The Euro

[hula4]

I read in one of the Sunday papers a couple of weeks ago that the Greeks were thinking about defaulting on their repayments which could lead to a collapse in the Euro and also according to the news today the Spanish position is even worse as the size of Greece's debt could be managed as it is a much smaller country.

What are peoples opinions on the merits or demerits of the single currency falling? particularly from Ireland's point of view?

[dahamsta]

I'd be with David McWilliams at this stage, we need to get out of the euro and either let the banks die or default on our debts.

[Spudulika]

He's been saying that, DMcW, since he had his tv show and right now I am more and more swayed. Then again, this is all going to stabilise. I'm more worried about Hungary going down the tubes. The paddython orgy of buying apartments in grotty locations is dead and gone, since even before we went belly up in Ireland. Now 2 leading politicos there say that the country's debt to GDP is rising and it'll need another hand out from the IMF. If the Greeks sort out the pension mess they'll be okay. Hungary has alot more problems to deal with!

[dahamsta]

If Gov.ie keeps sneaking a billion here and a billion there into Anglo to prop it up, and similiar idiocy, Ireland hasn't a hope of stabilising. If anything, things'll get worse.

Remember, our debts are actually worse than all of the other countries in the horrors.

[Fr Damo]

It;s not stopping Estonia from joining up!

http://www.rte.ie/business/2010/0608/euro.html

If we left the Euro it would bring about an Automatic default IMO as we would not be able to repay loans denominated in Euro from our "new" worthless currency!

[outspoken]

The govermant in this country is lucky were not like the greeks with all their rioting. When the greeks took to the streets they were chanting we are not like the irish we fight for our rights..... true story it was on tv3 news couple of weeks back

[bennocelt]

I agree, but then the Greeks even with all their rioting didnt change a whole lot either for themselves. But they probably felt that little bit better

[Fr Damo]

The govermant in this country is lucky were not like the greeks with all their rioting. When the greeks took to the streets they were chanting we are not like the irish we fight for our rights..... true story it was on tv3 news couple of weeks back


How were they "lucky"? What difference would it have made to them, their income or their pension?

On the other side, strikers would have been out of pockets to the tune of millons and union leaders would have basked in the limlight. All the while, interests payments would be getting bigger and we'd have been getting deeper in debt as we paid overtime to the public sector to catch up when they came back into to earn their crust.
As for the Greeks chanting were not like the Irish..... Thank goodness for that as it works both ways!
Didn't they murder a bank offical or two in the process?

Lucky indeed.

[OneRedArmy]

It;s not stopping Estonia from joining up!

http://www.rte.ie/business/2010/0608/euro.html

If we left the Euro it would bring about an Automatic default IMO as we would not be able to repay loans denominated in Euro from our "new" worthless currency!Spot on Fr. Damo.

You can't move from a stronger currency to a weaker one without complete default as your debt is still denominated in the "stronger" currency. If we leave the Euro, we'd need to move to the Dollar, Swiss Franc or Chinese Reminbi. Is that going to happen? If we adopted a "new Irish punt" it would immediately devalue against the Euro, our Euro denominated debt would still need to be repaid in Euro, and we'd need even more "new Irish punts" to repay it. Ergo complete default.

McWilliams is so tied to his position that any credibility he ever had has long since gone. He's firmly in the space of the housewives economist.

[Mr A]

In fairness to McWilliams- he also argues for default, saying in the long term it will be less painful than trying to deal with massive debt levels.

[dahamsta]

Indeed. That was actually the point of the "leave the euro" articles.

[OneRedArmy]

In fairness to McWilliams- he also argues for default, saying in the long term it will be less painful than trying to deal with massive debt levels.


Indeed. That was actually the point of the "leave the euro" articles.If I'm remembering the same article, he couldn't quote one example where a country has benefited from a strategic default. If you look at sovereigns that default over time, a trend emerges: default begets future default.

He also leaves the core question unanswered: after you default, who do you borrow from and at what rate (after the IMF have left town)?

Or do you put the printing presses into overdrive, create inflation and decimate the nations savings?

Some economists I disagree with their analysis (Morgan Kelly being one) but their work is clear, academically rigorous and well presented. McWilliams is different, there is nothing there when you scrape beneath the veneer of the weekly columns and 30min primetime sessions on RTE.

[pineapple stu]

Just for the lay people among us - by "defaulting", are we kind of talking the same thing as Derry and Cork in the league last year?

[OneRedArmy]

Just for the lay people among us - by "defaulting", are we kind of talking the same thing as Derry and Cork in the league last year?Yes. Not making repayments on your outstanding loans.

As for you being a "lay person", aren't you an accountant?!

