Portes: The euro and its discontents

The slides of the presentation by Richard Portes at the IIIS-TCD euro crisis roundtable are here.

[Sinn and Taylor did not use slides.]

13 replies on “Portes: The euro and its discontents”

A very impressive presentation but one wonders if, like a doughnut, there is not a hole in the middle of it.

“The problem then and now is not primarily ‘competitiveness’ as measured, for example, by unit labour costs

Indeed, export market shares did not deteriorate significantly for these countries in the 2000s, while since beginning of 2010, Spanish and Portuguese exports have been growing at over 10% annually.”

[From slide ‘The problem today’]

This analysis will certainly come as a surprise to the French as the new government commissioned not alone a leading light, Louis Gallois, former head of EADS, to look into the disastrous “de-industrialisation” of France but devoted a government seminar to the issue.


The improvement in the export performance of Portugal and Spain is neither here nor there. It could be equally well argued that it flows form a reorientation of their export efforts as a result of the crisis. Both, after all, have former empires, one Spanish speaking, the other Portuguese, both with bright futures, while the French have some former colonies in Africa.

That going on a spending splurge on the basis of ephemeral tax receipts from an almighty building bubble still does not qualify Ireland as having indulged in “fiscal excess” stretches credibility to the limit.

Portes cogently and coherently makes the point that Ze Germans have this far laid off the costs of reckless lending by their financial institutions on the taxpayers of the periphery. Eventually that debt will have to be restructured or there will be a series of defaults that will destroy the EU.

One of the slides in the above, refers to Ireland and the kind of cycle it went through to gets itself into such trouble now. I thought that the recent RTE television documentary, about the ‘Insurance Corporation of Ireland’, really summed up a lot of the affair looking back to the 1980s.

I could not believe that it was the same basic couple of players from Fine Gael, were still around and having a lot of influence in the 2008 crisis, as in the mid 1980s one – a quarter of a century later.

The basic thesis of the program, and not an outlandish one, that we will find ourselves back in this situation in another 25 years, and little or no ‘institution memory’ worth the name. What was very noticeable about the 1980s crisis though, was the cutzpah displayed by AIB at the time – and I am sure that ethics and morals – are something that are reflective of the society of that time. A chief executive whose bank was being saved by a tax payer bailout, saw fit to gamble on his own shares to the tune of £50k in 1980s money.

Surely, one can only imagine the impact that this must have had on the young bankers in Ireland at that time, in terms of how they were lining themselves up career-wise, and behaviour-wise. It looks like the whole political and banking structure in Ireland is rotten to its core – and it only becomes more apparent, when one takes a look at the cycle of 25 years – which seems to repeat itself, like a bad echo or something. BOH.

The interesting thing about the 1980s ICI event in Ireland also, was how the shareholders were paid a dividend as per normal the same year as the bailout. Despite it being a bailout by the public purse, the public television crews were not even allowed into the meeting of shareholders. And the entire board was voted back in, by the shareholders.

In terms of setting an example again, for what was to happen in Ireland in the 2000s, it gave the impression probably, that shareholders would still be protected the second time round! BOH.

When asked about possible leaders Portes said he had hoped it would come from DSK.

To think what might have been were it not for his insatiable appetites and the futile efforts of publicity seeking zealous prosecutors.

“overlooking the unpalatable characteristics of alpha males: the cost of great leaders”


@ Sarah Carey

“Power is the ultimate aphrodisiac,” Henry Kissinger once said.

Alas, DSK coudn’t wait.

The other tales revealed him to be an unsavourary character.

So France has the hapless Hollande, who is being compared with Louis XVI — who was better at fixing locks than statecraft.


The clowns running the EZ have the potential to drive the world into recession especially now that China seems to be slowing down and the US is still some way away from maximum escape velocity. Treasury yields are still at crisis levels. The big risk now may be deflation. I expect the Yanks to have some words in ears over the summer. “Get with the program already Frankfurt ” or something similar.

@ seafóid

Prof Portes said France is ‘helpless’ which if true is a depressing scenario.

As for spinning, a big majority of the French seem to be uninspired by Hollande’s leadership: an Ifop institute poll on Sunday put it @ 25% – – that rating is for doing nothing; it could be similar for doing something — but that could possibly have positive results sometime.


I think l’affaire Cahuzac is damaging in the short term and that is reflected in the polls but that it is early days . The FT seem like a dog with a bone. And at the same time they editorialise that austerity alone a la Angela is a flop. Go figure.

They don’t like the taxes, it seems. 3 business people leave France and suddenly it’s a flood.

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