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Should Germany leave the Euro?


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Should Germany leave the Euro?

  #51 (permalink)
 
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 bobwest 
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xplorer View Post
@Fat Tails, of the 3 options you listed I believe that 'technically' what should happen if the 'EU project' is to succeed long term is go down the Option 1 route, i.e. the creation of a United States of Europe structure where not only economic policy but also fiscal policy is centralised.

Of course that won't fly in reality. No head of state/politician will ever relinquish such powers to a higher authority and de facto abdicate their country's sovereignty. I don't see it happening anyway.

I don't know if this will add much to the discussion, but I think something like the first option was really always the end state that was envisioned by the European project: union economically, fiscally and politically. I think that it was felt that a common currency would be a good lead-in to that.

As has been pointed out many times, there are both cultural and basic political obstacles that have not been overcome, and that can't be just papered over or hand-waved away.

It's a pity, frankly, but any such unification will probably be a result of a slower evolution that reduces the barriers more naturally, if, in fact, it happens at all.

Bob.

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  #52 (permalink)
 
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1. If you want to keep one single € zone as is exists today, then it mandatory requires a mone
y flow from the rich(er) regions to the poorer regions. This is also the case in the USA, where some
states need to pay for the other states.

While there is a single € zone and a € trade zone with free movement of capital and people,
the mindset (as correctly analysis in the previous view) is not yet generally accepted and people
tend to not want to pay for the party of the other..

From a macro economic point of view, it is difficult to have such a big region, with significant
cultural differences (aka put a Fin and a Greek together... and watch) and a single monetary
instrument... policy makers have never thought this one true completely...

While there are many advantages of a single euro zone, there are disadvantages
people tend to quickly forget and want + but no -

2. In case the hole chapter of europe and the euro needs to be un-done, there will be a lot of
financial issues. Who pays for what ? Unless this happens at the moment of a complete meltdown
of the system, at which point it does no longer matter...

3. Feet on the ground, i think in the current context, the fact to create 60B euro per month, just
out of thin air, with no reasonable sign of any improvement for the euro zone, this will simply
just back fire... only i haven't found a way to monetize it yet...

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  #53 (permalink)
 
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xplorer View Post
Excellent analysis of the European situation. Of course many months have passed and the Greece odissey is in the rearview mirror. Personally I think it was despicable both how the Greeks were treated and, at the same time, the gamble that Tsipras took with a referendum which, in the end, harmed Greece more than not.

@Fat Tails, of the 3 options you listed I believe that 'technically' what should happen if the 'EU project' is to succeed long term is go down the Option 1 route, i.e. the creation of a United States of Europe structure where not only economic policy but also fiscal policy is centralised.

Of course that won't fly in reality. No head of state/politician will ever relinquish such powers to a higher authority and de facto abdicate their country's sovereignty. I don't see it happening anyway.
So we're stuck with huge cultural differences, especially between the northern and the 'peripheral economies' with the public opinion of the former negatively biased towards the latter. Who can blame them? When a German pensioner who's always paid taxes lives now on a pension of 1,300 Euros but then hears that we have in Greece ex postal workers on pensions as high as 4,000 Euros (extreme cases probably but, still) and Greece/Italy (for instance) are not known for honoring taxes as much as them, I would probably be pretty mad too.

On the other hand, I agreed with Varoufakis when he said that the proposals put forward by the EU (signing a deal for a new loan, only to pay the debt of the previous one) was simply akin to kicking the can down the road. He said that he explained from a technical point of view to his EU counterparts why that was not viable but he could not engage them in an economics discussion. If true, it's disappointing.

Anyway, we are where we are.

I don't understand Option 2. How can you devalue a common EU currency in a EU country but not in another?

Option 2 was not properly explained. Devaluation requires reintroducing a local currency. The Euro should not be treated as a holy cow.

Today the European Union is made up of 28 member countries. 19 have introduced the Euro. 9 countries have so far kept their local currency. Out of the 9 countries, 3 of them (UK, Denmark and Sweden) have voted against the introduction of the Euro. Poland, the Czech Republic, Hungary, Bulgaria and Croatia are not interested in introducing the Euro.

This shows that there are two groups of countries who wish to keep their currencies

-> Scandinavian countries / UK
-> Eastern European countries with the exception of the Baltic states, Slovakia and Slovenia

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  #54 (permalink)
 
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bobwest View Post
I think something like the first option was really always the end state that was envisioned by the European project: union economically, fiscally and politically. I think that it was felt that a common currency would be a good lead-in to that [...] if, in fact, it happens at all.


Fat Tails View Post
This shows that there are two groups of countries who wish to keep their currencies

-> Scandinavian countries / UK
-> Eastern European countries with the exception of the Baltic states, Slovakia and Slovenia

And there in lies the rub. As bob says, the Fiscal etc. union is a long term project, but who knows if it will ever happen.

