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Post 28 Jun 2013, 4:37 pm

Sassenach wrote:
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.
No, I was answering your assertion that the debate had been wholly economic in that part.

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.
I detect now a fair chunk of exaggeration: "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." seems to be a lot stronger than the re-working in your latest post.

And this is my problem with Eurosceptics - not that they don't have a point, but that they can't help making it without exaggeration or ascribing the worst motives to those they oppose. It's not exactly conducive to rational debate.

I understand what you are saying. I have to say there is a point, but there were economic as well as political reasons for a single currency. It makes trade a lot easier, for a start.
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Post 28 Jun 2013, 11:49 pm

No, I was answering your assertion that the debate had been wholly economic in that part.


The debate in this country was wholly economic. Even in continental Europe it was mostly economic. They didn't sell it to the people as a means of achieving ever closer union. Sure, that was always implicit in the treaties, but it was never a point that was made explicitly when attempting to convince the electorates to accept membership. This despite the fact, as you have freely admitted yourself, that the politics rather than the economics was always the driver.

I detect now a fair chunk of exaggeration: "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." seems to be a lot stronger than the re-working in your latest post.


Not really. When I said 'planned all along to bring it about' I meant common economic governance, not economic apocalypse. The re-working is more or less the same. And in any case, I do still maintain that the Euro was sold on a lie. If you can find much in the way of evidence that the debate anywhere in Europe explicitly spelled out the case for the Euro as a tool for greater political centralisation then I'd be interested to see it. I suspect you'll also find a lot of examples where it was explicitly denied that the Euro would lead to common fiscal policies.

And this is my problem with Eurosceptics - not that they don't have a point, but that they can't help making it without exaggeration or ascribing the worst motives to those they oppose. It's not exactly conducive to rational debate.


Oh, I'm sure their motives were pure. Those who created the Euro are true believers in the European project and genuinely believe that political centralisation in the EU will be good for the people. They did lie to us though.

I should add btw that your own remark earlier in the thread conforms to the classic tactics deployed by the Euro enthusiasts. You sought to belittle my argument by painting it as a conspiracy theory. I know you were only joking, but the same thing has been used against eurospectic arguments in Britain for decades. Rather than attempt to engage with the argument we see attempots to smear the person making that argument as being a myopic little englander or patronising attempts to belittle it as the product of a paranoid mind. That's not exactly conducive to rational debate either. It doesn't happen so often these days, but only because the eurosceptics have more or less won the argument and public opinion is right behind them.

And as for exaggeration, that's hardly the sole preserve of eurosceptics either. How's about this beauty from Peter Mandelson:
“If we stay out, the price we will pay in lost investment and jobs would be incalculable.”

There's an honest debate that could be had about whether greater centralisation of power at the EU level is desirable. In my view that's a debate which should have taken place before the creation of the Euro rather than afterwards, and it should be in the open rather than behind closed doors in crisis conferences. It's not really a debate that the political leaders of Europe want to engage in though, which is a great shame.
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Post 29 Jun 2013, 3:11 am

Sassenach wrote:How's about this beauty from Peter Mandelson:
“If we stay out, the price we will pay in lost investment and jobs would be incalculable.”
In a Rumsfeldian way he is right (even if that was not his intent). It is impossible to calculate the gain/loss from joining the Euro or staying out. Even now with hindsight it's not going to be possible.

But I do understand yourpoint

There's an honest debate that could be had about whether greater centralisation of power at the EU level is desirable. In my view that's a debate which should have taken place before the creation of the Euro rather than afterwards, and it should be in the open rather than behind closed doors in crisis conferences. It's not really a debate that the political leaders of Europe want to engage in though, which is a great shame.
And yet the treaties we all signed up to and debated before the Euro do indeed - openly in print - show moves to centralisation and Union.

I'm not sure how that is lying.
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Post 01 Jul 2013, 3:26 pm

And yet the treaties we all signed up to and debated before the Euro do indeed - openly in print - show moves to centralisation and Union.

I'm not sure how that is lying.


My point was that the Euro was primarily a political project, with economics very much secondary, but it was not sold as such to the people of Europe who should have paid far more attention to the deliberately vague statements in all of those treaties. I think people deserved the chance to know what they were really letting themselves in for before having to go through such a fundamentally import step as giving up the national currency, and I don't think European leaders were honest about it.
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Post 02 Jul 2013, 1:51 pm

Sassenach wrote:My point was that the Euro was primarily a political project, with economics very much secondary, but it was not sold as such to the people of Europe who should have paid far more attention to the deliberately vague statements in all of those treaties. I think people deserved the chance to know what they were really letting themselves in for before having to go through such a fundamentally import step as giving up the national currency, and I don't think European leaders were honest about it.
I don't believe that the treaties were vague at all.