[pineapple stu]

Yes. I work in the motor industry making sure people pay us what they owe and telling the boss man how much poorer he is this month. There's subtle differences between that and the economics involved in running a country. ;)

I wasn't aware a country could basically start again.

[OneRedArmy]

Yes. I work in the motor industry making sure people pay us what they owe and telling the boss man how much poorer he is this month. There's subtle differences between that and the economics involved in running a country. ;)

I wasn't aware a country could basically start again.The only difference in this situation is that the numbers are bigger!

Argentina does it every few years. The problem is that people (and the Governments and corporations they work for) have memories and are reluctant to lend to you again without some kind of IMF guarantee or ridiculously high interest rates.....which tend to increase the probability of future default as previously defaulters are the first countries that the financing tap is turned off for whenever any financial crisis erupts anywhere in the world.

Even if you get the IMF to guarantee or provide loans, their fiscal austerity measures tend to decimate any remaining wealth of a country.

[dahamsta]

It was more than one article, and he did give examples of previous defaults. His website is here (http://www.davidmcwilliams.ie/).

[culloty82]

Most economists were blaming the strong euro for our lack of competitiveness, so at least export trade will improve, which would in turn impact on the balance of payments. Interesting to note that non-eurozone members such as Hungary and Latvia are facing some of the stiffest austerity measures, while the UK economy suggests that we would be little better off if we had kept the punt. As one commentator mentioned when Italy toyed with bringing back the lira, you couldn't imagine California or Florida abandoning the dollar, in 3-5 years time, the cycle will favour the EU once more.

[outspoken]

How were they "lucky"? What difference would it have made to them, their income or their pension?

On the other side, strikers would have been out of pockets to the tune of millons and union leaders would have basked in the limlight. All the while, interests payments would be getting bigger and we'd have been getting deeper in debt as we paid overtime to the public sector to catch up when they came back into to earn their crust.
As for the Greeks chanting were not like the Irish..... Thank goodness for that as it works both ways!
Didn't they murder a bank offical or two in the process?


Lucky indeed.

good point and I think they murdered 3 people all together (just put that part in cause my post was to short)

[Fr Damo]

Most economists were blaming the strong euro for our lack of competitiveness, so at least export trade will improve, which would in turn impact on the balance of payments. Interesting to note that non-eurozone members such as Hungary and Latvia are facing some of the stiffest austerity measures, while the UK economy suggests that we would be little better off if we had kept the punt. As one commentator mentioned when Italy toyed with bringing back the lira, you couldn't imagine California or Florida abandoning the dollar, in 3-5 years time, the cycle will favour the EU once more.



IMO we are better to be in the Euro now than to leave, the UK will find out they are none too smart soon enough (june 22) and could well wish they were in the Euro too. The question of "would we be better off if we never joined up"? is the real one and all the evidence points to yes. In other words, our wealth could well be less than 1999 levels before this finishes. The ECB was bad for Ireland becuase we were not used to having and therefore managing cash, from household, commercial and especially governments
Didn't read the report published yesterday yet, but how is Neary not in jail? At the very least he collected a couple of hundred grand a year for doing nack all. Fraud, no?

[Macy]

Didn't read the report published yesterday yet, but how is Neary not in jail? At the very least he collected a couple of hundred grand a year for doing nack all. Fraud, no?
Because he was only doing what the Government, his boss, wanted. The Honohan report is quite clear were most blame lies, not that you'd get that from RTE "reports".

On McWilliams, whatever respect I had left went when I got the latest flier from The Abbey, for "Outsiders"...

[mypost]

The Euro protected us from Icelandic freefall here 18 months ago. Without the Euro, they hadn't a leg to stand on. Nobody will leave the Euro, while 17 countries currently use it with more to follow. Economically, it's the only way forward.

[Fr Damo]

Because he was only doing what the Government, his boss, wanted. The Honohan report is quite clear were most blame lies, not that you'd get that from RTE "reports".

So he ruined his reputation in the process for a couple of years salary. If he didn't like what he was told to do he should have left office. I on the other hand think he simply wasn't capable. Prime time last night was a classic. The lies we were told about the banks.... "so well caplitalised"..." fundamentals are strong"... "Nobody saw it coming"...... "go off and commit harry carry".



The Euro protected us from Icelandic freefall here 18 months ago. Without the Euro, they hadn't a leg to stand on. Nobody will leave the Euro, while 17 countries currently use it with more to follow. Economically, it's the only way forward.


Sums it up mypost.

[Macy]

So he ruined his reputation in the process for a couple of years salary. If he didn't like what he was told to do he should have left office. I on the other hand think he simply wasn't capable.
I agree to a degree, but you have to put in the context of the time, when the leader of this state was telling the naysayers to go and commit suicide, and the fact that the bubble was making massive money for the main Government Parties galway tent benefactors of bankers and developers. He's a handy fall guy for Cowen, Lenihan et al though...

