The Euro, why can't it fail??

[desperate]

The Euro, what a mess, and all the big cheeses seem able to say is "it can't be allowed to fail", they talk of collapses of banks, entire economies, dire consequences and all sorts. They endlessly state the problem and say we need a lasting solution, line in the sand, clean slate,turn a new leaf, blah blah blah.

Before the Euro, if a country wasn't as competitive and fell into debt, it was possible to devalue and make exports cheaper and boost the competitiveness. OK so Greece wasn't creating as much wealth as Germany so as a country it wasn't as rich, whats the problem with that?That was only a little more than 15 years ago.
 I'm probably a little richer than some of you, and a lot poorer than others, that's the way of the world isn't it.

OK I realise it isn't quite that simple, but why is the Euro system soo irreversible? or is that just another lot of baloney?


Desperate

[martin]

That'll be because we're not allowed to recognise that the "King's New Clothes" don't actually exist - we have to keep believing that they do, or we all wake up with a horrid bump, the house of cards of capitalist economics comes tumbling down, and we realise we've come to the sticky end of a pyramid/Ponzi scheme based on imaginary thingummyjiggers! So the Europeans will invent even more non-existent money, and we'll totter along till it happens again, only worse! Simples!

[Contadino]

As far as I can tell, it's just because of the dent it would put in the credibility of the whole Europe 'project'.  In Italian, we have a nifty little expression which covers it precisely - brutta figura.

In real terms, it may even be good for individual countries' economies: All that computer and POS system modifications, another opportunity to hide a sudden surge in prices without it appearing in inflation figures, the ability to protect your markets, etc..

[clockmanFR]

Here in France things just potter along.
Never could borrow on Credit cards, Government leg means not many folk have English style credit cards. Mortgage law states 3 x salary that's it. To get a mortgage you must have had 10 years with a bank without any problems, but when you do get a mortgage the Government set the rate at low and you pay a set fee per month, but the time can be extended if there is any slight rate changes. To us France is definitely not a consumer economy. I also here and see constant stories of officialdom ignoring/fudging serious problems, because it would rock the boat. I could go on and on.

As a small business man and the Mrs the Corprate Global Exec, France has never had boom and doesn't have bust, it just potters along.

My Point, however, is that there are severe cultural issues regards each of the struggling countries, and they have joined the Euro at the wrong exchange rate, I can only see semi-default in the near future and then individual revaluation of offending country's.

And to be provocative, we have all heard of the Protestant work ethic, and the Mediterranean work culture.

 

[qeipl]

To blame the financial crisis in Europe on the euro is missing the point. The crisis has been caused by a combination of casino banking and weak (or corrupt) government. All of the countries in the euro zone have participated in one or the other (or both), as have the rest of the EU countries. Allowing countries to fall out of the euro zone will not fix the problem.

The problem is arguably worse in the US dollar zone.
In 2010 the Economic Policy Journal ( http://www.economicpolicyjournal.com/2010/05/32-states-have-borrowed-from-treasury.html ) reported that 32 US states were effectively bankrupt and relying on the federal government to pay for things like unemployment benefit. California was worst having borrowed nearly $7 billion. This isn't a recent phenomenon. Throughout the history of the US single currency some states have relied upon the federation to prop them up, just as is happening in the euro zone today.

Common currencies help economic activity by making cross-border transactions easier and more transparent, and promoting competition.
If the euro zone falls apart it will make economic recovery harder for all of us, which is why EU leaders are trying to keep Greece et al afloat until the real problems are fixed.

[biff]

while all you lot are worrying away,we are sailing along without a clue,in fact we are in a process of electing a president today but dougal mcguire or father ted would outshine any of the candidates.we are in serious trouble,,forget about the euro,we cannot even find a decent representative to do the job.in fact we would be much better off without a president than to have to suffer the likes of this present shower of hopefulls.we really have run low on moral fibre.
                                                      biff

[dhaslam]

Every so often the banks cause serious problems, not by lending too much  but   by panicking and looking for it all back instantly.   This time it is worse because governments are doing severe cutbacks at the same time.   The result is big unemployment  and a lot of individuals in financial difficulties. There could be a whole generation with no jobs,  the equivalent of five years school leavers already in Ireland.  Some of the decisions  they make like  increasing bank liquidity ,which makes them lend even less,  and raising taxes that  are payable regardless of asset or income situation  are just daft. 

