Ireland Adopting the British Pound Sterling

One of my students (an undergraduate here at Maynooth) has a short blog post suggesting that Ireland should implement a policy over the next few years to drop the Euro and instead adopt the British pound sterling as its currency.  It is not my proposal so please do not blame me for it, but reading his short blog I cannot figure out where he is wrong. Where are the errors in his analysis?

There is the small problem of you-know-who’s silhouette on the currency.  Most Irish people actually seem to like her ok as far as I can tell, but some do not.  Perhaps we could make a deal where we can paste over a picture of James Joyce or Bono.

172 replies on “Ireland Adopting the British Pound Sterling”

The idea that we would have increased influence is not really valid. Colonial guilt is going to override Cameron’s self-interest? Come on, that’s just silly. Cameron will do what’s in his best interest, just like Merkel. Beyond that, the ECB is independent, as we’ve seen in the past weeks, won’t just do whatever people want, indeed Sarkozy never gets what he wants. It just happens that they agree with Merkel, it’s not dominated by Merkel. Also, we have an appointee to the ECB, and he seems to support the ECB’s current interest rate policy.

Focusing on France and Germany in terms of trade is problematic too, while trade to the UK might be 16%, Belgium, Germany and France combined is 29%. We’re a lot closer to them than we might think.

Beyond that, there would be massive implications for the IDA in terms of image and role. We would not longer be as easily a place to enter the common market.

Well, the following is wrong:

“Contrary to Germany, the UK actually cares about Ireland”. Ireland has significantly more influence on European public policy (even if this is tiny) than Westminster.

But, agreed, overall, there is not much to disagree with in the post.

Economically it is sound but politically it will never happen. And it is politics not economics that determines public policy decisions.


“I cannot figure out where he is wrong”

Then you are duty bound to give that student an ‘A’ and not come here look for ways to mark them down 🙂

How about bank funding? Can’t see the BoE being happy to take over the Irish elements of ELA, LTRO and whatever overnight funding they’re reliant on from the ECB.

Also, I don’t buy the credibility argument for Sterling v Punt Nua. Once our initial devaluation – which the post doesn’t acknowledge will certainly happen – is harsh enough then we should be ok in this regard.

“The UK is one of few countries in Europe which actually believes in independence and democracy”

Was this an Op-Ed from the Daily Mail?

I’m afraid i don’t agree.

We have more influence over the ECB (albeit minimal) than we would have over the BOE.

A free floating currency was and is the ideal. I think we should bide our time with the Euro and then once things have stabilised, we should start moving towards a free floating currency again. That currency would probably track sterling pretty closely if left to its own devices, but would not be the same thing as adopting sterling.

I’m not terribly worried about whether the value of a free floating currency is likely to go up and down. In many ways, this is the great advantage of having a free floating currency.

The proposed fiscal compact is the least of the problems with the Euro. Indeed, I am mildly positive towards it. But the great advantage would be to have a monetary policy that suits our needs once again. This “too tight-too loose” monetary policy cycle that all countries are experiencing is simply intolerable.

If we were ever to leave the Euro then I agree we would have to adopt another currency. An Irish Punt would get blown away and debt repayment and borrowing costs would rocket etc etc. The crucial issue for me is whither FDI if we were to leave the Euro? In a sterling monetary zone we would have lost some of our comparative advantage vis a vis UK as a site for foreign inward investment. Politically we would also be sending a signal that we are aligning ourselves with the UK and like them risk becoming semi detached from the EU. Not to forget that London would be deciding on monetary policy.
I am old enough to remember when almost 70% of our trade was with the UK. Not a healthy situation. Breaking the link with sterling, joining ERM, opening up of EU markets etc all helped the geographic diversification of our trade.
While a devaluation of our currency would be a great help domestically I don’t see the powers that be in London giving us any presents in terms of a competitive exchange rate for exiting the Euro to join sterling. After all they will want us to be able to afford the repayment of their share of the bail out funds.


If the ECB refuses to help Ireland and its banks, then it’s Germany and France that will be hit the worst. They’re not giving you money out of charity, you know, it’s because it’s profitable for them (or so they think). It will still be profitable even with Ireland in the sterling. But most importantly, Ireland’s bond yields are certain to fall as every euro country nowadays have to sell their bonds at a discount, because they are denominated in euros. It could help Ireland return to the market. Staying in the euro is not an option anyway, the real choice is between punt nua and sterling.

In addition to that, currency transactions involving the sterling has a really low bid/ask-spread, while currency transactions involving the punt nua (seeing as it would be a much smaller currency) would have a significantly larger bid/ask-spread. A small bid/ask-spread is preferable from an investment perspective.

Dan, I think you underestimate how badly damaged Ireland’s reputation really is. Currencies, in particular fiat currencies, are built on trust. No-one trusts you, and then you can’t have a currency, at least not until people start trusting you again (and that could be a decade or two).

Dave W: The left in the UK would suffer from more colonial guilt than the tories of course. Yet, you’re ignoring part of my argument: That the UK wants Ireland to be socially stable, because if Ireland truly does collapse, that will affect Northern Ireland too and could reignite the troubles – remember the troubles started during the bad years of stagflation and oil crisis in the 1970’s. That’s not a coincidence at all. Economic crises tend to produce other crises. Also, Ireland has a long history of working with the UK, while you’re still just learning how to work and co-operate with Germany.

Brian, care to comment on where I’m wrong? And btw, I’m a 3rd year majoring in finance and economics.

PR Guy, Thank you! I really hope Gregory didn’t post my article here because he was trying to find a reason not to give me an A 😉 On a serious note, Gregory unfortunately is one of my finance lecturer, so no matter how much I know about the eurozone it’s unlikely to affect my grade in his module.

Aidan, I agree odds are it won’t happen. Yet, it’s an interesting scenario and a solution I think is worth discussing.

Good grief, this isn’t hard, nor should anyone be applauded for summarising the issue (not at Trinity, anyway…other Universities are a different story).

Currency does two things: (1) acts as a safe store of value (2) facilitates monetary policy. For the sake of argument and putting aside our tinfoil hats, let’s say the EUR and GBP are safe stores of value. Then the issue turns on (2).

The thesis is that ECB monetary policy has not been ‘good’ for depressed economies, and that the UK’s monetary policy would be ‘better.’ I read the essay to argue as follows: since there is more international trade in goods & services between the UK & Ireland, the growth rates of the two economies must be co-integrated, and therefore UK choices over monetary policy will be better suited to any given realisation of the state of the Irish economy.

This is a simple and testable proposition. I don’t have the time to assemble this data set, but, by introspection, the argument is almost certainly historically inaccurate.

More importantly, there is no clear “political” reason the BoE will give an external economy more weight in its Taylor rule than it currently does (i.e., external trade enters the UK Taylor rule through observations on UK GDP, which includes the current account). This is like arguing for LATAM dollarisation because the US trades with Latin America, and American interest rates will therefore reflect the state of the LATAM economies.

As a final technical point, the issue the Queen’s face appearing on “Irish” notes would be surmountable, if the agreement were formalised (i.e., if the Irish economy didn’t simply “sterlingise” as some economics have “dollarised” with the USD). Scotland, Northern Ireland, and the British Isles currently print their own Sterling-equivalent notes.

A predictable question, predictably answered. Low 2:1.

I’m sure the economists, more well-versed than I am in these matters, will find some, if they are so inclined. Yes, Ireland is embedded, historically, culturally, geographical and economically in the economic pace defined by the US and the UK, so re-adopting sterling should pose insurmountable obstacles. But it would be a major strategic error for Ireland. The US is a polarised, dysfunctional polity – though it has always demonstarted a remarkable ability to renew itself and will do so again. But it is also shifting its focus from the Atlantic to the Pacific and approaching what lies between from that perspective. The UK is suffering more deeply embedded dysfunction and, since this will take longer to resolve, Ireland would suffer more from this if it were to use Sterling.

Linda Colley, one of the more astute commentators on the UK’s challenges, makes a strong case here:

To paraphrase Churchill, the EU is the worst union of sovereign states, but it is better than any alternative. Ireland’s future lies in Europe; not in small-minded isolation with the little Englanders. The challenge is to reform its governance so that, once again, it can participate effectively with the better-governed members. But the implications of this are so frightening for the embedded narrow sectional economic and political interests and elites that it is possible they would embrace the Ancient Enemy rather than confronting what needs to be done.

Why not join the USD area if we are talking about leaving the EUR and joining a different currency area? At least the Dollar is sure to be around in 10 years. If Scotland votes for independence, what happens then to Sterling?

Did you ever think you’d see the day??!
Problem is loss of control over fiscal and monetary policy. Then there’s logistics. How does it actually work? Does our CB print Sterling? Does their CB just give us the Sterling? And what happens to our existing Euro denominated assets and liabilities? And how free are we to default? Surely the UK would feel compelled to prevent this from occurring which it could only do by loans etc. it just becomes messy and doesn’t solve the problems.

But this does highlight how p****d off with Europe we have become. When we consider going back to English coinage after 800 years etc it says a lot.

Two continents. One crisis.
Compare the economic indicators.
Vs all the European stuff.

The Europeans have stuffed the Euro! When Ireland talks about going back to the UK then Europe should know its in very serious trouble.

Well done to that student for giving some thought to following a different path from the disastrous ‘eurausterity’ fundamentalism that has taken hold in Europe.

Personally I would support the idea of moving to sterling but we need a 30% devaluation before we link to it.
There would be little point leaving the euro without the advantage of a significant devaluation.

As for paying debts in Euro. Really?
The new currency is issued at par to euro. One to one. All debts converted at par to new currency at midnight. That defrauds nobody. Then allow currency to depreciate by about 30%. Help the depreciation along if needs be. When devaluation reaches about 30%, link to or formally adopt sterling.
The nonsense trotted out that using or being linked to sterling would hamper our trade with Europe does not bear scrutiny and derives from our historic ineptitude in developing trading links. An ineptitude that derives in large part because of language deficiencies in domestic and indeed foreign owned enterprises.

To those who admonish the student for taking an interest and teasing out his ideas we should reflect where existing ‘ideas’ and ‘approaches’ have got us to.

@clintdeal has commented elsewhere

i sometimes think back to early 2008 and if we could do it all again would it be possible to put the country in a worst position at end of 2011

Amen to that.

Well the uk banks are into us for €80 bn or around 30% of core tier 1. They have taken pitiful writedowns on this debt of about 20%. So there’s leverage for us there…. somewhere.

What about the overriding strength of the currency? All of a sudden, we’re lumped with a currency that is extremely expensive to purchase. How will our exporters fare if they have to sell their goods in sterling?

Aren’t we better off just going for the punt?
The English CB will have to put a floor on it anyway since we owe them so much. Would probably devalue to 60-70% and then hold.

Will that be before or after the British start using it?

Seriously, the “leave the euro” stuff on this site (and others – David McWilliams springs to mind) is getting silly. If you guys insist on stating it, I’d love to see the following questions answered (let’s say the new currency is called the IEN for the Irish New Punt):

1) I have a mortgage denominated in Euro. At transition is it changed to IEN at a fixed rate? Who sets that rate? Since the goal would be to devalue our currency (that’s the supposed benefit if I understand correctly), why would a non-Irish bank support this?
2) I’m paid a salary by a multi-national. I’m pretty sure it’s in my contract that I’m to be paid in Euros. Why would I accept a change to IEN? That would be nuts on my part.
3) While we’re on the topic, why wouldn’t a multi-national company seek to liquidise and move its assets out of the country with huge haste? the moment a move away from the Euro is decided.

Now I assume several answers here involve the gov’t interfering with contracts, and draconian limits on currency movement and possibly a “surprise!” element in policy.

The last two don’t seem sane, and if the first is possible it seems like there are other, less extreme uses of such a power that could be put to good use. Remove upward only commercial rent reviews and investigate mortgage cramdown options for instance.

@ Kevin Lyda
Just to pick up quickly on one of your points – the IEP still exists and still is exchangeable for Euro at a defined rate.

I think we should be bolder and propose a revitalized punt which various regions of the UK would be invited to join. As a financial center currency, Sterling is subject to huge volatility and intrinsic overvaluation due to the special features of London e.g. Gulf Arabs buying property again now they they are no longer being outbid by Paddies looking to fly the tricolour over the Savoy. Furthermore, Scotland’s days in sterling are numbered as it needs to think about oil depletion and advantages of an export orientation to revive Clydeside. So IEP is recirculated and everywhere north of Watford is offered the chance the sign up.

“No loss of fiscal independence?” As I understand the Eurozone situation, “fiscal independence” is part of the PROBLEM. When two countries run different fiscal policies (taxation, govt. spending etc), they’re basically running at two different speeds, and the normal result of that is changes in the currency exchange rates. Inflation in one country means its exchange rate drops, and that makes e.g. exports cheaper. But since one Eurozone country can’t devalue against another, that removes that “safety valve”.

