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The lesson of Europe's economic crisis

Gavin Hewitt | 17:41 UK time, Tuesday, 9 February 2010

barroso_595.jpgSome European leaders believe that the lesson of the recession and the crisis with the euro is that Europe should coordinate its economic policies much more closely.

Speaking in Strasbourg today, when the European Parliament approved the new Commission, Jose Manuel Barroso made a strong pitch for greater economic coordination. "It's the only way forward," he said.

It remains unclear exactly what coordination he has in mind but he obviously envisages a significant change. "I believe that our economic and social situation demands a radical shift for the status quo... and the treaty allows this," he said.

It seems that he is referring to articles 120-122 under the Lisbon Treaty. "Where it is established... that the economic policies of a member state... risk jeopardising the proper functioning of economic and monetary union, the Commission may address a warning to the member state concerned," it states.

So, a warning. Perhaps sanctions, but that is not explicit. But that hardly matches the ambition of Mr Barroso's words. "If we want to reinforce our industrial base... then stronger economic coordination is the only way forward," he said. The word "only" was underlined.

Others go further. Herman Van Rompuy, the new president of the European Council who has called this Thursday's informal economic summit, is looking for more economic government at a European level. This "economic government" will involve four or five objectives that "have to be agreed by everyone".

In his letter to the heads of government attending Thursday's meeting, Mr Van Rompuy said: "Recent developments in the euro area highlight the urgent need to strengthen our economic governance." He went on to write: "Whether it is called coordination of policies or economic government, only the European Council is capable of delivering and sustaining a common European strategy for more growth and more jobs."

The British government is in favour of active coordination of economic steps taken and backs an annual economic summit, but there are officials who see economic turbulence as an excuse for further European integration, and that is why the fine print of this week's summit and beyond will be pored over.

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  • 1. At 6:30pm on 09 Feb 2010, dennisjunior1 wrote:

    Gavin:

    I am glad, that there will be an evaluations of lessons, that were learned following the recent Economic Crisis in Europe....

    And, also, I am sending my best wishes to Mr. Barroso with the recent nomination of his team for the next 5-years....

    -Dennis Junior-

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  • 2. At 7:02pm on 09 Feb 2010, Mike Dixon Londoner in Spain wrote:

    Gavin

    ¡What a difference in tone from the last feed!

    Speculation over, now switched to the Yen - and with more reason.

    Regarding Regulation, I have reason to suspect a coordinated approach between the European Community has or is being worked through. I very much doubt that José Zapatero was in Washington just for the dinner to raise money for Haiti and it certainly wasn't for the weather.

    By the way - ¿What chance GM getting 11b € from the European Governments? My guess - As about as much chance as a snowball in the hot place.

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  • 3. At 7:02pm on 09 Feb 2010, John_from_Hendon wrote:

    Lessons:

    Global issues:

    1. Bubbles are bad, very bad, news for economies.
    2. The management of bubbles requires pre-emptive monetary management - and the people will not like it, but it is critically necessary.

    Why these lessons need to be re-learned is really quite astonishing as they are basic economics - but they were the root cause of the irrational exuberance that underlay the noughties.

    Further we need individuals that will take unpopular decisions and have the integrity and courage to do so.

    On the parochial issues in the European 27 states:

    1. Don't mess about - one currency needs one legal framework and one accounting system - get on with it.
    2. Countries not using the European currency should be thrown out of the EU as the extra complications that they cause are a terrible wast of resources.
    3. Fix the accounting system as a matter of urgency - if the individual states can't efficiently and correctly manage delegated economic management and funds management they should be taken back to the centre.

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  • 4. At 7:04pm on 09 Feb 2010, DiscoStu_d wrote:

    "....and the treaty allows this". Get used to that phrase. They’ve only just begun using it! Be careful what you sign up for as it may come back and kick you in the....

    "and that is why the fine print of this week's summit and beyond will be poured over." That would be wise. Be careful what you sign up for....

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  • 5. At 7:13pm on 09 Feb 2010, Mike Dixon Londoner in Spain wrote:

    To Finano 140 previous feed.

    Yes, just about spot on to my mind.

    The biggest number of foreigners here are the British at 750 thousand, many of them pensioners suffering from the fall in the value of Sterling.

    The next largest group are the Morrocans at some 650 thousand, with whom we have had a love/hate relationship for the last 2,500 years.

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  • 6. At 7:32pm on 09 Feb 2010, democracythreat wrote:

    Being a politician must be a fantastic way to earn money. You can say whatever you want, all the while spending other peoples money on schemes that enrich your ever widening circle of good friends.

    The only drawback is having to win elections.

    For most politicians, I mean. Obviously guys like Barroso don't have to worry about that.

    All he has to do is say whatever he wants while he spends other people's money.

    Seriously, who is this guy?

    It is all I can think when I look at him. Who is this guy?

    Did he magically appear out of a hat? Did god reach down out of the clouds and touch him on the shoulder, so we'd all know who to listen to?

    Who is he? On what basis is he in the news, and spending our money?

    The most appalling irony in this bitter farce is that this man is lecturing the world about economics and proper accounting. He works at the EU. In the commission.

    Even your bank manager doesn't lecture you as he takes your money. These EU folks are just outrageous.

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  • 7. At 7:47pm on 09 Feb 2010, Menedemus wrote:

    Centralised fiscal control and then, no doubt, centralised tax raising powers are the endgame of EU politicians. What a surprise!

    Just a further step in the integration of European States into a centralised Political Union without anyone having a choice in the matter - other than the politicians who all connive to deprive the docile electorate of any rational choice in the changes being made.

