Is the Eurozone now becoming a single state?

[Hazir]

Uhm, not only is the "catastrophe" not avoided...because it doesn't deal with structural flaws any more than our US "bail-outs" of banks did.....but saying you don't care sounds like an old throw-back to British Imperialism. Or something. We should ALL care what the hell is happening, because we now have financial markets that are globally and inextricably connected.

Well, it's pretty much summing up the UK's position since the crisis started; 'not our problem, we won't be part of the solution'.

[RandBlade]

Well, it's pretty much summing up the UK's position since the crisis started; 'not our problem, we won't be part of the solution'.

The solution is admitting that the nations are bust, leaving the eurozone, devaluing their new currency and going bust and starting again. How do we be a part of that?

[Hazir]

The solution is admitting that the nations are bust, leaving the eurozone, devaluing their new currency and going bust and starting again. How do we be a part of that?

Your 'solutions' consist out of making a bigger mess for all sides, both debtors and creditors. You are part of it because you are part of the single capital market in which this all plays out. Exposure to the eurozone still adds up to around €1trn for the UK. You really really really don't want to see the eurozone collapse, no matter what your jingoistic impulses tell you.

[RandBlade]

No I don't, but nor do I want to delay the inevitable which will only make it worse. So far the solutions are either austerity or more loans. I am fan of austerity, don't get me wrong, but even I don't think that will be enough for many of the nations involved. Giving more loans at 7% plus is only making the situation worse and making the inevitable day of reckoning even worse.

Currency unions have broken up before, in the short-term it won't be pleasant but in the long-term it may be necessary.

The irony is that 2 years ago I would have agreed with you (and did agree with you) that due to the policies of Brown the UK was one of the worst-placed to weather the storm. But due to a combination of austerity, devaluation and quantative easing the UK is as safe as Germany on the bond market and all threats to downgrade the UK have been withdrawn. The euro prevents devaluation while the ECB really restricts quantative easing (which is not a policy I like normally).

[Hazir]

What is inevitable? The de facto default of Greece that already happened? Other than that I don't see any problem that can't be solved. And who the hell is paying 7%? The Italians aren't, the Spaniards aren't and nobody else is. What I think of this crisis is that it creates a prime opportunity for the Club Med not just to cut expenses but to drastically make their economies more competitive. Not much unlike what Germany and the countries around it already have. The buzz of cheap credit has worn off, now it's time to get back to work. It is the only thing that will work even for Greece; if you don't produce anything but strikes, it doesn't matter much if you try to sell them at a lower price.

As for the situation of the UK; the austerity plan in the UK hasn't worked, your currency is under constant attack by it's own issuer, the BoE, which really should be re-named Bank of English Debt. You are worse of than the Italians. If I were a Brit with any savings at all I would demand King's head.

[RandBlade]

I fail to see how I'm worse off than an Italian right now. As for saver vs borrower, I'm quite happy: My mortgage rate is negligble right now

[Hazir]

You fail to see why you are worse of than an Italian because you don't understand it's really not a good thing if your national bank is holding 40% of your sovereign debt on its books.

[RandBlade]

Actually that's true, I don't.

Please explain why its such a bad thing.

[Hazir]

If the BoE keeps this 40% of the UK sovereign debt on its books it will lead to a higher inflation as the economy will not be able to keep up in growth with the money creation. Then at some point the BoE will either have to raise interest (which is bad because you need more growth not less) or alternatively the BoE would have to start selling the debt they are holding, who to is anyone's guess, but it won't be pretty. Also you can expect borrowing costs for the state to jump up.

Technically it could even lead to the BoE going bust. That is a bit extreme as a scenario, but not impossible.

[RandBlade]

I think the Eurozone is definitely unable to stay at the Status Quo. Its either merging into a single state or totally falling apart.

A series of Tweets from Andrew Neil, @afneil BBC journalist (My additions in Italics)

Honeymoon already over for Super Mario in Italy. He faces series of coordinated rolling strikes agst his €33bn austerity package.
Estonia says it will not contribute to €200bn payment to IMF.
Swedish government fears it can't get Merkozy plan through parliament.
Czeck PM says of Merkozy deal: nobody knows what is in it.
Irish newspapers say 50:50 their will have to be a referendum. Now FF
Finnish Parliament investigating if their PM has overstepped his mandate. Unlikely to get required supermandate.
Merkozy fiscal union plan seems to have split the new centre-left coalition.
Bundesbank says money for IMF could breach Bundestag limits.
As I said on #bbcdp today the man the polls tell us will be next president of France wants to renegotiate the Merkozy deal. I.e. Hollande as I posted in the other thread yesterday.
______________________


Merkozy plan already falling apart.

[Hazir]

Yeah and Lisbon would not be ratified ever either.

Irish Finance minister has made clear that any referendum will basically be an in-out vote, and that is true for any other country that doesn't ratify.

[RandBlade]

Nobody ever claimed Lisbon wouldn't be ratified so that sarcasm doesn't achieve anything.

The Irish Finance Minister can claim what he likes, there's no process to expel a member from the EU let alone the Eurozone itself. Are you claiming the UK is now out? That Sweden if they don't ratify etc will be out.

[Nessus]

I'd be curious to know what the response would be if we told Berlin to fuck off, we're not paying any more.

[GGT]

The solution is admitting that the nations are bust, leaving the eurozone, devaluing their new currency and going bust and starting again. How do we be a part of that?

All nations are heavily in debt, some more than others. Defining sovereign debt as percent of national GDP doesn't make much sense to me...not since globalization means everyone has mixed different currency valuations, traded inter-national bond debts as 'investments'...in order to fund public obligations that are based on political decisions/policy.

(Plus, as I understand it, GDP is nothing more than aggregate numbers of money moving around, including borrowing/lending, credit/debt. GDP doesn't include context or type of debt, and bubbles are easily ignored.)

Your 'solutions' consist out of making a bigger mess for all sides, both debtors and creditors. You are part of it because you are part of the single capital market in which this all plays out. Exposure to the eurozone still adds up to around €1trn for the UK. You really really really don't want to see the eurozone collapse, no matter what your jingoistic impulses tell you.

No I don't, but nor do I want to delay the inevitable which will only make it worse. So far the solutions are either austerity or more loans. I am fan of austerity, don't get me wrong, but even I don't think that will be enough for many of the nations involved. Giving more loans at 7% plus is only making the situation worse and making the inevitable day of reckoning even worse.

Currency unions have broken up before, in the short-term it won't be pleasant but in the long-term it may be necessary.

The irony is that 2 years ago I would have agreed with you (and did agree with you) that due to the policies of Brown the UK was one of the worst-placed to weather the storm. But due to a combination of austerity, devaluation and quantative easing the UK is as safe as Germany on the bond market and all threats to downgrade the UK have been withdrawn. The euro prevents devaluation while the ECB really restricts quantative easing (which is not a policy I like normally).

What is inevitable? The de facto default of Greece that already happened? Other than that I don't see any problem that can't be solved. And who the hell is paying 7%? The Italians aren't, the Spaniards aren't and nobody else is. What I think of this crisis is that it creates a prime opportunity for the Club Med not just to cut expenses but to drastically make their economies more competitive. Not much unlike what Germany and the countries around it already have. The buzz of cheap credit has worn off, now it's time to get back to work. It is the only thing that will work even for Greece; if you don't produce anything but strikes, it doesn't matter much if you try to sell them at a lower price.

As for the situation of the UK; the austerity plan in the UK hasn't worked, your currency is under constant attack by it's own issuer, the BoE, which really should be re-named Bank of English Debt. You are worse of than the Italians. If I were a Brit with any savings at all I would demand King's head.

Reading Rand and Hazir debate the Euro--as a 'united' trading zone or currency--is a reminder that "money" is a powerful political force. But money/currency, or lending/borrowing debt (as investment or profit) can't necessarily bring different political ideologies together. Instead, it's the kind of thing that leads to such social turmoil and polarity, that extremists can find their way to power. It's how the seeds of protests, riots, and wars are started.



