The Irish Debate on the Single Currency

I was asked by an Irish Times journalist recently if anyone had written up a review of the Irish debate on joining the single currency.  This paper of mine from 1997 came close, though it doesn’t for the most part name or ascribe  positions to the participants.  Rereading it now though, it strikes me that a lot of it remains relevant.

The Bayoumi and Eichengreen material makes clear that central control of national fiscal deficits across the eurozone – the suggestion du jour – will not remove the vulnerability of Ireland and the Mediterranean economies to asymmetric (country-specific) shocks.  This is what I was referring to in my post of a few months ago entitled:  Jean-Claude Trichet, 2004: ‘no design flaw in the euro project’.

Colm McCarthy and I agreed recently that the Irish debates (in which both of us were anti) did not identify the precise fault lines that would ultimately emerge.  Centralised eurozone banking regulation and resolution regimes – the absence of which we all now recognise as design flaws – will not address the problem of asymmetries however.

The article makes the point that “those worried about the rigidity of the single currency system argue instead for policy co-ordination alongside floating rates.  In that way the destabilising element associated with ‘maverick’ macro policies would be removed but the exchange rate would still be free to adjust to counter country-specific shocks.”

Alternatively, within the single currency, “fiscal federalism” could go some way towards correcting the problem.  The Federal Budget absorbs about one-third of  the average region-specific shock in the US; the figure for Canada is around one-fifth.  We have nothing similar in Europe.  But think of the pork-barrel politics this would (will?) entail.

And have a wry smile at footnote 11, which I had forgotten about, concerning an aspect of the debate between Patrick Honohan on the one hand and Peter Neary and Rodney Thom on the other.  (The ‘foreign currency’ refers to the euro).  How times can change!

57 replies on “The Irish Debate on the Single Currency”

Very timely piece Frank! Understandably, there has been plenty of debate recently about the inherent flaws of the euro. Does the question then arise about Ireland’s continued participation in the euro?

(As posed by Tom McDonnell: http://www.progressive-economy.ie/2011/12/new-deal-is-required.html … He refers to a UBS report which argues that the costs of a eurozone breakup would be “catastrophic”: http://www.zerohedge.com/news/bring-out-your-dead-ubs-quantifies-costs-euro-break-warns-collapse-banking-system-and-civil-war … But of course this is from the perspective of a self-interested bank! )

Certainly there have been calls in the popular media for Ireland to repudiate its (bank-related) debts.

(e.g. David McWilliams: http://www.davidmcwilliams.ie/2011/11/23/this-cannot-go-on-and-it-wont-change-is-coming … and Fintan O’Toole: http://www.irishtimes.com/newspaper/opinion/2011/1129/1224308280035.html).

But doing this unilaterally would presumably imply leaving the euro (?). I’ve recently heard Terry McDonagh of NUIG arguing that the costs of such a course of action are greatly exaggerated and should, in any case, be weighed against the costs of continued participation.

I would be curious to know what contributors to this blog think of this. Leaving aside for the moment the political barriers, is there any research or debate on the costs and benefits of (a) a unilateral decision to leave the euro and (b) the break-up of the eurozone? (excluding reports written by banks!)

@Frank Barry

Is your IT journalist planning on writing one of those hand-wringing “Why oh why oh why (did we do it)” articles?

It’s hard to believe that it was (nearly) ten years ago I was rushing out to a post office in France (where I lived at the time) to get that little sealed plastic bag of the new Euro coins. They are still unopened, hiding in the top drawer of my desk at home. Perhaps I should spend them before it’s too late?

“The Federal Budget absorbs about one-third of the average region-specific shock in the US; the figure for Canada is around one-fifth.”

The difference between them is that while Canada allocates by the equalization formula (albeit a politically malleable delivery system), the US equalizes by giving Senators from tiny States disproportionate power to hold the country to ransom.

Loans for House purchases took a big big dive in October – nothing against this if money is redirected towards more rational development.

But WTF happened ?
Sep Loans for House Purchases :97 ,961 million
Oct loans for House purchases : 80 ,768 million

Did somebody pay off a 17 Billion loan or what ?

