Economic storm hits Greek farmers
BOIOTIA, central Greece
There are no speeding cars, not a single lorry on this stretch of the main Athens-Thessaloniki highway. Instead, in the centre of the four-line highway, there's a group of about 50 men milling around and chatting. They're farmers and their small tractors are neatly parked on both sides of the road.
This blockade is now in its tenth day and it's a very well-mannered and relaxed sort of protest at the moment. The farmers are not literally blockading the road, just standing ready to do so, to move their tractors into place. But there's no real need. The police are diverting drivers off the motorway long before.
It's been a different story in other parts of Greece, particularly at the crossing from Bulgaria, where lorries have been queueing for days trying to cross.
I came here expecting to hear a simple demand for more money from the government at a time of economic difficulty, but the picture from the motorway is both more specific and more general. The men are genial and generous with their hospitality, but as we talk their very real anger becomes apparent. 
On our way to the protest we pass by a large body of water - Lake Iliki. One of the farmers' main complaints is about the lack of irrigation. "We still get our water like they did in the pharaohs' time," says one man. They are also angry about low prices and high production costs. There is surprisingly little talk about the euro, but they are furious that their products are undercut by cheap wheat from Ukraine and potatoes from Egypt.
When I suggest that they want bigger subsidies one man interrupts angrily: "No, no, not more money, no!" It is a surprising intervention. But he continues to tell me, as they all do, that in the past Greek governments have thrown money around when there is a crisis, but don't plan for the future. "We want planning, for the sake of our children." A blockade for structural reform? Perhaps.
Most of them seem to think their problems have little to do with the worldwide financial crisis, but instead blame a series of lacklustre governments.
But Greece is one of those countries rudely nicknamed the "PIGS" economies. Portugal, Ireland, Italy, Greece and Spain have all had their credit ratings cut recently, and this makes borrowing more difficult and foreign investment even less likely.
A few - and at the moment they are pretty rare - voices are raised to suggest that these economies are suffering from membership of the euro. Some argue that one or more of these currencies could be forced to leave the euro and they might have been in a healthier state if they had never entered the single currency.
While all the economists I have spoken to regard this as nonsense, they do think Greece is in a poor economic state and it will get worse before it gets better.
The European Commission's recent report suggested that, although there would be no recession, growth would be sluggish, driven exclusively by domestic demand. In particular, the pillars of the Greek economy - shipping and tourism - will be "vulnerable".
But the chairman of the government's council of economic advisers, Dr George Sfakianakis, is almost upbeat when I talk to him. He says Greece "is in a relatively better position than almost any other country in Europe.
"The fundamentals of the financial system in Greece are very healthy. We have no risk of any bank failing. Still, in order to safeguard the competitiveness of the Greek financial system we have implemented a rescue plan, because without it there would be a comparison between Greek banks not being protected and banks in Europe being protected. We think this is going to enhance liquidity in the economy.
"It was not a case of saving banks, but it was about ensuring that there is adequate credit in the economy, so that enterprises and households keep their standards."
He admitted that the credit downgrading was a negative verdict from the markets, but suggested that the publication of tomorrow's latest growth and stability forecasts would reassure an international audience.
But what about the euro?
"Despite the competitiveness problem it means there is no question of a devaluation. You see what happened in Hungary and Latvia, where they had to call in the IMF because they did not have the single currency. I do not believe in devaluations - they lead to a vicious circle of inflation and further devaluation. The euro has helped Greece very much."
You can hear my reports on the Greek economy on Radio 4's World at One and BBC1's News at Ten today.
But if you live in Greece or any of the other "PIGS", or know those countries, or even if you don't, what do you think?
I’m Mark Mardell, the BBC's North America editor. These are my reflections on American politics, some thoughts on being a Brit living in the USA, and who knows what else? My 
© MMIX~RS~q~RS~~RS~z~RS~46~RS~)
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I can point towards an interview between Niall Ferguson (british historian at Harvard) and Fareed Zakaria (CNN pundit) wherein Ferguson asks the crucial question "Even if the world wants to borrow, what if the Chinese stop lending, because they need their savings to prop up their own failing economy?"
It is fascinating, because the governments of the world continue to discuss bailouts and stimulus packages as if the supply of easy credit that has been around for the past 20 years will continue.
They presume they can simply borrow their way out of trouble.
But if they cannot, and they are faced with the options of doing nothing or simply printing money.... well, as Ferguson says, in that scenario the consequences will be dire indeed.
Could the EU even survive if member states face domestic pressure to print money? I'm no expert on the EU monetary system, but as I understand it, member states would need to drop the Euro in order to follow this course.
It would be curious indeed if a depression followed the pattern of the 30's, and state began isolating themselves. Could the EU survive?
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The Greeks clearly trust the ECB more than their own politicians to manage their currency - maybe with good reason.
To address their current problems, they cannot mess around wiht their currency, so people (quite rightly) see structureal reform as the tool they must used to 'progress'.
This is in strong contrast to the UK - overall we trust our own government to manage our currency more than we would trust an EU institution.
However, with a failing socialist government the management of the UK's currency is going to be very poor - as the 'quick fix' of printing money has (as ever) proved irrisistible to the left. Any supposed short term benefits of 'quantitive easing' are illusionary, but the long term damage is very real.
If you don't beleive you can trust your government, then tieing their hands in certain respects may be attractive - however doing so purely on the basis of the mad rantings of a prime minister who only has about a year left to do his damage would not only be an over-reaction, and would tie the hands of the decent politicians who will be installed to sort out his mess.
The people know that structural refrom is the way to address problems, the politicians need to catch up and not play silly financial games.
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I'm from the UK, but I'm currently living in Greece where I'm writing a guidebook to the Peloponnese. The biggest problem I see facing Greece is with the "vulnerable pillar" that is tourism. Greece is no longer the place for a cheap holiday, especially with the exchange rate. The traditional package tourists, who just want a week of sand and sun, are already starting to go elsewhere. Greece needs to reposition itself as a high culture, high class destination - specialist holidays, agritourism etc etc. This is starting to happen, but there is still far too much complacency in the industry, with people thinking the tourists will keep on coming whatever they do. The country still has an immense amount to offer, with some of the finest landscapes and history in Europe, but the industry must negotiate itself through a difficult transition.
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democracythreat,
Surely it is inevitable that the UK is going to eventually adopt "quantative easing" as the room for manoevre on reducing the Bank Base Rate reaches zero%.
Within the EUROzone, the ECB controls the three EURO printing locations and is the single and sole controller of money supply (just like the Bank of England).
But this is where the EUROzone nations could learn something from the UK where you have one common currency, i.e. the British Pound and you have concurrent and acceptable within the relevant realm/province of the Bank of Scotland Pound and Northern Irish Pound. I believe the EURO is even acceptable in Northern Ireland due to the unique within the UK cross-border movement of people between Ireland and N. Ireland as two independent countries.
There is even a Scottish driven push to have the Scottish Pound made acceptable South of the border (but to be honest, as a Berwick-upon-Tweed boy, I can attest the Scottish Pound is already accepted south of the border!)
Thus there is no absolute need to "ditch the Euro", there is the room and potential flexibility to create local currencies that reflates an individual Economy by making cashflow more liquid and allows local users to be paid in a local currency as an alternative to the Euro - similarly the local currency only has value in the local country but it is something that works and can be seen to work within the UK.
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Trouble in France. Trouble in Greece.
Based on European history this is exactly the sort of thing that could lead to a pan-European military coup if we had one European Army and no British Army.
It would be the excuse some were waiting for.
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4. At 08:32am on 29 Jan 2009, Menedemus wrote:
"...
There is even a Scottish driven push to have the Scottish Pound made acceptable South of the border (but to be honest, as a Berwick-upon-Tweed boy, I can attest the Scottish Pound is already accepted south of the border!)"
I and others accept the Scottish Pound here in Suffolk.
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SB2 @ #6
My point is that the Bank of Scotland Pound must be accepted in Scotland as legal tender but in England it is not a mandatoryrequirement to accept the Scottish Pound.
However, your point is well taken as it signifies how easy it would be for a concurrent currency can obtain acceptability and then legitimacy within a sovereign State and thus could be applied to individual nations within the EUROzone.
Perhaps one could also consider how, as the GB Pound reaches parity with the value of the Euro that the EUro and the Pound(s) could become acceptable currency within the UK and thus the need to "ditch the pound" in order to adopt the Euro becomes an obsolete concept as they could become concurrent currency.
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Menedemus
Scottish pounds are not a 'local currency' as their exchange rate with stirling is fixed at one for one.
A 'local' currency would need to float to be any use -- and the big problem this introduces is paying your taxes.
If taxes are paid in the national currency, then (with the draconian power of the state against you to enforce payment) having your income in a local currency will always be a risk (income/assets in one currency, liablities in a different currency is for gamblers!).
As our stupid labour government have demonstrated by agreeing to pay our EU membership fees in euros rather than pounds... Just hope that reports of the bulk of the UK national debt being owed in pounds (not dollars or Euros etc) is true...
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I agree with Petrobey (3). I also used to live in Greece for 3 years during the transition into the Euro. Excepts some goods or services (like taxis or house rents), everything went very expensive, well above the EU average.
A coffee in Greece can cost you up to 5€ and a beer in fashionable bar, 9€. I never understood how Greeks manage to pay such prices, taking into account the low salaries paid there, well below the Eurozone.
As Petrobey says, Greece has a huge potential as an attractive destination, but there's too much complacency among the tourism sector, in the believe that people will continue visiting the country, no matter how fast prices can rise.
BTW, Mark, being from the S of the PIGS; it's not really nice such a nickname :-(
I'd prefer you call our countries Club Med, it's just more glamorous ;-)
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the-real-truth @ 8
*As our stupid labour government have demonstrated by agreeing to pay our EU membership fees in euros rather than pounds...*
Not sure if you are a Eurosceptic or not, but this must be a classic in British EU-thinking, and that really takes a beating. The euro, whether the British like it or not, is the OFFICIAL currency of the EU. There is no case of the British government being able to *negotiate* the currency in which it pays its membership fees. This is a bit like one of the hundreds of thousands of British pensioners in retirement in the Eurozone expecting the local government to accept their taxes being paid in pounds instead of euros.
As for the question posted by Mark, I live in the UK but come from a PIG country (somehow I have manage to keep my body odour to reasonable levels) and all I can say is that the debate about the euro here (in the UK) and there is like something from two different planets. The euro was never a *sovereignty* issue in the pigpen to start with, but a pragmatic one of belonging to a more powerful currency. Since the euro was introduced there has been much talk about the inflation it has brought but that is all. At this particular juncture you could trawl all newspapers or any other media (right wing or left wing), parliamentary or political debates, and you wouldn’t be able to find any credible voice advocating ditching the euro as a way to fight the current recession. Anybody advocating that would be advised to undergo mental health treatment.
In any case, as it is well known, the British Eurosceptics have been widely predicting the demise of the euro ever since it was a spark in the milkmans eye and now they are, to the last man, predicting an imminent collapse.
What is most interesting is the way this imminent (imaginary) collapse of the euro is described by them: It is so reminiscent of the pound crashing out of ERM, deeply ingrained in the British psyche.
I cannot categorically affirm whether the euro will continue to thrive or encounter serious problems in the next ten or twenty years but one thing is for sure: it will NOT suddenly implode as a result of the current recession. If any Eurozone country was brave enough to decide to bring back its old currency it would take it years of preparation, just as the changeover to the euro took over a decade of planning. A country cannot “crash out” of the euro; neither the Eurozone can almost suddenly implode. If that was to happen, what currency would they use the following Monday morning? Sterling, dollar, bartering? They cannot just revert to their old currency because there will be no notes and coins ready to use, neither banks, shops nor even the taxman will have their computers ready to hand the new (actually old) currency.
So if any of the so called PIGS think that being in the Euro makes things too hard in the current recession and feel nostalgic of the era of easy devaluations, by the time they manage to go through all the necessary logistics for reverting to their old currencies, the recession will be part of the history books. Either that or everybody, PIGS or no PIGS, euro or no euro, will be well and truly shafted.
There are many arguments in favour of the euro. There are also arguments against it. It is like a marriage. You give and you take. For me, the most compelling argument is this one: try to have a workable *single market* of 30 countries (27 EU plus 3 EFTA countries) with 30 different currencies, and one in which the banks in each of these 30 countries grab a tidy commission out of each cross-border transaction, either from businesses or individuals.
Try also having a credible Single Market where a Chinese or Indian business has to apply for 30 different visas to visit each of the 30 countries that constitute the Single Market.
And a Single Market where goods, capital, labour and EU nationals can move around freely but other *human beings* (legal residents in the EU but non-EU passport holders) cannot do so.
That is the (mini)EU where the UK is in on its own and is also the vision of the EU embraced by the public school clique that populates the UK major parties. I wonder why they didn’t teach them the basics about *single markets* at Oxbridge? I thought these were world class institutions.
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The Greek government has failed to create possibilities for farmers to switch jobs and make the agricultural sector more efficient. Yes, its a difficult task in a country struck by heatwaves and drought, but that should just make the point clearer. However, this is a general problem among the souther European countries. They don't embrace technology and don't reform. Too bad for them and their citizens and for the rest of the EU that has to bail them out.
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'PIGS' - I love it! I can't stop laughing about that acronym. Having relatives in Greece who are participating in these farmer demonstrations (their road blockade tactics are nothing new to Greeks), I can vouch that they're been lucky to be the recipients of EU largesse. Had it not been for the richer EU countries pumping the money, how many of these Greek farmers would have had those tractors that they're blocking the roads with?
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@JorgeG1,10: The public school clique's vision of the EU of the is likely quite internationalist, but they are afraid to voice it because that will probably cost their parties votes.
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Just a journalistic moment Mr Mardell!
Quote, "While all the economists I have spoken to think this is (membership of Euro effects Greek economy) nonsense..."
Verification? Which economists is that who blithely dismiss the possibility of dire economic consequences of being tied into a European Central bank system? How many economists did you refer to about Greece or Portugal or the other"pigs" before blandly writing it as fact?
The entire European Union is grounded in this sort of "nonsense": A perpetutation by Journalists (who surely were trained to know better!?) and media in general of pro-EU double-speak and propaganda.
If the pan-European Fiscal Euro is not a part of the general malaise in the European economies then it is an astounding first ever for a 'currency'! I mean, would you have ever considered writing.. "..every economist I have spoken has said it is nonsense that the UK Pound has anything to do with G-B.'s economic difficulties.."?
Of course 'Currency' is part of the problem for Greece, Spain, France, Finland.. How could a currency not be part of the issue when Banks and Investment companies are losing billions?
Mr Mardell, the BBC News Service, as proven with its principled refusal to show the Gaza Appeal, is not around to intentionally or inadvertently promote a certain attitude of mind, system, process call it what you will.
The European Union is in financial difficulty along with the rest of the world: Kindly acknowledge that if the Dollar, Yen, Pound, Rouble are under pressure then no matter what the 'given' is amongst economists, politicians etc within the modern day soviet that is the EU it also has a Currency experiencing real difficulty which must impact on those obliged to to use it!
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Menedemus 7 and no need to ditch pound if Euro and Pound become equal in the UK.
Why not the Pound acceptable as currency in the Euro-zone?
If it is as easy as you suggest when there's parity between the currencies then surely the Pound has every bit as much right to co-exist inside the EU nations as legal tender from Finland to Greece?
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"If it is as easy as you suggest when there's parity between the currencies then surely the Pound has every bit as much right to co-exist inside the EU nations as legal tender from Finland to Greece?"
Apologies, but this is nonsense. Unless they are fixed at parity, similar to Denmark, then its pointless. Furthermore, that would require ERM II and changing to the Euro from then would just be a formality.
Hey I have an idea..why don't you call it British-Euro, just like you call Eurosport in Britain "British Eurosport" (sorry, can't stop laughing..)
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ikamaskeip in post 14 -
I think you need to read a bit more carefully. This is your version of what Mark Mardell wrote:
"While all the economists I have spoken to think this is (membership of Euro effects Greek economy) nonsense..."
The bit in brackets was added by yourself and is not in fact what Mardell is referring to. The economists think it is nonsense that Greece would be in a better state if it had never joined the Euro.
This has nothing to do with denying that the Euro is tied up with the problem.
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Mark, a quick internet check (about 10 seconds) produced the below dissenting voice from an economist (In relation to Ireland but principles are pretty much thje same) -
"This is war: countries have to defend themselves,” said David McWilliams, a former official at the Irish central bank...
Mr McWilliams said EMU was preventing Irish recovery. “The only way we can win this war is by becoming, once again, an export country. We can do what we are doing now, which is to reduce our wages, throw more people on the dole and suffer a long contraction. The other model is what the British are doing. Britain is letting sterling fall so that the problem becomes someone else’s. But we, of course, have ruled this out by our euro membership.
“We are paying twice for the euro: once on the exchange rate and once more on the interest rate,” he said.
“By keeping with the current policy, the state is ensuring that Ireland turns itself into a large debt-repayment machine. Is this the sort of strategy to win wars? “ he said."
David McWilliams is an Irish journalist and economist. McWilliams has worked with the Central Bank of Ireland, UBS bank, and the Banque Nationale de Paris. More recently, he has become a popular broadcaster and documentary-maker with TV3 and RTÉ,
Maybe a little more research on your part (sure you are much better at this sort of thing than me) will produce more dissenting opinions from other economists
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As another national of a "porcine" state, I'm also of the meaning that the use of that unloveable acronym is not going to win you many fans down South, Mark.
Besides that, there's also the question of whether such mental associations do not have other more damaging effects. You rightly point out that some ratings agencies have recently downgraded the public debt of those countries. Now my question to the likes of Standard & Poor's would be: how comes that Spain, with a debt/GDP ratio of only 44.2% according to the OECD, is downgraded, whereas the UK, with a debt/GDP ratio of 58.7% according to the OECD, a significantly higher deficit, a deeper recession, and an added currency risk isn't?
Is there any objective reasoning behind this, or are the ratings agencies still pulling doubt ratings out of you-know-where? And do then negative cultural stereotypes influence their ratings, with serious economic consequences for the countries and companies rated?!
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Petrobey 17 I think you need to read more carefully..
Thanks for that advice:
"A few - at the moment they are pretty rare - voices are raised to suggest that these economies are suffering from membership of the Euro. Some argue that one or more of these 'currencies' (did he infact mean countries?) could be forced to leave the Euro and they might have been in a healthier state if they had never entered the single currency.
While all economists I have spoken to regard this as nonsense, they do think Greece is in a poor economic state and it will get worse.."
Well, I can only add, you must have a very different reading ability to my own!
So far as my own humble attempts go to interpret Mr Mardell's 'nonsense' claim it would appear to be referring to precisely my bracketed thought, "membership of Euro effects Greek economy".
I.e. 'nonsense' suffering from membership of Euro; 'nonsense' they might have been in a healthier state if they had never entered Euro; 'nonsense' say all economists Mr Mardell has spoken to.
By all means stick with your version: Personally, I still would like Mr Mardell to verify which economists are stating it is all 'nonsense'?
Far too often in these EU soviet days the self-serving line of EUrocratic interest is taken at face value. In the old DDR it was described as 'in the interests of the wider community' that a certain line was followed irrespective of its validity.
Forgive me, but I expect more and better from a BBC Journalist.
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No ikamaskeip, you are wrong again.
The question is not whether membership of the Euro affects the Greek economy. Obviously it does.
The question is not whether the Euro is in trouble. Obviously it is, as are most currencies in the current downturn.
The two questions are:
Whether Greece would have been better off to have kept the Drachma?
Whether they would be better off to leave the Euro now and return to the Drachma?
jordanbasset, in post 18, has found an economist who supports the latter route for Ireland (which I would posit is a very different case to Greece), but if you can find me many economists that thinks the answer to the last two questions is "Yes", then I would be most interested.
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The EU sand castle is being blown away by the first strong breeze. Wait until the full force of the hurricaine is unleashed on it. Economists seem to have gotten it wrong lately every single time. If most people had a memory that lasted more than five minutes, economists would be out starving in the street. Greece's economy is okay, the EU will stagnate but not go into recession, China will grow 8 percent this year. This all forgets a few inconvenient facts. The world is bankrupt. Many trillions of dollars of presumed wealth have suddenly evaporated. The inhabitants of the worlds leading consumer economy have stopped buying discretionary imports because they are worried about paying their mortgages, heating their homes, fueling their cars, losing their jobs. The world's number two economy has been in a state of stagnation for nearly 30 years. The world's number three economy depends almost entirely on exports which are discretionary expenses, most notably to the world's number one economy. The Euro zone is uncompetitive with its maze of bureaucracies, its extravagant social safety net it can't possibly afford, its ludicrous anti-investment work rules, and its unyielding rigidity. Looming in the background is global warming and wars which put the very question of human survival in doubt.
The world's largest economy did not send a representative to Davos this year. How could it? It is preoccupied with a financial system that has frozen solid despite 300 billion dollars spent to thaw it out. Now it is grappling with 800 billion more to circumvent its failed financial institutions and put money into the hands of mainstreet directly. But will it be nearly enough and will it come in time to prevent a general economic collapse? And why should it have gone to one more expensive useless talking shop? If there were any real answers to the problems being discussed, they would not have waited for a party at a ski resort, they'd have been implimented already. For the cost of the hotels and meals alone, many needy Americans could be fed or put to work so that they could feed themselves. Money would go into their hands instead of the hands of Swiss hotelliers and resteraunteurs. Finally a slight ray of economic responsibility.
Greece, Bulgaria, France are just the beginning.
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Petrobey 21 you are wrong again.
Far be it for me to question someone with such consumate wisdom as yourself, but, my opinion is not "wrong", merely different in content and conclusion from your own.
The 'question' you raise is an interesting and diverting one, but, as i was referring to an article by Mr Mardell I am unsure as to why you think I want to debate the drachma!?
re jordanbasset 18, that is fine by me: I didn't ask for him/her to find anything.
Again, I addressed my remarks to Mr Mardell's Blog which I still find wanting in its 'verification' of the 'nonsense' economists he writes of being in discussion with and were the premise of the 'nonsense' remark.
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Some of the euro-sceptic posts on here make absolutely no rational sense. It's almost like a sense of denial prevades, ignoring anyones opinion which doesn't agree with their pre-conceived ideas. I can't help but wonder if the judgement of many on here isn't being clouded by their political leanings.
Sure, some economists think the euro is negatively affecting some countries (afterall, there's the an unwritten rule that economists never all agree on anything) but it's pretty clear that the vast, vast majority of economists do agree the eurozone economies are far safer thanks to the euro and ECB (as confirmed by all the economists Mark spoke with).
One just has to look at Iceland to see the dangers of going it alone (it's no surprise at all that basically all Icelandic economists are wishing they'd joined the Euro now!).
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No, your opinion is not "merely different", it is objectively wrong.
I'll try once more. We are trying to talk about what these economists think of as nonsense.
You think that this is "precisely my bracketed thought, membership of Euro effects Greek economy".
It isn't. It is what Mark Mardell wrote just above the nonsense bit:
"Some argue that one or more of these currencies could be forced to leave the euro and they might have been in a healthier state if they had never entered the single currency."
Do you see now where a discussion of Greece keeping or returning to the Drachma is relevant?
I suspect not.
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the-real-truth @ #8
Perhaps you have not noticed but the GB Pound (Scottish Pound, N. Irish Pound) are now as good as at parity with the Euro.
However, regardless of your concerns, you would need to convince me that the Scottish Pound note is not printed outside of control of the Bank of England and thus, although the Scottish Pound has parity with the English Pound, the Scots could develop a currency that is not only acceptable in the whole of the UK but could use "quantitive easing" any time they wish (especially after they do achieve independence) for the Scottish currency - if they don't do so already.
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ikamaskeip @ #15
I only offer the possibility of dual-currency to consider as a discussion idea.
The main drawback to the acceptability of the GB (i.e. English and for that matter Scottish and N. Irish) Pound Bank Notes is acceptability. Just as the Scottish Pound note is legal currency in Scotland but there is no compunction for people (traders or customers) to accept Scottish currency south of the border . . . . similarly I could not envisage people in Spain or Italy or elsewhere in the Eurozone accepting GB Pound currency unless the ECB agreed that it was legal tender AND the tradespeople and their customers were willing to accept alternate currencies.
Thus it remains merely a suggestion but I do accept that there would be many, many hurdles to overcome for such an agreement to work within Europe.
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Mark - you wrote: "Some argue that one or more of these currencies could be forced to leave the euro and they might have been in a healthier state if they had never entered the single currency. While all the economists I have spoken to regard this as nonsense ..."
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"All"? May I ask how many that was exactly?
Only the other day Nobel prize-winning economist Milton Friedman, writing in the Daily Telegraph, questioned how Greece could possibly withstand having the same interest rate as Austria and said that this euro rigidity was causing "immense damage" to those with inappropriate rates.
"The most logical option would be for Greece and Spain to leave the euro", he concluded.
Some contradiction with everyone regarding the idea as "nonsense", wouldn't you say?
From my recent observations Mr Friedman is far from alone in the economic world in holding such views.
On Latvia and Hungary, what on earth is Dr Sfakianakis talking about? Both their currencies are actually pegged to the euro, so the idea they had to call in the IMF because they haven't yet replaced their notes and coins is the genuine nonsense of the piece.
And to think this man is chairman of the Greek government's council of economic advisers!
Being so closely linked to the government, he's hardly going to fuel speculation about the country's commitment to the euro - even if the issue is being debated within government circles. What answer exactly did you expect from him?
The fact that Latvia and Hungary have not yet disposed of their currencies gives them at least an option of taking back full economic control once again. Perhaps they could learn from our own painful experience of currency pegging and the strong public opposition here to euro membership which was likely spawned from that time.
On devaluations, yes they do provoke inflation. No-one seriously thinks they alone are a solution. Resulting inflation does then have to be dealt with, and that is not impossible. It is a second order problem after returning the economy to growth.
But devaluations are an emergency 'get out of crisis' card - the quickest and most effective means of relieving pressure on real people in the real economy. Isn't that what matters most? In many cases the political elite need to come back down to earth.
A flexible exchange rate is a powerful tool euro member countries no longer have. Growing public unrest across the eurozone is testament to that heavy price of euro membership.
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OK, I come from Greece. The problem is not the Euro the problem is how people use their Euro! The farmers demands to have a fixed price for their produce makes no sense. What other sector can make such demands? I can't see plumber blocking the streets because the govement will not give him a fixed price to fix a tap! Farming is less then 10% of the Greek ecomomy, so Euro or Drachma I can't see what govenment would say lets devaluate the currency of 90% of the population so than our cotton or tomatoes are as cheap as the cotton that Egypt can produce! So lets leave the Euro alone, although it appeals to people to blame Euro for all the evils in this world!
Also having Euro at 2% interest is better than Drachma at 18% interest
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Petrobey 25, so, you suspect not.
Alright, I'll come clean: I am a retired economist with many published articles. I worked with Governments, NGOs and private institutions over a 35 year period.
You, on the other hand, are obviously way too knowledgeable for me on this topic.
I really am curious though about Mr Mardell's 'nonsense' economists: So far as I can tell from ex-colleagues and those currently in-touch the idea of 'nonsense' as an economist's terminology was and is simply and wholly unlikely.
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Re the lelvel of the pound versus the euro, it may have escaped people's notice that since the new year the pound has risen from near parity to just over 1.09 euros (still rising at the moment) I appreciate it was 1.34 a year ago.
I believe the U.K. Government will not want it to rise too much more as it does make our exports much more competitive and imports very expensive. In effect it gives hope to the manaufacturing industry. In addition I know many who will not be going to Greece or other eurozone destinations for their holiday this year because of the exchange rate.
To ensure the pound does not rise too much further am sure the Government will employ tactics (for example printing money - put pressure on the B OF E to reduce interest rates further) to keep the exchange rate low.
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@ 24. timOfBrum wrote: "One just has to look at Iceland to see the dangers of going it alone "
Or rather, the dangers of not regulating your banks properly.
It's amazing how the fallout from a failure to control is to some an argument for giving up even more control.
Could there possibly be political leanings at work there too, timOfBrum? I think I would have to agree with your comments about the potential for "pre-conceived ideas" to cloud some people's outlook!
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Inaccuracy in article: Ireland has not had its credit rating cut. It's on negative watch, but it's still AAA.
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Oh and by the way, I recently moved from one of the "PIGS" - Ireland - to the UK about 18 months ago, and my biggest bother is the declining purchasing power of my sterling savings.
I would much rather have the UK using the Euro. The decline in worth of my savings, and the prospect of further theft by the government via debasement of the currency, is one of the biggest concerns on my mind right now.
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"Alright, I'll come clean: I am a retired economist with many published articles. I worked with Governments, NGOs and private institutions over a 35 year period."
And I'm Adam Smith.
"You, on the other hand, are obviously way too knowledgeable for me on this topic."
No, I'm just better at reading comprehension.
In post 27 StuartC wrote:
"Only the other day Nobel prize-winning economist Milton Friedman, writing in the Daily Telegraph, questioned how Greece could possibly withstand having the same interest rate as Austria and said that this euro rigidity was causing "immense damage" to those with inappropriate rates."
That's a pretty neat trick, considering he died 3 years ago.
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I believe we are going to see much more protests across Europe. Unfortunately we face a lot of challenges and next 2-3 years will not be easy. The main problem is to reform the whole economic system (too social for what we can afford) without going into the brainless free market orthodoxy of Thatcher type. It’s funny that I experienced first hand the collapse of socialism (between 1985 and 1995 in my case) and now I may have a chance to see the end of the completely free market (admittedly a much better system). I guess that the answer is that the state should do all it must do and not an inch more, but it has an important role to play, because after all we are social animals and the benefits from social cohesion are as big as the ones of free personal initiative. The tricky part is to combine them. Unfortunately it is the human nature that we postpone necessary changes (but painful) in the good times (when the price for their implementation is the lowest), only to face the fact that their inevitable in the bad times (when they really hurt, but there is no better alternative really). For me the whole concept of consumers’ society is a bit alien, because I remember times when we had no disposable income, so I really can’t understand the idea of plasma TV in the toilet or the convertible car for the weekend. I think the people in Europe should work and save more, consume less, and not expect to retire at 60 and spend their last three decades in some tropical paradise. On the other hand we should have a system that provides for the less fortunate (as long as they are not free riding), prevent large fluctuation of food prices and generally allows reasonable standards of living for everyone. I guess Scandinavia is a good model.
About the euro: I think it’s a great idea. After all it is necessary for a common market, saves a lot of money and makes live easier. I believe that ECB has the right attitude (probably because it’s explicitly oblige to have it) to concentrate on price stability. After all that is the only thing that it can do. Providing a stable currency that is priced according to the fundamentals of the economy is the best way to facilitate growth. It prevents large fluctuations, gives security to the investors and to the workers and builds trust in all parties involved in economic process. If I invest I would like to have some idea how much it will cost me to repay my loans and to buy equipment and as a worker, what will my salary buy.
If anybody should be worries about the euro those are the politicians that have no easy way out by devaluating the currency (a very bad idea in a longer term because it actually impoverishes the majority of the population and reduces the competiveness and efficiency of the economy in a longer term). Now they have to implement reforms and explain them to the people.
P.S. I also watched the program with Niall Ferguson on CNN and find it as far as solid science is concerned absolute intellectual rubbish. It was counterfactual, which makes a good base for fiction, but no basis what so ever for science. To be honest I quite like his books and enjoy reading them, but they are mainly of the “What if…” variety. So far no country is willing to leave the euro (on the contrary, probably because they have the Iceland example), China is not able to unhook itself from USA (this will happen to a large extend, but not during this crisis, I see it more likely in next 20-30 years) and willing or not will have to lend money to USA.
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StuartC, the reasons for the collapse in value of the Icelandic króna are in many ways irrelevant, Iceland is not the first – and certainly won’t be the last - country to experience the pain of rapid currency devaluation for one reason or another. Regardless, it can't be denied that using a currency with a diverse, multi-trillion pound economy behind it gives a massive safety net compared to having a currency used only by a far smaller economy.
My comment on political leanings clouding peoples judgement was in regard to some comments posted here who don't seem even able to accept how anyone could consider any country using the Euro as a wise economic decision, regardless of how many respected economists believe the Euro has been a success. I'm not saying that means everyone should agree with that view at all, but immediately and completely disregarding the opinion of people who have spent years studying these things – or shouting claims of conspiracy at the reporter who says his interviewees also held those views – does show a definite clouding of one's judgement.
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Well I don't know how you might benefit from it, but here: my Rus. TV state channel said this second Euro will cost 71-80 roubles within this year.
(today 45)
(for years before - 35)
I'm not sure this means Euro will do so wondefully well, might be, rather it means that rouble will do so wonderfully bad.
But overall a daring statement.
In Latvia, for example, it's by the new crisis law a criminal offence, "up to 8 years prizon term" to "hint at the possibility of currency depreciation in public sources." New law, days old, two people in court room already. A journalist and some market analyst.
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The EU is like 27 drowning men who have tied themselves together for dear life, each hoping that some of the others are strong enough swimmers to pull them all to safety. It hardly matters whether they have one currency or many. Their survival depends on whether or not the underlying fundimentals of their economies are based on sound principles that generate profits and incentives that are adequate and reasonably equitably shared. IMO they are not, they are entirely irrational. So far in calmer waters, they have managed to keep afloat but now they are entering the whitewater and soon the rapids. When they get to the falls, that's when it's over. Europe will become a third-world-like economic entity. Europe's economic/social/political model is Argentina just prior to the default. It doesn't see it because it's blind as a bat.
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Petrobey34
Well, if smugness rocks your... as they say, you go right ahead.
re27, What has that to do with anything?
I am a retired economist: I did work with many organisations and like to think made my contribution in a reasonably positive manner. These days my wife and I spend most of our time at a log cabin a little north of Lake Inari: Amateur Astronomers, we study and photograph the Milky Way's 200 billion Stars. Far more interesting and profoundly more relaxing.
Interesting you should refer to Adam Smith: Wealth of Nations, not one of Mr Mardell's strong points.
I do also admit whilst still earning the daily crust I referred comprehension exercises to those much like your eminent self... well pardon, I'll use an old economics term, those with Ocular Regression.
Don't worry it's not infectious but in economic terms your last 3 posts have matched the 'verifiable' standard.
PS: When you get a chance I recommend the astronomy.
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The reality is that the Greek farmers' protest has nothing at all to do with the EU or the Euro. Their grief is with their own Government.
Greece, like every other country in the EU including the UK, spends the grants it receives (eg CAP money) by using the EU rule book very flexibly (and the national governments ensured the rules were flexible). If Greek farmers need irrigation, then it is the Greek Government that should provide it - and they have received EU grants that could have been used for that. As one of Mark's farmers put it, it's not more EU money they want, just better spending.
This situation does highlight the fact that the EU does not "govern", as some sceptics argue. Maybe if it was a "real" Government the Greek farmers would have had less cause for complaint? (Just a thought).
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@38
here all have got the message but what about Riga? Marcusau, this is unhuman,
I am sure the Latvians should also be informed by you about their inevitable future.
I see it like this: I arrange for the text to be well translated, so that not a detail of the forecast is missing, you fly over, and go out with the speech in hands to one of the down-town squares in Riga :o)
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@ 34. Petrobey: "That's a pretty neat trick, considering he died 3 years ago."
Gah, you're right - mea culpa! I'm embarrassed.
The article mentions Freidman in the subhead ... don't know how I misread that. The quotes I gave were actually by the Telegraph's diplomatic editor ... not sure of his economic qualifications but I wouldn't count on them!
Somebody previously mentioned David McWilliams, the Irish economist, as holding out the possibility of Ireland leaving the euro. But I also recently read Martin Feldstein, professor of economics at Harvard, writing on the VoxEU website, who said:
"Smaller countries may now feel that they have lost control over their economic future. In these circumstances, it is possible that one or more countries might actually withdraw from the Eurozone. It is clear why some national political leaders – or would be leaders – might consider such an option. Doing so would allow their reinstated national central bank to choose an easier monetary policy. The national central bank could also create the currency needed to act as a lender of last resort to national commercial banks. The country’s fiscal authority would no longer be bound by the restrictions of the Stability and Growth Pact and could therefore pursue a large fiscal stimulus. The international value of the currency could adjust to make local products more competitive."
The point is, there are economists out there who hold such views. Live ones too!
While to be fair Mark does say that it is only all the economists "I have spoken to" who regard such views as nonsense - which is why I'm interested in exactly how many non-governmental ones that was (unlike the one he quoted at the end of the posting) - I think there's a danger in misrepresenting the situation because the use of "all" has by far the greater impact.
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Re post 36, Tim of Brum, my view on the euro is that it is too early to make a judgement, in the life of a currency it is very young. Do I think it is going to collapse, unlikely and I certainly would not want it to, it would throw the world into even more chaos.
I can see how people would think big is beautiful as regards currency and they may even look at the dollar for example to support that view. However the U.S. is one nation with much more control over how and where it spends it's money. The E.U. is a collection of nation states and does not have the same flexibility.
I believe, as many others do, including economists, that it is in the U.K.'s interest to keep it's own currency so it has the flexibility to influence the exchange rate and vary money supply. This is not some crack pot theory but tried and tested measures to deal with such problems. That does not make me right and you wrong, but I hope you would not dismiss such a view because of your political prejudices.
Some here worry that devalueing a currency will lead to inflation. That is as crazy as refusing to use water to put out a house fire because your worried you may have to ration water in the summer if you do. Inflation is not the elephant in the room, deflation is much more of an issue and global recession. Millions of jobs are at risk, especially in manufacturing. That is not to say we should not give inflation consideration, but recognise priorities at this time. We need to keep manufacturing, by making our exports cheaper that is more likely to happen. May be at the expense of jobs in eurozone coubtries, whose exports are relatively expensive, but that is for them to deal with.
The reason why some did not like Mark's nonsense comment in relation to all the economists he had met was the clear suggestion that youy would have to be stupid to hold such a view contrary to that of the euro supporters. It is clear many economist do hold such contrary views to those economists Mark has met. Perhaps it is the circle he moves in that he does not meet economists with differeing opinions to those espoused by the E.U. supporters. Perhaps he should get out more and seek such opinions from both sides of the debate.
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A number of you were posting on Scottish banknotes earlier.
Currently no banknotes (from any country - only coins) are "legal tender" in Scotland.
Scottish, English, N Irish sterling notes (as well as debit cards) are, however, acceptable since Scots Law requires that any "reasonable offer" for settlement of a debt must be accepted. Hence, if the supplier of goods/services can reasonably be expected to be able to ascertain the value of euros or dollars, they are also required to be accepted here.
The notes issued by the note-issuing banks in Scotland and Northern Ireland have to be backed by Bank of England notes held by the issuing bank. The combined size of these banknote issues is well over a billion pounds. To make it possible for the note-issuing banks to hold equivalent values in Bank of England notes, the Bank of England issues special notes with denominations of one million pounds ("Giants") and one hundred million pounds ("Titans") for internal use by the other banks.
If "quantitative easing" proceeds in the UK, we may all end up with Giants and Titans in our wallets!
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Ok so blame the euro ... up until now Greece has been a very comfortable place to live.
In my opinion having lived here for 4 years for the average person the economy was fine.
HOWEVER due to the financial investments of the Greek banks outside the country they have now found themselves without the money to pay out morgages. My close friend who works for a national bank has told me that the banks are not giving out loans. This has meant a total collapse of the building sector which has left my hardworking husband without work. This in turn leaves many families struggling, as we currently are, even to find the money to pay for rent. It is these people who should be protesting not the farmers. In contrast I then see the UN raising money for Gaza well what about the citizens of Europe who are currently struggling to feed their families? We are trying to struggle on 500E this month... This is not the fault of the euro this is the fault of the banks who paniced and blocked loans before christmas, even pre-agreed ones! There are also many people who want to start buildings but are unable to get funding. Would this situation have been better without the euro? Would the Greek banks have invested only in Greece?
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@ 36. timOfBrum wrote: "Regardless, it can't be denied that using a currency with a diverse, multi-trillion pound economy behind it gives a massive safety net compared to having a currency used only by a far smaller economy."
---------------------
Sounds cosy, but when you think about it ... what "safety net" is that exactly?
The safety of a currency that's unquestionably going to be around forever, because it's backed by a government and treasury? Nah, instead there's the inherent economic diversity on which the euro is based and consequent risk of the euro falling apart if it turns out some economies can't take the strain of 'one-size-fits-none'.
Perhaps the backup of an IMF-style bail out from the ECB or EU if things really go wrong? Er, no. There simply isn't the money, and even if there was other countries would not agree to it.
So, safety from currency speculation? Yes, that part can't be denied. But at huge cost to economic flexibility. Having the wrong interest rate for prevailing domestic conditions is something which has the potential to be far more damaging to prosperity every day of the week than occasional attention from speculators.
Economics is more complicated than the starry-eyed 'big must be best' exhibited by most EU fans.
What doesn't make sense to me is how you can on the one hand raise the spectre of the "dangers" of "going it alone", but on the other dismiss those supposed dangers as "irrelevant" as soon as they've become unhelpful to your pro-euro case.
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@ 40. frenchderek wrote: "The reality is that the Greek farmers' protest has nothing at all to do with the EU or the Euro. Their grief is with their own Government."
At the moment. Til there's a change of government but they find nothing much else changes. Because all the eurozone's elected governments' have had their hands tied.
The EU is often insulated from the public fallout as a result of its actions because national governments don't like to admit the extent to which they no longer govern.
They keep up the pretence of governance in many areas, while merely enacting EU instructions, and naturally they then get the blame for the result. But this charade can't last forever.
For the reality of the situation, look no further than the new European Parliament 'Reasons to Vote' website, set up for the forthcoming EU Elections.
That admits; "Many, probably most, laws enacted in your country are a transposition of European acts voted by MEPs". It's a misrepresentation, of course, because it doesn't mentioned the largely unelected Council or completely unelected Commission - and both far more influential in law-making than the EP.
But the "many, probably most" quantity of laws coming from the EU is a point that EU-critics have long been making, only to be dismissed as spreading 'myths'.
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What poetic irony. Of all the things Europe could have copied from the US, the one they chose was unregulated greed at major financail institutions leading to short term profits at the cost of impossible risks and inevitable collapse. Not only didn't Americans learn anything from the market crash of 29-32 and the great depression of the 30s but neither did the Europeans. And they followed America right over the same cliff. In fact they seem to be heading towards the bottom even faster than America is. While Putin may have been right at Davos about this calamity having been invented in America, much of the rest of the world seems to have bought into the same lunacy.
Europe will have to learn to live in far more modest style than it is accostomed to. That was inevitable even before the current crisis but now the level it will descend to will be far lower.
I hope the French throw Sarko out and go with Segolene Royal adopting her program in its entirety Same for Germany and the rest. In the aftermath, it will be far easier for America to compete with a socialist Europe than a capitalist Europe weak as that would be. From the look of the French general strike today, who knows, it just could happen.
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27. -StuartC-:
The fact that Latvia and Hungary have not yet disposed of their currencies gives them at least an option of taking back full economic control once again.
I believe countries such as Latvia and Hungary don't have much choice with their euro pegging, not because big bad EU forces them to do so but because it would make the situation much worse. A lot of people in East European countries borrow not in their local currency but in dollars, euro, yen etc. so if their local currency gets undervalued that means the debt of the consumer gets effectively doubled or in in extreme cases tripled (this is what happened in Iceland) I don't see how that would help.
Then again I'm not Adam Smith nor a retired economist currently spending his retirement stargazing, so hey what do I know. ^^
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Dear Mark, I love reading your blog, but today's picking up the pigs pun, coined by some europhobes, betrays a lack of solid argument. It won't win you many readers from that part of Europe, and neither will it make much honour to your tongue. English humour is known to be much smarter and pungent than making up pubescent acronyms.
As for the euro-no-euro question, I think it is a purely British obsession. I visit Greece, and other Eurozone countries quite often and no one I know ever thinks about it as much as the Brits do. The only people considering the possibility of "reverting" to former currencies are the Brits. The words "grapes" and "sour" spring to mind.
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ikamaskeip @39,
I understand your are a retired economist and a keen amateur Astronomer.
Good choice.
The forecasting abilities of most of the economists I've read in the past few years indicates that they'd get better results practicing astrology.
Speaking of dismal sciences, Anatole Kaletsky in today's 'The Times' says that it's not all doom and gloom. Since, on past reckoning, whatever he predicts seems to be the exact opposite if the reality that subsequently unfolds, I'm seriously worried.
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50. At 11:47pm on 29 Jan 2009, lacerniagigante wrote:
" ... The only people considering the possibility of "reverting" to former currencies are the Brits. The words "grapes" and "sour" spring to mind.."
There are certainly a whole load of Austrians and Germans who are fed up with your Euro.
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I read this blog yesterday - and again today just to check that I had it right:
"THere is surprisingly little talk about the Euro"
"A few - and at the moment they are pretty rare - voices are raised to suggest that these ecnomies are suffering from membership of the Euro".
The report of this visit to Greece on Newsnight last night was wholly focused on the Euro; and quoted the 'pretty rare' voices before concluding that the PIIGS could be forced out.
Presumably this was the result of some editorial decision that the Euro was "the story" and the reporters findings would have to fit within it.
Can someone explain why the BBC is Trying to talk down the Euro? and at whose behest?
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@SB2
"There are certainly a whole load of Austrians and Germans who are fed up with your Euro."
Probably not as many as are fed up by the declining pound.
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Oil Refinery protests over EU Workers.Why dont Gordon Brown tellthem EU worker come first over British Workers welcome to the EU Gordon Browns infamous speach " British jobs for British workers" thats a lie he would get a good smacking from Brosso for that
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Just a brief comment on the paragraph where you said:
"But Greece is one of those countries rudely nicknamed the "PIGS" economies. Portugal, Ireland, Italy, Greece and Spain have all had their credit ratings cut recently, and this makes borrowing more difficult and foreign investment even less likely."
Ireland has not in fact had its credit rating cut by any of the major agencies- unlike Italy, Greece and Spain. Fitch has reaffirmed its AAA rating for Irish sovereign debt, as recently as last week, while S&P has said its current AAA rating will be reviewed in light of the results of the austerity talks currently ongoing between the unions and the employers bodies- but due to finish next week.
Ireland is paying a premium on its sovereign debt, over and above other AAA rated EURO debt, because of our massive budget deficit, and the perceived structural weaknesses in our banking sector (which led to the government banking guarantee last year, and the recent nationalisation of the failed bank- Anglo Irish Bank). Unlike the other countries in your PIGS commentary- we have never ever reneged on sovereign debt- and are considered highly unlikely to ever do. If we managed in the 80's when our public sector debt was over 140% of GDP, we certainly should be able to cope now, when its just over the 40% mark. The difference this time round- is our ridiculous levels of private sector debt- and it is a massive concern for people on a personal level.
Regards,
SMcCarrick
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I know nothing about economics. I do know a few things about common sense and about balance and harmony and the well being they yield.
Solvency cannot be achieved nor maintained by constant borrowing. Any more than health is by nonstop growth and development. You borrow then you got to pay back both interest and principal. If you borrow and can't pay back, then Trouble! The bigger the borrow the greater the trouble. Any body or entity growing and developing nonstop ceases to be healthy, be it a human body, a population, a nation or any other. This is common sense, not economics.
What we have in the world today is a culture of excess: excess and instant gratification for some, insufficiency for many others. But also one of unexamined structural mythologies and fragmented world views which no longer work.
What is needed,
(a) a global consensus to reduce birthrates and mantain population at replacement levels. To do so it is imperative that human poverty and misery be eliminated from the planet. (See Chapter 7, “Eradicating Povery, Stabilizing Population,” in Lester R. Brown, Plan B 3.0: Mobilizing to Save Civilization (New York: W.W. Norton & Company, 2008), available for free downloading and purchase at www.earthpolicy.org/Books/PB3/index.htm.)
(b) a radical re-think of the world's current paradigm of growth and development as 'progress'. Growth and development practices pursued for centuries and measured by their products have brought the world to its present condition of decline and near-collapse in all sectors. Nothing grows endlessly and all excess becomes toxic. Our pursuit of 'progress' is thus delusional and suicidal. The evidence is facing us but we stick to denial.
(c) a redefinition of 'progress' as movement towards the well-being of people, of creatures, of eco-systems and of the planet. As sufficiency within balanced and healthy eco-systems. As freedom from the misery of want and poverty, of wars and killings. As life lived for its own sake without the choking burdens of perennial growth and development, competition and excess.
What is needed then is the restructuring of Thought towards the emergence of a new paradigm and a world view beyond the 'isms' and assumptions that now rule us. The 'isms'--political, social, religious and economic, framing our thoughts and decisions are obsolete. Our world view of Homo sapiens as the superior species, master of all he surveys, of his fate and of his soul is pure bogus. Current multi-crises mirror our hubris back to us!
Thus, the vehicles that have brought us from yesteryear to the present cannot take us towards any viable future. New ones must be devised and set up. And soon.
Until we do so, here's a recipe that worked for me and could work for you to keep out of debt, free from the stress of insufficiency and yet blessed by unstructured free time for play and for growth: "Reduce wants to needs and needs to essentials and get clear about the difference." If you must borrow, borrow to shore up essentials, as when the kids grow and their essentials also grow, but not for excesses or luxuries. But 'don't fiddle with definitions and don't walk faster than you can breathe, or you'll have to stop to catch your breath.' Keep aware that excess of anything is a burden that comes at too high a cost not affordable by well-being.
The choice before us is between Perdition or Paradise--by omission or comission we stand to create either.
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I know nothing about economics. I do know a few things about common sense and about balance and harmony and the well being they yield.
Solvency cannot be achieved nor maintained by constant borrowing. Any more than health is by nonstop growth and development. You borrow then you got to pay back both interest and principal. If you borrow and can't pay back, then Trouble! The bigger the borrow the greater the trouble. Any body or entity growing and developing nonstop ceases to be healthy, be it a human body, a population, a nation or any other. This is common sense, not economics.
What we have in the world today is a culture of excess: excess and instant gratification for some, insufficiency for many others. But also one of unexamined structural mythologies and fragmented world views which no longer work.
What is needed,
(a) a global consensus to reduce birthrates and mantain population at replacement levels. To do so it is imperative that human poverty and misery be eliminated from the planet. (See Chapter 7, “Eradicating Povery, Stabilizing Population,” in Lester R. Brown, Plan B 3.0: Mobilizing to Save Civilization (New York: W.W. Norton & Company, 2008), available for free downloading and purchase at www.earthpolicy.org/Books/PB3/index.htm.)
(b) a radical re-think of the world's current paradigm of growth and development as 'progress'. Growth and development practices pursued for centuries and measured by their products have brought the world to its present condition of decline and near-collapse in all sectors. Nothing grows endlessly and all excess becomes toxic. Our pursuit of 'progress' is thus delusional and suicidal. The evidence is facing us but we stick to denial.
(c) a redefinition of 'progress' as movement towards the well-being of people, of creatures, of eco-systems and of the planet. As sufficiency within balanced and healthy eco-systems. As freedom from the misery of want and poverty, of wars and killings. As life lived for its own sake without the choking burdens of perennial growth and development, competition and excess.
What is needed then is the restructuring of Thought towards the emergence of a new paradigm and a world view beyond the 'isms' and assumptions that now rule us. The 'isms'--political, social, religious and economic, framing our thoughts and decisions are obsolete. Our world view of Homo sapiens as the superior species, master of all he surveys, of his fate and of his soul is pure bogus. Current multi-crises mirror our hubris back to us!
Thus, the vehicles that have brought us from yesteryear to the present cannot take us towards any viable future. New ones must be devised and set up. And soon.
Until we do so, here's a recipe that worked for me and could work for you to keep out of debt, free from the stress of insufficiency and yet blessed by unstructured free time for play and for growth: "Reduce wants to needs and needs to essentials and get clear about the difference." If you must borrow, borrow to shore up essentials, as when the kids grow and their essentials also grow, but not for excesses or luxuries. But 'don't fiddle with definitions and don't walk faster than you can breathe, or you'll have to stop to catch your breath.' Keep aware that excess of anything is a burden that comes at too high a cost not affordable by well-being.
The choice before us is between Perdition or Paradise--by omission or commission we stand to create either.
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In most Eurozone countries it's usually just the left-wing and right-wing extremists campaigning against that currency.
You cannot really blame the mainstream media for limiting the air time of both these groups to a level that is somewhat appropriate to the actual number of supporters they have. Otherwise, they would dominate the news even more than they currently do.
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If Gordon Brown means what he says" British Jobs for British Workers" then he must repel the 1973 european act and send them back...until then he is just a puppet of brosso
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Mark, I think it should be spelled Voiotia (as the modern Greek "beta" is pronounced "v"). Or, if you want to be more "classical" then it should be Boeotia, where the diphthong "oe" stands for modern "oi".
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Re 52: Suffolkboy "There are certainly a whole load of Austrians and Germans who are fed up with your Euro."
Do you reckon? Last time I went there, over the Xmas break, no one seemed to complain. Same for Belgium and Italy.
By the way, I live in the UK, so no euros for me :-( Why do you think I'm so pissed off with Gordo? Do you think I'd care if I were earning my wages in euros? As I said, it's only us sterling-earners who talk about the euro.
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Re 53: "Can someone explain why the BBC is Trying to talk down the Euro? and at whose behest?"
Well, since Dyke was ousted by Hutton and friends, you know what the BBC's role has been. I got rid of the telly ages ago, I hope you don't pay the license either.
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59. At 10:40am on 30 Jan 2009, JohaMe wrote: "In most Eurozone countries it's usually just the left-wing and right-wing extremists campaigning against that currency."
It's the same in the England, except that there is no left-wing and the right-wing comprises Tories&Nulabs.
The only reasonable folks are the Libdems and the Greenies (present only in some councils though).
But this being England, and not some "socialist continental dictatorship", those who bother to vote don't tend to switch too much and it's the red/blue thing all over. And the red is just a relict, nothing to worry about.
It's a bit different north of the border. The talk of euroisation is becoming more serious over there.
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The transfer of wealth from older richer nations to newer poorer ones in the EU is the bribe Shroeder and Chirac used to effect enlargement. Chirac gave Hungary British taxpayer money to buld roads so that the GDP of the EU would look larger than that of the US. And so it does. Now doesn't that make everyone in the EU feel "superior?" Why not take in China, it would make the EU's GDP look much larger and its population too. You say China is not part of Europe? So what, Angela Merkel asked the US to join on her first trip to America after she was elected. This as Sarkozy was telling the Turks they could never enter the EU because they are not European. Don't look for logic there, it's French so it's not supposed to have any. Sarkozy is not Pascal or DesCartes.
Anyway, with France disillusioned by its inability to control the EU, it has invented the MU where it will be the biggest fish in the Mediteranian pond at least GDP wise. That should make French farmers feel good. Now all he has to do is figure out how to get farm subsidies for them from Lybia and Morocco.
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Petroby - writing (yet another) guide book about Greece. I lived 40 years in Greece, was in the toursim biz for the last 12 of those. I knew the writing was on the wall when the Minister of tourism in 1995 stated "Greece shall no longer be the cheap destination, we must become the destination for the best clients" which was totally ridiculous and laughable. Greece has since become an expensive resort country, and even where you are, is no longer a "cheap area" for lodging. The MOM and Pop management system continues and with it the "cute" delivery of your stay. It is however, at the price asked, insufficient, amaturish and unnaceptable. The same can be said for the farming. They are running too many small holdings still operating on ancient principals. The number of "immigrant" farmers - mainly Albanian, is another thorn in the side of the arming community. They are not poor, but they wont get any richer, and that is the crux of the matter to them. Greeks by nature and habit, live for their grandchildren. They want to pass everything on. This is becoming less possible now. The Greek governments are corrupt in every manner and in every area, be it fiddling land sales or "topping" up prices to fill their own pockets on contracts and import quotas. Greece has been ruled by 3 families in that 40 years I was there, but mainly by two - The Caramanlis and the Papandreou clan. Until these can be removed the country will never be cleaned up and progress. Democracy may have been born there but as sure as eggs are eggs, it is today and has been for more than 30 years a very corrupt democracy. I adore the people, the country and its history. I go there every year for my vacations. I speak the language and am very much "at home" there. But my head rules my heart when it comes down to the real problem and that is the need to remove these two ruling patrician families from power perminantly.
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I would like to add another thought. Calling those named countries "PIGS" is derisive, disrespectful and even anti racial. Let me put some of these Euro big wig clever cloggs straight. I will speak on behalf of Greece - as I consider it more of my home than anywhere else. The Greek is FAR and away better educated than the British, the French and possibly the German. The Greek (we are talking overall average here) has MORE ownersip without debt than ANY other EEC member - which makes them in fact a wealthy society as such. The Greek has more history, more architecture, more language (with the exception of Latin) in every other spoken language in Europe. I therefore believe that any misconceptions about the Greeks being "PIGS" or associated with such a disgraceful terminolgy brought up no doubt by those in the larger communities of the EEC who believe they are the kings - should think again very carefully and make every effort to stop this ":PIGS:"term to be removed quickly. I am ashamed once again to be British - who failed the Greeks badly in the fiasco of Cyprus where they were supposedly caretaker and allowed the Turks to roll in basically unhindered and destroy that country. People in glass houses etc.
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Thank you Robinstp, you make an extremely valid point in saying :' Calling those named countries "PIGS" is derisive, disrespectful and even anti racial.'
I am truly disturbed by the use of the term, and urge the BBC to remove it from its news telling vocabulary.
With the Gaza appeal not being broadcast, the frequent use of the PIGS acronym in the past week in particular, I pledge my licence back. Calling it an unbiased organisation IS the really derisive part of the story. Your news reporting is truly below standard and an insult to common sense.
Shame on you BBC!!!!
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The first winds of the economic storm have just begun to be felt and the populations from Scotland to Vladivostok are up in arms. This is just the start of a complete realignment of the world's economies and politics. The tectonic plates are moving quickly, the result of enormous stresses that have broken all of the prior alignments. The poor who are often victims of corrupt governments will have to largely fend for themselves now as the rich will be preoccupied with their own problems, their resources greatly diminished and they being desperate to avoid getting sucked into the financial black hole they created. Lazy populations who enjoyed lavish public safety nets they couldn't pay for will not only have those nets break, they will be lucky to find jobs to pay their own way for once. How will they ever survive without 35 hour work weeks and 7 weeks a year paid vacations, unemployment benefits for life, and free medical care? All of the lies, false hopes, self delusions won't carry water now that the mirage can no longer be sustained. In Davos where the most powerful people on earth sipped the finest vintages of Dom Perignon and ate beluga caviar as they pondered what to do next, their destitute populations waited for them to return home with swords drawn and sharpened to a razor's edge, the better to cut their throats. These "leaders" don't want protectionism because it does not allow for maximum capital profits for them and their friends? But what are governments for if not to protect the jobs, markets, and financial well being of their own citizens? Now these traitors to their constituencies will have to face the music. Their elaborate financial schemes of instruments so complex nobody understood them, their falacies so great anyone objective over the last decades could hardly mistake them, have all failed. The US has just reshuffled its political deck throwing out the last bums who got America into this mess. Now it will be up to the other party's bums to see what they can do to get the nation out of it. It won't do Vladimir Putin one bit of good to blame it all on America. Even if he is right, (America only gets part of the credit) that will not save him or his nation from the fallout of his failed policies. Now not only would it be stupid for anyone to invest in Russia as he demonstrated to those who made that mistake once, they don't have any money to do it with even if they could be fooled again.
Yes the world is undergoing a massive shift and realignment and the whole world is scared. This must have been what Pompei felt like when the volcano finally erupted.
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NikolayTzvetkov wrote:
"P.S. I also watched the program with Niall Ferguson on CNN and find it as far as solid science is concerned absolute intellectual rubbish. It was counterfactual, which makes a good base for fiction, but no basis what so ever for science. To be honest I quite like his books and enjoy reading them, but they are mainly of the ?What if?? variety."
You have clearly never read a book written by Niall Ferguson. Why you choose to slander him is beyond me. I don't like him either, because he fell in with the neo-cons, but he is an extremely hard working historian, and deserves more respect.
Now you speak of "science" when discussing economics and history. I put it to everybody that this is dangerously close to insanity.
Very few people on this thread seem to grasp the fact that money today is a fictional concept, and that the world has been spending wealth it does not have for decades. Monetary politics is NOT science. It is arguably not even political theory.
The money that has been lent out by the banks does not exist. It never did. It was made up, out of thin air. This is not a situation marxists will understand, because they do not understand how banking works.
Put simply, bankers lend money that does not exist in order to create economic activity that would not have existed but for the presence of the fictional money. Politicians allow bankers to lend money that never existed because it creates economic activity that generates taxes and jobs.
Now in a perfect world the economic activity created by the fictional money creates real wealth in the form of the product of the labour. So, a bank invents a million pounds and lends it to a farmer, who then pays men to build a bridge, a road, a barn and an orchard.
But in an imperfect world, the fictional money does not create real wealth in the real world, because it is not used to create wealth from labour. Instead, this fictional money goes from a bank in the UK to a bank in an offshore centre, and thence changes currency and winds up being the profit for a hedge fund manager.
In this imperfect world, no real wealth is being created to substantiate the fictional money that was created by the whim of the banker. This is what is unsustainable.
When bankers invent money, they are placing a bet. They are betting that the work and wealth generated by the fictional money will come to equal or exceed the value of the fictional money. If this happens, the economy grows, and the nation can claim to have wealth equal to its money, and therefore that its' fictional money has become "real".
But this magic trick of credit has not been achieved by our current banking class. Indeed, such has been their rapacity that for the past ten years no wealth at all has been created from the fictional money.
Bankers and hedge fund managers have been using fictional money to gamble on fictional companies promoting fictional services. No wealth has been created by the product of labour in the UK, and as a result the nation cannot claim that the fictional money the bankers created is now real.
Consequently, the value of the economy and of the currency must fall, relative to other nations who have been building their wealth with the products of their labour.
Using fictional money to stimulate labour is surely preferable to using despotic force, however it would appear that this trick has its' dangers. The danger is that the ruling class of bankers decides that they can do whatever they want, and that they will plunder the future economic fortune of their people for the sake of huge short term wealth in offshore accounts.
To my own taste, the behaviour of the ruling class in the UK has been treasonous. I suspect the Queen agrees, which is why she offered to recapitalize her own banking concerns without recourse to public funds.
I think we all know the traditional penalty for treason.
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By the way, I forgot to mention that I greatly appreciate the writing of MarcusAureliusII.
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Mark Mardell:
....But what about the euro?
I think that the currency will bounce back from its problems.
~Dennis Junior~
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Mark Mardell:
....But if you live in Greece or any of the other "PIGS", or know those countries, or even if you don't, what do you think?
-I think that "PIGS" will get thru the crisis in their countries...If the government in the countries affected; Do some refining in how there economies are run..
~Dennis Junior~
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