Frankly, why bother?

24 hours to save the euro: Germany prepares for a ‘temporary’ Greek exit as euro project on the brink of collapse

36 thoughts on “Frankly, why bother?”

  1. So if I read that right, the TL:DR version is that Greece accepts a new bail out deal where technocrats appointed by Brussels run the country or Greece leaves the Euro.

    I believe wars have started over less.

  2. Why bother?
    Because about 20-25% of the central bank reserves of the world are held in euros? That a good reason?

  3. So Much for Subtlety

    Face saving.

    Greece will leave “temporarily”. Or until they get their house in order. Or ad Kalendas Graecas.

    But the important thing is that the Eurosceptics will not be allowed to get the chance to say “we told you so”.

  4. There’s no such thing as “temporary” exit from the Euro.

    The collateral idea is similar to the ruse used to strip and privatise East German assets after reunification. It amounts to an Anschluss.

    Oh, and there can be no proposal from Greece that will ever satisfy Germany. This is Germany’s gang and it doesn’t want Greece as a member any more. There’s nothing to be gained by continuing negotiations. Even Draghi was slapped down by Schaueble last night.

  5. So, we’ve been told over the past few months that it is impossible to leave the Euro; that Greece is going to be ejected from the Euro; that Greece will temporarily leave the Euro and come back later.

    Clarity.

  6. Why bother ? A thorough investigation of why a European currency is not viable without massive fiscal transfers would be a useful lesson for future generations. No stratagem should go unexplored.

  7. So Much for Subtlety

    Frances Coppola – “The collateral idea is similar to the ruse used to strip and privatise East German assets after reunification. It amounts to an Anschluss.”

    Ruse? Strip? Saving the Trabi was even possible?

    “Oh, and there can be no proposal from Greece that will ever satisfy Germany. This is Germany’s gang and it doesn’t want Greece as a member any more. There’s nothing to be gained by continuing negotiations.”

    Indeed. The Germans have decided the Greek government are a lying shower of sh!t. They cannot be trust. How this turns into a criticism of the Germans I don’t know.

  8. Legally there is no mechanism for exit. But in reality if the Greek banks are cut off from Target2 and not allowed to borrow from the ECB, the Greeks would have no choice but to issue their own parallel currency. Eventually they would probably have to convert. This would put them in breach of their treaty obligations, something would be bodged together to allow them to stay in the EU, but not the EZ probably.

    All countries can leave treaties, even ones that have no provision for exit.

  9. All countries can leave treaties, even ones that have no provision for exit.

    Which speaks volumes of EU treaties which have no mechanism for withdrawal. Given sufficient time and enough member states it makes one disorderly exit inevitably and where one goes (proving escape is possible), others follow – usually in short order.

    What will happen then? Will German tanks roll across the highways of Europe once?

    Not to save the Euro or the EU as neither are worth the healthy bones of a single Pomeranian grenadier..

  10. Frankly, those of us few remaining ideologically-driven leftist neoliberals who support the euro, are growing a bit tired of the “24 hours to save the euro” stories. There’ve been 24 such stories a day for the last 17 years.

  11. No, there won’t be German tanks rolling again.

    Even if there were sufficient numbers of Germans willing to get involved, and there just aren’t these days, why would they risk it? Defeat would be inevitable, and this time Germany would have to be erased entirely.

    German politicians like to play up the threat of renewed war as it’s politically useful for Germany.

  12. @Jack C,

    That lots of Telegraph columnists have spent half a career praying for their predictions to come true.

  13. No, there won’t be German tanks rolling again.

    Agreed. Hence my quote from Uncle Otto about neither the Euro nor the EU being worth the “healthy bones of a single Pomeranian grenadier..”

    I do wonder though at what point the Germans will call it a day…

  14. BiG,
    Let’s put it another way.

    With hindsight, how many EZ members wish they hadn’t joined?

    Looking at the EZ’s dismal growth record, slow strangulation of weaker members, and the heroic amounts of time and money spent keeping the show on the road, you can’t really say it’s been a success.

