[QUOTE=Ximenean]
Objections to the euro are a bit simpler. From an economics 101 perspective, it has always been difficult to see how such different countries could share a common currency.
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Just to expand on this a little, when monetary policy is centralised it removes the ability of national governments to use it as a means of addressing economic issues that might affect that country particularly without affecting the Eurozone as a whole. If your country has low inflation and you really need to stimulate spending, but inflation is high elsewhere, you’re stuck with ECB interest rate increases no matter what they do to your economy. And you lose the ability to even contemplate things like devaluing your currency. I don’t think it’s hard to see why people who may be willing to go along with a certain amount of loss of sovereignty in policy-making would balk at ceding that much control over their country’s economy.
Assuming the British left has the same objections as the Irish left, it comes down to, firstly, the issue of taking power from a democratically-elected national government and putting it in the hands of unaccountable bureaucrats, and secondly the inevitability that that power will be used to further those bureaucrats’ neoliberal agenda.
I suspect that the verdict of history will be that European Community (before 1986, the European Econimic Community) was a sucees, the EU was not. By 1986, Economic Union had been achieved, the political Union which found its manifestation in the SEA and 1992 Maastrict Treaty which created the EU; will probably be thought of as overreaching.
If the EU were democratic – that is, if all power were centralized in the parliament – would that satisfy them?
The criticism I’ve heard was that it established a common currency without a real sovereign common government overseeing that currency or related financial decisions, so each Eurozone government going its own way put a strain on the euro.
But, that has nothing to do with their being “such different countries,” does it? I have no doubt the exact same thing would happen to the U.S. dollar if the Federal Reserve were abolished and relevant monetary policy devolved on the states.
That the US has a strong federal government ultimately depends on the fact that Americans see the US as a single country. Californians do not object to the idea of someone from Illinois being their president and wielding real power over them (even if some of them object to the current man from Illinois). They consent to the kind of financial transfers that take place from richer states to poorer ones. But if the EU or the eurozone had a powerful federal government, would Dutch people, say, be comfortable with a president from Portugal? I doubt it. And we already know that the Germans and other northern countries are deeply unhappy about bailing out Greece.
And the reason we don’t have this sort of federal structure in the EU is because ultimately it would need the consent of the peoples of EU countries, and the support just isn’t there. The populaces of European countries do not generally regard other Europeans as their countrymen. There is a certain kinship, I suppose, but it is nowhere near as strong as the nationhood that Americans feel.
They put the cart before the horse with the euro. You really need a bona fide nation first, before you can have a single currency. Multi-national currency unions have been tried before, and they always collapse.
A further reason why the Eurozone and the US are not alike is that it’s much easier to move around the US if one state is facing economic problems. Moving around the EU to work is an absolute nightmare, due to the likes of language, culture and legal mismatches in each EU country.
Bizarrely, the EU could be doing much more here to harmonize how each country handles mutual tax treaties (still handled on a case by case basis between member countries with no form of harmonization), how each country’s university’s degrees map onto another country’s (partly handled by the Bologna Process, though bizarrely, my employer, the University of Bologna is not party to this process), and a million other things to make moving around the Continent for work reasons much easier, but they’re too focussed on building castles in the sky to actually implement regulations that could make everybody’s lives easier.
Yes, but that’s not because they dislike Greeks or Greece or don’t feel any kinship with them - it’s because they’ve grossly mishandled their money, and are probably going to keep right on mishandling it if they’re spotted some more cash without strings attached.
Last time I checked, the US citizenry wasn’t too happy about bailing out Wall Street either.
As an American, I don’t see why the eros disn’t stop at the common market…and then implement a “trading” currency (whilst keeping their own currencies). Europe is too diverse and has too many differences. Take Greece:its a primarily service/tourist economy on the edge of the continent. It is not a business-friendly place, which is partly why tax evasion is rampant (the WSJ carried a story abot a Greek businessman who tried to get into the beer business-government regulation nearly put him out of business).
Then there is Germany, which has a huge manufacturing sector, and an efficient breaucracy-presumably, Germany welcomes business in a way thet Greece doesn’t. Now you pair them together-bad mix.
So I think that the euros shold back off a bit.
