The political economy of eurozone membership

Richard Pine makes a point about Greece that I have found myself wondering about in the context of Ireland:

The public service, which will lose 150,000 workers by 2015, and faces another round of pay cuts as part of new austerity measures, clearly does not relish a return to a new, devalued, drachma. Those in the private sector who need a stimulus to manufacturing, agriculture and tourism would welcome the boost in exports and the end of recession.

I think the political economy of eurozone membership is more complicated than this. Anyone in secure employment, be it in the public or the private sector, is presumably happy to be paid in a nice hard currency, while in the Irish case the multinational sector may not have the same interests as Irish-owned SMEs. But the general point that the more secure elements in society (and the wealthy) have a stake in eurozone membership, while those in precarious employment, and the unemployed, may have quite different interests, seems like a potentially valid one.

What do people think?

53 replies on “The political economy of eurozone membership”

I think the ‘wealthy’ or ‘rentier’ argument is bunk. The do not have savings in cash, not in this country anyway. Rather they have assets that inflation would suit – property mainly.

On the other hand, small savers do not have the flexibility to escape inflation (which is what a change of currency would entail) or the effects of devaluation on their living standards.

So the beneficiaries of a move away from the euro are the richest and maybe the poorest (though I have my doubts about this too) with the middle losing out most.

Basically, anyone in employment in the state would see their standard of living fall, with those in employment in export areas or who are protected by inflation-linked pay seeing it fall least.

The wealthy, leveraged as many of them are in this country, have most risk of a continuation of the status quo where their malinvestments come back to haunt them in an unassailable currency. Luckily NAMA and the banks will bail them out, as they always have done.

Reading today about the protesters in Greece one aspect caught my attention. A nurse with 25 years service in a State hospital earns 1100 euro a month and it is now going to be cut to 900 euro. How does this compare to Ireland?

Perhaps that people should look at the UK, which has effectively devalued by 25-30% since 2008.

I have not noted a massive acceleration of exports, of industrial production, or more broadly of economic activity. Not much change either to the trade balance or the current account balance.

A bit puzzling for me …

Introducing new currency in a bankrupt country with huge budget deficit but without any foreign exchange reserves will not only lead to devaluation, but to full-fledged and uncontrollable hyperinflation with dire consequences for everyone.
Many Eastern European countries had such experience. No one remembers these days with pleasure, it was not helpful for anyone in the economy. Without monetary stability Greece is dead – will turn into a poor African country. And then will need to again apply for IMF help, in order to survive and stop the hyperinflation.

I raised it before as an interesting thought experiment…what if the govt came out and said “every employment contract in the country gets a xx% cut tomorrow”. It’d be much the same as a devaluation, but without the hassle of changing the notes and coins. (you could include other prices too, perhaps, but I leave that for the moment)

Briefly, any company that was concerned about staff retention might readjust salaries back to – or close to – their original position very quickly, particularly if they compete in international markets. Other companies might not. The public service would not.

This crucial point is a reflection of the reason why Bob Mundell—the first to note the importance of having an optimal currency area—later changed his mind and became the “father of the euro”.

As explained in a series of articles by McKinnon (easy to google), Mundell realized that a country suffering from a downward asymmetric shock would at least retain the value of its wealth if it were a member of a common currency area. An exchange rate collapse, on the other hand, might offer some relief in terms of the ease of economic adjustment but would severely reduce the global purchasing power of domestic wealth, to the extent that this wealth were held in the domestic currency.

Mundell felt that, on balance, the beneficial wealth effect from a common currency would outweigh the higher cost of adjustment from a negative shock. Moreover, and conversely, he felt that the common currency would allow other members to benefit from a positive shock to one member.

And this, of course, is the cruelest irony of Ireland’s predicament. Other euro members benefited from our growth. But then, when the negative shock hit, we had to massively reduce our net wealth by bailing out the other members of the union. Our wealth effect was disproportionately negative instead of being a positive factor. And we cannot even borrow in our common currency now, unless it is the minimum to allow us to repay our debts.

This was not the plan.

The broad thrust of the argument quoted from Pine makes sense to me.

People in secure employment are still getting paid in a hard currency. earnings translate to savings and the savings are finding their way to non-Irish banks accounts pretty rapidly.

With an exit from the Euro and devaluation:-
Those in insecure employment (there are many) and those employed in the export sector would all see an enhanced prospect of a continuation of their employment even if at lower real wages. Unemployed would see a better prospect of employment.
Even the ‘wealthy’ business people would stand a better chance of their businesses surviving, thereby holding on to their wealth.

Welath is more than a matter of existing savings whether in property or elsewhere.
Wealth is also very much the ability to retain an income stream.

Hard Currency ?
Some Austrian Germans may disagree.

If it was a hard currency we would not have experienced a hyperinflation in non productive assets.
Even their/ our ? physical cash is not backed 100% with a asset that at least in theory does not have a counterclaim.
I have nothing against a soft currency that is honest in its structure but the Euro masters outright lies and deception is just too much to bear.
This classic inflation / deflation power play is plainly obvious for all with eyes to see.

Bond Eoin Bond

How will this new “policy” square with the current policy on the senior unsecured in the twin pillars?

Pine seems to regard a return to the drachma as inevitable in the event of default. It is if the ECB sticks to its hard line, but that’s not a certainty.

As to the political economy question, AFAICR the battle-lines were pretty clear in the days of the EMS. Most of those in the traded sector were for devaluation, though the multinational sector was more-or-less neutral. So were debtors because propping up the exchange rate invariably required high interest rates and a bit of inflation would ease their burden. Workers and pensioners were typically opposed, but of course workers in the traded sector had to weigh the greater risk of unemployment if we battled on against the speculators.

But it’s more complicated now. If we quit the Eurozone, or more likely get booted out as the penalty for default, will mortgages be redenominated in New Punts? There are many complications to consider. Most people will assume that they themselves will be among the losers, even though economic reasoning may suggest that some of them must be too pessimistic.

@ Eoin Bond,

Indeed. What’s with all the chopping and changing on this issue? Could it just be a publicity stunt or is there something of substance there?

Also I’m not sure the revelation that the IMF supports this strategy qualifies as ‘news’ any longer.

Kevin what do you mean by “devaluation”? Do you actually have to leave the Euro – is that what really matters.

You say those outsides state and similarly secure employment might benefit. Isn’t the reason for that that domestic costs would be reduced – making things done or made in Ireland cheaper to foreigners.

If this is the mechanism then surely it comes down to choosing your preferred mechanism for deflating these costs.

Piecemeal devaluation via negotiated wage or benefit reductions in Euros is slow and divisive with the strong, organised or connected allowed to delay and reduce the decrease in their earnings. The devaluation then is skewed toward vulnerable groups and small private sector enterprises and employees. This results in a distorted economy in which some private sector elements might decide the whole thing is a mechanism for extracting money from them to support high dead weight costs. Why hang around?

The key advantage of devaluation of the whole currency is simultaneity and immediacy. Nobody gets the opportunity to improve their position in the earnings league by refusing to participate.

If you think devaluation might have advantages, why not do something like it without leaving the Euro. The state cannot borrow commercially to sustain its high cost / high pay model. If it is going to take too long to carry out a reasonably equitably internal devaluation, why not stop borrowing all the Euros needed to pay the high wages. Pay some of those wages in IOUs and allow some of the domestic economy to be quickly deflated by using them as a parallel currency to pay for some domestic products and services.

If Google or whoever, can still pay wages in Euros – fantastic, what’s the problem?

It is clear that it is those in the private sector and secure employment that have the most to gain from a strategy of making devaluation take as long as possible and requiring the government to do whatever they are told by the EU in order to keep the “bailout” credit line open. The longer the devaluation takes – the bigger will be the comparative gains of those with the longest fingernails most firmly embedded into the high domestic cost structure.

Krugman’s point about the “wealthy” looks clumsy to me. Many assets have a value that has an underlying value that is merely denominated in the currency. Not all “wealthy” people invest in Irish government bonds, bank bonds and cash deposits. Think about other assets, their value is not defined by the value of a domestic currency.

