The Irish Economy
Commentary, information, and intelligent discourse about the Irish economy
The WSJ carries an interesting article here.
The central political issue confronting European leaders is illustrated in the following extracts.
First, on how Germany views the role of the Commission.
“Domestic and international political pressure is forcing Berlin to accept greater responsibility.
Crucially, Germany’s willingness to publicly accept this responsibility also marks a shift in Berlin’s European strategy away from the supranational “community method” centered on the Brussels-based European Commission toward bilateral and intergovernmental initiatives that allow Berlin a far greater degree of control.”
Second, the change in the conduct of Germany, largely as a result of the approach by Merkel.
“Germany’s critics focus only on the nominal value of outstanding debt, which may be very high relative to gross domestic product. But they ignore the substantial reductions in the so-called net present value of debts, the actual amount countries must repay over the coming decades measured in today’s money. This is a much more relevant figure when assessing long-term solvency.
Berlin has played its part in easing debt burdens, but has done so in a way that has allowed it to keep control of the process to protect its own taxpayers and ensure that crisis countries pursue reforms. That may have frustrated those who wanted something for nothing, but it was politically and economically the only sensible way to proceed.”
The actions of the Commission may not be to Germany’s liking but it is not its role to conform to the wishes of any one particular state. It has come in for even more criticism from France which suggest that it may actually be doing the job required of it by the treaties and relevant adopted legislation.
Berlin “has played its part”. Unfortunately, this is not how the German electorate sees it. It has somehow been landed with the impression that it is the only actor on the stage.
There is likely to be a return to the Community method after the German elections. In the meantime, another EU institution, the ECB, will have to hold the ring.
Germany is one country in which Dr. Joseph Huber’s analysis of the debt crisis is gaining national attention.
As the author of ‘Creating new money: A monetary reform for the information age’, Dr. Huber has been touring Germany promoting a modern variation of full reserve banking as a solution to the eurozone’s debt problems.
I’ve listened to and read some of his work on national media and I’m always amazed at how quickly interviewer’s/bloggers gloss over the fact that it’s the commercial banks which create euros and they do so by recording a matching debt but great that it’s getting some media attention all the same.
If anyone would like more information on Dr. Huber’s work his website is:
and ‘Creating new money’ can be downloaded from:
The view of the French government.
What the French finance minister appears to be suggesting in terms of an arrangement that would create the necessary “synergy” i.e. giving a Commissioner with enhanced responsibility for EMU and the euro, also the chair of the Eurogroup can be done within the existing treaties. No doubt, a special committee arrangement within the European Parliament could also be arranged.
In a nutshell, the euro is self-evidently a supranational undertaking and can only be managed successfully with supranational institutions.
Berlin remains to be persuaded.
Ireland and downstream debtors are figuring on debt forgiveness in the end. On the macro level, the “core” creditor EU, being mainly Germany, will drive that process. The recent Anglo tapes will not make that easier. That in turn will impact how individual debtors will be treated in the end. It’s interesting to read and hear about the recent failed Allsop auction which apparently became quite aggressive and nationalist in tone. Someone senior in the Dublin real estate business said to me over the weekend that it signaled a turning point and that the banks’ /govt’s plan to foreclose on people suffered a major set back….Also that it will “force the banks to cut deals with people”. Not so sure about that….not sure where people in Ireland think the money will come from…Germany? Doubtful anytime soon.
Yet I hear that more houses are getting sold. A house in north Dublin which would have cost E520k last year could get E100k more this year, I’m told. Pop-up shops opening around the place, people spending in the supermarkets…..How’s all that? Has something fundamentally changed for the better that people in Ireland are openly saying that the country has “turned the corner at last”? Is the current (double-dip ) (continuous) “recession” all an illusion?
@ Paul W
“On the macro level, the “core” creditor EU, being mainly Germany, will drive that process.”
This is undoubtedly correct. But Germany is not, and cannot lay claim to be, the only country in the driving seat.
On the other point you raise, it is an illusion IMHO. While academic economic debate in Ireland continues – mainly – a form of peculiarly Celtic narcissism, there is movement! Notably as reflected in the RTE interview yesterday with the governor of the Central Bank. The IT has a reasonable summary.
Another Youtube parody (from a long – and by now tedious – series).
The Commission sets out its stall!
As they say in Newfoundland “Holy thunderin jesis bi.”
AIX-EN-PROVENCE, France (Reuters) – The European Central Bank cannot solve the euro zone crisis, Bundesbank chief Jens Weidmann told economists on Sunday, pressing the bloc’s governments to get their economies in shape and tighten their fiscal rules.
Weidmann addressed an economists’ conference in Aix-en-Provence, southern France, only three days after the ECB broke with precedent by declaring that it intended to keep interest rates at record lows for an extended period and may yet cut further.
“Monetary policy has already done a lot to absorb the economic consequences of the crisis, but it cannot solve the crisis,” Weidmann said in his speech.
“This is the consensus of the Governing Council. The crisis has laid bare structural shortcomings. As such, they require structural solutions.”
While he does not see sufficient support in the euro zone for governments to give up sovereignty on fiscal matters to forge a fiscal union to prevent such crises in the future, Weidmann pressed them to stiffen Europe’s fiscal rules.
“To fully unleash the common currency’s potential, efforts are needed on two fronts: structural reforms as well as the abolition of implicit guarantees for banks and sovereigns (government bonds),” Weidmann said.
“In addition to stronger rules, we need to make sure that in a system of national control and national responsibility, sovereign default is possible without bringing down the financial system. Only then will we really do away with the implicit guarantee for sovereigns.”
The Bundesbank chief also called for euro zone governments to sever what he describes as the “excessively close links” between banks and sovereign governments, saying that European banks hold too many of their own governments’ bonds.
“This is because banks do not have to hold any capital against their government debt, as the risk-weight assigned to sovereign bonds is zero.
Six Key Points
The ECB cannot solve the crisis
The problems are structural
There is little support for governments to give up sovereignty on fiscal matters to forge a fiscal union
There should be no guarantee on banks and sovereign bonds
European banks hold too many sovereign bonds
Sovereign bonds should not have a risk-weight of zero
Unstated Message “No One Else Can Either”
The above six points are obvious. But what Weidmann did not say (but should have) is the euro itself is a big structural problem.
And please note point number three. Weidmann was not just speaking for Germany. Rather he was speaking of the divide between Northern Europe and Southern Europe.
Yet another divide exists between France and Germany regarding productivity issues, labor reforms, taxes, government spending, and the role of the ECB.
And just imagine the impact if all of a sudden banks had to assign a reasonable risk-weight on sovereign bonds. Banks holding them would suddenly (and correctly) be viewed as capital impaired. The obvious implication is banks are capital impaired right now, but impairment is hidden via of absurd zero-risk weightings on bonds.
So don’t expect anything to come of points 4-6. And don’t expect countries to give up sovereignty. And don’t expect France to do anything about work rule reform, its pension problems, its massive 56% of GDP public sector, or its horrendous agricultural subsidies (imposed on the rest of the EU as well).
In short, the problem remains unsolvable until the first country has enough common sense to say “to hell with the euro”.
leaving the Euro does not solve the problems, that you have to live within your means, sell your products competitively into a global market, and does not make the debt disappear.
To believe that turning the table, throwing the cards and gameboard up into the air solves anything, I find this weird.
But any crazy step would immediately require very far reaching changes and present a huge risk, primarily for the one who takes it. So I actually think iut will not happen.
Given the history of Europe, doing things noisily, as the WSJ called it, doesnt help anything, and Merkel didnt invent the smooth going.
The rules for the ECB are as they are, as they have to be, and they will not change.
These agricultural subsidies are not that horrendous. They also mean that we can feed ourselves in hard times.
This world is not going to be a nicer place. A lot of countries are depleting their aquifers, while rapidly growing their population. Read on the China Smog in the FT, and think a little about, how you would solve this problem. Any suggestions?
One can make do for quite a few years without a new BMW, but most of us want to have food on the table every day : – )
I came to it actually along http://ftalphaville.ft.com/2013/07/08/1560152/godwins-law-lucrative-firing-precedent-edition/
Hans-Werner Sinn also called Germany in 2005 a “basar economy”
It should not be news that the German chancellor calls another EMU prime minister.
