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

[turbobloke]

Smollet said:

Axionknight said:

That'll take years though, a decade, perhaps longer.

Well good things take time

On the other hand, so does a lingering painful death!

Which thing isn't much liked, to put it mildly.

[Steffan]

Axionknight said:

Art0ir said:

I've been following and occasionally posting on this thread for a few years now but this is the first time I've genuinely felt we're close to this all unravelling. Grexit really looks inevitable now. They need to default and Merkel won't risk political suicide by agreeing to that.

Once one leaves, devalues and starts growing again, what's to stop the rest?

As William Hague reminded us this week, if you have very different economies with artificially identical currencies and interest rates, then there will instead be huge disparity in wages, growth, employment and debt.

That'll take years though, a decade, perhaps longer.

I agree. There are no quick fixes for Greece.

One free of debt, Greece will be seriously hamstrung finanially.for the forseable future. If Greece recovers, which is not certain, by any means, that recovery will take many years. At best. The EU will inevitably offer support and succour to Greece because they cannot do otherwise with a mainland European State in such difficulty. Nevertheless the Greek population are facing a very torrid time.

The sting innthe tail in this will be in the consequences to the EU and the EU politicians, and to the EU Bureaucrats like Mario Draghi who repeatedly offered "Whatever it takes" as the "solution". It never was and never could have been. Greece should never have been within the EU with these fundamental economic failures so apparet, within the state.

I am concerned about the consequences to the strength of the Euro, and the credibility of the EU as a concept, in its current form and the serious consequences of Contagion onto the many other failing states. If the EU manage those probems as badly as this mess there really will be trouble.

[andy-xr]

Steffan said:

I agree. There are no quick fixes for Greece.

Who said anything about fixing things?! The deal is, make the problem go away...

Steffan said:

I am concerned about the consequences to the strength of the Euro, and the credibility of the EU as a concept, in its current form and the serious consequences of Contagion onto the many other failing states. If the EU manage those probems as badly as this mess there really will be trouble.

The € will be fine, it'll continue in one form or another long after we're dead and buried, the $ will prop it up because if EU countries want to trade with the rest of the world, and if the rest of the world wants to trade with Germany, France and Italy, they'll trade in € or punts or whatever they want to call it. I think Poland sitting on the sidelines waiting is kind of comical though, as if Germany is doing the bouncer routine with a one in one out mentality.

[matsoc]

I don't understand all the anti-EU and pro-Tsipras case many political parties are endorsing here in Italy in these days. Especially here in the north Italy can't be more different than Greece. Yes we have a huge debt but we relies on manufacturing and exports, with Euro and crisis in place exports has been steady rising since 2010 and reached 400 €Billions last year.

[Digga]

anonymous said:

[redacted]

Are you the PH candidate for Lega Nord!

As an outsider, I do see similarities in Italy and Greece WRT to tax avoidance/evasion and also to corruption and bribery - both private and public, although industrially, the Italians are clearly in a different place entirely.

[DAVEVO9]

https://www.youtube.com/watch?v=94UcyJnRcGU&fe...

[Mojocvh]

turbobloke said:

fblm said:

RYH64E said:

At the end of the negotiating sessions the EU representatives go home to countries where the banks are open, there's food on the shelves in shops, and people have money to pay for good and services. The Greeks go home to a country that's on a downward spiral, with none of the facilities the rest of us take for granted, and where things will only get worse. I wouldn't say the Greeks are winning.

I didn't say they were winning, there isn't a scenario where they 'win', DJRC pretty much nailed it previously. Germany has already won. Whatever you call it the referendum was a democratic rejection of the EU and the more often that happens the better IMO!

Democratic rejection of the EU as it stands, now, yes.

[matsoc]

anonymous said:

[redacted]

Well, in the north most of the population demands "fiscal federalism", since the the beginning of 2000s some move in that direction has been made but it is still limited and didn't help to reduce overall taxation, some Regions proved even less efficient than the central state in supplying services through pubblic spending.

