Its not hard to see why the Germans are against Eurobonds. If they are introduced and the Euro still goes tits up then the Bundesbank will have taken most of the liability for almost no gain.
Its not hard to see why the Germans are against Eurobonds. If they are introduced and the Euro still goes tits up then the Bundesbank will have taken most of the liability for almost no gain.
Because I think Ireland will need access to the bailout fund. Also we are totally dependent on foreign investment, and a no vote would impact this. Some multinationals (Paypal, Amazon) said flat out they would reconsider expansion in Ireland in the event of a no vote.Originally Posted by Bartholomeus Crane
Personally, I wouldn't know what I'd vote for Ireland if I had the choice. The deal is pretty shitty, given the circumstances, and a no might give Ireland a chance to renegotiate it. A yes on the other hand has some guarantees to it, and you never know where those negotiations might up.
Why are you saying, so definitely, that a yes is good for Ireland?
In my own case, if Ireland crashed and burned (left the euro etc) then my sterling would be worth a lot more.
As usual (with every EU vote in Ireland) the no campaign consisted mostly of insane scaremongering about the EU conscripting the first-born and aborting the rest.
Further notes: I think Ireland would be much better off run by Germans. Also the only major party advocating a NO vote was Sinn Féin who are marxist terrorists. Their solution to the economic crisis likely involves a repeat of this: http://en.wikipedia.org/wiki/Northern_Bank_robbery (one could argue this is better than the banks robbing us tho)
Last edited by balistic void; June 1 2012 at 01:18:57 PM.
The Eurobond idea has been floated several times in the past couple of years. But every time the notion is floated, the Germans (and the Dutch and Austrians quietly acquiesce) said no. Merckel said no to the idea this week!One of the lead articles in the Economist cited what they would do to stablise the eurozone, can be summed up with the term euro bonds. There is a serious line of argument in academic circles that the present crisis presents an opportunity for the EU to further integrate and strengthen itself, which the adoption of euro bonds would be an example of. Interestingly there seems to be some movement on the issue now that Hollande is President (apparently he supports their implementation), the stumbling block is Merkel though who is opposed. As for Greece, nearly every economist is saying that they have to leave the euro and then devalue the drachma to make themselves competitive and rebuild their economy, but nearly every European politician states that Greece won't leave. So it’s basically a contest between Economics and Politics with very serious ramifications for not only the future of the euro but the whole EU project itself.
You can read the Economist article here: http://www.economist.com/node/21555916 (should be accessible unless you've read 5+ articles this week on their site)
P.S: currencies are nouns not proper nouns and thus don't need to be capitalised(/grammar nazi)
And from their point of view that's not just being stubborn. They'll be asked, through their national economies, to take most of the risks run in countries where they have no control over how the money is spend, or if it will ever be paid back. Even leaving out Greece, it is asking a lot of the northern Europeans to back Ireland, Spain, Italy, Portugal, without them giving up a sizable portion of sovereignty as well. Not least because it also means that those northern countries will have to forfeit so much of their citizen's saved wealth (in pensions, accounts, etc.), to do this. And there's a good chance it may not work. The confidence in northern Europe may be significantly damaged if it is bundled along with the periphery and if that happens those same northern Europeans will have just squandered their wealth for nothing.
Even if the Eurobond is just limited to the financial sector, as the Economist proposes, even though they are correct that this is easier, that same risk remains. Spain is still sitting on a mass of property it can't move, and the liabilities may very well overwhelm even a Eurobond issue. And do you really think a French financial sector will be willing to submit to rules from Berlin or Frankfurt?
This whole Eurobond idea may work, and it is at least a better plan than just letting the euro go under, but it does depend on it being picked up, implemented perfectly, and the various nations and financial sectors basically allowing themselves to be brought under European (read Northern European) administration. Given how even now Spain is dithering on accepting EU money to bail out their banks, under the current rules and regulations, I have a hard time believing this is achievable.
