For a decade until 2008-09, large majority of the economists weren't able to predict how this is going to bite. The southern states were having a ball as they carelessly kept increasing the labour charges and enjoyed a comparatively higher valuation at the cost of nations that have a more professional workforce. I get eerie whenever a country's mood and economy is suddenly booming for no seeming important reason other than the play on financial instruments.
Anyway, back to the point. Spain, Italy have a lot of fine craftsmen - remember Zara, Ferrari and Lamborghini! But the Northerners are pretty professional at their work - BMW, Volvo, Nokia! It will take long for the mindset in the southern states to change from casual to the one of performance.
As the pressure mounts, a lot of young people will start to gravitate towards greener pastures in other countries - it's easy for people from member states to move to a new country, thus depriving these countries of young workers. It'll turn out to be a pretty painful situation them, a brain/workforce drain, which is the last thing they want right now.
The EU and Euro currency brings both good and bad. The good that I see is the easy exchange of money, travel and work options. The bad is that European people aren't a single stock, they don't like to be compared to each other, or to be put on similar benchmarks. It was smart move by Switzerland and UK to stay out of the Euro currency. The common currency puts a pressure on everyone to be equal. And that, is not going to happen. This will be a challenge EU will face for a very long time to come, and maybe there's no good answer.
Any further EU integration, of the kind necessary to make it a functioning union will likely require referendums in many countries. More than that it will realistically signify the death knell of what was traditionally the nation states of europe. The public mood is not there for those to pass in many countries
> The public mood is not there for those to pass in many countries
It will be once the next European war is over.
America wasn't as unified as it is now until after the Civil War and the subsequent passage of Constitutional amendments to fully and finally not only abolish slavery, but to make sure freed blacks would be full citizens, despite what the states formerly in a state of rebellion thought about it.
However the European monetary union isn't a union like you see in the US or other huge countries. In the US we have probably 100-200 billion a year in transfer payments. Automatic stabilizers like social security and unemployment insurance, etc. And then we have a true central banking system Bank in Florida goes under, it's not Florida's problem it's the Federal Reserves problem.
If a state isn't able to use currency exchange rates to control in flow and out flow of money then you need these types of things to keep the system stable. Europe doesn't.
So you are indeed right about not being able to pick and choose. You can't take control of a counties currency away from them without guaranteeing that the central bank and government will have their back economically.
These are transitionary days, the lines are being blurred. I would say that the bracket of folks who talk about these issues are not the same as those doing something about it - its far easier for a middle-aged, entrenched worker to get on the Internet and complain about these issues than it is to see the guys who are crossing borders and working in a new culture to break down the typically insular nature of contemporary European life. You can see this internationalization factor at very specific strata - however, as usual, the squeaky wheel gets the grease ..
So your country is full of a lot of new smart, amicable and creative people now easing the ways to South-american markets to you. Well done, Denmark!
I remember when we have here very nice, modest and that can only be called as "elegant" people from Ecuador for example. Not being ironic at all. Hard workers, very responsible and good people.
> The sad part is that the ones that leave are probably the most driven ones, and thus the ones the southern countries need in the future.
The current way of doing things by the euro-kings in Europe will most probably lead to a big chunk of land and economy in many southern european countries ending in the hands and future property of Russia, China or Saudi Arabia I guess... they could easily atract workers as needed. Don' worry by this.
>The bad is that European people aren't a single stock, they don't like to be compared to each other, or to be put on similar benchmarks
This needs to change, and it will happen - in spite of statements to the contrary - because young people all over Europe are moving to other countries, the so-called 'greener pastures' - and thus the integration and cultural osmosis is in process. Spanish workers moving to Germany are becoming less Spanish; Romanians moving to Austria, less Romanian. This is a good thing, and will - over time spans of 5..10 years - result in the badly needed cross-pollination. Its very clear in Europe that cultural mores and disciplines which result in prejudice and exclusion need to be abandoned - I see precisely this happening at the youth level, and less so in the middle-age bracket - but such is life.
And then the Spaniard carpenter go out wearing some extra furs and chase some dinosaurs for dinner, END.
> Because the Spanish workers aren’t as good as the German at optimising chair-making
> This is not necessarily because the spanish workers are lazy
Oh, thanks, thanks. You are so kind... Except that the spanish workers are not lazy at all (you can find some lazy workers here, and in Germany of course) this is what the troika and little friends want you to think for fun and scamfit. They had called us even the PIGS countries... Portugal Greece, Spain, Italy... ready for sacrifice, "they merit this, they are lazy, stupid, living la vida loca with our money"...
