"If euro fails then Europe fails" - Angela Merkel
- Thread starter Jason
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You are still stuck on this idea it is a euro issue. It isnt. Its merely a coincidence that a certain group of countries uses the euro. The logic for or against bailouts would be the same in drachma, though because the euro circulates much more widely it has a lot more speculative potential and international fallout. But equally it has helped Greece et all survive thus far. The crisis would already have happened otherwise.
Id say the good side of this might be that UK banks have so much involvement in the US that the US could not allow the Uk to default. But it is foolish to think any US UK 'special relationship' would last 1 second longer than mutual self interest. If european banks all fail, how far behind would be those in the US?
Political precedent is that politicians always do brave things which are the opposite of their position. So just watch for Cameron joining in with a european bailout. He knows we might be next and be the ones needing the aid...
as to ''the UK has now abandoned its recent policies of politically motivated financial illiteracy'', what do you mean? Nothings changed here recently.
So exactly what is the IMF position on bailing out Greece because of the risk of bringing down the US if it defaults or restructures?
Well you said it. If they cannot afford to bailout Greece then we are into endgame global banking collapse. There was a startling difference of opinion on newsnight today between their tame experts. The 'trader' reckoned the game was up already. The 'professor' reckoned it was still all manageable.
D_Tully Tunnelrat
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Well I have to say that Barrosso's calling Germany naive today certainly had a new ring to the tenor of inter euro communications today. What apparently isn't apparent to all is that EU politics will have to be further bent (treaties/accords, etc.) to accommodate greater economic integration, otherwise the EMF fund as an answer to the debt crisis is not the solution. Some form of internal re-balancing of trade accounts will have to take place, it may not be a tax, but it will function like one. The other thought is that Barroso had better mind his words, Germany may have been naive in determining their level of responsibility in the EU partnership, but they still call the tune. Without Germany the EU, and the euro, for they are going to be one in the same, won't exist. Likewise, without them Barroso would be out of a job, joining the swelled ranks of the unemployed in Spain. Economic exigency will beget political accommodation.
eurotop40
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He's been quite prickly in his comments throughout this crisis - maybe understandable, but not particularly what you'd expect from the head of the Commission. Sounds kinda rattled, tbh. At least Van Rompuy vents his frustrations via Haiku poems instead. :biggrin1:
I remember a couple of years back he went off on one about the UK wanting to keep the budget rebate - and quoted disingenous figures to support scrapping it. Grrr.
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No I don't agree. Had Greece remained on the drachma we would have seen a decade of steady drachma deflation and steady Greek inflation. Their present problems wouldn't have been anything like as severe as they are, and anyway there would be mechanisms to deal with them, including more deflation, printing money and export boost. Ditto Portugal, Spain, Italy.
But I suppose we are past arguing about the might have beens. Right now we're in a mess. I take the point that experts have different views - the "Trader" and "Professor" on Newsnight is a good illustration. Politically there is enormous importance in saying that it is not as bad as all that, as talking down the markets is something no politician wants to be accused of doing. So our politicians are unlikely to tell us the position as they really see it. But there is a well-established "Trader" view that the Euro is doomed, and it would need a massive change in market confidence to shift this view.
The interests of the UK are in the Euro staggering on for a bit longer. Before it crashes we need to demonstrate to the markets substantial cuts in spending, some tax rises and a tightening of monetary policy in order to minimise the chance of the markets moving against us - so a bit of time would help. We need to use the time to plan our response to the crisis - because it will hurt us. There is very little we can do to help the Eurozone, and very little help the Eurozone can give us. However we can be helped by the USA - we might well need international guarantees for our credit worthiness in order to avoid a crash, and the USA has the clout to support us getting these. We can also help the USA as the gateway to European trade and as a friend of the USA on the world stage. There is mutual interest. The UK government has signalled an Atlanticist policy by calling the alliance with the USA "unbreakable".
D_Tully Tunnelrat
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Indeed. Then again isn't the EU all one now? (Chorus rises...) Whatever his nationality everyone will want to sure his case of hoof in mouth disease won't spread to them.
I expect more gridging remarks from Southern Europeans to their Northern counterparts in the weeks to come.
Personally I find Von Rumpuy's enigmatic paeans to Japanese haikus are easier to digest. (Thanks for the literary tip Joll)
At this point the world (post China confidence in euro bonds announcement this AM) has so much invested in the euro, it will be propped up, perhaps indefinitely. However, the political wheels will really be churning, as the current configuration of the EU will have to change.
When our Treasury Secretary Geithner is back to lecturing Europe about getting it's financial house in order be afraid, very afraid.
Ironically with the devaluation of the euro, the EU is no longer the world's largest economic block. It is now approximately equal with the US. Should the euro fall to parity with the dollar, the EU would be 20% less in value than the US economy. No big deal in and of itself, but worth noting that losing notional value is very costly - about $5 trillion dollars in this case. Which begs the question if the euro becomes so far devalued, will it jump start the Southern European economies back into a competitive labor position?
I know one thing: trips to Europe are going to start to get much cheaper for Americans.
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To some small extent it will help. But EU countries typically have about two-thirds of their trade with other EU countries, and the Eurozone more than two-thirds with other Eurozone nations. To really make a difference Club Med needs to devalue against the north. This is the core problem with the Euro and it remains a problem whatever level the Euro is at.
Devaluation of the Euro will help Ireland which has much of its trade with sterling UK. Indeed Ireland may be the biggest beneficiary of a sliding Euro. The north - Germany in particular - faces overheating.
