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Shocking
sorry you feel that way
+333|4960|...
If you have been following the news attentively lately I don't think you could have missed all the stuff that's been going on in the eurozone right now. The economic malaise in Greece, Ireland and Portugal, the extremely high unemployment in Spain and its unsure future, Italy on the brink - and the rest of the EMU nations are supposed to put a stop to all this with a reluctant Germany being pulled to the forefront as the superman who has to save the day. Through all of this, France has been eagerly pursueing 'more euro' with Lagarde, Sarkozy and Trichet leading a charge for fiscal unity. Logical, as monetary union without fiscal union is doomed for failure anyway.

The question is, have the proposed measures been enough/are they enough or is the euro headed for failure if the EMU nations, most notably Germany and France, keep going in the same pace?

Article;

Economist wrote:

https://media.economist.com/sites/default/files/images/print-edition/20110730_EUD000_0.jpg
AT THE emergency meeting of euro-zone leaders on July 21st Jean-Claude Trichet, president of the European Central Bank, circulated a set of charts showing how bond spreads had blown out after every summit over the past year. He also handed out a ranking of countries deemed by markets most likely to default: Greece, Portugal and Ireland were at the top, riskier than Venezuela and Pakistan; Spain was less safe than revolutionary Egypt. Mr Trichet’s point was clear. The response to the crisis had been inadequate and often made matters worse, with markets seeing Europe as more of a basket-case even than Africa.

The leaders were determined to reverse this grim trend. So they agreed to slash interest rates on bail-out loans for the most crippled members, and to double their maturities to 15 years (and, if need be, be ready to double them again, to 30 years). The summit promised to keep up the subsidies until Greece could return to the market. Ireland and Portugal got the same terms. Greece’s private creditors were asked to pay, but only a bit.
In this section

To limit contagion, the leaders gave enlarged powers to the European Financial Stability Facility (EFSF) to extend short-term loans, recapitalise banks and buy bonds of troubled sovereigns in the markets. To France’s delighted president, Nicolas Sarkozy, this was the birth of a European Monetary Fund. The markets were pleasantly surprised, even euphoric for a while. Finally, said some analysts, euro-zone leaders were taking the bold steps required. But those taking off on their summer holidays would be wise not to switch off their mobile telephones. Spain and Italy, in particular, have been wobbling yet again this week.

The rescue of Greece is a necessary first step, but it will not end the crisis. Despite everything, the summit did too little to lighten Greece’s debt burden, given the political fury and market turbulence caused by demands for private-sector participation. Leaders say they will do “whatever is needed” to save the euro. But what is needed? The options are hard or costly. More money may be wanted for Ireland and Portugal. Many think the EFSF, to be credible, should be doubled or tripled in size. But at some point throwing in money will raise doubts about the creditors. Can enfeebled Italy and Spain afford to pledge tens of billions of euros more? How long before France’s AAA rating is at risk?

For some, the time has come to address the underlying design flaw of the euro: a single currency with many different states. Even the sceptical British say that the “remorseless logic” of monetary union is greater fiscal union. Mr Sarkozy sees an opportunity to achieve his vision of “economic governance”, with regular summits of the euro zone’s 17 leaders producing a more integrated economic policy and progressively breaking away from the wider EU of 27. “I am a federalist,” Mr Sarkozy told his colleagues. In joining the euro, countries had to surrender some sovereignty. That such views should be expressed by a former Gaullist, at a time when the EU is unpopular, was perhaps a surprise.

In truth, Mr Sarkozy is trying to amplify France’s voice in a smaller core that excludes pesky liberals like the British, Swedes and Poles, and gives greater weight to France’s Mediterranean allies. Europe at 17, he thinks, really means Europe à deux, with Mr Sarkozy as co-regent alongside Angela Merkel. The German chancellor has tried to resist this, but has relented as the crisis has deepened. Her priority has been to push weaker countries to be more Germanic through reforms to improve their competitiveness. To get some of this, she agreed earlier this year to summit meetings of a “euro-plus” group of the 17 euro members with others ready to abide by the same strictures.

Now Mr Sarkozy wants to push this bargain a stage further. He seems to have the backing of Herman Van Rompuy, president of the European Council (representing leaders), who stands to gain at the expense of the European Commission (the EU’s civil service) and the finance ministers, the crown princes of the EU. An idea proposed by Mr Trichet may gain strength: the creation of a “European finance minister” to oversee economic and budgetary policies, supervise the financial sector and represent the euro abroad. Alas, for advocates of the notion, the experiment of an EU “foreign minister” has hardly been a great success.

There will be much blood spilt over institutional changes, especially if they require a treaty amendment that could reopen an argument with Britain over the repatriation of powers from Brussels. In any case, a re-engineered EU will not impress the markets unless they think it will act more effectively. Will the strong then be more likely to stand behind the weak?

