DMcW - Ireland should consider leaving the euro?

McWilliams = Idiot!

Nothing constructive to add, no? Just hurl insults at people?

I find McW’s suggestion to horse-trade Lisbon idiotic (but not him as a person). Our sovereignty is priceless, IMHO. More disappointing still is the echo of Al (Capone) Reynolds’s ‘bribe’ in a previous referendum (Nice, Maastricht?) to the effect that the EU would send lots of dosh if we voted ‘the right way’.

However, would leaving the Euro be so bad? It was largely the low ECB rates that pumped up the bubble.


Our sovereign debt is denominated in euro, indeed pretty much our external debt is. We would have to raise interest rates substantially to maintain repayment power on the punt nua with the euro. Hands up anyone who thinks that 9% interest rates would be a good thing? (That’s what Hungarians with forint mortgages are paying - they were paying 14% recently (Hungarian CB rate, not mortgage rate)). Or perhaps we could leave existing mortgages denominated in euro at ECB rates? And expose anyone with a mortgage to FX swings? If they don’t understand what a tracker mortgage is, how are they supposed to understand what a currency crisis is and why their repayments have gone up 20% in a month.

Capital flight from the Irish banks would undoubtedly ensue if you tried to enforce currency conversion. They would collapse as soon as the scheme was announced.

Massive deflation would be the instant result as there would be a shortage of credit and capital. Then there would be massive inflation as the robbe… er, social partners got together and started a wage-price spiral. Mr. Gono would be on the phone to Mr. Hurley to congratulate him within hours.

I have heard Mr. McWilliams make the claim that it would be desirable and possible to leave the euro. This is not the same as saying we shouldn’t have joined it. I have yet to see any notions as to how this might be achieved without collapsing the country. It is wishful thinking for a might-have-been, wrapped up in a fairy story and sold as snake oil.

Split off from Bubble Radio/TV thread. Based on interview Mr. McWilliams gave on Marian Finucane in which he suggested leaving the euro as a part of the solution for Ireland’s economic woes.

Maccer is wrong wrong wrong on this. Hes floated this one a few times. Why he persists is unclear, as IT CANT BE DONE…

Of course it can. Whether it would be sane to do it is the only question.

As yogan said all our humungous debt is denominated in Euros. Therefore, until all that debt is reduced, the political system and public sector are reformed, and the general cost level of the country massively reduced to restore competitiveness, leaving the Euro simply is not a practical or feasible option at this time.

It might well be a logical end point of the necessary program of reforms, but it absolutely is not any sort of a starting point and would at this stage only make matters far far worse.

correct. we should try to get out eventually, but not now.

Apologies. Severe paucity in the patience department at the moment with wrong headed proposals at a time when what’s needed is a clear and responsible roadmap out of the world of shit we’re in. I’ll rephrase the above to: This is an idiotic idea.

It reminds me of O.J. Simpson being pursued by the cops with a gun to his own head and telling the cops to back off or he’ll shoot!

Leaving the Euro, to me, is the national equivalent of jingle mail. The low ECB rates did not give the banks an excuse to throw the rules out the window and abandon standard metrics for loan approval.

Agreed. But you’d be disillusioned by how many people use it as an excuse.

I mean, low interest rates weren’t an excuse to borrow far too much money either, and yet, they’re used as such.

I’m now thoroughly disillusioned which is why I am now making efforts to avoid reality as far as possible without resorting to drugs or too much alcohol.

u cant blame the euro for our our woes . Other countries had the same low interest rates and didnt gorge themselves on property bubbles. The bubble is homegrown pure and simple. And if we leave the € what then , a massive currency devaluation, our national debt explodes as a % of GDP to 200-300%, and we default. We try and print our way out of the problem Fed style and experience hyperinflation.

I dont believe leaving the € helps us 1 bit

The corollary of this is that other countries didn’t join the euro and did gorge themselves on property bubbles as with the main currencies having low interest rates the two options were:

  • join them and have low interest rates and keep exports competitive (Denmark)
  • keep interest rates high and have an over-valued currency with speculative carry-trade inflows (Iceland)

As an exporter, we would, IMO, have had low interest rates to keep the exchange rate of the punt competitive with our export markets. Indeed, as the euro weakened following its inception, we may even have had to have lower interest rates than the eurozone! But this is what-ifs and they are not helpful to our current situation.

Given the way this country has been governed in recent times, we’d end up printing our way out of the problem “Zimbabwe-style” rather than Fed. style XX

I dont see any difference between the FED and Zimbabwe, their actions are going to gave the same result; hyperinflation, collapse of the currency, civil unrest etc

I though DMcW’s interview was excelllent. I particularly like his description of economics as a mix of traditional economics and looking at peoples’ behaviour. Or something like that…don’t quote me … it was on the Marion Finucane show. It’ll be here eventually, maybe

Did he actually advocate leaving the euro during the interview? He did say that Ireland needs to think outside the box.

Leave the Euro? Ireland is hooked on debt. Public euro debt and private euro debt. We can’t leave the euro now. Cold turkey would kill the patient.

I agree it was an otherwise excellent interview. His solutions to our problems were to tap the diaspora and leave the euro. IMO, the paucity of his solutions shows the seriousness of the situation we are in, rather than necessarily being a reflection on Mr. McWilliams himself.

He mentioned it as a possibility.

I think the main point he was trying to emphasize was that we need unconventional thinking to get us out of this crisis. He is of course correct. We’re not going to get anywhere by doing what the Americans and British are doing.

Well, there is an argument that we should do exactly the conventional thing, as this is what will please the debt markets and the rating agencies. I’m not sure I agree with it, but it is something to consider. If we stood up and said we were going to follow the Swedish model for dealing with our bank problems and the IMF model for dealing with our fiscal problems would that increase or decrease the attractiveness of Irish sovereign debt? IMO sovereign debt has become a beauty contest.

Yeah - and we’re one of the ugly sisters!

Excellent quote! 8DD

It really pisses me off that the rating agencies completely underestimated the risk of funding our banks while they überfunded a property bubble, and now the same rating agencies are (presumably) bouncing countries into taking on the debt that they mispriced.