I think the 1986 Single European Treaty is pretty clear what it's about from the name. The Maastricht Treaty (which is the one under which the Euro was then developed), has this as the first Objective for the European Union (link to original text):

- to promote economic and social progress which is balanced and sustainable, in particular through the creation of an area without internal frontiers, through the strengthening of economic and social cohesion and through the establishment of economic and monetary union, ultimately including a single currency in accordance with the provisions of this Treaty;
That is not all that vague, and it places monetary union as a part of a wider political aim and alongside social cohesion and free movement.

It also amended the original EEC treaty to replace the previous version of Article 2 with this:

The Community shall have as its task, by establishing a common market and an economic and monetary union and by implementing the common policies or activities referred to in Articles 3 and 3a, to promote throughout the Community a harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.
I've put some parts in bold (economic), and others in italics (political). I think that highlights that both sides were certainly part of the debate in the mid 1990s.

Sure, they are a bit vague in that they are talking about general aims, but this is the start of the treaty. The objectives may not be tightly defined, but are certainly not selling monetary union as just an economic programme.
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Post 02 Jul 2013, 2:18 pm

So at what point do they talk about a common fiscal policy and strengthened centralised institutions to over see economic policy across member states ? Where does it talk about fiscal transfer payments from the richer to the poorer states ? These are the inevitable consequence of a single currency. The treaty simply asserts that a single currency is the goal, at no point are the implications of that made plain, and neither have they been since. Those of us who take an interest in these things can of course read between the lines, but we're talking about serious economic and constitutional issues here and the standard of debate should be much better. Most of the wording in the treaty preamble is worthless platitudes.
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Post 02 Jul 2013, 2:47 pm

Sassenach wrote:So at what point do they talk about a common fiscal policy and strengthened centralised institutions to over see economic policy across member states ?
Article 103?

3. In order to ensure closer coordination of economic policies and sustained convergence of the economic performances of the Member States, the Council shall, on the basis of reports submitted by the Commission, monitor economic developments in each of the Member States and in the Community as well as the consistency of economic policies with the broad guidelines referred to in paragraph 2, and regularly carry out an overall assessment.

For the purpose of this multilateral surveillance, Member States shall forward information to the Commission about important measures taken by them in the field of their economic policy and such other information as they deem necessary.

4. Where it is established, under the procedure referred to in paragraph 3, that the economic policies of a Member State are not consistent with the broad guidelines referred to in paragraph 2 or that they risk jeopardizing the proper functioning of economic and monetary union, the Council may, acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualified majority on a proposal from the Commission, decide to make its recommendations public.

The President of the Council and the Commission shall report to the European Parliament on the results of multilateral surveillance. The President of the Council may be invited to appear before the competent Committee of the European Parliament if the Council has made its recommendations public.


Where does it talk about fiscal transfer payments from the richer to the poorer states ? These are the inevitable consequence of a single currency.
The first of your two 'inevitable' consequences is already in Maastricht (and I haven't checked later agreements yet). The second is not inevitable.

The treaty simply asserts that a single currency is the goal, at no point are the implications of that made plain, and neither have they been since. Those of us who take an interest in these things can of course read between the lines, but we're talking about serious economic and constitutional issues here and the standard of debate should be much better. Most of the wording in the treaty preamble is worthless platitudes.
No, the treaty asserts that closer union (economic and social, and by extension political) is the goal, and that the single currency is part of the means to achieve it. That the Euro may well lead to closer union should not be a surprise.

The debate indeed should be better. Better informed, for a start.
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Post 02 Jul 2013, 3:03 pm

Dan, that article simply says that the Commission can monitor economic performance and make recommendations. Are we supposed to have read that to mean that this small acorn would inevitably grow into a mighty oak of centralised economic governance ?

The second is not inevitable.


I disagree. The Euro will not be saved without tapping the German taxpayer for billions and eroding their savings to the tune of much more. The system is too unstable without some kind of a fiscal correction mechanism.

But anyway, we don't need to agree on whether the wording of the treaties is sufficient prior notice to the people of Europe who were expected to give their consent to the abandonment of their national currency. I don't think so, but it's not really important now. What matters is whether people are going to be willing to pay the price for saving the Euro now. I tend to doubt it, but they may not be given the choice. Ultimately I think the Euro will fail though, because at some point one country is going to decide there's more to lose by staying in, and once one goes a lot more will follow.
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Post 02 Jul 2013, 3:12 pm

Sassenach wrote:Dan, that article simply says that the Commission can monitor economic performance and make recommendations. Are we supposed to have read that to mean that this small acorn would inevitably grow into a mighty oak of centralised economic governance ?
It is increased powers to oversee economic policy (not just monitor performance: "Where it is established, under the procedure referred to in paragraph 3, that the economic policies of a Member State are not consistent with the broad guidelines referred to in paragraph 2 or that they risk jeopardizing the proper functioning of economic and monetary union...".