I don't think we will see any sort of integrated Europe anytime soon, even if the Euro survives. European countries have a very strong sense of self and culture which varies greatly. I don't think the French would be very happy about being bossed around by the Germans for instance, there is just to much history/conflict/bad blood involved. It makes sense to integrate the financial aspects of it, but that brings up the whole "it's good in the short term but what kind of fuck-up are we inviting for the future". European banks are already "too big to fail" at nation level, making them bigger is a bad idea if you ask me.
I'm watching Greece with interest, as if/when it fails it's going to have a huge impact on the EU, none of it good I'm betting. Greece is already polarizing to the extreme Left/Right, if this start's spreading who knows what kind of crazy shit will go down. We live in interesting times brothers, and we all have front row seats.
yes, I am Le terribad at BF3
You're right there is no real sense of shared European identity punkboy, but the whole EU project is an example of European integration. The fiscal and stability pact is an example of further integration and the functionalist school argues that there is spillover from any form of integration that encourages more of it. So if the pact is successful it might lead to a more federalised EU body. This is the whole point about crisis leading to further integration and strengthening of the union. There was no motivation to further integrate the EU when things were going well before the GFC because after all... if it aint' broke don't fix it. Now everything is broken a solution is needed. Theres two ways this can go. Further integration or disintegration and despite the obstacles to integration in the forms of national sovereignty and identity the progressive nature of European society which is born from the Enlightenment makes it difficult to conceive how in the long term political elites will be willing to accept taking steps backward by allowing the EU to disintegrate.
This doesn't necessairily mean that all the current members of the eurozone will remain members, I personally think its pretty easy to make a strong argument that Greece leaving the euro would actually strengthen the euro politically even though its an admission of defeat, the alternative is a continuation of the current situation with no forseeable end in sight. I'm personally a student of politics not economics so getting my head around the economics side of things is not that easy but if you have a firm grasp of the politics and history of the EU I can't yet fathom the EU breaking up but it is an argument that basically divides EU experts down the middle right now. I think the fact that the German/French engine is now split on eurobonds is quite significant, the big reason Merkel worked in cooperation with Sarkzoy was not out of economic necessity but rather out of political necessity. The Germans have an economic hegemony in the EU but its a reluctant one due to their history, the Merkozy partnership provided them with the political cover to be tough on austerity. Now with Sarkozy being gone and Hollande not sharing the same approach to the crisis this political cover is gone. Merkel is going to have no choice but to moderate her position to accomodate the change in leadership in France.
Anyways apologies for the rambling its late, but the whole subject of the EU is fascinating right now. I'm actually studying it for my course right now and have spent quite a few hours in classes debating many of these topics so I get quite enthusastic about it
I think what the EU represents is a classic case of those at the top - politicans, breaucrats, business leaders, etc - having far more in common as "Europeans" than the individual citizens in the individual nations who still view themselves via their national or even regional identities. Europe has always been like that.
The problem starts when you start asking those individual citizens to start giving things up of the greater good of "Pan Europa". It was no surprise to me that in those countries where they were permitted a vote the EU constitution was rejected. For most citizens now their leaders are distant and effectively uncontactable except via the ballot box. Those leaders in turn don't seem to realise the level of distrust their citizens have in transfering power to Brussels.
http://economics.com.au/?p=8933
tldr; either PIGSS act like Germans, or their youth will emigrate to Germany then they're fucked even more.It has been an interesting few months in Europe. The Greeks have just had their first round of parliamentary elections and need at least another round before a government can be formed. The French have just elected a new president on an anti-austerity platform, making it a clean sweep around Europe: in every country populations have punished their government for the recession following the GFC. Meanwhile the Germans are being their obstinate selves, clinging to a fiscal treaty no-one else has any intention of sticking to.
The main mistake being made by European politicians, and in particular the German ones, has been to prevent countries going bankrupt that have no hope of balancing their books without radical reforms. The temporary bailouts allow those countries to avoid truly reforming, completely paralysing those countries and exasperating underlying problems (As the ECB bank-president said just yesterday!).
