Eurozone Sovereign Debt Crisis part 2 - Ireland

[Drifterwood]

Aren't politicians wonderful when things seem to be going well.

A two tier Eurobond system would allow the market some latitude in working with what is in effect a two tier economic Europe. You work with this system until realistic fiscal union has formed over a generation or perhaps two.

Short termism because of our political system is a major barrier to making the correct decision. Not so in China BTW.

 

[Jason]

It is technically possible to have a two-tier EuroBond - after all we presently have a 17-tier EuroBond system. But I think the market pressure to back this up with two euros, Noro and Soro, would be enormous. I suppose it is an option. The big question is where France would fit. It doesn't really fit either group. And it isn't an answer for Greece which has to exit the euro.

If there is a political will to go for the two-tier approach we could try to make it work. But at the moment I don't think there is.

 

[Perados]

do i sound so selfish? - im not against eurobonds, cause germany would have to pay... Im against eurobonds cause it wouldnt work!

Its like your leg is broken and you take morphium for the pain... But your leg doesnt heal as long as you dont rest.
The same way eurobonds work... It will lower the intrests for some members, but it doesnt solve the problem. - its the opposit, it will make it even worst... Why should the gov start to safe money, if they can get easely money for low intrests. They proofed in the past they cant

Should we find a solution that last longer as it takes for the next election in europe and shows a way out of this mess... Then im more then willing to confirm eurobonds, but not without an united europe.

Like out of the US/GB History... Their is no guarantation without representation :wink:

 

[798686]

Like out of the US/GB History... Their is no guarantation without representation :wink:

It's the other way round tho, Perados!

Germany has lots of influence over the euro and ECB - so it's like representation with no taxation! :tongue:

 

[dandelion]

do i sound so selfish? - im not against eurobonds, cause germany would have to pay... Im against eurobonds cause it wouldnt work!

Quite.

Anyone proposing eurobonds should ask why within the UK the government does not massively increase its borrowing and spend that money in the poorest parts of the UK? Why not, they need it?

Perhaps it does not do this because it believes it would not work. Sure, those areas would have a better standard of living but fundamentally income would not have increased and spending would. Now, the government might be able to do this if it looked about at those with more money than the rest and chose to tax them more. The analogy, tax the germans more to help the rest of europe. But in the UK the govenmnet is adamant that the last thing it must do is tax the rich to help the poor. because, it says, the rich need their money to make more for the rest of us. Frankly, I have much more confidence that Germany will invest money if it has it than will 'the rich' in Britain. So even less reason to ask them to pay for europe than to ask the rich in britain to pay for the poor.

Germany has lots of influence over the euro and ECB - so it's like representation with no taxation! :tongue:

Wake up and smell the coffee? Germany doesnt need europe. Europe needs germany.

If you compare now how mutch of income privat people had to spend to pay all intrests in 1950 and now. You will see, in 1950 it was 10% of income, now its 70% (data only for germany)
This shows why the theory, that the economy collapse around every 80 years, could be possible.

I see you are still following your theory of the inevitability of economic collapses. I still dont agree that collapses are inevitable. I do agree that without intervention designed to prevent it, then human nature and greed will cause an essentially unstable free market to run out of control.

 

[Drifterwood]

The thing about Eurobonds, Jase, is the joint and several liability.

I would attach serious conditions for access, rather unlike the case for joining the Euro in the first place.

 

[798686]

Wake up and smell the coffee? Germany doesnt need europe. Europe needs germany.

Yes and no - Germany gets a lot of its power and influence through being the pre-eminent member of the EU. It also provides the Germans with a hugely important export market.

I agree that Germany is extremely important to the EU - and its survival (altho oddly, it seems to be achieving the opposite at present), but it's definitely a symbiotic relationship.

 

[Jason]

Eurobonds would both work and not work. It depends how you define working.

They would avoid an immediate collapse of the euro, the economies of Europe, global collapse and other horrors. They would also force the creation of a single sovereign state of the EZ, which many believe is a worthwhile goal. So at one level yes they would work. And the whole world would rejoice at financial catastrophe averted and wish the new Euro-socialist nation the best of luck.