There is an additional complication to this argument in the case of Ireland. Those with employment will prefer a hard currency, but they will that money in zombie domestic banks. The resulting deposit flight, and subsequent economic instability, undermines the very status quo they seek to maintain.

People’s personal actions are undermining their personal preferences. Unfortunately, I wouldn’t call it just desserts as those who are advocating the country’s current policies while withdrawing their money will be the very ones who benefit enormously in the event of an exit form the euro–their funds will be abroad in a hard currency.

One again, the Ascendancy class has failed and bankrupted Ireland, for their own private gain.


Any bright ideas as to how to entice these deposit holders to return their cash to the homeland anytime soon?

Quite evidently a 100% Govt Guarantee doesn’t cut the mustard anymore. As JTO has explained (times 10) it certainly isn’t the additional returns v larger European/UK banks. So the dumbing down of the risk and the raising of the returns dynamic has been tried and has failed – where does one go from here?

An ECB Gaurantee is my view not going to happen and given the ECB Greek exposures I’m not sure the average Corporate Treasurer will be very comfortable with it in any event.

Re Krugman Article.

I think he is 110% correct. All western economies are now marching to the sound of the debt collectors drum. And he is absolutely right about who is leading the band.
We are all being marched into a great depression.

There is much talk of the value of public pensions which are index linked. But of course this may be valuable in a high inflation devaluation environment, it is much less remarkable in a low inflation Euro environment. Presently anyone can beat the index linked aspect of the public pension by simply putting money in a deposit account. So I do not see how the public sector benefit more than anyone else from the Euro. Indded, you could buy government bonds and have a great pension, the government might not pay out, of course, but this is true for employees of the State who pensions and salaries are seen as pawns in politics.

On Kevin’s good question, it is obvious from voting patterns that more prosperous members of society are more likely to favour all things European than those who are less prosperous. I’m sure there are underlying economic reasons for this preference, but I don’t think they are simple.

However, I think that one important component to the preference is an insider-outsider one. There are quite a lot of insider jobs (at least tens of thousands) held by relatively prosperous members of society in which it is career limiting to be openly negative about the EU and its pomps and works. More prosperous members of society tend to be internationalist in outlook anyway, and I think the pro-EU insider opportunities available have the effect of anchoring this wider prosperous population in a pro-EU perspective.

When Greece defaults it will trigger as the Americans and RTE call it, “A Major credit event”. This being a credit Default swap event and then all hell breaks loose. It won,t just be Greece up the creek.

I have a pretty substantial mortgage, so a bit of real inflation would benefit me personally, even without pay increases. At least it would reduce my negative equity. On the other hand, I dread the idea of being paid in punts and paying for a mortgage in Euros.

How to get people to repatriate their capital flight? Devalue, and it will be back in a NY minute and buy up all the assets it can before inflation ramps up. Same old IFM story. Play games for the rich at the expense of the poor, to make them richer. Welcome to Latin America.

@Dearg Doom

Presently anyone can beat the index linked aspect of the public pension by simply putting money in a deposit account. So I do not see how the public sector benefit more than anyone else from the Euro.

With respect, I have to wonder what planet you are living on.

I listened to a soon to be retired judge on Newstalk this morning who thought his salary was about €144,000 but would only be half that in a few weeks. If he lives to the ripe old age of 110, he will still be getting the €72,000 pa.
He pointed out that judges, unlike other sectors, are prevented from doing other work! He also bemoaned the fact that some judges were having difficulty in paying their mortgages etc.!

I was driving at the time and wondering about the truck drivers on the road, many since six in the morning, most earning about about €10-€12 that work by the week, some by the day, some with o/t paid, more o/t not paid. They are paying the salary and pensions of m’luds to adjudicate on their minors discretions.

Public servants earn a regular salary from which they can make regular savings. They also up until now have fixity of tenure.

