The Euro

Great Debates
61

>> A federal Europe is more likely to stop any of the EU states to engage in oppression and tyranny
>> I simply don’t buy this. Nations act out of self-interest. Always have, always will.

Well, there was a recent case where Austria decided to have as prime honcho some undesirable and they did for a short while until they realised there was too much pressure from the rest of Europe. I consider that kind of interference as a good thing. If other European countries could have exerted that kind of influence on Germany in the late 30s I doubt WWII would have happened.

I agree that a Federal level adds to the citizens liberties and protection just as it does in the US. The Federal level just sets a minimum level of freedooms which the governments cannot infringe. Nothing wrong with that. If your government wrongs you then you have a venue where you can seek redress and many Europeans, including Brits, have already done so. I cannot see any instance of the Eu limiting and civil liberties. Rather the opposite.

62

Xerxes

Aside from personal tastes in the freedom to settle were we want. It is an essential part of creating a fair and even playing field that competition for labor is carried out on equal grounds. Freedom of movement is an essential part of that. Guaranteeing that no state of the Union can back down on that commitment and making it as easy as possible for us to exercise that right is hence a pillar of free trade and fair competition.

With ‘we’ I know not if you speak of the EU or the UK, in both cases the answer is; yes we do, so I’m confused as to your position here. As regards centralized power a federal level does not centralize power per se. For that matter largely speaking power is already centralized in the EU since most of what a federal Union would entail is already in place and with the event of the Treaty of Nice (pending Ireland’s ratification) it will undoubtedly be so. To not have a constitutionally governed federal level in what is a de-facto federation is begging for opaque government structures. I for one like to keep things as clear as possible. And if you really meant our government I recall the current Council as being pretty supportive of regional self-governance as well.

Well yes, but you see that is why we had best do away with the need to be a nation that acts in self interest and create a federal Union that unites them as one. Nations are themselves arbitrary structures, or are you going to argue the natural national divisions of the peoples and races of Europe next? I might suggest against it, it’s an uphill debate these days, actually always has been and is most definitely the main reason we are having this debate in the first place.

Some of your fellow citizens who have had the opportunity of appeal to the European Court might disagree as stated earlier by sailor.

Glad that we agree on something at least. As for the last part there is no connection, you’re the one who brought him up. As I said; leave your strawmen out of the debate please. I’ll be clear about it; Churchill has no relevance to why or how anyone should support the EU other than as a source for it’s founding principles and the vision of the European Movement.

I think you took my statement a little too personally. I somehow never thought that your parent’s feelings would enter into this debate as a cite. I am truly sorry if it came across as if I inferred that they were liars. I am aware that some people in the UK feel that they were lied to, but beyond the oft brandished quote by Edward Heath from 1972 (two years ahead of the ref) re the lack of a federal blueprint and no erosion of sovereignty and a tenuous argument in an Op Ed in the Guardian regarding some intelligence report on monetary union in relation to that quote I have yet to see any strong evidence of that anyone was truly ‘systematically lied’ to. To the contrary it is rather the way London Calling earlier indicated that the opposition was right there and speaking out loudly.

Since you haven’t expressed the usual fear of undemocratic processes and so forth I still fail to see what it is that you feel threatens you in a federal EU. To the contrary you have expressed at least one concern that typically is voiced by us federalists. Maybe you would care to explain?

Sparc

63

And while we are at it…

Hemlock voiced some doubt as regards our wishes and then there was a whole other load of thinly based assumptions before that. Since the latest Eurobarometer’s first results are out. I thought we might have a look at what the stats say instead of playing the usual games of second guessing the will of the people.

Polling was face-to-face interviews conducted across the EU in April and May this year.

Support for the Euro



Region          For Against
EU 15	          67%   25%
Euro Zone       75%   19%
Outside EZ      35%   50%
UK              32%   51%
Denmark         52%   43%
Sweden          48%   43%

Support is significantly up since the late 2001 poll. Only in the UK does the majority remain against the Euro.

Is membership in the EU a good thing?



Region         Good   Bad   Neutral
EU 15	          53%   11%   28%
IRL (hi)        78%    4%   12%
UK (lo)         32%   21%   32%

Hardly any changes since last poll. The late arrivals are the most skeptic.

Supports a constitution (supports s a federal EU)



Region          For Against
EU 15	          63%   10%
Italy (hi)      81%    4% 
Denmark (lo)    49%   28%

Since the UK didn’t make it into the lowest position- chucks eh!: UK figures where 50% For and 11% Against.