When a weak President Hollande appears to be uncertain what role to take, by default Germany would appear more assertive.
One week the French president calls for an ‘economic government’ and another week is offended by the effrontery of the commission raising issues of reform with his government.
“There is a deep French ambiguity,” Thomas Klau of the European Council on Foreign Relations in Paris told the FT. “On the one hand most French politicians are genuinely in favour of a stronger Europe that can exert its power in the world. The problem comes when Europe asserts its power over Paris.”
Hollande made plain his irritation when the commission went into some detail at the end of May on the reforms it expected, including on the sensitive issue of pension reforms. Since then, Paris has pushed back, insisting that while it is the proper role of the commission to agree and outline broad policy needs, it is for individual countries to decide the means of implementation.
Like former president Nicolas Sarkozy before him, Hollande sees a more integrated Eurozone being governed by “club of national leaders”, not a “federal bureaucracy”, says Klau, with power being exercised chiefly through more regular meetings of the European Council, which groups heads of government.
José Manuel Barroso, head of the European Commission, is currently the piñata of the French political elite, because it is out of aces.
In this crisis there have been few black and white situations.
There are no simple explanations but even the limited release thus far of the Anglo tapes, points to a system that wasn’t invented with the Celtic Tiger. Remember all those shocked folk when the Moriarty tribunal issued its report on Charles Haughey!
Some believed that he had been the beneficiary of a tooth fairy or leprechaun. Angela Merkel isn’t a tooth fairy offering money without strings but overtime, if a country makes an effort, other members would cut it some slack.
There isn’t a federal European system and few would want it.
Last Thursday, the IMF said in its Article IV assessment of Italy that the seeds of Italy’s low growth pre-date the financial crisis and follow from its stagnant productivity, difficult business environment, and over-leveraged public sector. The report says accelerating reforms to address these structural weaknesses will be crucial to limit the risks of long-term unemployment, especially for the youth, and raise Italy’s trend growth.
If countries such as Ireland, France and Italy do not address problems hindering for example sustainable job creation, neither the commission, Germany or any other country can act as surrogates.
I recently had a look at EU social protection spending and in 2009 as a ratio of GDP, it was highest in Denmark (33.4 %), France (33.1 %), Sweden (32.1 %), the Netherlands (31.6 %) and Germany (31.4 %), while Austria, Belgium and Finland also reported ratios in excess of 30 %.
Ireland had the biggest jump in the period from 1999, from 14.5% to 27.9% — apart from GDP as a denominator, spending on private health insurance and pensions are not included in the Irish total. The pension spending ratio of 7% in Ireland ranks among the lowest with Cyprus.
So Germany may have too many mini-jobs whereas in Ireland, a section of the population is destined for pensioner poverty.
On a per inhabitant basis, the top rankings are: Netherlands, Denmark, Austria, Sweden, Germany and Ireland.
German trade with the rest of the Eurozone was in balance in the first 5 months of 2013.
@ Mickey Hickey
It is clear that old habits die hard, France being no exception. However, if the French finance minister is to be taken at his word, the course being adopted is that of reliance on the institutional structure of the EU. In other words, the penny may finally have dropped that France is the loser if the country continues to try to go head to head on an intergovernmental basis with Germany.
@ Michael Hennigan
As I understand it, Germany’s exports to the rest of the EA are down 10% YOY. Budgetary consolidation, to take the expression preferred by Merkel, has inevitable consequences. Not that I am against it! It has to take place but not without compensating political and institutional initiatives which show that Europe knows where it is going.
“As they say in Newfoundland “Holy thunderin jesis bi.”
Do they really speak in Waterford accents in Newfoundland? That sentence could be in Waterford really, just with ba instead of bi (or just boy)
They do indeed speak with Waterford accents in Newfoundland.
“Do they really speak in Waterford accents in Newfoundland?”
Splendidly off topic, indeed they do: also Wexford.
10 years ago I wrote a piece for Fishamble and a Newfoundland theatre group that was simultaneously performed in Ireland and Newfoundland using web cams. I think it was the first Irish piece to do that.