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  • 8. At 9:33pm on 09 Feb 2010, EUprisoner209456731 wrote:

    "Some European leaders believe that the lesson of the recession and the crisis with the euro is that Europe should co-ordinate its economic policies much more closely."

    EUpris: If they say that that is what they believe, then there is no reason to assume that it is. The last forty years have shown that you cannot believe a word an EU-lover says.

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  • 9. At 9:43pm on 09 Feb 2010, EUprisoner209456731 wrote:

    3. At 7:02pm on 09 Feb 2010, John_from_Hendon wrote:

    ' ...
    Countries not using the European currency should be thrown out of the EU as the extra complications that they cause are a terrible wast of resources.'

    EUpris: PLEASE! PLEASE! PLEASE! Throw us out!

    We don;t need this rubbish. British people retiring at 65 don't need to be paying for Greeks to retire at fifty.

    We don't need to have fascist continental policemen landing in the UK

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  • 10. At 9:48pm on 09 Feb 2010, ghostofsichuan wrote:

    Riding many dead horses will give better opportunity to win the race? Individually, none of them saw the financial crisis coming...or pretended not too. So collectively, they think they will fair better? This is the same as placing your navy all at one port....not a good strategy as it can all be lost at once.
    It sure would make it easier for the banks to steal, but I am not sure that is the objective..or is it.

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  • 11. At 11:15pm on 09 Feb 2010, Gheryando wrote:

    Yay, EuPrisoner is back With full force!!

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  • 12. At 11:18pm on 09 Feb 2010, EUprisoner209456731 wrote:

    3. At 7:02pm on 09 Feb 2010, John_from_Hendon wrote:

    " ...

    Further we need individuals that will take unpopular decisions and have the integrity and courage to do so."

    EUpris:

    We need to resist this sort of rubbish.

    "1. Don't mess about - one currency needs one legal framework and one accounting system - get on with it."


    EUpris: Totally unacceptable to be in a politial union with the continentals.


    " Fix the accounting system as a matter of urgency - if the individual states can't efficiently and correctly manage delegated economic management and funds management they should be taken back to the centre."

    EUpris: "The centre" cannot manage what it controls now.

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  • 13. At 11:21pm on 09 Feb 2010, EUprisoner209456731 wrote:

    5. At 7:13pm on 09 Feb 2010, Mike Dixon Londoner in Spain wrote:

    " ...
    The biggest number of foreigners here are the British at 750 thousand, many of them pensioners suffering from the fall in the value of Sterling."

    EUpris: They should get out now, before it hits the fan.

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  • 14. At 11:26pm on 09 Feb 2010, EUprisoner209456731 wrote:

    " ...there are officials who see economic turbulence as an excuse for further European integration ..."

    EUpris:

    They see anything as an excuse for further integration.

    A long way away two galaxies are colliding. Clearly that proves that we need more European integration.

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  • 15. At 11:33pm on 09 Feb 2010, John_from_Hendon wrote:

    #9. EUprisoner209456731 wrote:

    "British people retiring at 65 don't need to be paying for Greeks to retire at fifty."

    Sounds like you are a strong support the Social Chapter... Why should our Government be permitted to make it worse for us than our fellow Europeans - that isn't fair is it!

    "We don't need to have fascist continental policemen landing in the UK"

    Quite right we already have our own!!!!! (see Today's news)

    You sound far more pro-European than almost anyone I have ever seen here. You are quite right to demand the mythical level playing field. Why should our civil servants be allowed to get away with excessively onerous literal implantation of EU directives when other Nations take a far more flexible approach? Our civil service gets the same directive as the others but then they choose to make things worse for us than the people of the other Nations in the EU. It isn't the directive that is at fault it is the way that our civil service implement it! (Almost anything our civil service touches damages the Nation and the Country by putting us at a disadvantage as against our fellow Europeans!)

    But your appeal for self mortification by begging to be 'thrown out of the EU' seems an excessive way to punish yourself and us. You do seem very keen to punish yourself, and the UK, by letting the upper class establishment (and bankers) punish the workers in the way they have always done and prevent us from having any protection against the exploitation by the 'good and the great' of this country.

    The EU provides a bulwark against our civil service and politicians. We desperately need the social chapter of equalisation of workers rights across Europe - why should our roads be kept more dangerous with tired drivers and almost unlimited working hours and our hospitals full of sleepy doctors? You are quite right to show that we need the working time directive as fully implemented here as it is in most of Europe If we have to work until we drop - so should the Greeks, and vice versa!

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  • 16. At 11:48pm on 09 Feb 2010, John_from_Hendon wrote:

    #12. EUprisoner209456731 wrote:

    "Further we need individuals that will take unpopular decisions and have the integrity and courage to do so."

    EUpris:

    We need to resist this sort of rubbish.


    Hey, you must have a short memory, don't you recall that we are in an economic mess and a bigger mess than our EU friends. The primary reason for this is the gutless wimps we have running the economy who were afraid to offend a few bankers and let unsustainable bubbles grow in the economy. We needed and need decision makers who are not afraid to take unpopular decisions that will prevent economic bubbles from getting out of hand - or maybe you want another economic crash! If you think that having a stable economy without rising unemployment but instead you want an eye-watering deficit that I am sorry I don't think that many people will agree with you!

    "1. Don't mess about - one currency needs one legal framework and one accounting system - get on with it."


    EUpris: Totally unacceptable to be in a political union with the continentals."


    This is daft from a practical point of view. Do you actually like giving your hard earned money to bankers and money-changers every time you go to your Spanish villa? But we also need proper oversight by people who we the people of Europe can sack when they mess up. So we must be able to vote people out of office. The problem with Europe is that it is run by a cabal of unelected officials responsible to a group of party leaders. Why can't the people elect the person in change? Do you not like democracy or something?