  15. @Jack C, depends on whose view you look at it from, doesn’t it? I’m sure the governments that liked to play client politics with money they were going to print in a few years are upset they can no longer do that (doesn’t stop any of them playing client politics).

    Other than that, the idea that a currency, as opposed to gross economic mismanagement is responsible for a “slow strangluation” is something you are going to have to spell out in short words for me. I’ve been asking for this for 17 years in various places and still don’t have an answer, so go on and surprise me.

    The anti-paradigm seems to be based on the erroneous notion that floating exchange rates among lots of small and insignificant currencies is some form of historical norm. It very much isn’t. The euro may cause some problems, but the chaos and unpredictability and exchange costs and restraint of trade caused by those dozens of currencies, and their repeated neighbour-beggaring devaluations, is one it has unquestionably solved. To determine what supposed loss of GDP growth it has caused you would need to compare with a hypothetical EU which never had a euro. It is not sufficient to compare with the rest of the world, particularly as the rest of the comparable world (developing countries aren’t a useful comparator) has also had an almighty recession if not depression. And true to form, the rest of that world masked the depths of it by – you guessed it – beggar-thy-neighbour devaluation, a path the EZ has only recently started down, and rather half-heartedly compared to, say, the UK or USA.

  16. Also, it absolutely flabbers my gast that so many alleged free market enthusiasts want governments to operate money-printing facilities. Please explain that one.

  17. So Much for Subtlety

    Bloke in Germany – “Also, it absolutely flabbers my gast that so many alleged free market enthusiasts want governments to operate money-printing facilities. Please explain that one.”

    Says the Left wing Eurofederalist. Sure, in Greece, fully privatising the currency and allowing private moneys to compete can only be an improvement.

  18. BiG

    I don’t want to get into any sort of angry debate or anything, I’m too easily led on that score (as you know!), but this is something I don’t get.

    You’re clearly a really intelligent guy, and a damned site smarter than me, judging by a lot of your comments on here. And yet when it comes to the euro, let’s just say you seem to change tack somewhat.

    Twice on here, certainly in recent memory, we have gone through asymmetric shocks (for example), and in some detail, and yet still you come up with comments like “Other than that, the idea that a currency, as opposed to gross economic mismanagement is responsible for a ‘slow strangulation’ is something you are going to have to spell out in short words for me. I’ve been asking for this for 17 years in various places and still don’t have an answer”.

    I’m not going to argue with you, I’ve tried that. But I do know that you are more than smart enough to understand the issues.

    If you simply said, “Look, I’m a supra-nationalist [or whatever variation on that theme, or something else], sure there are all sorts of problems with a single currency outside of a political / fiscal union, but I’m happy to let it play out in pursuit of a bigger picture” – then I would understand that 100%. I would disagree with you, and fundamentally, but I would understand it and respect the different value system etc.

    But the position where it almost looks as if you pretend not to understand – I really just don’t get.

    And it’s not as if that kind of approach would likely influence the average reader around here either?

    It’s late and perhaps I simply shouldn’t post this but whatever…

  19. So Much for Subtlety

    Bloke in Germany – “Other than that, the idea that a currency, as opposed to gross economic mismanagement is responsible for a “slow strangluation” is something you are going to have to spell out in short words for me. I’ve been asking for this for 17 years in various places and still don’t have an answer, so go on and surprise me.”

    When Britain came back on to gold after WW1 they very deliberately did so at the old rate from before the war. To restore the pre-inflationary value of the pound. That meant that the pound was over valued and so Britain had to go through a period of deflation in order for the currency to regain that value. I think that was the right thing to do, but there is no denying it caused a great deal of economic pain. Britain’s economy took off when Britain came off gold.

    In 17 years no one has pointed this out to you?

    “The anti-paradigm seems to be based on the erroneous notion that floating exchange rates among lots of small and insignificant currencies is some form of historical norm. It very much isn’t.”

    It very much is. To the point of Jesus driving the money changers out of the Temple.

    “The euro may cause some problems, but the chaos and unpredictability and exchange costs and restraint of trade caused by those dozens of currencies, and their repeated neighbour-beggaring devaluations, is one it has unquestionably solved.”