As a collective group, the wider public sector are the elite payees of this society and as such benefit disproportionately in their incomes. Therefore there have more to deposit and the fact that those incomes are in hard currency is all the better.
And now that we are facing an avalance of retirements out of the PS, maybe it is time to determine where the pension gratuity sums are going. What % are being transferred out of the country, particularly those with large sums.

And as for indexed linked, how come the pensions were not indexed down for the salary reductions?
And how come one can manage to selectively boost ones income in final three years of work through overtime and have that added to salary?

If I had my way, I would pay all retirement gratuities over a 10 year period, in Government bonds. Then we might all get a little more concentration on what makes the economy tick.

And to real shame of the PS, they have ‘let -go’ the temporary and part-time workers to save payroll costs instead of keeping these unfortunate workers and reducing salaries all the way up particularly at the top of the beanstalk tree.

There was a suggestion somewhere to introduce a parallel currency to pay local expenses.
I am beginning to think it would be a good idea, because the message about the real pain being suffered is not getting through to the comfortably off.
I don’t mean to cause offence but..

@Kevin Walsh
“I have a pretty substantial mortgage, so a bit of real inflation would benefit me personally, even without pay increases. At least it would reduce my negative equity.”
Er, really?

Suppose you have income of 100 euro per month of which 50 euro goes on paying the mortgage, 25 euro goes on living expenses and 25 euro is fun and savings.

Suppose there is 10% inflation in the year.

Next year you still have 100 euro income.
You still have 50 euro mortgage (assuming no rise in rates…).
You are now paying 27.50 on living expenses.
Your fun and savings is now down to 22.50…

If everyone else is in the same boat (no traction for wage increases), how is your house price going to increase?

I suppose there will be attempts to increase credit in the economy (print money essentially), but the risk is that there could be severe inflation, in which case everything might well be pegged in a stable currency anyway (it would, though, eventually benefit you through increased wages, but I fear the lag would be severe).

Meanwhile things are not getting any better in the US. How likely are those Troika bailout growth numbers ?

“Like Japan’s zombies, there is no quick end in sight to the chronic weakness of American consumers. I suspect it will take a minimum of another three to five years before debt loads and saving rates have been restored to more sustainable levels. With consumption still about 70 per cent of gross domestic product, that points to sharply reduced growth in the US economy — unless America is quick to uncover a new and vibrant source of growth. Policy paralysis in Washington is hardly encouraging in that regard.

There are important implications for the global economy. A protracted shortfall of the world’s biggest consumer, as well as weakness in Japan and debt-ravaged Europe, spells lasting pressure on external demand for export-led economies. Barring a quick rebalancing towards internal demand, so-called growth miracles in the developing world could be in for a rude awakening.”

Maybe a parallel currency for all private debts could be a solution – this could trade at a floating rate against the euro and could be used for domestic transactions.
We need a money supply – as domestic commerce is now grossly inefficient.
Redirecting tax policey towards petrol / diesel consumption reduction is also a option.
A dual currency option may perversely be the cleanest option now.
I would like to think I would be rewarded for holding goverment paper but perhaps that is a selfish thought.


I suppose I should clarify that I was referring to demand pull inflation, not price increases as a result of external demand shocks, which is all we have going on at the minute.

If we had real inflation as a result of increased consumer spending, this would eventually result in me getting a pay increase, and the possibility of getting my finances into some kind of order.

Unfortunately all I have to look forward to for the foreseeable future is declining income and increased mortgage payments.

Time to Rethink Capitalism … maybe?

THE Irish economic crash tells us a lot about modern capitalism. The key decisions, which brought about the collapse, were taken by a tiny number of people.

There were 20 executive directors in the six main banks and most of them were paid over €1 million a year. There were 10 top developers who borrowed an average of €1.6 billion each and, maybe, 20 or 30 more key figures besides. Fewer than one hundred people effectively controlled a major part of the economy and their decisions were almost wholly motivated by a desire for ever greater profits.

@ David O’Donnell

Developing countries and owners of capital in developed countries have been the big gainers from modern capitalism.

It’s time to put a cross on the mantelpiece when Sir Max Hastings in the UK asks how long the struggling masses will put up with big payoffs to a small elite.