    " Fix the accounting system as a matter of urgency - if the individual states can't efficiently and correctly manage delegated economic management and funds management they should be taken back to the centre."

    EUpris: "The centre" cannot manage what it controls now. "


    The main problem with the EU's accounts is the bit that is delegated to the nation states I think you will find. These countries that are a lot more corrupt than we may be(?) and fiddle the farm budgets etc. These payments than fail to show that they have been properly handled by the local delegated official and this is then reflected back into the EU's accounts. (The EU's civil servants and MEPs also meed taking in hand. why can't we see all of their expenses in detail, just like our oh so wonderful MPs!!!)

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  • 17. At 00:04am on 10 Feb 2010, EUprisoner209456731 wrote:

    11. At 11:15pm on 09 Feb 2010, Gheryando wrote:

    Yay, EuPrisoner is back With full force!!

    EUpris:

    EUprisoner is staggered and amazed at the incredibly positive experience he has just had with his local hospital. They did throw me out one day too early. The sister was filling out a form She said "and you want to go home." I shouted "NO, I DON'T!" She just ignored me. I presume that somewhere there is a form saying that I agreed to go home. They did the same to my dad about twenty years ago. He collapsed at home and then they had him for six weeks. A classic British false economy. Learn from the Germans but don't be in a political union with them!

    Anyway, on the whole it was a very positive experience and I am extremely grateful to the competent and kind doctors and other medical staff.

    I did have to wait along time in A+E.

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  • 18. At 00:37am on 10 Feb 2010, MarcusAureliusII wrote:

    The lesson of Europe's economic crisis that every ten year old should already know is that a fool and his money are soon parted. Another lesson is that when you see a fool is put in charge of handling money including yours, get out while the getting is good.

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  • 19. At 01:06am on 10 Feb 2010, crash wrote:

    The EU will never work why should the people of Germany,France carry the economies of Greece,England and Spain?The sooner the EU is disbanded the better for the people of Europe

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  • 20. At 02:40am on 10 Feb 2010, MarcusAureliusII wrote:

    crash 19;

    Don't you think it's a small price to pay to be able to go toe to toe with the world's number one superpower, the US? Look at how they stood up to President Obama at Copenhagen. Look at how he was so scared of them he never even showed up for the EU summit. He was probably cowering under his desk in the oval office trembling with fear over the very thought of it.

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  • 21. At 03:36am on 10 Feb 2010, democracythreat wrote:

    MarcusAureliusII wrote:
    "The lesson of Europe's economic crisis that every ten year old should already know is that a fool and his money are soon parted. Another lesson is that when you see a fool is put in charge of handling money including yours, get out while the getting is good."

    Marcus, must you preach from such a very great height?

    The consistency of your prose is soothing, and speaks of a certain determination and resilience of character.

    The problem is that you are determined, as often as not, to be absurd. Has it truly not occurred to you that what you have written could be read back at you verbatim, changing only the single word "Europe" to "USA"?

    You are aware, are you not, of the recent economic problems in the USA?

    Looking down your nose at everything european is all good fun, but even a clown wears pants.

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  • 22. At 04:16am on 10 Feb 2010, MarcusAureliusII wrote:

    dt;

    What economic crisis in the US dt?

    "The problem is that you are determined, as often as not, to be absurd. Has it truly not occurred to you that what you have written could be read back at you verbatim, changing only the single word "Europe" to "USA"?"

    Actually dt, that's what I thought of first. Not just about Americanomics but the first time in my life I got my hands on some real money about 27 years ago that thought kept ringing in my ears. America, Europe, Tasmania, wherever you go there's always an horde of people just too ready, willing, and eager to take it away from you. They stay up at night inventing clever new ways. It's one thing to make or inherit money, quite another to keep it. Just ask any Hollywood celebrity or sports jock who made a fortune only to lose it to some trusted money manager. And who better to manage your money than a government? Or a Swiss Bank?

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  • 23. At 05:16am on 10 Feb 2010, democracythreat wrote:

    Well, I'm no expert on money. But I would have thought the problem with governments like the EU is that they prevent everyone, fools and non fools alike, from having money in the first place. Unless you are in their special club, in which case the money comes to you via the party.

    I noticed the guy who was running the FSA in the UK is stepping down. Before he was in charge of regulation, he worked for a bank. Of course. Because that is what we want, isn't it? Experts managing our money. And bankers are experts.

    I suppose it is a paradox of the modern world (or maybe it seems a paradox to me because I'm stupid) that we "trust" those who make a lot of money for themselves to make the best decisions for the community. Because they are so knowledgeable, the conventional wisdom goes, they can make the best decisions for everyone. And how do you prove that you are knowledgeable? By getting a whole load of money for yourself.

    To my understanding, the corporation is a perfect and simple articulation of the desire to exclude the community from gain. I am not saying corporations are evil, or that they have no place in the world, but simply that people start corporations in order to make money for themselves, and not for everyone else. And banks are just corporations.

    So when people live and work and get trained to think as corporate executives, what they are really experiencing is conditioning to reject the good of the community, and to focus only upon the owners of the business. That narrow and focused loyalty to the owners is what allows them to progress through the corporate ranks.

    In a way, anyone who has had a successful corporate career has demonstrated that they do not care one jot for the wider community. They have been perfectly happy to ignore the interests and concerns of the wider community, and to invest every waking hour into the pursuit of private, exclusive wealth.

    And somehow, these same people end up managing the government, and advising the government, and writing the laws under which we all live.