My own pre-EMU contributions include this paper: http://www.philiplane.org/LaneEMU1998.pdf

One relevant passage is below

Under EMU, national central banks will not have the monetary autonomy to act
as local lenders of last resort. Moreover, the ECB is unlikely to
intervene in the case of a purely regional financial crisis that does not
pose a systemic risk to the overall euroland financial system. One solution
to a regional crisis would a fire-sale of local financial institutions to
deep-pocketed international banks. If the government rather wished to
maintain locally-owned banks, an alternative may be to establish a fiscal
“reserve fund” that could fulfill, at least partially, a lender of last
resort function. Such a fund would have to be kept distinct from the general
government budget, since its resources would have to be available for
immediate disbursal in the event of a crisis. Moreover, to make such a rapid
response feasible, the fund should hold mostly highly liquid assets. Of
course, to minimize moral hazard problems, resources should be released only
when there is a serious systemic risk to the local financial system and with
significant penalties imposed on recipient institutions.

In addition to the provision of liquidity, a fiscal reserve fund may also be
helpful in financing a reorganisation, were the banking sector to fall into
chronic difficulties. As has occurred in such circumstances elsewhere, it
may be efficient for the government to restart normal lending activity by
buying out the nonperforming loans of the banking sector.6 The international
experience is that such bailouts may entail upfront costs in excess of 10% of
GDP and, in the absence of a reserve fund, this could severely damage the
government’s fiscal position and have especially adverse implications in the
context of the limits imposed by the Stability and Growth pact.

@Mr. Lane
😯
You should have taken that one to Paddy Power…

““those worried about the rigidity of the single currency system argue instead for policy co-ordination alongside floating rates. In that way the destabilising element associated with ‘maverick’ macro policies would be removed but the exchange rate would still be free to adjust to counter country-specific shocks.””
The problem with this, old ground though it may be, is that policy co-ordination implies lower devaluations than are require to spur a return to growth – look at the experience of Hungary – vast sums spent defending a 10% devaluation (275 forint to the euro), with a second call to the IMF pushing this out to over 20% plus (300 forint plus). Yet despite this, no real evidence of a recovery.

To butcher the quote on african demographic fundamentals, if a weakening of your currency is all you need to resolve fiscal difficulties, Zimbabwe would be a leading export nation.

Anyone see this from our French friend today:

‘The French President said changes would entail more and closer economic governance, with more qualified majority voting. He added that “unfair competition” on tax could not continue’

Corporation Tax pressure to ratchet up on little old Ireland again?

Yes, I heard that tax remark – nobody took it up on 6-1 at the time, which was strange as the theme of the show was Sark’s speech.
‘France & Germany must coverge’ was another one.

@ Philip,
That was incredibly perceptive. All the more shocking that the terms of reference from government for the ESRI study on ‘Economic Implications for Ireland of EMU’ did not require that such issues be addressed (though I know the ESRI people were aware that EMU would require a whole new approach to fiscal policy). It supports the broader point I made in the Irish Times recently that government decisions should await the outcomes of these debates, which throw up such insights, rather than simply serve as the trigger for them.

By Post Author

@ Philip

Indeed, kudos for the 1998 contribution. You should have been tooting your own trumpet on that one long before now!

@ All

Repeating myself here but the emergence in the last week or so of the constant repitition that severe centralised fiscal monitoring and deficit limits is the new meaning of “fiscal union” strikes me as quite Orwellian. It’s like the people in Berlin have read enough Munchau columns to know that many people think that you can’t have a successful monetary union without a fiscal union and so they think they can sell destructive and pro-cyclical deficit limit rules under the guise of “fiscal union” and people will think there’s some kind of intellectual case for it.

I found this article fairly worrying.

http://www.ft.com/intl/cms/s/0/331b5380-1c3e-11e1-9b41-00144feabdc0.html#axzz1fKEdIZcb

Peel and Atkins, the FT’s top Euro reporters, telling us that the deal is nearly finalised and yet all they can say about the ECB is

“Eurozone governments, led by France, see the ECB as the only institution with the financial firepower to calm the markets in the near term, while new rules are enacted, and extra firewalls erected, in the coming months. Ms Merkel is more sceptical, but insists the ECB must decide for itself.”

From the article cited by Karl whelan:

“National measures to cut spending, raise taxes and introduce reforms to boost growth and competitiveness will be announced by Mr Monti on Monday.”

And on Tuesday a swodge of highly respected organisations will explain why growth expectations for Italy will be downgraded.

