriver

mycroft wrote:

However political history has taught us that in Western Europe Far right groups are quick to blame a social/religious grouping for all societies ills, and the italian far right are at the moment picking on a specific aspect of the EU to blame all their ills on.

Yes, blame everything on the far right.

bonkey

Screwdriver wrote:

Yes, blame everything on the far right.

Thats not what he said. Its not even what he said in the bit you quoted.

The Corinthian

bonkey wrote:

Thats not what he said. Its not even what he said in the bit you quoted.

In fairness it is fair comment on what he said. It's probably OT though at this stage in the thread.