I keep thinking of the policeman quotation  from Brendan Behan, he could have extended it to the wider Civil Service.
I have never seen a situation so dismal that a policeman couldn't make it worse       

[Ki Lo Watt]

I've been pondering the Euro since 2006. At this time I invested in ERTB's and have watched as the  EURO/GBP FX pair traded in a 36% range. I was able to leverage my holding by 1000% on my Euro account and trade 24/7 across many FX pairs. I have seen my portfolio and options  outperform the Stark Currency Traders Index and the Barclay Currency Traders Index in most quarters. I have shorted the GBP and I was long the Swiss Franc. I can dump my Euro holding via a neat programme on my computer if key trading calls are triggered with a set stop loss.

So will the Euro fail?

Like most leeches in the Financial sector it will not make any difference. The trading platforms will re-base to other crosses and the effect of real financial pain will only be felt by the 99%.

[merkland]

Ki Lo Watt,

Care to rewrite your post in a language that more people can understand ? - pure gobledegook as far as I am concerned!!

[SteveH]

 Quick translation would be:-

  Morlocks 10 - 0 Eloi.


 H.G. Wells

[GavinA]

why can't it fail?

same reason the UK absolutely couldn't leave the ERM...

[spaces]

qeipl, it's a shame the UK media can't/don't report on the truths of the US economy which you mention. I still fail to understand why people believe being ruled by an unelected group of very-well paid Euro-politicians can be a good thing for the UK, let alone the idea of losing our independence completely by handing over the Treasury as well as everything else. (Though it doesn't help that UK rulers have made a mess of things time after time in the last few years.)

This is the way I see the Euro situation - many may not agree, but it's just my thoughts and feelings on the matter:

I suppose (single) currencies have some things in common with time zones. For a region/state/country to work well it makes sense to have it all at the same time - when the railways arrived, all the various time zones around the UK were harmonised, even though it meant it got light 'later' in Bristol than London. The difference was small enough for it not to matter. Similarly after numerous wars down the centuries we have a single UK currency, even though the interest rate set to suit the South East of England harms financially-depressed areas of the nation. Increase the economic zone too large and tensions will affect it's smooth running to the point it is destructive, just as the UK sharing a time zone with Turkey or America's EST would be daft and cause all sorts of problems.

America had 100 years of civil war before it became politically one nation (officially!) and the final bit of unification was its common currency. In Europe, the French wanted to keep tabs on the German's ability to militarise post WW2 so the Coal and Steel pact was formed, which has rolled over into the desire for the United States of Europe. It is a strange organisation with a lack of democracy at its heart, founded on the basis of mistrust and with enough red tape to suffocate the nation which is prepared to thoroughly enforce it all. Its founders have done very well financially from it - the French way of life has prospered under the Agricultural Policy, designed for France and which takes up nearly half of the EU budget. Similarly, since the Euro was imposed 11 years ago, the Germans haven't been constrained by the high value of the Deutschmark - which existed because they were so economically successful and acted as a natural balance on the economy. At the same time, poorer nations have become bound and bankrupted by the huge economic zone which the hopeful assumed was the route to unending riches.

So for all the Socialist ideals embedded in the project, the rich have become richer and the poor poorer. I know that is an over-simplification and there are many poor areas of Europe which have received huge amounts of EU 'charity' money and better roads (which has allowed the Tescos into far-flung communities so further harming the local economy) but handouts are never as good as earning money yourself. Relying on someone else means the choices are never as good as they would be if it were your own doing - and a dependence culture sets in, leading to stagnation and more charity. (I always think of British Leyland which consumed tens of millions of handouts down the years then collapsed, compared with the bankrupt West German car industry in the early 1970s which was offered state aid for 3 years and no more. That's the way to subsidise an industry.)

The very worst Socialist practises have combined with the modern Capitalist approach (both back-scratching, fundamentally) in an unholy alliance which has resulted in Ireland, Greece, Portugal, Italy and Spain in dire straits, while France and Germany are sitting relatively rich and unscathed. I'm not altogether sure where we would have been if we hadn't had the ability to devalue our own currency as we did in 2009(?)

The answer - to preserve Europe's image and not allow any nation to 'leave', but instead borrow gazillions from the Chinese to prop up a system which is guaranteed to eventually self-destruct, if allowed to continue with the same high-mindedness it has at present.

[Richard Owen]

I still fail to understand why people believe being ruled by an unelected group of very-well paid Euro-politicians .................

That's not quite right. Decisions are made in the Council of Ministers. All of whom are elected to their governments in national elections. Why else would David Cameron and George Osborne be flying out for negotiations on the Euro?

The democratic deficit isn't in the unelected nature of the decision makers, it is in the fact that the proceedings of meetings of the Council of Ministers are never published.

Which generates the behaviour that ministers go to Brussels and sign up to this or that EU initiative and then come home and blame the EU for the negative effects it has on their country.

[qeipl]

qeipl, it's a shame the UK media can't/don't report on the truths of the US economy which you mention. I still fail to understand why people believe being ruled by an unelected group of very-well paid Euro-politicians can be a good thing for the UK, let alone the idea of losing our independence completely by handing over the Treasury as well as everything else. (Though it doesn't help that UK rulers have made a mess of things time after time in the last few years.)......

My point was the exact opposite to the one that you seem to have taken.
Since the US adopted a single currency it has been the economic powerhouse of the world, despite some of its individual states being economic basket cases.
Neither does your point about time zones make any sense to me. I've worked in the US and doing business from Maine with companies in New Mexico or California is effortless.
Large scale single currencies promote prosperity.

The euro is a good thing that's been damaged by incompetence (of governments and regulators - including the UK) and greed (of individuals who collaborated in the credit bubbles of the last decade - including most of us).

Since the European Coal & Steel Community (the precursor to the EU) was created in 1951 Europe has enjoyed 60 years of unprecedented peace and prosperity.
Of the 60 years preceding 1951 Europe was engaged in full-blown war for 10 of them, and at each others throats, at home or abroad, for the other 50.
If the choice is war or red tape, give me more red tape.

The EU appears to be a hideously inefficient collection of institutions. Exactly the same can be said of the political institutions of the UK.
Both sets of institutions require reform, not demolition. All of them derive their power from us, via democratic processes. The power to reform them lies with us.

[spaces]

Decisions are made in the Council of Ministers. All of whom are elected to their governments in national elections.

The democratic deficit isn't in the unelected nature of the decision makers...

And that's not quite the whole truth. Any organisation which should exist for the benefit of the population should not be allowed to keep its meetings secret, nor its accounting. I think the way it tried to prevent any National referendums on the further integration of EU states and their handing over more power to Brussels (The Lisbon Treaty) - and subsequent ignoring of the 'wrong' results in countries whose constitutions demanded one is an eye-opener to how the EU works.  

qeipl, my point was that as for any operation, there is a 'sweet spot' for the best results. So I suggested that economic zones with one currency can be unnecessarily small and unneccessarily big. I think any analogy with time zones was confusing and not a good one. (Wasn't suggesting several time zones across the USA was bad - the opposite, in that local needs are taken account of. It's rather harder to pull the wool over the public's eyes when it comes to something as simple as daylight hours than it is to create a super-currency as in Europe, with the results which are beginning to come to light, no pun intended.)

Having one currency and fiscal straightjacket which encompasses Germany, Holland, Portugal, Ireland and Greece is bound to create strains for the local economies. Equally having a Yorkshire Pound which has to be changed for a Lincolnshire Pound would be daft in most people's eyes, even though the two economies are chalk and cheese.   

I believe the 'no war since the EU' argument is totally fatuous. Europe was broken, ravaged, impoverished by war and its people had seen how senseless it is, especially when it is created by a few nutters in positions of great power (bankers and political leaders), accountable to nobody. The thought that there could have been another similar war as long as the majority of those veterans lived is crazy.

Unrest becomes more likely when people in large numbers feel unempowered and feel the tyranny of a dictatorship or pseudo-dictatorship. Tony Benn has quite a lot to say on the matter.