“And on Tuesday a swodge of highly respected organisations will explain why growth expectations for Italy will be downgraded.”

The worst thing is that there is no way out of this. For years there has been a rapid expansion of credit and now it is beginning to dawn on market participants that all that credit will have to be covered by production in real world in order for it to be repaid. And the way things are stacked it is not apparent how and when will the economies be in the position to grow fast enough for that to happen.

Should we assume that Charlie McCreevy read Philip’s article and decided to name the associated fund “NPRF?”

@Frank Barry,

“…government decisions should await the outcomes of these debates, which throw up such insights, rather than simply serve as the trigger for them.”

In the context of Philip Lane’s remarkable prescience your observation goes right to the heart of the matter – and which I have been banging on about for some time (latest here:
http://www.irisheconomy.ie/index.php/2011/11/30/solving-the-fiscal-crisis-via-limiting-government-commitments/

All EU member-states – and the EU itself – are ultimately governed by the rule of law; and law is made by parliaments. At he EU level law is made via various interactions among the Council, the Commission and the Parliament, but all national governments, once agreement is reached in the Council on primary EU legislation or regulations, undertake to ensure the transposition of these primary laws and regulations into national law. And this makes national parliaments primarily responsible for this transposition.

Once something is agreed at the Council – after who knows how much ‘horse-trading’ there – national governments are obligated, expected by their peers and under pressure from the Commission to transpose primary legislation within the time allowed in this legislation for transposition. The Commission continuously pursues infringment proceedings to compel timely and complete transposition. If, following an inadequate response or continued non-compliance by a member-state and the issue of a reasoned judgement by the Commission, the member-state remains recalcitrant, the matter is referred to the ECJ.

As a result, governments, under pressure, crank up the spin-machine, close down debate and attempt to use their executive dominance to ram the necessary through their national parliaments. While they can whip, threaten or cajole sufficient parliamentary support, they are generally successful. Precisely the same approach is employed to enact all national, non-EU related, legislation.

There is little point in economists, or political scientists, or others with knowledge and competence in the public policy sphere bemoaning the fact there is a total absence of proper public debate based on facts, evidence and analysis and using robust adversarial disputation prior to the enactment of legislation implementing public policy.

I’m sure it’s all great fun holding seminars, publishing papers, commenting learnedly, sounding off on blogs, appearing on radio and TV and writing op-eds for the press – and it probably enhances individual reputations, but it is vanishingly rare for any of this frenetic activity to make a blind bit of difference to what a government has already decided on in detail (under the influence of who knows what vested interests) and is determined, by hook or by crook, to ram through parliament.

If those who profess and practise these disciplines – and have a measure of public standing – are as concerned about the public interest as the noise they make seems to suggest, there is a compelling argument that they should act collectively to make the case that the Oireachtas should be empowered and resourced to commission the resources required to apply the necessary scrutiny to proposed policy and legislation prior to it being ‘debated’ in the Oireachtas. The government has all the resources it could wish for to advance its case; the Oireachtas has pitifully little. It is vital that this imbalance is rectified in the public interest. This imbalance in legislative power is one of the principal reasons Ireland is in the mess it’s in.

If those who profess and practise these disciplines and pronounce on public policy continue to fail to make this case then their pronouncements are simply hot air and it constitutes a gross dereliction of their duty to the public.

Re paddy power above, this just posted under Draghi previous, may be more appropriate here:

RE:

It is notable that “semi-peripheral” bond spreads are narrowing dramatically. The announcement of new budgeary measures by Italy, Monday, will accentuate that trend. In other words, the contagion risk is being reduced but Ireland, of course, is still in the contagion ward.

I think you are reading this in the wrong way. Bond spreads are narrowing because there is growing confidence that a solution is imminent that will end the contagion effect.

However, that solution may not be the one you hope for:

I’m not going to use any mathematical laws of probability on this, but this could be done, there is currently very high risk, if not high probability of the following:

Following Sarkozy Toulon speech, given the lengthy negotiations that will be required to redesign European Treaties, we could be expelled from the EMU with a new hardening of the rules to be imposed on member states. Those rules may by majority make it impossible for peripherals to remain within the EMU.

There may already be a new core Treaty ready for signature by Germany and France initiating a core EMU with Germany leading a number of core countries out of the old and into the new.

This would also mean changes to the current Treaty on the the terms under which this tier 2 group, those remaining on some second level EMU status, could continue to retain membership of tier 2.

Less likely imho the EMU and ECB will be disbanded and the flag of a new redesigned EMU ready for application by intending members made ready for some future point.

High probability exists for any of these scenarios:

One thing for sure, the EMU as we know it is finished: der Euro ist fertig

oops left out block quote, should be:
RE

It is notable that “semi-peripheral” bond spreads are narrowing dramatically. The announcement of new budgetary measures by Italy, Monday, will accentuate that trend. In other words, the contagion risk is being reduced but Ireland, of course, is still in the contagion ward.

Everything reminds Paul Hunt of Oireachtas oversight. Milton Friedman had the same thing about the money supply.

Thank you, Karl. I knew I could rely on you for a suitably waspish and liverish response. I presume I can take it that your peers – in so far as they have any interest – share your view and also dismiss the case I am making (though, perhaps, with less acerbity).

I suppose the intention is for ESM programs to be the mechanism for dealing with asymmetric shocks.

I’m not defending it, but I presume that is the logic being followed.

This is slightly off-topic as does not make specific reference to Ireland. Frank Barry is well aware of it and I may have drawn attention to it a while ago. But it’s worth repeating. It’s from a piece Paul de Grauwe wrote in February 1997 (Note the date!) in the FT:

“Suppose a country, which we arbitrarily call Spain, experiences a boom which is stronger than in the rest of the euro-area. As a result of the boom, output and prices grow faster in Spain than in the other euro-countries. This also leads to a real estate boom and a general asset inflation in Spain. Since the ECB looks at euro-wide data, it cannot do anything to restrain the booming conditions in Spain. In fact the existence of a monetary union is likely to intensify the asset inflation in Spain. Unhindered by exchange risk vast amounts of capital are attracted from the rest of the euro-area. Spanish banks that still dominate the Spanish markets, are pulled into the game and increase their lending. They are driven by the high rates of return produced by ever increasing Spanish asset prices, and by the fact that in a monetary union, they can borrow funds at the same interest rate as banks in Germany, France etc. After the boom comes the bust. Asset prices collapse, creating a crisis in the Spanish banking system.”
“Too far fetched to be realistic? ….”

One of many economist voices which went unheeded.

@Paul Hunt

There is little point in economists, or political scientists, or others with knowledge and competence in the public policy sphere bemoaning the fact there is a total absence of proper public debate based on facts, evidence and analysis and using robust adversarial disputation prior to the enactment of legislation implementing public policy.

Its actually unbelievable to see such an open dismissal of the third estate, the people, ‘the fourth estate’, ‘the media’ so openly dismissed in favour of some obscure and dark:

Oireachtas should be empowered and resourced to commission the resources required to apply the necessary scrutiny to proposed policy and legislation prior to it being ‘debated’ in the Oireachtas

@ Paul

“your peers … dismiss the case I am making (though, perhaps, with less acerbity).”

Not necessarily. There are many serious issues in relation to the role of the Oireachtas. For instance, you could give it lots of resources but it could still be effectively used as a rubberstamp for proposals that are approved by Cabinet after coming through departments with limited policy expertise.

As with many magic bullet cures “imagine a fully functioning well-staff serious Oireachtas staffed with people who debate policy instead of worrying about potholes” is great in principle but not in practice would require massive political and social change that’s not going to be easily achived.

Other people than your good self do actually understand the strengths and weaknesses of policy formulation in Ireland. Insulting practically everyone who contributes to discussing policy issues is not a good way to debate the question of Oireachtas reform.

Perhaps Paul Hunt would be more at home in a more totalitarian culture where all political opposition is eliminated, maybe fueled by a strictly disciplined Oireachtas gang of 42 ?

On the other hand, this would be the logical outcome of refusal to consult with the Dail on the guarantee, or refusal to have referenda on matters such as socialism for the banks.

Nuf said! 🙂

I know it is off topic but can anybody explain the abrupt drop in loans for house purchases in October – was it something to do with last years Troika deal and a transfer / draw down of funds ?
You see I am a Dork and cannot keep up with everything.
But 17 billion is still a large sum of money these days.

