Join In On The Action "Register Here" To View The Forums

Already a Member Login Here

Board index Forum Index
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 26 Jun 2013, 12:44 am

Yes, Sass, it would be interesting to see if that is also the case. Even so, it does not help to convince me that the Eurosceptics or US conservatives are right when exaggeration, faulty assumption or just plain false statements are used as evidence. This sort of thing does rather undermine the concludions.

I eagerly await your data.
User avatar
Dignitary
 
Posts: 3486
Joined: 02 Oct 2000, 9:01 am

Post 26 Jun 2013, 6:47 am

danivon wrote:I eagerly await your data.


To be fair, he was responding to my comment that was comparing the PIIGS to Ecuador, and certainly the Greece, et. al. are more like Germany than they are like Ecuador.
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 26 Jun 2013, 8:34 am

They are, but I would submit that they already were more so (not least due to being more developed - particularly Spain) before the Euro came along.

There are a few countries that have adopted the Euro without being in the EU or participating in the monetary union. Most of these are enclaves so it's not really surprising (Andorra, the Vatican, Monaco, and San Marino) and those do have arrangements with the EU. However, Montenegro and Kosovo also use the Euro having adopted it unilaterally (in a similar way to those South American countries).

In fact, just as Venezuela and a slew of Carribbean nations have pegged their currencies to the USD, a swathe of Western African nations use currencies pegged to the Euro. The main difference between these and tge likes of Ecuador, when compared with EU members who have adopted the Euro is that the former have absolutely no say in monetary policy of the base currency, while Greece and Spain do.

That say is of course diminished by the influence of the northern states (Germany gets a lot of the blame/praise as the major economy, but Austria and the Netherlands are more strident than Frau Merkel.

The US does have similar tensions. Rich states and poor states, those that spend a lot and those that don't, those with high taxes and those with low taxes. There used to be a lot of problems about economoc and fiscal policy, and even though slavery was a major issue, the US Civil War was also largely about different types of economy competing under one monetary, fiscal and poltical system (not that monetary theory was all that advanced back then). Even now I wonder at the massive disparities between states like Alabama and Louisiana and those in the North East. Totally different incomes, different levels of development and of social demand.

Anyway, while Sass was responding to you on that, I think we need to beware of the tropes that have been trotted out - particularly in the USA - regarding European countries.
User avatar
Emissary
 
Posts: 3405
Joined: 12 Jun 2006, 2:01 am

Post 26 Jun 2013, 9:53 am

I eagerly await your data.


This seems to cover it reasonably well:

http://www.voxeu.org/article/how-restor ... iveness-eu

The need for troubled Eurozone nations to rein in unsustainable government finances is clear (see, for instance, Wyplosz 2011 on this site). But it is now also widely acknowledged that they must also address their lack of competitiveness, which drains economic performance, undercuts finances, and strains the fabric holding the EU together.

Since unification, unit labour costs – wage compensation adjusted for labour productivity – in troubled Eurozone nations have risen dramatically faster than in Germany and other high-performing nations. The sources of these unit-labour-cost divergences are very instructive.
Contrary to the common view, the largest source of diverging labour competitiveness in many Eurozone nations has been wage increases that exceeded productivity gains.

The policy implications are clear. Realigning real wages with productivity in Greece, Italy, Portugal, and other EU nations is as important, if not more important, than required fiscal austerity. However, this will be easier said than done.

Germany’s labour policies and its trends in wages and productivity following unification provide a viable roadmap for troubled EU nations, but the political and social obstacles are daunting.

Since 2000, productivity-adjusted wages have increased only 5% in Germany (they actually declined from 2000-2008).
In other European nations, meanwhile, wages have increased by between 25% and 35% (see Figure 1).


Looking behind the wage competitiveness changes

Disaggregating these competitiveness trends into wages and productivity shows that the bulk of the divergence stems from differing patterns of wage hikes. Certainly, from 2000-2008, Germany’s productivity rose faster than most other Eurozone nations. But official data show that since 2000, including the recent period of deep recession and recovery, labour productivity gains in France, Spain, and even Portugal have kept pace with Germany. Italy has been the outlier, with no gains in productivity since 2000. It may seem odd that productivity gains in Greece have risen faster than in other EU nations, including Germany. Assuming the data are correct, this likely reflects Greece’s low starting point when it entered the EU, and the benefits to trade provided by the union.

But the real story - contrary to the commonly held notion that German workers are more productive – is that the key was German wages restraint; its wages rose modestly, generally in line with labour productivity. In other Eurozone nations, wages have persistently risen faster than labour productivity.