The European authorities were aware of this risk up front, and the EU Stability and Growth Pact was supposed to mean that the various economies would be aligned without any loss of politically-sensitive “fiscal independence”. It hasn’t worked. (Sorry if I’m preaching to the choir here!). This is not news: it was discussed e.g. back in August last year, with comments by Pres. Obama and editorials such as this one:

If Ireland were to peg its internal currency to Sterling – whether implicitly or by explicitly adopting the Sterling – not aligning fiscal policy with the UK would be a repeat of the same mistakes that have seriously injured the Euro. The Bank of England and/or Westminster might not be as tolerant of Ireland’s low corporate tax rate as the ECB & Brussels have been. In my opinion, of course.

Kevin Lyda, I’m not supporting a return to the punt, I’m supporting an actual adoption of the sterling (not just a peg). So I can’t answer those questions, they don’t seem relevant to the topic of my article.

Eureka, as I explain in the article, the punt nua would have zero credibility among investors and it would quickly devalue (the sterling – not very much, not by any significant amount that would cause a capital flight). No-one trusts Ireland anymore. It’s sad, and maybe it’s somewhat undeserved. But it’s still the case. Ireland won’t be able to set up a currency for a few decades I’d say.

We should also notice that Ireland’s crisis has a precedent: The Swedish financial crisis in the early 90’s. And that one didn’t end before we (yes, I’m Swedish) abandoned our fixed exchange rate. Just like Ireland’s crisis won’t end until you abandon your fixed exchange rate, which is the euro. And since you can’t set up your own currency for reasons I explained, the sterling is the best you can do.

Peter Malone, the UK has a much sounder approach to inflation than Germany (a country which suffers from inflateophobia), which should help exports. And as someone pointed out, the UK has a great financial (as well as a cultural/political) stake in Ireland surviving this crisis. I’d argue the UK has more to lose than Germany if Ireland’s financial system were to collapse.

Fergaloh, that’s a reason not to introduce a punt nua. The bid/ask spread would be huge. With sterling, that’s not a big issue though as there is much more trade in that currency and the spread is very tight. Also the currency future/forward/FX-swap market would be messed up with a punt nua because of lack of trust, credibility etc creating unwanted volatility.

Carson, the US is quite far away and I’m personally concerned about the US fiscal crisis. I think the UK has a much sounder economy with a better long-term outlook.

A very simple analysis in my opinion.
You might even think Gregory is trying to discredit other alternatives by introducing this Baby like anylasis.
The Euro is like a Gold standard currency in some ways and yet like Goverment issued currencies in others.
Its a perversion.
Its core problem is that the M1 is not on the ECBs balance sheet – hence you get extreme leverage events – (see flaws in Peels bank act)
In this light we must divorce ourselfs from this experiment as we have no other choice.
If this was a normal country I would say we have no friends only interests but we are not a normal country.
You cannot seem to tell people here that there are no care bears in international politics – I suppose they need a church crutch of some sort.

Anyway we have cuckoos everywhere with little loyality to anything but themselves – indeed the place has become even more ungovernable since it became a market state.
Also the author does not deal with the external debt issue.
The very point of a euro divorce is devaluation.
But the last thing we want to become is another Hungary – paying back high valued external debt with Punts or Sterling we cannot produce.

The MMTers have it right – defecit spend out of this and default big by re dominating euro debt into punts.
If you are going to default do it big.

Trade war will follow but you can’t stop this now – France & Germany or whoever is behind them have not devalued against Gold which was the Euros only way out.
Its time to eject.

PS – I suppose we will try to become another Hungary – we will give it a good go anyhow.
Sweet Jesus.
The Chances of us doing the right thing is about as High as Randell Wrays blogpost appearing on the Irish economy website – Zero.

Ditto for Warren Moslers meme.

“The Greek government would announce that it will begin taxing exclusively in the new (domestic) currency.

The Greek government would announce that it will make all payments in the new currency…………………………….

He then goes on unrealistically in my opinion thinking that euro deposit savings will remain until they are run down – but its a good a idea as any.

Anyway Punts might be a better investment then Euros as there is now a distinct possibility they might not exist soon.

But something in the back of my head tells me this is the greatest bluff of all time – its a truely spectacular poker game.

Surprised Professor Connor couldn’t find any fault…

The UK is only our largest trading partner if you go on a narrow country-by-country basis. However, when talking about leaving the euro for the pound you should take the Eurozone as a single entity. Going on CSO figures you find (as a single entity) the Eurozone is in fact our largest trading partner. In terms of volume, it works out that for every one good traded with the UK, we traded 1.8 goods with the Eurozone and in terms of minimizing transaction costs and costs associated with exchange rate fluctuation, remaining within the Eurozone is best for the export sector of our economy.

On a more qualitative level this becomes even more important because the UK actually remains one of the few countries with whom we have a trade deficit. For the first 6 months of 2011, there was a deficit of €1.7bn whereas for the same period we had a trade surplus of €14.9bn from the Eurozone. If we were to re-join the Sterling, it would have a two-fold negative effect. The trade deficit with the UK would be exacerbated, as exemplified when the pound depreciated to 97 pence to the €1 in December 2008 and Ireland’s exchequer lost significant income to the North as Southern shoppers flocked across the border; proving that parity with the UK is inherently negative for our domestic economy. However, the double-whammy is completed by a diminished trade surplus with the Eurozone because of our goods becoming more expensive due to the exchange rate disparities. This would considerable effect our overall external trade surplus which is intrinsically important to attempts at fiscal consolidation and repayment of sovereign debt.

Not to mention importance of the role the ECD is playing in keeping our domestic banks on life-support and how the Troika is preventing us from defaulting on our debt and immediate balancing of the government’s budget. Without the euro we lose 2/3 of the Troika.

If you suggest a monetary union, it is doubtful the BoE has the political will or capacity to back-stop our banking system and if you’re suggesting we peg to the sterling, the printing of money required by the Irish Central Bank to support the banking system would (on the back of inevitable investor speculation/attacks) force the peg to collapse.

Finally, the structural problems facing the UK economy, including its deficit and debt levels, make it an ideal candidate to become the next domino in the sovereign-debt crisis should the euro fail.

I honestly don’t see how it can be of economic benefit to rejoin the pound sterling.

Brian t, I disagree on fiscal independence being a problem. The problem, at its very core, is that the Eurozone is a globalist daydream. It’s a political project altogether by politicians who lack even the slightest clue about economics.

I’m going to write a post about this, but basically, abolishing fiscal independence will mean that Germany will become the permanent babysitters for the rest of Europe, slapping you on the wrist when you’re being naughty and spending too much. The problem is Germany itself lacks the competence to do this efficiently. The germans can’t possible know how much each country should spend, or what tax rates are suitable for each country. If we assume complete information, they could do that, but in reality there is no such thnig as complete information. Complete information exists only in the most theoretical economic models, nowhere else.

And they’re hardly interested either. Germany is interested in Germany. So if they believe that you cutting your capital gains tax would be bad for Germany, they’ll stop you from doing it (I’m not saying cutting the capital gains tax is a good idea, it’s just an example).

Economists don’t understand politics, and politicans don’t understand economics. That’s why economists keep coming up with solutions like a fiscal union that could never work in practice because of politics. It’s time we get real.

The euro area consolidated balance sheet for 2012 is on line – it has increased substantially since the summer – from 2 trillion + to 2.7 trillion +
But Gold needs to be much higher then what it is now – a quarterly rise of just 3.6 billion will not make any difference to the extreme leverage present in the system.

cant knock the economics part …yet, am still in study.

For the UK this would polically be a no no.

Politically for me an obstacle would be why the Brits would tolerate it, as adding a soverign state with common language would give Scotland all the proof it needed that it could retain the economic benefits of the currency (wont say the union) while enjoying sovereignty.

So even if decided to go ahead and do it our “friends” in London wouild not be too pleased to see us coming in and helping win the independence of Scotland.

How they would pressure us I cant think of but then they werent exactly shy when it came to helping govts in the 70s follow an appropriate course.

Set all that against the fact that they are a useful ally at the moment


I’m not sure about that – as a matter of fact, this idea has been promoted by conservative MEP David Hannan. What’s good for Ireland is, for the most part, also good for Britain. I write about this in the post.

Scotland is not going to go independent anytime soon. The financial crisis has killed that dream – in crisis, you stick together. I’m not worried about that and I doubt London is. It’s one thing to support independence in an opinion poll, another thing to actually support it in a referendum.

Ireland shouldn’t exchange one externally controlled currency with another. Certainly Ireland can peg its currencies to others as it sees fit, but fundamentally, Ireland like any independent nation must retain Independence control of its own currency.

I fear that 10 years in the euro has robbed your young student of the ability to even consider an independent currency as a possibility. Even after so short a time in the euro, this country is beginning to forget that monetary independence is in fact a valid option.


The Euro is weaking at the mo. This will help our exports to the Continent and in the UK market. Cattle prices continue to rise. Most of the future is on food/drink and in timber.

We have the climate to produce this relatively cheaply and supply the world with same.

Why would we join a strengthening Pound STG?
Meanwhile back at the ranch JTO’s bonds in euros continue to loose value Vs the pound STG.

How about we keep borrowing euros, balance the budget, then bring back the punt as 2nd official currency but keep euros around too. Convert all state wages and debt to punts, allow private sector contracts to be honored in euros, new ones in punts, keep old savings in euros and new in punts.

Who’s to say we can’t accept 2 currencies as legal tender? The ECB? It would solve the problem of inflated public sector pay bill, if the punt was worth say 30% less than the euro.

Joining sterling would send out the wrong signal politically. No country ‘likes us more’, countries have interests not friends.

John Foody, I get your point. I accept, and everyone should accept this, that whether Ireland goes the sterling path or the punt nua path, there will have to be a transition period. Another option would be to make sterling legal tender together with the euro. if the market no longer trusts the euro, then the transition to another currency will be easier as it will already be in use.

JimmyTheFish, what I’m worried about is Germany’s anti-inflation policies and their frankly totalitarian tendencies and attempt to take over Ireland’s fiscal independence.

@John Foody

What you’re suggesting sounds like a repeat of the 16th/17th Century Spanish government’s experiments with the vellon. As I recall, it didn’t turn out too well.


Your little trade math ignores that there are only two influential countries in the Eurozone: France and Germany. Unless your economy is tied to them, it’s not a good idea to have your monetary policy controlled by them.

Like I said, economists don’t understand politics. They don’t understand how bad the UK DOESN’T want another civil war in Northern Ireland, which could result from an Irish meltdown (could anyone seriously argue that it wouldn’t have spillover effect)? Also, the likelihood that the UK and Ireland would want the same policy and be able to co-operate are much higher than the odds that you’ll ever be able to co-operate and agree with Germany/France.

As for fiscal independence, it’s true Ireland won’t have a lot of independence RIGHT NOW either way. Extreme cutbacks will have to be made. However, if Germany gets their way, Ireland will lose its fiscal independence forever and ever, and effectively be reduced to a Germany colony. Not just while this crisis lasts; you’ll never get it back. Not even once you’re done with the austerity program (In 2015 I think). You, and everyone else, will forever have to get your budgets approved by the German government.

If that doesn’t scare you, nothing will.

“If it’s anything that the UK does not want, it is for the age-old conflict between catholics and protestants in the North to catch fire again.”

Eh? Well at least the Brits didn’t entirely waste their time carefully fostering the impression the the Republican/Loyalist conflict in Ireland boiled down to a sectarian row bteween catholics and protestants and that they were simply there to keep the peace. I hope his grasp of British/Irish economics is better than his grasp of British/Irish politics – but somehow I think not. As far as I had got he had suggested as one of his reasons is because Irland has more trade with the UK than Germany.
Germany is not the Eurozone despite what he seems to imply – and we have more than double the trade with the EZ than with Britain.


It doesn’t matter one bit how much you trade with the Eurozone, because it’s not the Eurozone that sets the ECB interest rates. It’s Germany and France. And you’re not trading a whole lot with them. The UK, btw, is trading a lot with the Eurozone and doing just fine. Sweden grew with 7.3 % in 2010, without any “help” from the euro. It really sucks when empirical data doesn’t show what the theory says it should show, doesn’t it?

Whether it’s Republican/Loyalist or Catholic/Protestant is completely irrelevant in this context. And I probably know more about Irish, British, American, Swedish and European politics than you do. I’ve been into politics since I was 10 years old.

Germany is not the Eurozone but Germany rules the Eurozone. Also, AFAIK the importance of UK trade rises significantly when you measure it in terms of jobs depending on that market, rather than value or volume indices.