@ Colm

“Perhaps Paul Hunt would be more at home in a more totalitarian culture where all political opposition is eliminated, maybe fueled by a strictly disciplined Oireachtas gang of 42 ?”

Eh, did you, literally, completely misunderstand what Paul Hunt wrote? Seriously.

Merkel said in her speech to the Bundestag this morning that one of the things she wanted in any reform was the right to sue other countries for non-compliance.

As I have said a number of times over the past few weeks, this is where they have been going all along and it should be a deal-breaker for us. This would be the end of freedom and of sovereignty deriving from the people for Ireland.

We have seen that in a crisis, the core states will act to help themselves first and have no qualms about locking the peripherary (especially the smaller countries but including even Spain) into pro-cyclical suicidal policies in order to protect creditors.

We have seen that they are not willing to use the laws they have to force private entities to accept their debts, or to have proper bank resolution schemes introduced across europe, which is within their national purview.

Why anybody would sign up to allowing them sue us for our debts when we have seen there mala fides in its full horrific majesty over the last number of years is beyond me. They have beaten us to within an inch of our life and now they want us to put down the knife and manacle ourselves to the radiator in the basement.

It is so unthinkable that one wonders if their real goal isn’t to force us out of the Euro?

Ultimately, this crisis can only end will through massive corporate and banking insolvencies/restructuring (the smoother the better), the protection of depositors up to a certain limit (possibly based on ECB managed resolution), and a wealth transfer to the average worker through direct state intervention. It will not be ended by quantitiative easing, technocratic governement, constitutional fiscal breaks or austerity measures.

@ Dork

“Due to securitisation activity, however, a decline of €17 billion was recorded in loans for house purchase on the credit institutions statistical balance sheet”

The Dork can’t navigate around the CBoI website?

“Why anybody would sign up to allowing them sue us for our debts when we have seen there mala fides in its full horrific majesty over the last number of years is beyond me.”

This sentence doesn’t read well!

The issue is that the sovereign’s ability to alter its debt due under sovereign bonds because such bonds are governed under Irish law is the ultimate expression of sovereignty.

Creditors accept this because they know countries will not treat them badly unless they have no other choice and in that case they will get a reasonable deal. They know the state has a lot of resources and is the strongest class of creditor out there.

@ Paul
Yes – there is no democracy. This sounds daft but it’s not I promise you. There has been a coup by moneylenders. It’s as simple as that.

On the more immediate issue – fiscal union is more scary than Euro collapse. We need to engineer expulsion before we are forced to bring this to a referendum. Secretly they’d love us to vote no and then have all our debts still to pay and it being our fault. We need to bring this down before it gets too far.

Now might be the time to let austerity slip, start missing our targets and enjoy life for a few months. Kicking us out is much less advantagious for them than forcing us to reject this through referendum.

@Bond
It has always been pretty clear that I am but a interested amateur………. and I have not read that passage ….. I was just struck by the massive drop in the figure during October.
Another large drop was seen during Nov / Dec 2010 although not as large…..making a connection in my little head.

If this stuff is not payed off or defaulted on what happens to it ?
Its pooled somewhere else is it ?
Just using the securitization jargon will not cut it for this albeit limited Dork.

@ Dork
No need to apologise.
You’re not the one whose industry has collapsed the world economy.
The lexicon of bulls**t is inexhaustible and these guys are full of it….

@Karl,

My comments were occasioned by Frank Barry’s observation on the need for debate, which draws on the knowledge and resources that demonstrably exist, prior to policy decisions being enacted. Anyone who wishes can choose to feel insulted. It is a failsafe technique to dismiss arguments one doesn’t find congenial.

Though it probably isn’t worth the effort, a few observations on the points you make. On “rubber-stamping”, any government that has a secure parliamentary majority will always gets its way. Irrespective of the evidence and analysis presented or the extent of the debate conducted, politicians will always make stupid decisions, but having a full adversarial disputation in full view of the puplic and the media should help to minimise the incidence and severity of political stupidity. And it provides the basis for subsequent remedy if it is required, when voters change their minds and change the politicians or demand a change in policy – which only happens in a democratic system. I don’t see this as any sort of ‘magic bullet’. It is a simple re-balancing of the powers of the executive and those of the legislature that might, and only might, lead to better governance.