Actually, the Germans don’t entirely like the Greeks, at least not now, and the Greeks at times hate the Germans. ironically, it’s really the Greeks who caused their own problems entirely, but they still blame the Germans. And they’re angry. I suppose it’s easier to throw blame and solve problems.
For once, Ralph, you might have had the right idea. But the “leaders” wanted to lead, I suppose, and they led people down the garden path.
I don’t get what the big deal is there. Money’s money - it’s the great thing about money. It’s a better equalizer than even guns. Every action of Man turns into a drop of quicksilver in the great flow of mercury (to shamelessly steal Neal Stephenson’s metaphor). Doesn’t matter what the action was, in the end, it’s just a dollar bill.
Or, to put it another way, Hollywood sells dreams. Chicago sold steel. Washington sells laws. Salt Lake City sells crooked Bibles. Hawaii sells white beaches and sharks. All different businesses and business plans, all equivalent: it’s just money in the end.
What makes Europe any different ?
Well, yes, that’s actually the problem. Money is equalizing, and the balance is not where people want it for various and sundry reasons. Joining the Eurozone enabled Greece to paper over its debts and get much more in loans, because it cannot depreciate the Euro. Now the bill is coming due, and people simply don’t want to lend it any more money. Greece has no interest in stopping its very generous welfare state, but it cannot possibly pay for it.
However, if Greece defaults (which may create some… interesting legal situations), it may start a chain reaction of bank failure and government default, first across southern Europe and then maybe even in the north. But Germany right now is having a hard time coughing up even more money for Greece - they’re not exactly rolling free cash and even if they do, there’s no particular reason to expect the Greeks will change anything, so it’s just kicking the can down the road.
And you’d be right that things might equalize, but the various peoples dont’ want it to. They have these pesky things caled law and culture which caue them to act and develop quite differently. The Greeks want the party to continue, but don’t want the consequences of it. The germans, meanwhile, aren’t that interested in permanently subsidizing Greece (and later, of course, it would other states as well.)
What’s going on in Europe seems to be straight out of Optimal Currency Area theory. Basically, the idea behind the theory (or model I should say) is that you need certain factors in place for a single currency. I would characterize the main factors as (1) good capital mobility, (2) good labor mobility, (3) a regular system of financial transfers and (4) centralized banking/financial regulation and supports. The wiki article characterizes the factors somewhat differently.
The US has all of these, or at least it does today. People can move across the country for jobs, people can move money (capital) around, we have financial transfers in the form of Federal aid to the states, direct Federal spending, Medicare, Social Security, etc., and although states do regulate banking and finance, ultimately, the Feds have the final say in the majority of banking/financial regulation.
Notice, there’s nothing in those factors about political makeup of a union. It’s probably easier to achieve the factors in one single government, such as the US has, but you could have the Eurozone countries achieve many of the same factors through treaty. It’s just that the Eurozone countries don’t want centralized bank regulation or a centralized social security system or the like.
If you accept OCA, then the problem is not that there’s no central government, it’s that the various governments are ideologically opposed to the necessary steps to have a functional monetary union. In which case, it may make sense for the monetary union to break up.
Now, as for the US, there are a number of interesting papers I’ve read long ago that argue that the US should have had multiple currencies at least until the beginning of the 20th century. Indeed, the gold/silver standard debates in the US in the latter 19th century are sometimes cited as proof of OCA.
Now, this is a model, not an iron-clad law of the universe. It may be true, it may not be. But prior to the implementation of the Eurozone, there was enough evidence in favor of OCA, that the Euro policy makers should have been prepared for this type of crisis happening. That they seem to have ignored OCA completely indicates to me a bit of obliviousness on their part. I wasn’t really that interested in economics back then, though, so I’m not quite sure how vigorous the debates about OCA were. I know a few economists warned of the possibility, but it seems that the Eurozone really didn’t build in the proper safeguards to prevent this sort of crisis from happening.
Yes, sort of. I’m not well-versed on the specifics of command economies, but it’s my understanding that there were several types of “virtual” rubles, which were used for internal accounting purposes to deal with transactions between state-owned enterprises. It might be better to think of the Soviet ruble as an accounting mechanism rather than a currency, per-se. But it’s not a topic that I’m capable of speaking to in any great detail.
EDIT: I also seem to recall that they had a special type of ruble for foreign exchange purposes.