Ireland to go bust

[Hazir]

But they should have been slow-growth like everyone else. Growing faster than someone else is stealing from them.

They would have been no-growth without my tax-money and access to the markets of the EU.

[earthJoker]

The Anglo-Saxon crowd of all people thinking that the Irish have got a right to tax-money they aren't willing to raise themselves, it's quite typical again.

The end justifies the means.

[Hazir]

The end justifies the means.

I suppose so. It's quite something to see Brits engaging in it; given how they have already refused to put their money where their mouth is. If somebody screwed the Irish it would have to be them.

[earthJoker]

The thing is, I actually agree with the goal to have low taxes.

[Nessus]

I think Ireland's case - even better than Greece's - illustrates the problem with the Euro. Greece just spent freely with other people's money, but Ireland has a viable growth model - low corporate taxes leading to high FDI. The problem is that this growth model didn't have the same business cycle as most of the big Euro economies.

A few years back, Ireland had incredibly high growth (and relatively high inflation) due to their growth strategy. But because the euro's monetary policy was set far away from Dublin, real interest rates in Ireland were effectively negative (e.g. borrowing euros cost less than inflation there). If Ireland had an independent central bank, this would have been a perfect time to raise interest rates, but they couldn't so presto - they blow up a huge bubble that completely trashes their economy, especially the financial sector.

If I'm reading you right, the problem with the Euro is the heterogeneous nature of European nations?* I can see the argument, but what's the alternative? Waiting around until Europe homogenizes on its own, and only then trying to form a cohesive whole? Because I don't see it homogenizing all by its lonesome (or lack of lonesome, to be precise); the Euro's one more tether around the nations' necks to bully them into forming one Europe. Realistically, Europe has to be one large entity to survive in a globe where the century is sponsored by the word super-power. Right? We can't build our economies on the backs of brown people anymore

*Assuming this because the Anglo press goes ape "rar rar dismantle Euro" at the first hint of trouble every goddamn time

[Dreadnaught]

Actually an apt point.

[Hazir]

The thing is, I actually agree with the goal to have low taxes.

Me too, but not with higher taxes for me so that the Irish can have lower taxes.

[Hazir]

If I'm reading you right, the problem with the Euro is the heterogeneous nature of European nations?* I can see the argument, but what's the alternative? Waiting around until Europe homogenizes on its own, and only then trying to form a cohesive whole? Because I don't see it homogenizing all by its lonesome (or lack of lonesome, to be precise); the Euro's one more tether around the nations' necks to bully them into forming one Europe. Realistically, Europe has to be one large entity to survive in a globe where the century is sponsored by the word super-power. Right? We can't build our economies on the backs of brown people anymore

*Assuming this because the Anglo press goes ape "rar rar dismantle Euro" at the first hint of trouble every goddamn time

I entirely agree with you.

[wiggin]

I don't get where Hazir is going with this tax money angle, so I'll leave it alone. But this merits some response:

If I'm reading you right, the problem with the Euro is the heterogeneous nature of European nations?* I can see the argument, but what's the alternative? Waiting around until Europe homogenizes on its own, and only then trying to form a cohesive whole? Because I don't see it homogenizing all by its lonesome (or lack of lonesome, to be precise); the Euro's one more tether around the nations' necks to bully them into forming one Europe. Realistically, Europe has to be one large entity to survive in a globe where the century is sponsored by the word super-power. Right? We can't build our economies on the backs of brown people anymore

*Assuming this because the Anglo press goes ape "rar rar dismantle Euro" at the first hint of trouble every goddamn time

My problem isn't that nations in the EMU are heterogeneous in general, or even that their economies are different. My problem is that economic and fiscal policy is extremely heterogeneous, but monetary policy is centralized. Generally the two have to go hand-in-hand to keep problems like Ireland's occurring. The solution is either to have independent banks for each economic unit (i.e. get rid of the euro) or to impose a much greater degree of economic policy coordination. The last possibility would effectively mean getting rid of the old euro model in favor of a true economic union with a large degree of control over regulation, tax rates and codes, fiscal policy, etc.

Now this latter option is certainly doable and might be a good idea, but it would require national governments to give up a lot more autonomy. I'm fine with that - I don't live in Europe and couldn't care less - but I think it would be a difficult sell politically.

This is the fundamental paradox of the EMU. Back before the EMU, countries could more or less opt in or out of the EU's policies with little real penalty. Now, though, they move in monetary lockstep without the attendant fiscal and economic coordination.

[Nessus]

It would definitely be a hard political sell, and would also e.g. spell the demise of the Nordic way of life, but I suspect it's the only logical next step for European integration. The fallout of this merry little cycle of countries going flat broke will hopefully be talks towards a more unified fiscal policy, at least baby steps in the direction.

[Hazir]

I don't get where Hazir is going with this tax money angle, so I'll leave it alone. But this merits some response:


My problem isn't that nations in the EMU are heterogeneous in general, or even that their economies are different. My problem is that economic and fiscal policy is extremely heterogeneous, but monetary policy is centralized. Generally the two have to go hand-in-hand to keep problems like Ireland's occurring. The solution is either to have independent banks for each economic unit (i.e. get rid of the euro) or to impose a much greater degree of economic policy coordination. The last possibility would effectively mean getting rid of the old euro model in favor of a true economic union with a large degree of control over regulation, tax rates and codes, fiscal policy, etc.

Now this latter option is certainly doable and might be a good idea, but it would require national governments to give up a lot more autonomy. I'm fine with that - I don't live in Europe and couldn't care less - but I think it would be a difficult sell politically.

This is the fundamental paradox of the EMU. Back before the EMU, countries could more or less opt in or out of the EU's policies with little real penalty. Now, though, they move in monetary lockstep without the attendant fiscal and economic coordination.

You have no idea where I am going? Where I am going is that the Irish want to continue their unilateral ways while they are asking me and other tax-payers in other EU countries to cough up the money for doing so. And if they are starting to whine about sovereignty while I know what they really want is having a go at my money with no strngs attached I tell them to go fuck themselves.

The least thing we should demand is to put in place a system where these little fucked up economies can't create crises several times bigger than their entire economy is worth.

If there is one thing that Randblade has got right it is that I have always seen the EMU as a political union. And because of its nature the EMU will force the EU to get its house in order. I have never believed in the SGP as an effective means to control the ninkunpoops in countries like Greece or Ireland or anywhere else, but I have always taken the line that the markets would do the disciplining. It took the markets a while to do so, but I still feel vindicated by what is going on right now.

I guess that I don't even disagree that much with your analysis, it's just that I am fed up. And I mean really fed up with the suggestions coming out of english speaking countries that the solution to be considered is breaking up the EMU. I really would like if the people that provide the American public with information would fucking learn to read in languages other than English and stop acting as if all wisdom about Europe resides in London.

[wiggin]

This is the part I don't get:

They would have been no-growth without my tax-money and access to the markets of the EU.

Why? Ireland didn't take eurozone tax money until (possibly) now AFAIK. That has no bearing on their growth model from years ago and how it got screwed over by euro monetary policy.


I'm also not sure I understand what you mean by 'unilateral ways' - they're currently supposed to have their own tax policy, yes? So isn't every country in the EMU 'unilateral' in that respect?

I guess where we differ is that you think Ireland was a 'little fucked up economy' when I think they had a sensible growth model but were hamstrung by euro monetary policy. Greece I can understand your anger about (though to be fair, Greece's profligacy was also encouraged by easy euros when their economy clearly didn't need easy euros), since they had a shit growth model and pretty much systematically lied. But I don't see the same thing with Ireland - their troubles are not structural, but tied to their position in the euro. Their deficit and debt problems are a very new phenomenon - Ireland until recently was just fine by SGP criteria - and are entirely due to the financial crisis. This crisis was exacerbated in Ireland by the EMU's monetary policy; is it not unreasonable for the EMU to step in if bond market vigilantes are punishing Ireland? The cost is far less than the potential financial and market shock to the eurozone.

[Hazir]

Ireland has been recieving money from the EU ever since it became a member. There hardly is a road in that country that wasn't paid for with EU-money. And everybody knows we're on the hook for the billions they blew with their irresponsable banking. Yet at every turn and twist they start whining about their bloody sovereignty. Also, if they weren't a part of the EU they couldn't attract anything at all to set up shop in Ireland. Their only real assets are the fact that they are seen as an english speaking country and that they are part of the EU.

[wiggin]

I can't speak to their roads, but as I understand it the fact that Ireland had a net gain in EU money (mostly 'regional aid') during some of the last decade doesn't translate directly into anything having to do with their tax policy or growth model. I don't understand the GCM very well or all of the things that go into it, though, so feel free to enlighten me.

Furthermore, you might call it irresponsible banking, but I might call it irresponsible monetary policy. Plenty of people have pointed fingers at the Fed for their mismanagement of the credit bubble and the crisis; why should monetary policy in Europe be exempted? There's no question that the financial sector in Ireland is partly at fault for the problem, but the correction (and needed bailout) for their banks would not have been nearly as large without shoddy monetary policy.

I think you're arguing against a point that few people have made - i.e. that Ireland's sovereignty is being in some way abrogated. It's not a matter of sovereignty - it's a matter of Ireland have a working growth policy that's being blamed for the crisis (and thus is being changed), when in reality it's not their low corporate tax rate that's at fault. Quite the contrary.

[earthJoker]

The last possibility would effectively mean getting rid of the old euro model in favor of a true economic union with a large degree of control over regulation, tax rates and codes, fiscal policy, etc.

Now this latter option is certainly doable and might be a good idea, but it would require national governments to give up a lot more autonomy. I'm fine with that - I don't live in Europe and couldn't care less - but I think it would be a difficult sell politically.

The EU has a lot of that already, mostly common trade regulations. I don't see why the countries have to give up their fiscal policies to such a degree, though. I don't know the US tax system, but if you compare Germany and Switzerland you'll see that while Germany has a centralized tax system, in Switzerland the cantons still have their own tax and fiscal independence.

I can't speak to their roads, but as I understand it the fact that Ireland had a net gain in EU money (mostly 'regional aid') during some of the last decade doesn't translate directly into anything having to do with their tax policy or growth model. I don't understand the GCM very well or all of the things that go into it, though, so feel free to enlighten me.

Well, the information is really right out there, Google and Wikipedia have all the stuff. Quickly I found this here: http://www.finfacts.ie/comment/irela...tsbenefits.htm
Some of the last decade is very funny. It seems that you just simply don't know anything about it. Well it is not that tragic. Ireland is one of the biggest takers from the EU per head since ever. But know that you are informed, you should see that you can't simply call Ireland the good boomers and the others like Germany the envy slow ones. Ireland profited highly from its constellation within the EU, which is a good thing. But we shouldn't forget about it.
And the Germans are easy to blame anyway, if there is someone to blame, it must be the Germans

Furthermore, you might call it irresponsible banking, but I might call it irresponsible monetary policy. Plenty of people have pointed fingers at the Fed for their mismanagement of the credit bubble and the crisis; why should monetary policy in Europe be exempted? There's no question that the financial sector in Ireland is partly at fault for the problem, but the correction (and needed bailout) for their banks would not have been nearly as large without shoddy monetary policy.

I definitely call it irresponsible banking. The praise of the boom to the privates the blame to the govs. Doesn't sound like a fair deal to me.

[wiggin]

The EU has a lot of that already, mostly common trade regulations. I don't see why the countries have to give up their fiscal policies to such a degree, though. I don't know the US tax system, but if you compare Germany and Switzerland you'll see that while Germany has a centralized tax system, in Switzerland the cantons still have their own tax and fiscal independence.

Uhm, yes, exactly. They have very different fiscal and tax policies (not to mention different macroeconomic policies), and that can cause monetary mismanagement. Your point?