    Well, has put off is probably a better way of putting it, but you are right about that. However, those exchange rates also gave the system some flexibility. If someone’s economy was hit by a short term shock, the currency could absorb some of the impact. Now, it has to flow through to lower workers’ wages in other ways. More painful ways. Especially in those countries where wages are not very flexible.

    However these benefits could have been obtained if instead of the Euro, Europe adopted the gold standard. A de facto single currency without exchange fluctuations. Would you agree that would have provided all the benefits of the Euro with fewer draw backs?

  20. @PF, there is no asymmetric shock. There are merely governments that indulge in wartime levels of spending in peacetime. Some of those can and do print their way out of their debts. I don’t think that’s a particularly liberal thing to do so having something that stops it is a good thing. And of all the PIIGS that were being moaned about for the last however many years, four out of five appeared to have learned their lesson, and four out of five ain’t bad.

    Now, whatever the solution with Greece (and my view is it has to be a near-total debt writedown in return for root-and-branch economic reforms and lifetime imprisonment for any Greek ministers that break the Maastricht criteria again), Germans will whinge about paying for it, but of course, with Greece in the euro, Greece leaving the euro, or there never having been a euro in the first place, we will still pay for it, but in different ways. So I really do think that the actual currency used has far less impact than a lot of people imagine.

    Am I a supra-nationalist? I really don’t know. I’m not much of a nationalist, that’s for sure (I wouldn’t be sure which country to be nationalistic about – it can be hard when you’ve held four citizenships and still have three of them). Being a leftist and Marxist (as I’m apparently regarded by some here), I recognise the need for some minimal form of government, also that different things needing governing are best done at different levels. It’s a good job Bremen doesn’t set motorway speed limits in Bremen (actually they do and it’s not pretty), and also a good job that, oh, Totnes, doesn’t issue its own currency (ditto). These are clearly things to run on a bigger scale than Bremen or Totnes as well as things to run on even smaller scales. So – not seeing any particular argument for nations (which have only existed in their current form for +/- 200 years and look to be on the way out, in historical terms) to be the largest scale on which we run stuff – there’s clearly things that are better off managed on a bigger scale than the UK or Germany. The key to me is to get those things right – and run on the right level, rather than whinge about there being an EU at all.

    @SMBS. The big problem with metal standards is that you are in hock to the value of that thing. A gold standard would have been massively deflationary in the last few years (so far worse than anything the euro has ever conjured up), and in practice everyone would have left it ASAP. If you are in any doubt, ask yourself why Aberdeen doesn’t use the “Brent Crude” as its currency.

    And yes, I’m sure the relative values of the hundreds of silver coins of dozens of different weights floating around in the New Testament era had floating, free-market exchange rates that were determined by advanced trading networks and totally unconnected to the metal value of the coin. Nurse will bring you your medicine shortly.

  21. BiG,
    I don’t think anyone would argue that there hasn’t been monumental stupidity, but the PIIGS weren’t the only ones over-spending, and/or breaking the rules. The Euro enabled additional stupidity, and no way out. Besides, 4 out of 5 might have learned their lesson, but there are still massive problems (look at unemployment in Spain).

    Some simple facts:

    1) There were entry criteria, and these were essential for the Euro to work. Ignoring the entry criteria has had predictable consequences.

    2) Because the rules were ignored, the EZ economies were not sufficiently aligned. This meant that interest rates were always going to be at the wrong level for all concerned except Germany. With predictable consequences.

    3) And what happened to the Growth & Stability Pact? Binned. With predictable consequences.

  22. Spain had monumental unemployment before it was even in the EU! Historical data here: http://www.tradingeconomics.com/spain/unemployment-rate

    showing that following a huge post-Franco increase in unemployment (surprise surprise) Spain had a big drop in unemployment (1) after joining the EU, then (2) after joining the euro. Correlation or causation? Who cares. If you’re going to blame the euro for Spain’s high unemployment, you should also praise the euro for Spain’s low unemployment in the 2000s.

    In fact if you want to conclude something it’s that dictators are good at keeping unemployment down. Shame about the methods.