Ireland was racing ahead economically at the time and one thing we found out was that Newfoundlanders were coming over to work in golf clubs and hotels as the patrons there wanted a real ‘traditional’ Irish welcome and the Newfoundlanders would take the work and were effectively indistinguishable from the local ‘Irish’.
Germany’s role in EU at the mo is to protect the German Financial System, and its local black holes, at all costs – including to the detriment of the rest of the EU.
It is failing abysmally in its leadership role … as the European Project regresses …
Difficult to be optimistic …
Thanks Edward v2.0 !
Gavin, that play sounds great!..and talking about great plays, I know a few people who caught Gauranteed recently and were saying it’s fantastic, fwiw
Interesting report from Reuters about Germany calling for a ban on “patent box” tax breaks. Not a word about us..it seems more prominent states are the real culprits…
Asmussen on ECB thinking…..
“Asked whether he would rule out the ECB announcing a new bumper long-term loans operation to banks, known as an LTRO, Asmussen said: “I would not rule out this … we have a whole range of non-standard instruments that can be deployed if and when the need arises.”
“I’m not ruling out anything,” he added when asked if he would rule out another interest rate cut.
“If you compare it to driving a car, (with) what we have decided now we are driving exactly at the right speed. We would not have a foot on the brake but also not on the accelerator, this is given the data as we see them right now.”
I’d be worried about his driving skills.
@ David O Donnell, do you have any evidence, or do you just slander on principle ?
German exports to the rest of the Eurozone were down 9.6% in May and 3.6% in first 5 months of 2013. Imports were off 0.5% and 0.7%.
The biggest deficit in recent years has been with the non-euro EU. The UK may offset a manufacturing deficit with a surplus in services.
Inputs in manufacturing from China in particular have grown over the past decade in several European countries and integration has also expanded in Europe.
Germany is strong in capital goods; France and Italy in consumer products and Spain in manufacturing.
Attracting private foreign capital in coming years is going to be important for the peripheral economies and Spain and Portugal should be able to build on their success with German investment.
Greece has a low FDI base and it has strong links with the Arab world.
Bank of Greece governor Giorgos Provopoulos said last week that data on June arrivals suggested that the country could even beat its 17 million-target this year.
Greece, Provopoulos said, should aspire to become a regional training center for businesses operating in the sector.
Tourism, Greece’s biggest industry, accounted for almost 16% of gross domestic product and one in five jobs in 2011.
Meanwhile, according to figures released on Monday arrivals at the country’s main airports grew 14.6% in June compared with the same month last year, amounting to 1.96m, from 1.71m in June 2012.
In total, arrivals in the first half of the year posted a 10% rise from H1 of 2012, to reach 4.35m, according to data processed by the Association of Hellenic Tourism Enterprises (SETE).
Greek daily Kathimerini says on the bumper tourism season that rather than luring as many tourists as possible the country should focus on attracting wealthy visitors: “Tourism looks particularly good this year. Even Athens, a city whose reputation suffered among tourists in past years, is once again becoming an attractive holiday destination. But we must develop our tourism plans with professionalism and a vision. Just attracting so-and-so-many million visitors is the wrong goal, one we should abandon. It makes no sense for the islands to be overrun by tourists who spend very little while those with more buying power are scared off. Perhaps the time has even come to limit the number of visitors to some popular tourist destinations, as is customary in other countries.”
The Avalon peninsula including St John’s is roughly 60% Irish, most from the Southeast of Ireland. The fishing boats (salted dried Cod) were run by merchants out of the Bristol Channel. They used to top up on provisions in Waterford and Cork, crew with doubts would desert and were replaced locally in SE Ireland. Walking down a street in St John’s you would see at least one exact resemblance of a cousin. The highest concentration of Irish outside of Ireland.
In August I am visiting the Gaelic College of Arts and Crafts in Cape Breton, Nova Scotia we are in the area mostly so as the children can scare themselves on the beach in Ingonish. Ballybunion is too cold for them and the rest of Europe too crowded. That being said Newfoundland and Cape Breton are not sex, sand and surf destinations more like home away from home with wide open spaces and warmer water in Cape Breton only. Burnt Cape, Park Reserve is similar to the Burren in Clare except a school teacher told me she saw a Polar Bear while conducting a school group in May. At the end of the peninsula is an area where ponds are formed on a ledge when the tide goes out, the locals swim there. The only warm water swimming available in NFL they told me.
