In my Business Conditions class I am in a debate on the European Union. My team is arguing that the European Union/Euro will not be successful. I specifically am arguing that the Euro will not succeed as a currency which is a harder to make than one might think.
My basic argument (which is still incomplete) is as follows:
Acceptance–UK, Denmark, Sweden have not accepted the currency; citizenry of nations such as france and germany were against the conversion;
Strength of economies–Some economies such as Germany are going to be lifting other weaker economies.
Future unrest–We can’t trust Europe to avoid major wars and there are no assurances that powers within the EU are not going to have serious problems in the future. If that happens (war between states is far more likely in the EU than in the US) then the currency will lose any trust.
My argument is sparse so I am hoping to find some viewpoints on the success or failure of the Euro. Please provide any resources along with your arguments.
What are the rules as to how many Euros each member country is allowed to issue? Can their national banks just crank out as many Euros as they darned well please, or is there some central agency that has absolute dictatorial power over how many Euros each country must produce in a given year, or is there some sort of middle ground?
The amount of physical currency is a small fraction of the amount of money in industrialized countries. I am sure there are limits on how much currency a EU government can print but I believe that limits to how much money can be printed is not a big cause of inflation. I do know that there are limits on how much of a deficit a EU government can have and used the Euro. I have heard that France is probably going to exceed their limit.
Your argument 1) is irrelevant, and 3) is bizarre (a war???).
There are plenty of good arguments against the Euro, though I wouldn’t argue that it will fail, it will simply exact a cost on countries that use it. I wouldn’t be surprised if one or two countries ditched it, and I wouldn’t expect the UK to adopt it this decade.
One-size-fits-all monetary policy. This is the #1 argument against it. Germany’s economy is weak because it is forced to have a monetary policy that is too tight. Conversely, Ireland has (until recently) been suffering an overheated economy because it needed tighter monetary policy but couldn’t have it.
Lack of centralized fiscal policy. Countries can cheat by running budget deficits that make life easier for themselves, while the entire euro-zone has to share the negative consequences. There is a mechanism for penalizing transgressors, but it is heavy-handed and enforcement is doubtful. Unfunded pension commitments are a major long-term worry.
The whole project was driven by political (read “symbolic” or “emotional”) reasons, not hard-headed economics. Moreover, there was little or no demand among the people of Europe for a common currency, especially among the Germans. It is the work of visionaries and utopianists who are determined to shape a European nation state from the top down, rather than in response to popular feeling. Their attitude is that problems 1. and 2. will “force” a European government into being. Idealy, a new country would come into being first, democratically, and the currency would follow.
This is the underlying reason for 1. and 2. (ie the euro is either a bad idea or, at best, ahead of its time), and suggests possible public hostility or lack of support for it in future- which is why I suspect one or two countries might drop it.
Thank you Hemlock for saving me from a burst cerebral aorta by using the word bizarre, thereby making me realize how inadvertent the OP is in its offensiveness. I surmise the OP was written with youthful naiveté towards the fact that some of the membership is of origins that might not take lightly to being labeled as a warring bunch of idiots, me being one of them.
But then there was also the rest of Hemlock’s post…
A currency, any currency including both Euro and US Dollar can fail in a value perspective, that is a failure of the perceived relative value of the economies which use this currency, not the currency itself. As for all other aspects the Euro is here to stay (well nothing lasts forever, but within a forseeable future it is). Changing back is just way out of the scope in perspective of expense, effort and possibility (leaving aside the fact that there is no reason to do so whatsoever). As for adopting the Euro; the UK, Sweden and Denmark will most probably adopt it in time, and pretty much faster than most seem to think. There is virtually no serious political or economical support to stay out anymore, it’s reactionary isolationism and xenophobic distrust that is driving the argumentation to do so - which is really hard to maintain over longer periods of time without going into serious conflicts like war, but then again the OP seems to feel that we might go to that level at any given moment.