Well, the information is really right out there, Google and Wikipedia have all the stuff. Quickly I found this here: http://www.finfacts.ie/comment/irela...tsbenefits.htm
Some of the last decade is very funny. It seems that you just simply don't know anything about it. Well it is not that tragic. Ireland is one of the biggest takers from the EU per head since ever. But know that you are informed, you should see that you can't simply call Ireland the good boomers and the others like Germany the envy slow ones. Ireland profited highly from its constellation within the EU, which is a good thing. But we shouldn't forget about it.
And the Germans are easy to blame anyway, if there is someone to blame, it must be the Germans

Thanks for the condescension. I'm well aware of Ireland's past receipts of EU regional aid; what I was asking about the evolution of a general compensation mechanism in the EU, and exactly why Ireland was such a big recipient of regional aid. I don't see why their adoption of an FDI-driven growth model in recent years has anything to do with that.

I definitely call it irresponsible banking. The praise of the boom to the privates the blame to the govs. Doesn't sound like a fair deal to me.

I agree that the financial sector in general made mistakes - big ones. But if Ireland had an independent central bank they would have raised interests much higher much faster (even assuming they didn't have some special prognostication about the housing/financial bust), which would have cushioned the blow somewhat. EMU monetary policy, when compared just to Ireland, was awful. That's a problem that you can't just blame on the banks.

[earthJoker]

Uhm, yes, exactly. They have very different fiscal and tax policies (not to mention different macroeconomic policies), and that can cause monetary mismanagement. Your point?

There is only one rate for whole Switzerland too, despite having 26 different tax and fiscal politics. Of course nobody is calling the end of the Swiss Franc if the federal government has to help out.

I think it was not a good idea for Ireland to bail out banks with money they don't have. But as it seems, they thought it will go well until the shit hit the fan.

[Hazir]

Exactly, they absolutely didn't want to accept the obvious. But unlike the Icelanders who couldn't tap into the coffers of the ECB they still have their joke of an economy. And then they start acting difficult because other countries actually are demanding a prestation for their money.

Maybe they should have another one of their bloody referenda whether or not they want to sink into the sea. That should be a laugh.

[wiggin]

Uhm, do I understand you correctly in thinking that it would be better to torpedo an economy rather than bail out some banks?

(BTW, earthJoker, Switzerland may have somewhat different tax rates and budgets - just like different states in the US - but the federal government there still sets economic policy.)

[Hazir]

Who are you trying to fool with your separation of saving the Irish economy and saving Irish banks? Their banks are already in near full state ownership anyway, and that is exactly the reason why the problem has spiraled out of control. What I want for the Irish is to shut the fuck up about 'their conditions' where it is them needing a lifeline. I am utterly fed up with types that think that solidarity is a one-way street. A one-way street that carries my tax-money to them.

I want them to stop talking about helping borrowers who can't afford their mortgages, I want them to stop trying their housing bubble to fully deflate and if higher taxation is needed, I want them to raise taxation. I don't want to hear one single syllable about how they are giving up their 'hard won freedom'. They could have thought about that before they stuck their collective necks in the nozzle they now want us to save them from.

[wiggin]

I think we're talking past each other, here.

[Hazir]

Probably, you are simply taken in by some brit-type nonsense about the EMU and how it can't be bla di bla. I am looking at it from a different angle, that sees that the most likely result of this crisis is that fiscal policies will be centralised to an extent that could not have been achieved before. Talk about the break up of the euro is either claptrap from english language people parrotting eachother, or EU politicians that want to put maximum pressure on those amongst them who are reluctant to give up their 'sovereignty' in fiscal affairs.

I find all of this actually highly amusing; arms being twisted in ways unthinkable not so long ago and even the idiotic Brits de facto being pulled into the eurozone more than they could even had imagined. No matter how they try to sugarcoat it; the British government is going to do exactly what it said it wouldn't do; bailing out a eurozone country

[RandBlade]

Hazir sees this uniquely from his euro-obsession. Yes Britain will want to support Ireland, but not because of the euro.

For many within the UK history and family relationships mean that Ireland is not regarded as a 'foreign' country in the same way as Germany is. Ireland is almost regarded for many English people as like Wales or Scotland.