Anyone contemplating emigrating while avoiding culture shock should look at St John’s, the bar scene and food are also familiar.
I am not suggesting we leave the Euro. If the Euro Zone collapses it will be initiated by Italy or Spain in my opinion.
By the way there are cultural differences between Germany and Ireland. While being judgmental the Irish tend not to put it on public display. In Germany there are little or no curbs on making blunt judgmental statements.
Your statement to O’Donnell would be considered blunt, offensive and lower class here. Instead of “do you just slander on principle.” the Irish would say “or is this your firmly held belief.”. As my wife says we Germans are a civilised people with a reputation worth keeping.
Your RE pal is well informed. There is a well lobbied campaign led by the main opposition party to prevent foreclosure in the guise of protecting the family home… Both the first and 2nd Et al. The piper still calls the tune.
DOD has a point. German govt policy is to prevent citizens taking a hit for foolish lending to peripheral Euro
banks and sovs. Eventually, it will fail. BTW, the US seems on the cusp of insisting that DBK fill the hole in its US balance sheet.
(Again) Liquidity does not equal solvency. That said, debt forgiveness can provide a sustainable basis. Forgiving debt is however unlikely to happen, not for Ireland anyway, anytime soon. I could be wrong of course….but I doubt it. Given that, are 15-20pc increases in Dublin property prices (albeit locally ….not general) sustainable /real (desirable is a diff discussion)? Or is this more Irish “exuberance”?
Enjoy the break in NFL. Have to say that it is not a proxy for Ireland during the Winter! Still, a relatively unspoiled place for a Summer break. A trip down the coast, Bar Harbor, kennebunk, Aguinquit, Boston, Cape Cod, etc is very underrated. Actually, Quebec to Montreal, across to Bar Harbor and down the coast to RI, is quite a spectacular trip (so long as the car doesn’t break down in the wilderness!)…..and definitely only in Summer.
While keeping people in their homes is laudable, I still wonder about the “unintended consequences” of such political interference in the market? Will it help or (artificially and hence temporarily) hinder? In Ireland, there is also the politically “motivated” aspect also of course…..more “raw” given how small the place is.
The policy of the opposition would appear to be to keep all the people in all their homes, both primary and other residences irrespective of whether they pay the mortgage. It keeps asset values up and keeps the FF landlord class in funds.
As an empiricist and an epistemological realist I have more than sufficient evidence ….
“The new German intransigence has deeper roots. In the wake of reunification, Germany’s perspective had already changed in an enlarged country preoccupied with its own problems. But there was a more sweeping change in mentalities after Helmut Kohl. With the exception of a too quickly exhausted Joschka Fischer, since Gerhard Schröder took office a normatively unambitious generation has been in power that has become preoccupied with a short-winded approach to the day-to-day problems of an increasingly complex society. Conscious of the diminishing room for political maneuver, these people shy away from farsighted goals and constructive political projects, let alone an undertaking like European unification. [Jurgen Habermas]
p.s. I don’t do slander – I do critical theory and evidence based critique.
@ Mickey Hickey
I’ve been to St John’s and was amazed by the number of times I mistook natives for Irish people. For anyone who finds themselves there in the future, I can heartily endorse the tour bus where I heard one of my favourite stories of all time about a fisherman who saves a tranquilized polar bear from drowning by hand.
David O’ Donnell,
there are probably 3 more persons who care about what habermas has to say, he himself, and 2 80year old germanistic study profs in brazil and china, or something similar. You are living in a world which is gone since 40 years.
Your conspiracy link states correctly “I didn’t see a credit for an original German publication”, because even in a time, when every nonsense is published somewhere, nobody wanted to publish this garbage in Germany, and not a single person found it worth to comment on it(at “the nation”).
But for you this 3 year old mumbo jumpo is epistemological empiry : – )
This is worth than slander, ….., for you.
Did you get your check on Alzheimer ?