    Interest rates schminterest rates. These again should not be the province of central banks but rather the market (see, showing my leftist Marxist credentials again). It’s up to lenders what interest rates they want to lend at – no reason Greece and Germany should be able to borrow at the same rate at all, with or without separate currencies. And indeed, go look at those yields!

    And I totally agree all the gov’s owe too much. Greece was merely the first across the finish line. This is a huge problem we have to fix somehow, much bigger and longer-term problem than whether Greece is or is not in the euro this time next week.

  23. BiG,
    If you recall, Spain, due to, a) stupidity, and, b) overly cheap money following entry into the Euro went on a building orgy, plus other spending. Similar in Ireland and elsewhere.

    Good in the short-term for employment, but a bugger when reality strikes.

    Also, you need to factor in recessions. The figures don’t say what you think they do. And I can see why you didn’t go for a graph showing EZ growth relative to elsewhere.

  24. Besides, you perpetually avoid the point that, regardless of whether the Euro is a good idea or not in principle, it should have been created in accordance with the rules laid down.

    If BMW supplied you with a car with no brakes, but with a promise that they were moving towards meeting car safety standards some time in the future, would you be okay with that?

  25. So Much for Subtlety

    Bloke in Germany – “I’m not much of a nationalist, that’s for sure (I wouldn’t be sure which country to be nationalistic about – it can be hard when you’ve held four citizenships and still have three of them).”

    As you so often remind us.

    “The key to me is to get those things right – and run on the right level, rather than whinge about there being an EU at all.”

    That would be more convincing if the EU had a track record of getting anything right. How is the Common Fisheries Policy working out? It wasn’t such a good idea to let people who have a culture of cheating and lying fish in our waters was it? How is the Common Agricultural Policy working out?

    “The big problem with metal standards is that you are in hock to the value of that thing. A gold standard would have been massively deflationary in the last few years (so far worse than anything the euro has ever conjured up), and in practice everyone would have left it ASAP.”

    Actually the gold standard would have, probably, seen less deflation these last few years and vastly less inflation over the past 50 years. Nothing done by a Gold Standard has been as bad as what the Euro is doing to the Med. But I agree everyone would have left it. Because it is not cool. The Euro is and so the Left is willing to inflict vastly more damage on the south than the gold standard would have.

    “If you are in any doubt, ask yourself why Aberdeen doesn’t use the “Brent Crude” as its currency.”

    Because they are not allowed to. Scotland would be better off with their own currency.

    “And yes, I’m sure the relative values of the hundreds of silver coins of dozens of different weights floating around in the New Testament era had floating, free-market exchange rates that were determined by advanced trading networks and totally unconnected to the metal value of the coin. Nurse will bring you your medicine shortly.”

    So you are simply going to pretend you do not understand the point? How do you think that is going to help you? In Europe our history is one of tens of thousands of different types of coins floating around and hence banks. The present few centuries when we have been down to a few dozen currencies in Europe is an anomaly.

  26. @JackC,

    Was the Spanish government blowing vast piles of cash on millions of unwanted beachside properties? I seem to recall it was the private sector (plenty of Brits among them, we’ve all seen the sob stories about people who didn’t get planning permission, or believed there was a law against prices going down, or both).

    I’m not interested in EZ growth compared to elsewhere. Which elsewhere should we use? China? Or one of the developed countries that devalued the unit in which GDP is measured while the EZ did no such thing? How can we possibly do such a comparison?

    Should the EZ countries have played by the rules from the beginning? You betcha! Might have seen more of that growth, without the government hoovering up all the available credit through the boom years.

    @FOBS,

    One currency based on multiples of 1.03 cubits of silver and another based on multiples of 1.07 cubits of silver had a fixed value relative to one another, even if the coins were not easily interchangeable. See also the history of the coinage of the American colonies.

    The difficult conversions were probably intentional – to restrain trade with people outside of your group/colony/kingdom/most serene republic. But any bank or money lender any where at any time over a very long period of time would offer the same exchange rate as anyone else (plus their cut). This is a euro-analogous situation, without the easy interchangeability and free flow of money across borders.

    Aside from that, why should I take lectures who couldn’t find the Mediterranean on a map of the Mediterranean?

