EU moves closer to total integration

[woolfe9999]

This strikes me as the most important news story of the day:

http://money.msn.com/business-news/article.aspx?feed=AP&date=20111209&id=14603606

Summary: The EU nations have now all agreed to submit their budgets to a central authority for approval, giving up much of whatever sovreighnty they currently hold. Britain is the sole dissenter and is staying completely out of it.

In terms of short term economic outcomes, I tend to think this is a positive development. Long term? Dunno. Interested in people's reactions.

 

[RbSX]

It's an awful idea.

 

[fskimospy]

This does nothing to address the Euro's problem. Budget deficits and debt are not the problem, so reigning them in won't do anything.

 

[RbSX]

This does nothing to address the Euro's problem. Budget deficits and debt are not the problem, so reigning them in won't do anything.

You are kidding, right? The core of the issue is sovereign debt.

 

[woolfe9999]

This does nothing to address the Euro's problem. Budget deficits and debt are not the problem, so reigning them in won't do anything.

I think it does have important economic ramifications in the short term, because the alternative was booting out the slackers, which would not have been good for the short term. Possibly would have been a better idea for the long term though.

 

[woolfe9999]

It's an awful idea.

Explain.

 

[Infohawk]

My concern is that this is not very democratic. There is no referendum here that I can see. There is already a tension between the European technocrats and the citizens of the individual countries. This takes it to the next level. "Why are my health care benefits being cut?" "Because Brussels says so. Sorry my hands are tied." I don't know how long that's going to fly.

 

[Hayabusa Rider]

Eventually nations in the EU will surrender sovereignty for economic reasons. I'm surprised it's taken this long.

 

[momeNt]

If this convinces the ECB to crank up the presses like the Fed and BoE, then kudos, they've "solved" the problem.

 

[woolfe9999]

My concern is that this is not very democratic. There is no referendum here that I can see. There is already a tension between the European technocrats and the citizens of the individual countries. This takes it to the next level. "Why are my health care benefits being cut?" "Because Brussels says so. Sorry my hands are tied." I don't know how long that's going to fly.

I would think that referendums should be conducted in the individual countries. Each is a democracy so I doubt this sort of thing can be done without approval of each electorate. Then again, maybe not...

 

[fskimospy]

You are kidding, right? The core of the issue is sovereign debt.

No it isn't. The core of the issue is interest rates on that debt that are being driven up due to currency issues unrelated to the actual fiscal health of a country.

 

[Infohawk]

I would think that referendums should be conducted in the individual countries. Each is a democracy so I doubt this sort of thing can be done without approval of each electorate. Then again, maybe not...

If I recall correctly the last round of referendums were defeated by some major countries. I haven't read anything in these stories about referendums. It sounds like they are just multilateral agreements (not actual treaty changes because of the UK).

Without getting to the level of a conspiracy theory, it is interesting that the various leaders are using this ongoing crisis (honestly it feels like it's been going on forever) to implement what amounts to more conservative fiscal leadership of Europe. Part of me shares eskimospy's sentiment that interest rates are being driven up for odd reasons.

 

[fskimospy]

If I recall correctly the last round of referendums were defeated by some major countries. I haven't read anything in these stories about referendums. It sounds like they are just multilateral agreements (not actual treaty changes because of the UK).

Without getting to the level of a conspiracy theory, it is interesting that the various leaders are using this ongoing crisis (honestly it feels like it's been going on forever) to implement what amounts to more conservative fiscal leadership of Europe. Part of me shares eskimospy's sentiment that interest rates are being driven up for odd reasons.

If you look at the countries that are being driven to the brink over sovereign debt issues you will notice that they encompass countries with huge sovereign debt and deficits like Greece, countries with large debt but a base surplus before interest payments like Italy, and countries with fairly low debt to GDP ratios like Spain. (Spain's debt to GDP ratio is about 20 points lower than Germany's, yet Germany faces no run on its bonds)

If these countries had their own currency or a lender of last resort, none of this would be happening.

 

[PingviN]

Sweden still hasn't agreed to this deal. It will be decided in parliament sometime before March. We voted against the Euro in 2003 and that no hasn't changed, I guess the vote will come out as a no.

 

[Infohawk]

Sweden still hasn't agreed to this deal. It will be decided in parliament sometime before March. We voted against the Euro in 2003 and that no hasn't changed, I guess the vote will come out as a no.

More importantly France and the Netherlands rejected the 2005 Constitution referendum. I think it's basically settled now that a multi-speed Europe is in place. France and Germany don't seem to worried about leaving the UK or smaller countries Sweden behind. The main problem is that even those big countries don't seem to have popular support. So maybe they can push this through their parliaments but eventually there's going to be some actual approval from the people living in the core of the European Union.

 

[Infohawk]

In hindsight it now seems to me that Europe has been growing to rapidly. Free trade, sure. But the Euro should have been limited to Germany, France and Benelux for multiple decades. The political union should have not aimed to include so many countries. This stuff with the UK never wanting to really be part of a genuinely unified Europe has been going on for decades too.

If these countries had their own currency or a lender of last resort, none of this would be happening.