@ All

George Provopoulos, governor of the Bank of Greece, wrote in the FT last year: “During the 1980s, Greece had another twin-deficit problem (large and unsustainable fiscal and external imbalances) and its own national currency, the drachma. It waved the magic wand twice, with large devaluations of the drachma in 1983 and in 1985, but in the absence of long-lasting structural adjustment and sustained fiscal contraction.

The devaluations were followed by higher wage growth and inflation, with no sustained improvement in competitiveness. Speculative attacks against the drachma were avoided only because of strict controls on capital flows, an option that is no longer feasible or desirable. The twin-deficit problem remained. So much for the magic wand of currency devaluation.”

@David O
I absolutely love how Kieran’s Allen’s article says that we could have excellent, durable and desirable consumer goods if we had a Marxist society.

@Michael Hennigan

It’s the small elite dumping their ‘losing chips’ on the masses that is anti-capitalist … and trumping democracy in the process. Even Sir Marx would struggle to figure out the benefits of naked credit default swops – and why they appear to take precedence over sovereign governments at the mo. Financial system went alien around 1990 …………. one massive global crash remains possible – even probable.

100 days – does it matter?

@Davod O’Donnell

Time to Rethink Capitalism … maybe?

The kind of capitalism you describe above. Very definitely.
But it feels moore like oligarchy than capitalism. Or even an absolutism of the Financial Industry.

And boy do we know who the oligarchs are.

@ Hugh Sheehy

Excellent and durable products are anti permagrowth. You can’t have 3% year on year progress if people hang onto products for too long. What products do you have at home that are more than 20 years old?

Cheap shiny plastic crap is far more desirable and makes economic sense . If they are harder to sell use a barely clothed woman in the ad campaign …
and don’t forget to throw everything away ASAP.

The Greek and Irish situation are different in this regard. The Greek fiscal system can only survive within the Euro if the EU changes to a transfer union over the medium term (10 years or so?). Government claimants in Greece want that outcome — the survival of the Euro in Greece with permanent large fiscal transfers from the EU to fill the big fiscal gap between tax revenues and claimants. If that solution is not available to Greece, the only stable solution is leaving the Euro and paying government claims in New Drachma. In Ireland, individuals across the full income range, and both public and private claimants, are better off sticking with the Euro even without the change of the Euro system into a transfer union. The conflicts regarding Ireland mostly concerns the bondholders and ECB’s role in recovery. So the situations seem markedly different to me in this respect.


Well I reckoned it was worth giving Kieran Allen a plug – imho, he is on the ball at times – and an economics blog without Sir Marx would be a contradiction in intellectual terms. The moral philosopher Adam Smith, imho, would also be pretty riled up were he around at the mo …. Where would European Social Democracy be without Sir Marx and Sir Adam … in fact, where he hell is European Social Democracy right now?

Design for obsolesence in a world of diminishing resources and increasing population … think about it!

@Joseph Ryan

It is pretty ABSOLUTIST at the mo ……

@ Seafoid, David O

No argument with aiming for a world where less crap is bought and sold, but if I think of places where you’re more likely to see durable attractive products made, then Marxist countries ain’t them. Of course, they are/were countries where people were forced to keep using stuff WAAAY past any sensible design lifetime,

Using 1950s cars in Cuba…they’re doing it because they believe that design for obsolescence is a bad plan and they want to show their rejection of this philosophy through the medium of crapped out old cars. Right.

So how much have the stockmarkets lost in value since yesterday in Athens? Compared to the outstanding market value of Greek debt.

Why is the system so fragile ? Where are the benefits in diversification and derivative insurance ? Are they just a series of open doors through which the fire can spread faster ? Would it have been easier to let Greece restructure a year ago ?

@ Hugh

Durable decent products are mostly only available to the rich or at least very comfortable anywhere. Do they sell any of them in Dunnes or Primark ? The shops of the first world are overflowing with crap.
Whether it is Bentleys or tailored suits or decent wine you have to have the cash even in OECD land.

Cuba appears to have a health system to match that of the US, at least based on life expectancy numbers. And it’s probably far cheaper per head.