As I have been saying… a majority supports a federal EU. Most of the other countries chime in between 60-75%.

Some notable and outstanding other facts; Ireland has a very large portion undecided at 40%, which I would attribute to the quandary re the Treaty of Nice. The Swedes who are otherwise noted skeptics give a whopping 73% support.

Anyway, here’s the the highlights in detail. The complete survey is pending.

Sparc

64

Let me repeat. Say Germany is in a recession, but France, Italy and Spain are not. A monetary policy that is appropriate for the former will not be appropriate for the latter.

Limitations on sales tax, curtailing the right to slash corporate taxes have nothing to do with the necessity of increasing government spending / cutting taxes in areas experiencing a downturn as you do the opposite in areas experiencing an upturn.

Similarly, I fail to see how Europe has achieved US-levels of migration. That’s ok, but it puts a greater burden on fiscal policy as a mechanism to counteract regional recessions.

Q: So what does Europe do in response?
A: They pass a “stability pact”, putting a cap on budget deficits and limiting the scope for countercyclical government spending. (Admittedly, I understand that there is a recession clause somewhere.)

Conclusion: A common currency area without the means to redistribute aggregate demand between temporarily booming and repressed areas is unsustainable. This is doubly true in regions where migration acts as a weak safety valve for cultural and historic reasons.

Furthermore: Patriotism is a poor substitute for analysis.

65

Flowbark, what do the several states of the US do when they are in different parts of the recession-expansion cycle? Or are they always in sync?

66

If things are way out of sync in the US, individuals & families migrate to the jobs. This is quite common with Texas- when the price of energy is way up, Texas does much better than the US as a whole and vice versa (though less so recently, with the Texas economy becoming more diversified). Having a common language & culture makes this reasonably easy.

When a Euro-based national economy falls out of sync with the EU as a whole, the language and culture barriers within the EU will make it much more difficult to migrate to the jobs. Although a person will have the freedom to migrate, they will still be a stranger in a strange land- having to learn a new language and overcome vast cultural differences.

67

>> the language and culture barriers within the EU will make it much more difficult to migrate to the jobs

While this may present a certain barrier I do not think it is anywhere close to what you make it to be. First off, there are already large numbers of people working in other countries than their own and I expect mobility to increase. While the population as a whole may have less mobility that the US equivalent, there are groups who are just as mobile. There are constant streams of young people from southern Europe who work in the UK and France in order to learn the language. These flows will expand or contract according to the cycle but they are already there. There is already a large immigrant population from outside the EU. These people are very mobile as they are away from home anyway. While working class people may be reluctant to move, professionals, career people, scientists, managers, engineers, etc know very weel they have to move if they want to make any progress. Check out any multinational in Europe and you will see many faces from other European countries. Multinationals need to move their people around and they do it.

But, most of all, if Mohamed won’t go to the jobs, the jobs can come to Mohammed. If Germany’s economy is booming and Spain’s is stagnant, it means the oprices of goods and services will diminish in Spain which will attract more business. Spin, instead of saying “the price in pesetas is the same but the peseta costs fewer marks” just says “prices in euros are lower”. It is about the same thing. More German tourists go to spain on holiday, some products which were purchased from Germany are now more advantageously acquired in Spain. Etc. I can’t see a huge problem here.

68

Yes, young people will move from home to strike out on their own, some to exotic locations, but from my understanding (of at least one EU country, Ireland, the “Celtic Tiger” from my second-hand expression of first-person accounts of many Irish friends) many of these youth return to the home to live with their parents until middle age. Also, in the US, we have some of our Mexican immigrants (legal and illegal) who don’t care where they go (they are going to be marginalized anyway) as long as they can produce a surplus to send home to the family (I live within a four-block radius of at least six places which advertise money wire services to Mexico), just as there are plenty of Turks (Mexicans) and others in Europe who will migrate to the labor wherever it is because they are already outsiders, whether it is in Spain (or Texas) or Germany (or Minnesota.) I don’t think that a German engineer would migrate so easily to Greece just because economic factors favored it.