The mistake of getting involved in bailouts was made early on, but reached its crescendo with the 130 billion euro gift to Greece in March 2012. It was an act of gross folly but there simply was no mechanism at the time to avoid agreeing to the bailout; the Greek politicians were signing every insane promise asked of them and Germany ran out of excuses not to agree to the bailout. That generosity helped the Greek politicians to keep buying off their domestic supporters but is proving the old adage that there is little people resent more than charity, and it will in the medium run achieve the opposite to the financial stability some hoped to gain from it.
To start with the ingratitude, Germany is now depicted once again as the evil man of Europe in popular media in Greece, Ireland, Spain, and Portugal. Rioting protesters in Athens burned German flags and newspapers carried pictures of Angela Merkel wearing a Nazi uniform. Cartoons in Greek newspapers depicted Merkel and the Finance Minister Schaeuble as running concentration camps for Greeks.
This despite the fact that the Germans not just directly sent huge amounts of money to the governments of these countries, but even allowed the European Central Bank to send more money to their troubled banks in the order of a trillion euros in total, which in effect is printed money and thus a form of tax on the whole of Europe. These populations should be thanking the Germans on their bare knees, but the reality is the opposite. Why and where is this going to?
For one, opportunistic politicians in all these countries have caught onto the trick of blaming the Germans and other European countries for the problems of their own making. They make ludicrous public demands for the rest of Europe to bail them out, or even blame them for the housing booms that preceded and worsened the financial crisis. And populations, with their exceptionally limited understanding of how financial matters go, lap it up and increasingly vote for anti-European political parties.
So far, German politicians seem to be oblivious of the damage that their generosity is doing. Instead of realising that they are setting themselves up for trouble, they insist other countries abide by Stability Pacts and austerity measures. They send financial experts to come and check the books, of course finding one discrepancy after the other. This makes it simpler for politicians elsewhere to pretend that the Germans are to blame for their problems and thus allows them to shirk their own responsibility.
A good example of irresponsible posturing in France is all the talk of using the European Structural Funds to give the European economy a boost. It sounds reasonable to call for the freeing up of money that is being idle, but a quick look at what these funds actually do and their size is sobering. For one, there are few funds in the world which do more useless and corruption-inviting projects than the ESF (see here for a nice discussion): lots of tunnels and roads that have only sheep as regular users. The idea that building some more concrete goat tracks will save France is fanciful, to say the least. More importantly, there is just not all that much money being idle in these funds. The European Social fund has no more than about 15 billion to spend per year and the European Regional Development Funds have a budget of about 35 billion a year. You thus need 3 years of their total just to cover the Greek deficit for 2012 and it’s not even a whole percent of European GDP. Add to that the dry realisation that the money ultimately of course comes from tax-payers and it should be clear that the call from some Southern European politicians and economists to raid these funds in a Keynesian gesture is a rent-seeking distraction from the main game.
Why do national politicians not get much more serious about internal reforms and instead blame others for their problems? Because it would cost them the next election and probably the one after that. It is in this regard handy to remind ourselves that the Germans themselves punished the last German leader who instigated serious reforms (the Hartz reforms, politically pushed through by Schroeder). It costs the German social democratic party ten years of being out of power, a clear deterrent for any other politician in Europe to be serious about reform. So the governments of the countries in trouble don’t reform. Even a technocratic government, like that led by Mario Monti in Italy, has found it too hard to push the unpopular reforms necessary and has instead opted for symbolic tinkering, like handing out 500 taxi permits or allowing shops to open on Sundays. As if 500 taxis are going to make much of a dent on the millions out of work!
Which brings us to the nub of why the financial crisis will not go away in Europe: because there is no serious reform in Southern Europe, growth there will remain negative and non-existent for quite a while. That in turn appears to be leading its smart young people to go to the North of Europe or emigrate outside of Europe. So the future hope and tax-base of these countries is being eroded as we speak which further aggravates the paralysis inside these countries and strengthens the interest groups that prevent real reforms. Only in the North of Europe are real reforms on the table, such as the UK where real banking reform and health service reform is being instigated.