    The "experts". And of course, if you have a lot of money you MUST be clever, and if you are clever you must be the right person to run the community.

    For me, this is perhaps the greatest reason to allow common people to veto laws, and to have sovereignty over themselves.

    Corporate executives and bankers may be smart, but they are also profoundly greedy and selfish people. They have to be, to do what they do. And greedy selfish people are not going to respect the "free market", or refrain from coveting the taxpayers resources.

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  • 24. At 09:12am on 10 Feb 2010, U14312152 wrote:

    Dear Mr. Hewitt,
    With all my respect, I think there is one point in your article which may mislead some fellow-bloggers in error, namely: the European Council is quite a different institution that is not subjected to what the Lisbon treaty already stipulates for the member states of the European Union. Hence, no matter that the two approaches (I mean that of the European Commission chief, Mr.Barroso and that of the European Council president, Mr. Van Rompuy) share similar ideas as a remedy for the Euro stabilization, there are still many arguments in favor of the necessary “radical shift for the status quo”, Mr.Barosso speaks of.
    For one cannot imagine, how the EU could overcome the present crises without some administrative restrictions aimed at the budget cuts, the fixed bank interest, the necessary change of the exchange rate, etc., etc., any normal democracy would use in order to stabilize its currency. To that matter, it seems that the stipulations of the Treaty of Lysbone constitute the ONLY arsenal of means which are still available to face the first big challenge the Euro faces today.
    Consequently, the appeal of Mr.Van Rompuy “to reinforce our industrial base” is more likely to be a goal, not a remedy for the present crises. It’s just a recommendation, an optional diplomatic appeal for good reason that he addressed to governments which differ so much, both in their will and approach, in their alleged attempt to share some kind of joint responsibility with the EU member states…
    (I wonder how you Brits feel now with your pound sterling is likely to be the winner in the present situation, no matter that you are member of the EU ever since 1975?)
    Sofia, Febr. 10th 2010
    Generalissimo Franco

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  • 25. At 09:12am on 10 Feb 2010, Francesca Jones wrote:

    Hi Gavin

    It is interesting that Mr Barroso and Van Rompuy are talking about more economic co-operation for the Euro zone and possible action. Is this not a little like shutting the stable door after the horse has bolted? I have seen many suggestions for what Europe could do concerning Greece and the other Euro zone countries in trouble on http://notayesmanseconomics.wordpress.com but underlying his analysis is that currency union pretty much requires economic and political union.

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  • 26. At 09:30am on 10 Feb 2010, Gheryando wrote:

    EuPrisoner,

    Then your experience was better than mine. I went to a London hospital for swine flu with 39 fever at 1am and was still waiting at 5am.

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  • 27. At 09:52am on 10 Feb 2010, John_from_Hendon wrote:

    #21. democracythreat wrote:

    "Maximus Barbarius wrote: ...You are aware, are you not, of the recent..."

    The Barbarian is completely oblivious of anybody else except him/her self with the possible exception of his/her two rottweilers (which I have it on good authority are planning to savage him/her in his/her sleep). Nobody else matters - nobody else exists for the Barbarian. Do not expect any glimmer of humanity or understanding that anyone else exists from him/her.

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  • 28. At 09:57am on 10 Feb 2010, WolfiePeters wrote:

    Make the club democratic, then make rules and if countries insist on breaking them, throw them out. If you don't throw them out, accept that you have to help them when they are in trouble.

    If it isn't democratic and it's not necessary to keep to the rules to remain a member, what kind of organisation is it?

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  • 29. At 10:37am on 10 Feb 2010, Justin150 wrote:

    I have said before (and John from Hendon does not agree) is that the crisis shows that the Euro is an immature currency union.

    EU is incapable of learning from the US (or maybe the lessons are just not acceptable). The US has had a currncy union for nearly 150 years - and for many states even longer than that. Their currency union has certain basic law which are common (Federal law) but everything else is delegated to individual states - particular issues being budgets, tax rates (and even types of taxes) and social policy. This allows each state to compete with each other trading more social security with higher tax against less social policy but lower taxes to find the right mix that works for each state. If a state over borrows then that is there problem to sort out. Of course the key advantage of the US is that mass labour mobility is a reality, there is a common language and all the legal systems work the same way.

    Now I know many people will point out the flaws in the US model - the health care problems, the very low (by EU standards) of social protection. By what has to be recognised are that those flaws are a deliberate choice of the American people, they both at national and state level could elect people who propose more social security but consistently the people do not elect those politicians.

    I would argue that what the crisis shows is that the EU needs to allow each state more freedom to set tax rates and social security - the social chapter should be scrapped. The EU must ensure that freedom of movement of labour is not merely some ivory tower principle but that all states accept the reality of it and finally (and probably most controversially) the EU must ensure that where a EU country gets into trouble it does not bail it out. A number of the EU states are like drug addicts. They have become hooked on living way beyond their means and regard it as a right. It is not. Ireland have taken the correct actions, Greece clearly has difficults accepting them. The faster way to convince the markets that the EU is a grown up currency is to let Greece default. Then the markets will view govt EU debt on the same basis as it views debt issued by US states.

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  • 30. At 10:44am on 10 Feb 2010, Christopher Alain Jones wrote:

    19: crash
    "The EU will never work why should the people of Germany,France carry the economies of Greece,England and Spain?The sooner the EU is disbanded the better for the people of Europe"

    yea right, why should the good people of islington carry the economy of manchester....