Fiscal federalism is applied only in autonmous regions like the partially German speaking Trentino Alto Adige, they keep all the money they locally collect with taxes. Crossing the border with Veneto you immediately notice the difference, in Trentino the roads are in perfect conditions, city public transport is cheaper, even free in some smaller towns. Veneto is equally efficient and rich but huge part of the collected taxation go to central state.

On the other hand the South but even more Rome wouldn't be capable to sustain spending with the limited taxation they manage to collect.

[matsoc]

anonymous said:

[redacted]

Yes, I think too there are similarities even I don't know Greece very well, been there a lot of times but sailing from an island to another didn't say much about how the locals in mainland live.

But the point is that despite what Lega Nord and other parties say Euro has been good for Italy. Yes, our production output and internal demand hasn't raised but the companies had to become more technologically advanced to balance the increased labor cost and export in the EU and out grew. The company I work for supply mostly sheet metal stamped parts for automotive. 20 years ago it would have been working mostly for Fiat and partially for French carmakers. Now it works mostly for German car makers with an increased unit part cost, using more advanced materials and technologies, codesigning and developing the parts.

[Derek Smith]

Esseesse said:

IIRC they owe far less than Germany did after WW2, which was structured/repaid in a far less punishing way than is expected of the Greeks.

Germany was kept afloat by some inspired politics from the USA. Marshall Aid kept them solvent and the masses of American and other allied forces in their country was another source of income.

The Yanks stopped WWIII. The fact that they've started every other one does not mitigate their generosity in any way, albeit they did it for their own reasons. They wanted a prosperous and stable Germany which they thought would dominate Europe.

The country most hurt by the war was the UK. It was crippled and in a much worse state than it was at the start of the recession, and even worse than now after years of politicians working on it.

I knew a high ranking civil servant who worked on a plan, I think designed it, for putting school children out in the fields to get in the harvest. This in 1946 after a bad winter.

What saved this country was the loan that Keynes more or less negotiated - the last instalment being paid on 2005 - and the lion's share of Marshall Aid. That, and the fact that the Atlee government used the money to build infrastructure. Rationing stayed on in the UK longer than any other European country. I remember my gran saying that rationing stopped in Germany within 3(ish) years of the war ending due to the fact that America flew their surplus food into it, pushing down prices that the UK farmers could get for their stock.

God knows where she heard that. She hadn't seen a field since she'd left Ireland at the age of 14.

[Steffan]

anonymous said:

[redacted]

Very good to see the detailed experience of matsoc on the Italian life. Interesting and informative detailed account of the reality of the attitude of Italians to taxation. They avoid it generally in my experience. But Italy does have at least half the country earning a living especially in the North. So fundamentally better than the Greek disaster. I look forward to further updates in due course! Please !!;)

[Andy Zarse]

anonymous said:

[redacted]

So you don't think having a smaller economy now compared to when you joined the Eurozone is a bad thing?

Or that joining the Euro has crushed the Italian auto industry?

(As a petrolhead it breaks my heart to drive the Autostradas and see dull VWs and crappy little Mercs everywhere, and horrified to see Italian men all riding bloody BMWs and not Ducati/Guzzi).

[Enricogto]

I think that the situation for Italy is a lot more complicated than that.
Yes, tax avoidance and productivity sit at two very different levels between the North and the South, in a way you get Germany and Greece condensed in the same country, but the reality goes beyond that. Fiscal federalism works in a more complex way than the one described, with each region collecting some taxes and retaining circa 70% of that. The difference is redistributed according to an ill-thought mechanism by which the poorest regions get more money in a vain hope to close the gap. Fiscally autonomous regions are not the solution either, in the sense that Trentino Alto Adige is one, but Sicily is one too. Trentino collects about 9k € per habitant but spends almost 11k €. Sicily collects less than 2K but spends almost 6K. Not viable either approach. Mainly Lombardy and Emilia "fund" the rest of regions, by collecting way more than what they spend. Incidentally those two regions, together with Veneto and Piedmont, are also the ones with higher pro-capita GDP and lowest tax evasion rates.
The motorways clogged with German cars are also a symptom of the failure by Fiat to design modern products outside the well exploited sectors (Punto, Panda and 500).
In a modern market two things the Italian automotive industry has survived on, you can't do:
1)don't innovate, rely on old products occasionally revamped;
2)expect the devaluation of your own currency to compensate for losses of productivity and competitive level