But of course Eurobonds and a debt union do mean an averaging out of wealth throughout the EuroZone, with massive flows from north to south. And they do mean perpetual subsidy of south by north. Germans will have to work longer, be taxed higher and get less good services. And Eurobonds will tend to encourage profligate behaviour in the south. Politically the new nation would be euro-socialist, ie wedded to a failed economic doctrine of ever increasing public sector expenditure. Europe will get poorer. There may well be a political backlash from Germany and others. There will also be a risk of rationalising the situation through economic colonisation - so Germany will fund Greece as long as Greece follows economic policies dictated by Germany.

Eurobonds will solve the immediate problem at the price of a long-term economic decline for Europe and the risk of some very nasty political developments. However we are now into "there is no alternative" territory. Either we have Eurobonds or the euro fails. My solution of course is the managed dismantling of a failed currency. I think the key is to manage the process.

 

[Jason]

The thing about Eurobonds, Jase, is the joint and several liability.

I would attach serious conditions for access, rather unlike the case for joining the Euro in the first place.

In this there are issues around democratic accountability. It looks as if France is about to elect a president pledged to spend - and therefore issue more bonds. This is the right of France reflecting the will of the people. If we impose conditions for access to the bond markets all significant decisions are taken by committees of the ECB - and Germany is pulling the strings. Eurobonds on these terms represent Europe falling into at best economic colonisation by Germany, at worst dictatorship with someone ultimately seizing power of the ECB.

 

[Over-reaching]

In this there are issues around democratic accountability. It looks as if France is about to elect a president pledged to spend - and therefore issue more bonds. This is the right of France reflecting the will of the people. If we impose conditions for access to the bond markets all significant decisions are taken by committees of the ECB - and Germany is pulling the strings. Eurobonds on these terms represent Europe falling into at best economic colonisation by Germany, at worst dictatorship with someone ultimately seizing power of the ECB.

One of the medium-term risks of the current approach, as I see it, is that if the people of a country that is subject to severe austerity measures (for want of a better term) perceive those measures as being imposed from outside (which they are being), there may be an increased likelihood of "odd" parties (extreme nationalistic parties, parties of the far right, parties of the far left) gaining power or being able to form governing coalitions. I'm not talking here about France, but about places such as Greece, Spain, Portugal, perhaps Italy. This is not an immediate threat, but I fear it could become one if things continue as they are.

 

[Perados]

Quite.

I see you are still following your theory of the inevitability of economic collapses. I still dont agree that collapses are inevitable. I do agree that without intervention designed to prevent it, then human nature and greed will cause an essentially unstable free market to run out of control.

yes i am, cause the past proofs me right and it sounds very plausible by a lots of evidence...
i dont say we cant do anything against it. BUT the system we build and use has this failer to collapse every few dekads.
hte only thing we can do now, is to desite. Do we want a real big crash that last a few years and then, we can start to grow again (the short but heavy way)... OR do we try to prevent the crash, then we wount grow for the nest dekad or two, and after this we will start to grow again.(the long and exhausting way) - ATM it looks like we try the long way (like japan does since the 1990´s), after we did the short one in the 1930´s - and even back then it needed a world war, to ceate a pulse big enough, to let us (western hemisphere) grow again

to prevent future crashs, we have to change the system we use...


@joll... where do i, as a german, have direct influence on other european govs???
or where do i can get sure, that EVERYONE in the EZ starts to safe, as soon as i have to grant for their debts???
Im more then willing to pay for the south, but not without an european gov...
Also, germany payd and grants allready for more then 700 billion... that still isnt enough, without any real proof of the other nations to safe money on the long term???

also its stupid to say (not you joll) germany has to raise their salaries or to "become less competitiv" compared to the others... if we would akt more like the rest of europe, it wouldnt create more jobs in europe. It would just distroy jobs in germany and everyone would start to import thouse goods, they got from germany bevor, now from out of europe

but back to the eurobonds and take spain as an example...
in the late 1990´s spain had an unemployment rate of 20% and youth unemployment of 50%. also the state debts were around the same as today... the only reason why spain lowered their debts and unemployment, was the euro and with this, the boom in building. so without the euro, spain would propably in a even worst situation. the only one you can blame for this situation in spain, are the spains self and their gov. they didnt used the last 10 years to reform their system and to create a new and stable economy.
so why should someone pay for their fault, if they, even now, arent willing to reform... you can see it at the demonstrations, as soon as the gov starts some reforms

 

[Perados]

Yes and no - Germany gets a lot of its power and influence through being the pre-eminent member of the EU. It also provides the Germans with a hugely important export market.