It is centralised (not only the Commission, but the Council, with participation by the Parliament).

I'm going to give up.
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Post 02 Jul 2013, 3:51 pm

No sorry, but you seem to have missed the end of that clause:

"the Council may, acting by a qualified majority on a recommendation from the Commission, make the necessary recommendations to the Member State concerned. The Council may, acting by a qualified majority on a proposal from the Commission, decide to make its recommendations public."

Recommendations with no force of law. The only leverage is the threat to make those recommendations public.
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Post 03 Jul 2013, 12:08 am

The point I was making was that the text is not just aboit monitoring outcomes, per your interpretation but policy.

I understand that there is no power there to enforce recommendations, but this still represented an increase in centralised oversight in Maastricht.

This is why I was giving up.

You assert "they said nothing about political reasons for the Euro" I find that the treaties do. You then complain that they don't include provisions you assume are necessary. Move the goalposts all you like, my point is made.
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Post 03 Jul 2013, 6:35 am

Sassenach wrote:The Euro will not be saved without tapping the German taxpayer for billions and eroding their savings to the tune of much more. The system is too unstable without some kind of a fiscal correction mechanism.


The Euro does have a tough slog, but it could survive without tapping the German taxpayer. Here's how: Some PIIGS default, or partially default like Greece did, on their national debt to bring it down to a manageable level (Spain and Italy probably don't have to do this.) They then adjust their benefits to a level that is sustainable. Living standards likewise adjust and then, over time, these new low wage economies of Europe start attracting certain back-office and low skill manufacturing processes that don't make sense to do in Germany or Netherlands. This decline in benefits and the scale of gov't may very well be a good thing as it might wring out some of the corruption that is endemic in these places.

It's the Iceland model: the bondholders take the hit, not the taxpayer. And because the bondholders are the ones with the money, they will scream the loudest and try like hell to shift the burden to the taxpayer, but that's a political issue that Europe will have to manage.
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Post 03 Jul 2013, 4:05 pm

Dan, I really don't agree that I'm moving the goalposts. The creation of the Euro was done in the full knowledge that it lacked a lender of last resort or any kind of fiscal stabilising mechanisms to even out the imbalances between economies that would otherwise have been ameliorated by differing exchange rates. They turned a blind eye to the quite obvious fact that nobody actually met the convergence criteria for entry (even Germany broke the stability pact). The endgame has always quite obviously been the creation of centralised economic governance and much deeper political integration in the Eurozone. I realise that these things are covered in vague form in the treaties but these are complex economic and constitutional issues and ordinary people can't really be expected to just work it all out for themselves. The likely consequences of monetary union should have been spelled out truthfully and in detail to the electorate before the decision was made to adopt the Euro.

It's the Iceland model: the bondholders take the hit, not the taxpayer. And because the bondholders are the ones with the money, they will scream the loudest and try like hell to shift the burden to the taxpayer, but that's a political issue that Europe will have to manage.


Interestingly, if not surprisingly, the negotiations over the new 'banking union' seem to be about to bring in regime for the whole Eurozone which essentially mandates a Cyprus-style raid on the bondholders and major depositors of any failing bank. Well, I guess nobody believed that it was ever going to be a one-off.

Not sure how I feel about this really. On the one hand I do agree that we can't keep getting the taxpayer on the hook for failing banks, but it's very risky I think. It could well lead to all kinds of massive capital flows out of countries with banks that are in trouble, which would just exacerbate the problem.
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Post 15 Dec 2013, 11:31 am

Machiavelli wrote:I bump this thread from time to time simply because I pointed out the structural flaws that are now tearing apart the Euro several years ago and was roundly poo-pooed in these forums.


Since Mach has left us, I guess it's up to me to "bump this thread from time to time."

Against the dollar the Euro is at a two-year+ high. If markets are a guide, it appears that the dollar is failing and the Euro is on its way to becoming a reserve currency.

Just saying.
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Post 17 Dec 2013, 11:39 am

The problems haven't gone away. France is about to tip into a triple-dip recession, Italy's debt to GDP ratio is sky-rocketing despite running a primary budget surplus, Spain and Portugal and Greece are still running youth unemployment rates of 40+% and anti-European parties are poised to sweep the board in a host of countries in next year's European Parliament elections. Right now the Front National is topping the polls in France. It remains to be seen whether they'll crash to earth again, but it's hardly an encouraging development.

The can has been successfully kicked down the road for a bit is all.