I think it is smarter to wait for that and then join in. Smart move for the countries who have not taken up the Euro offer. More independence and being more in tune with their country's fiscal policies.

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  #55 (permalink)
 
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Nobody in Germany likes the "Soros Option" - that Germany leaves the Euro.

Why ?

Because Germany has benefitted the most by far from its introduction.

Why ?

Because Germans as a whole work harder & more efficiently to produce better designed products of higher quality that consumers want.

Normally within the capitalist model, this strength would lead to an increased valuation of their currency, giving their trading partners within the EU a better chance of competing. But since the Eurozone was created, Germany has been superior and economically crushed its partners, helped by further enormous interest rate imbalance in the form of, for example, the Greeks being able to borrow a the same rate as the Germans (impossible without the same currency).

So, berating the Greeks and others whilst stuffing in their bratwurst and downing their delicious Bavarian beer, they have benefitted enormously... and who lent the Greeks all that money they were never going to be able to pay back : oh, my goodness, the Germans (mostly).

So, dear Angela (Merkel), stop whining about paying for everybody else, a situation in whose creation you played a, if not the, major part, get real & write off the debt, leave the Euro to give every one else in the Eurozone a chance to slowly regain economic health (it won't happen otherwise) and clear up the mess and suffering you have caused with your foolish, if well-intentioned, "open doors policy" to the refugees (who cannot be blamed for flooding across Europe to get there).

A different point of view (from someone who drives & appreciates German cars... and Ninjascript coders ).

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Interesting reading :

End of Europe? Berlin, Brussels' shock tactic on migrants By Reuters

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  #57 (permalink)
 
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...offering no grounds to be optimistic other than that "optimism is our last line of our defense"

And that is precisely why the Wave Principle is present in human affairs.

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  #58 (permalink)
 
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jtrade View Post
Nobody in Germany likes the "Soros Option" - that Germany leaves the Euro.

Why ?

Because Germany has benefitted the most by far from its introduction.

Why ?

Because Germans as a whole work harder & more efficiently to produce better designed products of higher quality that consumers want.

Normally within the capitalist model, this strength would lead to an increased valuation of their currency, giving their trading partners within the EU a better chance of competing. But since the Eurozone was created, Germany has been superior and economically crushed its partners, helped by further enormous interest rate imbalance in the form of, for example, the Greeks being able to borrow a the same rate as the Germans (impossible without the same currency).

So, berating the Greeks and others whilst stuffing in their bratwurst and downing their delicious Bavarian beer, they have benefitted enormously... and who lent the Greeks all that money they were never going to be able to pay back : oh, my goodness, the Germans (mostly).

So, dear Angela (Merkel), stop whining about paying for everybody else, a situation in whose creation you played a, if not the, major part, get real & write off the debt, leave the Euro to give every one else in the Eurozone a chance to slowly regain economic health (it won't happen otherwise) and clear up the mess and suffering you have caused with your foolish, if well-intentioned, "open doors policy" to the refugees (who cannot be blamed for flooding across Europe to get there).

A different point of view (from someone who drives & appreciates German cars... and Ninjascript coders ).


And you think that Germany has benefitted more from the introduction of the Euro than the Netherlands, which are handling a large part of German imports and exports?

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  #59 (permalink)
 
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Fat Tails View Post
And you think that Germany has benefitted more from the introduction of the Euro than the Netherlands, which are handling a large part of German imports and exports?

FAR more... but the Dutch are indeed pretty darned sneaky, the way they handle so many non-EU corporations' business within Europe, ie. they help them avoid EU taxes.

I'm Scottish, btw - we just had a near-miss with the referendum : had Scotland left the UK & joined the Eurozone, with its calculations for fiscal balance based on $110 oil, we'd now be heading for bankruptcy... then you Germans could have bailed us out as well

Wait a minute ! If Germany leaves the Eurozone, who's going to bail everyone else out ?

No, no - we didn't mean it, you are essential to the Eurozone !

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  #60 (permalink)
 
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jtrade View Post
FAR more... but the Dutch are indeed pretty darned sneaky, the way they handle so many non-EU corporations' business within Europe, ie. they help them avoid EU taxes.

I'm Scottish, btw - we just had a near-miss with the referendum : had Scotland left the UK & joined the Eurozone, with its calculations for fiscal balance based on $110 oil, we'd now be heading for bankruptcy... then you Germans could have bailed us out as well

Wait a minute ! If Germany leaves the Eurozone, who's going to bail everyone else out ?

No, no - we didn't mean it, you are essential to the Eurozone !


The Scottish are easy to bail out.

Just need to introduce export duties on whisky.

Then they'll drink the good stuff themselves and don't need anything else ......

That is thw worst case scenario - at least from my point of view ....

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