All in all, kudos to John Gustavsson. I’m not convinced that adopting sterling is our best course but it’s time to get to grips with the fact that the EZ may not last much longer. Irish economists should be thinking about what sort of regime we want to enter if and when it falls apart.

“And I probably know more about Irish, British, American, Swedish and European politics than you do. I’ve been into politics since I was 10 years old.”
I’ll certainly not lecture you on Swedish politics but if you seriously believe that the northern conflict was about catholic vs protestant sectarianism then I have to take that last remark as the childish sounding boast I suspect it is.

Jesus wept. I suppose it was inevitable that a post about sterling would bring out the NI trolls, but it’s still a pain in the arse. Is there a moderator in the house?

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@Kevin Donohue – the moderator was out having Chinese dinner with He/she Who Must Be Obeyed. But I am back now. Yes of course the old “troubles” were bound to get mentioned but it seems the discussion is within the bounds of gentlemanly discourse isn’t it? Seems acceptable to me.

@Shay Begorrah – did you have multiple hyperlinks in your comment? The control-bots in the blog software do not like multiple hyperlinks. Or perhaps a profanity or a word that could be interpreted that way? Other than that, I am clueless.

@ Kevin,

Yeah cause it happened and pretending it didnt never worked. People can mentioned it and note it but that doesnt mean we are tied down by it. In a way the only stock response has been yours.

“Germany cares about Ireland not defaulting on the debt it owes to German banks”

This doodle keeps on coming up, despite the fact that the statistics of the Central Bank of Ireland are crystal clear in this respect. The Irish banks got most of their wholesale funding from non-Euro investors, probably mostly UK and US banks.


Simply compare column I vs. column J and column K vs. column L on the liabilities sheet.

Truly irritating this constant distortion of the facts.

So instead of “with one bound we are free” it’s “with the pound we are free”. How come nobody thought of that. And how exactly does it get us out of our current difficulties?

Beyond that, the analysis of Mr. Gustavsson is rather weak.

Without saying it, I have the impression that the author believes that Irish bond yields would somehow align with UK bond yields. I infer that from the fact that the author assumes that Ireland would recover its budgetary freedom. This is only possible if Ireland enjoys low bond yields.

If Ireland joins sterling, it would mean that Ireland and the UK would form a monetary union. Why should we assume that Irish bond yields would somehow get close to the level of UK bond yields? This is clearly not happening in the Euro Area, which is also a monetary union.

For bond yield convergence to happen, the UK-Ireland monetary union needs to function in a different way than the Euro monetary union. But nowhere is the author explaining in how that would be the case.

@ All

Meanwhile, back at the ranch!

Another interesting development, although not reported, is that Germany is insisting that countries that do not sign up to the new treaty cannot benefit from the ESM!

It may be a question not of Ireland leaving the euro but of the euro leaving Ireland.


IMHO we should only be discussing two possible outcomes. Staying within the Euro (if it survives) or introducing Punt Nua (whether or not the Euro survives).

Joining sterling would only be a factor if the Euro collapsed which, judging by reports currently coming out of Paris, is not an inconceivable possiblility.

Fortunately for Ireland, despite the fact that many journalists/commentators would be tempted to spin it as an act of “altruism” and/ or “colonial guilt” if Ireland were to join sterling in the event of a Euro collapse, the reality is that Ireland is a very significant export market for the UK.

However it is only in the interest of both countries to treat this as an “insurance policy” in the event of the Euro collapsing in a rapid and disorderly manner.


As I understand part of the objective of this post is to receive feedback please allow me to start with A) constructive criticism and then B) some praise.

A)IMHO this is a theoretical argument which should not be discussed on an influential (albeit “academically monitored”) site like this at this particular time. Last autumn (before the imposition of “temporary ” technocratic governments in two of the EU 15 states and isolation of Britain among the 27 states) would perhaps have been a more appropriate time.

The economic and political situation is so critical now, in Europe,(which will impact on Sweden and other non EZ states) that we have to do what we can to preserve the Euro while openly examining the only other medium term alternative which is Punt Nua.

B) I understand the actual intended audience is in the US where readers can not be expected to understand fully what is going on in Europe. That audience which, as another commenter correctly pointed out, is also concerned about Asia and the Pacific region can afford to have a more “detached” interest.

With that in mind IMHO the background and facts of the UK and Irish economic/historical/political relationship should prove informative to such an audience and is presented simply and clearly.

Hope this helps 🙂

Well for one thing, Incognito, the UK-Ireland “monetary union” did function in a different way than the Euro monetary union for about 60 years and Irish bond yields were reasonably close to UK bond yields for much of the time. Of course one can argue that those were different times, but why is it up to John Gustavsson to do all the work? Those who claim that sticking with the Euro will lead to a happy outcome need to start explaining why things are going to change.

@ Kevin Donoghue

I agree with you in fact. For me, the Euro Area has become a highly dysfunctional monetary union. It will not last long in the present state. Either we find a way to address the ailments of the Euro Area. Or we get back to something that we understand: one currency for one sovereign, and with the sovereign in control of its own central bank.

But getting into another monetary union (be it sterling, the dollar or whatever) without understanding why the existing monetary union does not function properly looks very dangerous to me. And that is true for any country belonging to the Euro.


“It may be a question not of Ireland leaving the euro but of the euro leaving Ireland.”

IMHO good point to which I might add:

It may also be a question of the Euro leaving all of us and settling in Germany,Austria, Luxembourg,Holland, Finland and (by Finno-Ugric political necessity) possibly Estonia.

I also would not be very certain whether the Dutch would (or could) go along with such a scenario.

CAn anyone remember ANY TIME that the Irish Govt. were -when we were pegged with sterling- able to influence the British setting interest rates etc. I don’t even think there was even ANY polite meeting mentioned in the papers.

As an aside, I returned from London to a depressed NI in the eighties, where a local decried the UK’s rise in interest rates. I explained to him that England was booming, and a rise in interest rates was needed to dampen demand. ‘If they raise it any more, we’ll drown’ was his Northern perspective.

@Gregory Connor

I give up. It may be that WordPress has a new filter that identifies and automatically rejects flowery yet strident accusations of economic imperialism, national betrayal, shared class interests and fascist tendencies against anyone unpatriotic (or worse, foreign), selfish and ignorant enough to disagree with me.

@mise mé fhéin amháin

Actually the sterling peg didn’t work too badly, in the sense that when Britain needed higher interest rates to curb inflation Ireland usually needed them too. But I don’t want to be pushing John Gustavsson’s proposal because really I don’t think it will fly. If the EZ falls apart and Ireland finds itself with a currency to manage, probably the best thing will be for the CBI to set a target for the trade-weighted index and try to build a reputation for being able to stick to it pretty closely without being too pig-headed about it (as it was with the ERM parity in 1992). And if the EZ continues to muddle along with sky-high unemployment we may eventually decide that it’s in our interest to actually precipitate the breakup, even if the VSPs fall on their fainting-couches at the mere suggestion of that.

1) The last time I summed up Ireland’s trade (and included services) I got this:


Exports (UK)
goods = 13.7bn
services = 14.4bn
Total = 28.1bn

Imports (UK)
goods = 14.5bn
services = 10.4bn
Total = 24.9bn

Exports (US)
goods = 20.7bn
services = 5.2bn
Total = 26.1bn

Imports (US)
goods = 6.4bn
services = 24.6bn
Total = 31bn

Basically, we do export more to Britain but only just. And overall we actually do more actual trade with the USA so one would have to be wary of this line of argument in isolation (even if the author does make other points).

2) Britain has more of an interest in Ireland’s well being. You know I am no longer certain this is the case

For starters, if we want to measure these things in a purely financial sense then you would have to agree that the Ireland has benefitted far more from bailouts and ECB funding than they have from Britain’s £3bn loan.

I am also severely scepitcal that the BoE (no matter how much the author feels Britain cares about Ireland) would seriously give a damn about the 5m in the Republic if the 62m British needed a move in interest rates which was different to one Britain clamoured for. But as the author also says, the two economies are probably more likely to require movements in the same direction.

3) Colonial guilt just looks like pie in the sky stuff. Also regarding what the author says about Britain’s motivation for blocking the new fiscal compact

“though the UK is currently bravely blocking it”

Seems naive in the extreme (no offence meant!)

4) Regarding Britain letting us in:

The author admits a new punt might be too weak and prone to speculation but does not seem to accept that the British may fear us as a drag on their currency? I mean we have already shown (in part I underline) that we could have a reasonably negative effect on the Euro at times – couldn’t it be said the UK would fear this if they allowed us into the sterling area?

Enjoyable read however. God, the thought of blogging would never even have ocurred to me as an undergrad.


“…..we may eventually decide that it’s in our interest to actually precipitate the breakup,…”

In such a chaotic situation it might be more diplomatic for us to not draw too much attention to ourselves and consider one of Paul Simons options when deciding how to leave our (European) lover : “Slip out the back Jack” 🙂

@ Kevin Walsh

I will start by saying I’m not an economist, I’m an engineer, economics is a hobby of mine as it is now with the rest of the country.

Joining sterling is crazy, agreed? If you’re going to go through the pain of dropping a currency, bring back your own, at least then you have counter cyclical monetary policy and all that good stuff, agreed?

IMHO If we’re to change at all it’ll be punt nua, if we change there will have to be a period when the euro and punt are both in circulation, surely then there’s some smart combination of the two that would serve us better than either one alone.

Rob S,

Thanks for your sensible comment.

As for colonial guilt, I think I got sort of misunderstood. I don’t think the finance people, like the ones at the BoE, care that much about colonial guilt. But leftist (and some right-winged as well) politicians do. They are all interested in not tearing up any old wounds in their relationship with Ireland. Does this indirectly affect BoE? Maybe, maybe not. Yet, since the UK is trading with Ireland, they also have a financial incentive to care about Ireland’s well-being. And yes, I believe BoE would take that into account.

We have to remember where we are: Ireland is in a currency union where it completely lacks influence. If Ireland were to join another currency union with the UK, the worst thing that could happen is that you end up in another currency union where you don’t have any influence. In short, it really can’t get worst in terms of influence than it currently is.

Introducing the US dollar would be an interesting experiment, the reason why I didn’t discuss it is because frankly I’m bearish on the long-term prospects of the US economy due to the extremely high deficit, political gridlock etc.

mise mé fhéin amháin,

Like Kevin pointed out, the sterling peg didn’t work too badly. A peg to the sterling is not the same thing as adopting sterling. If you have a peg, and the country who’s currency you’re pegged to doesn’t have the kind of monetary/fiscal policy you need right now, you can always change the peg. So no reason for the country in question to care about you, setting your peg is your responsibility completely.

I believe of course there will have to be a transition period, when the euro will be in use together with the sterling. And also, Ireland should have some kind of negotiated agreement with the UK and get them to agree to let you join. There are benefits for both sides as I’ve pointed out, so it shouldn’t be impossible to work something out.

That should be just ‘surely’ as opposed to ‘surely then’. Of course the simple fact the both would be in circulation doesn’t have to mean it’s better situation than one currency on its own.

I’m posing it as a question basically.

This is the different circles of hell argument.
I agree Sterling direct use is better then Euros for the Irish economy.

Kevin has a point about the benefits to the domestic more organic job sector that do not show up much on the big export numbers.
Then you have some extra benefits in conjunction with closer macro tax policey such as a reduction of fuel tourism and the like and therefore a increase of efficiency overall on this floating bog .

Certain cultural problems can be overcome with widespread printing of Scottish like paper but others will be created.
Such is life

Parochialism at its worst. The Empire has expired, although Britain looms large in Irish eyes and Ireland on its own is a cork bobbing in the wake of super tankers Britain is but a small row boat in the same sea.

We are now in the largest trading bloc the world has ever seen, being treated seriously along with all the other small countries in the bloc.. I know there is a fair amount of bitching, whining, blaming and complaining going on but we should be capable of facing facts. The fact is we screwed ourselves royally, to suggest that the EZ and access to low interest rate funds forced us to act irresponsibly is an abdication of responsibility.

We are now continuing the Irish tragi-comedy show, latching on to another one trick pony only this one is lame to say the least.

1) The politics are impossible. David Cameron could never support such a proposal.

In coming years Scotland will hold a referendum on independence. The only factor that will prevent the disintegration of the United Kingdom is uncertainty about the economics – – the currency, value of savings etc.
First Minister Alex Salmond wants to keep the British pound for the first years at least but it’s in the interest of the English to keep that option uncertain.

I don’t see the relevance of a potential impact on the current politics of Northern Ireland.

2) The trade argument doesn’t stack up.

The Eurozone is Ireland’s biggest trading partner with the value of exports exceeding the combined totals of the UK and US – – almost 40% of total exports (merchandise and tradeable services).