China now has enormous influence over the Eurozone economies. The implicit threat is that if the countries of the Eurozone do something the Chinese government doesn't like then China might decide to sell Euros. Right now it doesn't suit China to dump Euros. This has more to do with politics than economics.
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Drifterwood
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D_Tully Tunnelrat
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China has enormous influence globally (recall how Hu Jintao expressed concern over US Treasuries about 2 months ago...) since they are the only ones with growth. However it's a precarious balance for China as well, since as many speculate, and the thesis has some validity, that the government has no choice but to keep it's foot on the economic gas pedal, as the tipping point in social unrest is 12% unemployment, after which potential protesters outnumber the Army. A sobering thought. Unemployment is currently 10%, however underemployment due to the Hukou (local passport) system is estimated at 30%, this means 1/3 of the citizens live as second class citizens in the big cities, and smaller ones, which for China means population of 5-12M. Economically speaking, if China dumps their euro holdings, they'd loose their silk shirts, so I think there is some strong self interest going on as well.
It's true that most euro trade is within the EU zone, but you have to think that it won't just be Germany's automotive and mechanical exports that will get a boost from a cheaper currency. Perhaps as Tom-Cat says tourism will go up. I had not thought about Ireland's situation - your point makes sense. I'd like to think they are not the only winners from the $1B bailout...
With all world economic powers propping up the euro, it's life cycle has to be extended, how long, and how it will be configured politically, can only be speculation at this point. If Germany takes on a similar role to say California, who has been paying 20% more into Federal coffers than is being paid back, then it maybe a period of 20 years where Germany is required to pay more into the EU, through either loan subsidies, or easy money policy, meaning taking worthless sovereign bonds as collateral, before the markets re-balance. This seems unfair to them since the Northern provinces like Westphalia are suffering from high unemployment already.
The internal balance of EU trade remains unresolved. Brighter minds will have to come up with a new politically palatable resolution to an age old problem.
And the Eurasian dollar has a nice ring to it. I think we are there already, but no currency names have been changed, so as to protect the innocent - or in this case the non-floating one.
We'd go with that - but only if you return to the Empire, and have the Queen as your Head of State. meheheh. :biggrin1:
midlifebear
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Dear Joll:
Much as I love you and your posts, the idea of Liz, and her sidekick Phil, being the iconic Heads of State has always been a major joke to me. I know it isn't to you. You're a Brit. But even Juan Carlos of Spain has enough class to get out and glad hand with the hoi polloi and not encourage frilly pre title titles such as HMS. He's just Juan Carlos. Even the idea of Liz being the iconic head of the various commonwealths (Canada, New Zealand, Australia) was enough to make me decline the opportunity to become a Canadian Citizen when that was a real and serious option during the Bush W. years. Thankfully, Spain was kind enough to bestow me residency.
Much as I love you and your posts, the idea of Liz, and her sidekick Phil, being the iconic Heads of State has always been a major joke to me. I know it isn't to you. You're a Brit. But even Juan Carlos of Spain has enough class to get out and glad hand with the hoi polloi and not encourage frilly pre title titles such as HMS. He's just Juan Carlos. Even the idea of Liz being the iconic head of the various commonwealths (Canada, New Zealand, Australia) was enough to make me decline the opportunity to become a Canadian Citizen when that was a real and serious option during the Bush W. years. Thankfully, Spain was kind enough to bestow me residency.
Drifterwood
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That's ok dude, still love ya. :wink:
I personally think she works bloody hard and is a credit to the country - and since she's kindly granted you clemency and a royal pardon, I guess you're free to live out your days on the Costa. :biggrin1:
HorsemanUK
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Im rather pleased the euro has fell flat on its face (Nothing against the countries in particular just the 'euro'). I never wanted to have a single euro currancy. I would very much like Britain to leave the EU all together. All this just goes to prove why we should never consider joining the euro currancy.
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I think the Euro is going to stagger along for a bit. But we are already into a position where most of the debate within the EU is just on propping up the Euro. There is something close to political paralysis. While there certainly is a view among some that a "beneficial crisis" should lead to a further treaty of integration the hard reality is that this isn't going to happen soon. Cameron has stated that the UK would veto. And lots of other EU countries would be very unhappy with it. For the Europhiles such a new treaty is a decade-long project, and even the Europhiles are realising that it may not be achievable.
Now it is all down to events. The distance we have travelled since the Lisbon Treaty was forced through against the will of the peoples of Europe is truly remarkable. Lisbon was surely the high water mark of the dogma of European integration, and the tide is now going out fast. Curiously the UK's relationship with the EU is largely going to be determined by this ebbing tide. Where the UK wants to be in relation with the nations of Europe is where the tide is leading us all.
Probably the Europhiles will have a stab at some sort of agreement for European governance. It will either fail entirely or create a two-speed Europe of those who sign up and those who don't. Almost certainly the Euro is heading for oblivion, and whenever that happens it will be a major blow to the EU. A UK exit referendum looks unlikely but is just about thinkable (if we vote on AV why not EU membership at the same time? There will be petitions for just this). What is coming to the fore is a UK Atlanticist foreign policy. We have a remarkable political opportunity caused by the oil spill. The US is likely to tighten up safety rules on drilling which will hit the availability of oil, particularly oil from politically stable areas. Falkland oil looks ever more attractive. I think the US would give its support to the UK developing this location - on-stream in about eight years. With a rebalancing of UK trade over eight years, issues around the EU just become less and less important for the UK.
Sure, I could be Head of State. Oh, you mean THE Queen, not A Queen :tongue::wink::biggrin1:
