If the ECB doesn’t engage in QE to get out of the recession/depression, the euro will emerge as the main reserve currency, giving the EU a bigger role in the world stage. That is why the French and German governments have a very different agenda, from Brown’s and Obama’s, for the G-20 summit.
I predict a second “big blow” to the markets, after the meeting finishes, either with little, or no big agreements.
It makes no sense to have a currency union without a centralised political union.
But of course, that was the whole point of doing it in this way. Create the peoblematic
currency so that the political solution desired by the EuroPolitBuro is adopted when it otherwise would have been rejected.
You are right. A proper “democratic” european state is needed. We are not far from it, the europolitburo of euroburocrats are the main obstacle.
First step would be to have a European Parliament with real political power, second, a president of the European Commission directly elected by european citizens. Maybe this recession/depression will force those changes
One of the reasons its been so half arsed is that such an EU would become a superpower very quickly. Lots of Europeans are terrified of that. From an Irish perspective there is a big upside in taking the toys away from our appalling ruling class and direct rule from Brussels can’t possibly be worse than from Dublin. But the EU architects and boosters had not fully risked the kind of twilight zone that now exists, full monetary union without any fiscal counterweight on an EU wide scale. It seems that the interests of Germany and France are in some instances directly contradicting those of the other members of the union. The time frame for full political integration will be much longer than than these kinds of pressures will allow. Something will have to give.
Agreed. In principle.
A “common European fiscal framework” is on the way, especially if you ask for help to Brussels.
The european bureacrats, no more than an expansion of our national political class, are very happy with the lack of democratic accountability.
In my opinion we have “de facto” an undemocratic confederation. As I posted before, we are very close to having a proper “European State”.
I don’t think most europeans are terrified of becoming the global superpower. They are ignorant of the fact that the EU economy is 20% bigger than the American. We just need a bit of the americans superiority complex…
The american “superiority complex” is derived mainly from the “speak softly and carry a big stick” approach. It’s all democracy and apple pie - backed up by a military industrial complex second to none.
Europe needs to get more hardcore if it wants to play with the big boys.
Eurocrats may be an extension to the ruling gangs on the continent but I think there is a lot of daylight between them and the clowns who dominate politics and policy in Ireland. Most people who work in the EU can tie their own shoelaces afterall. I agree that the EU is undemocratic and its prospects are not good to evolve in a more democratic direction, add to that a European army and an inevitably aggressive foreign policy and it starts to look like a very scary future. Thats what a lot of Europeans fear. And that is a lot closer than a mechanism for EU wide fiscal management. I can see an EU airforce before an EU that collects tax from citizens. So we are getting part of an EU state but there is no prospect of member countries conceding their fiscal powers. Domestic governments would become little more than expensive county councils with less and less control over largesse. This is the maximum contradiction confronting the euro.
Which is why the obvious model is the US. Two chambers, upper chamber made up of 2 representitives per state, i.e. we become Wyoming. (2 senators from Wyoming but only one house representitive, as they’re based on population.) So while “France/Germany” would dominate lower house, upper chamber gives much more power to small states. IMO it’s the only way you can give small countries any “ownership” of a United States of Europe. (USE being the slightly unfortunate acronym… Maybe spindoctor types would prefer Federal Republic of Enlarged Europe… )
There are three scenarios for the Euro:
- they opt for price stability and the euro becomes the world fiat currency, leading to an age of careful regulation, enlightenment and girls with hariy armpits
- they opt for price stability and the euro falls apart, europe goes back to being a relative backwater, Ireland turns to krud and the Germans & French go on as before
- they opt for inflationary policies and we float along with the rest of the world, comparatively safe, but with no real advantage to it.
I think the chances of 2) are fairly low, so we should go for 1) and if it looks like 2) might happen, we can always adopt option 3) late in the game. But we should give the first scenario a shot to see if it works out.
As bitter experience has shown us, the vast car manufacturers of France, Germany, Italy and Eastern Europe (the Skoda works spring particularly to mind) can be turned at short notice into a powerful military machine. Lets not go down that route, the Germans are a happy, peace loving people who make chocolate and luxury sedans and have buxom maidens milking cows in their lederhosen. Let’s keep it that way.
I’d rather see them in something more alluring.
While girls in lederhosen can look sexy it can be very hit and miss, the Dirndl is what you want and flatters most women.
The Euro is not more doomed than the GBP or the USD… at the moment.
I’d even go as far as saying that the euro is still a stronger currency than GBP and USD, based on the amount of total debt, and the trade balances that these currencies carry with them.
Nevertheless, it’d be stupid not to recognise the massive tectonic change that means the ECB engaging in QE. That is the second great victory for our real overlords, the world’s financial speculators (sorry, I meant investors), since the beginning of the current financial crisis.
Did the Eurozone have any other option, besides QE? Yes, enforcing capital controls, to avoid capital flight, while doing what had to be done at the beginning of the crisis; reforming the tax, financial, and pensions systems, to make them work for the benefit of the real economy and wider society, not a bunch of financial global speculators.
Salient point I posted the same last night in a less than articulate manner on another similar thread.
I forgot that it fitted the Hegelian Dialect so perfectly. Everyone seems to have forgotten Lisbon is in place before this “Crisis”, they already have their solution in place.
If anyone could answer me this question I’d appreciate it:
I don’t understand why/how France/Germany could leave the Euro. If they did, then presumably it would be so their currency could appreciate - thus killing their exports. If they are doing it because they don’t want to be stuck with the liabilities of other countries, changing currency doesn’t matter - either Greece etc. can pay back French/German banks or they cannot. Being in the Euro doesn’t change that.
So why would they do it?
No it wouldn’t necessarily kill their exports. Don’t these country import a lot of raw materials to make their exporting products in the first place? A strong currency is also beneficial for purchasing power and lower interest rates.
The euro: love it or leave it? - → voxeu.org/index.php?q=node/729
Two possible reasons: the imminent loss of political power due to default or the population loosing confidence in the Euro fearing inflation. What you may see are parallel currencies to the Euro created, but the problem is they would be backed by nothing in the case of debtor nations and without some sort of structural reform in the country would quickly disintegrate into a hyper-inflationary scenario. I have yet to figure out how the IMF special drawing rights (SDRs) could figure in this.
Two problems face the Euro right now.
The political one
The people of a country that receives support will be increasingly angry at the terms of the support.
The people of a donor country will be increasingly angry at propping up profligates.
The practical one.
The bailout money hasn’t been raised yet.
There’s just a commitment to borrow the trillion whenever it may be required.
But whenever it is required interest rates by definition will be spiking.