All in all, as an Italian, as an Italian from the north, would I want my country to split or exit the Euro? No, of course no, I would want a country where the Government is able to provide services commensurate to the taxes it asks for and I would want it to be able to evenly cash this taxes in. Last week a study was published, showing that if in 2000 we had a serious crack at corruption and at reducing government overspending, our GDP today would be 280bn € higher than it is and debt/GDP ratio would be somewhere below 90% (aka A Dream).

[Steffan]

Derek Smith said:

Esseesse said:

IIRC they owe far less than Germany did after WW2, which was structured/repaid in a far less punishing way than is expected of the Greeks.

Germany was kept afloat by some inspired politics from the USA. Marshall Aid kept them solvent and the masses of American and other allied forces in their country was another source of income.

The Yanks stopped WWIII. The fact that they've started every other one does not mitigate their generosity in any way, albeit they did it for their own reasons. They wanted a prosperous and stable Germany which they thought would dominate Europe.

The country most hurt by the war was the UK. It was crippled and in a much worse state than it was at the start of the recession, and even worse than now after years of politicians working on it.

I knew a high ranking civil servant who worked on a plan, I think designed it, for putting school children out in the fields to get in the harvest. This in 1946 after a bad winter.

What saved this country was the loan that Keynes more or less negotiated - the last instalment being paid on 2005 - and the lion's share of Marshall Aid. That, and the fact that the Atlee government used the money to build infrastructure. Rationing stayed on in the UK longer than any other European country. I remember my gran saying that rationing stopped in Germany within 3(ish) years of the war ending due to the fact that America flew their surplus food into it, pushing down prices that the UK farmers could get for their stock.

God knows where she heard that. She hadn't seen a field since she'd left Ireland at the age of 14.

Seems a pretty fair assessement of the settlements with Germany after WWII which ensured recovery quickly. The British have a peculiar ability to win wars and then fail to recover the costs of the war from their opponents. WWI and WWII being prime examples. We leased huge armaments, shipping, aircraft etc from America in WWII. Paid the Aericans in full. We were on the winning side in bth WWI and WWII, with all the other allies including the huge commonwealth contingents, America ( who really won the war by sheer numbers and power) etc. We never got the costs back from Germany, in either case, because Germany was ruined in the wars. Once I can understand. Twice is just silly.

Interesting to hear of your Irish roots. One of the delights of the Irish (there are many) is the lasting strength of the families. Lot to be said for Catholic Guilt. In moderation!

[tumble dryer]

Enricogto said:

I think that the situation for Italy is a lot more complicated than that.
Yes, tax avoidance and productivity sit at two very different levels between the North and the South, in a way you get Germany and Greece condensed in the same country, but the reality goes beyond that. Fiscal federalism works in a more complex way than the one described, with each region collecting some taxes and retaining circa 70% of that. The difference is redistributed according to an ill-thought mechanism by which the poorest regions get more money in a vain hope to close the gap. Fiscally autonomous regions are not the solution either, in the sense that Trentino Alto Adige is one, but Sicily is one too. Trentino collects about 9k € per habitant but spends almost 11k €. Sicily collects less than 2K but spends almost 6K. Not viable either approach. Mainly Lombardy and Emilia "fund" the rest of regions, by collecting way more than what they spend. Incidentally those two regions, together with Veneto and Piedmont, are also the ones with higher pro-capita GDP and lowest tax evasion rates.
The motorways clogged with German cars are also a symptom of the failure by Fiat to design modern products outside the well exploited sectors (Punto, Panda and 500).
In a modern market two things the Italian automotive industry has survived on, you can't do:
1)don't innovate, rely on old products occasionally revamped;
2)expect the devaluation of your own currency to compensate for losses of productivity and competitive level

All in all, as an Italian, as an Italian from the north, would I want my country to split or exit the Euro? No, of course no, I would want a country where the Government is able to provide services commensurate to the taxes it asks for and I would want it to be able to evenly cash this taxes in. Last week a study was published, showing that if in 2000 we had a serious crack at corruption and at reducing government overspending, our GDP today would be 280bn € higher than it is and debt/GDP ratio would be somewhere below 90% (aka A Dream).

