That is a site put up by one of the authors of a report exploring the idea that the PIIGS should write off their mutual net balance debt: if I owe you $10, and you owe me $2, then we strike the $2, and I owe you $8 while you owe me $0, reducing loss by friction. That report (pdf) is linked from the site.
I found that site by searching for the filename of the image (EURBEF.png), and looking for a post or article that uses it and cites its source. This is one such post:
For me, the most shocking thing in the web is that Ireland and its banks owe $867 billion. That's approximately $188,000 for every man, woman, and child in Ireland.
Its difficult to know what the figures on that chart mean, after casual inspection. Is it gross debt? Debt net of assets? How are they calculating the debt?
There are more subtle issues, too. Its very hard to know what to count as Irish sovereign debt. Do you count 'working capital' on loan from the ECB? How do you value the assets of the nationalised banks, which perhaps count against debt? Also, adding to the confusion, is that countries have an incentive to use various accounting strategies to minimise the figures.
So its very hard to come up with an estimate that everyone agrees on.
One of the Irish economic commentators, generally thought to hold the most pessimistic outlook, is academic economist Morgan Kelly; he wrote an article in the Irish times, in May, where he estimated the debt at 250B euro (~$340B) (http://www.irishtimes.com/newspaper/opinion/2011/0507/122429... - pretty grim reading).
Obviously a terrible amount of debt, but its half the amount quoted in the NYT.
Basically, we had a housing bubble in Ireland, some very careless bank management (like the rest of the world) and a political failure to either A) regulate the banks properly, or B) to deal with the consequent bank failures properly.
When things started to go south in September 2008, the government of the day made a decision to guarantee much of the debts of the main Irish banks. This turned out to be a very bad decision. Its also a decision that the ECB and other EU countries won't let Ireland wriggle out of, as many of the creditors of the Irish banking system are other EU financial institutions (worried about systemic risk) - to the extent that Ireland recently paid off a controversial unguaranteed bank loan, under pressure from the ECB.
So this is why the Irish sovereign debt is so high.
The fundamentals of the economy could have been better - there was too much building construction, for a start - but they weren't bad; the state functions, people pay their taxes, Irelands a good place to do business, and is becoming a very friendly place for startups; so the scenario is very different from Greece; but the level of debt is sadly huge.
Yes, but that's the book value of the debt, not the real value. In reality creditors will never be remunerated with this. A political and economic fantasy persists that the creditors will not lose out of this, that they will be made whole. But each loan involves a debtor and a creditor, both will end up accepting losses. The faster this is done, the better it will be for all involved.
The tech industry in Ireland is still going quite well. Talk to a tech recruiter in Dublin (or a tech company) and they'll tell you how hard it is to hire people.
It's the construction sector that's not so good now.
Not that many although the tech industry doesn't seem to be going anywhere thank fate. Still, it's not like those jobs are even theoretically available to more than maybe a quarter of the population. One thing that surprised me when I read it[0] was the huge difference in profitability of domestic and multinational firms in Ireland per employee in the same sector. Twice as productive, twice.
I can't find that article anymore but a few days ago I read an article showing that since August, French banks have largely reduced their exposure to other European countries' debt. By largely I'm speaking of figures ranging from 40% to 80%, depending on the Bank.
What was more disturbing in that article is that it clearly shows that the activity of those banks is still very sane and that they made profits and all indicators are green even through the last few months. In other words, besides market speculation, nothing justifies the 20% drop of the CAC40 or 50% drop for certain groups (Carrefour is now worth less on the market than their assets).
I'll reach back when I find the article.
Edit: I believe it's this article, but it's now behind a paywall:
Here is a related link from the WSJ, essentially saying that French banks are reducing their exposure to Greek debt (and to other governments as well):
I'd say that their assets in China only are worth more than this. Carrefour has literally withdrawn from Thailand (they had a large and well placed fleet of shops and a good reputation) to invest everything in China. They had long been in China before that but that's just to give an idea of how seriously they take the Chinese market. Their strategy is to be fully implemented throughout the country when the middle class fully emerges. If such a middle class ever emerges, they will be terribly wealthy.
Which is why Walmart et al. are desperately trying to build brandshare there. They don't want to be left out of the China frenzy and "stuck" with the reliable old US embarrassment of riches.
Switzerland. It also introduced a "debt brake" in 2003 [1].
Seeing where we stand now this was quite a visionary step. Switzerland paid for it with slower growth etc. but is now one of the countries with the healthiest Budget (a feat especially considering Switzerland does not have any natural resources) and one of the few (besides Singapore and Norway I think) that is not in danger of losing its Triple-A ratings.
Thanks for the link. My first thought was that it would be a potential disaster like the inflexible and pro cyclical American balanced budget laws, but the Swiss law seems very reasonable """It states that each year, the budget must be in balance, adjusted for economic conditions. This adjustment is made by multiplying expenditures by a cyclical factor (the ratio of trend real GDP to expected real GDP), thus either allowing for deficits during recessions or forcing lawmakers to have surpluses during booms."""