    :rolleyes:

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  • 31. At 11:00am on 10 Feb 2010, Kit Green wrote:

    What is "the market" and who really controls it?
    If trade in currencies is intentionally directed to make profit by deliberate manipulation of poor economies then surely this is terrorism? Surely traders within a currency area taking part in this activity are guilty of treason. Those working from other countries are at economic war.
    Where is the fightback. Where is the rule of international law to control the aggressors?

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  • 32. At 11:50am on 10 Feb 2010, Chris wrote:

    Uf, now I'm getting ready for "the markets" read "highly paid compulsive gamblers" to turn their eyes to our currency. It looks as if the eurozone today/tomorrow will support Greece, Spain, etc. so they will start gambling with ours. There is only one option available to us all, change the rules so that banks can go back to been banks, i.e. borrow money from people and lend money to people. What we have now are state backed casinos, where the people that gamble in them "highly paid compulsive gamblers" are not afraid of failure because the tax payers will bail them out. A person will think twice before he/she bets on a horse because if they get it wrong they loose money, our bankers don't have such worries. Its other people's money they play with. The worse that could happen to them is they will not receive a huge bonus on top of their already huge salary!

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  • 33. At 12:38pm on 10 Feb 2010, Benefactor wrote:

    Could all this not be solved by giving the ECB the ability to veto budgets that would break the rules?

    As a knock on effect hopefully it would stop politicians making promises that they can't keep without spending their countries coffers into massive debt.

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  • 34. At 12:39pm on 10 Feb 2010, MarcusAureliusII wrote:

    dt;

    Do you know what the word facetious means?

    BTW, I think you are entirely too cynical. Corporations like all other businesses exist for one purpose and that is to make money. Most large American corporations have found out the hard way over many decades of experience that they make more money by being well thought of as good citizens than by being indifferent and even hostile to the communities they do business in. There are countless examples for every major corporation I can think of. One example I can think of offhand is target metrics or goals for charitable contributions to respected organizations like the United Way. The usual goal is 100% employee participation of at least 1/2 of 1% of gross salary. Another is at least one weekend a year of community volunteer service among all management which included painting and repairing homes of poor people, volunteering to work in hospitals, soup kitchens, cleanup of public beaches, parks, etc. They also fund scholarships, contribute to community efforts such as after school programs for students, take on summer interns to give youngsters the chance to earn money doing less skilled jobs that really aren't very important, corporate donations to private charities, civic organizations and other public service organizations such as PBS and NPR, donations to the arts like symphony orchestras. Their technical staff also lends expertise to committees which write building, safety, and other public codes, teach and lend expertise to colleges and universities they often partner with, mentor high school and elementary school students. No these are not like Swiss banks. There is more to their existance and their life than just the business of making money. It all goes back to the American heritage of what we call "the Protestent ethic" which came from America's early roots. And even with all that, they still usually kick the stuffing out of their foreign competitors. If they don't it is for entirely different reasons. The reason for the failure of American automobile manufacturers for example is a whole tale all by itself. I think you got this one really wrong this time dt. You don't understand us at all.

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  • 35. At 1:20pm on 10 Feb 2010, Chris wrote:

    @34

    Ohhh, those corporations are so kind cute and cuddly :)) it reminds me of politicians holding babies here in UK just about before every election!

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  • 36. At 1:49pm on 10 Feb 2010, Nik wrote:

    Re34: MarcusAureliusII : I do not basically disagree on what you say about many US (and EU) companies but then I cannot but see that they started doing so only after having sub-contracted all dirty jobs to China, India, Indonesia and elsewhere. So up to quite recently people died of cancer in industrial regions of US, now it is all about respecting the environment and the community, cos they buy the dirty stuff elsewhere where they do not have yet such sensitivities, thus regions in China and India hit record rates of cancer, allergies and such.

    Non-the less I am not bashing this trend among US companies, it is good and has to go on that line. What I will bash though is this infamous "protestand work ethic", one big lie. Protestands never rose to prominence because they have a work ethic - this is absolutely ridiculous. One of the people that on average worked considerably less than others were the protestand British and they were the Empire till last century. Protestants only rose to power only after catholic Spain kicked out their overly-rich Jewish community (till then the financial ruling class in Spain, recently liberated by the Moors - take notice that Jewish became rich during the Moorish conquest, a fact that explains to a large extend why there was that rivalry between catholics and jewish) who found refuge to Holland where the first true modern capitalist market was set. Analysing the protestant and catholic nature of belief I would say that the protestant is very often much more backwards.

    The only difference that protestantism made is that by breaking away from the catholic church it just fragmentalised and directly weakened the overall link of people to religion and traditional structures and this was of course some short of advantage in the beginning of the industrial era that followed not long after.

    And just to catch you out of the blue: among all the EU nations' working populations guess who works more.... its the Greeks mate. Not Danish, not Dutch. Not British.

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  • 37. At 1:50pm on 10 Feb 2010, WolfiePeters wrote:

    23, 34, 35

    I think that we used to call this idea benevolent self-interest. It was a popular corporate concept back in the 1970s. The essence of the idea is that, in the long term, it pays for a corporation to make some investment in the world in which it exists. It makes sense from two angles: one the business looks good and two, if the cake gets bigger for everyone, your share gets bigger as well.

    Unfortunately, it went out fashion with long hair and E-types. In a world of buzz cuts, Thatcher, Porsches and instant gratification, it was way too ...namby-pamby, hippie, liberal, socialist.