Excellent post.

[Digga]

Enricogto said:

Interesting stuff

Good post, thanks for your POV.

Enricogto said:

Last week a study was published, showing that if in 2000 we had a serious crack at corruption and at reducing government overspending, our GDP today would be 280bn € higher than it is and debt/GDP ratio would be somewhere below 90% (aka A Dream).

In truth, I doubt anyone really can know the effect, but I remain convinced corruption is a drag on economic efficiency for many reasons. It certainly makes it far easier for criminal elements to exist and manipulate markets to their own advantage.

[chris watton]

tumble dryer said:

Enricogto said:

I think that the situation for Italy is a lot more complicated than that.
Yes, tax avoidance and productivity sit at two very different levels between the North and the South, in a way you get Germany and Greece condensed in the same country, but the reality goes beyond that. Fiscal federalism works in a more complex way than the one described, with each region collecting some taxes and retaining circa 70% of that. The difference is redistributed according to an ill-thought mechanism by which the poorest regions get more money in a vain hope to close the gap. Fiscally autonomous regions are not the solution either, in the sense that Trentino Alto Adige is one, but Sicily is one too. Trentino collects about 9k € per habitant but spends almost 11k €. Sicily collects less than 2K but spends almost 6K. Not viable either approach. Mainly Lombardy and Emilia "fund" the rest of regions, by collecting way more than what they spend. Incidentally those two regions, together with Veneto and Piedmont, are also the ones with higher pro-capita GDP and lowest tax evasion rates.
The motorways clogged with German cars are also a symptom of the failure by Fiat to design modern products outside the well exploited sectors (Punto, Panda and 500).
In a modern market two things the Italian automotive industry has survived on, you can't do:
1)don't innovate, rely on old products occasionally revamped;
2)expect the devaluation of your own currency to compensate for losses of productivity and competitive level

All in all, as an Italian, as an Italian from the north, would I want my country to split or exit the Euro? No, of course no, I would want a country where the Government is able to provide services commensurate to the taxes it asks for and I would want it to be able to evenly cash this taxes in. Last week a study was published, showing that if in 2000 we had a serious crack at corruption and at reducing government overspending, our GDP today would be 280bn € higher than it is and debt/GDP ratio would be somewhere below 90% (aka A Dream).

Excellent post.

Indeed. the trouble with the Italian tax and NI system is that they simply take too much off you, so many are forced to avoid/evade paying what they owe. I know that when I worked there, I only kept 36 Cents out of every Euro I earned (40% tax and 24% NI), and on top of that, by law, I had to have an accountant, who charged double what I pay here in the UK. There is no starting rate like here in the UK, every single Euro you earn, whether you're on 6000 or 600000 Euros, you pay tax on.

Even the lawyer who sorted out house buying wanted half the bill in cash, so he didn't have to declare it - it's mental!

The UK is a tax haven by comparison!

[Derek Smith]

Steffan said:

Seems a pretty fair assessement of the settlements with Germany after WWII which ensured recovery quickly. The British have a peculiar ability to win wars and then fail to recover the costs of the war from their opponents. WWI and WWII being prime examples. We leased huge armaments, shipping, aircraft etc from America in WWII. Paid the Aericans in full. We were on the winning side in bth WWI and WWII, with all the other allies including the huge commonwealth contingents, America ( who really won the war by sheer numbers and power) etc. We never got the costs back from Germany, in either case, because Germany was ruined in the wars. Once I can understand. Twice is just silly.

Interesting to hear of your Irish roots. One of the delights of the Irish (there are many) is the lasting strength of the families. Lot to be said for Catholic Guilt. In moderation!