FYI this pertinent commentary from the markets section of the FT.
The really positive aspect of the analysis is the market reflection of the fact that the two core economies of the EA – Germany and France – are not diverging to any extent which would suggest political rupture. The negative aspect is the continuing difficulties confronting the “Club Med” countries.
The positive aspect from an Irish point of view is that the country is no longer automatically included among the latter.
At times, it does surprise me at the poor knowledge of many German citizens on the output of The Frankfurt School, drawing on Kant, Hegel, Marx et al from Adorno, Horkeimer, Habermas, Fromm, Marcuse et al to Honneth …. allow me to humbly contribute to partly educating you on your philosophical heritage ….
Democracy, Solidarity and the European Crisis
Lecture delivered by Professor Jürgen Habermas on 26 April 2013 in Leuven
“The Economic and Monetary Union took shape during the 1990s in accordance with the ordoliberal ideas of the Stability and Growth Pact. The Monetary Union was conceived as a supporting pillar of an economic constitution that stimulates free competition among market players across national borders, and it is organized in accordance with general rules binding on all member states. Even without the instrument of devaluing national currencies that is not available in a monetary union, the differences in levels of competitiveness among the national economies were supposed to even out of their own accord. But the assumption that permitting unrestrained competition in accordance with fair rules would lead to similar unit labor costs and equal levels of prosperity, thereby obviating the need for joint decision-making on financial, economic and social policies, has proved to be false. Because the optimal conditions for a single currency in the euro zone are not satisfied, the structural imbalances between the national economies that existed from the start have become more acute; and they will become even more acute as long as the European policy pattern does not break with the principle that each member state makes sovereign decisions within the relevant policy fields without taking other member states into consideration, in other words, exclusively from its own national perspective. In spite of some concessions, however, until now the German Federal Government has clung steadfastly to this dogma.
Do you .. er .. support this flawed ‘dog_ma’?
what I realize here more and more is that many people here who claim to have knowledge about Germany are either living in some world long gone
(DOD with his frankfort school, shay with his lack of knowledge of plebiscites, or DOCM delving into some tiny 0.6% extremist group tagesspiegel stuff).
And believing this has something to do with a present day main stream Germany.
Simple enough for you?
Coincidentally, Tony Barber has this excellent commentary.
The only – and central – point that he is missing is that none of the countries mentioned could be described as “heavy hitters”. The caravan will move on; with or without them.
@ D O D
how about we ponder what comrade stalin might have to say about it?
The Frankfurt School was nonsense, mere word blather 50 years ago, and at some point people realized that, habermas was retired, and silence covers the sky, just not for a few residuals like you.
We have a lot of experience with our “Soziale Marktwirtschaft”, it is consensus. The Rules for the ECB are clear. What phantasy picture habermas develops as a straw man.
How about you try to get specific what you mean?
francis, do you think that insight might be applicable to your own knowledge of Ireland?
Mickey Hickey, thanks, I remember it from the 00s when talk of the connection between SE Ireland/Newfoundland was at its peak (as mentioned by Gavin above) It sounds nice, I wouldn’t mind visiting sometime
*that* insight, is this
“what I realize here more and more is that many people here who claim to have knowledge about Germany are either living in some world long gone”
D O D,
your yes/no question is as senseless as “Do you hit your wife every day or only every second day?” simple but senseless, because of insinuating starting point.
try a little harder with the rethoric tricks : – )
i enjoyed this series/special report from the economist..
where do I make here claims to know what Irish folks want, think, know?
Maybe that describes Germans role , not only in Europe, but in the world:
When I talk and listen to folks like german communist markov, we talk the same language, he thanks for the help his state gets, because he knows the millions of hours of labor, which created them, and I trust him to spend them wisely.
When I talk with a chinese engineeer, we both have a very clear understanding what technical specifications and contract lingo mean.
With DOCM, D O D, Shay , it feel it is more as when I come and say, the contract says, you have to deliver 12 bushel of wheat today, grade xy, where are they?
and then they start to lament that the scripture of glasperlenspiel haber-mas(ter) says: we shall all be drunken and happy, and the union of glass perlenspiel players wants to have a discussion of what “bushel” means.