I agree that Germany is extremely important to the EU - and its survival (altho oddly, it seems to be achieving the opposite at present), but it's definitely a symbiotic relationship.

to bring it down... without germany no EU or EZ.
but that doesnt mean that germany didnt profits from the EU. But its not mainly a profit in economy, but a bigger international influence of germany in politics.
but if europe really wants to become important n the world. we HAVE to unite even more

 

[Perados]

In this there are issues around democratic accountability. It looks as if France is about to elect a president pledged to spend - and therefore issue more bonds. This is the right of France reflecting the will of the people. If we impose conditions for access to the bond markets all significant decisions are taken by committees of the ECB - and Germany is pulling the strings. Eurobonds on these terms represent Europe falling into at best economic colonisation by Germany, at worst dictatorship with someone ultimately seizing power of the ECB.

eurobonds could create a colonisation by germany??? no way, its more the opposit... eurobonds in this situation would mean, no one would have to lissen to the needs of thouse who still own the AAA-rating.
It COULD be the signal for massiv spending in greece portugal and spain... what else would a gov do, who didnt have to lissen to other govs and trys everything to get elected next time again? - especially if thouse govs can now start to spend the tax of other countries

 

[Perados]

ALSO

eurobonds arent the ultima ratio... we could use a similar system the single states of amerika used, after the civil war. it was quite difficult to grant for the debts of a state you fought a war a few month ago. but it worked and together with their temporarely debt system they created the USA

 

[Jason]

One of the medium-term risks of the current approach, as I see it, is that if the people of a country that is subject to severe austerity measures (for want of a better term) perceive those measures as being imposed from outside (which they are being), there may be an increased likelihood of "odd" parties (extreme nationalistic parties, parties of the far right, parties of the far left) gaining power or being able to form governing coalitions. I'm not talking here about France, but about places such as Greece, Spain, Portugal, perhaps Italy. This is not an immediate threat, but I fear it could become one if things continue as they are.

Yes, I think this is a realistic risk. The Greek elections will give a sense of how this might develop. All the main parties are pledged to the Troika's austerity but the fringe left and right are not - and they are likely to do well.

For that matter there is a risk of extremist parties coming to the fore in the north, representing the resentment felt at working to pay for Club Med. The True Finns did very well in the last Finnish election.

Also worth noting is that in France one person in five voted fascist in the first round presidential election.

Europe needs to look to its own history. English Common Law provides a check on dictatorship - Continental Civil Law codes have in the past allowed dictators to arise in Germany, Italy and Spain and provided no meaningful check to dictatorship in the Warsaw Pact nations. I think there is a realistic risk of the "democratic deficit" of the EU leading to dictatorship. Already Italy has a PM who is unelected without a terminal date to his period in office and who is by definition a dictator. Greek democracy has been badly strained and a
referendum cancelled. The Fiscal Union is anti-democratic. The situation is already alarming. It seems set to get worse.

 

[Perados]

double post

 

[Perados]

again this BS of dictators at the continent...

you cant compare germanys weimarer republik from 1919 - 1932 with the constitution or germany of today...

i guess probably the same counts for italy

but specially not for countries like germany and israel. - sometimes i really wonder that its often looks like that just japans art (manga / movie) changed after WW2. the gov or japanies "civilysation" doesnt in the way they akt or "it works".

 

[798686]

@joll... where do i, as a german, have direct influence on other european govs???
or where do i can get sure, that EVERYONE in the EZ starts to safe, as soon as i have to grant for their debts???
Im more then willing to pay for the south, but not without an european gov...
Also, germany payd and grants allready for more then 700 billion... that still isnt enough, without any real proof of the other nations to safe money on the long term???

Well, I'm not saying Germans individually can influence things that much - I was talking more about Germany as a whole, with voting weights, ECB (due to it basically being a copy of the Bundesbank, in Frankfurt and with many high-ranking German officials). Also politically - as the major player within the eurozone, their opinions carry a lot of weight.