> There’s just one problem. Those damned voters
Yeah, the bastards that we had looted are soo unpredictable that now they don't want to vote us again... this is what they call it democracy I think, stupid democracy...
This article is just propaganda repeating the same dated ideas. Spanish workers can buy the machines they need and the materials they need. We don't live in the XIII siecle. And just for the record, spreading the picture of a spanish (or greek) carpenter sitting under a fig tree working exclusively on "olive wood" is so silly that can not be casual.
I would agree that the characterization is insulting. But the real point is that once a disparity appears, regardless of the cause, it becomes a vicious cycle. And in a dynamic multilateral economy, disparities are virtually guaranteed. Any economic system that relies on relative parity in the participants must have a compensatory mechanism (ie, wealth redistribution) to maintain that parity in the face of the systematic tendency for wealth to flow from the poor to the rich. This is as true for the Eurozone as it is for the NFL here in the States.
> once a disparity appears, regardless of the cause, it becomes a vicious cycle
And that nobody is saying is that austerity measures wrong-by-design, corrupt politics generously feeded and sponsored by "Europe", and national central banks and organisms deliberately not doing the surveillance job what supossedly we had payed them for, are the cause, or at least responsible for a lot of this situation.
And there is also the full speed "burn as many environmental resources and biodiversity as you can" situation in order to be able to pay high fake interests also. Economists are blind. His "I will not spend any money for erradicating those zebra critter mussels in Spain in 2001 (when we could have done this) because the economy..." is currently a mortage of >40 millions of euro/each year for the next generation of europeans. All that they say is that "economy is recovering". Those people should be fired. Right now! Before they can be able to do more damage.
German banks lend lots of money to help some especulators and delinquents continue destroying the coasts and nature of southern Europe, when the pyramidal system crash eventually Greeks and Spaniards workers, that weren't even in the bussiness, are forced to pay the disaster created, for an esotheric reason.
The author makes variation in competitiveness out to be a bigger problem than it actually is. Even if one nation is always less competitive than the other (and I am not sure that Spain and Germany would be a good example here), this doesn't have to end up in a situation where one nation can produce a product for less and less and the other nation stagnates indefinitely.
> It’s pretty obvious that Merkel, or maybe her voters, aren’t European enough to accept the fact that Greece will never be able to repay it’s debt, no matter how much they cut their spending.
Most German voters are very capable of accepting this. They think reforms are necessary to prevent the problem from reoccurring, but they don't oppose a haircut per se.
> Far-outish-upon-Grandalf with 1000 inhabitants and a closed factory in the North of England just isn’t a good business for England. But the government still pays for social services, public pensions, roads and schools because the British voters accept that even though far-outish-upon-Grandalf is pretty screwed up, they are after all British and you can’t just throw the poor bastards out of the Commonwealth.
> Carolina is a piss-poor state that needs handouts from the federal government year after year. Last year South Carolina spent $2.34 for every $1 they collected in taxes. Courtesy of the federal government.
EU nations aren't like states in the US. It will be great if some time they become states in a union, but that time is not now. While they're still independent, though, each nation remains able to plan their budget and expenses independently. Sure, there is not much freedom to adjust the currency -- but each nation still has plenty of other tools available to make sure the deficit remains controllable.
I disagree with the notion that the Euro has to fail just because EU nations are not all the exactly the same. I see this crisis as a point where people finally start paying attention to their neighbors in the fiscal union around the Euro, and that should make future crises much less likely and should make the EU more resilient as a whole.
Pretty spot on. And the "2-speed" union has been in the talks quite a few times in the past decade. I don't think we need more nationalism at the European level to strengthen the public opinion of the need for further integration.
It just seems that the news outlet have not moved out of the national border and are indirectly responsible for this feeling of being a national from the country before being European. That being said, a lot of people in the younger generation seems to feel European t least on an equal part with the feeling of being a national citizen from their country.
There's another much simpler option: Greece can go bankrupt, default on it's loans, and start over without the burden of unrealistic debt keeping them in poverty. It can remain in the Euro and everyone can move forward more - perhaps with more prudent lending standards.
Yes, some investors will lose that money. They were happy cashing their cheques when things were going well. Investing is a business with a risk of loss.
Forgive me for being blunt, but I get the impression that you knew what comment you'd make before you read the article.
The article suggests the problem is systemic. Even if Greece goes bankrupt but stays in the Euro, the core issues have not been solved and the situation will arise again. In a race between efficiency and diversity, the Euro is systematically predisposed towards efficiency (which reduces the scope for diversity), and the economic controls that have historically protected diversity have been removed, therefore either diversity is lost (member nations lose control of their fiscal policy) or the Euro is abandoned.
That is what the article suggests. What is your response to that?
I think it's a mistake to assume that fiscal policy and monetary policy need to be linked.
The United States (although the federal government has expanded to a level I hope does not happen in Europe) provides an example. There are many state governments which have a dire financial situation. No one suggests the abandonment of the US dollar over it - it's understood that it's possible to have one group managing fiscal policy with a different group managing monetary policy.
I think the same applies to Europe.
And I actually do think that bankruptcy would solve core issues: a clean slate would allow things to be built a new in a more sustainable way.
It's my understanding that bankruptcy did wonders for New Zealand. It's not a wonderful option, but sometimes it's all that is left. And it's the only way capitalism works.
> They aren’t really Europeans, and there is no way German, Finnish or Belgian voters will accept yearly handouts counted in billions of euro to Spain, Portugal and Greece. Even as a Brit I feel the pain of my European partners. We have paid a shedload of cash into Europe to be disbursed before the Euro.
I don't disagree that some of the levers of monetary policy are removed by the common currency. If the German chairmakers were so good, would you devalue until the exchange rate was 0dm for 1ps?
I'm not familiar with the study mentionned, but i don't understand why, in theory, the southern states couldn't lower salaries to have productivity gains ( since pay raises have been the major reason for the loss in the first place).
(note especially the ludicrous 27% "natural rate" of unemployment for Spain predicted by standard economic models cited there)
Ordinarily the problem would be solved by de-valuing the currency against the more competitive economies' currencies, but with the Euro that's not possible.
So the best way in practice would be for the more competitive economies to incur some inflation, say 5%, for several of years so that the less competitive ones can stay at <1% and restore competitiveness that way.
Unfortunately this is politically impossible in the Euro zone today, hence we have 25% unemployment in southern countries.
i just realized another big difference between the traditional devaluation/inflation solution and the wage reduction :
In the first case, savings and capital in general are affected as well, whereas in the second only workers are.
So i guess wage reduction would restore competitivity but would also increase the inequality in the country dramaticaly (unless you dramaticaly increase the taxes on higher revenues and on savings as well).
Another thing is that if a country changes its currency to be able to devaluate, you can be pretty sure that all the savings will immediately leave the country's bank and convert to stronger currencies.
Also, there's more to productivity than salary levels. You also need to factor in education, experience, access to capital (for tools and machines), infrastructure, proximity with suppliers ot clients, administrative overhead, etc. At least part of that will need to get funding (ideally by the EU).
There is so much hyprocrisy in this article as well as in the comments who try to analyze the situation. Just by searching
Google, you could find that labor costs in most Northern countries is much higher than in South:
"...by accepting the euro, your government accepted a loss of sovereignty. You cannot be a sovereign state if you don’t have your own money. If you don’t have your own money, you can’t finance your own government. So this is all the trouble that we see in Greece, in Spain, Portugal, Ireland, Italy. These are governments that are not sovereign, because they don’t have their own money and therefore they cannot finance themselves, they have to rely on foreign private banks to finance them and their creditors are more powerful than the governments and so when the countries have difficulty paying, the creditors may impose austerity on them and loot the countries; Greece is being looted. How do you loot a country? You tell them their pensions have to be cut, their employment has to be cut, social services have to be cut, so that there’s money to pay the banks...."
Anyway, back to the point. Spain, Italy have a lot of fine craftsmen - remember Zara, Ferrari and Lamborghini! But the Northerners are pretty professional at their work - BMW, Volvo, Nokia! It will take long for the mindset in the southern states to change from casual to the one of performance.
As the pressure mounts, a lot of young people will start to gravitate towards greener pastures in other countries - it's easy for people from member states to move to a new country, thus depriving these countries of young workers. It'll turn out to be a pretty painful situation them, a brain/workforce drain, which is the last thing they want right now.
The EU and Euro currency brings both good and bad. The good that I see is the easy exchange of money, travel and work options. The bad is that European people aren't a single stock, they don't like to be compared to each other, or to be put on similar benchmarks. It was smart move by Switzerland and UK to stay out of the Euro currency. The common currency puts a pressure on everyone to be equal. And that, is not going to happen. This will be a challenge EU will face for a very long time to come, and maybe there's no good answer.