On an economic level, we have more in common with Ireland than any other nation.

On a 'national' level, my company operates in the UK and Ireland, on an international level the UK and Ireland being viewed as one Market. Now that's just one company but I suspect it is far from unique.

[Dreadnaught]

Separately, I don't think it's totally fair to couple their taxes with their irresponsible banking. They had an asset and debt bubble, so did lots of places. But I think some nation's banking systems exploiting the good value of the Euro to load-up on cheap debt is the Big Thing that many missed over the past 15-20 years. Most assumed that borrowing rates would fluctuate based on the specific finances and needs of particular banks and particular nations. Just like the Amerikans assumed banks would rationally lend out money. That simply wasn't the case.

[Being]

Separately, I don't think it's totally fair to couple their taxes with their irresponsible banking.

Their tax policy made it impossible for them to bail out their own banks.

[Dreadnaught]

Actually, their debt situation is apparently making it impossible for them to bail out their banks.

[Being]

Actually, their debt situation is apparently making it impossible for them to bail out their banks.

How does that differ from what I said?

[earthJoker]

(BTW, earthJoker, Switzerland may have somewhat different tax rates and budgets - just like different states in the US - but the federal government there still sets economic policy.)

Somewhat different is a big understatement. In fact we will vote about on the 28th of this month. The socialists have made an Initiative (proposal) that there should be a minimum tax for the rich. The thing is we have little Ireland within our countries. (Schwyz, Zug). But then again the federal government has it's own budget two, and the federal gov and parliament decide what to do with that money. This is actually the thing the EU is lacking. They don't have a budget they can decide upon, all the EU budget is actually bound to certain defined expenses.

What I want to say is that the countries don't have to give up that much, but the EU has to get something. But I think to make this possible the EU needs to be more democratic first. Otherwise their decisions wont be legitimated.

[Hazir]

Hazir sees this uniquely from his euro-obsession. Yes Britain will want to support Ireland, but not because of the euro.

For many within the UK history and family relationships mean that Ireland is not regarded as a 'foreign' country in the same way as Germany is. Ireland is almost regarded for many English people as like Wales or Scotland.

On an economic level, we have more in common with Ireland than any other nation.

On a 'national' level, my company operates in the UK and Ireland, on an international level the UK and Ireland being viewed as one Market. Now that's just one company but I suspect it is far from unique.

Whatever is the appropriate answer here. As usual you don't get the message.

Separately, I don't think it's totally fair to couple their taxes with their irresponsible banking. They had an asset and debt bubble, so did lots of places. But I think some nation's banking systems exploiting the good value of the Euro to load-up on cheap debt is the Big Thing that many missed over the past 15-20 years. Most assumed that borrowing rates would fluctuate based on the specific finances and needs of particular banks and particular nations. Just like the Amerikans assumed banks would rationally lend out money. That simply wasn't the case.

Now, let's say the USA takes on $10 trillion in obligations it can't afford. Do you think the US would have a right to empty the wallets of the rest of the world in order to stay afloat and even demand that it won't change anything internally?

[Hazir]

Somewhat different is a big understatement. In fact we will vote about on the 28th of this month. The socialists have made an Initiative (proposal) that there should be a minimum tax for the rich. The thing is we have little Ireland within our countries. (Schwyz, Zug). But then again the federal government has it's own budget two, and the federal gov and parliament decide what to do with that money. This is actually the thing the EU is lacking. They don't have a budget they can decide upon, all the EU budget is actually bound to certain defined expenses.

What I want to say is that the countries don't have to give up that much, but the EU has to get something. But I think to make this possible the EU needs to be more democratic first. Otherwise their decisions wont be legitimated.

If the EU is going to coordinate to the extent that it appearantly is going to coordinate you are right. The obvious solution would be to enhance the role of the EP. Maybe, and I do say maybe, after that we can start to look into merging the presidency of the Council and the presidency of the Commission in order to have something that resembles a regular administration with accountability to the EP and/or Council.