Reparations ensured that there would be a second installment. My history teacher always said WWI started in 1914 and ended in 1945, with a rest period in between. Beggaring a country never works. It builds up resentment. The Yanks got it right in the main with throwing money at Germany to stabilise it. Without that Russia would probably have moved west.

Whilst we were told that the UK received the biggest slice of Marshall Aid, if you take into account all the support given Germany immediately post war, it is not quite so clear.

My relations were very 'political', two or three being communists and one fighting for the international brigade in Spain, and they supported the funding of Germany, accepting it as a political move, but realising the danger from the USSR as was.

I was part of a biggish family: my mother, 1/2 Irish, was one of 8 kids and my father one of 18. My gran used to call us bog Irish, leaving the 'and so what' unsaid. The two wars, the war perhaps, killed five of my father's brothers and every sister who was married lost a husband. I was reminded recently that one aunt of mine lost a husband in WWI and WWII, not a unique situation where sailors were hubbies.

Remembrance Sunday was a day when I was surrounded by old women.

But the family bond was something I didn't really appreciate until I was older. I never thought of it as Irish but just an extended family. My gran 'adopted' various people as well, with me calling half the women in my street auntie.

[Steffan]

Derek Smith said:

Steffan said:

Seems a pretty fair assessement of the settlements with Germany after WWII which ensured recovery quickly. The British have a peculiar ability to win wars and then fail to recover the costs of the war from their opponents. WWI and WWII being prime examples. We leased huge armaments, shipping, aircraft etc from America in WWII. Paid the Aericans in full. We were on the winning side in bth WWI and WWII, with all the other allies including the huge commonwealth contingents, America ( who really won the war by sheer numbers and power) etc. We never got the costs back from Germany, in either case, because Germany was ruined in the wars. Once I can understand. Twice is just silly.

Interesting to hear of your Irish roots. One of the delights of the Irish (there are many) is the lasting strength of the families. Lot to be said for Catholic Guilt. In moderation!

Reparations ensured that there would be a second installment. My history teacher always said WWI started in 1914 and ended in 1945, with a rest period in between. Beggaring a country never works. It builds up resentment. The Yanks got it right in the main with throwing money at Germany to stabilise it. Without that Russia would probably have moved west.

Whilst we were told that the UK received the biggest slice of Marshall Aid, if you take into account all the support given Germany immediately post war, it is not quite so clear.

My relations were very 'political', two or three being communists and one fighting for the international brigade in Spain, and they supported the funding of Germany, accepting it as a political move, but realising the danger from the USSR as was.

I was part of a biggish family: my mother, 1/2 Irish, was one of 8 kids and my father one of 18. My gran used to call us bog Irish, leaving the 'and so what' unsaid. The two wars, the war perhaps, killed five of my father's brothers and every sister who was married lost a husband. I was reminded recently that one aunt of mine lost a husband in WWI and WWII, not a unique situation where sailors were hubbies.

Remembrance Sunday was a day when I was surrounded by old women.

But the family bond was something I didn't really appreciate until I was older. I never thought of it as Irish but just an extended family. My gran 'adopted' various people as well, with me calling half the women in my street auntie.

I rather suspected that would be the case from your earlier comments. Your parents and the wider family clearly had a huge influence upon your childhood and development, as did mine as the Son of the Manse with a Archdeacon father and head teacher mother. Huge and singularly constructive influence.

On the subject of this thread, the phrase "Rock and a hard place"come to mind. Whatever is decided the EU is changing and will undergo significant further changes. No lasting solution has been found for the problem of Greece, nor will one be found. Whatever the EU do now, they are damned either way. Big mistake by the EU who have hopelessly over reached themselves. Greece cannot regain solvency therefore Greece must and will in the end, fall away from the EU.

Can there be any more nonsence extensions? Possibly but the ridiculous nonsense of the EU needing to establish credibility in this failure suggests to me, that is highly unlikely. Matter of time!

[LongQ]

Today's Alex cartoon covering Greece and the Chinese Stock market situation.

http://www.alexcartoon.com/index.cfm?cartoons_id=4...


Interesting times all round it seems.