Since US GDP is currently far below potential GDP that would seem to allow for a substantial fiscal stimulus right now but force the government to save when the economy is stronger again.
Unfortunately Switzerland didn't manage to dodge the bullet entirely.
Many people saw the Swiss Franc as a safe haven currency and massively bought them up, driving up the exchange rate. This caused Switzerland's exports to become uncompetitive which is also slowing what is a very export driven economy.
Oddly enough prices haven't really come down domestically either, but neither has unemployment risen that much (despite large layoffs in the financial services sector, particularly in their biggest banks, UBS and Credit Suisse).
Yes, in September this year the Swiss bank took the almost unprecedented step of announcing it would print currency at 'any amount' in order to maintain something like 1.2 with the Euro. Having a huge volume of money seeking safe haven in Swiss Francs has all sorts of destabilizing effects.
No, the primary surplus is before interest payments. After interest payments it runs a deficit, so it is still borrowing to pay the interest bill, so debt is increasing.
That's true in absolute numbers. But if a country is able to run a primary surplus over the long run, it means that the growth of its economy and its tax revenues is keeping up with the additional nominal debt. So the debt grows in absolute numbers but not relative to GDP. That's why the primary balance is generally considered a good measure for debt sustainability.
Still, you are right that they may not be reducing debt, but at least they are keeping it stable.
Yes, real GDP growth has been anemic, but as most of the interest they pay is not inflation adjusted, you need to use nominal GDP - I think.
Anyway, I think Italy does have a great industrial base, so they have something to work with if they can get some reforms done. Not so in Greece.
But maybe I'm just whistling in the dark here. If interest rates spike and the ECB stops buying debt all talk of longer term sustainability will be moot.
These numbers are not long term sustainable I dont think, a financial bubble and loose credit meant that banks could fund governments in increasing their debts in boom and recession, but now they have seen that the downside of that is bailing out the banks, and ever increasing leverage.
The amount of government debt the non bank private sector wants to hold now is maybe half the existing stock. Higher real interest rates might increase that level somewhat by encouraging saving, as might mandated savings. The alternatives are inflation or default, or trying to float a giant government hedge fund to take on the leverage, the EFSF plan.
You could well be right. But I'm still somewhat hopeful because the EU and the eurozone as a whole is less indebted than the US or Japan. So the problem becomes one of sharing the burden, which is the rational thing to do considering the disastrous consequences of an Italian default.
I don't think the the EFSF will play much of a role in that. Ultimately the ECB will have to keep Italy's (and later Frances) bond yields at a sustainable level. They will have to do what the Fed and the Bank of England have been busy doing all along: monetize the debt. Trouble is, they're not legally permitted to do that, but I think the Germans are pragmatic enough to let it happen. The question is when.
Every country that issues government bonds has some amount of debt. For some countries (most notably Russia) the total debt issued is a tiny fraction of their GDP.
edit: The surplus/deficit is the first derivative of the debt. Whether a country runs a surplus or a deficit changes from year to year.
The various governments largely don't act as lenders. When they say "Portugal owes Spain $86 Billion", they actually mean "The government of Portugal owes various Spanish institutions and individuals, mainly banks and retirement funds, a total of $86 Billion".
The hand-wavey text in the top-left explains that "Banks and governments in these five shaky economies owe each other many billions of euros."
So while it does look like "Greece owes Ireland $8.5bn" is at least partially cancelled out by "Ireland owes Greece $0.8bn", I would expect that these statements roughly translate to "The Greek government owes various Irish banks $8.5bn" and "The Irish government owes various Greek banks $0.8bn", which unfortunately don't cancel each other out.
per-capita debt as a fraction of per-capita income or possessions would be more interesting; a millionnaire or someone with a solid 200K income with a 100k mortgage is not a problem.
The source is from Bank for International Settlements, which has a nice interactive web app for doing your own analysis. http://stats.bis.org/ The data in this table is almost a year and a half old.
Be a lot better if Germany, France, and the US were on there. You'd see how tiny Greece is in the big picture. A lot of people are going to get hurt just to teach a few Greeks a lesson.
It's gotten bigger than Greece... if the recovery was intact it would just be the weak countries like Greece that couldn't pay their debts, if the economy dips then the big countries like Spain and Italy can't either. It turns into a death spiral, the more people panic over the crisis, the worse the economy gets, the more countries are at risk of default.
Meanwhile, German economic policy essentially consists of:
1) Tight fiscal policy to crush any signs of a recovery.
2) Tight monetary policy to crush any signs of recovery.
3) Tie yourself to some profligate countries so that you have a cheap exchange rate
and can sell s***loads of exports.
4) When the countries you provided vendor finance to start having trouble paying
you back insist that they follow 1) and 2).
5) Wonder why everyone hates you.
..."It's a pulley system - you throw everyone over the cliff and let the rope
take you higher. But eventually you reach the pulley."
reminds me of Air France 447, the people running the show initially reacted by pushing the stick in the wrong direction, they're still way behind the curve, by the time they react with sufficient force, might be too late, crash of markets, governments defaulting, countries abandoning the Euro.