And I dont know about making sure people save. I also agree that if Germany continues to bail out the EU - or agrees to eurobonds, she should have a lot of control over the EZ, but... she already does to a large extent.

Going back to a point you (and Dandy) have mentioned - altho I do think the way the euro was set up worked well for Germany, and disadvantaged others - you're right in saying Greece and everyone could (and should) have used the low interest opportunity to reform labour and gain competitiveness, rather than going on a borrowing spree. Why didn't they? Dunno. :redface:

to bring it down... without germany no EU or EZ.
but that doesnt mean that germany didnt profits from the EU. But its not mainly a profit in economy, but a bigger international influence of germany in politics.
but if europe really wants to become important n the world. we HAVE to unite even more

Yes, I agree. Germany is important for the EU, and has always been. But the EU is of benefit to Germany too (as you admit) - they (Germany) were able to gain a lot more power and influence through the EU than they would have felt able to otherwise - because of a reluctance to allow Germany power on her own after WW2.

So - economically, politically, and to some extent defensively Germany has been able to have a great deal of influence on the world stage, but mainly through her influential involvement in the EU.

And yeh, if the EU wants to survive, it does need a single government, and to unify more - altho that's something I feel sure the UK would stay out of.

 

[Perados]

Well, I'm not saying Germans individually can influence things that much - I was talking more about Germany as a whole, with voting weights, ECB (due to it basically being a copy of the Bundesbank, in Frankfurt and with many high-ranking German officials). Also politically - as the major player within the eurozone, their opinions carry a lot of weight.

sadly no, germany doesnt has "many high ranking officials". useually its a person of a small country, cause often the bigs cant get confirm about an official out of their country. - the highest german officials are: schulz EU parlament president - öettinger minister for energy - stäuber official for de-bureaucracysm (lol)... and at the ecb a german has a job - intern its called janitor
yes the ecb is mainly a copy of the bundesbank. that was the major condition of germany (and remember, the DM was the last and only national symble germans had after WW2. also it was the symble of our success after WW2. so at least, we wanted to make sure we keep an independet CB, as the symble of a strong currency) - an independent CB... but germany only owns one seat at the ecb, just as every other member. - even though germany pays 27% of the ecb privat equity

and remember about the ecb... in the latest years, after the crisis ALL germans quit their job or doesnt even want to start their job. cause the ecb did mainly the opposit of the german vote

And I dont know about making sure people save. I also agree that if Germany continues to bail out the EU - or agrees to eurobonds, she should have a lot of control over the EZ, but... she already does to a large extent.

and thats the problem we have to solve, bevor we start to run eurobonds - we dont need more control... but a guaranty, and the only guaranty that def. last longer as the next election is a ez gov.

Going back to a point you (and Dandy) have mentioned - altho I do think the way the euro was set up worked well for Germany, and disadvantaged others - you're right in saying Greece and everyone could (and should) have used the low interest opportunity to reform labour and gain competitiveness, rather than going on a borrowing spree. Why didn't they? Dunno. :redface:

at the beginning of the euro, the conditions were for everyone the same...

but no one expected the euro will perform so well. at 1.17$ in 2002 everyone thought the euro will go down to 0.90 -0.80... but it didnt.

this was the only negativ effect the euro had, to greece and other countries. what happened inside the EZ was cause of own faults.

Yes, I agree. Germany is important for the EU, and has always been. But the EU is of benefit to Germany too (as you admit) - they (Germany) were able to gain a lot more power and influence through the EU than they would have felt able to otherwise - because of a reluctance to allow Germany power on her own after WW2.

So - economically, politically, and to some extent defensively Germany has been able to have a great deal of influence on the world stage, but mainly through her influential involvement in the EU.

And yeh, if the EU wants to survive, it does need a single government, and to unify more - altho that's something I feel sure the UK would stay out of.

sadly i think the same... the uk wount join a united eu / ez. but it would be a major plus for bouth

 

[Perados]

sorry but there is one off topic left i have to post... ( i know its late)

FC bayer won the semi finals vs real madrid :biggrin1::biggrin1::biggrin1:


kaka 64 million €
christiano ronaldo 92 million €

...

being a german at penalti - priceless :tongue: