Whither the euro?

[silverfox]

The edf has gone very quiet on this issue.

Serious problem folks.

My view is Germany's agreement to the next tranche of the bailout for Greece will not help matters.

The issue is no longer an economic one. Politics is now killing the Euro. A member country cannot be seen to be jumping ship.

Sadly Greece, having prostituted itself to the Euro, can demonstate until it is blue in the face. The EU piper now calls the tune.

Edited for typo

[mockney piers]

This problem isn't caused by the euro.

There are flexibilities of response that membership may limit. But this issue is not of the euro's making, we can largely thank the US leading the way with the awful banking practices that got us here.

The sheer cost of avoiding financial melt down has now exposed the rather wayward fiscal practices of certain gov'ts.

In boom times the Greeks could spend many they didn't have. In bad times they can't.

Greece isn't prostituting itself to the Euro, it would have been fucked outside of the Euro. Inside it the euro may be screwing itself in a bid to leave no man behind. Noble if possibly foolish.

I thought the last time we dealt with this issue we said the gloating was unseemly. People seem to be taking an awful lot of delight from others' suffering.

[silverfox]

MP, this isn't schadenfreude. There is no gloating.

Unless you've been on a different planet since 2008 we have a very serious problem on our hands.

It's no use bleating about how the Greeks don't pay taxes, like to retire at 55 etc, all this was known before they became members.

We are now talking about writing off 50% of their debt.

Don't. Not one more penny, cent. When they can't feed themselves you'll be surprised how readily the Greeks and unions will drop their demands, nepotism, corruption etc.

We can then send in food parcels until they learn to get up and do a fair day's work for a fair day's pay and pay tax for the luxury of doing it - like the rest of us.

So forget bailouts - only then will the Euro have a chance of still existing in 2012.

[Huguenot]

These types of thread are always tediously kicked off by craven anti-Europeans looking for another opportunity to say 'the Euro is dead' - rather witlessly they forget that the amount of times they said it is exactly the same number of times they've been wrong.

So congratulations silverfox, you currently have a 100% failure rate in signalling the end of the Euro.

Then the thread steps, as it does now, into a borderline xenophobic rant against the supposed laziness and criminality of foreigners.

In that sense congratulations are also in order silverfox, for managing to do that in two posts!

You saved us all a lot of bother.

[silverfox]

Talk about head in the sand.

You cannot keep bailing out countries indefinitely. At some stage it has to stop. Greece is on the verge of complete social breakdown.

There are only two possible solutions. Cast some of the weaker members adrift or go for total fiscal union where unelected bureaucrats tell you what rates you set your taxes at.

It must be nice living in your rose-tinted world Huguenot.

[Huguenot]

Come on silverfox, you've been saying the same thing for years.

Everyday is the new 'end of the world Euro day'.

http://www.independent.co.uk/multimedia/dynamic/00587/camping_587187t.jpg

Harold Camping Silverfox has been broadcasting his Doomsday predictions around the world.

More here.., oh, and here... and here... and here... etc.

[silverfox]

Maybe this thread is a bit too high brow for you Huguenot.

nothing I have said is controversial. The markets have already factored in a default from Greece. many commentators recognise that the EU cannot continue in it's present form.

I have not said the Euro is dead. The question is whither the Euro?

[Huguenot]

There's no point in having the debate with you silverfox, because you just use every response to roll out tired xenophobic cliches like "unelected bureaucrats tell you what rates you set your taxes at"

There's an easy answer to the question, which is that there are two competing groups in this:

One is a group of visionary, inclusive, capable politicians who recognise that the long term security of Europe relies upon the creation of a united region with sound political and economic strategies that can negotiate effectively in a world of shrinking energy reserves and mineral resources.

The other is a group of short-sighted financial carpet baggers, ably supported by narrowminded xenophobes and competitive economic blocs who would try and bring the European economy to its knees. They will attempt to do this in piecemeal fashion, by rolling Greece, rolling Italy, then Spain or Ireland until there is nothing left.

It is not yet apparent who will win - it is clear that the latter group must not win if Europe is to prove a society worth living in, and that the former must never give up this battle with wheedling myopic Wormtongues so pervasive in cultures like the UK.

Many will wish Europe to fail, because like the worst kind of ineffectual misanthropes, they want find some sense of justification by dragging others down to their acrid moral bankruptcy.

Like voting reform before this, the importance of ideas such as economic convergence are like rubber bullets on the waste drum of your imagination. There's just a dull clang and a slight shift from the effluent within before it slumps to its original state.

Now I shall leave you to your boorish comments - would that you could run your own private nation, so only you could suffer the privations of your cynicism.

[silverfox]

That's better Huguenot - I can almost hear the dusty cogs grinding into action.

"...Like voting reform before this, the importance of ideas such as economic convergence are like rubber bullets on the waste drum of your imagination.."

Funny how 99% of Britain agreed with me.

Now, may we have the benefit of your wisdom on the big story of today?

Euro bank on brink as debt crisis spreads across continent

France and Belgium battle to save continental lender Dexia, as fears begin to grow of a delay to next bailout payment for Greece

http://www.thesundaytimes.co.uk/sto/business/Economy/article788329.ece

[Huguenot]

99% of Britain did not agree with you - only 12.9m people did. Out of a population of over 60m that's not 99%.

The European Central Bank (which administers the Euro) is not on the brink of anything - it's probably the strongest bank in the world.

That's the problem with talking to you about anything - you just make stuff up and keep on lying.

Certain banks in Europe (of mostly minor importance - don't claim you ever heard of Dexia before) are exposed to sovereign debt from governments such as Greece that have a repayment problem.

Nobody wants to see these banks fail, because retards then deliberately cause a run on the banks to make money out of other people's misery.

There's two tasks to resolving this - one is the process of increasing bank capitalisation that coincides with the credit crunch corrections, the other is to create a system which prevents similar problems occuring in the future.

The act of 'shoring up' these banks is not throwing away money: these are trading exercises. As the UK discovered, saving the banks only costs a few tens of millions in the final analysis, more than the trillions a melt down would create.

[silverfox]

"...The European Central Bank (which administers the Euro) is not on the brink of anything - it's probably the strongest bank in the world.

That's the problem with talking to you about anything - you just make stuff up and keep on lying..."

You haven't read the article have you Huguenot otherwise you'd realize how ridiculous that statement is. I never said the ECB was on the brink.

[Huguenot]

You keep putting references to subscription-only material silverfox, you've been reminded of it several times - but as with everything else you still persist on your own course of action indifferent to the advice of those around you.

You can only expect then, since your own prose is vague and your history is obtuse, that you are likely to be misunderstood.

[silverfox]

Fair point Huguenot

[new mother]

I would lovethe euro to have worked. However, I have never seen how, sans mobility of labour and a common language, it ever could be more than an ambition of a eurocrat. The problem is fundamental - once you give up control over ir policy, you rely on the rate setter having the same considerations as your country requires. Clearly, euro Europe involves a number of countries the economies of which will NEVER be in sync. A rate which is right for some will not be right for others, save by random chance. This is ok ish if you are doing well and can take the hit of an unsuitable level of ir but disastrous if doing badly. The whole idea is intrinsically flawed, sadly.

To return to the actual query, I don't know. Break up and relaunch with various tiers? That could actually work, depending on how the tiers are comprised. Devaluation by eg 40pc? Bad for us as german exports would suddenly get very cheap and wipe us out.

[Huguenot]

Whilst your point is valid new mother, you don't recognise that the same observation is valid within a nation. The sterling exchange rate that works for London and the South East is completely incorrect for the midlands and the north, which would benefit from a weaker pound to support manufacturing exports.

