Is the end nigh for the Euro? [vol. 3]

Is the end nigh for the Euro? [vol. 3]

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Discussion

LongQ

13,864 posts

232 months

Monday 3rd November 2014
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A small anecdote.

My younger daughter, after graduation, decided to give London a go for a few years. She managed to get a job quickly, not what she was looking for but it was a job. There she met a young French woman doing much the same thing. They both left after a few months but kept in touch and still do. The French lady, working in London, met an Italian chap and a coupld of yuears ago they married in Paris. But they still work in London.

I met them at a wedding in December last year. (Mutual English friend of my Daughter that we have known since they were children) and found both the French lady and the Italian gentleman to be nice people (beyond nice in fact) and good company. Both are still in their 20s or were at that time.

I asked the Italian chap what he did and what attracted him to working in London.

He replied that he worked in Restaurant consultancy helping (mainly Italian) restaurants obtain better results.

Why, I asked, had he chosen London for such a career rather than Italy?

The answer was that there was a corporate opportunity in the UK that did not exist in Italy. Italy has family owned businesses in social situations and such arrangements are not so conducive to change or making a living out of consultancy. Corporate chains of nominally "family" run Italian Restaurants in the London and the wider UK are a more lucrative market.

Now I have no idea whether that is fact or wishful thinking on somebody's part - but it sort of made sense as an explanation.

Is it the sort of situation that does indeed offer an opportunity in the UK that may not exist "back at home", wherever home may be.

How does that tale relate to Italy's situation and is the implication positive, negative or neutral? I have no idea.

Enricogto

646 posts

144 months

Monday 3rd November 2014
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Jogon, between 4 and 5 times.

Steffan, the politicians know perfectly well what needs to be done, but who wants to be the one sinking the party for the next 30 years or facing massive protests?

LongQ, that's quite a peculiar case, me too I've never heard of such job, although it seems quite interesting. Consider though that it's not that (neither mine) job that it's going to alter the current situation. It's not even a matter of pure competitiveness of wages. What kills the situation is that if I'm the employer and I pay you 1K (let's say as an example), my real cost is about 2.1K, and out of the 1K you receive, after taxes you are left with 600 £. Where goes the wedge? Taxes. Or better, pays the salaries for an immense plethora of public workers. That vote. That's why before EU election this year Renzi gave each person with an annual income lower than 30K € 80€ per month extra. At the same time though, he marginally increased a wide range of taxes and duties and by 2017 VAT will be at 25%. This way he secured victory for his party at the elections, and after an initial success people are now realising the price of those 80€. But how to kick the can further down the road, as we say in Italy, will be a problem for who will be ruling then.

Edited by Enricogto on Monday 3rd November 21:05

LongQ

13,864 posts

232 months

Monday 3rd November 2014
quotequote all
Enricogto said:
Jogon, between 4 and 5 times.

Steffan, the politicians know perfectly well what needs to be done, but who wants to be the one sinking the party for the next 30 years or facing massive protests?

LongQ, that's quite a peculiar case, me too I've never heard of such job, although it seems quite interesting. Consider though that it's not that (neither mine) job that it's going to alter the current situation. It's not even a matter of pure competitiveness of wages. What kills the situation is that if I'm the employer and I pay you 1K (let's say as an example), my real cost is about 2.1K, and out of the 1K you receive, after taxes you are left with 600 £. Where goes the wedge? Taxes. Or better, pays the salaries for an immense plethora of public workers. That vote. That's why before EU election this year Renzi gave each person with an annual income lower than 30K € 80€ per month extra. At the same time though, he marginally increased a wide range of taxes and duties and by 2017 VAT will be at 25%. This way he secured victory for his party at the elections, and after an initial success people are now realising the price of those 80€. But how to kick the can further down the road, as we say in Italy, will be a problem for who will be ruling then.

Edited by Enricogto on Monday 3rd November 21:05
The can public kicking,for longer or shorter distances, has been a factor of politics ever since the right to vote was offered to the masses. Before that other factors were in play - though the effects were really rather similar.

