May 18, 2011

The End of the Eurozone?

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David McWilliams, Gabor Steingart, Joseph Stiglitz, Simon Wolfson and Stephanie Flanders. 2011 European Zeitgeist.

The Eurozone is suffering a crisis of confidence, with many questioning the future of the Euro and the EU alliance itself. Stephanie Flanders engages economic experts on both sides of the European debate. Can we afford to prop up the Euro? Is this just a financial crisis, or does it reflect broader challenges in bringing diverse nations together?

See more information about Zeitgeist here.


  1. kevinc

    I think Ireland has a unqiue perspective about the Euro that’s different from mainland Europe. As an Island, we need to get a flight or ferry to get to other countries. I live in Munich right now and can easily get a train or bus to Austria in an hour to go skiing or hiking. It doesn’t feel like you’ve even crossed a border, so economic issues aside, there’s a huge everyday practicality for the euro that is often discounted in economic discourse.

    You don’t want to change currencies every time you go for a short drive.

  2. posted this last article, might be more appropriate here:

    @citizenwhy,

    Re “do not know why Ireland, along with Britain, does not seek to join a Scandinavian Union rather than the EU, with each country retaining its own currency.”

    I don’t know whether the Scandinavian countries would be interested, but we certainly should. The Brits were right about Europe, it has fundamental flaws that helped bankrupt us. The experiment was tried and failed, time to move on.

    I presume you would see it operating along the lines of the British Commonwealth of Nations http://en.wikipedia.org/wiki/Commonwealth_of_Nations

    Thanks Malcolm re link to DmcW Zeitgeist video. Unlike you, I wasn’t at all impressed by David’s contribution. But I wasn’t impressed by other contributions as well:)

    It would appear, correct me if I’m wrong, David is for restructuring, but not for leaving the EMU; the latter was not proposed by him in the discussion exchanges. So is David joining the orchestra on the Titanic perhaps fed by the hope of a soft restructuring for us currently proposed for Greece.

    I listened to Lucinda Creighton our Minister for European Affairs on Morning Ireland, who was affronted when asked should we be comparing ourselves to Greece? She argued there was no comparison between ourselves and Greece as we had “a strong economy”.

    I hope no one from Germany, France or ECB was listening, or they’ll be raising our rate of interest. But we know she was delusional or plain wrong. Our economy, barely held alive by exports, is disappearing up its..fed by emigration and massive unemployment.Choked by banking debt.

    Everyone has their head in the sand at the moment with Noonan instead of calling for Puntnua with his begging bowl on sur la pont d’avignon, is having difficulty
    getting recognised by secretaries whose job it is to fob him off whenever he phones up for an appointment to discuss our dire situation.

    But then those who sing our swan song abound with stories of opportunities in our economy. Even DmcW is taking on employees:)

    Perhaps Lucinda and David are in the same boat talking up the opportunities and potential in our economy.

    If we get a soft restructuring, DmcW will throw his hat in the air, ‘I told you so’ and Lucinda will join in the celebrations. Meanwhile DmcW avoids the tag of economic bete noir in Ireland but retains a more commercially sound and marketable status as a critical light weight TouchStone.

    The fact is, Morgan Kelly, who borrowed:-) my ‘Charge of the Light Brigade’ metaphor though switching it to ‘Little Big Horn’ is right, we are on the slippery slope to nasty default. We’ve sent our 7th cavalry against the Lakota Sioux of the ECB and the Northern cheyenne indians of the French and the Finns.They’ve brought defeat and humiliation.

    http://www.fas.org/sgp/crs/row/RL34314.pdf

    Note UK is third highest holder of US securities, approx $800bn after China and Japan each $1200bn. One of the problems of our gombeens leaving the EMU is the fear we might at some stage give way to the Gadaffi’s in our midst, or the IRA; also we might be considerably worsened, if this were possible, by the politically and economically incompetent Creighton’s of this world.

    But if we were to leave the EMU, return to Puntnua,join the British Commonwealth of Nations under a new formal arrrangement to treat Ireland north and south as a single unit, then Geithner of the US treasury and the US government might also lend support.

    The 16000 thousand Portuguese football supporters in Dublin for the match might be able to afford a coffee and a pint at our PuntNua prices and we might have real numbers returning to work in eg the tourism industry.