The value of US exports is not relevant to choosing a currency to align with (most of the exports are not from indigenous firms) but what is relevant is that 90% of Irish tradeable exports are made mainly by US firms in Ireland. Decisions on destination of the output are generally not made in Ireland (policymakers prefer to ignore this reality and they waffle on exporting to BRIC countries etc when companies based in Ireland have no input on where their output goes).

Besides feeding into global supply chains, US firms in Ireland as regional headquarters, have an important role in the single currency area. While each European country would have its own sales company, the main finance operation can be operated from Dublin as all trading is in euro.

The attraction of Dublin’s offshore centre is that we are in the EMU.

3) Sane people should welcome external monitoring given the history of economic mismanagement, weak and inefficient public institutions, a culture of cronyism where prudence in using public funds is an exception and where the concept of conflict of interest is hardly recognised.

The UK is one of few countries in Europe which actually believes in independence and democracy, which makes them a perfect country to share a currency with.

Hyperbolic, methinks.

The independent Little Englanders pine for the lost empire.

4) To those who see devaluations as a panacea in an open economy where most exports are made by foreign firms, the world trading system has changed significantly in recent decades.

The miraculous claims for past Irish devaluations are for believers in the tooth fairy.

Besides, sterling’s trade weighted depreciation of more than 20% in recent years hasn’t triggered an export boom.

Price isn’t always the key and a country needs to have a product portfolio in demand in growing markets.

China became as important a market as Europe for Volkswagen’s passenger car brand in 2011, as Chinese sales rose 14% to a record 1.72 million vehicles in 2011, the German car maker said Friday.

@ Mickey Hickey


How about giving nihilism a chance? Give up on having any currency. Trading will occur in whatever currency the participants like, and a percent will be remitted to the Irish treasury in whatever currency the participants transacted in. There are loose ends like collecting real estate taxes but I am sure they would be worked out. Workers, including government workers, would be paid a share of what’s left in the till at the end of the month, thereby making deficits impossible. The US dollar, Russian Rubble, European Euro, Bolivian Boliviano, Ghanain Cedi will be joined by the Irish Nothing. Good bye And good riddance I say. The end.

@ Mickey Hickey

Lame? Blind also in one eye (if not both!).

On the other hand, it is useful to see the purveyors of snake oil being put in the spotlight recently. The piece by Brian Hayes in the Independent was notable in this respect and will reach a wide audience.

Let’s see what the Sindo comes up with tomorrow!

@ all

If any one fancies ST250,000 for the least damaging scheme to break the euro up, you have a month.

“I’m claiming the £250,000 Wolfson prize for how to break-up the euro”

@ PR Guy,

Thanks for that – and another chap needs your services.

“German President Christian Wulff has rejected a request to allow publication of a voicemail at the heart of a home loan scandal.”

“Mr Wulff was later asked in Lower Saxony’s parliament if he had had business relations with the businessman, Egon Geerkens, and said he had not, making no mention of his dealings with Mr Geerkens’s wife.”

I think Bill Mitchell makes a good case that an Irish currency with floating exchange rates is the best option.

An independent currency with floating exchange rates would mean fiscal policy would be free to fill the spending gap (from a drop in C, I or X-M) at all times without worrying about funding. Taxing or issuing debt would just be operations to reabsorb the reserves added to the banking system by the government spending.

Something that is not mentioned here is that Ireland could redenominate its sov debt in Sterling and not trigger a default. This is because Sterling is the currency of a G7 country and is per the rule defined by ISDA.

If joining Sterling we should request a seat on the MPC of the BoE – I think it would be a reasonable request.

This would be definately in the UKs interest as it would ensure their banks get paid back on their Irish exposures and also decrease its political isolation in Europe.

Finally, the problem of the Queen’s head can easily be circumvented. Scotland has its own notes, why couldn’t Ireland have its own notes and coins?

I don’t think international commentators have a full understanding of how deformed by “free trade” this country really is and how nearly all domestic profits go overseas even when it comes to simple typically “Irish” Alcohol / food production
Our Import / Export dependency is one of the highest in the world which means we have little internal redundancy – we are not a US or even a Australia , these are Continents apart even in this globalised world where capital flows have a huge edge over more organic trade flows.

However despite this we are being forced into a corner.
Perhaps being part of the Sterling zone will be our only option for now at least for the conservative class who wish to keep whatever pitiful ascendancy they have over the lower orders.

The Irish despite the caricatures were never born to be wild – they were born to be bitched slapped into eternity simply because we like it deep down.
Pitiful – there is simply no other word for us , how we managed to get into this position is almost unimaginable if you were not Irish.
But try to imagine having conversations with people 10 years ago when they were prisoners of the bank opium.
I remember having colourful “chats” with Kerry people back then – there was something quite surreal about their entire world view.
Most Irish people simply have no understanding of where wealth comes from.
We are still a larger Beara Peninsula where some money flows into the local economy from the RN base down below in Castletown.

There’s no such thing as a floating rate. All currencies are band or peg bound. Exchanging one fixed rate regime that we have little control over for another that we also have little control over seems at best foolish at worse useless.

Just because sterling currently has a favourable exchange rate to the dollar doesn’t mean it will continue to do so. Just because UK interest rates are lower than ECB ones and the BoE is engaged in QE doesn’t mean it will continue to do so.

Dog with a bone looks at reflection in river…

Bazza, thanks for mentioning that. Yes, I think too that converting the sov debt to sterling would be easier for investors to accept and it might not trigger the credit default swaps (if it does, then we got ourselves a real financial meltdown).

Michael Hennigan,

1) No, they’re not impossible, and Scotland isn’t seriously going to leave the UK. Every once in a while they get pissed off and start to talk about it, but it never goes any further than that. As I pointed out, and as many others pointed out in this thread, there are plenty of benefits to the UK as well.

2) Again, it doesn’t matter how much you trade with the Eurozone. Sweden trades plenty with the Eurozone, and is not a member of the euro – and we’re doing just fine, thank you (7.3 % growth in 2010). The interest rate is set by the ECB, which is controlled by Germany and France, so the important thing is that whatever monetary policy your country needs, it better fit very well with the monetary policy that Germany and France needs. Otherwise, you’re not a good fit for the Eurozone.

3) You’re completely ignoring that the EU is even more corrupt than Ireland will ever be. The EU is the most bureaucratic, inefficient, incompetent organization the world has (only the UN comes close). Fiscal supervision by the EU has to be the worst case ever of the blind leading the blind.

I am right now in the process of writing a new article on why a fiscal union won’t work. Will be done probably today.

4) I largely agree. Depreciation isn’t very important when demand for your exports are inelastic.

Nobody has a clear explanation of how to leave the Euro,without first balancing the budget. If Ireland were able to balance its budget ,there would be little incentive to use the sterling.

Well done John Gustavsson on a well written and argued blogpost. By coincidence, I had just read Paul Gillespie’s article in today’s IT (online) immediately before getting online here. Gillespie’s article is really weak and reflects the sheltered sector that sucks on the EU tit and the terror of that being withdrawn. It reflects almost childish faith in the goodwill of Eurocrats and Euro politicians. The choice is no longer ‘Boston or Berlin’ but rather ‘Bermingham or Berlin’. I agree with John that we would have much more influence dealing with the UK Government and the large number of powerful Irish people in all walks of British life (culture, sport, media, business, etc.) would, I believe, give us useful leverage.

@Overseas commentator

out of the frying pan in to the fire kinda stuff
after the initial devaluation why not a peg with nordic currencies

@ John Gustavsson

7.3% in 2010? Are you sure?

“You’re completely ignoring that the EU is even more corrupt than Ireland will ever be. The EU is the most bureaucratic, inefficient, incompetent organization the world has (only the UN comes close). Fiscal supervision by the EU has to be the worst case ever of the blind leading the blind”.

This type of statement does not strengthen your argument. The EU has a smaller public service than a medium-sized city. This is possible because it is the Member States themselves that are responsible for executing the policies decided in common, not a separate federal government as in a classic federation. If you are accusing it of corruption, you are ipso facto, accusing the countries that make it up, including Sweden.

Sweden is doing well outside the euro. Finland is doing equally well inside it. What they have in common are well-run administrations and competent economists.

Incidentally, Sweden is in breach of the obligations undertaken when it joined to EU with regard to adoption of the euro. The fact that adoption of the government’s proposal to introduce the euro was rejected in a referendum does not alter the existence of the obligation. It is not possible to be on the sidelines and the pitch at the same time. Sweden has done much better than the UK in maintaining a constructive approach to the difficulties being experienced by those countries that have lived up to their treaty obligations. But there is no mood to accept criticism of any kind on the part of those countries endeavouring to resolve the difficulties confronting the euro and the member countries trying, belatedly, to live up to the disciplines involved.

“Sweden trades plenty with the Eurozone, and is not a member of the euro – and we’re doing just fine, thank you (7.3 % growth in 2010).”

That surprised me enough to prompt a check. Okay, 7.3% 4th quarter to 4th quarter and 5.5% year-on-year. Certainly impressive.

@DOCM: “Sweden is in breach of the obligations undertaken when it joined to EU with regard to adoption of the euro.”

Well, sue them. ECB officials have acknowledged that they break rules to save banks. The Swedes broke rules to save their economy? I’m in no doubt which I prefer.

@ John Gustavsson

You first pointed out that the UK was Ireland’s biggest trading partner; when it was pointed out to you that it was the Eurozone not the UK, you argue that it doesn’t matter.

The euro design was flawed but in a historical context, your comment on the EU, a multilateral system of diverse nation states is ridiculous.

It has been the most sucessful project in Europe in a thousand years and made wars between the major European states inconceviable.

You must have been an admirer of George W. Bush?


Sweden is doing well outside the euro. Finland is doing equally well inside it.

Disingenuous in the extreme, Sweden is in a much better position than Finland precisely because it is less involved in the train crash of the Euro project.

Incidentally, Sweden is in breach of the obligations undertaken when it joined to EU with regard to adoption of the euro. The fact that adoption of the government’s proposal to introduce the euro was rejected in a referendum does not alter the existence of the obligation…..<more craziness follows>

Representatives of a political party made a promise on behalf of the Swedish people to join the Euro, when the people of Sweden themselves were asked would they have made this promise they said “Hell, no” and this represents a failure in Swedish government somehow?

Trying to to fully understand you, it seems you believe that the job of a government in the EU is to persuade its electorate to agree with commitments made among the ruling political parties in Europe – representative democracy in reverse. Elected elite leadership.

This is aside from the historical fact that EZ membership has proven to been disastrous for most of the countries in Europe not tightly economically bound with Germany. Who would be fanatical or deluded enough to want to do join such a project now? The UK are under Tory rule and their only advantage, god help them, is being outside the Euro.

The Euro has been a disaster, it can not be made to work without the destruction of much of the social fabric of the countries outside the core. We can only hope that it is torn apart in the next few months before it takes the EU with it.

@Gavin Kostick

“Mr Wulff was later asked in Lower Saxony’s parliament if he had had business relations with the businessman, Egon Geerkens, and said he had not, making no mention of his dealings with Mr Geerkens’s wife.”

Er, I belieive a popular phrase in these circumstances may be along the lines of: “I did not have relations with that woman.”

I will give my mate Bill a call later and ask him to remind me how that one worked out for him 🙂

Wives seem to be causing a number of problems in places like Germany and Switzerland at the moment. Actually, you could apply that to Ireland too as Mrs PR Guy has just told me how much Christmas cost us (me) 🙁

What was that jibe about the 60s ? – yes if you can remember it you were not there.
What decade do you currently inhabit ?
There has been various pretend pegs since 71 – all currencies are now freefloating pairs against each other.

You don’t balance at budget in a economy with excess credit / leverage !!!! – you defecit spend until you reach the required money / credit ratio.
Pre 1987 it was 8 to 1 , at the height of the boom it was 40 to 1.

That book I was talking about…… but could not recall its name.
“Captain Rock – The Irish Agarian Rebellion of 1821 – 1824

Just started but it seems a cracking good read.
Post Napoleonic depression stuff – you can understand why there is a folk memory meme of protest up in North Cork from the Bond watch crowd.

But we have all been assimilated now.

Michael Hennigan,

I never claimed the Uk was a bigger trading partner than the Eurozone, only that it was a bigger trading partner than Germany, and since Germany controls the ECB, all that matters is how similar your economy is to the german economy. If your economy is very similar to the german economy, you may be able to have the same central bank with the same interest rates. If not, it’s not a very good idea (because the interest rates will be set according to german needs, not Irish).

I will reply to the rest of the comments later.

@Mickey Hickey/Michael Hennigan/DOCM

The Brian Hayes car analogy is a good one. Many people would prefer a car crash than to continue in a car that is being driven steadily towards a cliff.

I know there is a fair amount of bitching, whining, blaming and complaining going on but we should be capable of facing facts. The fact is we screwed ourselves royally..