As for an “Oireachtas staffed with people who debate policy”, we don’t need policy experts, technocrats, experts or other assorted pointy-heads as public representatives; we need politicians representative of the people who can secure relevant expertise from various quarters for their consideration, who can arrange for disputation on this evidence and analysis to be conducted before them and who can then make judgements in the public interest.

It’s probably me, but I don’t see how this will need ‘massive political and social change’. Parliaments in the better governed northern EU states over the last 20 years or so have gradually exercised more scrutiny of, and more restraint on, their governments. In the context of this Euro crisis, the irony is that it is desire of these parliaments (in Germany, the Netherlands, Austria and Finland – with outside support from those in Sweden and Denmark) – to ensure the effective democratic legitimacy of any changes required that is delaying the formulation of an effective resolution.

However, if people genuinely believe it will require massive social and political changes to secure even a limited rebalancing of the powers of the executive and the legislature in Ireland, it is probably as good an excuse as any to do nothing.

@zhou-enlai

“It is so unthinkable that one wonders if their real goal isn’t to force us out of the Euro?”

Or out of the Euro Bundesliga anyway. A departure of the core. I suspect there’s more than a smattering of truth in your question. There’s a whiff of, “We’re going ‘there’, follow us if you want – or not. It’s up to you.”

“They have beaten us to within an inch of our life and now they want us to put down the knife and manacle ourselves to the radiator in the basement.”

I recall seeing a flyer for a film like that where they manacled them to the radiator in the basement… but left a saw beside them that could only cut through flesh, not the manacle. Gruesome stuff but somehow fits the analogy.

@ Zhou
That’s their real goal. They know it’ll go to referendum and probably be defeated.
Then we reject them as opposed to them ejecting us (not good)
Better nip this one in the bud
Comments by Sarkozy thoroughly unacceptable for a country that is struggling as hard as it can to survive. If this is the new face of European integration we are perfectly entitled to wonder if it is what we want (out loud) if needs be.
We got to scare them.

@Stephen

“Economist Intelligence Unit ”

Thanks for that link – it’s a very interesting read.

How do I keep my finger on the real time pulse of bank withdrawals so I can see where and when the bank runs are starting?!!

@ Dork

the figures are not the amount of money lent to Irish households, they are the amount of “credit advanced” by the Irish financial system to Irish households. A securitisation, so long as it is funded/bought externally, takes it off the balance sheets of the Irish banks and amounts to a defacto deleveraging of the Irish financial system.

@Eoin
Of course it depends on what you want to see – if you want to see the health of the financial system, the securitisations largely don’t matter (though embedded guarantees might), on the other hand, household finances should be calculated from the gross figure including securitisations.

Which do you think matters more to the economy?

@Bond
Credit advanced is debt is it not ? – yes I think you are making a distinction between “the Irish Financial system” and the international and indeed if this happened Irish institutions are deleveraging but the domestic debt remains.
Therefore my question now is – who bought this debt or “credit advanced” & where did it go ? –
Was there a substantial haircut etc etc.

Is this why Irish Mortgage holders are being cut so much slack……… their mortgages are out there in the financial ether getting 20 cents on the Euro or something.
Even if they pay just 50% back the entity which repackaged this crap can make some doe.
Its a very sick world out there Bond.

“imagine a fully functioning well-staff serious Oireachtas staffed with people who debate policy instead of worrying about potholes”

Is people worrying about potholes really the main problem with our political system, or even anything close to a fair minded analysis of the reforms outlined by people like Paul Hunt and Niamh Hardiman?

Rather than:

“Other people than your good self do actually understand the strengths and weaknesses of policy formulation in Ireland.”

the problem is this countries econoclass refuses to acknowledge, in any meaningful way, the importance of politics and consistently falls into the trap oulined by Robert Skidelsky (which I use regularly as Im not particularly original)

“overimpressed by economics. Many historians feel that history is in some way inferior to the more exact sciences…. Economics, especially in its mathematicized form, purveys a peculiar vision of society. Society to the mathematicians is a market imperfection. Among other imperfections, the idea is that allocation of resources is not as efficient and information for making choices is not as complete as they should be.

This delusive, but powerful, idea suggests that behind the imperfection lies perfection, a world in which the future will be perfectly known and therefore hold no surprises.”