Blabber and utter fucking nonsense fetched from the Eurocritic homepage I take it? It’s just simply not true. The suffering of the German economy is far more linked to market sclerosis and a very tight relationship to an ailing US economy. The Irish economy has enjoyed an enormous upswing through somewhat geared fiscal policy and resulting foreign investment. The Euro balances all that out a little. Both those facts are reflected in our currency’s value, which is part of the idea with one common currency. All that being said, what I just wrote is also verging on simplicity worthy of a fifth grader. Analysis of the current state of the EU economy is somewhat beyond the scope of this forum I think.
More crap form Eurocritic? Paranoid delusions and an over belief in Keynesian economy by its very detractors makes one wonder what the the point of even trying to be reasonable is?
The first point is moot since fiscal policy is no different in the EU before or after the Euro and anyone who cheats is, well cheating and will most probably be haunted by the rest of the Union states.
The second point is a) outrageously irrelevant since the budget deficit of an individual State will not be the chief driving factor in evaluating and trading in a currency and b) based on the most simplistic model of EU economy I can even dream up. Actually, when I think about it, I don’t even understand what the hell this thing about ‘making life easier for themselves’ is supposed to mean, to not mention the how and why that would be.
The third point is just plain irritating in as much as that it just spins off the first two and pretends to know that, within the EU there is no desire to enforce infractions, which to boot happen to have no relevance in the first place.
As for the last point… What the devil does the chaos in the EU pension system have to do with the Euro? Once again the chaos was there before and unfortunately it lingers, but it has naught to do with a common currency. Not more than it does on the overal ecenomy in any case.
Abso-fucking-lutely not that simple. Read this thread from not so long ago to see what an insult that whole statement is both to the EU founders and the majority of the peoples of the Union, who support its existence as well as its enlargement into a federal union of real as envisioned by Churchill and the other founders after WWII. The Euro has suffered in popularity since its inception due to some real crap public relations events and the natural emotional nostalgia when loosing our old currencies, but it’s getting more popular once again. Meanwhile the support to back down from it is virtually not relevant anymore.
“We can’t trust Europe to avoid major wars and there are no assurances that powers within the EU are not going to have serious problems in the future.” Wow, I’m still trying to get over that one! Might the OP furnish us with a clarification, or better yet a retraction or even perhaps an apology?
Last but not least the OP and Hemlock might want to check the current value of the Dollar to the Euro as part of the homework at hand. Not that the current strength of the Euro is a good thing on all levels, but it certainly helps in the idiot-level public debate where winning the pissing contest in exchange value is evidently the only thing that counts.
Britain will join in this decade. The strength of the US dollar in the last 2-4 years makes it seem as if the Euro will not do very well. If you were to predict the future of the Euro based on the last year, then the Euro should be equivalent to about $2.00 US by the end of the decade. Which is just as stupid.
I do know that the OP is part of a perhaps forced effort to debate against the Euro’s success, but I happen to agree with particlewill plus that I find avoiding the spreading of ignorance a little more important than someone else’s homework.
You had better go find some better arguments, based on deep and serious evaluation of the next year’s weaknesses and strengths of the Euro zone economy or concede the debate Mambo, that’s all I can say.
You’re slightly prejudging the view of the UK’s population. The issue is not one of whether politicians or economists think the UK should join, but whether the public want to join. That question that will be answered in a Referendum as soon as the Government thinks it will likely win that vote – if it doesn’t, we’ll, presumably, keep having Referendums (periodically) until there is a vote that supports joining. Mambo - I’m not going to do your homework for you either, but I’m happy to point you towards a couple of your stronger arguments (none of which you’ve grasped yet, IMHO).