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  • 38. At 2:00pm on 10 Feb 2010, ghostofsichuan wrote:

    The nation-state is based on the idea,in democratic coutries, that representatives of the people (theory) will represent the priorities of the people. If a centralized structure has the power to determine debt levels that can only lead to more specific recommendations within an economy. The influence of big business has ensured that they are the favored few and decisions benefit them. The shrinking middle class is of primary concern as this is the engine that drives the train. The financial sector has lost sight of that and has diminished the personal wealth of the middle class with their last scheme to get rich quick. There are social implication to economies and these are hardly discussed. The globalization of banking has put everyone at risk as there does not appear to be a government with the will to regulate that industry to protect the citizens. The idea should be to insure that each elected body protects the investments of the citizens, not expedite bussiness for the banks. This is all about business deals and has little or no benefit to the average citizen and more likely puts those citizens at greater risk. Banks and financial industry have betrayed everyone and act like this is some blip on the radar. Until some rules regarding risk management are put in place we are all subject to another bubble created by that industry for their own benefit. Ethics can not be regulated so everything else must be. When prisoners are released they are placed on probation and that is how the banks should be treated....let them prove that the conduct of their business has changed.....no signs yet.

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  • 39. At 2:09pm on 10 Feb 2010, cool_brush_work wrote:

    Msr Barroso!

    EU Commission President: "..demands a radical shift for the status quo... the treaty allows for this..": Whether it is the Treaty of Union, Masricht, Nice or even the wretched Treaty of Lisbon the bell is tolling for European Citizens' Free-will.

    Not content with no majority Citizen Mandate at the last 3 EP Elections, comprehensive founding Nations' Citizens rejection of the 'Constitution', despite evidence of a systemic failure to consult Citizens for support on the ratification of the Lisbon Treaty, Msr Barroso still dares to call for more 'centralising' power and authority to be placed in the hands of Brussels' EUrocrats!

    This incorrigible aggrandising menace and usurper of the Democratic Rights and Responsibilities of alleged EU Citizens sees fit to pronounce, "..stronger economic coordination is the only way forward.."!
    The arch lick-spittle of EU 'one-size-fits-all' philosophy claims provision for such a Paris-Berlin-Brussels takeover stems from Articles 120 - 122.

    Well, how rapidly have all the contemptuous deceitfulness and outright lies about the meaning of Maastricht, Lisbon Treaty etc. been exposed!
    All those 'pro-EU' on these Blogs and the EU representatives spouting about how Lisbon does not extend EU intervention in National Governance or alter the constitution of every State. Now, apparently from Maastricht to Lisbon does give Brussels authority and power to 'insist' on 'further European integration'.

    Anyone care to bet within 2 years Brussels will have accrued and been backed by that other tool of anti-democratic manoeuvres the ECJ for all the unprecedented 'coordination' powers time-serving, jobsworth Msr Rompuy and Barroso blithely refer to as the "..only way forward.." (emphasis on 'only')!?

    European Citizens have been misled for 2 decades about the actual aims and intentions of the European Union and its federalist project.

    In this 3rd decade since Maastricht set in motion the political-economic-judicial levers of the grand scheme to subvert the 'democratic' options available to 450+ million People the issue is reaching its climax: This could and should be the zenith of the EU venture. From this point the decline will begin to materialise as Citizens across this undemocratic, corrupt and venal supra-National institution resist a 'coordination' which is shorthand for longterm, unwarranted and uncalled for domination of Citizens by 'big-Government/big-Business'.

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  • 40. At 3:06pm on 10 Feb 2010, cool_brush_work wrote:

    Francesca Jones

    Very interesting reading the link you provided at #25 to the 'NotaYesManEconomicBlog'.
    The views were informative and constructive.

    However, my particular interest was taken by the reference to the Financial Times' 2010 - Chart of National Debt to Gross Domestic Product and relative Fiscal Defecit.

    The Chart was a revelation!

    Occasionally on these Blogs when the topic arose I have puzzled over the apparent economic-financial miracle of Paris-Berlin always being in step: Never more so than in the last 2 years when the twinned-EU 'great powers' entered recession using the same figures and emerged from it at the same, together with similar figures!

    Just how does this modern European miracle ocur? How does France's economy - - dwarfed by Germany - - manage to keep coming up with these stunning growth figures on National Balance sheets despite its entire industrial-social system never making economic sense?

    Well, surprise, surprise, it does not!

    As the FT Chart spectacularly reveals France's Nat Debt to GDP relative to its Fiscal Defecit is practically a mirror-image of Portugal's and nothing like the impressive level attained by Germany (even in these straitened times).
    Put bluntly, France is very nearly in with the 'PIGS'!

    If the Chart is taken at face value, France, far from being a 'bailer-out' of Greece, is in such a weakened condition it may require a 'Bail-out'!
    It appears the Elysee-hubris coupled with Paris' Financial-expediency (in which Berlin is always a conniving partner such is its desperation to retain and hold sway over Europe) could develop into an embarrassing under-the-counter subsidisation by Germany! Afterall, if Berlin is worried by the possible fallout from Greece's economic problems imagine 'Allemagne' and Paris' fears if France started to reflect its true economic plight!

    No, I am not claiming any high ground for the UK: Just look at what the 'link' article has to say on the dire situation London faces, but unlike Paris, at least the Bank of England Governor does not gloss over the plight UK is in and certainly there is no atempt to fix the Balance sheet which would appear to be France's mainstay for economic viability.

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  • 41. At 4:04pm on 10 Feb 2010, democracythreat wrote:

    Benefactor wrote:
    "Could all this not be solved by giving the ECB the ability to veto budgets that would break the rules?

    As a knock on effect hopefully it would stop politicians making promises that they can't keep without spending their countries coffers into massive debt."

    Sure! That would solve the problem of politicians making promises they can't keep. It would solve the "problem" of politicians in member states altogether.