One of the odd things about such a job function of course is that it can really only exist in an era that is inherently wealthy enough for corporate food chains to need it and to be able to justify paying for the expertise.

Enricogto

646 posts

144 months

Monday 3rd November 2014
quotequote all
Yes and no.

What I meant is that is not the possibility for an unusual job in an affluent market that determines the economic success of an area. There is an entire sector connected with ski holidays or beach resorts that for example is absent in the UK but present in Italy. What dampens the possibility to prosper is the bureaucracy and the inefficiencies connected with public services.

LongQ

13,864 posts

232 months

Tuesday 4th November 2014
quotequote all
Enricogto said:
Yes and no.

What I meant is that is not the possibility for an unusual job in an affluent market that determines the economic success of an area. There is an entire sector connected with ski holidays or beach resorts that for example is absent in the UK but present in Italy. What dampens the possibility to prosper is the bureaucracy and the inefficiencies connected with public services.
I take your points and agree although I am suspicious that there are significant inefficiencies inherent in all bureaucratic systems - including private industries - but some are more visible (or perhaps less well buried) than others.

If the end result is the same in terms of delays and inefficiencies it doesn't really matter whether the operational side of things can be clearly seen to be indolent and beyond "laid back" or appears to be "working hard" yet still achieves poor results. In many ways I would prefer to know that things are going to be slow and inefficient rather than expect efficiency and have it fail to materialise.

Just my views of course. I have no doubt that most would take a different line.

Digga

40,207 posts

282 months

Tuesday 4th November 2014
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Steffan said:
Interesting and challenging to hear your views. I cannot see how Italy can recover, given the reality of the extent of the bureacracy etc. Nor can I see how Greece, Portugal, Spain, France and all the other failing sovereign states within the EU can possibly continue with this apparent nonsense...
To echo what Enricogto says, I can confirm similar sorts of barriers to enterprise exist in Greece. My BIL is currently wrestling with the anti-business system, an example of which is registered businesses having to sign up to pay about 300 EUR a month tax, whether or not they are actually achieving any turnover, let alone profit.

That the Troika are so blind as to not spot the basic flaws in the various systems in play is depressing and telling.

RYH64E

7,960 posts

243 months

Tuesday 4th November 2014
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Digga said:
My BIL is currently wrestling with the anti-business system, an example of which is registered businesses having to sign up to pay about 300 EUR a month tax, whether or not they are actually achieving any turnover, let alone profit.
A bit like the £1500 per month I have to pay in the UK regardless of turnover, that one's called business rates, or the £2250 per month I have to pay for employers NI before I sell anything. Doesn't mean the end of the GBP is any more nigh than the euro...

Andy Zarse

10,868 posts

246 months

Tuesday 4th November 2014
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Catalan vote declared illegal by Spanish Court, going ahead anyway...

http://english.vilaweb.cat/politics/catalonia-main...

Steffan

10,362 posts

227 months

Tuesday 4th November 2014
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RYH64E said:
Digga said:
My BIL is currently wrestling with the anti-business system, an example of which is registered businesses having to sign up to pay about 300 EUR a month tax, whether or not they are actually achieving any turnover, let alone profit.
A bit like the £1500 per month I have to pay in the UK regardless of turnover, that one's called business rates, or the £2250 per month I have to pay for employers NI before I sell anything. Doesn't mean the end of the GBP is any more nigh than the euro...
You are of course quite right that the UK has equally unproductive and onerous taxation legislation. This is just one of the consequences of the modern political approach of get as much out of the taxpayers as you can so beloved of the boys club that runs modern politics. I find it less than surprising that so many modern businesses are set up trading over the net and often run (at least initially) from residential premises acting as a store and office, because taxes such as business rates are only applicabable if you have business premises. I have literally lost count of the number of start up businesses that I am now aware of that are based in residential accommodation thus avoiding such taxes. Indeed I cannot understand anyone in business not always adopting the most tax efficient business structure from the start on every occasion because the savings are permanent and substantial. Why would you not adopt that approach if your business can avail itself of such savings? Taxation is largely a voluntary process as the constantly falling take on PAYE demonstrates within the UK.

I find the concerns and comments that Starbucks, Costa Coffee, and many many other substantial businesses avoid Corporation Tax and the like understandable but based on a false premis. That is their legitimate choice providing the returns are correctly completed and given the PLC status, and the likekelyhood of one of the big Accountancy firrms being responsible is highly probable. I have never seen a moral element in Taxation. It is simply a matter of mathematics and understanding the rules.

What I cannot understand in the EU nonsense, as it has now become, is the sealed in aspic steady decline and failure of the failing Sovereign States within the EU who are visibly (I live in Italy currently and have seen the changes year upon year over the last three years) failing to recover in any sense and sliding steadily into abject financial collapse. The fact that they can borrow the money needed to survive at preferential interest rates from the EU is a complete nonsense economically.

None of these states are going to recover. They cannot afford the lifestyles they have had or to remain within a currency dominated by Germany. But that is the aim, apparently of the EU. Nothing that the EU has done has really improved the financial state of theses economies nor can it possibly do so. They are hopelessly insolvent and have been for years. I cannot see any hope of recovery and I do not think there will be one. Simply a matter of time IMO. But clearly the EU can keep this going currently. Not for long I believe.

The UK still has its demons economically, public sector borrowing being our bête noire. However in the world financial markets the Sterling rates reflect the reality of our currencies value as viewed by the marketplace. This is an inherent strength which these failing states cannot create. We may have difficulties but these failing states within the EA are way beyond the point of being able to address their problems. This " Hide eveything and keep taking the money" approach of keeoing failing states held within a currency that they could never afford to remain within must eventually collapse. When it does the consequences will be horrendous. I am very unhappy that this situation has been created by the EA and their gravy train approach. But it is a fact and there cannot be any other result.

Digga

40,207 posts

282 months

Tuesday 4th November 2014
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RYH64E said:
Digga said:
My BIL is currently wrestling with the anti-business system, an example of which is registered businesses having to sign up to pay about 300 EUR a month tax, whether or not they are actually achieving any turnover, let alone profit.
A bit like the £1500 per month I have to pay in the UK regardless of turnover, that one's called business rates, or the £2250 per month I have to pay for employers NI before I sell anything. Doesn't mean the end of the GBP is any more nigh than the euro...
Nothing like really.

Business rates (BR) are a consumptive tax - derived from rental values, whereas the Greek business tax structure will extract money even for effectively dormant entities.

Don't get me wrong, I think BR are extremely damaging, especially for certain types and sizes of business. They are also extremely bad for economic flexibility because, under the current regime, they are a significant disincentive for developers building speculative commercial and industrial property, which means there are shortages of buildings for new or expanding businesses to utilise.

RYH64E

7,960 posts

243 months

Tuesday 4th November 2014
quotequote all
Digga said:
Nothing like really.
Seems the same to me, I get hit with at least £4k per month in tax before I've opened the doors or bought or sold anything, let alone made a profit. I'd be happy to settle for just eur300, that's a bargain.

Andy Zarse

10,868 posts

246 months

Tuesday 4th November 2014
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RYH64E said:
Digga said:
Nothing like really.
Seems the same to me, I get hit with at least £4k per month in tax before I've opened the doors or bought or sold anything, let alone made a profit. I'd be happy to settle for just eur300, that's a bargain.
Kindly refrain from being so wilfully and deliberately thick. You pay your £4kpm rates because you have chosen to base your firm in a certain building of a certain type/size, and in a certain neighbourhood. If you moved and worked from home you would pay fk all. Or move into an Enterprise Zone where you could get up to ten years with no rates.

The fees Digga refers to are levied on all businesses, irrespective of the level of trade. I guess it's similar to our annual filing fee at Companies House, currently £14pa IIRC.