For one I believe that Germans know what they're doing. They might be a little bit too bent on saving Framany's banks - however if these banks drop then Framany drops. If that happens Eurozone has no steering wheel and no engine to get anywhere.
So in fact it is essential that in eurozone:
1. Germany and France be saved from the worst.
2. Germany and France beat the other juvenile countries into fiscal submission.
3. The new "germanized" europe lifts itself out of ash.
Whatever people think, the whole point of eurozone is "germanization" of Europe. It's not as some people state that Germany is trying to occupy the Europe. The fact is that Europe wants to occupy Germany. Thats the whole point, the whole Europe and its citizenry would like to live in Germany.
And Germans know full well what they're doing - I'd even dare to say that they know what they're doing even better than 'mericans. Don't forget that Germany annexed DDR 20 years ago and that DDR was in much worse shape than any of PIIGS. Alo Angela Merkl along with many people in charge, grew up in DDR.
If you look at the hopfeully neutral doing business rankings compiled by the world bank (http://www.doingbusiness.org/rankings) you see:
- Italy: Rank 87
- Greece: Rank 100
I hope we can agree that these are horrible numbers for wealthy EU countries and not the result of political choices, but primarily bad management. I mean even countries that really cannot be considered laissez-faire capitalistic like Sweden (14), Germany (19), France (29) are doing much better. Even the former eastern european states, that started at a much lower level have better rankings...
So I wouldn't say that the aim is some "germanization" of Europe, but that the reforms in Italy+Greece are just clearly necessary.
Since Italy+Greece joined the Euro, they had the cheapest access to credit ever and it didn't help them at all. Maybe the harsh reforms and austerity now isn't optimal either because it is killing the economy, but it seems it is the only thing that can work.
Thats the whole point, the whole Europe and its citizenry would like to live in Germany.
That's nonsense. The German welfare and pension system is really bad compared to e.g. The Netherlands and Scandinavian countries (which are doing fine economically, by the way). Besides that, Germany doesn't even have a minimum wage.
To us, Germany means: potentially bad income when you work (no minimum wage), bad income (Harz IV) when you are long-time unemployed, and bad income when you retire (compared to e.g. The Netherlands where you do not only get whatever private pension you build up, but also a decent state pension).
Citizens of EU states are free to move to and work in other EU states. So, if your point were true, we'd see lots of immigration to Germany. Which isn't the case.
I guess I went wrong when I said Europe instead of European periphery (East and Mediterran, or he so called New Europe). Since the France, Benelux, North and Germanic states (the Old Europe) already share much more of the same values and outlooks towards business and civic responsibilities.
And I didn't mean that these peripheral people are all looking to move to Germany and eat Bratwurst and drink Beer, while reciting Goethe and enjoying Shit German Welfare. By the way, calling German welfare bad is absurd and completely a matter of political and personal convictions. Some of our US friends here would call German welfare socialistic and dangerous (?).
There are also other reasons why people don't emigrate - language and cultural barrier is key here. Romanians and Bulgars are migrating to Italy, due to language and cultural similarities. Polish are migrating to UK - since new generations apparently speak better English than German, etc. If more people spoke German, then you would see much more emigration to Germany, hell you don't even need to migrate for the most part. Being able to get business connection with Germany going on a personal level is more than enough for one to get going.
What I mean is that New Europe would want more of Germany (or Old Europe) in their own countries. And by that I mean an judicial systems that work. Government that actually offers some services beyond employment for the unemployable and privileged. And system where hard working people are protected from scores of predators. This is the gist of problems that Europe is facing currently. As far as Greece, Italy and Spain goes - its not the same as the CDS crisis in US. The problems that led to current state of affairs have been well know for a long time, but have not been acted upon due to ignorance and systemic corruption on the part of these weak countries.
People from outside europe (which I suspect you are) have this annoying tendency to over simplify things. You can't neatly split europe into "new" and "old". Also, check your dates: what you're calling "new europe" actually joined a decade before the scandinavian countries.
I'm sorry, but you sound like all you know about europe is what's been airing in the news for the last year. You call the spanish economy "weak", when in fact it's the 5th largest. Italy is the 4th.
Please check your facts. A few good comments about the judicial systems aren't enough to offset having an argument that stands entirely on stereotype and pulp news.
I am from Europe (Slovenia) and between me and my milieu we have put our feet on all of European countries.
My division is not geopolitical, it is more of an cultural division. Protestant vs Catholic would be a starting point of two bigger blocks.
I haven't called Italy and Spain economically weak. However they are weak as far as civic virtues go, work and business ethics also leave a lot to be desired. When confronted with these issues people usually go and play the "meiterranean melos" card. When in reality these countries are likely just failing to cultivate a sense of personal responsibility in the citizenry and institutions.
You'd perfectly call, at least Spain's, economy weak as it is not growing because a correction period. Spain had to reform its subsidized industries, a considerable mass of low specialized workforce and a sub par infrastructure network in the 80s. It has succeed in most of them, but the welfare state has been paid taxing a housing bubble which has popped. So although it has stopped growing, in volume it's strong, and its past performance has been quite good considering where it started.