In relation to the UK: There is a structural problem in so much as the UK economy has, traditionally, been tied closely to that of the US and not that of mainland Europe. This is manifest in the national economic cycle - consequence (for the UK): What’s good for the Euro zone (for example, low interest rates) is unlikely to be the best thing for the UK (probably encouraging the UK to overheat). And vice versa. The issue obviously also involves personal and corporate borrowing, etc. There are strong indications that cycles are now more closely aligned but it remains something of a concern .
In relation to the EU in general: For many, there are political issues stemming from the inevitable growth of power within the top echelon of the EU as a result of the empowerment of the ECB – simply can’t have a bank with the power of the ECB without an elected body overseeing policy, that would amount to fundamental anti-democracy. So, by increasing the depth and breadth of political power at the top of the EU, one can see the Euro as a vital enabling mechanism on the road to Federalism. Beyond this ‘back way forward’, you’ll have to find the arguments as to why (contributing to) enabling a US of Europe isn’t a good idea (like, the public of Europe don’t particularly want it). Do remember, the motivation behind the Euro is primarily political, not economic.
There are also other potential transparency/democracy/accountability arguments you could tout but you’ll need to look at how the ECB operates and research the dissenting views.
Time might reveal cracks if the smaller countries suffer at the hands of a German-Franco centric ECB, but there’s no obvious scenario that would cause the existing countries to fall out of economic sync, IMHO.
‘Parity’ is, of course, symbolic. But it also begs the question of whether 'tis better to have a strong currency or not…look to the traditional view/discussions/arguments on that vis a vie the $US.
Finally, it’s probably the grandest political statement of intent in European history and the greatest economic experiment of the capitalist era. One would think things have to pear-shaped somewhere along the line…perhaps its most significant problem, for now, is just that: ‘market confidence’.
L_C, I just wish that the debate in the UK will take your example of clear and even-handed examination of the facts, rather than having fat balding men dressed in Union Flag clothing and shouting about what the evil Germans and those Johnny Foreigners want to do with the GREAT BRITISH INSTITUTIONS!!!
As we all have stated it would be rather shameful to have to help out with homework tasks, but I still see a good debate in here. I’d love to tackle it at some point. If you’re interested I say we wait for a week or so until the homework quandary is out of the way and then we can get back at it in a peaceful, civilized and informed manner, as there seems to be base for that between your latest post and my first one. What say you to that?
The Euro is an example of Gresham’s Law - good money driving out bad. As an example - Euroland includes the Greek economy as well as the German. People hoped they were getting the strength of the German economy but got the weakness of the Greek instead.
The UK will eventually join the Euro, when a government finally wins a referendum after rigging the question and squandering taxpayers’ money in propoganda. Most people accept this, and despite a majority being against the Euro, also accept that the government will trick us into it.
Referenda on the Euro so far have been won by the slimmest of margins in a number of other countries, (IIRC France and Ireland were in the low fifties in favour). Given the fundamental sacrifice of political and economic sovereignty involved with joining the Euro, a simple majority is not enough, it should be two-thirds.
But the Euro isn’t about economics, it’s about politics. Joining the Euro means that the federal ambitions of unelected civil servants and failed politicians (the EU Commisioners) can be furthered. There is no democratic control over EU policy. The total lack of democratic accountability will, IMHO, manifest itself in civil unrest (cf French farmers) as the people feel helpless in the face of a European superstate with recourse other than to violence.
As the EU enlarges (another 10 states are under consideration) the situation will get worse. Unlike the USA, there is no European national identity. In the US, people are Americans first, then Californians, New Yorkers, etc. In the EU people are German, French, British a long way before European. Until that order is reversed, the EU has little hope. With no democratic accontability, it has none.
I voted for Common Market membership in the 1970’s referendum. I was wrong, in spades.
The real problem with the euro-fanatics is that they continually lie and try to shout down any real discussion. This is what produces the cynicism you see amongst the anti brigade. I remember the 70’s referendum - Heath told that this was just a trading treaty with no intent to produce a ‘common community’. Even so, I voted against it because I had the sense to read the detail.