From 2000-2007, Germany’s wages rose modestly in line with inflation and closely tracked labour productivity gains, as shown in Figures 3 and 4.
Since that sustained period of flat unit labour costs, a pickup in wages has lifted unit labour costs by about 5%.
France’s and Italy’s wages and unit costs have increased 40% above their 2000 levels (Italy’s real GDP has expanded a strikingly anaemic 5.5% cumulatively, a 0.5% average annualized growth pace). Trends are similar in Spain and Portugal.
Greece’s wage pattern is striking - compensation rose a whopping 15% in 2002, and spiked again in 2003, seemingly as a bonus for Greece’s admission into the Eurozone. And much of this was in government employees’ wages.
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 27 Jun 2013, 5:51 am

Interesting article and graphs. Of course it uses nominal rather than real figures for wages, which may mask things. Also the graphs are all based on 2000 = 100, so while it shows trends for each country relative to then, it does not indicate relative starting positions for each country - as Germany is likely to be starting from a much higher point, the gap may not have narrowed much.

One factor appears to be missing in the analysis of Greece. There was a big spike in wage costs, rising in 2003 and falling after 2004. As well as things like the issuing of the Euro and a rise in exports, there was a major impact on Greek employment with the Olympics, particularly with the rush to complete major projects in time which will have soaked up labour and increased wage demands. Take that out, and Greece actually looks quite reasonable compared to the other countries shown. Indeed, the worst would seem to be France and Italy, who are not in such dire straits, and then Spain (which was having an Ireland-style property boom). Greece and Portugal are less extreme.

It would be interesting (and I will see what I can find myself) to see what the '100' was for each country in 2000. That way we can see what the actual gaps were then and later on.
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 27 Jun 2013, 7:31 am

Drat, his data source is 'Eurostat', which means trying to find the data he would have used nearly 18 months ago is not easy to find. For example, when I searched for unit labour costs, most tables I could find were indexed to 2005=100, not 2000.

However, I did find a report from late 2011, called Labour Market Statistics which while using a 100 base for labour costs also had figures for earnings. The source for those (pre 2008) is the table earn_gr_nace which can be viewed here: Eurostat Data Explorer. The initial view shows a subsection, excluding public services, so I went for the widest stat it has, which only excludes agriculture, fishing, household and extra-territorial.

The figures for Italy are missing, Spain starts in 2001 while Greece ends in 2003, but here are the figures I could get - Full time gross earnings in Euros, with purchasing power in brackets, followed by % of Germany's figures at the time

2001
Germany 34,500 (33094.6) 100 (100)
Greece 16,630 (20206.6) 47.0 (61.1)
Spain 17,873.8 (20937.9) 50.5 (63.3)
France 27,072 (26013.8) 76.5 (78.6)
Portugal 13,309 (15776.7) 37.6 (47.7)

2007 (Greece missing)

Germany 39,800 (39136.2) 100 (100)
Spain 22,176.5 (23882.4) 55.7 (61.0)
France 31,848.0 (29473.3) 80.0 (75.3)
Portugal 16,727.3 (19519.7) 42.0 (49.9)

Here's what I noticed. While the relative gap in earnings is closer in Euro terms, it is more likely to have fallen in terms of purchasing power (so, perhaps comparing to the graphs you saw, there is a difference in terms of inflation as well). And even where the gap closes, in terms of Euros Spaniards go from being 17,526 behind to being 17,623 behind, with the Portuguese going from being 22,091 behind to 23,072 behind. When you look at purchasing power, the gap widens further and even does over the French.

Which does also make me wonder if the article you posted, Sass, uses the data relating to its claims - it talks about wage restraint, but compares unit labour cost (wages are a major component of labour costs, but not the only one and the other factors may well vary over time). The data I looked at is wages. It does show that Spanish and Portuguese wages went up by 24-25% in 6 years (compared to 18% in France and 12% in Germany) but also that with purchasing power, German wages went up by 18% while Spanish and French by 13-14% (Portuguese at 24% again).

I don't think it is really all that clear cut. Yes, absolute wages in some European countries increased at a higher rate than they did in Germany, and while some saw comparable growth (basically Italy is the only one of the 5 that didn't), in real terms (the purchasing power of those wages) Germany increased faster than others, and widened the gap.
User avatar
Emissary
 
Posts: 3405
Joined: 12 Jun 2006, 2:01 am

Post 27 Jun 2013, 9:34 am

I suspect this is likely to be beyond us. It's all an analysis of what was in the most part a throwaway remark that I made so I'm not sure it's really worth all the Googling that it's likely to require. In any case, there are so many other factors in play such as current account deficits, levels of household debt etc. The article I posted is certainly interesting but it has a very narrow focus.