Closer bonding
Inexorably, all this leads to talk of a deeper “transfer union” and of issuing joint Eurobonds. Mrs Merkel says this is a matter for future generations: Eurobonds would need both a new EU treaty and a new German constitution. But she may be forced to discuss it quite soon. Spain and Greece, and most Socialist opposition parties, want Eurobonds. The commission will propose them in the autumn. Critics say mutualised debt encourages the profligate to freeride on the virtuous. Might Eurobonds turn to junk bonds? And even if moral hazard can be avoided, will Germany and others not end up paying higher rates on their debt? Much depends on the course of the crisis: if it rages on, more people may come to see Eurobonds as cheaper than more bail-outs.

Euro-zone leaders find themselves buffeted by a crisis they cannot control. How much more fiscal and political integration does the euro need? Nobody knows. Are citizens ready to give up more sovereignty to save the euro? Nobody has asked them. The more leaders try to fix the euro’s flaws the more they risk exposing a flaw in the European Union itself: a project of European integration that lacks a strong democratic mandate.
inane little opines
m3thod
All kiiiiiiiiinds of gainz
+2,197|5632|UK
intresting
Blackbelts are just whitebelts who have never quit.
13rin
Member
+977|5440
Well, I thought it was doomed from the start.  Don't most of these states have 'national healthcare'?
I stood in line for four hours. They better give me a Wal-Mart gift card, or something.  - Rodney Booker, Job Fair attendee.
RDMC
Enemy Wheelbarrow Spotted..!!
+736|5526|Area 51
Ye, this is just heading for utter disaster.
Jay
Bork! Bork! Bork!
+2,003|4319|London, England
The prudent thing would've been to simply dismiss Greece and the other problem children from the shared currency, but that would go against the dreams of the power hungry politicians who want what Napoleon and Hitler failed to create: a lasting European empire.

‘The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means, it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power. Now do you begin to understand me?’
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
RDMC
Enemy Wheelbarrow Spotted..!!
+736|5526|Area 51
Well cutting off said states from the euro would mean that alot of money would have to be written off, resulting in billions of euros lost.
Jay
Bork! Bork! Bork!
+2,003|4319|London, England
Throwing good money after bad doesn't make the investment any better.
"Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough."
-Frederick Bastiat
Macbeth
Banned
+2,443|4547

You can't jettison a country from an economic union because they are too weak without fundamentally undermining the union and it's purpose. You can't lobby more countries to use the currency and submit to EU regulations while at the same time sending the message that you will be on your own in a time of crisis and will always be at risk of expulsion if your country doesn't perform.

So dismissing Greece isn't an option unless you want to take apart the whole EU. It has nothing to do with the dreams of Hitler and Napoleon and holding onto to power but everything to do with with necessity.

Last edited by Macbeth (2011-08-19 08:47:35)

Shocking
sorry you feel that way
+333|4960|...
Pretty much what Macbeth said really... furthermore, ING calculated that if the euro failed it would result in a worldwide depression. Southern Europe would be, well, a disaster and most other countries can expect to lose 5-10% of their GDP; including European countries not participating in the union - it would dwarf the 2008 recession. The dilemma comes with the alternative: Eurobonds, which means we would be pooling the debt. It's a con for countries like the Netherlands and Germany who've been playing by the rules; they're going to lose money to support the southern countries. It's also in France's self interest as they would want to dominate in European affairs, which is going to require a weaker Germany.

Last edited by Shocking (2011-08-18 15:06:50)

inane little opines
RDMC
Enemy Wheelbarrow Spotted..!!
+736|5526|Area 51
So were pretty much stuck with pouring billions of euros into the southern countries to keep them alive.
Hallvard
Member
+262|5484|North Norway

loleuro
Dilbert_X
The X stands for
+1,734|5067|eXtreme to the maX
It was never realistically going to work, and never will.
Had it not over-expanded and been under-regulated it might have lasted a little longer.
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JahManRed
wank
+646|5589|IRELAND

Idiots.
The net result of the crisis will be a to bring on a quicker 1 Europe Government. They are starting with finance and sure we all know when you united the control of money then you are united.
Thank fuck I am not in the Euro Zone. Thank fuck I'm British. (From an now Ex Irish Republican from Northern Ireland)
Varegg
Support fanatic :-)
+2,206|5771|Nårvei

It's not so much the Euro that is the problem if at all ... the problem is as it is in the US ... debt and the lack of a balanced budget!

You simply can't have the welfare of Norway and taxation as low as Greece, debt financed budgets will burst sooner or later ... fiscal responsibility and getting back on track will be a bitch for many western countries the next decade ... or two ...

As it looks now Italy may very well run into bankruptcy, their economy is to large to be rescued by anyone
Wait behind the line ..............................................................
FEOS
Bellicose Yankee Air Pirate
+1,182|5372|'Murka

Will people now realize that Keynesian economics doesn't work?
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein

Doing the popular thing is not always right. Doing the right thing is not always popular
Shocking
sorry you feel that way
+333|4960|...

