Europe heading into recession
Discussion
smifffymoto said:
When we talk fiscal union are we suggesting total harmonisation,tax,vat,interest rates even wages?
Or am I overthinking it?
Yep. A eurozone budget. Likely excluding wages though. Or am I overthinking it?
Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
Sway said:
Yep. A eurozone budget. Likely excluding wages though.
Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
It is, but I find it very hard to see Germany being willing to transfer wealth from it’s budget surplus to Greece or Italy, which is the core of what that would entail.Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
Sway said:
smifffymoto said:
When we talk fiscal union are we suggesting total harmonisation,tax,vat,interest rates even wages?
Or am I overthinking it?
Yep. A eurozone budget. Likely excluding wages though. Or am I overthinking it?
Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
The banking issue is that the ECB is the central bank for the Eurozone, but individual banks are 'guaranteed' by their respective national banks. The key drawback being that these national reserve banks are not in control of their currency like the Fed or BoE. Again, union at this stage looks unlikely.
Sway said:
smifffymoto said:
When we talk fiscal union are we suggesting total harmonisation,tax,vat,interest rates even wages?
Or am I overthinking it?
Yep. A eurozone budget. Likely excluding wages though. Or am I overthinking it?
Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
loafer123 said:
Sway said:
Yep. A eurozone budget. Likely excluding wages though.
Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
It is, but I find it very hard to see Germany being willing to transfer wealth from it’s budget surplus to Greece or Italy, which is the core of what that would entail.Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
After all, all that balance Germany is "owed" - effectively printed by the Bundesbank, as nothing transferred from say Italian BMW buyer to German manufacturer. In the middle the Italian Central Bank kept the dosh (and spent it), and the German central Bank created it and put it in BMW's account...
Take out T2 liability growth, and Germany doesn't have a surplus (or it's tiny).
I'm not saying it's palatable - it's not.
However, it is the only answer for the Eurozone to survive. It simply cannot work without it (which is why there isn't another example of anything like this anywhere else, ever (to the best of my knowledge!)).
My point, is that measures can and have been taken in a crisis, that would not have been palatable before. The EU have already said they use crisis as a means to implement things that would not be accepted in 'normal' times - of course, once normality resumes it doesn't roll back either...
As I said originally - these are my most cynical thoughts. And I do try not to ascribe malice when stupidity could be the reason...
A few years old now, but a good read. Nothing’s changed other than being further down the road
https://www.spiegel.de/international/europe/the-ti...
https://www.spiegel.de/international/europe/the-ti...
stongle said:
My response will deam with your first and last points, if ok?
I actually don't think its that harsh, tbh.
He knows full well the state of the European Banking system, they have the worst leverage ratio's globally. He knows that most of the european market is loan based rather than securitised (so the preferred methods of MP will always gross them up). He knows that after your first shot of NIRP or QE its pretty much exhausted. He knows the EC is desperatly fighting back on post crisis regs - such as mininum capital standards. If they do TLTROs (which is a subsid), I'm half expecting Vestager to come up with a new accounting standard.
In fact the reason i've a poor view, is that the EC is making the system less safe - and he's not saying anything or pushing back. He's not an idiot.
I know he was better than before, but he's done a shot of this, big bazooka of that; and finally it's kitchen sink?
Of course he had do it though, because he did'nt or was unable to do persuade the Eurozone states to do fiscal intervention. Which as you say is not his mandate. I know the central bankers have been calling it in since Jackson Hole is 16/17; but the euro governments arent listening. Ze Germans are always "Nein, zere is zero to see here", and the others can't for political reasons.
Harsh, but fair. Methinks.
All fair points I agree but in context of what Draghi could do given the hand he was dealt with, I don't think the ECB has done too badly. With pretty much a single statement Draghi had managed to push the eurozone from 2012 when it was very seriously creaking towards a point where they could get to in one piece ie today. Which while not exactly great is let's face it, one heck of a lot better than 2011/12. The ECB council has also (broadly) kept Weidmann onside without him going apesI actually don't think its that harsh, tbh.
He knows full well the state of the European Banking system, they have the worst leverage ratio's globally. He knows that most of the european market is loan based rather than securitised (so the preferred methods of MP will always gross them up). He knows that after your first shot of NIRP or QE its pretty much exhausted. He knows the EC is desperatly fighting back on post crisis regs - such as mininum capital standards. If they do TLTROs (which is a subsid), I'm half expecting Vestager to come up with a new accounting standard.
In fact the reason i've a poor view, is that the EC is making the system less safe - and he's not saying anything or pushing back. He's not an idiot.
I know he was better than before, but he's done a shot of this, big bazooka of that; and finally it's kitchen sink?
Of course he had do it though, because he did'nt or was unable to do persuade the Eurozone states to do fiscal intervention. Which as you say is not his mandate. I know the central bankers have been calling it in since Jackson Hole is 16/17; but the euro governments arent listening. Ze Germans are always "Nein, zere is zero to see here", and the others can't for political reasons.