Screwed ourselves with more than a little help from the ECB..

All very true but where does that get us now.
The choices are simple and none of them are pleasant.

1. Take five more years to balance the budget as per Troika dictates and stay the course within the EZ and the New German dominated Europe that has essentially a Neocon agenda. With no devaluation this means very high unemployment for years and years and the Troika as a permanent feature deciding Irish economic and social life.
This is the insiders solution as it keeps them in power, defers most of the pain and foists that pain in lumps onto the younger generation and next generation. It is a morally reprehensible so called ‘solution’ that has little chance of success for Ireland.
2. Balance the budget quickly (two years max) and then decide whether or not to exit the EZ with a large devaluation so that we can regain competitive advantage more quickly and reduce unemployment.
Neither element of this solution is even considered because it would adversely affect those in power to a degree that they are not willing to contemplate. Balancing the budget would involve large tax increases, large salary reductions at the higher levels, pensions reductions and social welfare cuts. Ireland would have to be put in economic emergency mode with emergency legislation tackling all vested interests of which there are many. In some ways this was the Morgan Kelly solution. Its sanity was rejected as insane two years ago.
3. Exit now in an unplanned chaotic reaction to the completely unjust reparations of private debts being foisted onto the Irish public. There is a real possibility of this happening because of the failure to deal with the crisis, while sticking to the Troika’s ECB solution.

The bottom line in all this is that a balanced budget, notwithstanding its adverse economic impact, is now more than ever an essential to be even in a position to decide our own future.
The present course will not get us a balanced budget even by 2016 and at that stage we will have lumbered the next generations or what will be left of them with unpayable debts. Unpayable debts.
There are other more sane options as outlined above but if the only choice is to remain on the course we are on now, it might be better to crash the car.

The advantage of a larger Sterling Zone may that that London may have more of a monopoly of pillage over these lands.
At the moment its Frankfurt , Amsterdam ,Paris etc – everybody in Europe essentially.
But Irish labour generally moves to London , Sydney ,New York ,Toronto etc.
Therefore Irish labour cannot feed off much of the scraps although London & Edinburgh still has a very large slice (200Billionish I believe.)

You may get a 1970s like economy here again which really was not that bad – we were in trade defecit which is a good thing if its real goods and not energy , also Irish GNP was higher then GDP perhaps from money remittances.
The 1970s was one of the most prosperous post independence periods for Cork , by the standards of the day anyhow.

@ Kevin Donoghue

A convention of lawbreakers must be organised as a matter of urgency, to include the ECB. (You might let me have chapter and verse on the confession by the ECB of its wrongdoing).

The general point that I am making is not a complicated one. The varying experiences of countries in Europe cannot all be attributed to whether or not they are in the euro. The facts contradict such an assertion.

The job of governments is not to sign their countries up to obligations that they cannot subsequently fulfil; a point that may be brought home in Ireland’s case in the not too distant future.

If there is any single message emerging from the current fraught negotiations it is that the era of dining à la carte at the European menu is well and truly over.

I find John’s article and arguments in support of his ‘adopt sterling’ thesis interesting and provocative, but, alas, entirely unconvincing.

John may have had an interest in politics since he was ten years old, but that’s not the same thing as an appreciation of the complexities of the historical relationship between Ireland and Britain. That relationship exists on many levels other than the nationalist paradigm, a relatively recent phenomenon that originates in the mid-nineteenth century post-famine era and which did not command the majority support of the general Irish population up to the 1918 revolution.

As for a ‘colonial guilt’ concept, if ever such could be said to apply, it is hardly located amongst the British ‘left’. Historically, the relationship between the British working class and their Irish counterpart became more inimical as the nineteenth century progressed, particularly from the post famine years onwards when Irish immigrants flooded the British jobs market and were used, amongst other things, as strike breakers in industrial mills etc. The changing relationship between Irish immigrant labour and its British counterpart is reflected in literature of that period and also, quite remarkably, in how the Irish are portrayed in British art of that time.

It’s also a fact of Anglo-Irish political relations from the mid to late twentieth century that successive Irish governments frequently discovered greater empathy and historical understanding of the relationships between the two islands, including the management and resolution of the conflict in Northern Ireland, amongst UK Conservative governments than their Labour counterparts. The late Garret FitzGerald’s experience with Labour PM Harold Wilson’s government on the threat of a British withdrawal from Northern Ireland in 1975 is illustrative.

John’s argument on fiscal independence is also a tad simplistic. The UK Treasury, as a lender to Ireland, is presumably as entitled to oversight of Irish budget plans as are the other EU member states that have put money into the pot? As other commenters have noted, rhetorical stuff about ‘German overlords’ is overstated and I regret to say, bordering on the offensive. The way in which the media conventionally frame the so-called ‘Merkozy’ alliance and the reality of that Franco-German relationship are two different things. Over simplistic representations and name-calling at any level is never particularly helpful. Nor should it be overlooked that there are pundits, and politicians aplenty in our own neck of the woods who have a political vested interest in demonising the French and the Germans for their obvious failings in this crisis, principally as a mechanism of distraction from their own failure, and their antipathy, towards any meaningful reform of the processes of governance and defective political culture of our own state.

As to whether or not we should adopt sterling or start planning now for the reintroduction of our own currency, it’s seems to me from what I’ve read on this site and elsewhere in recent weeks that Ireland’s best interests – and Britain’s too – in the long run will be served by survival of the euro. If that becomes impossible, then one assumes a strategy has already been worked out as to what will replace it and how the consequences of the failure of the euro, which would be catastrophic for all the EU, the British and the US economies, will be managed? My worry is, though, that nobody amongst the elites of politicians or economists or high grade administrators, anywhere, has a clue what to do anymore. At least that’s the way it looks.

Who was it, by the way, who wrote that economists need to learn a bit more about history and historians a bit more about economics? And, one might add, nobody should assume they have the definitive take on solutions to the present crisis.
Happy New Year to one and all!

@Mickey Hickey

“We are now in the largest trading bloc the world has ever seen, being treated seriously along with all the other small countries in the bloc.”

That is true but will also remain true whether or not the Euro survives or whether we remain in the Euro.

There are only two alternatives (presuming the Euro does not enter into a disorderly collapse or retreat to a bizarre circle of five or six states) for Ireland in the medium term. Those alternatives are the Euro or Punt Nua.


IMHO the title of this thread is also very unfortunate and could lead to a lot of baseless rumours around Europe.

No decisions will be made about the need for a referendum, on the advice of the AG, until March. If a referendum is necessary legislation, logistics and other Governing factors will dictate that a referendum (on treaty changes) probably will not take place until 20 April.

In between now and then a lot of “horse trading” will be going on amidst the “hovering spectre” of possible Euro collapse or hasty retreat to a circle of five or six states.

As I understand it the Irish Government only agreed to enter negotiations about treaty changes (after certain influential states indicated a willingnes to demonstrate flexibility) which will only start in earnest from 1st March.

Since that agreement at least two other EU 27 states (apart from the UK) have expressed “second thoughts” after their leaders returned home.


Congratulations on making an impact with this blog.

However you may want to hold off on dismissing the idea of a fiscal union until we have more information. Within Ireland some people who might have been expected to dismiss Fiscal Union have actually expressed willingness to consider it if it is accompanied by more effective and de,ocratic representation within the EU.

It might also be wise to keep in mind that if the Euro collapses Swedish banks will be heavily exposed because of their holdings in neighbouring Euro currency and “Euro pegged” countries. Recently one of those banks experienced a bank run in a neighbouring country just based on incorrect rumours.

This site has a wide readership and no doubt includes people who are very well informed about Swedish and North East European politics. 🙂


With all due respect to Gregory and John I do not think we should be having this discussion (about the pros and cons of joining sterling) at this time on this excellent and influential Irish Economics site.


re last post please read: “…..if it is accompanied by more effective and deMocratic representation….”


“If that becomes impossible, then one assumes a strategy has already been worked out as to what will replace it .”


@ All

Attached chart shows the rather erratic course of the Swedish crown relative to the euro. Although I am no expert in these matters, the large devaluation in 2009 is probably not unrelated to the spurt of growth in 2010. Not having a fixed rate relative to a country’s major export markets (i.e. not being in the euro) has its disadvantages. These are emerging now as the crown begins to assume a safe haven status.

@Livonian: “… I do not think we should be having this discussion….”

I disagree. Whatever chance we have of arriving at a sensible policy through discussion, we have no chance at all without it. Think how much better off we would be if banking policy and suchlike had been a staple of Irish conversation in the bubble years. Alas, we left such discussions to the likes of Patrick Neary and Kevin Cardiff. We need to be more informed and less trusting of officialdom.

@DOCM: “Although I am no expert in these matters, the large devaluation in 2009 is probably not unrelated to the spurt of growth in 2010.”

Write things like that too often and people are apt to start calling you Sherlock.

“I never claimed the Uk was a bigger trading partner than the Eurozone, only that it was a bigger trading partner than Germany, and since Germany controls the ECB, all that matters is how similar your economy is to the german economy.”

Nobody said you did. People said that the UK/Germany comparison is the wrong one to make. You have two potentially valid arguments:

(1) that rates in a Sterling Zone would take Ireland more into account than the much larger Eurozone; and
(2) that Ireland’s business cycle is more correlated with the UK’s than with the Eurozone average’s.

However you keep distracting from that by making dark comments about Germany controlling everything. Well Germany certainly gets more weight in ECB considerations because it’s economy is much larger than anyone else’s. But I’m sure a savvy political observer like yourself will remember the Bundesbank members who resigned from the ECB board because they couldn’t bring himself to endorse the banks actions, in particular it’s bond buying programme. And how frustrated both Merkozy and Sarkel got with the same ECB when it would do their bidding. That doesn’t really sound like the malign Germanic control permeating the Bank that you hint at.

As for the two parts of your argument I find more compelling, I think that (1) would only be unambiguously true if we entered into an official monetary union with the UK, which I think would be an enormously complicated project that would take quite a long time and it’s not immediately clear to me that the British would be interested in such a thing.

I think (2) is probably accurate, as it has been for a long time. Of course based on just these two criteria, we’d still be better off with our own currency. I still don’t think it’s very clear that should our current currency union break up, that we should immediately jump into another one (if it were even possible to do so imediately)

The Nordics in the global crisis

“The Nordics have all had different monetary regimes since the euro. Given their similarity in other respects, a comparison of Finland and Sweden is especially interesting. It is almost a laboratory experiment. Sweden has a floating exchange rate and an independent central bank geared to price stability, while Finland is part of the Eurozone. Who has made the better choice?”


Thank you for that link.

If one looks at the peaks and troughs of the Swedish Krona to the Euro over the last 12 months one can match them very closely with the various Euro “panics” over the last 12 months.

I also found it interesting to note, six months ago, that the Irish Central Bank appointed a prominent Swedish economist (who presumably is very well briefed on how to deal with banking and economic crises) as Deputy Governor.

After the Scandinavian financial crisis 20 years ago I would guess that most Swedish Economists and policy makers are instinctively alert to potential Euro crises especially since their banks have extensive operations in neighbouring Euro currency (and Euro pegged) countries

The Swedish Krona appears to have become “nervous” (v Euro) in November, started to “relax” a little in early December, got “slightly nervous”again around the time of Cameronś “surprise Non” and appears to have “relaxed” since.

It will be interesting to see which way the Krona responds following the meeting between Messrs Sarkozy and Monti on Friday and Mr Montis upcoming meeting with Chancellor Merkel on Monday:)


Of course we should be dicussing the future of (and our future within) the Euro and not leaving it to the likes of the two personalities you mentioned.

I just feel that we can only seriously consider two medium term alternatives : Euro or Punt Nua.

IMHO time is too short to be discussing a Sterling link and that discussion should have taken place a few months ago. sterling can only be an emergency option (necessary for both countries) if the the Euro enters a disordely collapse ar rapid “retreat” to a bizarre collection of 5 or 6 countries.

I also feel the title of the thread is unfortunate because it could set off unnecessary rumours among journalist around Europe who have to write several articles in one day.

Perhaps I did not make myself clear and, if so, please accept my apologies. 🙂

@ All

As I have advocated on numerous occasions the “Nordic model” as the one to follow as far as Ireland is concerned, I would heartily recommend the Voxeu paper which I have read (and the longer paper which I intend to get round to) to which Jesper has kindly provided a link.

cf. in particular, in terms of the debate on this thread, the following extract from the Voxeu article.

“Either the effects of the improved competitiveness are relatively modest or the lags are long, or a depreciation of a floating currency has less effect on export and output volumes than a devaluation of a pegged currency used to have. What is clear is that the floating exchange rate does not insulate an economy from external shocks, and the economic differences between the two exchange rate regimes seem smaller than often claimed in the heated debate about the Eurozone”.