“Why is the system so fragile ? Where are the benefits in diversification and derivative insurance ? Are they just a series of open doors through which the fire can spread faster ? Would it have been easier to let Greece restructure a year ago ?”
For the answer to your first questions, please see your last question. Mr. Taleb was on Newsnight last night pointing out that failure to allow failures (or vibrations as he put it) results in fragile systems.

Fire is an apporpriate metaphor that Mr. Taleb uses. If you put out all small forest fires, you end up with no natural firebreaks. A big fire will burn uncontrollably.

The more you suppress small disturbances, by papering over risk, the larger the tail risk you create – you make the system fragile, if it fails, it fails catastrophically.

@ seafoid
Debates on the ability of Marxist states to make quality consumer goods are WAY off topic, so last comment.

Almost anything in Primark or Dunnes is a more durable and better made product than you can get anywhere in the world. I have quite a lot of Primark stuff. Pretty good in general. It’s not Dior, but it’s not bad.

@ Hogan

Thanks for that. That firebreak analogy came up for real when the Carmel fire hit Israel last year. The trees were like petrol was what the American firemen brought in to deal with it said.

@ Hugh

I think China has destroyed a lot of indigenous consumer sector industry
across the developing world (it definitely has in India) so I am not sure that the primark type stuff is sold exclusively in OECD land.

Greece and how about this by Langston Hughes ?

What happens to a dream deferred?

Does it dry up
like a raisin in the sun?
Or fester like a sore–
And then run?
Does it stink like rotten meat?
Or crust and sugar over–
like a syrupy sweet?

Maybe it just sags
like a heavy load.

Or does it explode?

@Kevin O`Rourke

“…the more secure elements in society (and the wealthy)….”

IMHO in the current economic environment anyone who is a member of “the more secure elements in society” is also “wealthy”. In fact I dare say many of the “wealthy” may consider their positions to be a lot more precarious than many members of “more secure elements in society”.

In March 2010 I actually heard one of the “beards” representing some of the “secure elements in society” passionately complaining on RTE radio ( about hardships being endured by his members) and saying that we were just like Greece. I often wonder what he meant when he said that.

I’m in partial agreement with Hugh Sheehy. You can get really good jeans in Penneys for a tenth of the price of big brand names jeans. Unfortunately, I haven’t had good luck with cheap shirts.

I think many of the respondents here to the question posed by Kevin O’Rourke are not seeing the wood for the trees.

Of course the wealthy of Ireland, or any other country want to retain their assets in as hard a currency as possible. One of the most important ways ‘capital’ has ensured, & increased it’s supremacy over ‘labour’ is its mobility. That means ensuring its highest possible value wherever it sits. The banking deposits have already fled – does anyone seriously think much of that cash was owned by the majority of ordinary citizens?

Only a tiny minority of the wealthy who, late to the party, jumped into the property bubble (really ‘land’ let’s not forget) with everything they had just before it crashed have really suffered.

Most still retain their property portfolios with any borrowings still nicely being covered by tenants. If it’s at all possible that those assets can retain or increase their euro value by squeezing every last drop of money out of the poorer masses, then sure, that’s the strategy.

What I think really ought to be disclosed is how many of the priveleged few political leaders, senior civil servants, media executives, judiciary etc. (leading economists?) were & still are on the inflated land/property value bandwagon. Probably most of them.

I also have to wonder why the Examiner chooses to print such nonsense as Kieran Allen’s piece on some ‘marxist’ utopia when there are many more relevant & practicle antidotes to the present socialism-for-the-rich model of ‘capitalism. I’m talking about work by the likes of Prof Michael Hudson, Prof Randell Wray, Prof Bill Mitchell, Prof William Black & the many others who have real solutions deserving of wide public debate. Is this to do with the deeply brainwashed notion that there exists only two possibilities – the mess we have or some ‘soviet’ style communism?

Two things are abundantly clear throughout the entire global financial ‘crisis’. First, it was completely avoidable had there been any significant oversight by persons in positions who should have been operating in the interests of the majority. Those in senior positions in all institutions in society utterly failed in this regard. The second is that the so called ‘solutions’ entirely favour the wealthy few over the majority.