    He’s going to do his DuckSoup link:) Hail Freedonia, Land of the brave and free:)

    http://bit.ly/i5Jobd

    “There’s one man too many in this room and I think it could be me” Lol

  3. The Dork of Cork

    Lord Blankfeins little friend Gabor strikes me as a vindictive little shit.
    David , you should have emphasized that if they want their money back we need to remain a tax haven.

    They cannot suck blood out of turnip fields.

    I personally would be happy ditching our corporate experiment if we got these debt pimps off our backs.

    I know your view is that we should remain in such exalted company but the only union I would be interested in now after listening to such creatures is with a Icelandic woman.

    Its time to leave me thinks.

    • stiofanc02

      Hey Dork, You Dorky S.O.B. have you seen Icelandic women? Huh?….. They are some of the most beautiful creatures on the face of the earth. You are 100% f’kn right!! Now, old horse breath, uh, I mean, the Queen is on the tube….I have to vomit.

  4. BrianC

    It was an interesting discussion. However, whilst discussing the solution to the problem there was no actual nailing of what is the real problem. No real point in discoursing my perspective of the real problem (fractional reserve banking does not work it compounds debt to the point the burden is to great for the revenue generation capacity of any economy).

    The US believes in buying their way out of an economic crisis and will endeavour to further cement their financial alliace to China to reinforce the ChinAmerican economic entity protecting the dollar as the premium trading currency. The Germans believe in austerity to correct wayward behaviour to achieve economic equilibrium. The Brits believe the only way out is to dismantle the Euro permiting each state the political autonomy to achieve equilibrium in the greater economic scheme of things. The French want to blame somebody anybody but themselves for the economic mess that prevails in Europe and the fact they have a lack lustre economy that has never created high growth.

    They (US, GB, D, F) are all understandably viewing the economic problem through their own natural national perspectives. They need to make sure that they are and remain the upper part of the pyramid retaining the greatest amount of influence and ultimate control of all wealth. Those economies such as Ireland and all other peripheral economies will be squeezed to comply to their will.

    The existence of soft tax regimes that favour companies retain the wealth they generate really upsets the hard core europeans. The disension that soft tax regimes creates can be elimiated in many favourable ways protecting the interest of all… too long to explain here.

    G Soros was right a common currency without a common treasury has created many unforseen problems that could have been seen by applying more foresight. The solution will eventually dawn on them that the only way to save the Euro is print more money at least 1.5 trillion. But doing such removes political leverage over the second tier weaker economies. And at that it is only a temporary solution as it will not be long before the debt burden grows and all return to square one.

    • Deco

      I think that you are correct. Eventually, they will resort to “Print-baby-print”.

      Especially, when it becomes abundantly clear that the official statistics in Spain are even less accurate, and more dodgy than the statistics coming from Greece. And this time it will not be the people’s fault for paying taxes. It will be the poltical and banking establishments responsibility for the messing.

      • A day or two ago the Us reached its debt ceiling allowed by Congress

        http://www.biodieselmagazine.com/articles/7805/u-s-reaches-debt-ceiling-again

        It cannot go on printing money, EU is in the same predicament, ultimately both currencies get debased.

        The result of US not extending the debt ceiling are seen as catastrophic…..

        • The problem is global debt which through deregulation and abandonment of the gold standard, has created a pile of toxic debt and financial paper that is fast becoming unmanageable. Economies have become dependent and reliant on debt and debt now exceeds the resources upon which it allegedly is based. Good money is debased by bad….We are not without similarity to conditions experienced by the Weimer Republic in Germany post World War One when it abandoned the gold standard to pay for its war, as Nixon did in early 70′s to pay for his war.

          http://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimer_Republic

          If money is printed, will this lead to hyperinflation and catastrophy; or will not printing lead to catastrophy and inflation.

          Interesting times.

          • BrianC

            Yes these are interesting times. What is more interesting is the fact that for all our intellectual prowess the economic problems we face are not being correctly defined. We are subject to a three dimensional world where two dimensional equations cannot deliver the required solutions.