Elementary, my dear Watson!

On the Sweden v. Finland issue, Krugman pointed out (blog 30/11/11):

Earlier I followed Joe Weisenthal in pointing to the divergence between Sweden and Finland as evidence of the bad effect of not having a central bank willing to act as lender of last resort. But Denmark is an even more remarkable case. It still has its own currency — but that currency is pegged to the euro. Even so, Denmark is being treated as a “haven” country, while Finland — which is very close in terms of both its deficit and its debt performance — is being priced as a risky debtor.

The point, presumably, is that Denmark retains the option of letting its currency float and printing money in an emergency — and this option makes all the difference.

Danish yields have since fallen even further:

Re Jespers first link at 4.55pm

In addition to the “comprehensive safety net” the Nordic satates also have a very good approach to Life Long Learning. This keeps them competitive when “selling” services and expertise abroad and makes every worker valuable.

Ireland would have no diffculty introducing both systems without impinging on taxation. The only thing we are lacking is the collective will and determination to tackle “precious” vested interests among senior public servants who tell us what they are worth rather than the other way around.

with a “comprehensive safety net” and more equality in wages we also would not suffer from the fact that we have a lot of talent tied up in the “gilded cage” of the public service who (instead of rotting away their enthusiasm and skill) could probably excell in the private sector.

We need to keep in mind that “Public Service” is precisely that: “Service”.
Not some bizarre lottery ticket. 🙂

@DOCM, in noisy desperation

The general point that I am making is not a complicated one. The varying experiences of countries in Europe cannot all be attributed to whether or not they are in the euro. The facts contradict such an assertion.

The deaths of the passengers on the Titanic cannot all be attributed to drowning either.

Kevin Donoghue’s reference to Krugman’s observation on Denmark should have put an end to this discussion. All other things being equal being a member of the Eurozone is a disadvantage for those not tightly bound with Germany’s economy. Preserve some dignity and let it go.

@ Kevin Donoghue

Krugman, unfortunately, has a tin ear when it comes to understanding how the EU works. It seems to be news to him that the Danish crown is pegged to the euro (as is now the Swiss franc). Technically, Denmark is in ERM II i.e. the country remains in the ante-chamber, so to speak, to membership of the euro. That it is linked to the fact that Germany is the country’s main trading partner.

Krugman also assumes that the markets are acting rationally. Rates at the most recent Danish auction were negative i.e. investors were paying the Danes to be allowed to hold the bonds. Were Denmark to leave the ERM II, the impact would be predictable. The Danish crown would go through the roof and the country’s trade would go through the floor.

You will note Krugman’s careful use of the adverb “presumably”.

The economic arguments are very good but since leaving the United Kingdom so much of Irish identity has been based around “Not being English” that I can’t see how it could happen politically. We were able to give away sovereignty and even control of our currency to a European Union, where we only represented the equivalent of a couple of major cities, but we could not rejoin a union where we once sent a much higher percentage of legislators to a shared parliament in London.

“Krugman, unfortunately, has a tin ear…. It seems to be news to him….”

Since I waste far too much time on blogs, I can report that the standard response to remarks like this is: Whatever, dude.


Krugman, unfortunately, has a tin ear when it comes to understanding how the EU works.

Economics works differently in the EU, presumably because of the logical strictures of the formerly community method, now ECB method? Really?

Krugman also assumes that the markets are acting rationally.

No sane person would honestly try to say that Paul Krugman is a true believer in market rationality. He is engaged in a deliciously rude public argument with fresh water snake John Cochrane at the moment on similar ground.

Here is his excessively nice review of Justin Long’s “The Myth of a Rational Market” in the NYT Review of Books (I have not read it myself) or read the section on “Panglossian Finance” in this rather NYT article.

Just give up on the defending the Euro. It is a mess for everyone except possibly those tightly economic bound to Germany. Whether Ireland can escape it is another matter.

for what it is worth, I cant follow the logic that, today, it would be beneficial to switch from Euros to a sterling peg. The reasoning that England cares more is silly. countries dont “care” in any real sense. the trade argument has some merit but it is disingenuous to only compare UK trade and German trade and it is irrelevant to the problem at hand. The fact is, we are in the Euro, we have signed contracts that are denominated in Euros and we have benefited fron liquidity facilities provided by the ECB.

If we assume that Ireland left today and pegged to Sterling, then a) this would precipitate a massive banking crisis across the region. Ireland’s deposits would flee and ECB support would stop suddenly. the country’s reputation is NOT in tatters yet, but it would be very quickly if it left the Euro. The “hope” that Irish rates would be at par with UK ones is not realistic.

Finally, the UK would be just as annoyed at Ireland as the rest of the EU would be. UK banks extended loans to Irish borrowers in Euros and expects to be repaid in same. A large partof the UK strategy to get out of its mess is to weaken sterling against the Euro. this is viable for them because their debt is in Sterling, so a devaluation helps trade and it enhances the value of interest income received on debt extended. ireland’s move to sterling would hurt that arithmatic.


@Kevin Donoghue on DOCM’s devastating attack on the credibility of Nobel prize winning economist and prominent public intellectual Paul Krugman.

Whatever dude

I wish I had said that. It is just the Internet after all.

@Veronica wrote: “That relationship exists on many levels other than the nationalist paradigm, a relatively recent phenomenon that originates in the mid-nineteenth century post-famine era”…that would be news to O’Neill and O’Donnell, to Ruadri O’Connor, to Eoin Rua O’Neill, to O’Sullivan-Beare agus na milte eile leo

5 years ago the financial markets believed the Irish banking system to be solvent. That would indicate that the financial markets can be wrong.

The ones who know why there is a difference in value between the Danish & Finnish governments bonds are the ones who chose between which ones they’d like to buy.

It would appear to be a case of: The ones who know do not speak. The ones who speak ……

Maybe the uncertainty regarding the costs relating to the EUR-‘rescue’ operation is the cause of the price-premium for Finland? The ones who know do not speak so we can only speculate 🙂

@ Kevin Donoghue

It is probably because I am not a liberal and I do not have a conscience. But, believe it or not, I form my own opinions and lend no infallibility to any person, even as exalted as one of those who has received the prize awarded by the Central Bank of Sweden in memory of Alfred Nobel.

Nobody cares much any more about debates between economists; dude! Get used to it!

@ All

Before I forget it, it should be pointed out that there is a dark side to the Nordic Utopia. Everybody knows what everybody else is earning and paying in terms of tax!

A rather relevant debate at the moment in the context of the current uproar about tax due by pensioners.

Is this the Nordic future for Ireland?

First of all, thanks to everyone for your comments. It’s been very interesting to read them, whether you agree with me or not.

I frankly didn’t anticipate that there would be this many comments. I wrote that post on sterling almost two weeks ago. Yesterday, I told Gregory Connor (who is one of my professors) about it and asked him to read it and give me some feedback. He then emailed me saying he put it up on his blog. Since then, I’ve been trying to keep up with all the comments. Make no mistake, I’m very happy he promoted it here, I’m just trying to explain why I haven’t commented on everything here: My time is limited, especially now during exams. I have read every comment and will continue to do so.

Before I began commenting on specific criticisms, I’d like to say this one thing: I’m scared by reading how many people here don’t think this should be discussed. What they are suggesting is nothing but censorship of an academic debate. They remind me of all the people whom, back in 2006, said no-one should dare suggest there was a housing bubble because if someone did, it might burst. The Eurozone crisis is not going to go away just because we don’t talk about it.


As for the Labour party not being as friendly towards Ireland as the Tories, I think you’re going too far back in history. The left began to change in the 1970’s, which is when this whole “colonial guilt” thing started. Before then, you’re right that they wouldn’t have been as friendly towards the Irish.

The UK would certainly have some “strings attached” before entering into a monetary union with Ireland – although it depends on what kind of union it would be, how much influence Ireland would want etc. But that’s nothing compared to what Germany is asking for.

Kevin Donaghue,

I agree there is a benefit to having your own monetary policy – that’s why I’ve always been against Sweden joining the euro. But that assumes the monetary policy in question is credible, and that investors trust the central bank and the government. That’s not the case with Ireland, and it will take a long time to rebuild the trust. Once it’s been rebuilt, maybe a punt nua can be considered – until then, it’s out of the question.


Germany’s influence is big because they’re a big country, and because their economy has done better than most other countries in this recession (mostly because it never really got overheated – remember Germany’s dismal growth from 2000-2005). Maybe this makes sense, maybe it doesn’t – it’s big anyway, and they’ve been able to block the ECB from entering the primary sovereign bond market despite the fact that every other country supports the idea. If they were to get that kind of influence in a fiscal union – and is there anything that suggests they wouldn’t? – then that means every budget would have to be approved by Germany. I personally believe introducing the sterling – an already existing, well-established and credible currency – is much easier than trying to put together a completely new currency that no-one would have any confidence in.


I’m well aware of the problems Sweden is facing right now, that are associated with becoming a safe haven. Yet, those problems are rather convenient compared with the ones you’re facing. Of course the boom in 2010 was to some extent related to the depreciation against the euro (which btw I think began in 2008, not 2009), but there’s nothing wrong with that. In a global economy where even modern western economies are struggling to stay afloat and not have to default, you take whatever growth you can get – even if it’s from depreciation. Don’t argue with success, you know. Also, I’d argue another big factor is that Sweden’s government is more credible than any other government in Europe, and Sweden’s central bank is more credible than any other central bank because we’ve all dealt with a similar crisis before (in the early 1990’s) and we got out alive.


I’m sorry for misstating Sweden’s growth slightly, but the point remains. Also, Sweden’s national debt is lower today than it was in 2006 – quite impressive I think.

On the three points.

1) Ireland’s trade with the UK, as a single nation, may be higher, but it’s a lot less than when compared to the cumulative trade of the Euro-zone, plus I’d expect that a lot of the trade with the UK is commodity priced, essentially in € or $ (energy, meat on the hoof, etc). Also, the idea that “Germany” sets the ECB policy will be news to the ECB, and to France, the Netherlands, Belgium, Italy, etc.

2) Ireland is a little bigger than Birmingham. Zero influence on the BoE MPC. As for “colonial guilt” influencing British monetary policy, please.

3) As for the loss of independence, or not, unless we decide to default we are faced with dreadful budgets for years to come. TBH getting our finances ruled by the IMF, ECB and EU commission is probably a helpful loss of independence rather than one to be worried about. Considering that our last three Ministers of Finance have been a barrister, Brian Cowen and Charlie McCreevy and that our recent head of the DoF was one Kevin “where’d that €3.6 billion come from” Cardiff, it’s not a loss of independence I’d worry about much.

So, overall, a B- for a slightly interesting but mostly unsupported argument.

I think if you dig deep enough the core difference between guys is wether they are Dinky or Train set types.
Chaos or Order.
Unless of course they are a paid propagandist.
Then you cannot tell until you see him playing with dolls houses.

@ John Gustavsson

I agree entirely with your point about limiting debate. In any case, it would be to overstate the importance of this blog, or any blog for that matter.

I would also agree wholeheartedly with what Veronica said above about widening the debate beyond the stultifying and incestuous one at a pure economics level.

The debate in Europe is about politics, not economics. No member state can be allowed to pick and choose the elements of the EU menu that suits it. That is what the UK has brought to a fine art and which Sweden, until recently, was trying to emulate. The approach has come to a shuddering halt as evidenced by the decision by the Swedish PM, in the early hours of the morning, to join the majority and to seek the approval of the Swedish parliament to sign up to the new treaty.

When push came to shove, Cameron was on his own.

Lycka till med din examen!

@ veronica

Many happy returns.

‘My worry is, though, that nobody amongst the elites of politicians or economists or high grade administrators, anywhere, has a clue what to do anymore. At least that’s the way it looks’

Ars longs vita brevis. You can stop worryying and blog more often because you have got style. Although this is, IMHO, a world-class board, the sky is the limit, so maybe bring a few friends too 🙂

Check out my new post, on why a fiscal union is not going to solve the eurozone crisis: http:// caffeinatedthoughts dot com/2012/01/a-fiscal-union-not-a-solution-for-the-eurozone/

Will be back later and answer more comments.


The debate in Europe is about politics, not economics.

Economics not being your strong point, or the ECBs.

No member state can be allowed to pick and choose the elements of the EU menu that suits it.

A set menu with not much international cuisine carefully put together by the centre right of German politics, EU technocrats and the Eurozone financial sector to meet their own peculiar dietary requirements. The restaurant may start to lose custom, what with the food making so many guests sick.

I wonder how many paid trolls and lobbyists there are on the Internet? How would one identify them?

