The Eurozone, or Potential Lack Thereof

[mykonian]

Definitely not an economics wonk, but having a bunch of separate nations using the same currency while setting policy independently just seems like a recipe for disaster. I think in the long run it will be a good thing to get countries back on to independent currency. In the short term, I have no clue what the growing pains will be like.

I don't think that's likely. The euro simply gives too many economic advantages. The fact that banks were no longer as able to roam off profits of international traders via currency exchange is known to have a large positive effect on a lot of European economies. The Euro promises monetary stability, apromise they are trying to keep now. I doubt that the Euro will disappear, everybody benefits too much from it. I think (or hope) that it'll go the other way. More power to Europe would solve the problem too.

That promise of stability partly gets Europe into trouble too. Where the USA can print money to get inflation, reducing their states debt, Europe hardly can.

A lot of people compare the Euro to the 50 states the differences are many but the key ones are too many languages. In theory people should be able to move around wherever they want where wages are better in comparison to costs etc and that should keep inflation down to a relatively stable level across the Euro-zone but it doesn't work like that.
Because of this when some countries need growth, others need increased interest rates. For example atm Germany needs higher interest rates to lower inflation but Italy and Greece need lower interest rates to increase growth. Unified monetary policy with the lack of labour mobility is a big problem.

How is this different from the USA? There are states who would like a lower interest rate, and states which wouldn't mind the economy to slow down. California is no nebraska. If they were individual nations, they would have a different monetary policies.


It is a problem that one country can muck up the for the entire zone, but that's a solvable problem. The nations could get less rights, and Europe more.

[mykonian]

It is a problem that one country can muck up the for the entire zone, but that's a solvable problem. The nations could get less rights, and Europe more.

And here we're back at the support problem. You won't get a majority for "more rights to the EU" in most of the EU countries.

PAY ATTENTION.

Just look at how the EU started out. Look what it's tasks are now. Europe is growing more important through time.

they are doing it behind your back, it's a conspiracy against democracy!

[mykonian]

Serious question; could someone explain to me why Greece staying in the euro is a good thing?

Leaving the euro gives greece control over it's currency and interest rates which lets them start to devalue / inflate as well as removing quite a bit of burden and instability from the rest of eurozone; seems like upsides to both and Greece can always rejoin a decade or three down the road once they have their house straightened out if they want.

What's the downside for Greece/Eurozone for Greece breaking off?

Benefits of the Euro go for greece too. Trade is made easier, tourism is encouraged by it. On the other hand you place that they could solve their debt by inflation if they stepped out.

Now, this inflation and stepping out of the Euro would benefit the state, it seems, but wouldn't benefit it's inhabitants. Greece can't have a healthy economy without Europa, this was already so before the Euro. Exporting greek products and tourism always were a huge part of the greek economy. Stepping out of the Euro could very well make things worse.

For the Eurozone it's halfway about reputation of stability. But even more important, to get the money (in Euro's) back from greece. Several banks heavily invested in Greece, loaned them money, and if they wouldn't be repaid, Europa has a big problem. This was the reason they tried to save Greece. Stepping out of the Euro doesn't solve that problem. Either greece decreases the debt by inflation, and the banks don't get their stuff, or the loans have to be repaid in Euro's with a inflated greek currency (which greece won't be able to do).

[mykonian]

Anyway, the Euro crises is getting more serious now. Italy, Spain, and even France are seeing their interest rates shoot up.

Meanwhile, there is now very serious talk about a Europe-wide tax being put in place in the near future to support the poorer nations in the Euro zone. Right now they're talking about one on the finance industry, but Britain is balking.

Those interest rates are annoying, but it's silly to assume Italy or France will fall. They simply aren't in trouble, apart from the fact that big investers don't want to loan out money at this point. There is money that can go around, it's that people don't want to. The same goes for the reserves companies have. There is enough, but they don't want to invest it in a market this bad.

And GB has every reason to want to stay out of that. Where the Euro zones inflation is iirc still sitting at 3% or a little lower (3% is the maximum allowed, again, iirc). The pond already hit 5% since the press is working there. While they have a low interest rate right now, GB could very well head into trouble. They wouldn't want to pay taxes in an expensive Euro.

[mykonian]

Anyway, the Euro crises is getting more serious now. Italy, Spain, and even France are seeing their interest rates shoot up.

Meanwhile, there is now very serious talk about a Europe-wide tax being put in place in the near future to support the poorer nations in the Euro zone. Right now they're talking about one on the finance industry, but Britain is balking.

Yes because by "Europe-wide" they mean almost entirely paid by just Britain.

Does this come from the idea that Britain is the richest country in Europe? Because you are missing a few then. And the United Kingdom is far from the healthiest country anyway.

[mykonian]

oh wait, we are talking about that silly idea that the transactions between banks had to be taxed?

One way to get into a crisis would be to shut down transactions between banks even more.

I thought yos knew more then me on the subject, and had another tax in mind. Because the statement about a tax on banks can't be taken seriously. (It was the reaction of pretty much every dutch analyst I heard about it. It was big language, but it was a thing that couldn't be done)

[mykonian]

One way to get into a crisis would be to shut down "transactions" between banks even more.

FTFY
dont think that word means what you think it means

You are probably right. Was it clear what I meant?