JahManRed wrote:

Idiots.
The net result of the crisis will be a to bring on a quicker 1 Europe Government. They are starting with finance and sure we all know when you united the control of money then you are united.
Thank fuck I am not in the Euro Zone. Thank fuck I'm British. (From an now Ex Irish Republican from Northern Ireland)
I'd imagine that the crisis is a bit frustrating for the people in the UK parliament because they have no say in what to do, while it does affect them as much as any EMU nation. British europhobia has left the UK outside of the playing field.
inane little opines
Dilbert_X
The X stands for
+1,734|5067|eXtreme to the maX

FEOS wrote:

Will people now realize that Keynesian economics doesn't work?
What does this have to do with Keynesian economics?
This is about merging disparate economies and not even attempting to manage the resulting mess.

Shocking wrote:

British europhobia has left the UK outside of the playing field.
The 'playing field' is knee deep in shit so who cares? Britain is well out of it and always has been.

Last edited by Dilbert_X (2011-08-19 05:18:33)

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JahManRed
wank
+646|5589|IRELAND

Shocking wrote:

JahManRed wrote:

Idiots.
The net result of the crisis will be a to bring on a quicker 1 Europe Government. They are starting with finance and sure we all know when you united the control of money then you are united.
Thank fuck I am not in the Euro Zone. Thank fuck I'm British. (From an now Ex Irish Republican from Northern Ireland)
I'd imagine that the crisis is a bit frustrating for the people in the UK parliament because they have no say in what to do, while it does affect them as much as any EMU nation. British europhobia has left the UK outside of the playing field.
As the Eurozone is tittering on collapse at the minute its hard to say if the UK made the right move staying out of it.
I think they made the right move for themselves. If it fails dont join it. If it 10-15 years its going strong then join it.
Shocking
sorry you feel that way
+333|4960|...

Dilbert_X wrote:

The 'playing field' is knee deep in shit so who cares? Britain is well out of it and always has been.
It affects them as much as it does any EMU nation. Besides, since the euro came on the market the pound has plummeted in value. It hasn't really been all that great for the brits. Though, if they couldn't devalue their own currency the UK would've been a giant Ireland right now. So yes, for the moment they probably made the right choice, but it would be wise to join the euro later on (given the currency survives the crisis).
inane little opines
FEOS
Bellicose Yankee Air Pirate
+1,182|5372|'Murka

Dilbert_X wrote:

FEOS wrote:

Will people now realize that Keynesian economics doesn't work?
What does this have to do with Keynesian economics?
This is about merging disparate economies and not even attempting to manage the resulting mess.
The mess has resulted from Keynesian spending models, which have tanked economies by running up unsustainable debt without creating corresponding growth, as promised.

So it has pretty much everything to do with it, as it's the root cause of the mess.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein

Doing the popular thing is not always right. Doing the right thing is not always popular
Dilbert_X
The X stands for
+1,734|5067|eXtreme to the maX
I thought it was simply down to spending more than they received in taxes, I doubt there was any kind of theory behind it.
#FreeBritney
FEOS
Bellicose Yankee Air Pirate
+1,182|5372|'Murka

Dilbert_X wrote:

I thought it was simply down to spending more than they received in taxes, I doubt there was any kind of theory behind it.
The theory that deficit spending is good is Keynesian.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein

Doing the popular thing is not always right. Doing the right thing is not always popular
Dilbert_X
The X stands for
+1,734|5067|eXtreme to the maX
PIGS and other European fiscal issues have nothing whatever to do with deficit spending or Keynesian theory, they're down to decades of spending far more than they collect in tax.

Same for the US in fact.

Last edited by Dilbert_X (2011-08-20 01:57:42)

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FEOS
Bellicose Yankee Air Pirate
+1,182|5372|'Murka

Dilbert_X wrote:

PIGS and other European fiscal issues have nothing whatever to do with deficit spending or Keynesian theory, they're down to decades of spending far more than they collect in tax.

Same for the US in fact.
Yes. Which is a result of Keynesian philosophies of government spending to stimulate the economy. The quadrupling of the US deficit aver the past 2.5 years is pure Keynesianism. Massive government programs in Europe, paid for with deficit funding, in attempts to stimulate the economies of Greece, Portugal, and others, is Keynesianism.
“Everybody is a genius. But if you judge a fish by its ability to climb a tree, it will live its whole life believing that it is stupid.”
― Albert Einstein

Doing the popular thing is not always right. Doing the right thing is not always popular
Dilbert_X
The X stands for
+1,734|5067|eXtreme to the maX
And the increase in the deficit under Republican Presidents?
What economic theory were they using?

Fiscal deficits don't disprove Keynesian theory any more than they disprove free market theory.
Not that I'm saying its right just that your arguments don't fly.
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