@Shay (I’m assuming the ‘Shaay’ is a typo, not a name-change),

There’s little point in speculating about paid trolls. If they are paid then keeping that fact to themselves is part of the deal. Also, recall the lines Orwell quoted:

You cannot hope to bribe or twist,
thank God! the British journalist.
But, seeing what the man will do
unbribed, there’s no occasion to.

That applies to the internet too. For every paid climate-change denialist, Pentagon hack, or whatever, there are hundreds of suckers who truly believe.

As for being allowed to pick and choose: The euro was not a part of the original deal. It didn’t exist when Sweden joined in 1995. Nor did this fiscal treaty. To say that we have to accept everything Germany comes up with just because the EU isn’t a buffet is beyond absurd!

Hugh Sheehy (I tried to reply to you earlier, that comment didn’t show up),

1) Interesting argument. However, I would say this is probably the case with all countries that Ireland are trading with, so doesn’t make that much of a difference. Also, there are probably more jobs that are depending on the trade with the UK.

2) Please take the time to read the post, then come back and comment on what I said in it with regard to Ireland being able to influence Britain.

3) It’s a really sad state we’re in when loss of independence is considered something positive. Sure, deal with the deficit, you don’t need the Germans for that. Remember a new treaty would be permanent. That means that you will be “fiscally occupied” by Germany for ever and ever. They won’t let you go even if you somehow fix your deficit and turn around. Once politicians get control over something, they never let go of it. You will have to ask permission for every budget you ever pass, for all eternity. What do you get in return that is so good that it’s worth giving up all that?


It is probably because I am not a liberal and I do not have a conscience.

i like it !

@Kevin Donoghue

There’s little point in speculating about paid trolls.

So they have got to you too Kevin?

No, you are right. It is just when people endlessly repeat the same nonsense over and over again I am reminded of the second Iraq War and how simply giving the impression that there was a serious debate over an issue allowed the bastards to get away with their plan and then claim that there was doubt afterwards. It was a master stroke of coordinated PR and these multi-front, multi-media assaults on public opinion still go on (Brian Hayes and Stephen Collins are not an impressive front, but there you go.)

Not only were never any Iraqi WMD but no one seriously thought that they could be a threat, not only is the Euro not an indispensable part of the EU but the self appointed core countries plan to use the tools of monetary union as a stick to beat the periphery with.

lets get real here people admit the big mistake ireland should never gone into the euro, dump it before ireland is complety finished, three choices, 1 join the dollar and hope for the best, 2 get real and join the sterling, or finally3 just go back to the punt, but for the sake of god and the men who gave their lives in the easter rising do something before ireland is totally finished. we at least owe that to these men, does no one in ireland have any pride left at all.

@John Gustavsson

keep up the good work a very interesting piece this is a topic that is coming down the track as much as some people would like to wish it away

as for how Sweden and Finland got out their troubles in the nineties it was by having an independant currency that could be devalued when the need the to revalue debt and compete on the European / World market place

in essence what i am saying it is better to have an small currency with a flexible independant central bank pegged to a larger trading area currency if in trouble use the most suitable option at that given time the Euro is a straight jacket only option IMO

@ John G

On 1), if much of our trade with the UK does depend on commodity ($/Euro) pricing, then what does it matter if our trade with other countries is similarly not in Sterling. What is your point?

On 2)….I read the post. Kindly refrain from suggesting I didn’t.

On 3) Yes. It’s a really sad state that we’re in. We can agree on that.

All fairly logical, nothing that hasn’t been said before, except for the amusing statement that “a meltdown in the Irish economy would threaten to erase all the progress that has been made and throw the North into another civil war”. The second argument made for joining sterling is fairytale stuff – avoiding Civil War in the North and British colonial guilt – Cameron has shown that his interest lies in controlling the fringe elements of the Conservative Party i.e the extreme and not so extreme Eurosceptics, and secondly to protect the Conservative Party backers in the City of London. Pragmatism before sentimentality, so forget about a colonial guilt.

But as for the actual argument of riding on the coattails of sterling, well I hope it is at least being seriously considered in Merrion Street.

A link to lectures by Prof Steven Keen, audio, subtitled with links on page to another dozen or so.
This one titled Modelling Endogenous Money Part 1

Requires knowledge of Math but still interesting to the math challenged.

Here is another clip by Keen Part 2 dealing with the real economy. Basic Circuitist Dilemmas Solved.

@ John Gustavsson

“As for being allowed to pick and choose: The euro was not a part of the original deal. It didn’t exist when Sweden joined in 1995. Nor did this fiscal treaty. To say that we have to accept everything Germany comes up with just because the EU isn’t a buffet is beyond absurd!”

You need to extend your studies to an understanding of something called the ‘acquis Communautaire’. Simply put, it means that when a country joins the EU, it accepts not only all the obligations set out in the treaties – the menu – but also all the policies that have been adopted and measures taken.

These included both the obligation, and the right, to adopt the euro once the various criteria set out in the treaties were met. The UK and Denmark have formal opt-outs (which they negotiated in detail with the other Member States) from the obligation, while carefully retaining the right to join.

Sweden does not have such an opt-out. (The last time I checked this, some aspect or other of central bank legislation was kindly viewed as not meeting the criteria).

Sweden is free to join the new intergovernmental agreement or not. My point was that the government, at least, has chosen to do so thus demonstrating that it wishes Sweden to sign up to the full menu.

I do not know what to make of your comment about Germany.

Qualifying someone else’s argument as absurd does not make it such. Indeed, a rule in good debate is never to qualify the position of another in such a manner but to advance counter arguments which demonstrate the fact.

@ clintideal

Devaluation in itself never made a country rich.

In the current recession the resistance to devaluations by the Baltic republics saved Swedish banks from losses.

@ All

Keep in mind that most exports are made by US-owned firms with the Eurozone being their main market. Their views would have to be considered if a change was planned.

Pay and benefits are generally better than at local firms at present and are higher than in some sectors in the US.

Caterpillar acquired a GM diesel engine plant in Canada in 2010. It is demanding a 50% cut in wages and a trimming of other benefits to bring costs in line with those of US workers.

Workers at a Swedish IKEA manufacturing plant earn a minimum wage of about $19 an hour and five weeks of mandatory paid holidays.
Counterparts in the US start at $8 an hour with 12 vacation days – – eight of them on dates determined by the company.

This trend is likely to accelerate.

Many thanks for the lesson in French and in how to debate.

Major problem with Europe is complete lack of democratic accountability. Why, for example, is this he first time I have heard of he acquis communitaire? Why is the term in French?

You have no idea how galling it was for Irish people to watch Mr Sarkozy make pronouncements on Irish taxation policy or Angela splutter through another version of Poverty makes you free. We did not elect these people.


“…that would be news to O’Neill and O’Donnell, to Ruadri O’Connor, to Eoin Rua O’Neill, to O’Sullivan-Beare agus na milte eile leo.”

It would alright. None of these historical figures would remotely recognise the version of irredentist nationalism that has characterised the political rhetoric of this state over the past seventy years.

@ Eureka

I bet you’re more easily outraged by these foreigners than you are by the carry on of local poltroons.

You bemoan the lack of ‘democratic accountability’ but how dare a political leader raise questions about what is effectively a scam — US mncs paying taxes to the Irish government on part of their earnings from sales to French and German companies – – in effect undeclaring their profits on sales in those countries to evade tax.

@John Gustavsson,

Congratulations on your oriignal article by the way. I’ll make a point of dipping into your interesting blogs in the future. But tell me, what have you learned from the discussion that your ‘adopt sterling’ idea has provoked?

About thirty five years ago I remember having some class of an epiphany about something or other that was so important that I have absolutely no recollection now as to what it was. But I have never forgotten what a very wise man said to me after I had blurted out my concept to him with all the enthusiastic certainty of a true zealot. “Ah, Veronica,” says he, “what matters is not that you’re sure you know the answer; it’s that you have the knowledge to ask the right questions.”

@ Veronica

‘None of these historical figures would remotely recognise the version of irredentist nationalism that has characterised the political rhetoric of this state over the past seventy years’

That’s because the unifiied, coherent nation state did not exist in their era. Ireland had not even been exposed to Roman influence, and the Tudors were in the nation-building phase.

I think the evidence is that Irish nationalism has been much more pragmatic than irredentist. We kept the sterling link for many years, we retained common law in our constitution, and the dominance of the English language was never in real doubt. The country is full of Man U fans, and nationlaist rhetoric has been almost entirely replaced by neoliberal, secular, or progressive politics.

The early 20th c. irredentist element in Irish nationalism has to be considered, in large part, as a legitimate and natural response to 19thc British imperial power. It lived on in the north for reasons which were eventually, and painfully, rectified, or at least addreessed. While there was reverse discrimination in the southern state, it was not as pervasive or as serious in its effects.

Thye very fact that the above debate can be conducted on its economic merits, and properly so, is a testament to how far we have moved.

@ Eureka

We will only get though this by co-operation, which includes the sharing of ideas. DOCM is, IMHO, only trying to keep us focussed on the dynamics of what is happening in that large sphere called Europe, especially the large powers of France and Germany. S/he is always happy to link, or provide translations. You say potato…. 🙂

Lucky us.

@Paul Quigley
Point taken but this link
shows the close relationship between bankers and politicians everywhere including Germany. It could be said that the pressure put on us to bail out their banks was influenced by this type of closeness. Consensus will only come through humility in all sides. I think this may soon dawn in the Germans.


…it’s seems to me from what I’ve read on this site and elsewhere in recent weeks that Ireland’s best interests – and Britain’s too – in the long run will be served by survival of the euro. ……. My worry is, though, that nobody amongst the elites of politicians or economists or high grade administrators, anywhere, has a clue what to do anymore. At least that’s the way it looks.

It is argued by many, particularly Germany and France, that the survival of the euro is essential. This stance is not logical based on the following.

1. It is agreed, virtually unanimously, that the ‘old euro’ had fatal design flaws from the beginning.
2. Bothe the ‘old euro’ and ‘new euro’ are experiments, the largest experimental piece of them being that they are currencies with a central bank that refuses (or is not allowed) to buy its own ‘government bonds’.
3. The ECB, the controlling vehicle of the both old and new euro, has no virtually mandate to do anything except keep the EZ inflation rate to an arbitrary 2%. It supposedly does not concern itself with unemployment in the EZ, trade imbalances within the EZ, disparate capital flows within the EZ. Therefore the controlling vehicle of the ECB does not concern itself with the essential economic facts that affect peoples lives.
4. Despite the ECB, the controlling vehicle of the Euro, not concerning itself with issues of unemployment, it did coincidentally manage to reduce it interest rates in the early 2000s at a point when German unemployment was high. This was a clear indication of the partiality of the ECB and that partiality has been in evidence at every step in this crisis.
5. The ECB has failed to implement a bank resolution scheme and has insisted on States, in particular Ireland, transferring assets to private banks, despite the fact that it has no overt mandate for such a policy.

6. The ‘Euro’ that people now want to save is not (and cannot) be the ‘Euro’ of the last ten years.
7. The New Euro comes with different rules. Selective different rules.
8. The new rules impose austerity over the continent, despite clear evidence that the economic cycle is going into recession.
9. The New Euro makes no attempt to restrict or manage capital flows and bank runs from the periphery to the core to the clear benefit of the core countries at this time.
10. The New Euro will unashamedly be the currency of the banking and financial elite, controlled and managed by their proxy ECB, for their benefit, with their banking institutions installed as the new untouchables of the New Europe.

In summary the ‘Euro’ being saved is not the ‘Euro’ of the last ten years and the New Euro comes with a brand of economics and politics that makes it inimical to the interests of many countries and their citizens.
A new currency is being imposed on us whether we like it or not.
My preference is to say no to such an imposition.

Sweden is well positioned now as they are seen to have learned from a previous crisis. Ireland might learn from current events, but joining with Stg would simply restart the whole property inflation again.

After the ten commandments and the Holy Trinity the most firmly held belief was that property values have never declined in Ireland. When people were told that the property boom will end badly this was the one and only response. Now attitudes have changed and you can rest assured that there will be no property boom in Ireland for at least 25 years. Unfortunately the Gov’t was no more intelligent than the population at large and even if they were the gravy train was too lucrative to stop. It is difficult to convince anyone to take an action that will reduce their income. We have great difficulty entertaining more than a couple of ideas at a time and up until 2008/09 the two mantras were “Property values have never declined in Ireland” and “Low corporate taxes guarantee our prosperity.”. Gaining currrency at the moment is the idea that we can walk away from our debts if we abandon the Euro. Lurching aimlessly from Pontius to Pilate, that’s us.

@Mickey Hickey, verging on the racist…

Unfortunately the Gov’t was no more intelligent than the population at large

Oh for sure, and Thatcher could have maimed the social fabric of the UK without help from the Murdoch press due to the essential selfishness of the little Englander. There are power social, political and economic forces that caused the English speaking world to hit the rocks before our European brethren but they’ll get there too, particularly if we give up any pretence of left wing principle by trying to save the Eurozone at the expense of the progressive characteristics of the EU.