France is probably the worst offender in terms of social costs to employers, if not in actual mind-bogglingly wasteful bureaucracy:

“For every 50 cents the employee gets,” says Annabelle Gausserand, co-owner with her husband, Nicolas, of Next Media Factory, a producer of specialised medical videos and communications tools, located on the Canal du Midi a little way out from the centre of Toulouse, “I have to pay the state one euro.” To demonstrate the point, she shows me a payslip that details a bewildering array of different charges. I count at least 12 before (for reasons of confidentiality) she pulls it away, including something called a “generalised social contribution” – a relatively recent addition to help deal with the deficit – and a mysteriously labelled “contribution to social autonomy and solidarity”. Other charges include pensions, health care, family allowance, workplace accidents, training and so on. She shrugs her shoulders in classically Gallic fashion: “I don’t know what they are all for. It’s just a time-wasting expense as far as I’m concerned.

“For sure, if I didn’t have to pay so much to the state, I would employ more people, but it is a struggle as things stand. We did take on a full-time employee recently, someone who was long-term unemployed, and we asked whether there was any help with social taxes for a small enterprise like ours. They said, if you were a charity, there would be help, but because you are a profit-making business, there is none. This is typical of the attitude. We are treated with suspicion, as if we are guilty of something or trying to cheat them. The tax demands we get are close to extortion.”

http://www.telegraph.co.uk/news/worldnews/europe/f...

Digga

40,207 posts

282 months

Tuesday 4th November 2014
quotequote all
Andy Zarse said:
“For sure, if I didn’t have to pay so much to the state, I would employ more people, but it is a struggle as things stand. We did take on a full-time employee recently, someone who was long-term unemployed, and we asked whether there was any help with social taxes for a small enterprise like ours. They said, if you were a charity, there would be help, but because you are a profit-making business, there is none. This is typical of the attitude. We are treated with suspicion, as if we are guilty of something or trying to cheat them. The tax demands we get are close to extortion.”
To be frank, if you inserted that into an article about UK business, especially high street shops, it would not look out of place. And the complaints about business rates too are certainly high on the list of suggested aggravating factors for the death of small shops.

The ruling on holiday overtime compensatory pay (covered in more detail elsewhere on PH) is yet another example of bonkers, EU anti-business steam-rollering.

Andy Zarse

10,868 posts

246 months

Tuesday 4th November 2014
quotequote all
Digga said:
The ruling on holiday overtime compensatory pay (covered in more detail elsewhere on PH) is yet another example of bonkers, EU anti-business steam-rollering.
It will help us compete in world markets...

The Americans/Japanese etc must be pissing their pants about it.

RYH64E

7,960 posts

243 months

Tuesday 4th November 2014
quotequote all
Andy Zarse said:
Kindly refrain from being so wilfully and deliberately thick.
The point that I was trying to make is that I'm sure that Greece has arbitrary taxes on business, France also has arbitrary taxes on business, and the UK has arbitrary taxes on business. When I was last in China my supplier there was complaining about arbitrary taxes on his business, it's universal and hardly a sign of impending doom for the euro zone.

If you want to get irate about a business tax then choose the UK's Employers NI, that's nothing more than a tax on employing people and completely unjustifiable imo.

Andy Zarse

10,868 posts

246 months

Tuesday 4th November 2014
quotequote all
RYH64E said:
The point that I was trying to make is that I'm sure that Greece has arbitrary taxes on business, France also has arbitrary taxes on business, and the UK has arbitrary taxes on business.
Indeed they do, but I don't believe we have arbitrary taxes levied by HMRC contingent on a corporate body simply existing (without trading). And certainly not at EU300 per month.

Digga's original point was, I think, to illustrate the difficulties faced by start-ups and how the peripheral economies had totally failed to reform and make it easier to start a business, despite all the stick-waving by the Troika for the last three years. No wonder they have such huge black economies.

Do you honestly believe it is just as simple to set up a very modest business in Italy, France or Greece as it is in the UK? Honestly, it almost couldn't be easier here.