Well, as all these instutions are headed by people who are highly remunerated, either are already wealthy or have that expectation, I think it’s pretty obvious what mechanism is at work.

As those thousands of young people in Madrid without a job or much prospect of one said:


(This sh1t is not democracy..)

@Mike Hall

Wray was in Ireland – almost totally ignored.

Hudson on US here …. and also applies here:

In the case of bailing out Wall Street – and thereby the wealthiest 1% of Americans – while saying there is no money for Social Security, Medicare or long-term public social spending and infrastructure investment, the beneficiaries are obvious. So are the losers. High finance means low wages, low employment, low industry and a shrinking economy under conditions where policy planning is centralized in hands of Wall Street and its political nominees rather than in more objective administrators.


@ David and Mike

Hudson quoting Marx:

“Usury centralises money wealth,” Marx elaborated. “It does not alter the mode of production, but attaches itself to it as a parasite and makes it miserable. It sucks its blood, kills its nerve, and compels reproduction to proceed under even more disheartening conditions. … usurer’s capital does not confront the laborer as industrial capital,” but “impoverishes this mode of production, paralyzes the productive forces instead of developing them.”

@ Mike Hall
One of the most important ways ‘capital’ has ensured, & increased its supremacy over ‘labour’ is its mobility

Samuel Brittan

“I have no 10-point programme for making “finance less proud”, as Winston Churchill once put it. I do not believe it will be done just by calling for more macro prudential bank regulation; nor by the so-called Tobin tax on all financial activity. It is more a matter of recognising, at every point of policy decision, that the free movement of artificially created electronic money across frontiers is not on a par with the free movement of goods and services, let alone more basic human freedoms, and recognising this not only for developing countries but for the so-called advanced ones as well”

@all at all …

‘In the end, democratic nations are not willing to relinquish their political planning authority to an emerging financial oligarchy.

No doubt the post-Soviet countries are watching, along with Latin American, African and other sovereign debtors whose growth has been stunted by predatory austerity programs imposed by IMF, World Bank and EU neoliberals in recent decades. We should all hope that the post-Bretton Woods era is over. But it won’t be until the Greek population follows that of Iceland in saying no – and Ireland finally wakes up.

Financial Times columnist Martin Wolf writes that the eurozone “has only two options: to go forwards towards a closer union or backwards towards at least partial dissolution. … either default and partial dissolution or open-ended official support.”[8] But ECB intransigence leaves little alternative to breakup. Europe’s payments-surplus nations are waging financial war against the deficit countries. Without a common union based on mutual support within a mixed economy – one capable of checking financial aggression – the European Central Bank replaced the military high command. Its bold gamble is whether the Greeks will be as stupid as the Irish, not as smart as the Icelanders.’


Well I seem to remember not so long ago a consensus among many on this very site denying a bailout for Ireland was coming down the line!!!! YES I do indeed remember and have not forgotten the pseudo science of O Rourke and others and the probability models which tumbled before during and after the crisis.Well Greece is in the sh t that is all we can say with certainty and the only way out would be to devalue and leave the Euro zone which in economic sense is the only solution but politically impossible.Thats it really no need for the mumbo jumbo of O rourke and others which did not predict or warn of the crisis of 2008 in which we are still plunged.The growing protest movement on the streets and in the colleges among the workers students unemployed and disanfranchised is the real voice of europe and not this elitist and irrelevant site hosted by those in privileged and over subsidised ivory towers

The EU is not prepared to take on the speculators or fully renounce the neo liberal religon of the Chicago school,therefore no solution can exist.Kevin o rourke predicted in 2007 that the greatest risk to the world economy would come from the balkans after the fall out of the breakup of the former communist regimes .Not a word about the inherent instability of the markets or the lack of regulation or the banks or the credit boom etc nope not a word.I refer you to his Tome world trade in the first millenium which was good on GENGHIS Khan but sadly lacking when it came to the real problems of world trade and finance in the 20th and 21st centuries

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