Polish are migrating to UK - since new generations apparently speak better English than German,
No. The Poles migrated to the UK because only three pre-2004 EU members (the UK, Ireland, and Sweden) would actually let them in. (All other pre-2004 EU members exercised their right to impose temporary immigration restriction on new members for up to seven years), and there had been a fair-sized Polish community there since WW2. http://en.wikipedia.org/wiki/Polish_Resettlement_Act_1947
The "move to AND WORK" in your last sentence is key. Because even for EU citizens it is not possible to move to a country simply to enjoy the benefits of the social systems - otherwise there would probably be alot of migration to Sweden for healthcare or Luxembourg for welfare etc...
If you are worried about minimum wage, you are likely looking for work in "unskilled areas", and of course Germany isnt great for that, which the high numbers of long-term unemployment show. It probably doesnt make sense to move between high income EU countries for minimum wage work anyway, since your cost of living etc. will probably increase if you dont have localized knowledge or a social network.
This "no minimum wage" is rather a red herring, since the Harz IV income is rather high there is a de facto minimum wage, since practically nobody would work for 3€ / hour.
Thats the whole point, the whole Europe and its citizenry would like to live in Germany
That couldn't be further from the truth. One of Europe's fundamental problems, actually, is each country's profound dislike for one another.
Immigration levels among the developed countries in the EU, which are shockingly low despite there being no actual barriers to transit, demonstrate this. This translates to a lack of cooperation and leadership, which many europeans agree is the true cause of all this trouble.
Greece (and Spain, and Italy, etc) spend
profligately, Germany is asked to bail them out yet again...and the Germans are the bad guys?
I couldn't understand the worldview of the Greeks, but now I realize that the grasshopper -- by its very nature -- hates the ant and always thinks he cheated.
Worth keeping in mind that Greece is quite unequal and oligarchical. The oligarchs' game is, to some degree, 1) salt away Euros abroad 2) blame all Greece's problems on Germany and whip up the masses with media they control, 3) have Greece leave the Euro, 4) buy privatized assets on the cheap with their safe Euros while the masses suffer, 5) profit! in particular avoid having to pay all the back taxes they evaded, or pay in devalued drachma.
A big part of the issue is lack of solidarity, no one trusts the government, no one wants to pay taxes, no one wants to make the hard choices. But when the government and leadership is seen as out for itself and dysfunctional and the wealthy are inoculated from pain while the average people suffer, then people think they are unfairly asked to sacrifice.
(if I may digress, some of this, sadly, is increasingly applicable to the US, including adoption of inflammatory ant/grasshopper rhetoric/posturing. There are a lot of dysfunctional poor subcultures, but also a lot of poor people who work a lot harder than middle and upper classes with little to show for it, limited opportunity to join the middle class, limited access to decent education and health care for their kids
When someone is trying to take away what you are accustomed to having, it's quite easy to persuade yourself of their moral degeneracy, whether they are 'dirty hippies', or 'fat cat banksters'. When you have interests to protect, it's quiet easy to find ideologies that make them just and necessary. Politics: A strife of interests masquerading as a contest of principles - Ambrose Bierce)
The Greeks, Spaniards and Italians aren't blameless here, but the point is that the Germans aren't as noble as they like to make out - they have benefited significantly from being a stronger economy in the euro at some expense of the weaker countries.
Greece is being forced to destroy its economy through pro-cyclical austerity; right at the bottom, when the economy is doing poorly, it is being forced to reduce economic activity further by cutting government spending.
The solution is for the ECB to monetize government debt, and combine that with much tighter fiscal monitoring to ensure it isn't abused; but the ECB is forbidden by treaty from lending to governments and the German public is implacably opposed to changing this.
This is not correct. At least you can't say that without depicting the full picture.
Greece is a country that can't afford it operations. It has no economic growth and large unemployment. It survives by borrowing money. In a "normal" situation, it would go bankrupt and its money would be devaluated. Then in several troubled years it could experience growth again because with a devaluated money you are in a better economic position to make things and sell them.
In reallity, Greece is part of the Euro zone so its money is the Euro and it has no control over it. Greece's situation is comparable to that of California (although not to the same extent).
While many economist agree that austerity doesn't bring growth, at least it stops the bleeding. Also, we "don't know better" is the general concensus. Not to mention it worked for Iceland.
I fully agree that if Greece had its own currency, devaluation would be a viable solution, but it doesn't, so there's no point talking about it.
Government spending isn't "bleeding"; economies are feedback systems, and changes to spending in one location directly reduces income in other areas, which results in lost productivity until the system readjusts. Adjusting the system when productivity is already low is one of the worst times to do it, because there's very little to take up the slack.
On the other hand, Greece probably needed a crisis like this in order for it to face up to its governance problems.
I don't know why you quoted "don't know better"; I didn't say that, nor anything like it, as far as I understand. Iceland is not very relevant, again, since it had its own currency; in sudden devaluation, it reduced the value of monetary wealth of its citizens massively. You could view it has a massive government appropriation of citizen assets.
>> massive government appropriation of citizen assets.
Hardly; The government got itself into so much debt in the first place because of tax evasion lowering tax revenue and high government expenditure. i.e The government spent too much servicing its own people, now it needs to grab the citizens' assets back to repay it all.
In a normal situation, they wouldn't necessarily have to go bankrupt. If they had a national lender of last resort, they could essentially monetize the debt, causing inflation, and pay their way out with their devalued currency.
The Greek economy is not fundamentally different than it was when it was accepted into the EU. France and Germany knew that then and know it now. They just want to have their cake and eat it too. They loaned money to a country that had little hope of paying it back. It's fun to say "it's all the debtor's fault" but there are two sides to every debt relationship and in this case, as much fault lies with France and Germany as it does with Greece.
Also, Iceland didn't go through the forced austerity that is being pushed upon the Greeks. The Icelandic government essentially defaulted when it nationalized the banks. There was no "We'll give you a bailout if you crush your economy through austerity programs" from the EU because Iceland is not an EU country.
Austerity only stops the bleeding to foreign creditors at the expense of the country's citizens. It does not stop the bleeding internally in the local economy. The Greek population knows this and that's why they are strongly resisting.
Austerity may cause internal devaluation. Lack of government spending - economy activity reduced and prices deflate. Lower prices means exports increase and imports decrease, eventually allowing the economy to grow again. At the same time, debts are paid and the government will have more money to spend again.
Yes, deflation is dangerous, but here it is the only way to get around the fixed Euro currency to lower prices.
Normally when the government gives a whole stack of money to its citizens, the country's currency inflates. Its exports will then be cheaper to others.
Greece cannot do this; Its currency is fixed with its major trading partners. There is no way to lower prices of its exports... besides deflation.
There's two ways out of it. Quit the Euro (default on debts) and inflate the economy to lower export prices (look where that got the US, I'm starting to be skeptical of this tactic), or cut public spending, start deflation, to lower export prices.
Since in France, Germany, prices are not deflating, deflation in Greece will lower Greece's export prices. While consumers in Greece may stop spending... "Ooo my money goes up in value by simply holding it", importers in France and Germany will not stop spending "Buying from Greece is cheaper than buying from France, Germany. No brainer". They're not going to stop spending because if they stop spending money to import they also stop earning money from selling the imports to their home countries.
Lower export prices -> Increased exports. Eventually, hopefully, it will bring the country back into growth.
I think deflation is more dangerous when your currency isn't fixed with others, because then banks/companies will be able to manipulate your currency to take advantage of the deflation in the country. When the currency is fixed, there is just as much point for an importer to play with currency as US Steel plays with US Dollars. (i.e Not their business).
This is all what I think Germany is trying to make Greece do. I don't have evidence for any of it.
Destroying the economy is the worst thing for Greek bond holders.
However I don't know if real damage is being done. Greece has import agriculture and tourist industries. Are the fields being left untendered? Is are there hotels being left half constructed?
I agree that unemployment is waste of human capital.
Perhaps the government should have just halved all there employees wages rather than laying them off?
Yes, but this is normal for Greece; leave your building unfinished, even if only cosmetically, and you pay no tax on it. A desperately needed tweak to the law is to start taxing buildings when they are actually used.
If you think this is about 'teaching a few Greeks a lesson', then you really don't understand the severity and complexity of the current situation. The Greeks are a symptom that can't be dealt with by being nice to them, because then they won't change a damned thing. Why would they, if the others want to keep them in the Euro so much they can get away with anything they want? And worse, by not being severe with them, the other countries will think similarly and cater to their population instead of the population of the Eurozone as a whole. That's just how the incentives are, so they are forced to impose strong counter-incentives.
It was. France and Germany have historically been the driving political forces behind the European bodies. This is why now there is a leadership crisis in Europe: those two countries are still filling a leadership gap and thus criticized by other countries for taking decisions.
It has been quite the eye opener to watch France and Germany drive the proceedings. I was quite supportive of the EU and the Euro, but now I'm glad we (the UK) stayed out of the Euro. It would appear that this crisis is being used to move power away from the "weaker" countries.
As you are from the UK, I will warn you. Every news you read from a British source should be cross-checked with another source (just so you have another take on it).
Don't get me wrong, I have no animosity toward the UK or anything like this. I also find BBC's reporting to be of very high quality and I watch it daily. However there is total unfairness regarding the Europe thing at the BBC.
Basically I'd sum their coverage as "See what's going on? We told you so!".
That said, I disagree with you regarding the "stay out of the Euro". I now think that it is sad that the UK didn't get more involved in the Europe. The UK is probably the only country that could have weighed enough to get France and Germany to actually implement another management.
Europe is victim of the "small team" problem. It's a small team so it's ok if the two biggest guys manage it hand in hand because everybody's just ok with that and nobody can really challenge them. Problem arise with tougher times like we experience.
You guys should have really pushed us :) My opinion: we needed you to kick us and tell us it's not ok to just take the lead; it needs to be formalized AND democratic.
I'm afraid our national psyche doesn't allow us to join any union worthy of the name. The only way I can describe it is that the eurozone and what it's becoming makes our skin crawl.
We are so culturally different to the rest of Europe, I'm very very glad we stayed out. Us having any sort of leading voice in Europe would have been ridiculous.
Hopefully we withdraw fully from the EU, and the Euro collapses.
Just watch the Eurovision song contest for an idea of how ridiculously different Europe is from the UK, and how widespread the whole "we like them but not them" thing is.
The membership in the European Union is key, having the Euro doesn't really make the integration much deeper. There are practically no laws that don't apply to the UK just because they are not in the Euro.
You can be happy that you aren't involved in the "saving the euro" mess and you should be. But believing that you are somewhat distanced from the EU or that it would be possible to believe is totally delusional - the european integration is extremely deep even if the euro fails and in my opinion cannot be stopped or reversed.
You know, as an Irish person living in England, I have to respectfully disagree. If the UK was in the euro, there might actually be a chance of meaningful finanical regulation at a global level, as the City being part of the euro would have made a huge difference to the way this crisis has unfolded.
In addition, the cultural differences are not really that large. Europe has a common fascination with arguments and alcohol, especially the Northern parts (which include Uk, Ireland, Scandanavia, Netherlands and Germany). Historically, there have been huge links between the UK (and ireland) and these countries. To claim that there are these huge differences based on the Eurovision is a little absurd.
That being said, while watching the Eurovision i often find myself regarding them with a mix or horror and bemusement, but thats mostly because they're the kind of people who go on the Eurovision, not because they are of different nationalities.
I am not sure I would like UK "culture" to be judged by our eurovision entries and suspect most europeans would feel the same.
The UK does have a problem though, in many ways we are much more like america economically than the rest of europe, but european is trade is big part of our economy.
I know very little about the economy in the UK and I'm curious to understand why you say that your economy is closer to that of the US than that of France or Germany (or any other EU economy for that matter).
Well, we try to enter songs/artists we think will appeal to Europe's tastes. And mainly fail, because we are so different from them.
It's fairly obvious that our countries usual musical output is pretty decent, and if we entered any of that into the contest, we'd win (If it was actually anything to do with the song).
I love the Eurovision song contest though, because it highlights how ridiculous the idea of integrating Europe is. You get countries who always vote for each other even when the song is rubbish, and you get no one voting for us, even when we have a half decent song. The Eurovision song contest is the best advert for a 'euro-skeptic'.
I won't take the eurovision to measure europe's culture. First it is not "European" anymore, neither politically (Swizerland) nor geographically (Algeria and Israel for example are participating). Secondly, France and Germany do not succeed very well and they participation is rather ridiculous.
Bear in mind that countries like Ireland are still strongly in favour of the Euro, even after what has happened; think about the reasons that could be.
Oh, wow, I got quite a bit of downvotes for simply stating a fact: the Eurozone has been around since 1999, and 11 states of the EU were founding members. Germany and France were among them, sure enough, but they weren's the only ones.
You are technically right but the driving forces were France and Germany. Those two countries have a long history of wars and one of the goal of the European Coal and Steel Community, which started the whole thing, was to bring peace in the long term by ensuring close ties between the two countries. My grandfather who fought the Nazi in the French "resistance" once told me that whatever I thought politically about Europe, I should back it of all my weight because then I wouldn't have to see history repeat itself.
Don't be naive. Without either of them actively promoting and wanting it, there wouldn't have been a Eurozone. Any other country could have dropped out, but neither of these.
Not sure were you get any naivite from my post. It's not like Germany and France decided to create a new currency and a few bystanders hopped on board. It was a very complicated and long process, and yes, the German reunification was at the heart of it, 10 years before the Eurozone actually came into existence. Even the US and Russia played key roles in the process.
I do get where you're coming from though, since Germany and France have been the motors of the EU's economy. Fair enough.
But the original claim from the ancestor was that Germany and France created the Eurozone and others joined later. That's simply factually untrue.
Germany has had a positive balance of trade (a trade surplus, i.e. it exported a lot more than it imported). If Germany had had its own currency (e.g. DM), importing nations would have had to buy DM in order to exchange them for German goods. The demand for DM would have pushed up the price of DM; this would have made importing goods from Germany more expensive.
But with the Euro, other countries in the Eurozone which have had a negative balance of trade (a trade deficit) balanced out Germany, preventing the Euro from appreciating too much. This helped Germany's export sector, helping keep them competitive.
The other issue with the Euro is that Germany's economy was already adjusted for low interest rates; but the introduction of the Euro meant low interest rates in countries which had not historically had them.
Ireland didn't have a big government deficit problem; Ireland's problem was a property bubble driven by reduced rates on mortgages. It only turned into governmental debt when the government guaranteed bank debt, having been convinced by the banking-political cabal in the middle of the 2008 crisis that the bank problem was liquidity, not solvency; but with banks holding assets formed from inflated house prices, they didn't have as much capital as they thought.
For exporter nations, a weaker currency means that they don't need to charge as much in foreign nations for the equivalent value in the local currency.
Let's take porsche cars as an example. Porsche pegs a price in euros, and the price that US customers pays is the equivalent price in dollars (plus some extra fees, but those are generally negligible). A weaker euro means that 1 dollar is worth more euros, so that the dollar cost of the porsche to US customers is lower than it would have been otherwise.
On the other side, US exporters are hurt because the stronger dollar means that they have to charge more euros for items.
Same happened with Nintendo. Largest losses in three decades. "Nintendo had a $690 million foreign exchange loss in the first six months of the fiscal year that began April 1, the company said."
Germany is actually in a difficult position. Most of Germany's current growth is driven by exports to industrializing countries. As we know it, those country's growth is largely tied to Europe (the biggest consumer market in the world). Therefore, if Europe was to collapse, it would affect industrializing nations and Germany would be hit both through Europe and through industrializing countries.
It's relative currency changes that hurt or help the economy, because that's what forces the rest of the import / export economy to adjust. A currency that increased in value substantially would have reduced global demand for German goods, which would have created unemployment in its export sector, reducing German wealth production until the German economy adjusted. If you asked these unemployed German people if they preferred this new "work less" situation, I expect they wouldn't be as happy with it as you seem to suggest.
...which would have created unemployment in its export sector, reducing German wealth production until the German economy adjusted.
Aren't we considering the counterfactual where Germany never entered the Euro and had it's currency dragged down by weaker nations? In that counterfactual, the currency appreciation would have been slow and there would have been plenty of time to adjust. So the unemployment effects would have been minimal.
So ultimately, all the Euro did was reduce German buying power and force Germans to work more.
So ultimately, all the Euro did was reduce German buying power and force Germans to work more.
ADBOC[0].It seems to me that it actually works out more like redistributive taxation than one might naively think from what you wrote. An artificially cheap currency means more manufacturing jobs at static wages more than the same number of people working more hours. It has very approximately similar effects to progressive taxation, or more accurately it acts as a subsidy to the German manufacturing sector.
I don't know (but doubt) if the German people would have signed up for this, but the possibility is stronger given that Germany is in the extremely unusual situation, for a developed country, of having a larger manufacturing sector than a services sector.
I don't think I actually disagree with you on any point.
I wonder about that. The Germans have imported labor from all over Europe plus Turkey in an effort to keep positions staffed. I don't see how it benefits Germans to create all these extra jobs and then fill them with foreigners.
I see; unemployment is indeed better than immigration, especially from Muslim countries. Anything would be better than that.
(Did I misread you? What you write seems rather xenophobic besides being somewhat economically illiterate. From a strict economic point of view, there is no surplus of jobs. The price of labour should rise until the demand for labour abates; and the German workers would be better off. To the degree that that isn't happening (though Germany's population overall is decreasing, not increasing), it is because Germany has an open economy with free movement of labour. If you're attacking that, you're attacking the whole foundation of the EU, and I don't want much more to do with you.)
I downvoted you for using racism accusations as a tool to shut down opinions you disagree with. This is no way to have a discussion; in fact it's downright insulting to anyone who thinks critically and likes to explore differing views.
Unless you are looking to increase your population you don't design policy to encourage immigration, you design policy to improve the lives of people already living there (indigenous or not). After all the government has invested in these people prior to working via services and schools. It is not xenophobic to put your needs ahead of those outside the country or suggest it should be so.
The reason the price of labour doesn't increase needs only a simple answer; that demand is met by supply from an open economy and free movement of labour. This benefits immigrants from weaker economies, of course, but also German businesses who employ them. If the EU did not have this freedom, ordinary Germans would be better off, but we would all lose out for three reasons described by DuncanIdaho.
First up, Islamophobia is distinct from racism; what's more, it's unfortunately fairly acceptable in the public discourse, in many countries, including the US. You're right that I disagree with it; I think right-thinking people should. But it hardly shut down discussion: you have replied.
Furthermore, I don't actually think tsotha was being Islamophobic, just that that was a potential misreading; it seemed slightly xenophobic at best, given the reality that a combination of healthy market for labour and an economy open to free movement of labour naturally gives rise to immigration.
Plenty of countries design policies to encourage immigration, of the right people, for different values of "right". Your assertion seems to me to be flat out wrong; the qualification of "looking to increase your population" seems semantically meaningless in this context, as it is assumed in encouraging immigration.
I also strongly dispute your assertion that if the EU didn't have freedom of labour, then ordinary Germans would be better off, on far more grounds than DuncanIdaho. Germans would be at least worse off from lacking freedom of labour themselves (these things are normally reciprocal); and they'd have a lot fewer opportunities to trade, and more obstacles, without all the rest of what the EU brings to the table. Furthermore, the character of the European continent would be dramatically different; I think it's questionable that it would have been as peaceful has it has been. Germany would still be split without the EU, for one thing.
No, obviously you don't see at all. My point was there's no benefit for a country to create more jobs than it has people. The rest is just projection. It must be easy pride yourself in a good post when you respond to things people didn't write.
>From a strict economic point of view, there is no surplus of jobs. The price of labour should rise until the demand for labour abates; and the German workers would be better off. To the degree that that isn't happening (though Germany's population overall is decreasing, not increasing), it is because Germany has an open economy with free movement of labour.