Yes, but in the US, I as a mostly monolingual (used to be close to fluent in Spanish, but I am out or pracitce enough that I could not currently perform my profession in a Spanish speaking county- although I can order a beer and dinner perfectly) professional (licensed in TX) engineer, I can go to Montana (or any other US state) and prove my competence (by references [in English]) and get a license to practice my profession in short order (only a couple of months of bureaucratic nightmares). This is in a country where the laws, language, building codes, and professional standards are similar enough that I can practice my profession(which I appenticed in TX) in any state in the US.

** For one thing, there are no more “marks” and “pesetas,” there are only Euros within the Euro zone. A Euro spent in Spain has only the value of a Euro spent in Germany- much like a dollar in Illinois is equivalent in value as a dollar spent in Hawaii (although it buys much less).

Has the EU done all of the harmonization of professional licensing and standards required for a professional to transfer his knowledge from one (currently) national jurisdiction to another?

I know from personal experience that this is a more than trivial matter (I hope to do some work in Mexico, which has an agreement with the State of Texas for mutual recognition of professional engineering licenses).

69

>> I don’t think that a German engineer would migrate so easily to Greece just because economic factors favored it.

Just like in the US career advancement is a powerful motivator. All German engineers do not need to be willing to relocate. As long as a few are it is ok. You obviously underestimate mobility. I can tell you Spain is already full if people from other countries. If you go into any large multinational you will see plenty of people there from other EU countries. Multinationals need to move people around like that and to mane young people it is the opportunity to advance in their careers when older people prefer not to relocate. Also, go to the Costa del Sol and you will see plenty of bars, pubs, restaurants owned by Brits and Germans. Does it urprise you they have chosen to live and work in Spain? For millions every year it is their tourist destination and many come to like it. IMHO your assessment is greatly underestimating European’s mobility.

>> For one thing, there are no more “marks” and “pesetas,” there are only Euros within the Euro zone.

I do not know why you imply I said that because I didn’t. I think you misunderstood me. What I’m saying is that if the Spanish economy is in a slump and the German economy is booming, then some goods and services which were being acquired in Germany will now more profitably be acquired in Spain. More people will go on vacation in Spain to take advantage of the lower prices there. People in Europe will buy more Spanish fruits and vegetables as they become cheaper. A company which was buying 30% of its widgets in Spain and 70% in Germany will now decide to buy 70% from Spain and 30% from Germany. Corporations are continually moving operations from one country to another. It is one major complaint: that they move easily to countries where labor is cheap. Now suddenly you are saying they can’t do it. They’re moving to China for crying out loud. How can they not move to Spain or Greece?

>> Has the EU done all of the harmonization of professional licensing and standards required for a professional to transfer his knowledge from one (currently) national jurisdiction to another?

I do not know much about this but in the US, as you say, these are also state matters and the only thing making it easier is the common language. In Europe you already have English as a defacto standard working language and the diferent licensing jurisdictions are no different from the different jusrisdictions in the US. Besides, not everybody or even a majority need to be licensed. I suppose a British lawyer cannot get very far in any other EU country except i dealing with british law from there. But in the US there are also certain states with very different laws from the rest. An architect or engineer might have to be licensed if he is going to deal directly with governmental authorities like in signing a project but most of them would work for large companies in teams and only the head ones need to be certified by the state AFAIK. I can tell you I deal with a lot of foreign engineers in Spain and I have never heard any requirement that they be certified. Only a very, very few would need this. Doctors, dentists etc are a different thing and they all would need to be certified. But again, the Dutch government is sending people to be treated in Spanish hospitals right now because it is cheaper. I assume the doctors and the patients speak enough common language to understand each other because this does not seem to be a problem.

I think you are making the problem seem much larger than it really is.

70

Fiscal Policy as Regulatory Means

Which is a hairy area as such. It is generally held as undesirable to use fiscal policy to regulate exchange rate since it tends to have recursive negative effects in business cycles to come. That’s what the Stability and Growth Pact aims to curtail in the short-term, so far this policy has succeeded although by the skin of its teeth, the difficulty laying mainly in Germany having insisted on a too narrow margin of deficit allowance. The long-term solution is a federally streamlined fiscal policy. A study called ”Do Monetary Handcuffs Restrain Leviathan? Fiscal Policy in Extreme Exchange Rate Regimes” (pdf) by Antonio Fatas and Andrew K. Rose evaluates the risk of fiscal policy as regulatory means in monetary unions such as the Euro.

Redistribution and Insurance Through A Federal Fiscal System

This is indeed one of the oldest arguments against the Euro. The theory is that the federal tax system in the US should provide a strong insurance for asymmetric shock in the economy, while Europe lacking a federal tax system, and not being likely to implement one in the immediate future will suffer from the lack of such effect.

The insurance effect in the US has previously been calculated to be such that a fall in state income of 1 Dollar is in terms of real disposable income reduced to between 56 and 65 Cents. This study ”Does the EMU Need a Fiscal Federation?” (pdf) also by Fatas, shows that this effect has been exaggerated for the US and that such effect would be even lesser in the EU, potentially below 10%. It also shows that other regulatory effects that are already in place through the regional systems have substantially more positive effects, equalizing the comparative insurance gap between the EU economy and the US economy. The study ends up arguing against a federal tax system in the EU, which should be pointed out is not the same thing as a streamlined fiscal policy.

Migration as A Reactive Regulatory Effect

There is no doubt that the EU has a far lower internal migration than the US. This has nothing to little to do with language and culture and much more to do with the nature of EU economy and population stability. In fact regional migration within for instance Germany follows much the same pattern as inter EU migration. The population spread in Europe is dramatically more even than in the US. An unemployment policy that is dominated by unemployment subsidies de-motivates migration as a response to economic downturn. Last but not least wage development and employment evolution is more homogenous across regions than in the US. Hence migration has a lower impact on the economy than in the US.

That aside the last years have seen an increase in migration of skilled labor and there is a dark zone of temporary labor transfers that does not show up in the statistics. Historically regions like Greece and Spain have seen a large emigration level. Since the 70s this has decreased due to the implementation of the welfare state in these regions and the economic growth the EU has engendered. However, the slower evolution regions still see higher level of emigration. I refer once again to Fatas in a paper called ”Intranational Migration, Business Cycles and Growth” (pdf).

Personally I happen to disagree with the general policy in the EU on this topic but I must nevertheless concede that as regards monetary regulation it seems to work. As I have stated earlier it is a stated political goal to increase mobility of labor within the EU and hence I conclude that my government is, as would be expected from them, shooting themselves in their foot on this one (too bad it’s my foot as well).

I take it that the honorable member is addressing my somewhat lengthy and potentially propagandist end note in my previous response. I should point out that this was not an argument for the success of the Euro, but specifically addressed as opposition to the isolationist arguments regularly served by a portion of the membership, hence patriotic hardly fits – rather the reverse. Being federalist in this case is the tantamount opposite of patriotism and nationalism since it demands the reduction of the self-governance of the entities these fellows so celebrate. I for one hail the US system of governance as much as I hail a future federal EU and I despise isolationist tendencies be they in China, the US or the EU.

Sparc

71

Let me recap my argument, then move on to some of Sparc’s points.

  1. Fiscal and monetary policy represent 2 mechanisms for moderating world-wide swings between recession and inflation.

  2. As for moderating regional economic fluctuations, there are various mechanisms that can operate between regions.

A. Between countries, the economically depressed country can devalue its currency, either by decree in a fixed exchange rate regime or automatically in a floating regime. This will stimulate that country’s export industry and promote import substitution.

B. Within the depressed region, monetary policy can be used only if the region controls its own currency, like the US and the UK, but unlike the Netherlands (part of the Euro-pact) or Texas.

C. Within the depressed region, fiscal policy can be used. In the US, states that are required to run balanced budgets find this mechanism to be of limited use. In Europe, states that have signed on to a stability pact also are limited.

D. A supra-regional body can redistribute resources among its minions. In the US, this takes place automatically. Lowered income in a region lowers tax receipts from that region, especially if income tax structure is progressive. Higher unemployment insurance payments and, before welfare reform, higher welfare payments also tend to ease the burden on states experiencing hard times.

My understanding is that Europe’s progress in this matter is weak.

E. Migration: In the US, people and to some extent firms will move from depressed regions and towards booming regions. Empirically, this happens less in Europe.

MY POINT
To address these problems the US uses a D-E strategy. Europe formerly used an A-B-C strategy. Europe now uses a modified “C-nothing” strategy. It’s modified because the Stability Pact (I think) limits the use of C.

A common currency precludes the use of A and B. Europe will have to find some sort of substitute and I suspect that encouraging E, while laudable, will prove inadequate. This is an empirical issue, guesswork can only take one so far. That leaves “D”, the remaining option.

On Fatas (1997 - fiscal fed) To say that the US’s use of “D” is weaker than commonly estimated is interesting but sort of misses the point (even if true, which I’m not sure of). The US enjoys both D and E. Furthermore, to the extent that a “C” strategy is sufficient for Europe (and the fact that Fatas (1997) did not appear to address migration at all makes this conclusion suspect) it is in practice limited by the Stability Pact.

FINALLY, I suspect that Sparc and I don’t really disagree that much. I have nothing against a European common currency per se. It’s just that methinks that Brussels needs to devise more plausible mechanisms for regional demand management.

Until they do, Britain, Scandinavia and Switzerland would be wise not to forgo the advantages of A and B.

72

Trivial caveat: a fair amount of fiscal regional spending in the US is discretionary. Specifically, whenever rural regions fall on hard times, Congress typically responds with an “emergency” farm bill.

Pork barrel projects can at least potentially have a similar effect, although admittedly I don’t know how they vary with changes in relative regional income growth.

73

My responses (after several days’ delay). First point, my anti-EU position is so ingrained and so rarely questioned by friends and family that it is refreshing (if damaging to the ego) to have my opinions challenged.

On with the rest. Some points are unsupported assertions, personal opinions, etc, which I may or may not be able to support, in time, with cites. So here goes.

Go alien’s OP:
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.

Sparc:
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.

Me:
True, it is an oversimplification. It was a sound byte I heard years agp and liked it so much it stuck with me. I cannot find any evidence to support it.

Go alien’s OP:
The UK will eventually join the Euro, when a government finally wins a referendum after rigging the question and squandering taxpayers’ money in propaganda. Most people accept this, and despite a majority being against the Euro, also accept that the government will trick us into it.

Sparc’s comment:
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.

Me:
The democratic process in the UK is probably no worse and no better than most other western democracies. The problem for all of them is the lack of engagement of people in the process. People feel helpless (I certainly do) in the face of big parties and big government, hence the growth of single issue lobby groups. If a government spends enough money, it has a good chance of getting the result it wants, especially when the opposition parties are ineffectual and themselves divided on the subject.

Go alien’s OP:
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

Sparc’s comment:
Referenda were not held in most EU countries, actually only Denmark did and said no.

Me:
The fact that referenda were not held in most countries speaks volumes for the democratic processes. I was mistaking the recent referenda on the Nice treaty, (Irish result at http://www.rte.ie/referenda/, haven’t found a site for France) for referenda on the Euro.
Go alien’s OP:
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.

Sparc’s comment:
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.

Me:
The EU commissioners are not elected by anybody. They are chosen by heads of member governments. The numbers are determined by nationality, e.g. the UK has, IIRC, two places in its gift for failed UK politicians – currently Neil Kinnock and Chris Patten.

The European parliament is not a governemnt. It is the only democratic body in the EU, but MEPs seem to have little influence. They voted to dismiss the entire commission recently for corruption, yet no commissioners suffered anything more than losing their jobs and some were even re-appointed e.g. Neil Kinnock.

The EU Commission makes law that is applicable to all member states. The laws are described as procedures of one sort or another, but they have to be enforced in member states. If a member state doesn’t like a law, it’s options are limited. Some countries, e.g. France, don’t bother enforcing it.
Go alien’s OP:
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.

Sparc’s comment:
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.

Go alien’s OP:
With no democratic accountability, it has none.

Sparc’s comment:
Which is a statement in complete fallacy. Once again I refer you the previous thread.

Me:
The first sentence is my opinion, based on the arguments (good, bad or indifferent, you decide) I had previously advanced.

I read through the linked thread and saw little to persuade me that the EU is a democracy in the sense that the UK, USA, France etc., are.

The lack of democratic accountability is the biggest single weakness in the EU. I cannot vote fot a single EU commissioner. I can only trust the UK Prime Minister’s ability to select two men/women whom I would consider myself. Kinnock and Patton are not two whom I’d choose.

Lots of countries would like to join the EU. Just think all of that aid from the rich western democracies and the ability to place politicians and their cronies in the tax-free paradise that is Brussels. Of course they want to join.

I am anti-government in pretty much most cases. Governments have too much power and too little accountability. As a rule, they try to do too much and are not very good at what they do. The current UK government is a fine example - the only thing it appears to be any good at is spin doctoring.

Mainstream parties, both in government and in opposition, appear too like each other, hence the apathy of the electorate and the growth of anti-system personalities like Pim Fortuyn, Jorge Haider and Jean Marie Le Pen.

The EU is government writ huge with even less accountability and unlikely to be any better than national governments at anything.

74

Go Alien, why do you think a lack of referenda indicates a lack of democracy? We have elected representatives in place who (theoretically, at least) have the time and skills to make objective decisions for the good of the nation as a whole. As you said yourself, the general public in the UK are not really engaged in debating adoption of the Euro. I don’t want people who don’t even have a minimal understanding of the pros and cons making decisions that will effect the country so dramatically. While I do not trust individual MPs particularly, I trust them to have a slightly better grasp of the real issues than a general public largely spoonfed by a biased media.

75

>> The EU commissioners are not elected by anybody

I assume you mean they are not elected by the population at large. You cannot imagine how tired I am of hearing this silly argument. No country that I know of elects every government official or decides most things by referendum. Go alien, I see you are in the UK. Please tell who you voted for Prime minister, home secretary and other members of the government. And tell me if you consider the British system democratic enough for your taste.

76

It seems my previous post on monetary regulation was lacking in carrying some points across. I shall attempt to be a little clearer.

For the sake of argument and sanity in the debate I shall use Flowbark’s system to divide the regulatory possibilities, although we would need a finer granularity in division for full accuracy.

As re A. and B. Flowbark is of course fully correct (save small nitpick to follow) and I think it is fairly obvious thay have naught to do with the debate for reasons obvious.

As re C. Flowbark is also correct in that this option is not dynamically open to the US and limited by the Growth and Stability Pact in the Euro Zone, for reasons I outlined earlier, being chiefly possible undesirable backlash of fiscal policy to drive a floating currency’s evaluation.

Well yes, but how can the US be in both camps? The Euro Zone stands on an equal footing to the US here. The ECB can devalue or revalue the Euro as they see fit (well within certain limits like any central bank), however, just like the US Dollar the Euro is a floating currency and therefore best left to float, lest we wreck havoc in the global economy, what-with the two currencies together encompassing a sizable portion of globally available capital per capita. Hence the comparison to Texas, or the Netherlands against the UK is fair, while how the US and the EU implicitly end up on opposite sides of the dividing line I do not understand, if the suggestion is not that the Dutch Euro should float against itself in contrary to the Texan Dollar?

Flowbark is correct re the principles of theory, but the conclusion is wanting for reason of inherent differences between the EU and the US.

In a most simplistic manner the situation can be described as follows. While insurance and redistribution through tax receipts is relatively high in the US, unemployment security and welfare support are by EU standards virtually non-existent. While redistribution and fiscal insurance is virtually non-existent in the EU, by US standards, the EU relies on a fairly homogenously high level of regulated subsidization to counter asymmetrical recession effects. This applies both to the individual workforce through welfare checks and unemployment security and low profit, but essential activities such as agriculture through the regional subsidy system.

As a result there is a high tax burden that theoretically serves to stockpile profit for times of economic downturn. Since the American system is more reactive and immediate the need to stockpile is lower, hence a lower tax burden is possible.

This is largely the reason why the EU has centralized the regional subsidy system. Each member state pays it’s ‘federal tax’ or ‘membership fee’, somewhat glibly called ‘contribution to the EU’. This fee is calculated relative to size, GDP, GRP, global recession keys and so forth. It is redistributed according to a complex regional distribution system where the EU is divided into several hundred regions that float into various levels depending on the state of their current business cycle.

This is Fatas implicit argument in his paper on fiscal federation.

Hence: the Euro Zone cannot be called weak in progression in this respect, it is just different.

I personally I prefer the American system. But there is no arguing that from a macroeconomic viewpoint the effects are similar as re redistribution and insurance. I just happen to think that the EU system (which BTW is inherited from the member states, since it is the usual way of business in Western Europe) is too unwieldy and inhibitive to market flexibility that might be painful in recession times, but serves the purpose of creating dynamic growth. That being said Fatas could have a point in that a US system would be hard to incorporate in the EU, which leads us to the next point.

Contrary to what was stated Fatas does indeed address this, albeit not in the same paper, but in ”Intranational Migration, Business Cycles and Growth” as previously linked to. Once again; the effects of migration as a reactive response to asymmetrical recession is less effective in Europe due to a more homogenous nature of employment evolution and population stability. In other words; the EU is far more evenly populated and tends to have a less asymmetric reaction to recession, hence moving people and corporation has less effect. That being said it still happens and it would seem that relative to the possible effect it is equal to the US. The level of welfare subsidies and unemployment benefits under D. bolster and support migratory effects by not motivating migration in the EU and motivating migration in the US.

The political need to increase mobility in the EU has more to do with stability of the Union and increasing dynamism in the competitive sphere in order to create a more modern flexible environment for sustainable growth.

No. The US and the EU use a mix of C-D-E strategy, where the mix in the US leans more towards D supported by E and the mix in Europe pivots pretty heavily around D. Within C, the Euro Zone has slightly higher regional flexibility, which will pass away as fiscal policy is streamlined. Within D the system will be found to have very different nature but similar effect. The effects of D also support a comparatively different degree of E.

Had not all this been in place the Euro experiment would have been tantamount to financial suicide. So far it seems to work. The introduction of the common currency saw a fall in Euro value that was much warranted as the EU zone struggled through the inception of the money and the 2001 recession. As the dynamics of the EU macroeconomic regulation seems to alleviate the effects while we struggle out of that recession, and while the US struggles with the effects of the corporate crisis, confidence in the Euro has been restored. As I have said earlier, I wish we would have been able to keep it at the lower level though.

Sparc

77

I don’t consider the British system democratic enough. I’d prefer the US system, where the president is directly elected. I do object to a system where I notionally elect an MP to represent my interests in Parliament but who is actually nothing more than a creature of the party that supported him in the campaign.

Unfortunately, all democracies suffer from lack of engagement (what was the turnout in the last US presidential elecion?)

Referenda are not a panacea. I favour referenda simply because most governments don’t - it allows people a direct say in decisions rather than their representatives. If people trusted politicians and believed that they had the best interests of the country and their electorate at heart, there’d be no need for referenda. Unfortunately, that is not the case.

As I said, referenda are not the answer, I don’t know what is, given people’s opinions of politicians and politicians’ power to manipulate the media, but referenda at least allow the electorate an opinion and a direct say.

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I forgot to address this part.

As re Britain; the argument is far too lengthy for me to address, it’s a whole thread of its own.

As re Scandinavia; Norway is not part of the Union, hence we can forget them. Finland is already in the Euro Zone. Denmark and Sweden, especially the latter, have seen some crushingly negative effects of not being part of the EMU in the last months. Both currencies have been fluctuating wildly against the Euro and while being too small to themselves offset recent recession effects they have simultaneously not been able to benefit from the equalizing effects of the Euro that for instance has held up Germany during the rough ride we just went through. Unexpectedly it turned out that the Northern economies suffered worse in the recent downturn while France, Italy, Spain, Greece and so on experienced less dire effects. As a result popular support for the Euro has grown dramatically and the Swedish government has announced that they will join the EMU as soon as they fulfill the formal criteria and are able to live up to the Growth and Stability Pact. Denmark are of course handcuffed by their own decision to hold referendum with negative outcome, I am sure there is a number of Danes that are kicking themselves pretty hard over that right now.

Although Switzerland is considering it more seriously than ever, they remain a beacon of neutrality and are not even on the applicant list to join the Union, hence locking the Swiss Franc to the Euro would seem to be somewhat of a remote probability.

To the next matter,

Go Alien, I am glad that you appreciate to hear the serious arguments of the opposition. I’ll answer try to answer some of your positions as well as I can.

I see by your posts that you seem to have lost faith in the democratic process. I somewhat agree with you in as much as that there are real problems in today’s political landscape, part of it I think is due to political aloofness and inability to transport the issues to a level that everyman can relate to. In that vacuum of information it is unfortunate that some populist and IMHO quite damaging simplicities have taken root, as was so blatantly clear in the French presidential elections most recently. Another problem could also be the tendency of politicians to not dare address public opinion on difficult issues when it has gone pear-shaped in that way, but to instead resort to hand wringing and real politicking.

Your position seems to be that the government know not what they speak of, desire to take the citizenry for a long ride for reasons unstated and that the general population are foolish lambs. Is this a reasonable position?

Could it be that some parts of the citizenry and the government are being less emotional about loosing the Pound Sterling and seeing the Union Jack get tainted by the Stars On Blue and more reasonable as for the long term effects of stability and growth within the Union? Could it be that rather than having resigned to fall for the evil trickery of government, there is a tacit admittance that the reasons to opposition are not based on reason, but emotion?

You answered that yourself just a moment ago:

I might add that the public opinion is fickle and representative democracy serves to slow that fickleness down to a cycle over a couple of years at least. Denmark’s current quandary being a case in point, the government foresaw the current situation, but did not dare to risk their political accountability and now end up being able to say; ‘hey you wanted it, you got it, don’t blame me!’

In my view referenda are cowardice, I’d rather see the politicians dare take decisions that polarize the population and let us decide when we see the effects. We then still have a vote and you bet yourself if someone starts fucking with us we usually use it. That’s what representative democracy is about, we give someone we trust the benefit of the doubt to decide for us for a while, we set up some checks and balances by having an opposition the retains influence. If they show themselves unworthy of our trust, we chuck ‘em out.

I am saddened to see that the disinformation continues to be rampant in our Union. Maybe you should read my posts in the previous thread more carefully. You are still deeply mistaken as regards how our government functions. These are the Governing bodies of the EU:

The European Parliament - by direct election

The EP functions much like the parliament in any country, it shares legislative responsibility with the government, it exercises democratic control over the government and is essential in adopting the Union budget.

The Council of the European Union – by appointment of the parliaments of the member states.

This is our government. The Council is brought to order the Secretary General, who also acts as its spokes person - currently Javier Solana. The presidency over the council rotates between the member states on a six month basis – it is currently with Denmark. Each of the fifteen states has one ministerial representative in the Council, they are politically accountable for their decisions to their home parliamentary bodies (whom we elect if you might recall). All states vote on equal footing. The relative size of each member state is offset through the composition of the Parliament where we have representation relative to size.

The European commission works for the Council and has no power to decide whatsoever. They prepare papers and drive the decision process forward by acting on the decisions previously taken by the Council. Undoubtedly this is a position of influence and as we have seen there is room for abuse, but that the MEPs voted that the Commissioners should be fired is a bit like the US congress voting to fire Ari Fleischer, sure the government is liable to listen, but in the end they must not, nor does it make any sense. It’s called political grandstanding.

That answers pretty much the rest of what you said.

But this begs for comment;

I retain myself. Surf over to europa.eu.int. Look up all the papers and evaluations produced on the status of development in the 10 applicant states. You’ll find hundreds of miles of proof that entry into the EU has hurdles so steep to overcome that by the time a state fulfills them they will by no means be a monkey on anyone’s back, nor would they technically speaking need to be part of the Union. By that time it is a bilateral benefit that has been created. It’s not like we a have a bunch of raving lunatics in government who only want to give our tax money away to developing neighbors. Or maybe you believe in the Great Comecon Cabal, that in the end it’s all a ploy by the Soviets to finally get world domination?

Sparc

79

Sparc

I checked out the two EU sites you suggested.

http://ue.eu.int/en/info/main1.htm

and:

http://www.europarl.eu.int/presentation/default_en.htm

What’s interesting is that the parliament has only in the last ten years acquired any legislative function. Previously, its powers were limited (IIRC all it could do was reject the whole EU budget).

http://www.europarl.eu.int/presentation/default_en.htm#political

In the short time I had, I couldn’t find a mission statement for the European Commission. Instead I found Romano Prodi’s speech (Feb 2000) on shaping the EU. http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=SPEECH/00/41|0|RAPID&lg=EN

It has a lot of juicy stuff but is too long to quote extensively from. It reads like a speech by President Bush, not what one would expect from the chief civil servant of the EU. It seems that Prodi believes he is as important a world player, even though the constitution of the EU as described in Sparc’s recommended sites implies that all policy and legislation is initiated by the council of ministers and the European parliament. In other words, Prodi should be doing what he’s told, not making policy pronouncement’s on Bosnia. Indeed, it is the equivalent to the head of the UK civil service making a speech to the House of Commons about the civil service’s role in initiating foreign policy.

As I have always maintained, there is an accountability gap in the EU. When the leader of the largest group in the parliament is beter known than Prodi and has more influence, then we will have a democratically accountable EU.

And now I have to go and won’t be able to see any replies for a couple of days.

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And one last point before I really must get home or be killed my Mrs Alien :slight_smile:

Having steep hurdles doesn’t invalidate my argument that joiners of the EU see it as a potential gravy train. The high hurdles are pretty much put in place by incumbent recipients of aid to prevent their snouts being pushed out of the trough by new members. I’m sure countries like Portugal and Ireland (both net aid recipients, IIRC) would hate to lose money to newcomers like Poland and Cyprus.