    After all, if the central bankers in Brussels have the power to veto budgets in member states, it follows that the bankers in Brussels have the power to block supply to any member state government.

    Think about what it means to be able to veto a budget. That means the power to suspend funds to the elected government. That means the people could vote for a given government, with specific mandates, and then that expression of popular will could be overturned by a few bankers in Brussels. None of whom are elected, none of whom have any recommendation to them except that they are bankers.

    The power.... and i mean raw power... of the bankers in Europe is evolving. And fast. They have built themselves an edifice from which they now play masters of the universe, and the rest of Europe can do nothing but watch and wait.

    But how have these self proclaimed masters of the universe been doing, in banking terms? Are they successful?

    They would say yes, but let us pause for just a second, and take a long hard look at the business of banking.

    Loaning money to folks is easy. We can all do it. Getting the money back is the hard part. True?

    I mean, is it not the fundamental business of bankers to make loans to people who are able to repay the loans? If a banker makes a loan to someone with no job and no real intention of repaying the money, then whose fault is that?

    And this is where a very, very strong case can be made to indict the bankers of Europe, particularly the ECB.

    It was the ECB who not only allowed Greece to run deficits for decades, it was precisely the ECB who declared to the wide world that Greece, and the political leaders in Greece, were competent to repay the money. Now that turns out to be false.

    And the answer? Do the bankers lose their money? NO! They lose our money!

    And the solution, put forward by these same bankers? Keep going! More of the same! Bail out the greek politicians with more of the workers money.

    In the old days, before central banking and a political system owned and run by bankers, when banks made bad loans to debtors who could not pay, the bankers went broke. They lost THEIR MONEY. Note the Emphasis. Not OUR money. Not Taxpayer's money. The bankers lost THEIR money. They ceased to be bankers, because they became poor folks.

    But in the brave new world, when bankers make loans to people and countries who can't pay the bills, it is the taxpayers who end up suffering. The bankers are never held accountable.

    The system is really quite easy to understand. We have privatized profits, and socialized losses. When bankers make money, they keep the money for themselves. It is called profits. Bonuses.

    And when they lose money because they lend to utterly corrupt regimes in eastern europe or equally dishonest regimes in Greece and Spain, ........ well then they keep their jobs, they keep their bonuses, and after the taxpayers are hit with greater taxes to bail them out, they even make profits!!

    There is an elephant in the room in todays world, and it is the control and abuse of the taxpayer by the shareholders and executives of banks. Banks are creating economic hardship by handing out stupid loans that can't be repaid, and then forcing the workers to pay more taxes so that the bankers can do it again. And again. And again.

    And why wouldn't they? Why wouldn't these bankers make stupid loans to politicians who lie for a living? It is not they who will lose their money. The bankers will still get salaries and dividends and bonuses. they will still be living high and mighty.

    Right now the bankers are wearing thin on my patience, and I am a very patient man. If they were all broke and on the dole, then I might see an end to their duplicitous and shoddy business dealings. But as it is, these clowns keep losing out with their grand schemes, and they keep raising taxes in order to be kept in the manner to which they have become accustomed.

    Every single person who ever worked for the ECB over the last twenty years should have their name printed in every local newspaper, they should have their assets stripped from them, and should be banned for life from ever holding a job that pays more that 8 euros an hour.

    That is what happens to people who make bad loans with their own money. That is what the market does to them.

    Why should it be different when it is our money they have lost?

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  • 42. At 4:09pm on 10 Feb 2010, democracythreat wrote:

    MarcusAureliusII wrote:

    "Corporations like all other businesses exist for one purpose and that is to make money."

    That was yesterday, Marcus.

    In the brave new world, car manufacturers do not make cars in order to sell them and make money. No, they provide jobs to the community. Therefore the taxpayer must bail them out if they go broke. Because they are too important to fail.

    And banks, too, no longer loan money in order to make money. Now bankers provide "liquidity to the market". It is a crucial social service, and so when they lose their money the taxpayer must work longer hours for less pay, because these banks are too important and too big to fail.

    In greece now the guy who clears the rubbish away from the streets so that the whole society does not turn rancid with disease is having his monthly wage dropped from 750 euros to 675 euros, and then he is paying more taxes on everything he spends to live.

    Meanwhile, the people who lent his government money that cannot be repaid have been rewarded with hundreds of thousands of Euro's every year, fancy cars, and a free pass from the corporate media.

    There is no free market in todays world. there is only corporate representation, sliding inexorably into outright fascism.

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  • 43. At 4:38pm on 10 Feb 2010, Chris wrote:

    @42 DT

    Very well said!

    Although I'm afraid Jukka and other "markets" religion believers will be worried that because you don't worship the almighty "markets" you'll go to hell for your sins

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  • 44. At 5:34pm on 10 Feb 2010, Gheryando wrote:

    We need an EU tax system similar to the US tax system.

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  • 45. At 5:58pm on 10 Feb 2010, Gheryando wrote:

    democracythreat -

    In the market, every business should be allowed to fail. Banks should be allowed to fail, while their deposits should be guaranteed up to an extend. This will allow for bad businesses to go bust and makes room for new and better firms.

    This is how it is supposed to work but it doesn't because politicians need to be populist and act according to the "reasons" you stated in your post 42.

    I also disagree with the notion of feeling sorry for the Greek worker. He has lived off his state and retired early unlike many others in other countries. He has lived a better life than he could afford. He was never supposed to earn 750 in the first place.

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  • 46. At 7:46pm on 10 Feb 2010, Chris wrote:

    @42

    So he should had picked up rubbish for free?

    come on!!! in that case bankers that lost millions of pounds should be used to make manure or replace laboratory animals!

    what is a fair price to pay a rubbish collector or other people give us your estimates!!

