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A good man, and a fox hole

Stephanie Flanders | 09:28 UK time, Friday, 26 November 2010

"If we stabilise Ireland, it may be possible to hold the eurozone as well." Interviewing the Irish finance minister yesterday, that was the line that jumped out at me. I had asked him whether he thought Ireland would be the last eurozone country to apply for emergency support.

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Say this for Brian Lenihan - he doesn't go in for the kind of exaggerated statements of confidence that most finance ministers resort to when their backs are against the wall. I suspect his fellow European finance ministers would have preferred something less tentative. But that has never been his style.

I first interviewed him back in April, at the start of Britain's election campaign. If anything, he was more relaxed the second time around, though compared to today, April must now seem to him like the lull between the storms. Rightly or wrongly, at that time the markets were giving Ireland the benefit of the doubt.

Come to think of it, back then the markets were feeling pretty optimistic about the entire world. The IMF started talking about unwinding the many G20 stimulus programmes, and it looked as though the eurozone might not be in as much trouble as some had feared.

Not any more. Now, some of the worst fears that senior policy-makers have had about the eurozone and its crisis management capacity have been realised - or at least now look much more real than they did before.

On the vexed issue of Ireland's banks and their debt, Mr Lenihan confirmed to me that there would be sizeable haircuts for many, if not all, the junior creditors of Ireland's most troubled banks. He was pleased that Anglo Irish had reached an exchange agreement for its subordinated debt maturing in 2017, which values it at merely 20% of the face value. Expect more such deals.

But he was adamant, as ever, on the question of senior debt. I pressed him hard: he kept returning to the same, undeniable truth - that Ireland is not so different on this issue than anyone else.

Ireland has guaranteed the debt explicitly. But implicitly, the other European governments have been just as keen to reassure senior bondholders in their banks (with the possible, and unsurprising exception of Germany.) He said "there has been no question" of failing to service this debt in Ireland - but there hadn't been any question of it happening in Britain either.

We tend to think that the desire to reassure bondholders is driven by blind fear: no-one wants a repeat of Lehmans. But, after the interview, Mr Lenihan mentioned an intriguing, practical, objection to imposing haircuts on senior bondholders. Because, in European law, the senior bondholders in a bank have an equal legal standing to its depositors, he claims that it would be legally challenging, to say the least, to punish bondholders without punishing depositors as well.

I'd be interested to hear whether the legal experts agree. If true, most of Europe's politicians would consider it yet another reason why they don't want to go down this road.

But, as we saw this week, investors do not believe that governments will be able to hold the line. if senior bank debt isn't restructured, they expect that there will be some form of sovereign restructuring instead. The price for taxpayers is just too high - and their economies too weak.

Against this backdrop, Mr Lenihan's lukewarm vote of confidence sounds about right. "[I]f we stabilise Ireland, it may be possible to hold the eurozone" is a fair reflection of where we are.

Comments

Page 1 of 3

  • Comment number 1.

    Dreamer, your nothing but a dreamer.

  • Comment number 2.

    You know, you know you had it coming to you
    Now there's not a lot I can do
    Dreamer, you stupid little dreamer
    So now you put your head in your hands, oh no

  • Comment number 3.

    Ranting and a raving. Irish, Germans and markets. Euro, eurozone and China. Thatcher, Major, Brown, Blair and EU Treaties. £, $, millionaires.

    The above sums up all the comments that follow.

  • Comment number 4.

    I blame XXX and here is the answer YYY.

  • Comment number 5.

    Someday we will all know the truth but until we do should we not enjoy the moment? Today the sun is out and I have money in my pocket, I don't know what tommorow will bring for me or the euro but smiling makes the world seem a better place. What really have we got to moan about? As a society we have more than we need and if we have less next week, it will still be more than we had in the 60's, 70's, 80's, 90's and for most of the last 10 years. Praise the sun in the sky for all the life it provides.

  • Comment number 6.

    Panic on the streets of London. Panic on the streets of Birmingham. I wonder to myself, could life ever be sane again?

  • Comment number 7.

    Surely if you have a single currency and a single central bank, the only way you can solve the differing economic conditions in the various regions / countries is by re-distributing tax revenues from the 'better off' areas to the less well off - not by lending euros as some form of bail-out. In the UK we don't lend pounds to Scotland or N.Ireland for example - we give them the money, ie. with re-distribute tax revenues. Lending euro's to Ireland on which it has to pay interest is not a recipe for a quick exit from the present difficulties - Ireland cannot act independently, ie devalue so redistribution is the only solution. European governments need to explain to their electorates that that is what a single currency means!

  • Comment number 8.

    Guy Debord argued in 1967 that spectacular features like mass media and advertising have a central role in an advanced capitalist society, which is to show a fake reality in order to mask the real capitalist degradation of human life. Has anyhting changed?

  • Comment number 9.

    I hear Belgium is next in line for the attentions of the ECB and the IMF.

    At least the European Commission in Brussels won't have far to walk. Out of the building, turn right and you are there.

    The embarrassment of the EU host country defaulting on its debt doesn't bare thinking about.

  • Comment number 10.

    Guy Debord argues that in advanced capitalism, life is reduced to an immense accumulation of spectacles, a triumph of mere appearance where "all that once was directly lived has become mere representation". The spectacle, which according to Debord is the core feature of the advanced capitalist societies, has its "most glaring superficial manifestation" in the advertising-mass media-marketing complex.

  • Comment number 11.

    "Down with a world in which the guarantee that we will not die of starvation has been purchased with the guarantee that we will die of boredom." - Raoul Vaneigem.

  • Comment number 12.

    5. At 10:10am on 26 Nov 2010, Arrrgh wrote:
    Someday we will all know the truth but until we do should we not enjoy the moment? Today the sun is out and I have money in my pocket, I don't know what tommorow will bring for me or the euro but smiling makes the world seem a better place. What really have we got to moan about? As a society we have more than we need and if we have less next week, it will still be more than we had in the 60's, 70's, 80's, 90's and for most of the last 10 years. Praise the sun in the sky for all the life it provides.
    =========================================================================

    Sorry I cant place these lyrics......
    Is it a little ditty by The Grateful Dead?

  • Comment number 13.

    " ... in European law, the senior bondholders in a bank have an equal legal standing to its depositors ... "

    If this is true, then European law is an ass and should be changed. Bond holders know that they are risking their money. Why else are different rates of interest offered on different bonds? Depositors who leave money in current accounts, very reasonably expect that the money is completely safe.

    Furthermore, bonds can be traded and when it becomes obvious that a bank is about to fail the market price of its bonds will approach zero. Surely no one should be entitled to receive more than the market price in compensation.

    This could be part of the misinformation passed to Mr Lenihan in order to persuade him to bail out the banks. The bail out of private banks using public funds could itself be illegal, especially if members of the government have any personal financial interest in the banks.

  • Comment number 14.

    Big difference between our neighbour, Eire, and ourselves is that the Governments of large economies have never defaulted on their sovereign debts - whereas small economies do so often. Maybe because there are economies of scale. [Please note this in small states].
    If Greek Banks or their government default, then German, French and Italian banks that own large amounts of Greek sovereign debt will be near bankrupt. To avoid that horrid possibility, the big Euro States MUST support Greece.
    But I'm not sure the same applies to Irish sovereign debts or to their Banks Bonds either.
    Ireland's government - and its EU sponsors including the UK - should be generous and demand bank shares in return for their credit support. At current or lower values per share. And sovereign bonds at current values too.
    Better still, lots of German people should take their holidays in Ireland and spend the money they've wasted by saving at ludicrously low interest rates. That would help the trade imbalances too!

  • Comment number 15.

    #9 - already posted these on Steph's last blog but possibly after this one had been launched and everyone had migrated to the new blog.

    With Belgium now in the frame will it become the B PIIGS or simpy the BIGPIS?

  • Comment number 16.

    It has to be paid for one way or another. The only decision is who pays, the culprits or everyone else - in which case taxes must go up and benefits must go down.

    It will continue to be a problem until the issues are really addressed. So far, no debts have been written off.

    The ECB has failed to raise interest rates which is what many Euro countries need. Hence the currency keeps falling.

    Too many risks were taken and those who took them (bankers and borrowers) should have to pay. Bailing them out will just encourage them to do it again.

  • Comment number 17.

    How can a nation of 4.5 million generate such a large black hole, perhaps Stephen Hawking could offer an answer.

    The debt is currently €90,973,817,391
    no it is now €90,973,963,472
    Dam it is now €90,974,029,751

    And so by lending them €90 billion more we are going to make things better.

    They need to be able to devalue, but they can't. They should look to restructure their debt, but they can't as this would bring the Euro down.
    They are damned if they do and they are damned if they don't. So one may say they are just damned!

  • Comment number 18.

    14. At 11:21am on 26 Nov 2010, leftie wrote:
    If Greek Banks or their government default, then German, French and Italian banks that own large amounts of Greek sovereign debt will be near bankrupt. To avoid that horrid possibility, the big Euro States MUST support Greece.
    But I'm not sure the same applies to Irish sovereign debts or to their Banks Bonds either.
    =========================================================================
    I am afraid so and the same applies for the rest of the PIIGS. This is like a cancer that will eat the Euro and EU if they don't take drastic action soon. But that is not in their nature. Why act now when you can put it off for another day. There must be lots to talk about first.

  • Comment number 19.

    This generally favourable review of Mr.Lenihan seems to ignore the dire straits that Ireland finds herself in. This continues one of the features of the behaviour of Ireland's ruling class which is the way they are able to ignore reality.
    The markets do not seem to be quite as complacent to say the least! Perhaps they too read this sort of analysis.
    "We still have not got to the bottom of the problems in the Irish banking sector. It is not possible to say how much extra it will cost but we can be sure there will be some extra and maybe a lot extra. The Irish four-year plan assumes the state of the Irish banking sector to be as it was on the 30th of September. Unfortunately the inconvenient truth is that it has got worse since then and is likely to worsen as time goes by. If you put these facts and expectations into the Irish four-year plan the situation looks much worse than it has been presented to be."
    https://notayesmanseconomics.wordpress.com

  • Comment number 20.

    "EU says no plans for Portugal aid European Commission President Jose Manuel Barroso dismisses reports Portugal is next in line for a financial rescue package."

    Is this the same as the Board of a football club giving it's full support for their manager just before sacking him?

  • Comment number 21.

    There is no threat to the Eurozone. The messages coming of the UK are desperate and aggressive propaganda to help deflect attention from the real problem: Sterling.

  • Comment number 22.

    # 21 - Tehe - The Euro is going to implode.

  • Comment number 23.

    Germany has much more in common with Central Europe and Scandinavia. They all share a similar culture of fiscal rectitude, which is seriously lacking in both Western and Southern Europe.

    Germany could build a strong central core of stable economies: Germany; Holland; Austria; Sweden; Denmark (yes) and the Czech Republic. with a little effort Poland and others could be brought on-board in time.

    MITTELEUROPA.

  • Comment number 24.

    The results being that the small banks will fail...the larger banks bailed-out and the larger banks end up with more power than before. All this caused by the larger banks gambling and changing the regulations as they instituted criminal lending. Without regulations that will shape the size and reach of the larger banks, this will only happen again as they have proven time and again that greed does not know restraint and political protection can be bought. The disappoinment being that the "people" find themsevles unable to elect governments that look out for the interest of the people. Most countries fall from within not from the outside...the outside only takes advantage of the weakness caused by corruption. Citizens paying off the debts of bankers in the name of free market capitalism...only politicians can justify that without a whince. Keep electing prostitutes and you will dance to the tune of their pimps.

  • Comment number 25.

    "EU says no plans for Portugal aid European Commission President Jose Manuel Barroso dismisses reports Portugal is next in line for a financial rescue package."

    Chris London wrote "Is this the same as the Board of a football club giving it's full support for their manager just before sacking him?"

    I think you're right! I give Portugal a week or two because the whole process of one crisis after another appears to be gathering pace.

    Oblivion wrote:
    "There is no threat to the Eurozone. The messages coming of the UK are desperate and aggressive propaganda to help deflect attention from the real problem: Sterling".

    I disagree. It is the Euro that faces oblivion and sterling will become more attractive as a currency to hold as the Euro crisis deepens.

    It should be noted that Sterling has devalued in relation to other world currencies in the last year or so. We do not therefore have an overvalued currency like the PIIGS. Great Britian has never defaulted and there is a process in place to reduce the Govt deficit which is nothing like as severe as other nations in the Eurozone. We have also returned to growth. The Eurozone however is only as strong as their weakest parts and they are weakening all the time.





  • Comment number 26.

    Eurosider wrote #9

    "I hear Belgium is next in line for the attentions of the ECB and the IMF.

    At least the European Commission in Brussels won't have far to walk. Out of the building, turn right and you are there.

    The embarrassment of the EU host country defaulting on its debt doesn't bare thinking about".

    It is in fact far worse than that! Belgium cannot even form a Govt and is in real danger of splitting between the Walloons and the Flems. It is deeply ironic that the EU establishment sitting in Brussels with their vision of an ever closer union is loacated in a state that is so deeply divided!

  • Comment number 27.

    I see that this entry is entitled "a good man" and is about the Irish Finance Minister Brian Lenihan.Is this the same finance minister who introduced the blanket bank guarantee which has led to Ireland's ruination? I just wanted to check.

    On his salary it is probably easy to be relaxed unlike most of Ireland's population.

  • Comment number 28.

    As I’ve mentioned before, I was working on a number of Irish bank funded developments in the Northwest when the Northern Rock went down in 2007.

    Those some way from completion were shut down, and remain vacant sites or part built developments.

    The Development Companies went into administration and the sites reverted back to the various Irish banks as they were security against the various loans.

    The various sites are now worth substantially less than the purchase prices and likely substantially less than the amount of debt outstanding

    However none have been offered for sale.
    And given the current situation with the banks, I suspect that this may be to avoid crystallising the loss on the loan.

    And if that’s correct, it tends to suggests that these assets, held as security against failed promises to pay, have not been marked market.

    Which in turn could mean that the true extent of Irish bank losses has yet to be recognised.

    I have noted the same scenario here in the UK, where repossessions are not going to be sold because lenders are unwilling to face the loss at the present time.

    Now whether Mr Lenihan is aware of this, is to some extent irrelevant. However whether those who are being asked to bailout the Irish banks are aware of it, is another matter.

  • Comment number 29.

    This piece is titled 'A good man, and a fox hole'.

    Is that because the Irish will be able to pay fox hole back?

  • Comment number 30.

    Stephanie F. loves Brian L.

    xxx

    Actually I find her columns a welcome correction to a lot of the fury about the current irish government.

    He does seems pretty calm and sensible, yes. Haircuts for the secondary bond-holders, and if the EU has it's way, despite Mr. Lenihan's doubts, the primary bondholders will too.

    Which is as it should be. Higher return, higher risk. And the returns on irish banking bonds must have been high for a long time.

    I do slightly wonder about what drongo at the ECB designed the recent stress-tests, if irish banks could pass them while their need for liquidity support from the ECB was simultaneously rocketing ?

  • Comment number 31.

    "EU says no plans for Portugal aid. European Commission President Jose Manuel Barroso dismisses reports Portugal is next in line for a financial rescue package."

    The aggressive attack on the Euro continues, and the BBC is complicit. Everyday a new speculative headline attempting to talk up a storm and become a self-fulfilling prophecy. What price your soul, BBC? The European countries must not let this go unforgiven. This modern day witch-hunt won't stop until Western Europe is on its knees. Don't think it won't happen to you, Britain; it happened before and will happen again. All it needs is the right words whispered in the right ears and the markets will light their torches to come after you. Remember Black Wednesday? I hear a few people made a bit of money off your plummeting currency that day.

  • Comment number 32.

    Stephanie asked the question is it good to take on more debt and is Ireland simply not delaying and exacerbating what needs to happen? I believe they are just kicking the can down the road as are we. The European economies will not grow in real terms for the foreseeable future. Therefore our debt which was based on payment by continuous growth will continue to grow rather than be paid off.

    Our structural debt is vastly underestimated just as our estimated growth rates are vastly over estimated.

    We will find that we have to cut our cloth far more realistically than we are currently contemplating and in order for us to have any kind of brighter future we will need to re-evaluate our priorities for investment.

    Much more public resource needs to go into technological and energy supply development.

    We are all going to have to learn to live with a much reduced state and much reduced disposable income (I'll rephrase that and say the majority of us not all).

    We can allow our currency to devalue to engineer the necessary adjustment in our relative prosperity vis a vis the rest of the world, the Euro members will have to eventually default and withdraw from a fixed multi-national currency. Neither economic growth nor inflation will come along to sort out their debts without this I'm afraid.

  • Comment number 33.

    D_I wrote #31

    "The aggressive attack on the Euro continues, and the BBC is complicit. Everyday a new speculative headline attempting to talk up a storm and become a self-fulfilling prophecy. What price your soul, BBC? The European countries must not let this go unforgiven. This modern day witch-hunt won't stop until Western Europe is on its knees. Don't think it won't happen to you, Britain; it happened before and will happen again. All it needs is the right words whispered in the right ears and the markets will light their torches to come after you."

    When all else fails, attack the BBC for reporting the news! How pathetic is that? This isn't a witch hunt. It is the market recognising the fundamental weaknesses at the heart of the European project and in particular that no amount of loans and bailouts will recitify the fundamental weakeness that a common currency and a "one size fits all interest rate" will ever meet the needs of all Eurozone members.

    D_I wrote

    "Remember Black Wednesday? I hear a few people made a bit of money off your plummeting currency that day".

    Yes, I remember it well. The decision to join the ERM was extremely foolish. The ERM taught us that we can expect zero support from our "European friends", in particular Germany who refused to help us remain in the ERM by refusing to cut their interest rates. That was the final straw that broke our membership of the ERM and allowed the speculators to cash in.

    Our recovery started the day we left the ERM as that freed us from the straight jacket of an overvalued currency. As I write today, an overvalued currency is blighting the recovery of the PIIGS. Sadly for them they cannot leave the Euro as easily as we left the ERM.

    We made a bad decision when we joined the ERM but the PIIGS made a far, far worse one when they joined the Euro.

  • Comment number 34.

    10. At 10:33am on 26 Nov 2010, Arrrgh wrote:
    Guy Debord argues that in advanced capitalism, life is reduced to an immense accumulation of spectacles, a triumph of mere appearance where "all that once was directly lived has become mere representation". The spectacle, which according to Debord is the core feature of the advanced capitalist societies, has its "most glaring superficial manifestation" in the advertising-mass media-marketing complex.

    Should have gone to Specsavers

  • Comment number 35.

    8. At 10:30am on 26 Nov 2010, Arrrgh wrote:
    "Guy Debord argued in 1967 that spectacular features like mass media and advertising have a central role in an advanced capitalist society, which is to show a fake reality in order to mask the real capitalist degradation of human life. Has anyhting changed?"

    Has he continuously argued the same thing since? If so, then in this respect, nothing has changed. But why should the musings of this man be particularly significant?

  • Comment number 36.

    What amazes me is why any of this comes as a shock to the so-called "experts".

    Eire had a benefit system that made the UK's look frugal and well-run, and you could say they had an open door immigration policy, but as with all countries in the EU - THERE IS NO DOOR!

    The Euro is doomed, it was never sustainable to hitch together various socialist governments and expect it to work. The money being pumped in is simply a sticking plaster. These fiscal solutions are not solving the problem.

    Even with some serious cutbacks, someone is going to have to pick up the bill for this, and ultimately it will be the Irish (and also British) tax payers. I would expect a strong surge of immigration *out* of Eire as this reality dawns, leaving an even greater burden on the poor sods remaining. It just won't pay people to work there any more, and for many it didn't with such generous benefits to be had by all and sundry who drifted in from the nether regions of the EU.

    But the reality of what we seen here is the same as in all parts of the EU, politicians are the puppets of the banks and big biz, what we are seeing now is the transfer (read theft) of tax payer money into the coffers of the banks and politician's friends.

    Here's my prediction: The Euro WILL collapse, eventually. Batten down the hatches guys!

  • Comment number 37.

    To hold the eurozone as well, do you think he has really big hands?

  • Comment number 38.

    Banks may have lent to much; banks may have borrowed too much; consumers and governments may have lived beyond their means BUT no measures to address the problems will be more than a short term palliative until global trade imbalances are addressed. Bail-out's for Ireland, Greece, whoever...are plugging holes in the dyke with sticking plaster but the pressure will build and build until the citizens of the massive trade surplus nations such as Germany and China recognise that they have just as much of a problem as those of the massive deficit nations...or until the dyke bursts and the foreign currency reserves built up by those mega-exporters plummet in value.

  • Comment number 39.

    "When all else fails, attack the BBC for reporting the news! How pathetic is that?"

    I'm sorry, but the BBC really is complicit. Maybe not with intent, but this tabloid style scaremongering is part of the problem. Reporting "the euro is sliding" when it loses a cent or two (gained without fanfare over the past weeks) is bad enough, but these thinly disguised double-bind headlines, of which today's is an example, are sensationalism, at best. Claiming something with no hard evidence, pushing people to deny the claim, then presenting that as "well there must be SOMETHING in it for him to have reacted" is not sound reporting. This is not news, it's gossip.

    With the policies it had in place Ireland would have landed in the same position regardless of currency. The UK should be thankful they didn't have the opportunity t odevalue, as the impact on the UK banks of all those worthless Punts would have caused a much bigger hole in the balance sheets than the couple of billion the government forked out. I think it's an indicator of our times that people see devaluation as a useful, fair and sound way to manage a position. Devaluation is the real "kicking the can down the road". It harms a country's creditors, long term competitiveness, population and reputation. It is an absolute last resort, and being [temporarily] deprived of that is no "Straitjacket". To hear commentators on here one would think it trivial.

  • Comment number 40.

    I do find it funny, the joy expressed at the problems the Euro has.

    Ultimately, our friends the bankers are making money on selling/ shorting the Euro. The Euro is the world's 2nd largest reserve currency: who do you think stands to gain if it does collapse? Certainly not the UK, we'll get mullered with the fallout.

    Its odd that the US dollar can survive despite individual states spending how they wish, across a large geographical area, but it does. Ultimately, there is no reason that the Euro shouldn't do the same and certainly in mainland Europe, it would benefit all of it's participants.

    We can argue whether the Euro would be good or bad for the UKs long term interest, but wishing it ill, is not going to help us at all.

    The effort would be much better spent looking at why the markets want to break it up, who benefits, and who looses. Well I can tell you the later: the plebs loose, every time.

  • Comment number 41.

    If only someone can explain how the trillions being thrown at the PIGS will culminate in the production of real goods and services, I can believe one word of the stitch-up.
    What will Greece produce & sell ?
    What will Ireland produce & sell ?
    And they will have Damocles - the debt mountain - on their necks.
    And if all these will result in the creation of more and more IOUs & Bonds, rather than real goods, one can understand.
    Japan, Korea, China, Brazil, India all have come up - accessing Global Capital Markets, in the face of having needed to justify the investments made to the Fund Managers.
    The EU - especially the weaker countries - have had their capacity to access Global Capital Markets 'enabled' by the EU facade, and yet they wobbled.
    Just tells you that there are no short cuts in the real world.
    It is best to face up to realities of the market place.
    Bite the bullet - and let the Euro be devalued down to say 1.00 vs the US Dollar, reflecting its weakest member, rather than try to reflect its strongest member.
    So that goods & services from the EU can stand on their weaker feet in the real world.
    If this means that the Chinese & Indian economies will become the Worlds largest and second largest - based on revalued currency rates - so be it.
    Just like Germany & Japan recovered from 1945.
    The alternative of blood-on-the-streets is not in the interests of global economic growth.

  • Comment number 42.

    I don't see why the Euro should "collapse".

    Isn't it more likely the PIGS get booted out and revert their sovereign currencies, while the remaining parties in the Euro consolidate and revalue the currency?

  • Comment number 43.

    Reading the above posts, there is mention of the euro failing, splitting apart for some nations or all nations in the eurozone. The tone is sanguine, as if it won't affect the UK. The full implications do do not seem to be realised; we will all suffer greatly. I suggest that the CDS market could then explode and that will be world wide and even if we aren't individual wiped out, trade will stall in the mess. I wonder if the government has any plans to cope with this eventuality, or am I wrting rubbish? I do hope so .....

  • Comment number 44.

    A short additional note. to #43.

    The euro doesn't have to collapse completely for the scenario I am envisaging. The CDS market just needs to be asked to pay up on a couple of states I suspect to trigger the falling dominoes.

  • Comment number 45.

    40. At 3:37pm on 26 Nov 2010, Crookwood wrote:

    "I do find it funny, the joy expressed at the problems the Euro has.

    Ultimately, our friends the bankers are making money on selling/ shorting the Euro. The Euro is the world's 2nd largest reserve currency: who do you think stands to gain if it does collapse? Certainly not the UK, we'll get mullered with the fallout.

    Its odd that the US dollar can survive despite individual states spending how they wish, across a large geographical area, but it does. Ultimately, there is no reason that the Euro shouldn't do the same and certainly in mainland Europe, it would benefit all of it's participants....."

    --------------------------------

    Remember, the dollar area was formed at a time when countries were comparatively insular and communications were poorer and there had been no real globalisation. They had a relatively easy ride compared to the euro. Could they do it now? I doubt it.

  • Comment number 46.

    Afternoon Stephanie,
    I'm having trouble with my maths at the moment and I wonder if you could help?
    Ireland owes Euro 90 Bn and they are loaned a further Euro 85 Bn and they have a population of 4 million. Does that mean that every man, woman and child in Ireland will have to repay Euro 43,750 plus interest?

  • Comment number 47.

    TheNewPonzi wrote:
    "Germany has much more in common with Central Europe and Scandinavia. They all share a similar culture of fiscal rectitude"

    Fiscal rectitude? Is there a cure. Germany has lent money to Greece Portugal etc to buy good from Germany, ie have its cake and eat it. Time people realised that Germans are just blowhards.

  • Comment number 48.

    The Euro is a political construct without the necessary disciplines in place to control those who operate with it.
    How anyone expected a currency system to work that allowed corrupt profligate member states to borrow at a low rate thanks to the confidence of Germany's membership is beyond understanding.
    The Euro was a tool to stimulate or possibly force European federalisation on all those who adopted it.
    That objective remains in place and the difficulties being experienced by the lesser fiscally able countries are simply working to help the overall game plan towards a federal European state.
    The Irish do have a strangely unique part to play in this political game and it comes in the form of Gerry Adams.
    The spectre of Adams becoming a member of the Irish government and possibly a senior minister after January, will give the EU political class something to think about as they demand Ireland submits to their economic demands.

  • Comment number 49.

    a good man and a fox hole?

    Did you hear right, did he say for fox' sake dont keep digging a hole.

  • Comment number 50.

    #43. SleepyDormouse wrote:

    "Reading the above posts..."

    Well done!

    The problem with the anti-Euro mob is inherent in the reason that they hate the Euro and this is simple bigoted xenophobia - these Little Englanders hate everything foreign and all foreigners. They are, as you rightly point out, so ignorant of the real World that they see economics ending at Dover and nothing in the outside World mattering at all to the good ship GB. There are, I am very afraid, too many of these people in Parliament, let alone on this blog!

  • Comment number 51.

    #46. splendidhashbrowns wrote:

    "I'm having trouble with my maths at the moment"

    To add to your sums RBS is owed 150 £Bn by Irish banks too and there are many more commercial loans to Irish banks and indeed from Irish Banks and these banks are essentially nationalised so every Irish man and woman....

    The fact is that most of these transactions are confidential and we can't find out the net result and we hope that we will never have to!

  • Comment number 52.

    Quick question for the moderator.
    If a post is submitted and receives the confirmation that it is being checked but doesn’t then appear does that mean it has been deleted by the moderation process?

  • Comment number 53.

    52 PR

    No, not necessarily. It appear sometime later but by then a new thread may have been started. This is a typical referral ploy by some interested parties, often commercial, who oppose posts which they consider may harm them but actually are okay if borderline. The rules on what can be posted appear to be vague so almost anything can be objected to. It is however difficult for anybody to object to facts contained in a BBC page link.

    Just for info.

    Not a moderator

  • Comment number 54.

    Crash that Euro ... Crash Euro Crash! Hooray! Set us free!

    Some may confuse 'Goodbye Euro sentiment' and call it so called 'xenephobia' ... with genuine concerns over the lack of sovereign and constitutional rights of British citizens ... this is because some do not understand the associated issues, rights and responsibilities what it actually means to be a citizen of a country.

    This dismissal of the genuine concerns of citizens over their sovereign and constitutional rights, cannot simply be dispelled by an over simplistic attack on those who have genuine concerns on the matter and is in fact another form of discrimination in terms of using inappropriate terminology to dismiss views which some individuals reject as based on their own political grounds/views.

  • Comment number 55.

    Hi all you friends of anti-Europe rhetorics out there. If you like Stephanies apocalyptic views on us continentals, our currency, our economy and our political stability, please don't worry. She has predicted the collapse many times and she will keep doing so until she retires.

  • Comment number 56.

    @7 Good point JS. A very good point. Monetary union without fiscal union only works when it works.

    But explaining how a single currency should work to the electorates of Europe is not a trivial matter.
    It's a vote-losing minefield.

  • Comment number 57.

    Ireland is full of good "financial" sorts who have literally done their best to manage this ugly situartion. Well now, guess what just snuck back into the picture?
    Ireland wants to set a bank levy (vs a rise in corporation tax).
    Yep, Ireland wants to make sure that any IMF-backed rescue plan imposes a bank levy on all banks operating in/out of Ireland.
    The EU finds itself amenable; the EU said that it expected the Irish Government to expand its tax revenue from businesses - even if it did not touch the 12.5% corporation tax.
    I've always supported the tax levy; so, I find this potential solution a logical move for Dublin. The Irish bank levy would offer the Irish Government a chance to leave the corporate tax untouched, while taxing (and therefore establishing an audit trail) for all banks doing business with Ireland.
    Officials in Brussels & Paris are confirming that several countries are finding the idea extremely attractive; after all, it was the nefarious financial instruments of banks "too big to fail" that began this whole financial fiasco. French finance minister Christine Lagarde said that it was “quite desirable that Ireland use the taxation lever to reduce its budget deficit”.
    Austria’s finance minister Josef Pröll said he saw “room to manoeuvre”. The levy idea is gaining support in Berlin too.
    EU leaders hope a bank levy would have three immediate impacts:
    1. raise taxes for Ireland,
    2. pay off deficits, and perhaps save social programs as well as
    3. establish an audit trail so that suspect transactions can be followed through.
    Merkel’s Free Democrats coalition partners said yesterday they were likely to back calls for an Irish bank levy.
    Well, the EU said it would go for a bank levy in solation, even if the US threw a fit, which it will.
    Way to go, Ireland and good luck.

  • Comment number 58.

    busby2 @25

    It is in the EU's interests that no central, all encompassing solution to sovereign funding be found right now.

    Eventually the UK and the US will be *begging* the EU to stop procrastinating. The passive, deal with the national debts one by one approach is ideal, and the BBC's Stephanie Flanders helps enormously, because it helps to devalue the Euro without violating the G20 agreements on competitive devaluation.

    A cheap Euro means unemployment in the UK and the US. You're welcome.

  • Comment number 59.

    We've been going round and round on these blogs for 2 or 3 years already. The crisis is here to stay, just like in Japan. As long as people stick with the same old ideas, nothing will change. For more info on the gravity of the UK situation, see here:
    https://www.youtube.com/watch?v=TcAK4zXUzCc

  • Comment number 60.

    Spare a thought for Brian Lenihan through all this.

    Lenihan says his cancer has stabilised
    https://www.irishtimes.com/newspaper/ireland/2010/0907/1224278365823.html

  • Comment number 61.

    @57 Bluesberry

    That's very interesting.

    The other effect is that it would push Irish bond purchases more to the domestic side. This is good because the domestic private sector can start to fund domestic public debt at rates that aren't so much distorted by big foreign buyers and sellers.

  • Comment number 62.


    Europhobes should not get too carried away with the problems facing the Euro.

    A currency is just that a currency, a faciltator of exchange, up it goes, down it goes.

    If problems persist, and I think they will, you will see Sovereign default and rising borrowing costs for everyone including the Germans, and the Euro will depreciate, which of course will make it easier for the Germans to export.

    The only real threat to the Euro is if a strong economy pulls out and their is only one, the German economy.

    Why.

    Consider a weak economy pulling out, say Greece or Ireland.

    Lets walk through it.

    They have to create a new national currency, the new Punt or new Drachmae. They can make the notes as pretty as they like.

    They then have too pursade their people to exchange Euros for it (remember, the Euro is not dead at this point), will they do that, I doubt it.

    Next the Finance Minister, of Greece or Ireland, off to market goes (like a little Piggy) with their new currency and tries to borrow money from the bond market. Well you will hear the laughter ringing for miles, lend you money, a country with brand new Mickey Mouse money, you must be joking.

    More. All the debts of this country will still be denominated in Euro and trying to service this debt with new Drachmae or new Punts. Well think about.

    So they re-denominate their Sovereign debt in their new currency. Well thats a default.

    The moral of the story. If you are going to default. If you are in deep doodah. Best to stay in the Euro.

    That is why it won't happen.

    The Germans have to spit their dummy out, and give up a huge internal market, before the Euro dies.

    Sort of explains why Estonia joins in 2011 and Iceland are in the queue to join.

    The queue of countrys wanting too leave. Empty.

    Apologies for ruining your evening Europhobes.

  • Comment number 63.

    62. At 9:26pm on 26 Nov 2010, Richard Dingle wrote:

    "..........The only real threat to the Euro is if a strong economy pulls out and their is only one, the German economy........."
    -----------------------------------------------
    I follow your plausible logic, but ..
    What if your scenario lasts only as long as Germany and the German people are willing to support the euro. They are getting annoyed now. Portugal then Spain .... how much will they stand?

    Your analysis did not consider the 'what if the German people demand their deutschmark back'

    Sadly, I have no answer, does anyone else?

  • Comment number 64.

    The Europhobic publications by the BBC here seem to be so divorced from economic and political reality that it makes me wonder if the authors are up to scratch, or up to something.

    In addition to RD's above comment, I'd also point out though that Germany is not necessarily in a stronger position than some of the so called weaker countries. Germany has a persisting current account surplus, and those surpluses are being invested abroad. If those surpluses were being used to fund domestic production or some such, then it would be rosy for Germany, but that is not the case as far as I know. Germany's surpluses are too a significant part in Souther European junk.

    What this means is bank exposure. Should there be any kind of sovereign default, there is a risk again of a German banking problem, or crisis.

  • Comment number 65.

    63. At 9:41pm on 26 Nov 2010, SleepyDormouse wrote:
    62. At 9:26pm on 26 Nov 2010, Richard Dingle wrote:

    "..........The only real threat to the Euro is if a strong economy pulls out and their is only one, the German economy........."
    -----------------------------------------------
    Your analysis did not consider the 'what if the German people demand their deutschmark back'


    Sleepy.

    I covered that with "The Germans have to spit their dummy out, and give up a huge internal market, before the Euro dies."






  • Comment number 66.

    A good man in a fox hole.. very interesting conversation but how would he respond to the following?

    Q1 are the Irish banks insolvent or suffering a liquidity problem ? If either of the above, were the bank stress tests nothing more than window dressing or has there been a fundamental change ( and if so what change) that has made the stress tests null and void?
    q2 If the Irish banks are are insolvent is this a direct result of the property / asset price crash exacerbated by the Irish governments initial policy response which was endorsed by the EU/ECB. With hindsight what were made and what have they learnt?
    Q3 given that the Irish and the other Euroland countries gave up their ability to pursue independent monetary policy on joining the Euro ...is this problem really an Irish problem or is it really a problem created by the lack of an effective collective response by the ECB?
    Why for example when Irish government debt and Irish bank bonds were being shunned by the market did the ECB not step in and use some of its trillion Euro reserves to confound the speculators that were shorting them?
    What stops the ECB effecting QE across the the Euro area and intervening in the bond markets to support the speculative attacks against the PIIGs?
    q4 Has the German Chancellors various statements regarding Germany's unwillingness to continue to support the bailouts affected market sentiment? In reality does Germany really have an option of opting out of supporting the bailouts ? And Angela Merkel's suggestion that there will have to be a structure where bond holders take a haircut ...did this calm the markets or in fact exacerbate the problem that the Irish government and people were facing?

  • Comment number 67.

    66. At 10:01pm on 26 Nov 2010, tao-das wrote:
    A good man in a fox hole.. very interesting conversation but how would he respond to the following?


    Q5. How much would you lose personally if the Irish banks went down.

    Time to stop throwing money at the problem.

    Over the next 12 months there will be Sovereign defaults and bankers sporting crewcuts so short as to make a US Marine look like a hippy.

    Time to lance the boil.




  • Comment number 68.

    65. At 9:59pm on 26 Nov 2010, Richard Dingle wrote:

    Apologies, I misunderstood the meaning of that; but is it realistic to expect them to do it? Governments everywhere in Europe are trying to save the euro and make/maintain political capital at home; a bit of a toxic cocktail.

    I wonder if your analysis is correct? Time will tell over the next 2-3 years. If we are still here as we are, then you've probably been proved correct in your analysis

  • Comment number 69.

    66. At 10:01pm on 26 Nov 2010, tao-das wrote:
    "Q1 are the Irish banks insolvent or suffering a liquidity problem?"

    Insolvent without the injection of capital from the Irish Govt and now the ECB and IMF.

    "If either of the above, were the bank stress tests nothing more than window dressing or has there been a fundamental change ( and if so what change) that has made the stress tests null and void?"

    A smoke and mirrors process - completely useless!

    "q2 If the Irish banks are are insolvent is this a direct result of the property / asset price crash exacerbated by the Irish governments initial policy response which was endorsed by the EU/ECB."

    Insolvent because they had to own up to 100% of non performing loans etc. unlike UK banks.

    "With hindsight what were made and what have they learnt?"

    Don't understand this comment.

    Q3 given that the Irish and the other Euroland countries gave up their ability to pursue independent monetary policy on joining the Euro ...is this problem really an Irish problem or is it really a problem created by the lack of an effective collective response by the ECB?"

    No, it is a problem in the establishment of the Euro. You can't bring together so many widely differing economies and expect a single currency to work just based on faith. It has all been done a... about face. The first requisite is convergence, then central fiscal control allied to political control and a central reserve bank with large reserves.

    "Why for example when Irish government debt and Irish bank bonds were being shunned by the market did the ECB not step in and use some of its trillion Euro reserves to confound the speculators that were shorting them?"

    Because they are not a Central bank in the meaning of the term and it would have inspired speculators to attack all the Eurozone countries - ask George Soros for an example!

    "What stops the ECB effecting QE across the the Euro area and intervening in the bond markets to support the speculative attacks against the PIIGs?"

    The Germans.

    q4 Has the German Chancellors various statements regarding Germany's unwillingness to continue to support the bailouts affected market sentiment? In reality does Germany really have an option of opting out of supporting the bailouts ? And Angela Merkel's suggestion that there will have to be a structure where bond holders take a haircut ...did this calm the markets or in fact exacerbate the problem that the Irish government and people were facing?"

    She is facing a GERMAN election and we are not yet the United States of Europe. She is saving her own skin. That is the main issue - the Eurozone was hastily set up and when push comes to shove, each country's politicians protect their own.

    The basic problem of the Eurozone and wider EC is that it incorporates countries with different economic structures and economic performances. The bull in the china shop is Germany. No one in Europe can keep pace with them. We need a structure almost like Asia where currencies are loosely pegged to the US Dollar and if the proverbial hits the fan countries can adjust their way out of trouble.

  • Comment number 70.

    50. At 5:22pm on 26 Nov 2010, John_from_Hendon wrote:
    =========================================================================
    Like most compulsive followers you can never stand back and look at the whole picture. Your head is far to low stuck in the boonies to realise that things are changing. The Euro may survive but it has shown its vulnerability in its current format so unless there is going to be a single fiscal policy within Europe IE a United States of Europe it is always going to have that achilles to attack.

  • Comment number 71.

    51. At 5:27pm on 26 Nov 2010, John_from_Hendon wrote:
    The fact is that most of these transactions are confidential and we can't find out the net result and we hope that we will never have to!
    =========================================================================
    You don't work for the EU do you, as you appear to have the appropriate nature to get on very well. That of an Ostrich. Please see previous posts if unsure of what I am alluding to.

  • Comment number 72.

    62. At 9:26pm on 26 Nov 2010, Richard Dingle wrote:

    They don't have to if Germany and others are the ones to walk away as you yourself have agreed that this is a possibility. So there may be soon a Euro lite option.

  • Comment number 73.

    65. At 9:59pm on 26 Nov 2010, Richard Dingle wrote:

    What market?

  • Comment number 74.

    #67. Richard Dingle

    Q5. How much would you lose personally if the Irish banks went down.

    A5 like most people I suspect its almost impossible to say. I don't hold any Irish bank bonds directly but my pension fund, I suspect, will have some direct exposure. My mortgage was with Bristol &West which was bought by BOI but as my mortgage is still linked to BOE interest rates it is unaffected but illustrates how what happens in Ireland could affect us individually.
    It is difficult to predict what the consequences of a bank default would be as the risk of a domino effect is great.... but given that the Irish banks have in effect been nationalised the question is really irrelevant.
    I do not believe that your prediction that there will be sovereign debt default, at least in the Eurozone as I believe that the EU/ECB still has a number of options to prevent this from happening and it seems to me that just as our Government would not stand by and see Scotland or Wales default nor will the EU stand by and see any of the PIIGs default on sovereign debt. However, I do find the German position ( if reported correctly) in all this incongruous given its advocacy of the Euro ... in that its analogous to the SE of England complaining that we are propping up the rest of the country which in general is not the way people think as we realise that we are in it together or perhaps this is just wishful thinking?

  • Comment number 75.

    I think that this may be a miss type.

    As the man is a Fox and is likely to run around and around in circles until he dis disappears up his own "Fox Hole".

  • Comment number 76.

    69. Nov 2010, dontmakeawave
    thank you for your answers
    your answer to Q3 is spot on however, I do believe that this was realised from the outset but the proposal to vet individual governments budgets compliance with an overall fiscal policy was blocked by the sovereignty argument.
    Whist I also agree in hindsight that the Eurozone may have been better started by incorporating Germany, the Benelux and possibly France there is the counter argument that if the UK had been in the Euro and subject to stricter monetary control perhaps the credit bubble would have been restricted to the the US just a thought!

  • Comment number 77.

    @50 John

    Well said! Stupid nationalism amongst people who should be working together will ruin us all. In Britain it's fed by Rupert Murdoch and his press - but he's an unscrupulous foreign citizen who business interests may well benefit from the failure of the EU.

    The xenophobia is also fed by the Daily Mail group. That's still controlled by the same family which gave us the Zinoviev letter and "Hurrah for the Blackshirts". They never did apologise for that or for their support of Hitler and appeasement. And of course the principal shareholder is non-Dom for tax purposes - rather less patriotic than the newspapers purport to be!

    https://en.wikipedia.org/wiki/Harold_Harmsworth,_1st_Viscount_Rothermere

    https://en.wikipedia.org/wiki/Zinoviev_letter

    https://en.wikipedia.org/wiki/Jonathan_Harmsworth,_4th_Viscount_Rothermere

    Xenophobia sells your newspapers in Britain, even if you happen to pay your taxes in France. (See the links.)

  • Comment number 78.

    I have no idea if the Euro will fall or not. Now there's a refreshing change in the light of the above (both pro and con)!

    I share the view that should it fail then the fallout will also overtake sterling as well. However, even with all of the not inconsiderable problems that we have in the UK, I would rather be here than in Ireland and probably in Greece, Spain, Portugal and as it now appears Belgium.

    I also would not want to be in the German government. Firstly, from a strategic standpoint you are never more vunerable than when you believe that you are strong. Secondly, if you look at the economic debates in Germany you will find equally virilent arguments dominated by two factions (a) we want our DM back, and (b) why should we pay. To my mind the biggest problem for Germany is the effect upon their own economy if the Euro fails. You have to look more closely at what Germany exports and to whom - and if they can't afford German high prices what do they do?

    Finally, in answer to BlueBerry's #57, a bank levy is not going to solve Irelands problems

  • Comment number 79.

    Perhaps the Germans are going to face a stark simple choice:

    Failure of the euro
    Allow the ECB to 'print money' [I hate using that term].

    Either way, we need the banking system to be reformd so it is simple and carries very low risk of failure. Other financial entities can then carry out gambling activities. However, we need to know where funds are to be invested to generate income for pensions and other savings. Pensions need to be a very low risk investment also.

  • Comment number 80.

    So I'm guessing that the whole argument for the UK joining the Euro has been parked for a while?

    Imagine the total disaster had the UK been part of the Eurozone and could not devalue it's currency? What would the bail out have to be for the UK? So using the 90 bil Irish bailout as a yardstick, would the UK bail out need to be circa EUR 1,199,700,000,000? I'm guessing that's too large a number even for the ECB's money merry-go-round to contemplate?

    The Euro is doomed and is a stark and expensive reminder of what happens when unelected political 'elites' pursue their 'vision' over the rights of their fellow citizens!

    Swallow your pride, admit the experiment failed, go back to a free trade zone and try and rebuild - your pride should not stand in the way of future generations right to have a prosperous life.

  • Comment number 81.

    78. At 11:54pm on 26 Nov 2010, foredeckdave wrote:

    ...and as it now appears Belgium. Whilst it is fashionable to play find the 'next domino', think it through - Belgium debt is almost entirely internal, not held by foreigners, their problems are the same as it always has been, the tension between Flemish speaking and Walloons.

    ' To my mind the biggest problem for Germany is the effect upon their own economy if the Euro fails.'

    It won't fail unless they (Germany) pull out, as per reasons in post #62. In any event they did alright with the old DM. If you are saying that Germany depends on a market for its exports then you are stating the obvious.

    The German economy will re-balance towards consumption over the next 5 years. The outlook in the old East Germany is a lot better with falling unemployment.

    ' if you look at the economic debates in Germany ' A given, Germany has its fair share of 'Sun and Daily Mail' readers, the difference is they don't elect amateurs or dilletantes (Gove, the classic example) into office.

    The Med countries and Ireland will always be at the periphery, economically, in Europe. But they feel better for it within the warm embrace of the Eurozone.

    Lets face it there is not a jot of evidence to suggest that any of the PIIGS would do any better outside the Eurozone.

    Not a jot. Which is why apart from the odd 'taxi driver' there is no clamour to leave. What is it about taxi drivers; ever since one of their ilk won the first Mastermind they are 'an opinion factory'.

    The problem for this country is that it has been in slow decline for decades with no real sharp shocks to wake people up. Yo-yo politics and a self serving incompetent political class. The ConDems over the next 5 years will destroy state education, the NHS and entrench elitism even more deeply. This habit incoming polticians (UK) have of cherry picking ideas that fit their prejudice and then applying them in a half-baked fashion is fundamental to why this country is the way it is. With Thatcher it was Hayek, with Gove it is some obscure discredited element of the Swedish education system.

    But heh, lets be 'appy'. CallMeDaves 'Appiness Index', well you gotta laugh, the happiest countries in Europe are Scandinavian with big public sector budgets.

    Finally, you are never more vulnerable than when you believe that you are strong

    This does not really apply here. More accurate to say the Germans suffer from an insecurity complex, something to do with their exposed geographical position in Europe, and history (probably the most attacked and invaded country in Europe) in the 1000 years up to 1871; 1933-1945 was only 12 of those 1000 odd years.

    Are cornered animals dangerous...





  • Comment number 82.

    Avoiding every single question (frankly)

  • Comment number 83.

    80. At 00:28am on 27 Nov 2010, ninetofivegrind wrote:
    So I'm guessing that the whole argument for the UK joining the Euro has been parked for a while?


    Parked. Back burner. Kicked into the long grass.

    Though more to do with the UK not being good enough to meet convergence criteria. (a cheeky one that :))

    Devalue, devalue. It really is no panacea; it never has been.

    Germany now make the Mini and Rolls Royce, what next, Aston Martin.

    Devaluation, in the UK context, will suck in inflation (imports more expensive) make exports more competitive (hang on, did I say exports, pray tell what do we export that the world wants, Toffee Apples ?), oh, and it will make it cheaper for the Germans to buy Aston Martin (who already have a German Chief Executive, Dr Ulrich Bez).

    Join the Euro, eventually, and the UK has a future.

    Stay out and what are you left with. Warm beer, wet summers, public schools and Morris Dancing, quaint.



  • Comment number 84.

    RD @ # 81 & many more :

    Perfect wisdom : The weaker nations want to join as collective security is better that their dodgy drachmae.

    So, it is Germany that has to pull out - and allow the Euro to weaken down to a level that makes Latin Europe competitive again vis-a-vis China, Brazil, India et al.

    With Germany & Britain outside the Euro, it will be like USA & Canada outside Latin America.

    Perfect solution : Latin Europe and Latin America tango ! The Peso and the Euro can dance down to a level they can do real trade with the World, rather than be free-loaders off the Deutsche Mark.

    Reality sooner than later.

  • Comment number 85.

    76. At 11:45pm on 26 Nov 2010, tao-das wrote: "Whilst I also agree in hindsight that the Eurozone may have been better started by incorporating Germany, the Benelux and possibly France"

    That was the idea, but Italy threw a strop and they were included, which opened the door to the other piggy wiggies and the rest is history.

    "there is the counter argument that if the UK had been in the Euro and subject to stricter monetary control perhaps the credit bubble would have been restricted to the the US just a thought!"

    It might have reined in Brown's spending splurge but Ireland's property boom shows the effect of low interest rates (and tax incentives to builders) as to what would have happened here AND we would not have been able to devalue out of trouble.

    The busts of the last ten to twelve years seem to have been finance sector led. What we need is proper oversight and insight into emerging problems in the Banking and Finance sector to head off potential bubbles or risky behaviour that endangers the wider economy. Why can't we poach some mebers of that community - poacher turned gamekeeper - to assist our less than insightful Financial Regulators?

  • Comment number 86.

    As we keep printing money and diluting savings is there really an end game to this financial crisis. When we were sold on EU enlargement (Blair and Bulgaria being a case in point) one of the big selling points was the size of the market 390 mill approx seems to ring a bell. The bit I did not understand from the EU apparatcik was that the countries joining, either had no money or would buy goods with credit lines. Who is kidding Whom.
    Before Gordon Brown robbed the pension funds to the tune of 8 bill per year, we had some of the best funded pensions in the world and this made us an attractive proposition for joining the euro zone. The EU would get hold of our assets. Maybe this concept should have been applied to the enlargment countries;
    Robbing Peter to pay Paul has never been a good idea, but this is what we have been living through and New Labour's Ponzi scheme has not helped particulalry with the Madoff equivalent still strutting the world stage filling his pockets.
    Does anyone know the end game or is this keep your fingers crossed and hope.

  • Comment number 87.

    84. At 08:47am on 27 Nov 2010, PlanetEnglish wrote:
    RD @ # 81 & many more :

    With Germany & Britain outside the Euro, it will be like USA & Canada outside Latin America


    So which one is Canada :)

    Yes the fate of the Euro is in Germany hands. The advantages of a large internal market versus the downside (importing inflation) of a depreciating Euro.

    The poor old French don't seem to get a look-in. Pigy in the Middle.

  • Comment number 88.

    86. At 09:20am on 27 Nov 2010, Michael wrote:
    Does anyone know the end game...


    Ruin. Throwing money at the problem. Borrowing to pay off borrowing never works.

    But nor does cutting public services.

  • Comment number 89.

    It is generally accepted that the Bank of England has pulled the lever controlling interest rates so far in the direction of lower rates that it has become disconnected from the mechanism.

    I am wondering why it is so fearful of moving the lever in the direction of raising interest rates (when so many indications show that it should). Is it, perhaps, a fear that the lever will prove to be disconnected? If the first upward step has no effect then a dilemma presents itself: will the next step have no effect? Is all this power over interest rates a myth? A delusion? Let's move the lever another step. And another. Until we feel something happen. Then we'll be in control again and feel that power over events (provided we don't try to move the lever again).

  • Comment number 90.

    85 dmaw

    'It might have reined in Brown's spending splurge but Ireland's property boom shows the effect of low interest rates (and tax incentives to builders) as to what would have happened here AND we would not have been able to devalue out of trouble.'

    Its not got that much to do with interest rates it is about a failure to control the point of sale loan criteria (ratios) (government consumer regulation) and to ensure the risk is correctly accounted (bank accounting and auditing). Interest rates cannot be expected to stay low over a 25 year loan on a property with a design life of 17 years ; )

    You cant expect individual consumers to be entirely on the ball when barraged with sophisticated propaganda and a government mute in property market risk - while at the same time in other markets the same government is developing consumer protection. False security results. Its a bit like a 25 year mortgage on a car with a design life of 7 years. Nobody would do that surely. Opps, I think some dull people did remortages just to do that.

    Just like StarWars Reagan won the cold war by encouraging the Soviet Union to take their eye off the economic ball and overspend on defense against an illusion, 911 encouraged the West, critically the USA, to take their eye off the economic ball and focus on conflict. Wars are economic or conventional or both in the face of nuke deterrent. Bush wasnt sharp enough to concentrate on more than one thing at a time : 0

  • Comment number 91.

    It might be worth a reflection of what benefits the Euro brings to Germany?

    Certainly as a UK exporter, the Euro cuts my costs in dealing with Europe because I only have to offer one exchange price for most of Europe. Less money goes to banks and it makes it easier for my European customers to judge the value of my products, as they don't have to keep calculating the exchange rates. It's sort of like speaking one language that can be understood by all: it removes confusion and opens doors.

    As Germany is a major exporter, I guess this runs true for them as well: the markets are more open to any manufacturer due to a common currency.

    This is similair to dealing with the rest of the world, where they want their products priced in US dollars, because again they can easily compare and contrast.

    So apart from egg on face, I suspect Germany would loose sales and profit if the Euro were to dissappear.

  • Comment number 92.

    83. At 08:43am on 27 Nov 2010, Richard Dingle wrote:
    "...
    Stay out and what are you left with. Warm beer, wet summers, public schools and Morris Dancing, quaint. "

    To be fair, we export about £60bn of goods and services a year, not an inconsequential number.

    To also be fair, we import about £80bn of the same...


  • Comment number 93.

    91. At 09:51am on 27 Nov 2010, Crookwood wrote:

    So apart from egg on face, I suspect Germany would loose sales and profit if the Euro were to dissappear.


    It is 'egg on face' prospect I suspect that drives most Europhobes (I am not saying you are one btw), that will teach them for (always so it seems) beating as at football.

    As for 'sales and profit', did not Germany do rather well with the DM.

    Why did they give up the DM.

    What is their cunning plan.

  • Comment number 94.

    I am not too keen on this guy give the part he has played in Ireland's current troubles, but this was a good performance.

  • Comment number 95.

    92. At 09:53am on 27 Nov 2010, I wrote:
    To be fair, we export about £60bn of goods and services a year, not an inconsequential number.

    To also be fair, we import about £80bn of the same...


    **********

    Sorry, wrong figures: we exported about £400bn, and imported about £420bn in 2009.

  • Comment number 96.

    95. At 10:48am on 27 Nov 2010, Crookwood wrote:
    92. At 09:53am on 27 Nov 2010, I wrote:
    To be fair, we export about £60bn of goods and services a year, not an inconsequential number.

    To also be fair, we import about £80bn of the same...


    **********

    Sorry, wrong figures: we exported about £400bn, and imported about £420bn in 2009.



    The UK lags behind France, Italy and Netherlands on exports.

    Significant.



  • Comment number 97.

    90. At 09:41am on 27 Nov 2010, Not Buzz Windrip wrote: "Its not got that much to do with interest rates it is about a failure to control the point of sale loan criteria (ratios) (government consumer regulation) and to ensure the risk is correctly accounted (bank accounting and auditing)."

    Don't disagree - isn't that what I wrote in my last paragraph. The failure to oversight the Finance community is a key failing! However in Ireland and Spain's case interest rates played a large part in creating the bubble - by encouraging large borrowing amounts.

  • Comment number 98.

    Actually if you realy want to know what we do, take a look at the Pink book, published by the Gov. This lists what we sell, what we buy and who we sell to and who we buy it from.

    It's a fascinating read, becuase it makes you realise that we do an awful lot of business as a country, and how relatively easy it would be to tilt this business in our favour to start to try and balance the books, were our goverments inclined to do so.

    Sometimes the solutions are in front of us, we're just too blind to see...

  • Comment number 99.

    Sorry but it's quite disappointing how clueless most of the posts are here.

    Germany's exports have been greatly benefited by joining the Euro. Without the 'weaker' nations with larger budget deficits, the Euro would have appreciated to the point that German exports would have suffered. The cumulative surplus Germany has earned is in the trillions of Euros now.

    Those trillions however are not in Germany. Those German surpluses would have caused domestic bubbles and asset inflation if the money had stayed in the country. Germany did not keep the money, it invested it abroad, and to a large extent in the so called PIIGS.

    It was that German financing that actually helped the PIIGS run up the deficits in the first place.

    What threatens Germany right now is that its foreign investments are under threat. Should those investments abroad collapse, there would be a German banking crisis.

    So the balancing act for Germany is this:
    a) Contribute to and assist with stability funds for the PIIGS, in order to protect foreign investments around Europe and avert a second banking crisis
    b) Fully stabilise the Eurozone, and allow the Euro to appreciate such that exports drop and unemployment rises

    The uninformed rhetoric going on about Euro collapses and pulling out of the Eurozone is just media static, and total garbage. A devaluing Euro means increased exports to the US, Asia, and more unemployment in the UK and the USA. Every blog post here that hypes a devaluing Euro is in line with exactly what the EU wants, and you can be proud of the fact each blog post on this line directly causes someone's lost job in the UK.

    Engage brain before writing tripe. If you want references, all the important data on budget and trade surpluses are available on the IMF sites.

    So, from Germany's point of

  • Comment number 100.

    Many getting confused here regarding imports and exports.

    Do UK exports include so called 'invisibles'? If so, why?

    In terms of UK living standards for most British people ... what matters on imports and exports is how many Brits are able to participate in foreign/domestic trade and add 'process value'. The more Brits who add 'process value' ... the less British people on the dole, the higher our UK tax revenues, paying less in welfare payments, much better income and wealth distribution and higher living standards ... a fairer and bigger society.

    Many on here are getting confused by comparing GDP and import and export details between different countries ... too much of UK trade is made by multi nationals with a toe hold in Britain/Europe for sales and not for adding 'proces value' ... a thing that is not even measured in any country in the world (as I know of).

    Compared to the UK, in Germany a significant larger number of German workers are likely to be adding significant process value in their production/manufacturing internation and domestic trade processes). The UK has become just an aircraft carrier for goondog billioniare import sucking spiv traders of one sort or another ... the new upper class as courted also by the champagne socialists crying out ... 'everyone who disagrees is a racist or fascist nutter.

    The real picture is not being shown here ... and 98. Crookwood is quite right, there is enough money and trade there for UK govt to re-structure the British framework on trade so that more British citizens are better off ... at the moment ... the vested interests are doing better while the remainder are struggling and this is all being 'spun' as 'growth'.

    The reason that sucessive governments do not act here and radically restructure is that these vested interests, as including many eurocrats/business europhiles are the new dicatatorial upper class ... shouting the rest down and calling ordinary people nasty names and continually re-grading British students/workers by their nasty discriminatory employment preference mechanisms.

    The biggest restraint on the necessary change being achieved in the UK is the ridiculous 'EU straight-jacket' that now engulfs and increasingly encroaches on all aspects of our lives in the UK (as well as in the rest of the EU). The EU is just like a giant bad greedy creditors' bond trade contract that needs ripping up as containing an extortionate interest repayment rate when everyone else gets a **** rate of interest at their own local bank.

    Real economics is not a matter of simply the quoting and comaparing statistics ... and then getting oneself and others confused by the 'analysis'.

    Ireland can help itself and the UK an awful lot here by making a stand ... we know that if anyone can do that ... the Irish can.

 

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