  27. So Much for Subtlety

    Bloke in Germany – “One currency based on multiples of 1.03 cubits of silver and another based on multiples of 1.07 cubits of silver had a fixed value relative to one another, even if the coins were not easily interchangeable. See also the history of the coinage of the American colonies.”

    They don’t actually. But again you are changing the topic. The fact is lots of money changers changing tens of thousands of different currencies was the norm in Europe until recently. In Norway and Sweden they even find buried troves of Islamic coins.

    “But any bank or money lender any where at any time over a very long period of time would offer the same exchange rate as anyone else (plus their cut). This is a euro-analogous situation, without the easy interchangeability and free flow of money across borders.”

    All other things being equal. But they rarely are. Different coins will have different levels of purity. Even the same coins from different periods would have different values depending on how much debasement was going on. When a government tottered, its currency would go down in value.

    But, of course, this is my point about the gold standard. We could simply define the pound as worth 7.322381 g of gold. And the New New Franc. And the New D Mark. And the Peso. And so on. It would do what the Euro does only better.

    “Aside from that, why should I take lectures who couldn’t find the Mediterranean on a map of the Mediterranean?”

    No idea. But given your usual performance, I don’t think you are in a position to turn down any help.

  28. Despite your posturing as Mr Reasonable Biggie you are an supranationalist who has no worries about every aspect of peoples lives being dictated by jumped up shite in Brussels. I don’t want ANY political scum meddling in any aspect of life. But I esp don’t want a bunch of Brussels fucking sprouts doing so. Everything they touch turns not just to shite but expensive shite. SMFS is correct–fishing, farming, eco-wibble–these clowns could not find their arse with their hands. Europe’s remaining prosperity is on the way out with these types gaining ever more control.

    If the euro was a good idea it would have worked from the start. It didn’t and it never will. And all your flannel won’t change that.

  29. @SMFS,

    The point is that those currencies did not fluctuate in value against each other. Like the CHF has been everything between 1:1 and 1:1.7 with the euro in the last few years. You can’t get that kind of dramatic fluctuation in value between currencies based on the same metal (though the metal can be worth different things in different places it doesn’t matter what king’s head is stamped on the front).

    It was the worst of both worlds – fixed exchange rates but difficult and expensive exchange. Post-Bretton-Woods floating currencies solves one problem, the euro solves the other problem.

    @Ecks,

    Despite your posturing as Mr Nutcase Hardarse you are actually a junior bookkeeper working for a small borough council’s leisure department in south-west London. You are still a virgin, and fantasise about being a shepherdess being taken roughly by your sheep. You have a pet squirrel. Called Gerald.

  30. Biggie: Glad to see the forthcoming doom of first the euro and then the EU is getting to you.

    Don’t worry tho’ Biggie–even post-eudeath your thirst for submission to authority will still be slaked. Your adopted homeland will still tell you what name you can give your kids.

  31. So Much for Subtlety

    Bloke in Germany – “The point is that those currencies did not fluctuate in value against each other.”

    You mean like the Euro? German euros being exactly and forever worth precisely what the Greek euro is worth?

    “You can’t get that kind of dramatic fluctuation in value between currencies based on the same metal (though the metal can be worth different things in different places it doesn’t matter what king’s head is stamped on the front).”

    You can actually. If someone makes a serious effort to debase the currency they can make big changes. But it is a minor point.

    “It was the worst of both worlds – fixed exchange rates but difficult and expensive exchange. Post-Bretton-Woods floating currencies solves one problem, the euro solves the other problem.”

    The euro has an exact fixed exchange. So you think that is a bad thing, right? It is nice to see you have changed your position and come around to my point of view. But again we can deal with this in a better way – we can say the pound is worth 7.3 grams of gold. As is the Franc. And the Mark. And the Florint. Or whatever. That way you could use British coins in France with no problems. But every country would have its own interest rate and hence more flexibility. In fact this is what we should do with Scotland – allow them to issue Scottish pounds on a 1:1 basis with English pounds. We almost do actually.

    Although I have had Scottish pounds rejected in London.

Leave a Reply

Your email address will not be published. Required fields are marked *