I never actually tried to say that being tied to a fixed exchange rate or a common currency is always going to be a bad thing anyway, what i said was that in doing so you lose the stabilising mechanisms that enable you to cope with a crisis when one occurs. As such it's very risky.
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 28 Jun 2013, 12:33 am

It may have been a throwaway comment to you, but gj picked up on it, and we already have enough misinformation about Europe being used by Americans to justify their position.

Besides, when you castigated me for not admitting that the 'Eurosceptics' were right all along (and they have been specialising in doom-laden predictions), what was I supposed to be agreeing with?

Sure, monetary controls are one way to try to get out of fiscal trouble. They are also often being clumsily used by monetarists to make things worse, so I think it evens out a bit.
User avatar
Emissary
 
Posts: 3405
Joined: 12 Jun 2006, 2:01 am

Post 28 Jun 2013, 1:00 pm

Well, they did predict very accurately that the incompatible business cycles of the various Eurozone members would lead to gross economic imbalances which could not be corrected by anything short of mass redundancies in the weaker countries. This is now taking place exactly as predicted. They also predicted that this would inevitably lead to moves towards political centralisation. This latter point was strenuously denied by advocates of the Euro, but it's also now coming to pass. Personally I don't really believe that the architects of the Euro were blind to the potential economic implications of what they were creating, these were smart people. As such I can only conclude that they knew full well that a common currency without common economic governance was doomed to fail and planned all along to bring it about. The Euro was sold on a lie. Thankfully we never joined, but Tony Blair was very keen so it was a close run thing.
User avatar
Ambassador
 
Posts: 215
Joined: 26 Nov 2006, 5:47 pm

Post 28 Jun 2013, 2:33 pm

Would it be remotely practical to keep the Euro as a convenient international currency, but for the member nations to resume having their own currencies as well? I mean, there are obviously problems with that, but are they severe enough to rule it out immediately?
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 28 Jun 2013, 2:37 pm

Sassenach wrote:Well, they did predict very accurately that the incompatible business cycles of the various Eurozone members would lead to gross economic imbalances which could not be corrected by anything short of mass redundancies in the weaker countries. This is now taking place exactly as predicted.
Really? It looks more like the concurrent cycles mean that all of Europe is struggling at the same time - global recessions lead to redundancies too.

They also predicted that this would inevitably lead to moves towards political centralisation. This latter point was strenuously denied by advocates of the Euro, but it's also now coming to pass.
Huh? The EU has always been about moving towards closer union. The trend even during the 90s and 00s was political centralisation. So I don't actually see evidence for your assertion on what the 'advocates' were saying.

Personally I don't really believe that the architects of the Euro were blind to the potential economic implications of what they were creating, these were smart people. As such I can only conclude that they knew full well that a common currency without common economic governance was doomed to fail and planned all along to bring it about. The Euro was sold on a lie.
To what end? What is the goal of this Continental Conspiracy? Will a tin-foil hat keep me safe? :wink:

Thankfully we never joined, but Tony Blair was very keen so it was a close run thing.
Not really. I think Blair was more ambivalent than you think he was, and it was not really that close - dropping out of the ERM in 1992 meant we would have had to take a long time to get there and it was never really popular even among Labour MPs let alone the opposition. I don't think it would have been much better or worse in or out either. Perhaps had we been in, we would have been a bolster to the system, raising more objections when other countries breached the rules. Who can say?
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 28 Jun 2013, 2:48 pm

King of Swords wrote:Would it be remotely practical to keep the Euro as a convenient international currency, but for the member nations to resume having their own currencies as well? I mean, there are obviously problems with that, but are they severe enough to rule it out immediately?
I guess the question would be what the point is of doing that.

Either national currencies are tied (or bound by close limits) to the Euro - in which case they are just using the Euro with a nominal exchange rate...

Or they are not, in which case it's pretty useless as a currency.

The main issue is that members have pooled their reserves in the European Central Bank, and so while one country or a series of them moving out would be a case of dividing the reserve up and agreeing it, undoing the Euro all at once would be all but impossible - and the Euro would cease to exist if all the reserves backing it were repatriated.

It would in theory be possible to have a smaller Eurozone, or even to split the Euro into two currencies.
User avatar
Emissary
 
Posts: 3405
Joined: 12 Jun 2006, 2:01 am

Post 28 Jun 2013, 2:52 pm

Really? It looks more like the concurrent cycles mean that all of Europe is struggling at the same time - global recessions lead to redundancies too.


This is quite clearly not the case. Some European countries are struggling far more than others. You know this so I'm finding it hard to believe that you'd seriously argue otherwise.

