Thinking about Europe

[andrewducker]

So, with the core of European Union steaming onwards towards integration, sensibly abandoning the UK behind it, I'm curious as to where that leaves us. Lagging along behind the rest of the EU? Or deciding that being half in and half out of an organisation is just ridiculous, and so off to join the European Free Trade Association?

context

Comments

[philmophlegm.livejournal.com]

According to an article in The Independent today, we should join the Euro apparently.


Head...desk...

[andrewducker]

I'm not interested in joining any currency that doesn't have (a)a lender of last resort, (b)the ability to deflate when it runs up stupid debts, and (c)centralised control over how it runs up stupid debts.

And to be honest, I came round to the idea (a couple of years ago now) that small currencies were probably actually more useful in many ways - we have enough problems across the UK with different areas being out of sync with each other but only having one interest rate, having the same across even bigger areas strikes me as likely to cause problems.

There are costs to working across multiple currencies, and having to worry about whether the debts/credits you have are going to change significantly as currencies move against each other. But there are also costs to being tied into a single interest rate, inflation, and the inability to rebalance against other currencies. My current inclination is that the latter costs are higher unless two cultures are constantly in sync with each other anyway. So it may well make sense for some countries to run the one currency, but it doesn't seem to make sense for Britain at all.

[heron61.livejournal.com]

I'm not interested in joining any currency that doesn't have (a)a lender of last resort, (b)the ability to deflate when it runs up stupid debts, and (c)centralised control over how it runs up stupid debts.

Indeed. Before the current problems, I had no idea that any of this was true, and I'm still baffled that the people who put it in place thought it was a remotely good idea.

I don't have any problem with the idea of a Euro, from my PoV it makes sense, if it actually resembled a sane national currency.

[danieldwilliam.livejournal.com]

In some other life I am working on PhD on the varying inflation rates within the UK currency union.

[danieldwilliam.livejournal.com]

I wonder if the point of the Euro was to be a trap for the unwary.

The deal that could be achieved at the time that the Euro was instituted was not a full fiscal (and by extension political union). I wonder if its flaws were built in, knowing that at some point they would be exposed and that the response would be either to abandon the single currency or to move closer to fiscal (and by extension political union). If this is the case, I suspect that the architects of the trap did not foresee such a viscous exposure.

[andrewducker]

Well, it was clearly pointed out by numerous people when some of the Southern European countries joined that their finances were not well matched, and that bad things were bound to happen.

It's whether it comes down to cock-up (with people handwaving everything as "It will be fine.") or conspiracy.

Also, I don't think anything less than a situation as bad as the current one would force the EU into more union. They've been clearly thrashing about looking for a different answer for months now.

[undeadbydawn.livejournal.com]

I wonder if it is coincidence that the Indie and the Sun are the two papers with the most significant drop in circulation this year

[heron61.livejournal.com]

Given that the cornerstone of the EUs fiscal policy is that ludicrous levels of fiscal austerity with on some miraculous fashion help jumpstart failing economies, the less your nation has to do with the EU, the better. I used to support the EU, but between the way the Euro has been handled and the crazed focus on austerity and cutbacks, I'm far less of one.

[danieldwilliam.livejournal.com]

I think we might see the same focus on austerity in Europe whether the EU existed or not.

[andrewducker]

Indeed. If we started trying to borrow significant amounts of money we would swiftly find ourselves unable to source it at interest rates that were at all affordable.

[danieldwilliam.livejournal.com]

What frustrates me slightly about the political and media (in its broadest sense) response to the current economic situation is the assumption that there is a solution i.e. some combination of policy and rhetoric that will soon return us to our previous trend of growth and make up the lost growth from the period when we were below trend.

I’d like to see some discussion about what we do if we’re unable to find that solution.

[sigmonster.livejournal.com]

But we *are* borrowing significant amounts of money - 10% of GDP a year right now! The UK don't pay low interest rates on government bonds because we're a good deal or because we're being prudent, we get cheap interest rates because every other option for long term capital investment looks appallingly risky to the markets...

[channelpenguin.livejournal.com]

whilst as individulas, we practially cannot get ANY interest on cash...

[heron61.livejournal.com]

Perhaps, but it's sufficiently obviously economic nonsense that if Germany wasn't cracking their whip about it, more nations might give up on this idea.

[philmophlegm.livejournal.com]

Agreed.

[bart-calendar.livejournal.com]

The EU's fiscal policy is essentially dictated by the Germans, who have a long term plan of devaluing the Euro so that they can increase their exports. To accomplish this they needed to crush the economies of Southern Europe and they've done a pretty good job at that.

By not being a part of this, the UK gets to avoid having Germany intentionally crushing your economy as well.

[drdoug.livejournal.com]

the Germans, who have a long term plan of devaluing the Euro

What, really?! They could do it tomorrow if they wanted.

I thought a key part of the political issue at the moment is that Germany doesn't want the euro to devalue, but countries like Greece and Italy desperately do want it to. My understanding is that it's German pressure that's kept the ECB from cutting interest rates more aggressively. (They even increased them in the summer.) And there is famous German resistance to the ECB printing money. That's the precise opposite of what you do if you want a currency to devalue.

Or are you arguing that the Germans want to keep the euro high in the short term, but devalue it longer term?

[philmophlegm.livejournal.com]

"...the Germans, who have a long term plan of devaluing the Euro so that they can increase their exports"


Arguably the German export plan all along was to get their major export markets tied into a fixed exchange rate regime in which other countries' currencies were held at too high a value. This they achieved with the ERM and it was that mechanism which ultimately set the rates at which member currencies joined the Euro. They've been enjoying the export benefits ever since (although ruining the economies of your export markets might not be such a good thing in the long term).

[bart-calendar.livejournal.com]

It means that when the euro collapses in a couple months you won't get hurt as badly as the rest of Europe.

Also, you'll have fewer riots than the rest of Europe.

Plus, after having to fight two wars against the bastards do you really want to have Germany be your leader, because that's what this whole integration means. After failing twice in combat to take over mainland Europe, Germany has accomplished it simply by crushing the economies of Southern Europe and manipulating bond markets.

[danieldwilliam.livejournal.com]

I for one welcome our new Germanic overlords.

[henriksdal.livejournal.com]

they'd get the trains running on time

[channelpenguin.livejournal.com]

I have always asuspected that alot of UK Euro-phobia springs/sprung from very similar assessment of Germany's intentions.

[channelpenguin.livejournal.com]

But I actually LIKE the Parts of Germany that I have been to (the Baltic coast) and the Germans I have met, and some of their general ways of running a country .... tricky one....

[bart-calendar.livejournal.com]

I think it's a pretty accurate and rational interpretation of Germany's intentions.

steaming onwards towards integration

[lsanderson.livejournal.com]

You misspelled "implosion"

http://krugman.blogs.nytimes.com/2011/12/09/the-summit-to-end-all-summits/?smid=tw-NytimesKrugman&seid=auto

Let the beatings continue!