I must fess up! I contributed little to the Join the Euro debate. At the time I was busy slaving away on the definitive policy document on Draining the River Shannon, the most urgent and unfulfilled aporia since the civil war; I’m sure that even Richard Tol would be impressed, had the final tome ever been dusted off and taken out of its storage facility where it keeps company with zillions of other Irish policy documents, the digitization of which would keep an army of historians and archivists busy for at least another century.

No. I simply found it very convenient to visit Amsterdam, Berlin, Paris, Toulouse, Toulon, Biaritzz, Athens, Frankfurt, Barcelona, Rome, and other spots where the ATMs worked and dispensed Euros – and the cost of everything was so much cheaper than Dublin or Cork. In all this time I only ever made one error, but it kept recurring, I came home – yet each time I came home it cost more and more and more ….

Now it costs MORE AND MORE AND MORER – AND THE RIVER SHANNON CONTINUES TO FLOOD ODIOUS DEBTS

Wonder is there any chance that Belfast might take us in? This is what families do. A little reverse takeover after a while and we could grant the English what they have always desired – Independence. Then we could form the Islands Quartet and invade Europe. Just a thought … on an otherwise dreary friday afternoon under the financial_system occupation … where’s me kafka?

@rf,

Careful. You’ll kick over a hornet’s nest possessing more virulence than the one I’ve disturbed 🙂

I agree that much of economics is over-mathematicised, the stylised models abstract too much from reality, it is too constrained by the narrow canon of neoclassical economics and forces the development of insights from other disciplines or fruitful cross-overs from other disciplines to operate as detached sub-disciplines or batters them into submission so that may be absorbed into the narrow canon.

But I would argue strongly that Ireland is blessed by having no shortage of competent, informed, subtle and enlightened economic practitioners who engage in the public domain and who, secure in their command of this huge body of knowledge, are able to range beyond these constraints in the way the discipline has evolved to make valuable contributions in the public policy sphere.

My only complaint is that their expertise is not employed to the extent it should be in the public interest.

zhou_enlai

“Merkel said in her speech to the Bundestag this morning that one of the things she wanted in any reform was the right to sue other countries for non-compliance.

As I have said a number of times over the past few weeks, this is where they have been going all along and it should be a deal-breaker for us. This would be the end of freedom and of sovereignty deriving from the people for Ireland.”

Not only that the proposed model raises serious questions about sovereignty, also it will not work.

The model based on policing the fiscal discipline will remain flawed. There will always be short term fluctuations between EZ countries which cannot be ironed out by policing the fiscal discipline. In case Germans forgot, they were actually the first one to break the agreed currency stability criteria while some of the ‘unruly’ countries (like for example Ireland) were fully compliant up to the 2007/2008 crisis. The mechanism of policing the budgetary discipline proposed by Merkel would have found Ireland fully compliant in 2007 and it is hard to see what action would have been taken in 2007 to prevent the budget deficit from exploding in 2008. And the idea that the mechanism which would enable EU to sue the countries which go over the debt limits is ludicrous. What possible good would be derived from an EU law-suit against a country which has fallen to a fiscal shock regardless to whether this is down to internal or external factors? How would an EU lawsuit against Ireland in 2008 solve anything?? The only way to manage short term fluctuations is through federal redistribution mechanisms and if the Germans prefer to continue to benefit from the exports facilitated by the EZ they will have to come to the terms with the need to have such a federal transfer mechanism.

@ Desmond

Feldstein says the US is different to Europe but what about this ?

http://www.vanityfair.com/business/features/2011/11/michael-lewis-201111

How does the United States emerge from the credit crisis?” Whitney asked herself. “I was convinced—because the credit crisis had been so different from region to region—that it would emerge with new regional strengths and weaknesses. Companies are more likely to flourish in the stronger states; the individuals will go to where the jobs are. Ultimately, the people will follow the companies.” The country, she thought, might organize itself increasingly into zones of financial security and zones of financial crisis. And the more clearly people understood which zones were which, the more friction there would be between the two. (“Indiana is going to be like, ‘N.F.W. I’m bailing out New Jersey.’ ”) As more and more people grasped which places had serious financial problems and which did not, the problems would only increase. “Those who have money and can move do so,” Whitney wrote in her report to her Wall Street clients, “those without money and who cannot move do not, and ultimately rely more on state and local assistance. It becomes effectively a ‘tragedy of the commons.’ ”

Comments are closed.