Nobody ventures this as a reason for the pound not to exist, so it is no more valid as a reason for the Euro to exist.

Your second calculation is also incorrect. A separation of the strong Eurozone countries from the week would result in a sudden and dramatic strengthening of the Euro on the markets, shutting down German and French exports and plunging them into recession.

This would hammer trade throughout the Eurozone, resulting an estimated collapse of GDP worth 25% in central members (including the UK) and 50% in peripheral ones. In turn this would take down the global economy.

So you see, the strong nations need the weak ones to hold them back.

In short a collapse in the Euro would make the credit crunch look like a barely noticeable hiccup in comparison.

So your 'sadly.. Would have loved to have worked', despite being bizarrely condescending, is both incorrect and disproportionately blase to the effects.

Your 'break up with tiers' cannot feasibly work at all - you either have a currency or you don't. I think you may be referring to debt defaults rather than the Euro, but you'll need to be clearer on that before I can comment.

[Marmora Man]

Transfer between London & the South East and the Midlands or the North is easy to achieve and sanctified by a long shared history; all these regions are within the one economic and fiscal entity, they are not sovereign states with separate political and fiscal objectives (Scottish & Welsh devolution and the NI Aassembly can be ignored in this context). You cannot, logically, compare UK to the Eurozone. There are those that would wish the Eurozone to become a one economic and fiscal entity - but it's not even close to that yet.

Given the current problems there seem to be two stark choices - proceed toward the logically required fiscal commonality, which doesn't seem to have wholehearted support of the Eurozone electorate, or revise the financial / fiscal status status of the countries within the Eurozone so as to proceed toward a tiered set of Euro values [roughly as has been suggested North strong Euro - South weak Euro] - which will be immensely complicated and fraught with global economic danger.

These sort of flaws were pointed out by Euro sceptics way back when - some, foolishly, are playing the "I told you so" game and enjoying the schadenfrude - others recognise that Europe is where it is and are attempting to fix the problem. This morning the news appears to be that Greece will not meet its own austerity / fiscal targets.

The political imperative of an ever closer European Union can be understood - but political will is, of itself, insufficient to overturn the logic of the market. Nor can ever tighter yet increasingly unbelievable / unachievable "bailout programmes" persuade the market to suspend logic. So the original questions stands "Wither the Euro". I do not know and not being an economist I have no real solutions to offer but watch, in hope and horror, as the story continues to unfold.

[new mother]

Will read H and MM properly but, H, regarding sterling, this is exactly why I say that mobility of labour forces and a common language are essential. Same goes for the USD.

[Huguenot]

In accepting the political perspective you also expose the flaws in your argument.

This is a modern society, and Victorian state borders built on paternalist hierarchies and a subordinate jingoist proletariat are fading fast under the bright lights of education and information.

Sure, you'll still find a hardcore of believers in the backwaters of Tower Hamlets where French is for poofters and German is for Nazis.

However, I simply don't feel that the people of Greece are any less deserving than the miners of Ripon - and I don't believe that the Italians are any more thieving than scousers.

More importantly I'm not alone in thinking this.

I can understand the desire to believe otherwise, but you're hanging onto rotten foundations during a storm of globalisation.

[DaveR]

"Certain banks in Europe (of mostly minor importance - don't claim you ever heard of Dexia before) are exposed to sovereign debt from governments such as Greece that have a repayment problem"

H, for someone who accuses others of lying quite so freely you can be fairly economical with the actualite yourself. The real concern is Italian debt, to which European banks are exposed to the tune of c.?350 billion (including all the major Italian, French and German banks).

"The act of 'shoring up' these banks is not throwing away money: these are trading exercises. As the UK discovered, saving the banks only costs a few tens of millions in the final analysis, more than the trillions a melt down would create"

I'll be generous and call this disingenuous. There is a clear difference between bailing out UK banks that were undercapitalised but had long term loan books that would pay off, and bailing out countries that cannot credibly pay their debts, ever. At the moment it looks like there will have to be (at least) a restructuring of the sovereign debt of a number of countries and this will put a strain on the continued existence of the euro - pointing this out is neither xenophobic nor 'lying'

and as for this....