@francis : Jetzt lass mal die Kirche im Dorf:)
FYI this interesting comment by Minister Noonan on the “arrangements” for Ireland’s exit from its “bailout”.
Re your rte link.
I think Michael is reinterpreting Wolfgang. Merkel has also said that full banking union requires Treaty changes. And he appears to have forgotten the little matter of the German Constitutional Court ruling post September. It seems probable that they won’t scupper present arrangements but any move to full banking union would appear to require German constitutional change..at the very least.
And what is this nonsense about exiting the bailout. What are we exiting? We still owe 200 billion or thereabouts…rising by a billion a month. No debt forgiveness and the IMF and others still want their money back. With no growth for the next few years according to the IMF things are not likely to get better anytime soon.
I sometimes believe that Noonan and Co are living in a parallel world..now I’m convinced. Or perhaps they are operating the mushroom theory.
I was struck by that comment myself!
All I can say is that the fate of nations is not decided by either central banks or constitutional courts. It seems to me that German political leaders are as aware of this as their opposite numbers in other EU countries (which, by definition – an entire chapter in the Lisbon Treaty – are functioning democracies).
I do not, however, share your pessimism. Banks can be closed down; not countries.
Whether or not they are functioning democracies is open to debate!
You only have to look at Spain where Rajoy has lost the support of his people, to Portugal where they have just managed to cobble an arrangement to remain in government and Italy where Letta is dependent on the whims of Silvio to remain in power. As for Greece…the home of democracy….barely functioning. Functioning democracies….perhap, but it depends on your definition.
Btw, I’m not being pessimistic..simply realistic. Continuously rising debt to GDP in an environment of low or no growth cannot have a happy outcome.
“For the present the German government is insisting that priority be accorded to stabilizing the budgets of the individual states by national administrations, mainly at the expense of their social security systems, of public services and collective goods. Along with a handful of smaller “donor countries,” it is vetoing the demand of the rest of the members for targeted investment programs and for a form of joint financial liability that would lower the interest rates of the government bonds of the crisis-hit countries. [Habermas]
In this situation, the German government holds the key to the fate of the European Union in its hand. If there is one government among the member states capable of taking the initiative to revise the treaties then it is the German government. Of course, the other governments could demand assistance on grounds of solidarity only if they themselves were ready to accept the complementary step of transferring required sovereignty rights to the European level. Otherwise, any assistance founded on solidarity would violate the democratic principle that the legislature that levies the taxes has also a say in the decision on how to allocate the funds and for whose benefit to use them. So the main question is, whether Germany not only is in a position to take the initiative, but also whether it could have an interest in doing so. In particular, I am looking for a specifically German interest that goes beyond the kind of interests shared by all the member states (such as the interest in the economic benefits of stabilizing the monetary union or the interest in preserving European influence on the international political agenda in the emerging multicultural world society, an influence which is in any case diminishing).”
“Germany not only has an interest in a policy of solidarity; I would propose that it has even a corresponding normative obligation. Claus Offe tries to defend this thesis with three contested arguments. To date, Germany has derived the greatest benefit from the single currency through the increase in its exports. Because of these export surpluses Germany furthermore contributes to aggravating the economic imbalances within the monetary union and, in its role as a contributory cause, is part of the problem. Finally, Germany itself is even profiting from the crisis, because the increase in interest rates for the government bonds of the crisis-hit countries is matched by a decrease in the interest rates on German government bonds. Even if we accept the arguments, the normative premise that these asymmetric effects of the politically unregulated interdependencies between the national economies entail an obligation to act in solidarity is not quite easy to explain. [JH]
Wonder has francis heard of Claus Offe? No – he doesn’t play left back for Bayern!
“This leads [Habermas ] to the final and philosophical question: What does it mean to show solidarity, and when are we entitled to appeal to solidarity?
For those interested in this concept of ‘solidarity’ ( a much abused and little understood term in an EU context) read on ….. link above. Nite.
As for democracy…..
Enjoy the sunshine..winter could be bleak.
Worth a read
Informative article by Brendan Keenan in the Indo….