Rand, it seemed that Cameron was trying to protect Fleet Street (aka The Bankers and Financial Industry), because they're such a large part of the UK's income. He bowed out of the EU as a "trading zone" because he wanted the UK to be a powerful financial center?

[LittleFuzzy]

Nobody ever claimed Lisbon wouldn't be ratified so that sarcasm doesn't achieve anything.

The Irish Finance Minister can claim what he likes, there's no process to expel a member from the EU let alone the Eurozone itself. Are you claiming the UK is now out? That Sweden if they don't ratify etc will be out.

While I'm generally more in agreement with your position than Hazir's when it comes to the imminent "kicking out" of members of the European Community's formal organizations, I have always been and remained puzzled by this blind and grossly inaccurate insistence you have that the formal tools and processes are the only way change can ever come.

edit: GGT, you are aware that there is a "delete post" option at the top of the edit page, yes?

[Hazir]

While I'm generally more in agreement with your position than Hazir's when it comes to the imminent "kicking out" of members of the European Community's formal organizations, I have always been and remained puzzled by this blind and grossly inaccurate insistence you have that the formal tools and processes are the only way change can ever come.

edit: GGT, you are aware that there is a "delete post" option at the top of the edit page, yes?

It has to do with the way the British press deals with the EU too I suppose. After the friday deal there were two stories; one was how Britain was robbed of influence this way, the other was a slew of stories about how the UK could stop this agreement by throwing some spanners in the work. Like not allowing the europlus group to convene in EU buildings.

To me it's quite simple now, countries that would like to wriggle out of last friday's deal can be divided in two groups; the first group are the countries that already use the euro. They actually have no other choice than to sign up to the deal, unless they want out of the euro. A situation of non-ratification would dangerously expose them to the markets as they would also be exposed as a country that is not backed by either EFSF or ESM (and ultimately the ECB even though nobody dares say that yet)

The second group consists of the rest; their signing up the deal is less urgent, though in the long run they can't escape it as they still want to join the euro. Thinking about it I am not so certain which group Denmark belongs to.

Merkel declared in the Bundestag yesterday that the EU had been set on a path to political union. Seems to me that means she didn't change her mind about anything, and that counts a hell of lot more than what any other person in Europe declares about what will happen.

@GGT; it's The City, not Fleet street. Fleet street is where British newspapers used to be located in the last century (IIRC pre-Thatcher)

[GGT]

Fuzzy, yes, I tried to delete the duplicate post but it still won't work

Hazir, whatever 'street' it's on, it seems to me the British Financial Industry is being favored above the nation's interest in eurozone unity. Rather like how 'Wall Street' was favored above 'Main Street' in the US. It's one thing to save the entire global banking sector, but at whose expense?

[Hazir]

Well, to be honest, the behaviour of Cameron is a bit puzzling the more details become clear. For starters, it is highly questionable if The City was really under such attack from Brussels. There are even signs that London wanted more regulation than Brussels, not less. Then you have to see that under EU rules what he asked was excessive; he effectively wanted a veto over a part of the market. Something that violates even his own professed 'europeanism'. And then finally, by walking away from the deal (that would only have affected the UK for real if it joined the eurozone) he created a forum inside the EU where 26 governments come together talking about financial affairs. Now how much imagination does it take to imagine them cooking up regulations for the financial sectore while they are at it.

The only positive about his walk-out is that he threw a bone to his most jingoistic party-members. But it seems what it did was not calm them but rather than that it caused a feeding frenzy.

[GGT]

Financial Services are still part of a bubble, IMO. It's just harder to "see" as part of structural flaws, because it's still paramount to how we think about and value money and investments. That's why any big bank, beginning in the UK with Northern Rock, and moving to Iceland/Ice-Save got automatic preference over their tax payer non-depositor bail-outs. The banks were holding pension plans and sovereign debts....with more political clout than financial power.

[RandBlade]

Hungary and Czech Republic WON'T join treaty unless Sarkozy drops his tax harmonisation plans. Oops.

This whole treaty is unravelling as fast as a kid unwraps his Christmas presents

[Hazir]

Hungary and Czech Republic WON'T join treaty unless Sarkozy drops his tax harmonisation plans. Oops.