Which was my point. This doesn't benefit the Germans. They would have been much better off allowing the price of labor to rise, which would have meant broadly-shared prosperity. As it is, only the large corporations and the state will benefit. But that was the point of the EU, wasn't it?
> If you're attacking that, you're attacking the whole foundation of the EU, and I don't want much more to do with you.
Oh my! Has the EU become a sacred thing now? It was a stupid idea, or at least a stupid implementation, one that Europe will be regretting for generations. Personally, I try to see the humor in it all - beyond that it's not my problem. Now, if you'll excuse me I need to find a soft shoulder to cry on now that you don't want anything to do with me.
By saying the EU is a stupid idea, you're attacking things that are core to the best experiences of my life, which is why I said I'd have nothing more to do with you.
Specifically, I live, work and travel in many different European countries, none of which are the country of my birth; and so too does my (German) girlfriend. The way of life I've experienced would not be possible without the EU or something very like it. Your opinion, as expressed, is in opposition to my way of life. That's the source of the vehemence of my opposition.
(Hopefully you'll note that I am neither a state nor a large corporation, yet I've benefited in many different ways.)
(This nationalistic notion that nations are important, that they should look after their own above others, I think is responsible for many evils in history, some very recent. I think humanistic cosmopolitanism is far better than "us for ourselves" ideologies.)
Alot of these people will return home (all over Europe plus Turkey) once in the future, and they will bring home with them - piles of saved Euros, German working ethics and loads of knowledge.
These people will become centres of new productive hubs, where there has be nothing of the sort thus far.
It is just globalisation on smaller scale. Europe is trying hard to integrate and mix all the countries and cultures in Europe to the level that would make warfare between their citizens too costly to anyone.
>Alot of these people will return home (all over Europe plus Turkey) once in the future, and they will bring home with them - piles of saved Euros, German working ethics and loads of knowledge.
That's what the Germans thought, originally. Turns out to be wrong. If you move to a new place and live there for a few decades, raising your family there, you don't leave unless you don't have any choice. That place is home, especially for your children.
>Europe is trying hard to integrate and mix all the countries and cultures in Europe to the level that would make warfare between their citizens too costly to anyone.
Yes, and it's not working. Even the leaders acknowledge that now. And before they get too comfortable they should remember Yugoslavia tried to do the same thing.
Not everybody will return, but great deal many will. The fact is that these returning migrants are probably the best bet for increasing the welfare in the parent lands. Even if most of migrants do not return "home" - they still maintain connections with their birthplaces, thus indirectly (and indeed slowly) influencing the culture through osmosis.
>Yes, and it's not working. Even the leaders acknowledge that now. And before they get too comfortable they should remember Yugoslavia tried to do the same thing.
Hmm. Saying its not working is rash. It didn't work as well as optimists hoped for it also didn't works so bad as pessimists hoped for. What leaders are realizing now is not that EU integration isn't working. It's just that current approach is losing steam.
And one should note, that current approach was more of an amalgam of inertia and half assed attitudes than something coordinated and sincere.
I see this motive for Germany: the Euro has been a back-door mechanism for buffeting weak parts of the economy during a stressful period (reunification, global plunge in manufacturing margins). The effect is similar to what China gets by constantly buying treasuries.
Beneficiaries have been the former east and farmers. Italians can buy German milk that would otherwise be expensive.
Here's some speculative fiction on Germany without the Euro: the DEM is a very strong currency. Bankers drive fast German-branded but Eastern-europe-manufactured cars along a financial-sector corridor that stretches between Zurich and a much larger Frankfurt am Main and which has sucked the momentum out of the city of London.
Munich has some strength for being in the middle of this but has been hit hard by the loss of manufacturing jobs. Most regions are less fortunate still. Production for export is impractical. There's significant social unease, particularly against hard-working migrants from other European areas "taking german jobs".
There are many poor regions that haven't crossed over into services mindset and vast regions of poverty. Wealthy western states resent seeing all their taxes disappear to weaker regions. There's general dissatisfaction with the reunification project.
The story I heard was that Francois Mitterand more or less extorted the commitment to the single currency out of Helmut Kohl as a quid quo pro for supporting German unification.
The reasoning is approximately as follows:
It was obvious by 1989 that monetary policy for European countries was de facto set in Frankfurt by the Bundesbank. The further you moved from the D-Mark interest rate the less D-Marks your currency would buy and reality would kick in inflating your currency. Mitterand had personal experience of this dynamic having been elected on a Socialist platform and ramped up spending without increasing taxes as much as would have been necessary to pay for the spending.
So he wanted a voice in European monetary policy, so a European currency with a central bank modelled on the Bundesbank.
So France wasn't duped at all.
One proposed end game I've heard is the solid Euro zone currencies (DE,AT,NL,LX,FI, maybe FR, eventually PL and Estonia, maybe others) seceding to a new currency which would end with the ECB managing two currencies.
The Euro, not as bad an idea as it looks in hindsight, though the scrutiny for countries that wanted in should have been much higher.
http://www.thepeakeffect.com/2011/09/europes-web-of-debt-upd...
no mention of sources though.