This bit is intriguing ……
“Perhaps they have concluded from three acts of the Greek tragedy (Act Four is under way currently) and two in Cyprus, that the eurozone authorities will somehow deal with each crisis separately while, in the words of ECB president Mario Draghi, doing “whatever is necessary” to preserve the currency.
Or, just as likely, the reaction says more about the current nature of the bond market (especially in high summer) and too much should not be read into it. Figures last week showed banks as the sole net buyers of Irish government bonds over the past 12 months, and they have nowhere else to go.”
Offe is right on all counts.
1. Greatest beneficiary.
2. Export surpluses exacerbate economic imbalances.
3. Profiting from the crisis by putting the screws to the periphery and setting off a flight of funds into low to no interest accounts in shaky German Banks.
4. Cost of Government borrowing less than ZIR.
This could all come crashing down one dark and dreary morning if either Spain or Italy say “enough is enough”. When the tide recedes only then will we know which German banks were truly solvent.
Why are so many German workers on income support/govt supplements?
Any chance you are related to, or perhaps really are, ‘Dork from Cork’?
I would consider what is happening in the countries in question as an example – not always pleasant to behold – of democracy in action i.e. the capacity to elect their leaders, hold them to account and replace them; peacefully! I do not know of any other better definition.
The institutional dispute which I identified at the start of this thread gets sharper and sharper.
This FT blog comment is on the ball!
It hardly needs to be repeated that assessing whether an adequate legal base exists in the treaties for any particular legislation is a matter for the ECJ.
Yes – Claus Offe is very much on the ball – even if he does not play left back for Bayern! Educating deutschlanders can be hard work at times ….
No minimum wage and where they do exist they are below poverty level.
There are visible signs of poverty in Germany since the mid 1990s. It is not the capitalist workers paradise that most foreigners think it is.
This accounts for the public resentment toward foreigners that have higher incomes than a lot of Germans. Why should we give them aid they are overpaid already thinking.
The Dork of Cork is a unique man with a broad streak of Irishness behind an inquisitive nature and keen mind he even has an awakened social consciousness.
Francis is more of the cold bare facts scientific type that does not wear velvet gloves.
Do they really speak in Waterford accents in Newfoundland?”
They speak Westmeath in Argentina…
Mentioned it up blog but Sony Kapoor’s latest INET piece on Germany is worth a read.
Germany Must Embrace its Crown of Thorns
I think Kappor’s piece is a worthy effort but it has the same mealy mouthedness as much as the rest of the liberal commentary on Germany’s economic policy and maneuvering.
Lack of Germany leadership is not the issue, Germany’s excessive control of European economic and monetary policy is.
It is a simple recognition of reality that Germany’s dominant economic philosophy is reactionary, simple minded and has proved dangerously wrong for the Eurozone.
However due to the structure of EMU, the pernicious influence of the Bundesbank on the design and philosophy of the ECB, the European Commission’s instinctive neoliberal bias and the Commission’s further tendency to try and side with whichever power bloc is currently the most powerful (think of it as consensus forcing, not building) Germany has ended up in control of European economic policy when its guiding principles are protecting its banks and the economic ideas of the early twentieth century.
Of course EMU is a disaster that the Germans never really wanted , and the Commission are fools and cowards but lets not pretend that Germany needs to step up and show more leadership. German power over the EU instead needs to be contained and that may mean rolling back some of the monetary and economic integration that has made the European component of the global financial crisis so difficult to end.
In what may either portend the opening of the seventh seal or the reinforcing of the sixth one Niall Fergusson %ltgags> accuses Germany of economic reactionaryism, self deception and short sighted self interest while getting an award, in Germany, from delusional selfish economic reactionaries.
Eurointelligence: A surprise from Niall Ferguson
Its’ a world gone suddenly sane.
Oh German benevolence : look : Europe is weakening and the USA is in the crosshairs to take up the slack wrt demand for German exports. German banks are most exposed: the exposure to shipping has already weakened the Banks here in the North. But that’s nothing in comparison to the events pending. A German lady keeps telling the truth: here is the link to the German Bank blackbox in English : https://reszatonline.wordpress.com/2013/07/11/black-box-german-bank-2/
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