This whole treaty is unravelling as fast as a kid unwraps his Christmas presents

Interesting all these people with an opinion on a treaty that hasn't been written yet. Also their opinion is quite irrelevant, as they may not accept the deal now, but then would have to give up any hope of ever joining the euro.

[RandBlade]

But I thought, like Sweden, they were obliged to join it no matter what they wanted.

Not sure saying they can't join the TitanicEuro is as much of a threat as you think it is.

[earthJoker]

Spain has got it's Euros easier and cheaper than expected.

BTW the Titanic was British.

[Nessus]

So were Chamberlain and Churchill; nation states are never friends, the purpose of a state is to protect its own well-being, and by extension her own citizenry. Naturally a Briton is gleeful about ruptures on the main-land, so long as he's not getting bombed/the banking in London isn't hurting too much.

[Hazir]

Spain has got it's Euros easier and cheaper than expected.

BTW the Titanic was British.

And the UK had a less than perfect auction; which is amazing considering that the BoE is in a buying mood. Those French officials are right about the UK being a worse risk than most of Europe, it is of course not nice of them to point this out so publicly, but then again, the UK needn't trumpet the fact that there are meetings about contingency plans for a break up of the Eurozone.

[CitizenCain]

This pissing match between you and RandBlade about whose country is superior is really rather pointless, given that the matter was decided last year and you both lost. Spain's the best country in the world, and no one cares about the UK or Germany or the EU because Spain's the reigning world champion, so you need to just learn to deal with it and move on.

[RandBlade]

This pissing match between you and RandBlade about whose country is superior is really rather pointless, given that the matter was decided last year and you both lost. Spain's the best country in the world, and no one cares about the UK or Germany or the EU because Spain's the reigning world champion, so you need to just learn to deal with it and move on.

Speaking of which, Spain (and Ireland) show why this new treaty or whatever you want to call it is utterly meaningless. Neither Spain nor Ireland got into the crisis they're in by violating what will be the conditions of the new Treaty ... or violating the old Growth and Stability Pact. Unlike Germany and France who both did. It's neither fixing this problem, nor preventing it from happening again.

It's like closing the houses windows after the horse has bolted from the stable.

[Hazir]

Sigh, it's getting so tedious talking with somebody who doesn't understand the mechanics of international politics. You brits have chips implanted that stop you from thinking outside of what is presented to you by your national rags? Everybody with half a braincell working knows that this deal is to put the ECB in a position where it can act without compromising its mandate. This whole austerity thing has got ECB written over it. The ECB has some very specific wishes that these countries have to fullfill before it will cover them in a crisis like we are seeing today.

Also, you can forget your dreams about countries not signing up to the deal. Finally the leaders of the eurozone are drawing conclusions from the fact that a system where every idiot can block anything is not a system that works. The new agreement will come in force once 9 countries of the eurozone have ratified it. Non-ratifying countries of the eurozone will effectively be forced out, non-ratifying non-euro countries will simply not be accepted into the eurozone, thus effectively negating their accession to the EU when that still stood for being part of Europe for them.

Ireland will get one vote, they can choose between a yes to the deal or facing the capital markets after a disorderly default.

CC ; I officially hate you now.

P.S. I am really going to laugh my ass off if we're going to see a British U-turn on the treaty by the end of january

[GGT]

Rand, what's the general reaction to Cameron's decision in your area? I didn't find much of anything at BBC, but other financial news makes it look like a split between 'favoring London's bankers/financiers over the general economy' and 'speculating the future values of Sterling will beat the Euro'.

[RandBlade]

Interesting that you now acknowledge defaults or the possibility of some nations leaving the euro but still want to cloud things in insults.

I understand the mechanics of international politics quite well thank you, its remarkably similar to any other type of politics. The mechanics are simple, if you have something to offer then people will try and make a deal, if you don't then put up or shut up. If you roll over for everything people will expect you to do the same again. Simply nodding along to everything does not help you one jot in international politics.

GGT: Not seen any of the latter. Overall opinion seems mainly to be that there was no alternative. Overall as well people have already moved on and its no longer big news.