            They will print more money there is no doubt about that what else is 2013 default about. And we will go around the board once again and arrive at square one at the same problem. But the speed that we go around the board will be much faster. We are destined to remain subject to the same fate of economic disequilibrium and turmoil as long as we are hostage to the same old conventional traditional thinking. A new model is required. So far nobody within the powers that preside over all of us has the brave vision to deliver the new thinking to create the new model. Our means and mechanism to enable the ‘equitable transfer of value’ is inadequate and all it does is present and award power to the few to gather wealth whilst investing the majority with ever increasing unsustainable debt.

            We can never achieve the right answer/ solution util we marshal ourselves to define the problem correctly. And there is no true will to achieve correct problem definition as the few have too much to loose. So in the meantime we are subjected to the temporary asinine quantative easing solution therefore must unwittingly accept the calamatous consequences of inflation deflation stagflation hyperinflation and whatever other type of crapologyation barren economic cares to deliver.

    • leewalshboy

      excellent point and like a good German car, well made.

  5. Deco

    Wolfson is making a point that everybody who has endured the nonsense coming from Brussels is about to awaken to. But he does this in a very clear, though understated manner.

    Basically, it was all a bit far-fetched to begin with. And he is acknowledging this.

    Eventually, there will be only one solution available – print, baby print. They will print the currency for the PIGIS. And the PIGIS, through their inept and often corrupt local elites will return the money to the bankers. And then it is finished, the Germans, the Dutch, the Scandinavians, and those who are responsible in the PIGIS countries will realise that the whole thing is a complete farce.

    Then, we will have a “95 Theses hammered to the door of Wittemburg Cathedral” moment. The corrupt hypocrisy of what is going on at the heart of the power structure, as well as the utterly invasive and absurd dictats will be laid bare for all to see. The printing press, and the media can be controlled by the juicy carrot of EU sponsored advertising. But the internet is more about people trying to find the truth of what is going on, and less about people waiting like sheep for instructions.

    • Deco

      I actually reckon the Euro has a better chance of lasting it than the current EU institutional superstate structure.

      The problem is not the Euro. It was an attempt to create a new silver standard for Europe like existed in the 1800s, and which ensured prosperity in the Latin countries.

      What people do not see, is that the real problem is the centralized control and power in Brussels, is now attracting lobbying and undue influence. And this is resulting in bondholder friendly bailout policies, like that which Sarkozy has been pushing persistently at the expense of honest decent taxpaying workers across Europe.

      The Euro is not in as bad shape as people think.

      But the Imperial project has been shown to be a dangerous and corrupting influence. And that will be impossible to cure, unless the entire thing is stepped down and in large part dismantled.

    • Deco

      I expect some sort of measure concerning the internet, a bit like measures in the 1530s concerning the printing press – to maintain the power structure.

  6. What an excellent discussion! In my opinion, you brained them, David. Loved the apposite Protestant v. Catholic division into sinners and lenders. The fallacy there of course is that the (inferential) saints, the lenders, failed all their risk management tests, so who are the REAL sinners? :)

    And Joe Stiglitz was wrong that no country should try to do its own thing on taxation. So Ireland MUST increase its company tax because tax competition’s a bad thing? Oh? What other sort of competition is bad, Joe, and what else must Ireland do? I thought you were a land tax advocate, Joe, so everyone must go to a land tax together, or none at all? (In reality, the first country that applies a significant one would generate such productivity that every other nation would HAVE to follow.)

    The so-called sinners should all flag their intention to default ASAP. As you said, David, Iceland has shown the way. It’s a no-brainer: don’t bail out the banks.

  7. I would have loved to see the whole discussion, I suppose this is just an excerpt, hence I find it very difficult to contribute plausible commentary. But two impressions I want to share.

    1. What the heck is so funny?

    Again, it is just an impression, but what struck me at first was the atmosphere in the panel.

    Forgive me, but the giggles and laughter were neither coming from a panel that just is enjoying themselves nor was this the laughter of nervousity because some high profile people were in the audience that knew what questions to ask.

    All the panel members are well used to be questioned by knowledgable people.

    I asked a few on their impression and they came up with the same feeling, this is the laughter of desperation, the laughter of people who have no clue what to do from here.

    Again, this impression can be wrong, but I just share it, although it is a long shot.

    2. Academic in deed at best

    At 16:00 a gentleman make this remark and asks whether this is not rather an academic discussion, and he points to the inflationary US politics and Chinese growth, the G-2 as some refer to already since a while, and that these circumstances, and I would add let alone Brazil India and other geopolitical circumstances, will cause the EU to be crushed.