Gaining currrency at the moment is the idea that we can walk away from our debts if we abandon the Euro.

That straw man looks flammable. This is a new idea emerging from our desperate need to distance ourselves from an EU now run almost exclusively in others interests.

It seems now that Ireland’s choice may be between sacrificing itself to save a German Christian Democrat (with hangers on) vision of the EU or leaving the Euro in order to gain tools that will allow the disaster of the European component of the global financial crisis to be better managed.

There are those prefer the former outcome (Always the project, ever closer union and never mind the type) but we still have the vestiges of democracy left here (we can vote on new European treaties, unlike many of our continental sisters) and that may mean an exit, cleanly or otherwise, from under the monetarist boot.

How the EU works, a guide for the tin-eared:

Status: Sweden is not yet a member of the euro area. The Swedish krona is not yet within the Exchange Rate Mechanism (ERM II).

Adoption of the euro: Sweden does not have a target date to adopt the euro.

Personally, I’d suggest December 31, 3002 at the earliest. Entry to ERM II should be postponed until January 1st, 3000 in order to ensure compliance with the sacred acquis Communautaire.

Very sad super 8 footage from 1986 of the old Tralee to Listowel railway……..

What will become of our market towns ?
Is this a refection of the future.
A sort of 1986 Eat the Peech like oil glut depression mixed up with succesive oil starvation periods ?
The monetory turmoil of this last 40 years must stop.
No one can hope to plan ahead because of these bankers.
They make money from flux & destruction, not from wealth generation.

@ Dork
Interesting link. Our British built rail network. The British were good at running their empire. It’s not by accident that they won two world wars and built the New World.

The French were very poor at imperialism. Most things they were involved in turned to nothing. The Germans had an altogether different approach (unfortunately).

@ John

Forget the patronising attitude of some on this blog. I have been a regular reader of since September 2010 and this is one of the more stimulating threads I have read. Perhaps it is because it was not written by an academic economist. I have lived through 4 currency changes in Ireland (old Pounds Shillings and Pence, decimal pound, Punt, and now Euro) so I feel qualified to comment on your original post and the implications. I see a lot of merit in your argument and, like Prof. Connor, I genuinely cannot see any flaw in your arguments. Also, with a young family, to paraphrase Sir Kenneth Bloomfield, as I get older I care less about the flag over public buildings, the tune of the anthem I stand for, or whose picture is on the pieces of coloured paper in my wallet. Good luck in your exams.

Yes – you are right – I don’t think Edwardian Ireland was all that bad a place – although the Liberties was off the scale.
Rural Ireland did pretty well back then.
It was the ending of the war that caused the turning – much like the troubles after the Napoleonic depression.
But Britain was broken after the Great war.
It was the city of London which created the modern $ – the cuckoo in the nest destroyed Britain.
But most of them cannot accept it.

But the French keep their ancient lines intact – see the Hybrid Valenciennes link in my other post.
The French are better at domestic long term planning me thinks.

While the Brits are trying to build 1 very expensive High speed line it might be better if they concentrated on more anti Beeching measures first.

@Kevin Donoghue

How the EU works, a guide for the tin-eared.

The king is dead. Long live the king.

You have performed an important public service, thank you.

@ Dork of Cork

Takes me a while to figure out your meaning, but I enjoy your posts. Of course, the newly ‘Independent Ireland’ was dominated by Munster, , ahem, the Republic of Cork. At the time of the signing of the Treaty with London, the Dublin Opinion ran a cartoon of people streaming out of Cork in their night attire heading for a sign marked Dublin and jobs in the new administration!

@ Paul Quigley,

Several posts back – not sure if you’re winding me up, but HNY to you too.

I’m not disposed to post too often – although I read most threads – either because I don’t have the expertise to comment on certain issues or because there is no discernible poltiical or historical angle to what’s being discussed that fits my own area of knowledge. In other words, I try to keep my mouth shut until I think I may have something useful to contribute.

I’m also committed to being positive, irrespective of any havoc the current situation may be wreaking on my own life, or the lives of others I know or may come across in social gatherings. And it is very bad, you know.

I was at a party last night. Once you start getting people to talk properly about their own experience you grasp an idea of how middle class life in Ireland has been hollowed out by the events of the past few years, of how ‘wealth’ has dissipated from the heart of this Ireland.

They’re depressed; they ashamed; they’re obsessed with ‘coping’. They’re us.

I was born in the mid 1950s, so I guess you could say I’ve lived through three major recessions – the 50’s when Lemass was advised by Whitaker that it might not be the worst idea ever to apply to rejoin the UK or else intiiate radical reform of the Irish state; the 1980s, when the Labour Party in government resolutely refused to face up to the fiscal crisis and instead resolutely protected its fellow ideologues; and now, the crisis that feels more like an extended war than just a global economic cataclysm.

The way I see out of it all this ultimately is nothing to do with conventional economic theory any more, even though knowledge of same is essential. It’s going to be more about belief in the self; but primarily working for others, not the self. In harnessing collective skills and intelligence; in looking out for one another and making sure the people you know and like are ‘O.K’.

I also think that serious critique of government policy – especially at this time – is hugely important to our ultimate wellbeing and people coming out of this experience feeling that they gained something personally, even if they’ve lost a great deal financially.

It’s time, I think, that we as ordinary citizens decided that this is our state. It belongs to us. We’re it. Only we can change its processes. We have two ways of doing that (a) civil disobedience and molotov cocktails or (b) demanding change incrementally via the ballot box, and rejecting ordinance form above, (as what happened with the referendum on granting more powers to Orieacthas Committees.)

To my mind, what matters in the meantime is exhibiting social solidarity amongst those to whom we may personally have some association.

Sorry for the bit of a rant. It’s just that I see no other way apart from social solidarity short of riot and disorder.

@ veronica

No windups. Whatever is to be done, it can’t be done without the sisters. As you say, the personal is political.

I have been a silent follower of “Irish Economy” for some time and have been an avid reader of the various posts on this site on a whole variety of fascinating issues. I have to confess first of all that, prior to the current economic crisis, I had almost zero understanding of economics and my knowledge today has only marginally increased, although “Irish Economy” has hugely helped in that regard.

To get back to the issue at hand, I am surprised that the attitude of the British Government and authorities to a possible return of Ireland to the sterling sphere has scarcely been mentioned in the posts. Many posters seem to assume that it is simply a matter of the Irish Government applying to(re?)join sterling and that such an application will automatically be accepted.

Again, I am no economist and I rely only on my extensive interaction with British officials at various levels over the years to come to the conclusion that the British authorities, particularly the Bank of England, will not touch Ireland with a forty foot pole. The British have enormous problems of their own: Government debt as percentage of GDP is 80%. The following from the Telegraph is also instructive: “Buried in the fine-print of the recent Autumn Statement, for instance, was an additional £111bn of borrowing between now and 2016. That’s equivalent to 7pc of national income and – repeat – is on top of the massive borrowing increase already planned. Gilt sales during 2012 alone will hit almost £180bn. That’s 18 times more than in 2000. So the UK isn’t a “safe haven”. Our fiscal position remains perilous. There is no room for complacency in any form, none whatsoever”.

So again, why would the British authorities possibly worsen their position by allowing some sort of fiscal union with Ireland, which is in such serious economic difficulties?

I realise that some of the wilder fringes of the Euro skeptics may look to Ireland as a possible ally to undermine the Euro, but much harder and colder calculations in the Bank of England and at the heart of the UK Government will prevail and will result in a polite but firm rebuttal of any approach by an Irish Government to rejoin Sterling. I do not think that it is even remotely feasible to suggest that this is a way out of our current difficulties.

Thought that was really well put.
Now for a much less eloquent rant:
What this thread might politically be saying us that we’d be better under King than Kaiser. And that we have lost all faith in our politicians.
There is a sneaky sleveenism in the way the pensions thing was handled. If labour think they won’t be annihalated at next election they are very very stupid. They make FF look good!

There is no doubt about it being your state or our state in the past , present or future. Change via the ballot box need not be incremental. The swing from FF/Gr to FG/Lab in the last election was quite pronounced. Unfortunately a lot of people thought FG was a distinct party with policies and ideals that differed from FF. The only difference between FF and FG was whose side your Granda was on in 1922 or in the case of the town I come from, was he on the barricades at the sports field or was he not. If he was on the barricades then his descendants voted FF and if he was not then they voted FG. I know it beggars belief to think that this is how we governed ourselves since 1922. At one point there was talk about shirt colours, brown I believe was one colour and to a lesser extent blue was also in play.

Ireland is not unique in this regard but the result has been that we were mired in poverty for seventy of the ninety years since 1922. If we are to believe the published figures we are exporting 70,000 per year which is the highest number reached since the worst days of our history in the mid nineteenth century. Even after the collapse of the economy at the end of the Korean War the peak was in the mid fifty thousand range.

Ireland is quite incapable of making the adjustments required to put the economy back on track. Every month we become more indebted to the ECB as the Gov’t sits on its hands hoping for a miracle. Small schools are closing as the teachers enjoy salaries that are significantly more than their counterparts in the EU. Politicians, PS, CS and those employed in quangos are all grossly overpaid when compared to the rest of the EU. The amount paid to “Professionals”, “Consultants” in the HSE is in inflated fantasy territory. The people carrying most of the burden are those in manufacturing who are competing with the Chinese, Koreans, Japanese and Germans.

If the Gov’t brought salaries into line there would be little need to lay off tens of thousands of people in the public and quasi public sector. Decisions should be made that take the needs of the general public into account. In the past Ireland has always opted to protect the well connected, cronies and relatives while throwing about a third of the population under the bus.

It is never too late to start new political parties if Sinn Fein being the only party presently untainted by failure is not to your liking. The stables have to be cleaned out wall to wall and floor to ceiling only then will we see meaningful change. There are a lot of people who feel angry and betrayed if they think things through and get organised change is inevitable.

Sorry, in my previous post the words “fiscal union” should be replaced by “currency union”.

> if Germany gets their way, Ireland will lose its fiscal
> independence forever and ever, and effectively be
> reduced to a Germany colony.

Would the buses run on time ? ! 🙂


> You have no idea how galling it was for Irish people to
> watch Mr Sarkozy make pronouncements on Irish taxation
> policy or Angela splutter through another version of Poverty
> makes you free. We did not elect these people.

No, but the irish body politic is determined to borrow, at great expense, loads of their money, to continue to live beyond our means …

An currency with silver, gold, or platinum, ( even clean energy reserves) as a basis for the currency rather than relying on a fiat currency would give the market confidence in a new currency. We could also have a dual currency system with the euro. The main problem though with leaving eurozone is whether France would demand trade bariffs to go up against exports from Ireland. Because if we leave eurozone, would we be leaving EU as well?
finally, as it’s a blog I presume its not getting marked, if it was an essay it would be an E, a blog is a great way not to provide much data analysis, just conjecture.

@ john the pessimist
They haven’t taxed creativity yet – give it a try when choosing a pseudonym?! JTO was very entertaining and erudite – you’ll have a lot to live up to and could fall short!

Germany is no Utopia – life expectancy for their poorest has fallen and it has difficulty attracting foreign workers:
It’s a good country but no utopia.

Regarding borrowing to live beyond our means – you are right. Low interest rates designed to help Germany through unification lead to massive inflation in labour costs and housing costs in many peripheral countries which now has to be corrected. Why German banks lent so much money to peripheral sovereigns is a bit beyond me but was also very stupid.
It is terrible to see how German national sentiment has remained completely unmoved by the suffering in Greece and other countries. Read horrible stories about Greek parents no longer able to afford insulin for their children. These are our fellow Europeans. There is a callous indifference to the plight of others evident in Getmany’s approach to this crisis. For a country that has brought so much suffering to the continent we would have expected better. As the saying goes “you know who your friends are….”


Thanks! Don’t worry, I’ve received worst criticism than the one on this site.


I’m afraid I won’t be able to comment any more, at least not before friday. I have four exams this week and they require my full attention.

Swedens currency is based on to a weighted basket of its trading partners, so is Singapores. The new Punt could follow their models, cue their central banks home pages for more details. Thats better than a return to Sterling.

@John Gustavsson

“I have four exams this week and they require my full attention.”

Ah yes… January and the joy of exams for some. Good luck with all that. Get plenty of sleep and drink lots of water – it really does help (taking it as a given that knowing your subject helps too!).

By co-incidence I watched the Grumpy Old Men movie last night in which Jack Lemon played the part of ….John Gustafson.

Fair play to you John – the Sterling idea deserves to be given serious consideration.


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