I have in the past prophesised that the ECB would bail out the weaker countries in return for a weak financial stability pact. That political deal has indeed been made and is being implemented, complete with the immediate realisation amongst the big players that the stability pact is not worth the paper it is written on. However, the ECB bailout cannot solve the underlying problems of a Southern Europe that is in political and economic paralysis, with politicians who cannot afford to instigate real reforms and are instead merely posturing. As a result, the countries will keep coming back for bailouts from either the Northern European governments or from the ECB. Only very slowly are the leaders in Northern Europe starting to wizen up to the fact that their generosity will not keep the place together but will tear the European Union apart.
Hence the European financial crisis is on hold until several countries are allowed to go bankrupt: Greece, Ireland, Portugal, and maybe even Spain and Italy. Once these countries go bankrupt there will be a much greater internal political will to push through real reforms, simply because the governments won’t have the means to pay off the interest groups and will thus have to offend most of them anyway. And those who fear some kind of fascist resurgence or extremely xenophobic nationalism to arise in these countries are mistaken: these are relatively small countries kept afloat by international trade and wealthy foreigners who can leave in a heartbeat, so there is basically no-one rich and foreign they can lay their hands on and threaten. Yes, nationalism will rise as populations try to regain some sense of self-worth, but the only hope for these countries is to remain integrated in the European and world economy and that reality limits the degree of fascism and xenophobia these countries can slide into.
Who will lose out in the end? It will be the politically weak inside the Southern European countries, including pensioners, welfare recipients, minorities, migrants, the unhealthy, and the unskilled. And who will be amongst the surprise winners? The Northern Europeans because they will be the beneficiaries of a large brain gain from the South and it will be their companies that are best poised to take advantage of the eventual resurrection of the Southern European economies.
As to the long-run, the Portuguese, Spanish, Greek, and Italian scholars I talk to all agree: the way out for their countrymen is to become German, either by moving to Germany or by adopting similar institutions and policies inside their own countries. But current institutions and attitudes cannot change so quickly. It is a fascinating question of societal transformation whether the road of least resistance actually does indeed lead to a slow Germanification of Southern Europe or whether it leads somewhere else. I am inclined to trust greed and ambition and thus would put my money on slow Germanification.
Contract stuff to Seraphina Amaranth.
"You give me the awful impression - I hate to have to say - of someone who hasn't read any of the arguments against your position. Ever."
"Only in the North of Europe are real reforms on the table, such as the UK where real banking reform and health service reform is being instigated"
all of my lols
Economics suck. People need some way to make a livelihood and nobody has any idea how the general public is supposed to get a livelihood anymore, do they. :/
But we will argue about it until hell freezes over.
Remittances from Germany are about the only way Europe can fix the money flow problem it has.
Indeed.
Yup. Had to re read that line myself.Indeed.
well our banking reforms do go further than the EU's own, but lol at the NHS reform.
Just to make sure I'm clear on this, nobody's figured out a better thing to do in response to the economic crisis than to stop spending money or to villify corporate profiteering, and no governments, or groups that aren't communists, hippies or anarchists, seem particularly willing to villify corporate profiteering, right?
Last edited by Evelgrivion; June 1 2012 at 11:24:02 PM.
You combat a crisis by increased public spending and expansive fiscal policy. If you don't have any money (aka huge debts) and you don't have your own currency, shits tough.
If you don't combat the crisis, it will linger around and that doesn't help paying your debts off.
Hence why the enforced austerity by the EU on greece is shit, but so is leaving the euro.
Yep government spending would have been the obvious solution but ideology prevented it. Its ironic that 80 years after The Great Depression and despite the massive volumes studying it, what caused it and what exacerbated it, the politicians in Europe repeated the mistakes of Hoover and now politicans in the US are following a similar path. I wish they'd urn off fox news and go read a history book.
What the world really needs is a unifying force. Something that would get people to stop bickering over petty ideology and work together to get something fucking accomplished.
I believe Krugman said that it would be good for us if the public believed aliens were about to invade...
I now you won't believe this but Keynesianism is very much a centrist policy. So the problem isn't two ideologically opposed sides bickering over a consensus. It's one backbendingly center-right position trying to reason with mouth foaming retards.
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