[OneRedArmy]

Because he was only doing what the Government, his boss, wanted. The Honohan report is quite clear were most blame lies, not that you'd get that from RTE "reports".

On McWilliams, whatever respect I had left went when I got the latest flier from The Abbey, for "Outsiders"...


I agree to a degree, but you have to put in the context of the time, when the leader of this state was telling the naysayers to go and commit suicide, and the fact that the bubble was making massive money for the main Government Parties galway tent benefactors of bankers and developers. He's a handy fall guy for Cowen, Lenihan et al though...I've read both reports and my own view would be that the blame is (correctly) fairly evenly doled out between Government, Central Bank/FinReg and the banks, with the Regulator coming out of it worst on balance.

The Financial Regulator isn't supposed to be betrothed to the Government of the day, they are required to be independent.

[dahamsta]

I thought Biffo's comment about the IMF predicting further growth in Ireland a couple of years ago was the best. Because of course everyone should rest their entire economic strategy on the IMF's word.

Plus of course the bank economists...

[Macy]

The Financial Regulator isn't supposed to be betrothed to the Government of the day, they are required to be independent.
No, they're not supposed to be... Now we have a Financial Regulator and Head of the Central Bank who are independent. Honohan comes out with much credit for ignoring his terms of reference and putting the boot in to FF. Pity the resulting enquiry won't look into the Government decisions.

[OneRedArmy]

No, they're not supposed to be... Now we have a Financial Regulator and Head of the Central Bank who are independent. Honohan comes out with much credit for ignoring his terms of reference and putting the boot in to FF. Pity the resulting enquiry won't look into the Government decisions.Sorry, you've lost me.

Are you saying the Financial Regulator (which is a body corporate, and not a person as the media seem to think) was supposed to be independent from Government, or wasn't in practice independent from Government?

I'm struggling to see where you're coming from as both reports clearly state the Financial Regulator was too easily influenced by the banks. For all the Governments sins, they didn't need to bother trying to influence the FinReg, as they were doing such an inept job anyway.

[Macy]

Crap formation of my post, sorry. My point is that they are supposed to be independent, but they weren't in practice. And I do think that the Government influenced the relationship between regulator and central bank, and the banks. Light touch regulation was a Government policy (arguably still is, although Saint Lenihan was brought into line when he tried to side with the Brits on that), the Financial Regulator just implemented that policy. Given the lack of records uncovered in other examples, I doubt there's a paper trail to the Government exerting influence, so we'll just have to rely on things like the fact that Government didn't attempt to change the regulatory framework for the years the regulator was apparently "inept".

[OneRedArmy]

Crap formation of my post, sorry. My point is that they are supposed to be independent, but they weren't in practice. And I do think that the Government influenced the relationship between regulator and central bank, and the banks. Light touch regulation was a Government policy (arguably still is, although Saint Lenihan was brought into line when he tried to side with the Brits on that), the Financial Regulator just implemented that policy. Given the lack of records uncovered in other examples, I doubt there's a paper trail to the Government exerting influence, so we'll just have to rely on things like the fact that Government didn't attempt to change the regulatory framework for the years the regulator was apparently "inept".I think we're in agreement!

For me the key thing in the report was absolutely showing up the FF assertion that it was all Lehmans fault. The report clearly states that was an accelerant that brought the problems to the surface quicker, but we'd have been goosed sooner rather than later anyway.

Wonder will Bertie be coming on any talkshows to discuss?

[John83]

Just for the lay people among us - by "defaulting", are we kind of talking the same thing as Derry and Cork in the league last year?
My opinion of the B.Comm. has just taken yet another hit.

[pineapple stu]

Hey, I'm not the one who had to go to the third world to get a job. ;)

I outlined the point I was unsure on later on.

[mypost]

Most economists were blaming the strong euro for our lack of competitiveness, so at least export trade will improve, which would in turn impact on the balance of payments. Interesting to note that non-eurozone members such as Hungary and Latvia are facing some of the stiffest austerity measures, while the UK economy suggests that we would be little better off if we had kept the punt.

Well if economists did research instead of waffling to O'Callaghan and Browne, they would know that there are many other countries throughout the world in severe recession, not just the 17 using the Euro. They all have to find a way out of it somehow. When Lehman's kicked the bucket, the dollar and the pound collapsed, several non-Euro countries needed the IMF to support them, while the Euro stayed upright in the storm. Germany has several non-Euro neighbours, yet emerged from recession well before the rest of the Eurozone did.

Our problems are down to FF policies, not the Euro.