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  • 47. At 10:14pm on 10 Feb 2010, Gheryando wrote:

    I suppose you are referring to my post not #42.

    The fair price to pay a rubbish collector or any other market participant is the rate that he is happy to provide the service for and his employer is happy to pay him. It is where demand and supply meet and it is the market equilibrium that gives the greatest benefits for society as a whole.

    What these rates ought to be in different geographic regions is obviously subject to great variations.

    Regarding the bankers. Again, if they fail, they should lose their jobs. They only kept them because the banks were saved. Were the banks not saved the bankers would have no job or would have to create a different bank and vastly change their ways of working. Bailing them out simply tells them that there is no downside to taking excessive risk.

    Its called YBG IBG mentality: "You'll be gone, I'll be gone" (when it hits the fan)

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  • 48. At 10:24pm on 10 Feb 2010, democracythreat wrote:

    cherryando wrote:
    " I also disagree with the notion of feeling sorry for the Greek worker. He has lived off his state and retired early unlike many others in other countries. He has lived a better life than he could afford. He was never supposed to earn 750 in the first place."

    I don't feel sorry for the greek worker doing crucial work. I feel his anger and bitterness.

    Now whether he is overpaid or underpaid is an open question, but what is not open for debate is that the man's work is absolutely crucial to everyone's well being.

    If nobody collects the garbage, disease ruins society for everybody. It may be simple work, and it may not need a grand education, but it is absolutely vital.

    That is not something that can be said for the thousands of paper pushers in the city of london, nor in Brussels.

    When those who do crucial work are struggling to feed their children and those who play at clever politics and money lending earn millions in bonuses, something is dreadfully wrong with society.

    Anyway, the fact stands that the EU and the ECB have been presiding over decades of money lending to governments who have not been legitimate candidates for loans. How do we know? Because they can't pay them back. Why? Because all the money that was lent to them by the ECB, in full view and under the watchful eye of the EU minions, was wasted and spent to curry political favours.

    Now cut that anyway you want, but the fact remains that the LENDER in this instance has failed just as much as the borrowers have failed. And do you know who those two sets of people are?

    All the bankers and the politicians who have been singing the praises of the grand EU market. It is the SAME PEOPLE.

    All those people in Brussels who lent the money to lying, wasteful politicians failed to check the credentials of the borrowers. All the borrowers failed to invest the debt of their people properly.

    Failure, all around.

    And now the taxpayer, who is just trying to collect the garbage so people don't die of dysentery, is being told he has to suffer so that these same people can spend more of his money.

    And that is the crucial point in this debate. These bankers and politicians have failed, they have wasted our money, and all they can talk about is more of the same. they are parasites sucking the life out of the European economy, and yet all they can talk about is that fabled beast called the open market, and how they know how to lead Europe towards prosperity.

    And because there is no accountability to the people, nor to the market, there is no way to be rid of these parasites. they can;t be voted out and they can;t go broke. It is desperate situation for Europe. Brussels steadfastly refuses to acknowledge it has failed in its duty as a lender and money manager, and schemes for ever more power.

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  • 49. At 10:38pm on 10 Feb 2010, Gheryando wrote:

    dt

    I sympathise with your analysis. Nevertheless, there are many jobs you can consider "crucial". In fact, most of those "crucial" services are done by the state. That is the whole idea of a state. It supplies vital services like water, schooling, army, justice etc.

    Just because they are crucial doesn't mean that those services can't be bloated and be a waste of money. This is what happened in Greece.

    Regarding the bankers, they also provide a crucial service: liquidity. They are facilitators but have grown beyond their original means due to greed. This is why I argue they should be allowed to fail and Bankers should then loose their jobs.

    Btw, the ECB has only barely existed ONE decade..

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  • 50. At 08:04am on 11 Feb 2010, David wrote:

    If

    there is no rescue of Greece..there will be no EU..

    therefore to survive and KEEP their infamous jobs,

    EU officials are/will be forced to fashion a rescue/austerity plan for Greece....with diplomacy:)

    but no big rewards just prudent friendly rewards (what ever the ... that means)

    BIGGG CRISIS HERE...INTELLECTUAL, ETC.

    or it will be..

    "I'm as mad as heck, And I'm not going to take it anymore"..if no rescue...

    gone goes EU...UP RISES ECONOMIC UNION OVER POLITICAL UNION ...

    GLEEFUL DERISION FROM THE MASSES:)

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  • 51. At 1:25pm on 12 Feb 2010, Granota wrote:

    The EU will continue, Greece will receive backing and the markets will recover.

    Bankers have always been bankers and politicians have always been politicians, society evolves but human nature does so at a much slower rate than the acceptance of ideas.

    We are talking of a world economic crisis in which some of the players will suffer more than others and take longer to recover, but recover they will, whether this constitutes an improvement in the quality of life of the average citizen or a "step backward" is another question. Evolution is inevitable, the integration of a united Europe will be a long process and perhaps this should be so but economic models such as the US to find the solution.
    2.8 million, let me just repeat that, 2.8 million mortgaged homes received notice of foreclosure in the States last year. No further comment should be needed. Will the US recover faster than some European nations? Probably, and one of the challenges facing European governments is to provide the right tools and conditions for high growth firms to prosper.

    Much to the chagrin of many of those commenting here, Europe is changing. New generations are increasingly ready to take on the challenge of Europe, not only in the sense of feeling European but of being capable of putting free movement of labour into practice. This evolution has begun and is unstoppable. The best thing we can do is to get all our culturally diverse heads together and look for a solution.

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