The most common argument I have heard from the euro supporters is ‘It’s going to happen’. This is no argument. Neither is ‘You are paranoid/xenophobic/backward (add insult of choice) if you don’t support us’. Why is there no real discussion?
A European state might be a good thing. The Euro supporters certainly think it would be. Why don’t they tell us why it would be good, and how it could be run efficiently? At present all I can see is an attempt to put together the apparatus of a super-state on top of all the other states’ structures - a huge inefficiency.
It seems to me that the advantages of a super-state could be gained by easing trading restrictions between nations and encouraging multi-national projects rather than forcing layer upon layer of administration and taxation. Don’t they understand that co-operation happens when people want to, and not when they are ordered? Trying to force nations with a long history into an artificial conjunction is a very good way to get a war.
OK smiling bandit, I’ll try to be kinder – not thanks to your thinly veiled threat, but for civility sake I will. I might add that I think you fail to see how much disinformation is passing through this thread already after only so few posts. To boot some of it is rather offensive, even if I understand that it was not thus intended.
Slightly off topic some of what follows, but it begs for replies.
Which is an oversimplification of the facts. If you want to put it that way you should rather say that the economies of these previous currencies will be judged in dependence to each other. The Euro does in fact create a situation were the economies of Greece and Germany are valued by the rest of the world as one economy.
Since the inner market of the EU strives towards economic equality on the playing field this is essential in assuring just that. All fiscal, monetary and subsidizing policy of the EU strives towards that goal. The way Go Alien phrases it implies that Greece would be a stalwart economy for ever and remain a ball and chain around the stronger German economy. There is no basis for such an assumption and it speaks against the fundamental principle of European equality.
I can’t comment on the fairness of the political process in the UK. I can however say that much of the propaganda that is being spewed out by the anti-Euro fraction is based on fallacious grounds and populist to the point of confusion, as I have shown previously, for instance.
The UK had some good reasons to hold back from joining the Euro originally, such as waiting until the Euro was even weaker to the Pound, these reasons are eroding fast and that is why the government is in a hurry to get in. Unfortunately there is nothing appealing nor emotional about these arguments and they are quite frankly so boring that if you’re not interested in the minutiae of monetary policy you fall asleep while trying to get your mind around them.
Referenda were not held in most EU countries, actually only Denmark did and said no. Sweden couldn’t join since the Krona had not been locked to to the EMU for the required period, in any case the government did not dare as they had just gotten over the hurdles of the referendum to join the Union and there was substantial opposition to the Euro. Meanwhile the Swedish economy took a severe beating and the resulting inflation to the Euro has driven the Swedish government to state that they will join as soon as they fulfill the criteria.
In any case most of the EU is not a direct democracy, but representative democracies where constant calls for referenda are not exactly in line with the principle of representative democracyt - IMHO that we are not direct democracies is good and best left that way, but that is just an opinion. Eire is the closest, but even Eire has limits on what and how referenda are to be held. Regarding popular support in various places you’ll find it all dealt with in this thread.
Go Alien is deeply and desperately misinformed as regards the governance of our Union. Not even how the EU government is actually made up and appointed is correct. I am afraid that there is not one single correct statement in the above quote. Once again I refer you to the thread linked to above.
I would very much like to see a cite for the first sentence. As regards the rest I refer once again to the previously linked thread.
Which is a statement in complete fallacy. Once again I refer you the previous thread.
Welcome to the SDMB cjb. What is the basis for your position? Could you provide some cites that show that the pro-Euro fraction has actually lied and spread false information? As re the 70s referendum it is a fair bit more complicated than what you purvey and I think that brandishing the government of the time as liars might not hold up to closer scrutiny, you might want to read up on that a little.
A majority of the EU population supports a federal EU. Even a majority in the UK does (a slim one, but still a majority). Read the other thread linked to above. I might add that the majority of European nations have a history that go back at the maximum 150 years, quite a few are even not 100 years old.