"One is a group of visionary, inclusive, capable politicians who recognise that the long term security of Europe relies upon the creation of a united region with sound political and economic strategies that can negotiate effectively in a world of shrinking energy reserves and mineral resources.

The other is a group of short-sighted financial carpet baggers, ably supported by narrowminded xenophobes and competitive economic blocs who would try and bring the European economy to its knees. They will attempt to do this in piecemeal fashion, by rolling Greece, rolling Italy, then Spain or Ireland until there is nothing left."

Nuance has never been your strong suit, has it? It gives me no pleasure to suggest that it is exactly your kind of near fanatic idealism and economic illiteracy that got the euro into this mess in the first place.

[mockney piers]

Actually on the second point, the leader in the euro issue of the Economist said pretty much exactly that too.

[Marmora Man]

MP - for clarity, are you saying the Economist leader supported Huge ot's position or DaveR's?

[mockney piers]

Ah yes. Huguenot's. At least that bit of it that said the cost of allowing the euro to fail will be 20-25% of GDP of strong countries and up to 50% of weaker economies.

In other words untenable.

The cost of restructuring debt of countries such as greece and possibly allow limited defaults whilst making a fund available* to shore up further problems will be infinitely smaller, and used the same analogy of not allowing the banks to fail to illustrate the point.

It's available under free content on their iOS/android app, not sure about t'web.

* the leader is a couple of issues ago pre recent announcements hence why it was badgering for strong announcements from the EU

[DaveR]

For clarity, I am not saying that supporting European banks that are exposed to sovereign debt is wrong. I am saying that it is not the issue. The Eurozone is not seeking to prevent Greek default because of the impact it would have on banks, but because of the impact it would have on the Greek economy and (more importantly) the knock-on effect it would have on other countries debt positions and the strain it would put on the Euro project as a whole. To compare the current situation with the UK government's decision to bail out Northern Rock et al is disingenuous, at best.

[Huguenot]

'The real problem is Italian debt...'

'...there will have to be (at least) a restructuring of the sovereign debt of a number of countries'

See? This is the problem - a hysterical population has now started heaping in Italians alongside the Greeks, when they're completely different situations.

I doubt very much that European economists have in mind 'the impact it would have on the Greek economy', the they'll be principally concerned with avoiding sending out destructive messages that the Euro is inconsistent, fails to protect its own interests, or will allow a centralised Euro based on the economies of Germany and France to overheat.

"it's your kind of near fanatic idealism and economic illiteracy that got the euro into this mess in the first place'

My kind of fanaticism? Don't be a prat. You've allowed your hatred of foreigners to overwhelm your good sense.

I think you'll find that the problem was created by excessive consumer credit, bad loans, devaluation in mortage securities, under capitalisation, a liquidity crunch, and a recession that pushed borderline economies into a situtation where profiteering money markets imposed cavalier interest rates that exceeded their ability to repay.

The Euro wasn't perfect - it didn't have a healthy balance between labour and fiscal discipline, but that's because European integration had political as well as economic goals. Only an idiot with a poor grasp of world affairs would try and make this two dimensional.

Since labour is likely to remain relatively inflexible in the short term, what we're seeing in Europe is an increase in fiscal discipline - but what many Economists feel is that they're moving too slowly. I agree with that, but I'm also willing to recognise that rabid xenophobes would stop them moving much faster.

So DaveR, it's illiterates like you running round shouting that the sky's about to fall on our heads that is turning a drama into a crisis here.

Just try and calm down and think about the complex consequences of a Greek default, instead of the binary conclusions you're drawing at the moment.

[Jeremy]

"Hatred of foreigners"??