Huh? The EU has always been about moving towards closer union. The trend even during the 90s and 00s was political centralisation. So I don't actually see evidence for your assertion on what the 'advocates' were saying.


Come now, I'm sure you remember the 90s and early 00s every bit as well as I do. The Euro was sold (in this country at least) exclusively as an economic project. You only need to look at Gordon Brown's '5 tests' to see that. The entirety of the debate was about whether it would be good for our economy, and when anybody tried to raise the constitutional implications they were dismissed as Littloe Englanders. It's interesting that you now seem quite happy to admit that ever closer union has always been the endgame because this is not how it was sold to the British people. Your honesty does you credit, but you shouldn't try to pretend that this was commonplace.

To what end? What is the goal of this Continental Conspiracy? Will a tin-foil hat keep me safe?


If you think this is a reasonable response then you've spent far too much time debating on Redscape. I refer you to my answer above, or for that matter to your own point that I was responding to.
User avatar
Ambassador
 
Posts: 15994
Joined: 15 Apr 2004, 6:29 am

Post 28 Jun 2013, 3:11 pm

Sassenach wrote:
Really? It looks more like the concurrent cycles mean that all of Europe is struggling at the same time - global recessions lead to redundancies too.


This is quite clearly not the case. Some European countries are struggling far more than others. You know this so I'm finding it hard to believe that you'd seriously argue otherwise.
They are struggling differently, but generally it's all part of a wider cycle. We all started to struggle in 2007-8, pretty much all going into recession in 2008-9, and some have come out quicker than others, but no-one is seeing much growth.

The cycles are fairly close in terms of time, even if their extremes are at different levels.

Come now, I'm sure you remember the 90s and early 00s every bit as well as I do. The Euro was sold (in this country at least) exclusively as an economic project. You only need to look at Gordon Brown's '5 tests' to see that. The entirety of the debate was about whether it would be good for our economy, and when anybody tried to raise the constitutional implications they were dismissed as Littloe Englanders. It's interesting that you now seem quite happy to admit that ever closer union has always been the endgame because this is not how it was sold to the British people. Your honesty does you credit, but you shouldn't try to pretend that this was commonplace.
Oh, so you are only considering the case of the debate in the UK? I was thinking a little wider, and to the actual stated intentions of the architects of the EU and monetary union.

Even so, I do indeed recall that period, and political aspects were indeed mentioned on both sides even here.

Interestingly, even at the time of the 1975 referendum it was there for people to find, if they would look, that the goal was closer union. The 1986 Single European Treaty was clear on that point. So was the later Maastricht Treaty. Those all pre-dated the Euro. We all knew what Jacques Delors was aiming at back then.

To what end? What is the goal of this Continental Conspiracy? Will a tin-foil hat keep me safe?


If you think this is a reasonable response then you've spent far too much time debating on Redscape. I refer you to my answer above, or for that matter to your own point that I was responding to.
I did put a smiley in to show I was moving toward sarcasm. Perhaps you've been here too long to notice levity?

But seriously, you assert that they all not only knew it could fail, but that they knew know it would fail, and deliberately created the Euro anyway. So my first question there is a serious response to that paragraph:

Why would they do that?

Even if it was to create a more Federal state out of the ashes, isn't it an incredibly risky way of going about it?
User avatar
Emissary
 
Posts: 3405
Joined: 12 Jun 2006, 2:01 am

Post 28 Jun 2013, 4:00 pm

I did put a smiley in to show I was moving toward sarcasm. Perhaps you've been here too long to notice levity?


Fair point. I wasn't really offended of course, but you know that I'm sure. Nevertheless though, it is a bit daft to make the point that political union has always been the driving force and then try to make out that me making that same point is some kind of conspiracy theory.

But seriously, you assert that they all not only knew it could fail, but that they knew know it would fail, and deliberately created the Euro anyway. So my first question there is a serious response to that paragraph:

Why would they do that?

Even if it was to create a more Federal state out of the ashes, isn't it an incredibly risky way of going about it?


Perhaps I've not made my poit very clearly (or maybe I've exaggerated). What I think is that the architects of the Euro knew full well that a common currency without common economic governance could never work. I tend to the view that they were aware of this but pushed ahead anyway because they calculated that at some point the economic imbalances would force a situation whereby they could introduce greater centralisation of economic policy and the people of Europe would be be willing to go along with once they'd come to realise that the alternative would be economic hardship. I don't think they really anticipated such a major crash or really thought this plan would result in rampant unemployment and the like, and obviously the same people are no longer in power in the EU. Nevertheless though, I do think the Euro was almost entirely a political rather than an economic project and that to some extent it was built to fail.