I'm not necessarily going to disagree with that conclusion but it seems sort of silly that a minuscule country like Greece needs its own currency.

 

[Fern]

This strikes me as the most important news story of the day:

http://money.msn.com/business-news/article.aspx?feed=AP&date=20111209&id=14603606

Summary: The EU nations have now all agreed to submit their budgets to a central authority for approval, giving up much of whatever sovreighnty they currently hold. Britain is the sole dissenter and is staying completely out of it.

In terms of short term economic outcomes, I tend to think this is a positive development. Long term? Dunno. Interested in people's reactions.

While Britain has said a definite "no", and for good reason IMO, I'm hearing Sweden is likely to do the same (3 countries, of which Sweden is one, have yet to affirm). Sweden, like Britain, retains it own currency and did not adapt the Euro. Accordingly, I don't see why Sweden would agree to this.

Other financial articles are are calling this a step sideways, not forward. I'll need more time to digest this before I form any firm opinions about this accord's likely effectiveness.

I think some details remain to be worked out. One of the details looks like more bailout (or bribe) money for the countries in bad shape. This could still fall apart because of that.

I'm having doubts that the people of some of these nations, thinking Greece here, are going to actually tolerate this. This is essentially a balanced budget amendment. I don't think people here would tolerate it.

I think it's faaaaaaaaar easier to say you're going to do, than it is to actually get it done. Who's gonna feel the brunt of the cuts in these countries?

You're only allowed a deficit of 1/2% of GDP? Frankly, I just don't see it. That's a butt-load of budget cutting.

So I have doubts this is gonna hold up. I don't study history, but my recollection is that the financial problems occurring around 1929 worked to force politics/countries into a nationalist/fascist mode. Seems like some push-back over losing sovereignty contributes to this too. Lately I've been wondering if this is where we're headed. I don't mean specifically just the USA, but some of those troubled Euro countries.

Lastly, I think only 17 countries use the Euro, why non-Euro currency countries would agree to this puzzles me. I must assume there is some benefit (bribe) thrown their way.

Fern

 

[Fern]

If this convinces the ECB to crank up the presses like the Fed and BoE, then kudos, they've "solved" the problem.

The Germans would go ballistic. I don't see that happening.

Fern

 

[fskimospy]

In hindsight it now seems to me that Europe has been growing to rapidly. Free trade, sure. But the Euro should have been limited to Germany, France and Benelux for multiple decades. The political union should have not aimed to include so many countries. This stuff with the UK never wanting to really be part of a genuinely unified Europe has been going on for decades too.

I'm not necessarily going to disagree with that conclusion but it seems sort of silly that a minuscule country like Greece needs its own currency.

It doesn't necessarily need its own currency, but its bonds need to be backed by a lender of last resort. The Euro is not a bad idea all on its own, but the implementation of it has left countries out to dry.

 

[fskimospy]

The Germans would go ballistic. I don't see that happening.

Fern

It will happen sooner or later or the Euro will fall apart. The only question is how long it takes before Germany bends to reality.

 

[Fern]

I would think that referendums should be conducted in the individual countries. Each is a democracy so I doubt this sort of thing can be done without approval of each electorate. Then again, maybe not...

From what I've read no, no referendums are required. I think this could turn into a political sh!t sandwich for some current politicians. I could foresee future elections dominated by this. It could get ugly.

Fern

 

[RbSX]

Explain.

Because the societies within the EU don't have the same standards. Germans, by their nature are spend thrifty, whereas others might prefer to spend on other things that Germans.

The reality is you can't create a sweeping set of rules that will fit for everyone, and if you try to impose those rules, well you tend to get something called... war.

 

[momeNt]

Bottom line is governments now prefer to pay in inflation with loose monetary policy.

ECB was constantly battling the governments where Fed works in perfect harmony.

No downside.

 

[RbSX]

No it isn't. The core of the issue is interest rates on that debt that are being driven up due to currency issues unrelated to the actual fiscal health of a country.

Why do you think the interest rates are going up? Because of the inherent risk of countries being unable to pay their bills.

Why can't they pay their bills? Because they took on too much debt and the lenders are starting to realize that countries aren't growing at a rate that would let them pay off their already existing debt.

 

[Infohawk]

I don't study history, but my recollection is that the financial problems occurring around 1929 worked to force politics/countries into a nationalist/fascist mode. Seems like some push-back over losing sovereignty contributes to this too. Lately I've been wondering if this is where we're headed. I don't mean specifically just the USA, but some of those troubled Euro countries.

The USA and Europe are in very similar boats (both have shrinking middle-classes and consequently first-world public services that are no longer being paid for) but the USA benefits from having genuine direct democracy at the federal level. If Americans are pissed at least they can choose the president. Europeans don't really have control over the continental government.

From what I've read no, no referendums are required. I think this could turn into a political sh!t sandwich for some current politicians. I could foresee future elections dominated by this. It could get ugly.

Yeah this is not going to end here. France and Germany both have big elections coming up soon if I recall correctly. The individual politicians may be hoping they can fix this ongoing borrowing problem and have the economy settle down in time for getting re-elected but it seems like wishful thinking.