Politics The end of the eurozone?

Brogan

🦶 Leg end
Staff member
It's all going horribly wrong, isn't it?

First it was Ireland, then Portugal, then Greece. Twice.

The latest news is Spain and Italy's debt/bonds are at unsustainable levels: http://www.bbc.co.uk/news/business-14375056

Records are being broken all the time, but not in a good way.
The Euro currency reached an all time low against the Swiss Franc today.

So, is this the beginning of the end of the big experiment?

Personally I always thought it was a terrible idea; having a one size fits all economy and currency for 25 different countries with vastly different policies, politics, lobbying positions, GDP, private sectors, self interests, etc.
Trade agreements? No problem. Single currency and interest rate for all? Nah.

I breathed a huge sigh of relief for the fact the UK wasn't dragged into the sorry mess.

All it will take is one country to break ranks and jump to capitalise on what little value the Euro has left.
Once that happens the flood gates will open.
The effect on business and the global economy will be catastrophic though.

It's a good job the US isn't in trouble.

Oh wait...
 

Jen

Here be dragons.
Contributor
I would love to have to postpone my holiday, not having had one in over twenty years that would be quite a treat :)

It might have been more catastrophic to the world if the US had not come to an agreement on their economic way forward. I, too, am pleased that we didn't join the Euro, but I'm sure that if it sinks without trace everyone in this part of the world will feel the repercussions.

What is sterling against the euro at the moment?
 

cider_and_toast

Exulted Lord High Moderator of the Apex
Staff member
Premium Contributor
The problem with the Eurozone is that there are far too many countries wanting to take more out of it than they put in. For all the criticism of Germany, they have almost single handedly been propping up the whole organisation up for years. The German public can only stand that for so long. The other central power, France, use the European union as they see fit to maximise their position. In terms of following/implementing EU law, France has one of the worst records of any European country.

The only way the whole thing would work is to move lock, stock and barrel to a single country, A federal republic of Europe if you will. Where there is a single economy with a single rate of tax and a single government. That will never happen, or at least not for a very very long time.

The Euro Zone dosn't even work as a free trade zone. France refused to lift the ban on British beef exports long after the end of the BSE crisis and even after being ordered by the European courts, purely for the benefit of French farmers.

The biggest problem is, when the whole sorry mess comes crashing down, it's going to take us all with it.
 
The German public can only stand that for so long. The other central power, France, use the European union as they see fit to maximise their position.snip/

The only way the whole thing would work is to move lock, stock and barrel to a single country.
This goes back many years, remember that Germany tried to make the Eurozone happen by force

The cost of reunification for Germany was the Eurozone, France gained senior partnership with Germany and thus remove the stigma of invasion and capitulation from earlier on and the assurance that it wouldnt happen again

The Eurozones biggest mover and shaker is Germany, they are the biggest importer or consumer from the rest, Europe is Germany ( and France latching itself on for the ride so it doesn't have to capitulate again inside 2 weeks)

Right now we have each country in control of its own borrowings and debt, which is why a country like Portugal is suddenly able to borrow at the same rate as Germany, and has to be bailed out when they cant pay.

The thing is that the Eurozone (Federal Europe) has no provision for any of its states like the PIGS to drop out or become a defacto second tier member. So the whole thing must collapse and get redrawn, or the strong members must cover the others.

If you ask me, its not Spain or Portugal or Ireland thats gonna cause the whole thing to collapse but France, that will be the bridge too far
 

TN23

Rookie
It seems to me as if, once again, the big capitalists have waded in and ruined the 'small fry'.

A one size fits all economic structure, tailored towards Germany (A country industrialised because of massive growth of monopolies in industry in the late 19th and early 20th century) with its huge capitalist corporations, and of course now, it leans towards service employment (Although Germany has retained a large industrial sector). A country at the far end of a capitalist development scale can't have an economic structure that also presides over countries which just are not as big and rich as Germany (Spain, Portugal, Ireland and Greece). Crickey, even Italy, the third biggest eurozone economy is struggling.

Once again, a crisis of capitalism (The credit crunch of 2008, and its vicious economic side-effects) has plunged the 'small fry' into deep trouble- and its a crisis caused by the big western powers and their banks. These people are paying for a crisis they didn't create- although they leeched off the good times somewhat.
 
No. The Republic of Italy has a US $2 Trillion dollar debt market. It's federal debt is the third largest in the world behind the US and Japan.

Italy is un-bailable ;)

"Unbailable" Hmmm I just created a new English word. :)
 

cider_and_toast

Exulted Lord High Moderator of the Apex
Staff member
Premium Contributor
Humpty Dumpty sat on the wall
Humpty Dumpty had a great fall
And all the kings horses and all the kings men
Couldn't put Humpty together again.