RYH64E

7,960 posts

243 months

Tuesday 4th November 2014
quotequote all
Andy Zarse said:
Do you honestly believe it is just as simple to set up a very modest business in Italy, France or Greece as it is in the UK? Honestly, it almost couldn't be easier here.
It may be easy to set up a very modest business in the UK, but it certainly isn't easy running a proper small/medium sized business here, with premises and staff and all the associated costs. Established small/medium companies contribute more to the UK economy than a plethora of one man band contractors running from limited companies so that they can pay themselves via dividends rather than salary. Small/medium sized companies in the UK should be nurtured by government and encouraged to grow, not hammered with taxes that actually discourage growth, such as Business Rates and Employers NI.

And as for your previous comment about avoiding business rates by working from home, how big do you think my house is?

YankeePorker

4,763 posts

240 months

Tuesday 4th November 2014
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Andy said:
Do you honestly believe it is just as simple to set up a very modest business in Italy, France or Greece as it is in the UK? Honestly, it almost couldn't be easier here.
I recall reading a study years ago in the Economist where it was reported that the Brit government were looking at how to rationalise the process of starting a business. At the time there were 8 steps in the bureaucratic process to open a business, in the UK, compared to 6 in the US and only 4 in Australia (if I recall correctly). In France it was reported that there were 65 hurdles to jump.....biglaugh

When I opened a business in France for my consulting work it took ages to set up, and I was then engulfed by a bewildering amount of mail from all the various institutions taxing me. I recall commenting to my accountant that even if I could read French well and considered myself to be reasonably intelligent, some of the paperwork demands made no sense to me, probably because I was British. He said "Non, don't worry, most French people can't understand all this st either!". Closing that business earlier this year made me so happy.

Back on topic, the economic downturn in the EU is even making the press here in the US so it must be bad! Various talking heads on the radio this morning saying that the ECB needs to act more aggressively like the Fed to avoid deflation. Obviously they seemed to think that more asset buying and QE is the way to go. Funny that they can't see that the QE here has just created a dependence economy and another big bubble that will burst even more painfully when the st finally hits the fan.

YOU CAN'T SOLVE A DEBT PROBLEM BY CREATING EVEN MORE DEBT FFS! YOU'LL JUST HAVE EVEN BIGGER PROBLEMS FURTHER DOWN THE ROAD.

AJS-

15,366 posts

235 months

Tuesday 4th November 2014
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YankeePorker said:
Back on topic, the economic downturn in the EU is even making the press here in the US so it must be bad! Various talking heads on the radio this morning saying that the ECB needs to act more aggressively like the Fed to avoid deflation. Obviously they seemed to think that more asset buying and QE is the way to go. Funny that they can't see that the QE here has just created a dependence economy and another big bubble that will burst even more painfully when the st finally hits the fan.

YOU CAN'T SOLVE A DEBT PROBLEM BY CREATING EVEN MORE DEBT FFS! YOU'LL JUST HAVE EVEN BIGGER PROBLEMS FURTHER DOWN THE ROAD.
It depends what your problem with the debt is. If it's that the debt will ultimately spiral out of control, make your economy uncompetitive, your currency unstable and lead to economic stagnation, then no, you can't solve it with more debt. If the problem is that you might make yourself and your party unpopular by making the necessary spending cuts then sure you can "solve" the problem by borrowing more!

YankeePorker

4,763 posts

240 months

Tuesday 4th November 2014
quotequote all
AJS- said:
It depends what your problem with the debt is. If it's that the debt will ultimately spiral out of control, make your economy uncompetitive, your currency unstable and lead to economic stagnation, then no, you can't solve it with more debt. If the problem is that you might make yourself and your party unpopular by making the necessary spending cuts then sure you can "solve" the problem by borrowing more!
True. Cynical but pragmatic, sadly that reflects short term politics. What political party would ever develop a 20 year plan and invest accordingly knowing that the results of their spending would not yet be evident by the next election? Unfortunately that could only work for a benign dictator who doesn't have to worry about re-election, and that kind of dumps on the principles of democracy......