    Joe’s answer went straight away to… well, you guessed it, liabilities and assets, and concludes that the good news for Europe would be these problems to be universal.

    On the plus side, of course he is right to point to debt default. When the first so called bailout strategies were discussed in the media, and denied in the periphery to take place, I made this comparison of someone drowning.

    The periphery states are drowning first in this flood, and the EU/IMF are throwing white and red painted millstones in the water, and asking them to hod on to them.

    Well, you guessed it, you hold on to them, you drown.

    To me, this snippet was a confirmation that the conventional thinking in economics has reached a point of urgency, urgency to reconsider and throw over board not millstones to drowning countries, but old and entrenched ideas, to make space for new thinking.

    Best
    Georg

    • Forgot to say… often in those discussions, I feel that there is a the lack to engage on the intersections where economics and other fields of our social structures are overlapping, global power dynamics perhaps being the most important.

  8. leewalshboy

    It angered me to listen to the panel attacking the Irish position on taxation. “Tax Poaching” is no way to run an economy and it failed. Another argument would be that Ireland never imposed military might on other nations in a bid to enforce her financial supremacy.
    I shudder when I hear the German panelist telling the world how we must educate the so called lesser states.
    Not communism, but a re-emerging fascism.

    Comparisons with The US are not valid as congress would never sanction austerity measures on 3 or 4 states alone without being held politically accountable.

  9. It is astonishing how little commentary on this clip appeared. Compared to other articles on this blog next to nothing.

    Then again, perhaps it is not!

    • Dorothy Jones

      David, Posters
      We are holding an alternative ‘EU summit’ in Achill this week with people from Greece, Germany, Poland and Canada. I have given this my own title: ‘No lads, the EU project actually does work….’ It’s not based on the economy [obviously] but on the other ‘stuff’ and personal relationships. We had Round 1 here in Dublin, lokking forward to the rest!!! Fortsetzung folgt……

    • Dorothy Jones

      And Georg
      The reason it works depends on the way in which one looks at it. You have to change the lens continually in order to achieve the image you desire – you are the expert in this field.
      It’s just a thought for now but the way that I see a solution is this:
      Much of the commenatry is based on finance and geography [underperforming, peripheral]. So it’s like drawing lines and allocating figures on a 2D map.
      So: Let’s take a different way of looking at the problem and look at it in layers:
      At the top; the relationship is not working because of wrestling: Ringen. Vested interests are attempting to consolidate their positions and the result is at best stasis and at worst default a la Argentinia.
      On a personal levelthe relationship works because of porosity: Durchdringlichkeit. People move, work together, build businesses and personal relationships. Now that has certainly worked.
      So it’s just a thought with which to start our little summit this week.
      In Italo Calvino’s Invisible Cities, Unsichtbare Staedte, the city of Venice is described in many different ways. The idea which interested me the most was that ecribing how the women found their own way of traversing the city. They could not appear in public without a man; so, as they used the rooftops to carry out houshold chores [no men there!! in this book anyway], they simply built bridges between the buildings and could move about as they pleased. This is not an exact analogy to what our group is trying to achieve, but it represents a different way of looking at the problem and as such, it seems a good place to start.
      Mendelsohn’s tower in Potsdam was one of the first buidlings designed using section rather than plan; a construction technology widely used at present, pioneered by people like Libeskind.
      I’d say you know that already though!!! Best from Dorothy

  10. [...] can watch the panel discussion mentioned above on the future of the euro here. tweetmeme_url = [...]

  11. Just watched this again.

    I think many of you need to re-examine your reasoning.

    Stiglitz is 100% right to have a go at our corporation tax rate as a strategy for growth. If one requires evidence that he is correct just look at Ireland. Our corporation tax may have attracted plenty of high value companies but where is the Irish IBM, Google, ARM?

    You can get some quick wins but you don’t create a sustainable economy based on low taxation alone, at some point you need also to create stuff (or services, ideas) people want to buy. The multinationals that are here are providing services internaly to their own organisations or they are in operations. None of them are involved in significant creative activity.

    Notwithstanding the current crisis situation, low corporate tax and the resultant FDI is heroin that we need to be weaned off. Of course doing this precipitously would be suicide but Gabor is bang on when he says we have to learn that success is difficult.

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