LOL
 

Road of Bones

MTC Mole
Premium Contributor
Not being an economist, I'm probably oversimplifying things a bit here...

My feeling is that having created the "Eurozone", the participants cannot afford to let it fail (much like the banking crisis), hence the continual bailing-out of the weaker members. It is a bit like a house of cards that is being maintained by some judiciously-applied sellotape.

More worrying to the global economy is the US debt crisis - the problem is that the policymakers are more interested in scoring points off one another and jockeying positions for the next election rather than addressing the actual debt problem itself. It's monumentally short-sighted and likely to result in a catastrophic collapse of the Dollar at some point. I shudder to think of the implications that would have...:shocked:
 

canis

Race Winner
Valued Member
The Euro zone was proposed to solve the problems some of the member countries were having with cross border trade and the fluctuation of the exchange rates. Nice idea, but unless you put all member states under one central economic control it is impossible to make it work correctly. How on earth the currency of Germany (still in a relative good financial state) be worth the same as the currency of Greece? The only way a Euro would work correctly is to have member states fed their budgets and economic policy from central europe.

What I will say is that certain states have profited massively from the Euro, namely Germany, France and Italy. By fixing the exchange rate through the rest of europe their industrial exports rose high for many years and the central governments profited from corporation taxes as well as increased employment and income taxes. Strange how these three states were the big voices for the Euro in the first place....

The money market has also failed to realise the problems with the Euro. They look at the overall financial state of Europe, the debt against the income, and when you take into account Germany/France etc the levels are not too bad compared to looking at Greece on its own. So this sets the exchange rate. But the debt markets work individually for each country, so each country borrows money at a different rate to all others in the euro zone. This causes a major imbalance in not only government funds, but also in the fact that Germany can borrow money at a low rate compared to Italy, but their currency is worth exactly the same, hence once the imbalance is created people are always going to move to the heavier side, making the imbalance worse and you get what is happening right now.

The Euro was doomed to failure since inception due to a lack of central control, but now it is well and truly in place certain member states cannot and will not let it fail, hence Germany becoming the bigger and bigger economic power within europe. Once this situation is firmly in place and accepted by all other Euro member states it is not going to change for a long time, and Germany will become the controlling power able to bully their way to what they want within Europe...
 
The Euro zone was a political led monetary union where the criteria for entry was actually never adhered to by the majority of the original 11 countries.

Germany
France
Italy
Netherlands
Belgium
Austria
Finland
Luxembourg
Spain
Portugal
Ireland

Those were the original 11 and then they let in Greece next.

Italy and some of the others never actually met the economic criteria...yet the politicians forced the union through.

If it were down to traders and businessmen making prudent decisions, there would only have been about 5 or 6 countries that would have been 'in' the club at the start of 1999.

Cheers.
 

canis

Race Winner
Valued Member
Ray, I completely understand what you are saying, and to be honest agree that they should have stuck to their original criteria for entrance, but at the end of the day this would have meant that the Euro failed to achieve the goals that were set for it by the stronger economies. I am happy to say that the politics around the Euro is the majority of what caused the issues now being faced.

But, even you will have to admit, it is never an ideal situation where you can trade id debt bonds for Germany and only Germany knowing that what happens in Spain, Greece etc will affect the currency you are dealing with and could affect your return directly?
 

Brogan

🦶 Leg end
Staff member
A simplified but very clear example of how it all went wrong.

http://www.bbc.co.uk/news/business-13991135

May be UK only, not sure.

And a timeline: http://www.bbc.co.uk/news/business-13856580

In January, an EU report condemns "severe irregularities" in Greek accounting procedures. Greece's budget deficit in 2009 is revised upwards to 12.7%, from 3.7%, and more than four times the maximum allowed by EU rules.

The European Central Bank dismisses speculation that Greece will have to leave the EU.
Ignoring the rules put in place to protect the Eurozone, just to protect the Eurozone, is farcical.

They should have been kicked out if they really wanted to save it.
 

FB

Not my cup of cake
Valued Member
Having recently been on holiday in Italy I wondered where on earth they have spent all this money as the country just appears to be a complete shambles - €1.2 trillion :o. There was a German banker on the radio the other day saying if Italy went pop there was nothing anyone could do as their economy is just too big and even the uber rich German economy couldn't (wouldn't?) help.
 
In Hitlers vision of the federal Europe all states were working for Germany

In this one Germany will be working for and supporting the rest

That's why the Germans don't want fiscal unity or one size fits all Eurobonds
 
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