Harsh, but fair. Methinks.
t and whatever actions the ECB can take is not just potentially politically limited but also limited wrt to the impact on parts of the euro banking system. One of the posts above suggests the ECB hasn't done enough to clean up the banking system which is possibly true but if the ECB ended up redrawing regulatory requirements and therefore sinking half the italian banks (even if they are effectively mostly zombified already) they will be crucified. Ultimately he's having to balance a pretty fine political line between the germans/dutch and pretty much everyone else. Out of interest, what else do you think the ECB could/should realistically have done?
s2art said:
Sway said:
smifffymoto said:
When we talk fiscal union are we suggesting total harmonisation,tax,vat,interest rates even wages?
Or am I overthinking it?
Yep. A eurozone budget. Likely excluding wages though. Or am I overthinking it?
Today, you have national central banks (such as the Bundesbank) and the ECB.
Stongle will likely clarify /correct me, but to this observer that's the root cause of pretty much all the litany of issues intrinsic to the Eurozone.
It has to happen though. Either that or they take steps very far back with the Euro...and politically they don't want to do that either.
Rocks.
Hard places.
isaldiri said:
Out of interest, what else do you think the ECB could/should realistically have done?
Truthfully, almost nothing. They are doomed from the outset. The Central Bankers have a mandate or playbook to work too. They are basically a braking system, not the engine.Despite favouring BREXIT Im a bit of Carney fan. Tells it how it is, made a bad call in 2016 with the cut; but by and large a straight shooter. Draghi too, the problem is the real medicine is unpalatable. I've been in the room when Carney speaks, but the reporting in the FT is naughty.
In a nutshell, MP needs trickle down to work, it runs into politic when govts then want to smash the middle classes on tax. Politics are creating too much transmission loss. Billionaires can't en-masse drag the working class up, you need tte middle class to do it. But everywhere they have a wealth threat hanging over their (middle class) heads. Too easy to tax. Relying on big companies to do it, isnt working that well.
I'm probably rambling. And this is without data, but its been banging around my head.
Edited by stongle on Saturday 17th August 06:10
stongle said:
I've been in the room when Carney speaks, but the reporting in the FT is naughty.
I mentioned this the other day. It isn't just the FT, CH4 news, BBC News, Sky News etc. all twist what he says to fit their agenda and it really doesn't help.
I think the Band of England should stream his conferences live in full so people can see what is really said and why it is said.
Mind you, most wouldn't bother watching it anyway.
stongle said:
In a nutshell, MP needs trickle down to work, it runs into politic when govts then want to smash the middle classes on tax. Politics are creating too much transmission loss. Billionaires can't en-masse drag the working class up, you need tte middle class to do it. But everywhere they have a wealth threat hanging over their (middle class) heads. Too easy to tax. Relying on big companies to do it, isnt working that well.
I'm probably rambling. And this is without data, but its been banging around my head.
Sort of with you on this and IKWYM. The present news about Asda exploiting their workforce is a case in point; big businesses have the economies of scale to play very fast and loose with employees, tax, etc. etc. thereby dodging sick pay, paid holiday, workplace pensions and a whole host of other worker's rights, so 'employed' people are kept poor.I'm probably rambling. And this is without data, but its been banging around my head.
Reading Peston's WTF book, this is one of the points he makes which really resonates with me. Running SMEs but also knowing, by various means, how mega corporations do things grates. FWIW I do not wish I could get away with that stuff too, I would rather see a more level playing field.
Should be interesting in Italy this week; Salvini looking for a vote of no confidence to break the alliance after his party was way more successful than 5 Star in the recent EU elections. Populist dog whistlers to most, but one of League's platforms is "voting in Strasbourg against the new president of the European commission and aiming to make the next budget a platform for openly challenging Europe over its fiscal rules."
Why would Germany issue a 30-year bond rather than dipping into their huge budget surplus?
https://www.theguardian.com/business/live/2019/aug...
https://www.theguardian.com/business/live/2019/aug...
CzechItOut said:
Why would Germany issue a 30-year bond rather than dipping into their huge budget surplus?
https://www.theguardian.com/business/live/2019/aug...
Zero interest? Why wouldn’t they?https://www.theguardian.com/business/live/2019/aug...
CzechItOut said:
loafer123 said:
Zero interest? Why wouldn’t they?
What do they gain from hoarding so much cash? Consensus suggests Germany will enter recession this quarter and yet they resolutely abstain from any kind of stimulus which might boost short term domestic demand.However, in general, your point about 'hoarding' does have some merit.
Digga said:
All governments issue bonds, that is (confusingly) parallel and not necessarily linked to their budgetary surplus or deficit, as the case may be.
However, in general, your point about 'hoarding' does have some merit.
They aren't hoarding cash. Probably some other bond redemptions are taking place and they are merely rolling forward another chunk of maturities and they have very little need to pay down outstanding debt as their debt levels are pretty low. However, in general, your point about 'hoarding' does have some merit.
isaldiri said:
They aren't hoarding cash. Probably some other bond redemptions are taking place and they are merely rolling forward another chunk of maturities and they have very little need to pay down outstanding debt as their debt levels are pretty low.
Why wouldn't a country on the verge of recession and with a 58bn euro budget surplus engage in some kind of short term stimulus?Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff