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There has been monumental debate on this forum on the future, stability, division and or otherwise of the Euro as a currency.
Are we at least now all agreed, not least following the statements of Angela Merkel concerning how Europe has to remain united, and all the evidence of the past week that; whatever the debate about the viability of the bailout funds and the partial default of Greece, the Euro is not about to disappear?
Seems to me at least, that despite all the protestations of its imminent collapse and a return to the various sovereign currencies, that this argument is now dead, dusted and gone to join the choir invisible.
Can we all agree on that – love it or hate it – financial crisis continuing – the Euro is plain and simple here to stay?
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@Chris McCarthy wrote:
There has been monumental debate on this forum on the future, stability, division and or otherwise of the Euro as a currency.
Are we at least now all agreed, not least following the statements of Angela Merkel concerning how Europe has to remain united, and all the evidence of the past week that; whatever the debate about the viability of the bailout funds and the partial default of Greece, the Euro is not about to disappear?
Seems to me at least, that despite all the protestations of its imminent collapse and a return to the various sovereign currencies, that this argument is now dead, dusted and gone to join the choir invisible.
Can we all agree on that – love it or hate it – financial crisis continuing – the Euro is plain and simple here to stay?
Word on the bond markets is that Spanish property will need to be devalued by 50% from todays prices at least — the debate at the moment is whether it should be 60% or 70%. Some say more but thats too extreme.
My view is that a 60%-65% devaluation from present levels on Spanish property market values is about right under current conditions.
— Munky
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@Chris McCarthy wrote:
Are we at least now all agreed, not least following the statements of Angela Merkel concerning how Europe has to remain united, and all the evidence of the past week that; whatever the debate about the viability of the bailout funds and the partial default of Greece, the Euro is not about to disappear?
I always thought they would do what is necessary to save the Euro. The problem is, what’s needed is both illegal and political suicide for Merkel in Germany. There are many people in Germany who will do absolutely everything in their power to to stop Germany paying to bail out the Euro. Greece will need another bailout and bond holders will need another haircut. Thats assuming this deal will stick – which I doubt.
So I have come to the conclusion that the Euro is doomed.
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Define “euro”!
If you mean a currency called the “euro” then yes it probably will hang around (even if countries somehow manage to stop using it as their “sovereign” currency) I don’t think anybody is predicting that it will suddenly vanish into thin air.
However if you think of the “euro” as more than just a currency – an agreement between certain nations to share the same currency, then it’s difficult to see how that agreement can continue unless there is some kind of fiscal union. I can’t see that happening.
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The Euro, in it’s current form, will only hang around if the German population are willing to pay through the nose for it, and that means much, much more than they have already commited, to keep the periphery nations (pns) average standards of living on a par with their own.
To put it another way there needs to be a Eurozone federal income tax which will mostly go to the poorer states. That is how it is done in the US and UK and no-one knows how it could be done differently.
If the German population can’t accept this then it won’t just be the Euro that breaks up it will be Europe itself, with continual rioting and unrest in the disadvantaged countries destabilising Europe as a whole.
The Germans do very well out of the present situation, their exports are far cheaper than they ought to be for an economy as strong as theirs and it is the pns that are keeping the value of the Euro so comparitively low for Germany who in turn are keeping it far too high for the pns to thrive.
If such fiscal unity can really be made to happen then the Euro will survive, but there is precious little evidence that Germany is up for it.This article has nothing new in it but encapsulates the problems pretty well.
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Word on the bond markets is that Spanish property will need to be devalued by 50% from todays prices at least — the debate at the moment is whether it should be 60% or 70%. Some say more but thats too extreme.
My view is that a 60%-65% devaluation from present levels on Spanish property market values is about right under current conditions.
— MunkyWith respect, unless I am missing the point – which happens to me in economy threads I have to admit – the basic question or point of this thread is not about Spanish property prices or values (plenty of threads about that) it is just asking; is the argument about the Euro dying, or being replaced now finally over?
Can we just get on and accept that the currency which is the Euro, which is being used to buy a latte all over Europe is here to stay, and we will not be returning to escudos, lira, drachma, punt or the like.
Isn’t this a fact now?
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@Chris McCarthy wrote:
Isn’t this a fact now?
No! Just because Mrs Merkel has implied that she will defend the Euro to the death (her political death, that is) it doesn’t mean the electorate will defend it too. I believe that recent polls showed that a significant percentage of the German population would like to return to the D Mark.
Since none of the underlying problems were addressed last week, the debt problem will continue for the foreseeable future and if Mrs Merkel gets pushed out in the meantime (or sees where it is all heading and changes her opinion) anything and everything is possible including a return to the currencies you listed.
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@zoro wrote:
This article has nothing new in it but encapsulates the problems pretty well.
Thanks Zoro for this link it was very interesting.
It also contained a phrase that said, regarding the notion today of anyone leaving the Euro: that it would be legal and financial disaster for all concerned so c’mon lets accept it, it just isn’t going to happen and let’s focus on other stuff that might happen.
What really interested me in the article was of course the ECB still has an interest rate of 1.5% that it can cut, and they have yet to print money, both of which the UK has done. These guys still have options yet.
But c’mon, the Euro is here to stay, more chance of the UK having to join it and actually being desperate to join in 10-15 years than it disappearing. Everyone wants an end to the
crisis but nobody want to go back to 17 currencies like your link said…. it just isn’t going to happen.The argument is over really. There is still much to understand and discuss about the economy but the Euro stays and we can count on that.
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@katy wrote:
If the euro stays there will be at least another 10 years of high unemployment and low or nil economic growth in the eurozone. The only positive thing is that the UK is unlikely to adopt the euro in my lifetime. 😀
I hardly think the existence of Euro is to blame for high unemployment or low growth in the Eurozone, Sterling is not exactly an awesome currency, nor the Dollar with the US not even triple AAA rated any longer. I rather think the blame for the result of the economic collapse, lies somewhere other than our currencies, as does the solution.
The Euro’s actual existence and future, is my essential point, and it now seems beyond doubt, as it appears conclusive now, that the debate which has raged back and forth on this site over the past several years, is effectively now over.
The Euro is not going to collapse. There is no return to 17 individual currencies. There is no possibility of some bizarre two tier Euro scenario. Can we accept that all those arguments and hypotheses are redundant?
We have a single Euro currency, it is what it is, across a huge trading and economic bloc. It is no more likely to go anywhere right now than the Yen, Rupee, Peso, or Rand.
It is what it is, and it is therefore pointless arguing in future threads about the economy, or heaven help us sometimes on here Spanish property, it is now pointless arguing that the Euro might somehow be removed or replaced.
The Euro is here and is as permanent and prominent as the Dollar and probably far more important and relevant than that single island currency Sterling.
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Can we just get on and accept that the currency which is the Euro, which is being used to buy a latte all over Europe is here to stay, and we will not be returning to escudos, lira, drachma, punt or the like.
Isn’t this a fact now?
No. Its even more likely the Euro will fail.
It also contained a phrase that said, regarding the notion today of anyone leaving the Euro: that it would be legal and financial disaster for all concerned so c’mon lets accept it, it just isn’t going to happen and let’s focus on other stuff that might happen.
The Germans seem very keen on the idea no matter the cost.
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No it’s even more likely the Euro will fail.
Oh, of course silly me, so… The eternal doomonger response has it then.
No reasoned argument, just the simple expostulation… The Euro will fail.
The Germans seem very keen on the idea no matter the cost.
Do they, do they indeed? Well I suppose that’s that then, how stupid of me.
Or are you missing the point entirely? Thus reducing the validity of your many previous and future posts considerably.
Whereas, if you just accepted that your rather extreme view that the Euro was / is a goner no longer holds water. Then maybe we could get back to discussing the relative issues of Spanish property without this rather false and misguided attempt to always allude to an Elephant in the Room because that simply isn’t accurate today.
The Euro is very evidently here to stay, I think you need to get past that or give me a far better argument than just – it will fail.
My purpose here by the way is of genuine interest.
One way or another, this blooming forum had me believing for awhile, that maybe some of you were right, that jeeze the currency could actually fall apart – you had me going – you really did.
But c’mon, it is not credible to talk of the currency doing anything other than remaining now. Actually the real debate would truly be whether Sterling will join the Euro in Katy’s lifetime.
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Well I don’t claim to be an expert on currencies or the european crisis but the general tone across all the financial newspapers is that the latest deal is a shambles and just delays the inevitable(whatever that may be). The debate is far from over.
I really am not arguing, none of us knows. Probably it will continue but not in it’s present form. As long as the UK keeps out I am happy, spent my last 1900 euro in Italy a few weeks ago (bloody expensive there!) and apart from 4 days in marbella for a party in Dec am not planning to buy anymore in the near future…I am out of here 😆
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Chris, you keep saying that the argument is over and the Euro is here to stay. The latter MAY be the case, however I haven’t seen anything from you that disputes the blindingly obvious; that it can only survive long term with complete fiscal unity in the Eurozone. Are you implicitly accepting that?
If so then the question has to be asked who will set the budgets and decide the taxes? If it were to be done democratically then all 17 member states would get a vote i.e. effectively dictating Germany’s economic policies. I can’t see that happening any time soon, it would be an anathema to Germany. If on the other hand Germany, by dint of being the largest economy, gets to decide on the economic policies for the other members then that’s democracy out of the window. Are the European nations ready to give up their independence yet?
To make the Euro work again for all its members, Europe will have to be a very different place from what it is now and if that can’t be achieved then the Euro will lurch from crisis to crisis with Germany being asked to pick up the bill every time.
Yes it would be a legal and financial disaster leaving the Euro, I don’t think the legal niceties matter too much when dealing with this crisis and it is already a financial disaster, we just haven’t seen the full extent of it yet. There is no win/win solution here, they are all lose/lose. The only differences between staying or leaving is that the latter will eventually lead to a recovery for the peripheral nations, the former condemns them to eternal austerity.
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@Chris McCarthy wrote:
No it’s even more likely the Euro will fail.
Oh, of course silly me, so… The eternal doomonger response has it then.
No reasoned argument, just the simple expostulation… The Euro will fail.
The Germans seem very keen on the idea no matter the cost.
Do they, do they indeed? Well I suppose that’s that then, how stupid of me.
Or are you missing the point entirely? Thus reducing the validity of your many previous and future posts considerably.
Whereas, if you just accepted that your rather extreme view that the Euro was / is a goner no longer holds water. Then maybe we could get back to discussing the relative issues of Spanish property without this rather false and misguided attempt to always allude to an Elephant in the Room because that simply isn’t accurate today.
The Euro is very evidently here to stay, I think you need to get past that or give me a far better argument than just – it will fail.
My purpose here by the way is of genuine interest.
One way or another, this blooming forum had me believing for awhile, that maybe some of you were right, that jeeze the currency could actually fall apart – you had me going – you really did.
But c’mon, it is not credible to talk of the currency doing anything other than remaining now. Actually the real debate would truly be whether Sterling will join the Euro in Katy’s lifetime.
Errrm but you haven’t provided a reasoned argument for why you think the euro is here to stay. You started this thread by stating “Can we all agree on that – love it or hate it – financial crisis continuing – the Euro is plain and simple here to stay?” but you refuse to say why that should be the case.
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the euro as it was is already dead they have broken all the rules set out in its original state we are now entering the 2nd life of the euro how many more different lives it will be allowed is down to the can kickers who keep burying their heads and hopeing doing alittle tweak here and there will help save it when in reality they should of been bold and faced it head on 2 years ago then maybe what they have just done would of been enough but we are in a whole different hole now and its ffar deeper
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@Chris McCarthy wrote:
What really interested me in the article was of course the ECB still has an interest rate of 1.5% that it can cut, and they have yet to print money, both of which the UK has done. These guys still have options yet.
Chris, I’ve just noticed your assertion here. The bit about printing money wasn’t in the article was it?
In fact Quantitative Easing in the UK is where the BoE “prints money” to purchase assets from private sector businesses including insurance companies, pension funds, high street banks and non-financial firms, plus government bonds.
ECB support for the periphery nations is where the ECB “printed money” to purchase only their government bonds.
To date the UK has made GBP275 billion pounds available (but not yet spent it all) for QE. The ECB on the other hand has already spent EUR175 billion on these bonds. Yes, I know it’s less than the UK but the principle remains the same.
Do you see what the clever old ECB did there? They haven’t actually indulged in QE at all but something completely different. Ha Ha!
Incidentally the Germans were so peeved about this that their only two members of the ECB resigned over it and Germany is trying to make sure they don’t do any more. They are insisting on the austerity route to growth. No-one else but the Germans thinks it will work but can’t do anything about it.Oh, and the reduction in interest rates will only happen if German inflation is deemed to be acceptable.
It went up in the first place from 1% to 1.5% at their behest even though such an increase clearly isn’t good for the periphery. -
@Chris McCarthy wrote:
No it’s even more likely the Euro will fail.
Oh, of course silly me, so… The eternal doomonger response has it then.
No reasoned argument, just the simple expostulation… The Euro will fail.
The Germans seem very keen on the idea no matter the cost.
Do they, do they indeed? Well I suppose that’s that then, how stupid of me.
You were given several complicated answers and choose to ignore them so I made it simpler for you. Here George Soros is of the same opinion as me
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@Chris McCarthy wrote:
There has been monumental debate on this forum on the future, stability, division and or otherwise of the Euro as a currency.
Are we at least now all agreed, not least following the statements of Angela Merkel concerning how Europe has to remain united, and all the evidence of the past week that; whatever the debate about the viability of the bailout funds and the partial default of Greece, the Euro is not about to disappear?
Seems to me at least, that despite all the protestations of its imminent collapse and a return to the various sovereign currencies, that this argument is now dead, dusted and gone to join the choir invisible.
Can we all agree on that – love it or hate it – financial crisis continuing – the Euro is plain and simple here to stay?
Merkel,. Sarkozy, Berlusconi, Soros, Roubini, Paul Volkers, Bernake and others have no idea whether Euro will survive or not. Wish is wish and reality is reality, these are only early days.
The only certainty is that the Western society will have to learn to live with less expenses and stop spending money they do not have. of course this means a full disaster for holiday home purchases… Which of course means that the people who sell such properties do not have a bright future…
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Europe Might Have Blown Last Chance to End Its Crisis
The euphoria over Europe’s latest rescue package faded quickly. Now the question is whether European leaders will ever agree on measures needed to end the sovereign debt crisis, and whether they will get another chance.
After an initial bounce, markets demonstrated a lack of confidence in Europe’s resolve to protect solvent governments from the financial malaise afflicting its weakest member nations. At a bond auction Oct. 28, the euro area’s third- largest economy, Italy, had to pay investors a yield of 4.93 percent — a euro-era high — to take the risk of lending it 3 billion euros ($1.8 trillion) for three years.
At least European leaders got the pieces right this time. They have recognized that a credible plan must include big writedowns of sovereign debt, a recapitalization of the banking system and guarantees for newly issued government bonds — and that all these elements are inextricably linked.
But the magnitude is all wrong. Even if put in place, the plan would reduce Greece’s debt by less than 50 percent, raise about 100 billion euros in new capital and boost the guarantee capacity of the European Financial Stability Facility to about 1 trillion euros. As Bloomberg View has pointed out, sovereign writedowns should be much steeper. And Europe needs a war chest of at least 3 trillion euros to ensure recapitalizations and cover the financing needs of euro-area governments.Opps, I was out a by Trillion euros.
Maybe Germany be persuaded to fork out another 125k per family to bail out the Euro, that would be nice.
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@Chopera wrote:
Errrm but you haven’t provided a reasoned argument for why you think the euro is here to stay. You started this thread by stating “Can we all agree on that – love it or hate it – financial crisis continuing – the Euro is plain and simple here to stay?” but you refuse to say why that should be the case.
My reasoning is based upon hearing people talk on here of the ‘imminent’ demise of the Euro over the past several years, and this not only not happening, but the talk of such an event amongst the politicians, the press and the banks all seems now to dismiss that possibility almost entirely.
It just isn’t going to happen that the Euro will go and we will return to the various individual currencies. It is just not going to happen. It suits the argument of some individuals on here to continually scaremonger that the Euro will fail, I listened for a while, but I believe that on the wider evidence I think we can discount the possibility.
As for Peterhun’s link to the George Soros piece, it is a good piece, it is an interesting piece, but it doesn’t say the Euro as a currency is not going to survive. We can all see that the various issues of Greek default, and general economic stability in the Eurozone are far from resolved, but nobody is talking in realistic terms that the Euro will actually cease to exist and we return to the individual currencies.
Fine, keep talking the situation regarding the wider issues, but I believe we should not being advising people that the Euro will not exist at some point in the next few years, in fact it is more likely to grow stronger once these issues have been resolved.
That is my only point. The Euro has survived and will survive long into the future.
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@Chris McCarthy wrote:
@Chopera wrote:
Fine, keep talking the situation regarding the wider issues, but I believe we should not being advising people that the Euro will not exist at some point in the next few years, in fact it is more likely to grow stronger once these issues have been resolved.
The ‘issues’ will be resolved with the destruction of the Euro, the fundamental basis of its creation was wrong. This is because it requires a continuous flow of money from the strong economies to the weak – much like the regions in the UK.
Germany, who would provide 85% of the money required, will not pay for it. Its in the German constitution and it was pledge by German politicians to their electorate when they joined the Euro. -
Chris, you keep saying that the argument is over and the Euro is here to stay. The latter MAY be the case, however I haven’t seen anything from you that disputes the blindingly obvious; that it can only survive long term with complete fiscal unity in the Eurozone. Are you implicitly accepting that?
I think that day is going to come in the future yes. I think when you live in Europe rather than the UK as I have for 20 years or so, you get to see that the benefits for the southern states in adopting the disciplines and practices of the northern states in both monetary and parliamentary terms eventually becomes obvious.
Shakeel has it right when he highlights say Spanish corruption or legal issues that defy belief, the right minded majority of Spanish people hate corruption far more than Shakeel does, a federal Europe saves a lot of time and energy reconstructing a Spanish state that can’t even decide on acceptable words for a national anthem.
A future United States of Europe is actually what a lot of Europeans would like to see, they are simply not as hung up on having a Little Englander sovereign state mentality. Most Europeans buy into the project. Currently the German electorate are patently miffed on several issues but they will get over it. Especially when they know they will be in charge.
Are the European nations ready to give up their independence yet?
To make the Euro work again for all its members, Europe will have to be a very different place from what it is now and if that can’t be achieved then the Euro will lurch from crisis to crisis with Germany being asked to pick up the bill every time.LIke you said later, there is plenty of lose/lose going on here. The UK, the USA all have their issues also with the crisis, I wouldn’t worry about the Germans they will look after themselves.
Yes it would be a legal and financial disaster leaving the Euro…. The only differences between staying or leaving is that the latter will eventually lead to a recovery for the peripheral nations, the former condemns them to eternal austerity.
That’s your opinion and I respect it, but I think the expression eternal austerity might be a bit extreme. Greece having lied its way into acceptance in the Euro is learning a hard, painful, bitter lesson. But all to its eventual good no?
It wanted the benefits of being part of the Euro, well, now it is getting them, a hard education in how to act and continue to behave. No bad thing I think, and a lesson to another like minded country or peripheral nation.
Greece going back to the Drachma – which is my original thread point about the Euro remaining – is not an option, it would completely wipe them off the map right now. They have to swallow their medicine and as much as they hate it, it will make them better.
Ladies and Gentlemen, c’mon now, I put it to you…. The Euro stays, it is not going anywhere. Let’s be fair here…
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@Chris McCarthy wrote:
Ladies and Gentlemen, c’mon now, I put it to you…. The Euro stays, it is not going anywhere. Let’s be fair here…
Hmm!
A hundred years ago, next year, there was a ship called the Titanic which was supposed to be unsinkable. A few naive people apparently said something like, “Hold on, steel is heavier than water isn’t it? How can it actually be unsinkable?” But many other people who knew better confidently pointed to it in Southampton harbour and said “Don’t be silly, look, it’s not sinking now so why should it ever sink?”
OK, I made that up. What happened next?
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@zoro wrote:
OK, I made that up. What happened next?
Yep, you made it up that’s the problem.
Of course what goes up, must come down, it is just a matter of when.
Roman rule lasted what… 1,500 years and the British Empire what… 150 years? The Euro might last only 50 years but it may last 500.
All things come to pass. The question is when. What I am saying is, the Euro is stronger than both Sterling and the Dollar at present. It is even seen by the likes of China as a real opportunity to support strongly and therefore weaken the world’s reliance on the Dollar.
It isn’t the bloody Titanic, I get your point, but that is a bit unfair to my argument. You can say that to anyone’s argument about anything… I could certainly say it in return about Polish Pete and his certainty on all things Euro economic crisis, his boat don’t often float either.
I am simply saying that right now, and for the foreseeable… the Euro is here to stay.
How difficult is that to accept really?
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@Chris McCarthy wrote:
@katy wrote:
If the euro stays there will be at least another 10 years of high unemployment and low or nil economic growth in the eurozone. The only positive thing is that the UK is unlikely to adopt the euro in my lifetime. 😀
I hardly think the existence of Euro is to blame for high unemployment or low growth in the Eurozone, Sterling is not exactly an awesome currency, nor the Dollar with the US not even triple AAA rated any longer. I rather think the blame for the result of the economic collapse, lies somewhere other than our currencies, as does the solution.
The Euro’s actual existence and future, is my essential point, and it now seems beyond doubt, as it appears conclusive now, that the debate which has raged back and forth on this site over the past several years, is effectively now over.
The Euro is not going to collapse. There is no return to 17 individual currencies. There is no possibility of some bizarre two tier Euro scenario. Can we accept that all those arguments and hypotheses are redundant?
We have a single Euro currency, it is what it is, across a huge trading and economic bloc. It is no more likely to go anywhere right now than the Yen, Rupee, Peso, or Rand.
It is what it is, and it is therefore pointless arguing in future threads about the economy, or heaven help us sometimes on here Spanish property, it is now pointless arguing that the Euro might somehow be removed or replaced.
The Euro is here and is as permanent and prominent as the Dollar and probably far more important and relevant than that single island currency Sterling.
I don’t really think you understand the concept of currency values and how it works. A currency adjusts according to how popular that currency is “how much other countries buys from that country”. As it is now Germanys export is greatly helped by that the euro is being kept low for them because of all the other countries in the EMU are having extreme problems. The value of the euro is about 50-60% to high for the PIGS because as it is now no one will buy anything from them. Tourism will always go down in harsh times so that won’t be able to help them to much either. Here in lies the problem with one single currency in such a diversified union and it will eventually make certain countries break apart from it. It has happened throughout history and it will happen again. Now even the countries that normaly would benefit from it because they have to bail out the others so even them will be in trouble. Sure you can take a different route and make those countries lower their spendings but it takes much longer time for those changes to take effect and you will also have riots and what not. Unemployment will be higher for a much longer time because of this.
The euro is allready dead but its kept “alive” by politicians and the tax payers are paying for it.
The only way for a single currency to work is by turning over all national financial power to one entity and that will never happen because of this crisis. Norway, Sweden and Denmark have allready begun discussing a scandinavian united states sort of and Finland will probably not be far away and we wouldn’t even mind helping out Iceland. Something we would never do freely for countries like Greece, Italy or Spain because these countries would never do the same for us. The difference is that these countries share similar culture, taxes, regulation and it would still not be an easy task. When our countries get into difficulties we don’t blame others like they do in southern europe. Instead we clinch our fists in our pockets and work harder to work off the debt like we did in the 90s when no one helped us. The UK and Germany also share most of these similarites but still have a few differencies. The baltic states are not to far off either.
Our politicians are slowly turning around because they can’t go against our population anymore.
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@Chris McCarthy wrote:
How difficult is that to accept really?
With respect, what’s difficult to accept is your groundless certainty.
Yes the Euro may be here to stay but it’s nowhere near being the certainty that you portray.
The Euro is fundamentally flawed and has been from the outset but if there were the political will it could be saved. The point is that there are no concrete signs of that political will together with them taking the necessary steps. Yes, the politicians have paid great lip service to keeping the Euro but have done precious little to ensure it happens.
Most commentators believe that the politicians couldn’t be stupid enough to let the Euro fail, hence a Euro failure is believed to be less likely but I genuinely believe that most politicians when forced to choose between doing the right thing and saving their own political skins, invariably choose the latter.
That is why Mrs Merkel has declined to give the copper bottomed pledges of money that lenders to governments want to see. She can’t do that without upsetting her electorate so interest rates will continue to rise for peripheral nations until they become unsustainable, generally reckoned to be 6-7%. Italy is now at 6% and that is with ECB support. Something has to give.
Either Germany has to announce that it will pay whatever it takes to keep the Eurozone intact (and deliver on that) or the Eurozone crumbles.
If you know for certain that Germany will pay whatever it takes then I concede that that your optimism warrants the certainty you are proclaiming.My own view is that it is far from certain and the jury is still out.
I’ve had enough of this thread now so feel free to keep proclaiming, I won’t be dissenting further.
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@zoro wrote:
I’ve had enough of this thread now so feel free to keep proclaiming, I won’t be dissenting further.
I have had enough of it also.
I appreciate all the back and forth on it.
I don’t have an absolute certainty on the issue.
A lot of things could happen, but they have all been long discussed and debated on what used to be a Spanish property forum, to which this relevant of course, but it seems to me that after all, the Euro is not going anywhere.
Lets leave it there then.
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@Chris McCarthy wrote:
@Chopera wrote:
Errrm but you haven’t provided a reasoned argument for why you think the euro is here to stay. You started this thread by stating “Can we all agree on that – love it or hate it – financial crisis continuing – the Euro is plain and simple here to stay?” but you refuse to say why that should be the case.
My reasoning is based upon hearing people talk on here of the ‘imminent’ demise of the Euro over the past several years, and this not only not happening, but the talk of such an event amongst the politicians, the press and the banks all seems now to dismiss that possibility almost entirely.
It just isn’t going to happen that the Euro will go and we will return to the various individual currencies. It is just not going to happen. It suits the argument of some individuals on here to continually scaremonger that the Euro will fail, I listened for a while, but I believe that on the wider evidence I think we can discount the possibility.
As for Peterhun’s link to the George Soros piece, it is a good piece, it is an interesting piece, but it doesn’t say the Euro as a currency is not going to survive. We can all see that the various issues of Greek default, and general economic stability in the Eurozone are far from resolved, but nobody is talking in realistic terms that the Euro will actually cease to exist and we return to the individual currencies.
Fine, keep talking the situation regarding the wider issues, but I believe we should not being advising people that the Euro will not exist at some point in the next few years, in fact it is more likely to grow stronger once these issues have been resolved.
That is my only point. The Euro has survived and will survive long into the future.
If the euro ends uo being used by say Spain, France and Italy – while other countries leave it for one reason or another – then would you say that the euro has survived?
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@Chopera wrote:
If the euro ends uo being used by say Spain, France and Italy – while other countries leave it for one reason or another – then would you say that the euro has survived?
Yes, I wouldn’t rule out someone being forced out or leaving… Greece has always been a case in point, and their decision to hold a referendum on the bail out could bring that about I suppose. They might be stupid enough to vote no I suppose.
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It may survive in another form but only if countries that share similar economies “Spain and Italy” but it will have a whole other value than it has now. Now one is saying that the euro will become worthless over a night. The end result is the same it will speed up those countries recovery but at the same time it will be a lot cheaper for “outsiders” to buy property in that area.
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@Chris McCarthy wrote:
@Chopera wrote:
If the euro ends uo being used by say Spain, France and Italy – while other countries leave it for one reason or another – then would you say that the euro has survived?
Yes, I wouldn’t rule out someone being forced out or leaving… Greece has always been a case in point, and their decision to hold a referendum on the bail out could bring that about I suppose. They might be stupid enough to vote no I suppose.
To my mind that would be equivalent to a break up of the euro and therefore failure. Even though there’d still be a currency called the “euro” it wouldn’t be the same as the “euro” we have now, which under such circumstances would have disappeared.
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@Chopera wrote:
To my mind that would be equivalent to a break up of the euro and therefore failure. Even though there’d still be a currency called the “euro” it wouldn’t be the same as the “euro” we have now, which under such circumstances would have disappeared.
[/quote]
Yep, you might be right, that is certainly a way of looking at it if several countries left. But I still say there is huge determination on the part of all the main players to stay in, and a real motion toward a federal US of E eventually.
But if the Greeks are MAD enough to think that with all the help and support they are getting from the Eurozone, that to just go fully wallop and bankrupt themselves, as if this can truly help them, then I could be wrong.
My money though says, that in 5 years time, if we all still on the forum – and I first came on here 5 years ago – then we will still be talking in Euros, we will hopefully then also be talking about Spanish Property Insight into buying, selling, renting, moving, lifestyle, education, health, prices, locations, pensions, employment, businesses, leisure, culture and well all the stuff that goes with that.
And lo, it shall come to pass that the predominance of these (entirely valid and interesting) financial / economic posts and threads will just be a distant memory, as we discuss then also the relative merits of…. Britain’s imminent entry to the Euro… (Joke guys, joke OK).
But seriously those days will come and if the financial crisis can just be declared – over. Then there are a ton of people looking to move once again. And I think the tone of the forum may change again also. I think everyone wants that, we all want a bit of financial stability no?
And on that point, is it me, or are there more guests on the forum a lot these days?
For a long time I would glance down the page and see just me and possibly one other forum member and 0-2 guests, lately, I often see 10-12 guests browsing. Or maybe am losing it and just seeing stuff?
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@Chris McCarthy wrote:
@Chopera wrote:
To my mind that would be equivalent to a break up of the euro and therefore failure. Even though there’d still be a currency called the “euro” it wouldn’t be the same as the “euro” we have now, which under such circumstances would have disappeared.
Yep, you might be right, that is certainly a way of looking at it if several countries left. But I still say there is huge determination on the part of all the main players to stay in, and a real motion toward a federal US of E eventually.
But if the Greeks are MAD enough to think that with all the help and support they are getting from the Eurozone, that to just go fully wallop and bankrupt themselves, as if this can truly help them, then I could be wrong.
The Greeks are not getting any help from Europe!!! The help is directed towards saving the banks that were greedy and loaned ot Greeks. And the banks are from Germany and France. So Germany wants to control Greek economy in order to make sure that the German banks are paid back by taking 10 skins out of Greek workers.
Greeks will have 5 years of severe austerity in order to pay German banks. Then the debt of Greece, after the 5 years of pain, will be 120% of GDP.
Would you sacrifice 5 year of your life just to make sure that some lousy German banks do not need support from their government?
The same with Spain, why would people suffer (50% unemployment fro young people) because they cannot devalue their currency and make the Spanish products more competitive? Just to make sure that the BMW and Audis are not too expensive for the world outside Germany?
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Katy’s post seems to be spot on, it’s far to premature to say the Euro is saved, and Soros too only gave that bail out deal a very short time before it went sour.
IMO, there are those maybe even in Greece that are making large Trades on Stock and Commodities markets by saying one thing and then saying another some days later, boost a market, then rock it, then boost it again. Markets are corrupt and big players are involved, perhaps Papandreou himself, who could blame him/them, when Governments, Ministers, MP’s, Bankers, regulators, Corporate types like Philip Green are corrupt and evading taxes to boot?
The world’s gone mad, it’s all about greed and sod the 99% of the populus. 🙄
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@flosmichael wrote:
The Greeks are not getting any help from Europe!!! The help is directed towards saving the banks that were greedy and loaned ot Greeks. And the banks are from Germany and France. So Germany wants to control Greek economy in order to make sure that the German banks are paid back by taking 10 skins out of Greek workers.
If that was the case it would much cheaper for Germany just to bail out its own banks and abandon Greece to its own fate ( French banks are the ones with the biggest exposure but the French Govt. can’t afford to bail them out). I have no wish to defend German banks, or any banks for that matter, but the situation is more complicated than just German banks bad, Greek people good.
The harsh reality is that unless someone bails out the Greeks they will be very poor very quickly (by European standards). But then again, why should Germans work hard and save so that Greeks can slob around?
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@mark wrote:
@flosmichael wrote:
The Greeks are not getting any help from Europe!!! The help is directed towards saving the banks that were greedy and loaned ot Greeks. And the banks are from Germany and France. So Germany wants to control Greek economy in order to make sure that the German banks are paid back by taking 10 skins out of Greek workers.
If that was the case it would much cheaper for Germany just to bail out its own banks and abandon Greece to its own fate ( French banks are the ones with the biggest exposure but the French Govt. can’t afford to bail them out). I have no wish to defend German banks, or any banks for that matter, but the situation is more complicated than just German banks bad, Greek people good.
The harsh reality is that unless someone bails out the Greeks they will be very poor very quickly (by European standards). But then again, why should Germans work hard and save so that Greeks can slob around?
Mark, of course the situation is much more complicated.
But the reality is that the DM would be so much stronger than the Euro and the Peseta/Drachma would be so much weaker. That would make the Spanish/Greek exports so much cheaper and the Germany exports so much more expensive. A Volkswagen Golf would cost £20000 in UK instead of £14000 but a Seat Leon would cost £8000 instead of £14000. People would buy Seat and Spanish would enjoy better exports.
Germany’s economy was in bad shape in 2002-2005 and they needed cheap money. Because of Germany, the cheap money was also available to Spain and Greece and, being humans (same as the Brits who made “property investments” with MEW-ed money), those countries abused the easy money and the result is that Greece is now bankrupt and Spain has 1.5 million properties that nobody wants to buy.
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The news that Greek politicians are attempting to replace the heads of the military with their own supporters is scary, its indicates there is a possibility of a military coup (again). That would be game over for the Euro, without a doubt.
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@peterhun wrote:
… and Spain has 1.5 million properties that nobody wants to buy.
Spain does not have 1.5 million properties that nobody wants to buy, that’s a general misconception and a rather snide aside that is very unhelpful in general but is most often used by people like yourself as some spurious and deliberately doom laden fact to continually hype up you own woe is the world and certainly Spain argument.
As is your further comment saying…. game over for the Euro without a doubt… in relation now to one item of news this morning, it is just yet more scaremongering. You just can’t stop yourself can you really.
I don’t understand people like you Peterhun I really don’t.
But then having watched ‘Attack of the Trip Advisors’ on TV last night, well actually maybe I do. Or maybe you were in the Peoples Popular Front of Judea, or was that…?
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@Chris McCarthy wrote:
@peterhun wrote:
… and Spain has 1.5 million properties that nobody wants to buy.
I don’t understand people like you Peterhun I really don’t.
But then having watched ‘Attack of the Trip Advisors’ on TV last night, well actually maybe I do. Or maybe you were in the Peoples Popular Front of Judea, or was that…?
You are in a different world from me. I see the world newspaper full of information about the certain collapse of the Greek deal and the chaos hitting the world markets and you see, apparently, what you want to see.
BTW, where did you get the 1.5million quote? obviously its spot on if you add “Spain has 1.5 million properties that nobody wants to buy at the price offered“. I’ll want a few hundred at £1 each, so you are also right.
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@peterhun wrote:
You are in a different world from me. I see the world newspaper full of information about the certain collapse of the Greek deal and the chaos hitting the world markets and you see, apparently, what you want to see.
BTW, where did you get the 1.5million quote? obviously its spot on if you add “Spain has 1.5 million properties that nobody wants to buy at the price offered“. I’ll want a few hundred at £1 each, so you are also right.
My sincere apologies I seem to have got the quote about the 1.5 million properties from a post by Floshmichael so that was entirely wrong to attribute to you. I should be more careful.
We do see things very differently indeed, I see the same financial crisis you do, but as I understand it the Greeks don’t want to leave the Euro, I think there is an aggressive left wing union led element that is looking to protect the worker, but the coalition government and the opposition I believe all see leaving the Euro as a catastrophe.
The whole thing is a complete mess, you just wonder what the politicians in all these states including our own and the USA are doing, they don’t seem to have a clue.
But all of this does not mean that the Euro is going to collapse or disappear, the alternative is just too horrendous to bear, when you say it is going for sure, I am sorry but nope, I don’t see that at all. I see massive commitment and effort to ensure that the Euro is the currency for all going foward.
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@Chris McCarthy wrote:
@peterhun wrote:
… and Spain has 1.5 million properties that nobody wants to buy.
Spain does not have 1.5 million properties that nobody wants to buy, that’s a general misconception and a rather snide aside that is very
There is no misconception.
Indeed, I should have written “Spain has 1.5 million properties that nobody wants to buy at current prices.” They would become somehow interesting if the price would at least half for some of them. But only part of them.
The demand of 2002-2006 was artificial and was determined by the easy money. Now people need to pay with real money (OK, banks have some way-overpriced property where one can get 100% mortgages) and nobody is fool enough to rush and spend.
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@flosmichael wrote:
Spain does not have 1.5 million properties that nobody wants to buy, that’s a general misconception and a rather snide aside that is very
OK, lets get a bit distracted, could you perhaps then explain to me on what you base this figure of 1.5 million unsold properties upon?
From where do you produce this statistic?
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@Chris McCarthy wrote:
@flosmichael wrote:
Spain does not have 1.5 million properties that nobody wants to buy, that’s a general misconception and a rather snide aside that is very
OK, lets get a bit distracted, could you perhaps then explain to me on what you base this figure of 1.5 million unsold properties upon?
From where do you produce this statistic?
I thought that you are better informed than me. What is your figure?
Anyway, a very brief check:
The conclusion could be 3.3 million properties for sale in Spain. Good luck selling them all. 😛
“According to the Spanish economist Ricardo Verges, there are some 2,320,000 new houses for sale in Spain – a number that is nothing less than breathtaking.
What makes Verges’ calculation important is that it has been done on the basis of what appears to be sound maths. In short, he has subtracted the property purchases from 2004 to now – from the building permits granted since 2002. The two year gap between the granting of the building permits (2002) and the purchases (2004) is no doubt an allowance of two years to complete the building process of the initial permits. This, it seems to me, is a sound assumption.
The worrying thing is that articles about the Spanish property crash often only restrict themselves to the amount of new properties in Spain that are for sale – when this factor does not take into account how many re-sales are also on the market. Certainly, no-one (including myself) has the remotest notion but this has got to be a million or more and is probably rising daily as the economic crisis takes its toll.
So, are we looking at potentially 3,300,000 + properties for sale in Spain? Probably.” -
@flosmichael wrote:
I thought that you are better informed than me. What is your figure?
“I don’t have a figure.
Your comments and the article attached included a lot of probably’s, could be’s and even confirmations that.. no one knows.
I can tell you this.
The number of private vendor enquiries that we receive today and have received monthly over the past three years is some 80% less than we would have done between 2000 – 2008. That’s a fact.
I can also state that the number of resale properties available to all agents in our own area has not increased at all over the past three years, and in looking at something as simple as the ‘Properties for Sale’ classifieds in something like the Sur in English it is usually limited to a half page of lineage adverts, whereas pre 2008 it would have been around 6 full pages.
Private vendors are simply not selling their properties unless they have to, they are holding on to them, there might very well be a number whom in these constrained and difficult times would actually like to sell them, but they know a buyers market when they see one, and they have no need, intention or desire to put up their property in that market.
We have a number of developers who likewise have property for sale, as we do have banks with repossessions, these generally along with private vendors have prices that I would say across the board have dropped by 30-50% from the peak.
I could argue that the granting of a licence to build does not mean that the project was ever completed.
I could argue that the ‘unsold’ tag doesn’t actually exist, someone owns the property whether that be a developer or a bank.
But I am telling you that if you arrive on the CdS today expecting us to have a vast stock of unsold property for sale at extreme distressed bargain bucket prices, well you will be very disappointed, in fact you and we are going to have to work very hard to find you exactly what you want at the price you likely think you expect to pay.
Also as we all know, supply is eaten up over a period of time, most especially when there is almost zero new build taking place this past several years and non scheduled for the coming years either.
And there is a very real demand, our buyers have not gone away, in fact I get the very real impression from website traffic and other sources that the reservoir of interested buyers is building up more and more in, just awaiting that day when someone tells them – the crisis is over. While the brave and maybe the smart – who knows – are still buying out there buying property every day of the week, from all over Europe and beyond.
Remember, the forward demand and interest for owning a home in Spain is as high as it ever was, as any number of lifestyle and aspirational surveys will show you, this is just a moment in time, it is part of a cycle, it is a pretty unique and peculiar time I will grant you that.
But when you bandy around the figure of 1.5 million unsold homes, I think you mislead people as to the actual reality and you can’t point to any genuine statistics, other than a blog post on, an interesting if slightly obscure, website that backs up your statement.
But then probably…. it doesn’t matter does it? It could be 500,000 or 5 million, whatever it is – it simply is what it is – and whoever owns whatever they own, will sell when they either absolutely have to or whenever they think it is right for them.
However, given that there is no new build, that fact will eventually balance things out to their inevitably being a shortage of supply and off we go on the cycle once again. It just is whatever it is right now. Possibly good for some, possibly bad for others.
I don’t mean to knock you Floshmichael I just want to balance the argument up a little when what I feel are dubious, yet inflammatory certainties, are liberally tossed out which could unnecessarily scare some people to death or alternatively give them unrealistic expectations.
So yes, there is a big over supply of new builds and maybe a lot of private vendors who might like to sell but are not active right now against a much reduced demand but that is all we can say.
You can’t actually tell me that are 1.5 million unsold homes sitting there.
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@Chris McCarthy wrote:
@flosmichael wrote:
I thought that you are better informed than me. What is your figure?
“I don’t have a figure.
.
Chris, sorry, your posting is scarily long. 😛
There are 1 million properties on idealista. Thera are 900K properties on fotocasa. I am not sure if all are the same. If someone has time, one can go to all the banks site with properties and then select properties which are not on idealista or fotocasa.
Add them up. -
@flosmichael wrote:
Chris, sorry, your posting is scarily long. 😛
There are 1 million properties on idealista. Thera are 900K properties on fotocasa. I am not sure if all are the same. If someone has time, one can go to all the banks site with properties and then select properties which are not on idealista or fotocasa.
Add them up.Yeah I know, I never have been able to use 5 words instead of 500 sorry!
How many properties do you think there are on Rightmove then Floshmichael?
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Just to add my tuppence to the tangent…
I tend to think the “x million unsold properties in Spain” line is a bit misleading. If a developer built 3 million empty houses on the north coast of Scotland, then would that cause a UK property crash? I doubt it because those 3 million houses aren’t meeting any demand (I wouldn’t want to own one even if they were giving them away). OK it’s an extreme case but in Spain many of these x million empty homes are in areas where nobody is ever going to buy. They might as well not exist and they certainly don’t have any effect on the prices of the houses in Spain that people do want to buy.
That’s not to say that I don’t think house prices in Spain will come down more – I think they will – but it’ll be due to high unemployment and credit tightening rather than excess supply.
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@Chris McCarthy wrote:
We do see things very differently indeed, I see the same financial crisis you do, but as I understand it the Greeks don’t want to leave the Euro, I think there is an aggressive left wing union led element that is looking to protect the worker, but the coalition government and the opposition I believe all see leaving the Euro as a catastrophe.
The problem with referendums is that the electorate doesn’t tend to vote logically, they vote for the immediate ‘no I don’t want to do that’ option. I’m pretty sure they will vote it down becuase they will believe the medicine is worse that disease. There is lots of cartoons depict the Germans as Nazi’s going around Greece, apparently. Sometimes peoples ego’s come far ahead of basic logic.
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@peterhun wrote:
@Chris McCarthy wrote:
The problem with referendums is that the electorate doesn’t tend to vote logically, they vote for the immediate ‘no I don’t want to do that’ option. I’m pretty sure they will vote it down becuase they will believe the medicine is worse that disease. There is lots of cartoons depict the Germans as Nazi’s going around Greece, apparently. Sometimes peoples ego’s come far ahead of basic logic.
True, very true, but if they want out let them out, they want to have a retirement age of 55, think they can have a massively overblown public sector, not understand that taxes are there to be paid and face the consequences of going it alone – then so be it really.
Will the Italians follow – I dunno, I know Spain is doing its absolute best to sort itself out, the world is a screwed up enough place so you might well be right. They could be that mad. Or in the cold light of day, the people that know their onions turn out in their millions and face up to the facts.
I suppose time will tell. I still say it won’t be the end of the Euro though. But truth is, yep I could be wrong.
Scale of 1-10 how likely you think we still be pricing and showing properties in Euros here in Spain this time next year then Peterhun?
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There will not be a choice by countries in leaving the Euro, they will have no choice and be forced becuase they will be unable to borrow. Spain is borrowing something like 6% of its GDP every year, the more the cost go up, the more they need to borrow, the more the cost goes up etc.
Its called a debt death spiral. It may not happen to Spain early on, but each country that leaves will devalue all their debt and there is a very direct cost to every Euro country. Greece, will hit Italy, and then the next domino will go at its hit by the losses on the previous leaver. Italy has 1.7 Trillion Euro’s of debt and are probably next, although it might be France.
Scale of 1-10 how likely you think we still be pricing and showing properties in Euros here in Spain this time next year then Peterhun?
4/10. Not likely.
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I have been following a lot on the threads of the forum of late and can only relate my own real life experience
I received very little interest in my apartment until i reduced it by 40% on 2009 purchase price
Now hopefully the sale is due to complete in november, purchaser has paid 10% and just loves it
Sales can be accomplished, and there are hungry buyers out there its just a question of price point.I took the advice of Adam Posen on the MPC who months ago proposed the solution to the euro crisis- take the pain and live with the write off 😀
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Here’s my 2 euros worth of points.
Re the number of properties for sale in Spain, some year or two ago there were figures being bandied about of 2 million or so, who has actually counted them, however it’s a huge amount still to be sold!
In the Telegraph yesterday was more bad news re the bailout and that was the big Greek Tax Evasion that is coming out of the woodwork. It’s said that there are more Porsche Cayennes in Greece than people who have declared incomes over 50,000 euros. It goes on to say that Germany and it’s people are losing the appetite to bail Greece out because of this latest revelation on top of all so far.
Then there is Papandreou and Greece in general, IMO they do want to leave the Eurozone and Euro so that they can revert to the drachma and devalue their currency.
People who say the Euro is too big to fail just don’t really know, once Portugal, Spain, Ireland, Italy etc start shouting ‘it’s not fair that Greece has a huge chunk of their debt written off and we don’t’ then the dominoe effect could start.
Is the Euro doomed? 50-50 seems the right call, no-one knows with any certainty 😕
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@boothy wrote:
I have been following a lot on the threads of the forum of late and can only relate my own real life experience
I received very little interest in my apartment until i reduced it by 40% on 2009 purchase price
Now hopefully the sale is due to complete in november, purchaser has paid 10% and just loves it
Sales can be accomplished, and there are hungry buyers out there its just a question of price point.I took the advice of Adam Posen on the MPC who months ago proposed the solution to the euro crisis- take the pain and live with the write off 😀
50% loss (including of course taxes you paid) in 2 years… 70K Euros…
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@peterhun wrote:
@peterhun wrote:
4/10. Not likely.
Greek PM resigns
8/10, no chance.Interesting, and that is what a forum is about I suppose – views at completely different ends of the scale.
I think the Greek PM tried to be a bit too clever, kind of understood his plan, but either way the Greeks have gone to the precipice and they absolutely do not want to leave the Euro, they absolutely want to stay in, they have to implement the demanded austerity measures.
And I believe, every single other country is committed to the Euro and now more than ever knows that austerity and cuts are the order of the day.
I think also the UK kind of leads the way in this regard, we have implemented the most severe cuts since WWII is my understanding, Ireland and Portugal are making it work for them.
There is an alternative but it would be a disaster for the Greeks, either way they have to live with it.
And as a result – the Euro just gets stronger and won’t be going anywhere – there is huge commitment to the Euro from every other country, and yes there may be problems to come with Italy and possibly Spain, but they will be dealt with and overcome.
I think you mean 2/10 no chance if he resigns. but I believe the Euro will be here next year and five years from now 9.9/10.
But am sure you just as me would like an end, an end to all this panic, drama, crazy speculation and whoever invented 24 hour News should be shot.
Who the hell needs all this grief. Who can believe that the G20 is there in Cannes today and with all that has gone on in the past year they can’t come out with a groundbreaking plan and solution? These are very sad times.
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@katy wrote:
If the euro does survive what difference will it make to the spanish property market…nada! Probably things will get worse. Unemployment up another 4%+ in malaga province last month, all other regions up too.
Like I said in earlier post – the market is what it is.
Talking about the past doesn’t change it.
Talking about how much is on the market doesn’t change it.
The property market is very simple, there are some people who would like to sell their homes, there are some people who might like to buy them.
The volume of either goes up and down like the proverbial yoyo dependent on various factors and cycles.
But I think people want to know that when they buy in Euros that the Euro is going to be around in the future, which is my original premise, that it will be. Which is not based upon some brilliant piece of economic analysis, just on what I think all Europeans – including the Greeks – feel, that there is no real way they want to go back to their old currencies. There is no appetite for it, it won’t happen.
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@katy wrote:
If the euro does survive what difference will it make to the spanish property market…nada! Probably things will get worse. Unemployment up another 4%+ in malaga province last month, all other regions up too.
If Spain drops out of the euro (or Germany for that matter) then whatever currency Spain ends up with will devalue drastically overnight. I read a while back some analysis claiming that if Germany drops out of the euro then the euro would devalue to something like €2.5 : 1 GBP. If Spain drops out I’d expect the “new peseta” to devalue even more. I think that might make a significant difference to the segment of the Spanish property market that is targeted at foreign buyers.
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@Chopera wrote:
. If Spain drops out I’d expect the “new peseta” to devalue even more. I think that might make a significant difference to the segment of the Spanish property market that is targeted at foreign buyers.
True but if things unravel dramatically, the recession/depression would be so bad that few people would think about investing in property in foreign countries…
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@flosmichael wrote:
True but if things unravel dramatically, the recession/depression would be so bad that few people would think about investing in property in foreign countries…
And back to the madness after Lehman ’09 there will be few people buying cars, buying white goods, furnishings, holidays, any blooming thing really, it isn’t just about property it would be about everything. That is why we have no growth is it not?
Which is why, one thing that is going nowhere is the Euro, it has been debated about on this site for years now. Its demise hasn’t happened and it won’t happen, there is zero gain for anybody in that scenario. There has been all of the debate, all of the many hypotheses on the multiple resulting scenarios. There is of course great frustration in every country from the people that no practical path has been plotted out of the worldwide crisis. But returning to individual currencies is not what the majority anywhere wants. Even the Greek opposition doesn’t want it.
As to the recession / depression being so bad that few people would think about investing in property in Spain, then forget about it, it doesn’t get any fewer than it already is or has been over the past few years. There is always a market of course there is, remember 48% of Britons would like to live abroad, but where you might still debate whether prices are at the bottom, you won’t really get any lower than where we have been in terms of interest and viewings over the past couple of years, in fact it might just increase as people who can and want to, make their move regardless of the economy.
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What gets me is the ‘Irrational Exuberance’ of the markets. They seems so convinced that the impossible will happen and ignore what is 99% certain. Which is why shares are such a lousy investment.
@Chris McCarthy wrote:
Which is why, one thing that is going nowhere is the Euro, it has been debated about on this site for years now. Its demise hasn’t happened and it won’t happen, there is zero gain for anybody in that scenario.
You are missing the point, the people who break the Euro will make billions of Euro’s in minutes, they will definitely gain.
The second point is its not a choice to keep the Euro or not; Italy for instance is asking for tens of Billions of dollars per year and nobody wants to give them it back becuase its not worth the risk of losing it. Why should lenders lend their money to a country that won’t pay it back, so again there is definitely winners here – those who don’t lend don’t lose billions.
The only gainers for keeping the Euro are countries asking for more money for free. They have no power and no influence on keeping the euro at all.
So in complete contrast to what you said, the is zero gain in keeping the Euro and massive gain if the Euro dies. Thats why its ****ed.
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@peterhun wrote:
You are missing the point, the people who break the Euro will make billions of Euro’s in minutes, they will definitely gain.
Yes, you see I have sat here for the past several years listening to that as just one of many, many multiple scenarios and sometimes, you have got me, and I have thought to myself yeah… yeah, that sounds logical. Cor, he could be right, we are doomed all of us doomed.
But am tired with that, where Zoro was right much earlier in this thread when he said he’d had enough of this topic and was off, well I got that really, it was because I am a bit retarded in my understanding of the deeper, wider economic minutiae or issues, that’s my excuse and I took it on board because I value his / her view quite highly; but you, well nothing stops you for a minute, you just keep waving your red flags – your end of the world is nigh sign – and I am telling you it don’t work for me and while I might be a bit retarded, I am not entirely stupid – your argument and your points don’t go anywhere for me really
@peterhun wrote:
Why should lenders lend their money to a country that won’t pay it back, so again there is definitely winners here – those who don’t lend don’t lose billions.
You see I just don’t understand that at all. I don’t lose cos I don’t lend? Well yes of course. I also don’t get a return if I don’t invest. In fact if I do nothing I die. These are not arguments that tell me that the Euro is going anywhere. I am listening Peterhun, believe me, am listening, I might be occasionally objectionable, crass or irritating often, but I am listening – but I don’t get it.
@peterhun wrote:
in complete contrast to what you said, the is zero gain in keeping the Euro and massive gain if the Euro dies. Thats why its ****ed.
So, massive gain for the what is it now… 350 million people who daily use the Euro as their currency if it dies?
You don’t see do you, that you are asking us to buy into this grand conspiracy theory, you espouse it with such certainty, you watch the news, you read the the weblinks, you delve into all financial machinations and you pop up and tell us… it’s nigh, the end of the world is nigh…. its not. Its Thursday night in November, bloody wet and windy here in Harrogate, back off to Marbella next week where it will be bright and sunny.
What will be will be, I remember the Winter of Discontent, Black whatever it was Tuesday, Wednesday or whatever, and my parents remembered the second world war and my unknown grandad fought in the first world war. The world just turns. And all of this will pass. But today with 24 hour news and this thing called the Internet, we just love the hype, we love the rollercoaster and the opportunity to shout out our opinion. Well…
Like I said you and a few others on here, once had me going, but am afraid no more.
The Euro will be going nowhere and will just get stronger. Every scenario I have read or listened to on TV or Radio, and as I watched Merkel and Sarkosy in their press conference last night, shaking their heads at the idiocy of the call for a Greek referendum, their very assertion jointly WE ARE EUROPEAN just tells me that it stays and it grows and that this is the will of the majority of 350+ million people.
But now if you want to tell me that the entire so called ‘investment’ banking community should be dragged out to sea and sunk without trace, then am up for that.
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@Chris McCarthy wrote:
@peterhun wrote:
@peterhun wrote:
in complete contrast to what you said, the is zero gain in keeping the Euro and massive gain if the Euro dies. Thats why its ****ed.
So, massive gain for the what is it now… 350 million people who daily use the Euro as their currency if it dies?
Of course, all we need is every one of those people to put up the money needed to back up the currency. 10,000 Euros each is all that needed for every single one of them, cash of course, nobody will lend for it.
Can you see where the problem might be?
You don’t see do you, that you are asking us to buy into this grand conspiracy theory, you espouse it with such certainty, you watch the news, you read the the weblinks, you delve into all financial machinations and you pop up and tell us… it’s nigh, the end of the world is nigh…. its not. Its Thursday night in November, bloody wet and windy here in Harrogate, back off to Marbella next week where it will be bright and sunny.
Problem solved have a nice nap, look forward to using pesetas and forgot about all this economic mumbo jumbo.
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The ordinary person in Germany. Netherlands etc. all want to return to their previous currency. Democracy has vanished in the rush to get on the gravy train. The euro isn’t working, if it were countries would not be falling like dominos now. The fudging of the figures has finally caught up. Italy is teetering on the edge, Spain is closing the gap.
And yes Chis you should get some sun in marbella next week as this week has been lashing down and pretty grim. Like the euro, bad weather can’t carry on forever…can it
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The ordinary person in Germany. Netherlands etc. all want to return to their previous currency.
It is not quite as stark as that Katy. I live in NL and would say that, on balance, the majority here prefer the Euro.
Chris, first and foremost fair play to you for fighting your ground. I have always appreciated the fact that you do that. Even when you are wrong. 8)
I do think the Euro will be around for the rest of my life at least. The question to me is, in which shape or form? Yesterday, for the first time, William Hill marked Greece as odds on to be out of the single currency by the end of this year. Whatever you may say about the bookies there are not politically biased. Their odds simply reflect where people are putting their money.
Truth is, I just can’t see Greece lasting in the Eurozone. Their debts, even after a 50% trim, are too great and the economy too structurally uncompetitive for this. Assuming they do pull out, the question is, What happens next?
Things can then go one of two ways. Either the remaining countries circle the wagons, contain the problem and the currency continues more or less as before. Or there are two Euros. One for the stronger Northern economies, one for the Club Med countries. My heart wants the former. My head says the latter.
It is with some sadness that I write this. I’m very much a Europhile. Have long supported the concept of the Euro and been ready to defend it to the many detractors around. I now just can’t see it surviving in its present form.
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Truth is, I just can’t see Greece lasting in the Eurozone. Their debts, even after a 50% trim, are too great and the economy too structurally uncompetitive for this. Assuming they do pull out, the question is, What happens next?
I was arguing exactly the same until recently, the Euro would survive split in two. However, the numbers say the euro would fail completely if Greek left. If ejecting Greece was the survivable for the Euro, don’t you think they would have kicked it out long ago?
If greece goes, Italy, France, Portugal maybe Spain will go next. There will be european wide banking crash’s.
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Peter, I’m pretty sure that, whatever happens, a rump euro will remain. Odds are that this will circulate in Germany, Netherlands and the Scandinavian countries.
The question then is, what happens in the remaining eurozone countries? Yes, they could all go back to individual countries but my guess is that some kind of monetary union would remain. A sub-prime euro of some kind perhaps.
Truth is, nobody knows. Observing this whole thing has been like watching a car crash in slow motion. I first started watching this closely some two years ago. At that time I couldn’t imagine that the euro could be in danger.
Thanks in good part to the ineptitude of the continent’s politicians and the general apathy of the populous I really think things have now gone too far for the currency to survive as we know it. Had decisive action been taken in time the markets wouldn’t have got to smell blood and we probably wouldn’t be in the pickle we are now in.
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‘So, are we all agreed’ that despite dramatic price falls in Spanish property (and other eurozone areas) the Brits contemplating buying in Spain etc could well see the value of their Spanish property devalue another 25% or so in Sterling terms should the PIIGS wish to devalue their currencies? 🙄
IMO, it doesn’t make sense for the British to be buying anywhere in Eurozone until this crisis is over, then the most likely best deals will be in Greece!
So, in short for example, spend 400k euros on a property that once was worth 600k euros but in reality has cost the same in sterling terms because of the exchange rate, but then wait a while for same property to fall another 100k down to 300k, complete madness methinks, then don’t forget to add in the exhorbitant buying costs in Spain and potential exhorbitant selling costs should you ever wish to resell (that’s if you can)
Yeah right!!
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@brianc_li wrote:
…Yesterday, for the first time, William Hill marked Greece as odds on to be out of the single currency by the end of this year. Whatever you may say about the bookies there are not politically biased. Their odds simply reflect where people are putting their money.
…Apparently Greece then placed a multi-million bet that they’d still be in the euro by the end of the year. Their winnings should be enough to clear their debts. 😆
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Found out today that Sarkozy is hanging on so closely to Merkel’s petticoat for a reason, and not her perfume, it’s because France are in not much better position than Italy financially, they’re getting desperate themselves and need Germany. Hence the Merkozy tag 😆
Is it all unravelling? Will it keep being patched up until it busts apart? It’s not looking good and whatever they decide doesn’t inspire any confidence.
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@angie wrote:
Found out today that Sarkozy is hanging on so closely to Merkel’s petticoat for a reason, and not her perfume, it’s because France are in not much better position than Italy financially, they’re getting desperate themselves and need Germany. Hence the Merkozy tag 😆
And Germany’s response?
FRANKFURT (Reuters) – Germany’s second-largest lender Commerzbank (which is 25 percent owned by the State) will refuse loans which don’t help Germany or Poland, as the euro zone crisis makes European banks more protectionist in choosing between writing new business and meeting stringent capital requirements.
And this
“The Germans want more fiscal unity and much tougher central observation – with the idea of a finance ministry,”
Mr O’Neill said in an interview with The Sunday Telegraph. “That will emerge for those that want to stay in this damn thing, or can stay in.
“With that caveat, it is tough to see all countries that joined wanting to live with that –including the one that is so troubled here [Greece]. If you wind the clock back, it was pretty obvious that economically probably only Germany, France and Benelux of the original joiners were the ones that were ideal for a monetary union.
“For [them] it is not a bad idea – these countries have always had some kind of tight fixing of exchange rates and are very intertwined. For all the rest that originally joined – Spain, Italy, Portugal, Ireland, Finland – it is actually questionable.”
http://www.telegraph.co.uk/finance/financialcrisis/8872380/Goldman-euro-could-split-apart.html
Maybe I was wrong and the Euro does have a future but based on Northern European countries (Germany, France, Benelux plus maybe Poland and Denmark, with strong economic/physical links and based on a fiscal union. (Poland is heading toward the Euro in a few years and besides doing 50% of its business with those countries, about 30% of its infrastructure and land was Germany until 1945. Germany may get its Lebensraum after all..)
Other countries, like Ireland would be better with re-introducing the pound (as in GBP not the Punt).
But Spain may be able to stay in, with taxes set from Berlin by the Euro finance minister.
Would a full fiscal Euro union be attractive to the UK if its just consisted of those countries? I suspect not.
edit.
This what the man who controls China’s investments thinks
“I think if you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of their worn out welfare societies,” Jin Liqun said in an interview with Al Jazeera television. “I think the labour laws are outdated – the labour laws induce sloth, indolence rather than hard working. The incentive system is totally out of whack.”
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This what the man who controls China’s investments thinks
“I think if you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of their worn out welfare societies,” Jin Liqun said in an interview with Al Jazeera television. “I think the labour laws are outdated – the labour laws induce sloth, indolence rather than hard working. The incentive system is totally out of whack.”
There is some truth in that statement. Spain is a good example. To make someone redundant they have to pay a worker 20 days pay for every year worked for the company. Many small to medium sized companies have no alternative but to go bankrupt. Happened to my friend’s Father in Elche, he had 2 shoe factories. Because of cheap imports they needed to cut the workforce but still had enough trade for 1 factory. All the workers had been there a lifetime and there was not enough money to pay redundancy…result, liquidation and everyone lost their jobs instead of 50% 🙄
When my Daughter worked in Netherlands they had problems with staff always on sick leave as the terms were generous. One worker had over 2 months sick leave for an ingrowing toe nail!
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Ah Fish, Katy, I remember that faux pas well 😛
IMO, If Greece melts, will the PIIGS roast, and le Coq Francaise get burnt??
Something has got to give soon regarding this crisis, and, don’t let us forget this upsurge in anti capitalism which is gathering momentum around the world!
Some politicians are now thinking of imposing further taxes on the greedy banks, and cutting the obscene bonus culture 🙄
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Here is W. Buffett’s latest statement on Europe. I know some of you on here are fond of quoting him
(Reuters) – Billionaire investor Warren Buffett said Europe’s debt crisis had shown up a “major flaw” in the 17-member euro zone system and it would take more than words to fix it.
“There is a major flaw in the euro system … I do know the system as presently designed has a major flaw and that flaw won’t be corrected just by words,” he told CNBC during his first trip to Japan on Monday.
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@katy wrote:
Here is W. Buffett’s latest statement on Europe.
“There is a major flaw in the euro system … I do know the system as presently designed has a major flaw and that flaw won’t be corrected just by words,”Well, not really something that earth shattering or highly illuminating a quote is it really?
He normally comes out with something better than the blatantly obvious, the old Buff must be slipping…
Cameron is talking today about a chill over the European economy, and how all the negative comment and talk just basically isn’t doing anyone any favours really. In fact it is mostly just a lot of rot.
Which was my original point.
Talk of the demise of the Euro is really nonsense, it is not going to happen.
We have three new governments within three weeks, all now committing to massive cuts which were absolutely necessary, and lo, the whole PIIGS issue that this forum has been waiting for several years (quite legitimately I would agree) will mostly fade back into the corners, and next year, finally we start to get some better news for the whole world economy.
This looks like the start of the end of the crisis to me, and the true beginnings of recovery – everybody woke up and finally realised there was no easy way out really.
And the Euro is – here to stay, and the UK can join in what… 10 – 15 years time, when we wake up to what the reality of our isolationism and self determination has become.
(Of course before all of that happens, the next thing the Press and the 24 Hour News channels are going to bombard and terrify us with is the failure of agreement on they US debt.,
Mmm…. what is it they trully owe again — $15 trillion? So now we got to suffer all the crap about that now for the next few weeks and our bit of local difficulty will be forgotten about. And who benefits from all this turmoil really?)
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@Chris McCarthy wrote:
Cameron is talking today about a chill over the European economy, and how all the negative comment and talk just basically isn’t doing anyone any favours really. In fact it is mostly just a lot of rot.
Which was my original point.
Hmm! He actually said:
“Paralysis in the Eurozone is causing alarm in the markets and having a chilling effect on economies in many countries – including our own. When the nightly news is about rising interest rates in Europe and uncertainty about the future, it is not surprising that this affects business and consumer confidence.”You have converted “news” to “negative comment and talk”, presumably to suit the point you are making. And there was nothing about a lot of rot.
I’d be more inclined to share your faith if you would stick to the facts please.
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@Chris McCarthy wrote:
@katy wrote:
Here is W. Buffett’s latest statement on Europe.
“There is a major flaw in the euro system … I do know the system as presently designed has a major flaw and that flaw won’t be corrected just by words,”Well, not really something that earth shattering or highly illuminating a quote is it really?
He normally comes out with something better than the blatantly obvious, the old Buff must be slipping…
Cameron is talking today about a chill over the European economy, and how all the negative comment and talk just basically isn’t doing anyone any favours really. In fact it is mostly just a lot of rot.
Which was my original point.
Talk of the demise of the Euro is really nonsense, it is not going to happen.
We have three new governments within three weeks, all now committing to massive cuts which were absolutely necessary, and lo, the whole PIIGS issue that this forum has been waiting for several years (quite legitimately I would agree) will mostly fade back into the corners, and next year, finally we start to get some better news for the whole world economy.
This looks like the start of the end of the crisis to me, and the true beginnings of recovery – everybody woke up and finally realised there was no easy way out really.
And the Euro is – here to stay, and the UK can join in what… 10 – 15 years time, when we wake up to what the reality of our isolationism and self determination has become.
(Of course before all of that happens, the next thing the Press and the 24 Hour News channels are going to bombard and terrify us with is the failure of agreement on they US debt.,
Mmm…. what is it they trully owe again — $15 trillion? So now we got to suffer all the crap about that now for the next few weeks and our bit of local difficulty will be forgotten about. And who benefits from all this turmoil really?)
Or now spain has a new goverment who won’t want to take the blame for the state of the spainish economy we might find out exactley how good the spainish economy is, maybe they will force the banks to own up to what is really on their books and to weather they are still solvant or not.lets wait and see if borrowing goes over the magic 7%.How you can say the euro is deffinatley here to stay is beyond me as no-one nows just yet what is going to happen.
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@zoro wrote:
I’d be more inclined to share your faith if you would stick to the facts please.
Yep, took a bit of licence and mixed up my commentary and views there I suppose.
My own point is that there is far less panic out there right now really, and the meeting between Cameron and Merkel didn’t get anywhere near the news coverage I thought it was going to get.
Will try to do better in future Zoro!
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@dartboy wrote:
Or now spain has a new goverment who won’t want to take the blame for the state of the spainish economy we might find out exactley how good the spainish economy is, maybe they will force the banks to own up to what is really on their books and to weather they are still solvant or not.lets wait and see if borrowing goes over the magic 7%.How you can say the euro is deffinatley here to stay is beyond me as no-one nows just yet what is going to happen.
Well I don’t think the Tories wanted to take the blame for Labour so why should the PP be any different after 7-8 years of the PSOE? As to the opening up of the books, well I think if we all know what is in there, then likely everyone else does also no?
As to the borrowing over 7% I don’t know, it is a figure that everyone jumps on, but will the world and the Euro fall apart if it goes over? I don’t think so, take a look at Greece’s borrowing figure.
As to the Euro, we all can only go on probability or not, and the resulting alternatives.
What are you still in either the Euro will be replaced by returning to 17 sovereign currencies camp or the Two Tier Euro camp, Dartboy?
You really think either of those is likely to replace the single Euro at this stage or in the foreseeable future?
C’mon, the Euro is here to stay, it is not going anywhere, in fact, with the PIIGS all have coming to their predicted crisis, if they make the cuts – like it looks they accept and now know they have to – then like Iceland, Ireland and I think Portugal, they will begin their recovery right now.
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@Chris McCarthy wrote:
@dartboy wrote:
Or now spain has a new goverment who won’t want to take the blame for the state of the spainish economy we might find out exactley how good the spainish economy is, maybe they will force the banks to own up to what is really on their books and to weather they are still solvant or not.lets wait and see if borrowing goes over the magic 7%.How you can say the euro is deffinatley here to stay is beyond me as no-one nows just yet what is going to happen.
Well I don’t think the Tories wanted to take the blame for Labour so why should the PP be any different after 7-8 years of the PSOE? As to the opening up of the books, well I think if we all know what is in there, then likely everyone else does also no?
As to the borrowing over 7% I don’t know, it is a figure that everyone jumps on, but will the world and the Euro fall apart if it goes over? I don’t think so, take a look at Greece’s borrowing figure.
As to the Euro, we all can only go on probability or not, and the resulting alternatives.
What are you still in either the Euro will be replaced by returning to 17 sovereign currencies camp or the Two Tier Euro camp, Dartboy?
You really think either of those is likely to replace the single Euro at this stage or in the foreseeable future?
C’mon, the Euro is here to stay, it is not going anywhere, in fact, with the PIIGS all have coming to their predicted crisis, if they make the cuts – like it looks they accept and now know they have to – then like Iceland, Ireland and I think Portugal, they will begin their recovery right now.
i am all for the single euro but unless something is changed it will all just go round in circles going from one thing to another.you can’t have a strong country (germany) paying constantley for the other nations that cannot afford to be init the way it is.
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@Chris McCarthy wrote:
@dartboy wrote:
Or now spain has a new goverment who won’t want to take the blame for the state of the spainish economy we might find out exactley how good the spainish economy is, maybe they will force the banks to own up to what is really on their books and to weather they are still solvant or not.lets wait and see if borrowing goes over the magic 7%.How you can say the euro is deffinatley here to stay is beyond me as no-one nows just yet what is going to happen.
Well I don’t think the Tories wanted to take the blame for Labour so why should the PP be any different after 7-8 years of the PSOE? As to the opening up of the books, well I think if we all know what is in there, then likely everyone else does also no?
As to the borrowing over 7% I don’t know, it is a figure that everyone jumps on, but will the world and the Euro fall apart if it goes over? I don’t think so, take a look at Greece’s borrowing figure.
As to the Euro, we all can only go on probability or not, and the resulting alternatives.
What are you still in either the Euro will be replaced by returning to 17 sovereign currencies camp or the Two Tier Euro camp, Dartboy?
You really think either of those is likely to replace the single Euro at this stage or in the foreseeable future?
C’mon, the Euro is here to stay, it is not going anywhere, in fact, with the PIIGS all have coming to their predicted crisis, if they make the cuts – like it looks they accept and now know they have to – then like Iceland, Ireland and I think Portugal, they will begin their recovery right now.
As others have mentioned earlier. How can you be so sure that the euro will still be around in this form? I’m not saying it’s not a possiblity but the markets are apparently not accepting the euro or it’s policies at the moment. You are acting like a person that is so heavily exposed to something so they just dig their head deeper into the sand because psychologically there is no turning back.
Trying to force austarity meassures onto struggling countries will not help one bit and it has only started. This way of tackling the issue will only prolong the agony for the involved countries. The losses needs to happen for things to get back to normal and that is another thing the EMU is not allowing to happen.
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Nicely summing by a pro-Eu organisation
The CER is a pro-EU group with a broadly free-market leaning.
Here are a few extracts:
European policy-makers have been reluctant to concede that the eurozone is institutionally flawed. Even now, many assert that the crisis is not one of the eurozone itself, but of errant behaviour within it. If certain countries had not broken the rules, they argue, the eurozone would never have run into trouble. The way to restore confidence, it follows, is to ensure that rules are rigorously enforced.
These claims are wrong on almost every count. It is now clear that a monetary union outside a fiscal union is a deeply unstable arrangement; and that efforts to fix this flaw with stricter and more rigid rules are making the eurozone less stable, not more.
The reason the eurozone is governed by rules is that few of its member-states – least of all its wealthier North European ones – have any appetite for fiscal union. Crudely, rules (gouvernance) exist because common fiscal institutions (gouvernement) do not. But rules are no substitute for common institutions. And tighter rules do not amount to greater fiscal integration.
The hallmark of fiscal integration is mutualisation – a greater pooling of budgetary resources, joint debt issuance, a common backstop to the banking system, and so on. Tighter rules are not so much a path to mutualisation, as an attempt to prevent it from happening.
This course of action is more likely to precipitate the euro’s disintegration than its survival.
Why is the eurozone in crisis?
The short answer is that the introduction of the euro spurred the emergence of enormous macroeconomic imbalances that were unsustainable, and that the eurozone has proved institutionally ill-equipped to tackle. North European policy-makers have been reluctant to accept this interpretation. For them, the crisis is not one of the eurozone itself, but of individual behaviour within it. If the eurozone is in difficulty, it is because of a few ‘bad apples’ in its ranks. In this interpretation, neither the design of the eurozone nor the behaviour of the ‘virtuous’ in the core were at fault.
Ever since the eurozone crisis broke out, the North European interpretation of it has prevailed. It essentially sees the crisis as a morality tale, pitting those who sinned against those who stuck to the path of virtue. The major sins of the periphery were government profligacy and losses of competitiveness. The way out of the crisis, it follows, is straightforward. It is to emulate the virtuous core by consolidating public finances and improving competitiveness (by raising productivity, reducing wages, or both). If the periphery can achieve this, then the eurozone debt crisis can be resolved without an institutional leap forward to fiscal union.
The North European interpretation is by no means all wrong (no serious observer disputes that Greece grossly mismanaged its public finances). But it is damagingly partial and self-serving. It skates over the contribution played by the euro’s introduction to the rise of indebtedness in the periphery; it wrongly assigns all the blame for peripheral indebtedness to government profligacy; it makes no mention of the far from innocent role played by creditor countries in the run-up to the crisis; and it does not acknowledge how the it was wasted (perhaps unsurprisingly).
It is wrong, however, to blame government profligacy for the rise in peripheral indebtedness: Greece is the only country where this holds true. In Ireland and Spain, it was the private sector (particularly banks and households) that was to blame. Indeed, in 2007, the Spanish and Irish governments looked more virtuous than Germany’s: they had never broken the fiscal rules, had lower levels of public debt and ran budget surpluses.
Creditor countries cannot be absolved of all blame. Not only was export-led growth in countries like Germany and the Netherlands structurally reliant on rising indebtedness abroad. But creditor countries in the core harboured plenty of vice: the conduits for the capital that flowed from core to periphery were banks, and these were more highly leveraged in countries like Germany, the Netherlands and Belgium than they were in the periphery (or the Anglo-Saxon world).
The eurozone crisis is as much a tale of excess bank leverage and poor risk management in the core as of excess consumption and wasteful investment in the periphery. If the eurozone had been a fully-fledged fiscal union, it would not be in its current predicament. Its aggregate public debt and deficit ratios, after all, are no worse than the US’s. But it is not a fiscal union – which is why it faces an existential crisis, and the US does not.
The current crisis, then, is not simply a tale of fiscal irresponsibility and lost competitiveness in the eurozone’s geographical periphery. It is also about the unsustainable macroeconomic imbalances to which the launch of the euro contributed (in creditor and debtor countries); about the epic misallocation of capital by excessively leveraged absence of fiscal integration has exacerbated financial vulnerabilities and made the crisis harder to resolve.
How did the euro’s introduction contribute to the current crisis? The answer is that the removal of exchange rate risk inside the eurozone encouraged massive sums of capital to flow from thrifty countries in the ‘core’ to countries in the ‘periphery’ (where private investors thought the rates of return were higher). The influx of foreign capital cut borrowing costs in the periphery, encouraging households, firms and governments to spend more than they earned. The result was an explosion of current-account imbalances inside the eurozone. As a share of GDP, these imbalances were far bigger than those between, say, the US and China.
Ever since the Greek sovereign debt crisis broke out, the thrust of eurozone policy has been to try and turn the region into a less Mediterranean and more Germanic bloc – that is a shared currency held together by increased discipline among its members. The centrepiece of the framework that has emerged is a ‘grand bargain’ between creditor and debtor countries. Creditor countries have assented to the creation of a European Financial Stability Facility (EFSF) to extend bridging loans to countries that are temporarily shut out of the bond markets. In return, debtor countries have agreed to much stricter membership rules.
The grand bargain (or Plan A) has failed. The reason is that its underlying philosophy – that of ‘collective responsibility’ – is flawed.
The demands of collective responsibility have been asymmetric: self-defeating medicine has been prescribed to debtor countries, while problems in creditor countries have been allowed to fester. Second, too much virtue has become a collective vice, resulting in excessively tight macroeconomic policy for the region as a whole.
The European Central Bank (ECB) believes that the faster budget deficits are cut, the faster private consumption and investment will pick up. The reverse has been the case. The ECB, meanwhile, has done too little to offset this synchronised fiscal tightening (in July, it actually raised its key official interest rate, citing “upside risks to price stability”). For a variety of reasons, the ECB has been deeply uncomfortable straying from the narrowest interpretation of its mandate. At times, the ECB has looked to be more concerned about inflation than about the eurozone’s survival.
The ECB’s reluctance to act as lender of last resort to governments, for example, has raised doubts in the financial markets about its commitment to the eurozone, and weakened confidence in solvent countries like Spain and Italy.
The punishing (and self-defeating) economic adjustments imposed on debtor countries contrasts with the self-righteous complacency shown in the creditor countries. Not only have the latter insisted that debtor countries implement the kind of structural reforms for which they have shown no enthusiasm themselves (like opening services to greater competition). But they have also been reluctant to accept the potential for write-downs among their banks. So the very countries that have insisted on wrenching economic adjustments indebtor countries have often been the ones that have done the most to conceal the fragility of their own banks.
This asymmetry in treatment has deepened the crisis and increased the cost of resolving it. A year’s worth of punishing austerity and contracting activity has only succeeded in pushing Greece deeper into insolvency. Contagion has spread to Ireland and Portugal (which have been forced to accept bail outs and swallow the same medicine as Greece). And foot-dragging in a number of countries has condemned the region to a series of weak ‘stress tests’ which have given clean bills of health to under-capitalised banks. Eurozone policy has therefore actively contributed to the vicious feed-back loop that has developed between banks and sovereigns.
Having spent two years denying that many European banks were under-capitalised, eurozone leaders finally relented – but at a terrible time. Fresh capital is much harder to raise from the private sector than it was a year ago, and several eurozone governments (including France) can ill afford to step in with taxpayer funds.
The eurozone crisis is chronic in character and requires far-reaching reforms. The euro is a currency union without a Treasury or a lender of last resort. The macroeconomic policy framework is ill-suited to a big, largely closed, economy, and the national markets are insufficiently flexible and imperfectly integrated.
Policy-makers now face a choice. They must either address the eurozone’s institutional underpinnings or risk a disorderly break-up.
They need to agree on a number of long-term steps. The first is a partial mutualisation of sovereign borrowing costs, via the adoption of a common bond. The second is the adoption of a eurozone-wide backstop for the banking sector. The third is growth-orientated macroeconomic policy: the European Central Bank needs a broader mandate, member-states’ fiscal policy must be co-ordinated, and trade balances narrowed symmetrically.
On current policy trends, a wave of sovereign defaults and bank failures are unavoidable. Much of the currency union faces depression and deflation. The ECB and EFSF will not keep a lid on bond yields, with the result that countries will face unsustainably high borrowing costs and eventually default. This, in turn, will cripple these countries’ banking sectors, but they will be unable to raise the funds needed to recapitalise them. Stuck in a vicious deflationary circle, unable to borrow on affordable terms, and subject to quixotic and counter-productive fiscal and other rules for what support they do get from the EFSF and ECB, political support for continued membership will drain away.
Faced with a choice between permanent slump and rising debt burdens (as economic contraction and deflation leads to inexorable increases in debt), countries will elect to quit the currency union. At least that route will allow them to print money, recapitalise their banks and escape deflation. Once Spain or Italy opts for this, an unravelling of the eurozone will be unstoppable. Investors will not believe that France could continue to participate in a core euro: the country has weak public finances and a sizeable external deficit.
Participation in a core eurozone would imply a potentially huge real currency appreciation and a corresponding collapse in economic activity. Investors will calculate that the wage cuts (to restore competitiveness) and cuts in public spending (to rein in the fiscal deficit) would be politically unsustainable. In short, France will effectively be in the same position as Italy and Spain are at present. While it is impossible to put a timescale on this, the direction of travel is clear.
Eurozone leaders now face a choice between two unpalatable alternatives. Either they accept that the eurozone is institutionally flawed and do what is necessary to turn it into a more stable arrangement. This will require some of them to go beyond what their voters seem prepared to allow, and to accept that a certain amount of ‘rule-breaking’ is necessary in the short term if the eurozone is to survive intact. Or they can stick to the fiction that confidence can be restored by the adoption (and enforcement) of tougher rules. This option will condemn the eurozone to self-defeating policies that hasten defaults, contagion and eventual break-up.Indeed. Read it all.
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In answer to Chris, and this is just my opinion and maybe that of millions of other Brits, I want the UK to have a referendum on being in the EU, adopt the Euro etc and I don’t want the UK to be part of it. As much as I like visiting parts of Europe, and I’m half Italian (Sicilian Chris, so watch it) I want the UK to have Free Trade with whoever they wish, not be governed nor told what to do by Brussels, Germany, France and sometime China no doubt.
I would prefer the UK to keep the Pound, or at worse have the US Dollar (just my opinion again), deal more with NAFTA, and above all not keep pumping UK money into the hotch potch of Eurozone countries who seem at odds with each other, don’t talk the same language, have different moral standards including scales of corruption.
Not that I’m particularly religious, but the Bible talks of Babylon, Babel and the peoples talking in tongues, sums up the Eurozone nicely, mayhem! It also mentions that ALL Government is corrupt, which is also the case.
B—-y Ca-Moron and his Tory boys seem hell bent on Britain being part of the Eurozone, and trying to make decisions for the UK population without asking us. In many respects there’s no difference between either main parties in the UK and in Europe, they all promise the earth to everyone during elections, they all line their own pockets, they all blame the previous Gov’t, very little actually improves for the masses but only for the 1% (maybe now 10%), and world poverty and disease is as bad as it ever was for millions.
I say NO to the whole Euro debacle, and the Eurozone leaders and their minions, they couldn’t run a piss-up in a brewery! 👿
Get the MAFIA involved and have some fair corruption! 8)
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Edward Hugh, an economist I have followed and generally believed for some time now, not least because he has generally been right, on the state of the euro at present and what he thinks will happen in future.
I don’t particularly like what he has to say but I tend to agree with him.
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@brianc_li wrote:
Edward Hugh, an economist I have followed and generally believed for some time now, not least because he has generally been right, on the state of the euro at present and what he thinks will happen in future.
I don’t particularly like what he has to say but I tend to agree with him.
Yup I find him to be the most informative blogger when it comes to the issues being faced by the Spanish economy. I notice he advocates splitting the eurozone into 2 (which I suspect would be considered a double victory for the euro by one poster here 😉 ) however if that happened then France would probably have to join the “periphery” block. I doubt if the French would accept that.
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To me the last part is the most telling……
So we have the last “alternative” which is simply that markets push the issue to the limit, the centre does not hold (Germany, for example could be threatened with being stripped of its triple A), and the whole thing flies apart in the most disorderly and disagreeable of fashions. If you were to ask me at this point which of the three above alternatives I considered most probable, I would have to say the latter, although naturally in no way do I wish this to happen, it is simply the risk that Europe’s leaders are now taking.
Somehow I’m reminded of Black Wednesday. The day when, after hours of chaos and interest rates going up 5% in one day, the UK was turfed out of the EMU. As Edward says, it will be “disorderly and disagreeable”, much more so than in the case of the UK as the countries involved no longer have their own currencies.
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@brianc_li wrote:
Somehow I’m reminded of Black Wednesday. The day when, after hours of chaos and interest rates going up 5% in one day, the UK was turfed out of the EMU. As Edward says, it will be “disorderly and disagreeable”, much more so than in the case of the UK as the countries involved no longer have their own currencies.
Reading the Times today about that time its seems the Germans deliberately worked to kick out and devalue the Pound and Lire. The were working closely with George Soros.
Ten more years of austerity
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@brianc_li wrote:
Edward Hugh, an economist I have followed and generally believed for some time now, not least because he has generally been right, on the state of the euro at present and what he thinks will happen in future.
I don’t particularly like what he has to say but I tend to agree with him.
Unfortunately ,there is really nothing there. Anybody with some knowledge of the situation would speculate in a similar fashion.
I have a feeling that people like Edward Hugh do not tell more because:
1) they are afraid to spell out the real situation to the masses so the masses do not panic.
or
2) the situation is under control and the European leaders just want to catch speculators (hedge funds, etc) with their pants down and teach them a hard lesson.
There might be a third possibility: nobody (including the world’s best economists) has a clue.
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@flosmichael wrote:
@brianc_li wrote:
Edward Hugh, an economist I have followed and generally believed for some time now, not least because he has generally been right, on the state of the euro at present and what he thinks will happen in future.
I don’t particularly like what he has to say but I tend to agree with him.
Unfortunately ,there is really nothing there. Anybody with some knowledge of the situation would speculate in a similar fashion.
I have a feeling that people like Edward Hugh do not tell more because:
1) they are afraid to spell out the real situation to the masses so the masses do not panic.
or
2) the situation is under control and the European leaders just want to catch speculators (hedge funds, etc) with their pants down and teach them a hard lesson.
There might be a third possibility: nobody (including the world’s best economists) has a clue.
In his defence I’d argue that he generally tries to understand what is going on rather than lecturing people about what is going to happen. Furthermore the link is to an interview with a broad audience so he might well leave out the nitty gritty, especially since it may come as a bit of a shock to readers in Cataluña who might be unfamiliar with the case for the euro’s demise.
I think he now mainly blogs on Roubini’s site:
http://www.economonitor.com/blog/author/ehugh3/
(Roubini isn’t regarded as someone who holds back from spelling out the “real situation”)
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@Chopera wrote:
I think he now mainly blogs on Roubini’s site:
I beleive he is also a friend of Mark Stucklin which is where I heard about him … on this site. Edward Hugh apparently has the ear of EU finance ministers.
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‘There seems to be some chaos and confusion surrounding the Euro and the future of the Eurozone’ says the article, an understatement for sure. The same as I’d posted earlier as ‘mayhem’. Too many tongues, too many cooks or (crooks), no cohesion whatsoever.
Have just seen Roger Bootle of Capital Economics say he thinks the Eurozone will break up. It will be interesting to see whether the economist/s like him are right, or whether Chris is right 🙄
At this stage, I don’t think anyone truly knows, but I think some members will leave or be kicked out, and Spain’s borrowing costs continue to rise today.
Chris, hedge your bets, sell half your Euro assets if you’re overexposed:!:
Spain does not look like a safe bet IMO, anymore than half a dozen or so other Eurozone countries, and doesn’t their 50% relief on SD tax on buying property end in December thereby shooting them in their property foot again?
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Whatever else you can or cannot say about Edward, he’s a lot more than one of ‘these “bloggers”‘. He’s a well respected LSE trained economist who, amongst other things, advises the IMF.
He has a long track record of accuracy, hence in good part his following. Whilst I don’t agree with everything he says I have built up a lot of respect for his opinions.
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@katy wrote:
I believe these “bloggers” are overated. Similar to the pseudo weather forecasters. We only hear about something they got right not about all the times they get it wrong. I don’t understand why people hang on to their every word 🙄 He is just another chancer trying to earn a euro or two!
The whole point of blogging is that you expose your ideas to scrutiny, and if you get it wrong it’s there for the whole world to see. All that Edward Hugh has blogged over the years is available for you to analyse so you are free to challenge/comment on anything you think he has got wrong.
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@brianc_li wrote:
Whatever else you can or cannot say about Edward, he’s a lot more than one of ‘these “bloggers”‘. He’s a well respected LSE trained economist who, amongst other things, advises the IMF.
He has a long track record of accuracy, hence in good part his following. Whilst I don’t agree with everything he says I have built up a lot of respect for his opinions.
If he knows so much, why doesn’t he tell more? We all know the story and in principle we all know about the upcoming European tragedy. Why doesn’t he tell us how to avoid or what to do in the aftermath?
Is he afraid?
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If he knows so much, why doesn’t he tell more?
Bear in mind that this is an interview rather than one of his blogs. The journo will have adapted what he said to a level he hopes his audience will understand. Some of Eds outpourings can get very technical, often I don’t understand them. Also, like anyone he (readily admits that he) doesn’t know how this will pan out. We are in uncharted territory here.
Is he afraid?
Yes. I would have thought that was quite obvious from the article.
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@flosmichael wrote:
If he knows so much, why doesn’t he tell more? We all know the story and in principle we all know about the upcoming European tragedy. Why doesn’t he tell us how to avoid or what to do in the aftermath?
…If you click on the link at the bottom of the article to part 2 “What’s Next” he clearly states that he advocates splitting the eurozone into 2, although he fears that the most likely outcome is that it will quickly fall apart.
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@Chopera wrote:
@flosmichael wrote:
If he knows so much, why doesn’t he tell more? We all know the story and in principle we all know about the upcoming European tragedy. Why doesn’t he tell us how to avoid or what to do in the aftermath?
…If you click on the link at the bottom of the article to part 2 “What’s Next” he clearly states that he advocates splitting the eurozone into 2, although he fears that the most likely outcome is that it will quickly fall apart.
We all know that the best solution would be for the Euro to split…
The questions are:
– if they split, how high is the new DM is going to go? How low is the new low Euro is going to go?
– will the competitivity deficit between South and NOrth be restored?
– will EU survive? Will everybody put the blame on Germany because they did not want to print? Who else will be blamed?
– as situation in Greece, Spain, Italy will deteriorate, will there be mass uprisings by millions of unemployed?
– where will the jobs come for the millions of unemployed? Will industries move back from China to Europe? If yes, what will happen to the tens of millions of Chinese who will lose their jobs?
– will nationalism become stronger in Europe? If yes, what directions is it going to take Europe to?This kinds of questions I would like answers for from people in the know. But they keep on telling us things that we already know.
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We all know that the best solution would be for the Euro to split.
Not so. There are many, myself included, who think it would be best if it remained intact.
Your wish list of questions simply cannot be answered. Lots of people can and do conjecture. Some people claim they know but the simple truth is they don’t. You just have to take in the various offerings and come to your own conclusions.
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@brianc_li wrote:
We all know that the best solution would be for the Euro to split.
Not so. There are many, myself included, who think it would be best if it remained intact.
.The only way to have intact Euro is if Germany and Netherlands pay. Germany seems to refuse it in spite of pressure. They want to sink the
Mediteranean countries before they print… The Southern countries won’t take orders from Berlin for a long time, they will eventually revolt.
Germans will lose again… -
@flosmichael wrote:
We all know that the best solution would be for the Euro to split…
The questions are:
– if they split, how high is the new DM is going to go? How low is the new low Euro is going to go?
Well that would depend on the circumstances of the split, the markets, and a whole host of other unknowns. If I knew the answer to those questions I’d be very rich indeed.
@flosmichael wrote:
– will the competitivity deficit between South and NOrth be restored?
I think the assumption is that through devaluation the south would become more competitive since that is the whole point in advocating a split in the first place
@flosmichael wrote:
– will EU survive? Will everybody put the blame on Germany because they did not want to print? Who else will be blamed?
This is a political question rather than an economic one.
@flosmichael wrote:
– as situation in Greece, Spain, Italy will deteriorate, will there be mass uprisings by millions of unemployed?
Again this is not really an economic question. I wouldn’t expect an economist like Eward Hugh to deal with this type of question.
@flosmichael wrote:
– where will the jobs come for the millions of unemployed? Will industries move back from China to Europe? If yes, what will happen to the tens of millions of Chinese who will lose their jobs?
I personally think this question relates more to general imbalances between the west and China. The west has taken on too much debt (while China has bought too much debt). China needs to stimulate internal markets so it doesn’t just rely on exports (which forces the west to rely on its imports)
@flosmichael wrote:
– will nationalism become stronger in Europe? If yes, what directions is it going to take Europe to?
Again this is not really an economic question. I wouldn’t expect an economist like Eward Hugh to deal with this type of question.
@flosmichael wrote:
This kinds of questions I would like answers for from people in the know. But they keep on telling us things that we already know.
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@flosmichael wrote:
This kinds of questions I would like answers for from people in the know. But they keep on telling us things that we already know.
Its becuase nobody knows and there is no nice answers and no solution.
You can get an idea by reading what happened and is still happening in Argentina. http://ferfal.blogspot.com/search/label/Argentine%20Collapse
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@Chopera wrote:
@flosmichael wrote:
We all know that the best solution would be for the Euro to split…
The questions are:
– if they split, how high is the new DM is going to go? How low is the new low Euro is going to go?
Well that would depend on the circumstances of the split, the markets, and a whole host of other unknowns. If I knew the answer to those questions I’d be very rich indeed.
@flosmichael wrote:
– will the competitivity deficit between South and NOrth be restored?
I think the assumption is that through devaluation the south would become more competitive since that is the whole point in advocating a split in the first place
@flosmichael wrote:
– will EU survive? Will everybody put the blame on Germany because they did not want to print? Who else will be blamed?
This is a political question rather than an economic one.
@flosmichael wrote:
– as situation in Greece, Spain, Italy will deteriorate, will there be mass uprisings by millions of unemployed?
Again this is not really an economic question. I wouldn’t expect an economist like Eward Hugh to deal with this type of question.
@flosmichael wrote:
– where will the jobs come for the millions of unemployed? Will industries move back from China to Europe? If yes, what will happen to the tens of millions of Chinese who will lose their jobs?
I personally think this question relates more to general imbalances between the west and China. The west has taken on too much debt (while China has bought too much debt). China needs to stimulate internal markets so it doesn’t just rely on exports (which forces the west to rely on its imports)
@flosmichael wrote:
– will nationalism become stronger in Europe? If yes, what directions is it going to take Europe to?
Again this is not really an economic question. I wouldn’t expect an economist like Eward Hugh to deal with this type of question.
@flosmichael wrote:
This kinds of questions I would like answers for from people in the know. But they keep on telling us things that we already know.
Considering that the deficit productivity is about 40% between Germany and say Spain/Italy/Portugal, a 15% increase in DM versus Euro and a 25% decrease of the new Euro versus the current Euro would be enough. We all know that a split is the only feasible way.
The imbalance between the China and Western society is related to the 40+ million jobs exported to China from Western societies. When they are brought back, the imbalance will vanish and the 1+ million jobless young people in every big Western economy will have a fair chance to get a job. I have no idea what will happen when 40+ million Chinese become jobless. There is no way China could stimulate their market when people have salaries of 10% as compared to western salaries, this will never happen unless the salaries become comparable (25% or more).
All the questions are actually economics. History has always been directly related to the economy. I am sure that some economists in 1931-1932 could have envisioned the disaster to come…
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We all know that a split is the only feasible way.
No we don’t. You keep on spouting this mantra as if it is a matter of fact. It could indeed happen but it may not. It is your opinion, no more, no less.
There are a number of significant differences between the early 30’s and now. Not least the fact that the lessons learnt from then have sparked some governments to adopt QE. Yes this is a nasty recession, it could indeed get worse before it gets better. It is however not directly comparable to the early thirties.
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@flosmichael wrote:
Considering that the deficit productivity is about 40% between Germany and say Spain/Italy/Portugal, a 15% increase in DM versus Euro and a 25% decrease of the new Euro versus the current Euro would be enough. We all know that a split is the only feasible way.
The German Euro/DM will recover its value against the Swiss Franc, so you could be talking about a 60% increase above its current value (Swiss are doing QE so they have kept the value down). Maybe it will only appreciate 40%, but 15% is very unlikely. I’d expect the bankrupt PIIGS will see at least a 30% maybe much more.
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@brianc_li wrote:
We all know that a split is the only feasible way.
No we don’t. You keep on spouting this mantra as if it is a matter of fact. It could indeed happen but it may not. It is your opinion, no more, no less.
There are a number of significant differences between the early 30’s and now. Not least the fact that the lessons learnt from then have sparked some governments to adopt QE. Yes this is a nasty recession, it could indeed get worse before it gets better. It is however not directly comparable to the early thirties.
Being the only feasible way does not mean that the feasible way is going to be followed.
It might well be that the can is kicked down the road and the problems are again hidden under the rug. Euro can survive in its current form only by hiding the truth. Nevertheless, I guess most of the people will be happy to be spared the truth.
So don’t get me wrong. I am far from being certain that the Euro will split but it will be a mistake not to do so.
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@peterhun wrote:
@flosmichael wrote:
Considering that the deficit productivity is about 40% between Germany and say Spain/Italy/Portugal, a 15% increase in DM versus Euro and a 25% decrease of the new Euro versus the current Euro would be enough. We all know that a split is the only feasible way.
The German Euro/DM will recover its value against the Swiss Franc, so you could be talking about a 60% increase above its current value (Swiss are doing QE so they have kept the value down). Maybe it will only appreciate 40%, but 15% is very unlikely. I’d expect the bankrupt PIIGS will see at least a 30% maybe much more.
OK, 40% increase and 30% decrease would make the Southern countries very competitive but German exports would take a hit.
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@peterhun wrote:
@flosmichael wrote:
OK, 40% increase and 30% decrease would make the Southern countries very competitive but German exports would take a hit.
Yes, which is why the Germans are being so very silly playing this game. Or mad.
The German problem is that , as many other time in history, they feel invincible. Only to be proven wrong at the end…
I know that they have a constitution they need to respect, but desperate measures at desperate times should be taken. -
@brianc_li wrote:
Whatever else you can or cannot say about Edward, he’s a lot more than one of ‘these “bloggers”‘. He’s a well respected LSE trained economist who, amongst other things, advises the IMF.
He has a long track record of accuracy, hence in good part his following. Whilst I don’t agree with everything he says I have built up a lot of respect for his opinions.
Well his CV is not very illustrious/. He is very talented at blogging though, seems to be a founder member of a few blogs 🙄 CV here
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@katy wrote:
@brianc_li wrote:
Whatever else you can or cannot say about Edward, he’s a lot more than one of ‘these “bloggers”‘. He’s a well respected LSE trained economist who, amongst other things, advises the IMF.
He has a long track record of accuracy, hence in good part his following. Whilst I don’t agree with everything he says I have built up a lot of respect for his opinions.
Well his CV is not very illustrious/. He is very talented at blogging though, seems to be a founder member of a few blogs 🙄 CV here
CV seems ok to me, although the point is that if you disagree with something he has written you are free to comment on his blogs. Or here for that matter. That way we all get to share the fruits of your wisdom as well.
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I don’t claim to have any wisdom re. economics but that CV wouldn’t get anyone a career start. My CV is better than that, although not in economics
I do know how to spot a bullshitter though..and a rent a quote! His Thesis was uncompleted and it is not clear what he did after 1978….except blogging….feel free to let me know what I have missed 😐 -
@katy wrote:
I don’t claim to have any wisdom re. economics but that CV wouldn’t get anyone a career start. My CV is better than that, although not in economics
I do know how to spot a bullshitter though..and a rent a quote! His Thesis was uncompleted and it is not clear what he did after 1978….except blogging….feel free to let me know what I have missed 😐Well the degree in economics from the top economics school in the world (LSE) ain’t bad, nor the MSc from Manchester. Both from back in the 70s when you had to be clever to do them. And if he was such a bullshitter then he wouldn’t mention the unfinished PhD (which is hardly a cardinal sin anyway). But really that’s beside the point: I have found him to be the most insightful Spanish blogger on the economic crisis – based on reading his blog rather than his CV 🙄
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Well there is a few missing years in that CV 😆 As for economics graduates…how many thousand will there have been since the 70’s. If he was sooo good why hasn’t he done anything else? Bit of a gap between the 70’s( 40 years ago!!) and the 5 or so blogs he has started….come on, enlighten me, what else has he done ❓ Might as well just read the Financial Times.
Have any of you aficionados read this rubbish
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@katy wrote:
Have any of you aficionados read this rubbish
I don’t know where you are going with this ad hominem attack. He’s a retired guy who posts about something he seems to understand (so much so that heads of state and the IMF listen to his views) and he happens to have a life and interests outside of finance.
So please make a comment on what he says rather that who he is.
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So maybe it was a disaster. Or maybe, it was simply a sign that investors stepped back from Eurozone mass hysteria, checked their data, and pulled out their calculators. And suddenly, that below-inflation yield of 1.98% looked very unappetizing.
They might have remembered some other things. Model Economy Germany was suffering not long ago from stagnation that lasted many years. It was also one of the first EU members to violate the Maastricht Treaty’s criteria that limit deficits to 3% of GDP and gross national debt to 60% of GDP. Currently, Germany’s debt is over 80% of GDP, just a hair lower than France’s and only about average for the Eurozone.
“The level of German debt is troubling,” said Luxembourg Prime Minister Jean-Claude Juncker a few days ago. His country’s debt is only 20% of GDP.
But Germany’s current deficit of 1.3% of GDP is low and is expected to decline further, perhaps even become a surplus. In theory. In reality, politicians, drunk with surplus euphoria, are already ratcheting up spending plans. Just wait till the recent collapse in the all-important export orders worms itself into GDP numbers and tax receipts. Big deficits will be back.
And there are other reasons why investors might have lost their previously ravenous, practically insatiable, and certainly irrational appetite for “safe-haven” bunds. Among them:
– Germany might get sucked into the whirlpool of Eurozone sovereign bonds by guaranteeing more and more of them via European bailout funds and Eurobonds. All would transfer risk to Germany’s own finances.
– Or the opposite: Germany might not do enough, fast enough, to save the euro, and as a consequence, might get sucked down as well.
– Germany might allow the ECB to print unlimited amounts of money and solve the debt crisis once and for all through inflation and devaluation.
– Or worse for bondholders: Germany might break away from the eurozone and issue its own currency either within a mini-eurozone or alone. The ECB would then be free to solve the debt crisis of the Eurozone’s remaining members by monetizing their sovereign debt. The euro might well lose 30-50% of its value over the next decade, as the dollar has done. And investors who’d bought euro-denominated 10-year bunds at a yield of 1.98% would get screwed royally.
In this scenario, Italian 10-year bonds with a yield of over 7% would compensate investors adequately for the expected inflation. And risk of default would return to near zero if the ECB starts monetizing the debt of its members.
http://www.zerohedge.com/contributed/buyers-german-bonds-finally-pulled-out-their-calculators
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@peterhun wrote:
@katy wrote:
Have any of you aficionados read this rubbish
I don’t know where you are going with this ad hominem attack. He’s a retired guy who posts about something he seems to understand (so much so that heads of state and the IMF listen to his views) and he happens to have a life and interests outside of finance.
So please make a comment on what he says rather that who he is.
It is not an attack, I am pointing out to those who hang on his every word that he does not have a good track record. I am not saying he is right or wrong, there’s a 50/50 chance whatever 😛 If someone is involved in setting up a lot of blogs and puts waffly stuff about their backgrounds then people like myself are entitled to comment that there is very little substance there about his past. How do you know heads of State and the IMF listen to his views….how come he was never offered a job
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@katy wrote:
. How do you know heads of State and the IMF listen to his views….how come he was never offered a job
As he has said, he has retired to Spain and has no further interest in economics other than a hobby.
It is an attack when you attack the person not what he says and you are doing it again (on a forum run by his friend).
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When I read any articles I like to see the credentials of the organisation/person who wrote it in order to make up my mind. I don’t know the history of forum friendships when writing on a forum…are you implying that some sort of censorship should be in place? What’s your interest anyway? Never bothered you before when anyones validity has been commented on 🙄 If you want to follow him ok. but I still stand by what I said and none of it is untrue!
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@katy wrote:
When I read any articles I like to see the credentials of the organisation/person who wrote it in order to make up my mind. I don’t know the history of forum friendships when writing on a forum…are you implying that some sort of censorship should be in place? What’s your interest anyway? Never bothered you before when anyones validity has been commented on 🙄 If you want to follow him ok. but I still stand by what I said and none of it is untrue!
The thing with economics is that it isn’t an exact science (in fact it isn’t a science at all) so you can have two people with all the qualifications in the world saying completely the opposite thing and there is no way of conclusively saying who is right and who is wrong. So you need to make up your own mind as to which ideas you think are good ideas and which ones you think are bullshit. Reading CVs doesn’t get you anywhere.
However the problem with economics is that while on the one hand its difficult to get your head round a lot of the theories, on the other hand you cannot escape them because if the wrong theory is applied people’s lives (including yours and mine) can be ruined.
Which is why people like me who have had no formal training in economics whatsoever value blogs and forums. They are the only resouces we have for learning about these issues. And quite frankly I’ve learnt a lot (but am no expert) by reading blogs and joining in debates (and being prepared to get burned occasionally). You on the other hand tend to shy away from such debates (e.g. by hi-jacking threads and saying that they are boring) and you won’t attempt to read any blogs unless you approve of the CV of the person who is writing them. So how are you going to learn? After all “learning” is the main point of a forum isn’t it?
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I did economics as a module on my business degree course (I actually completed it too!) It is a bit airy-fairy and there are a lot of unpredictable outside influences…bit like social studies 😆 I haven’t exactly disagreed with the guy but TBH there are people out there on the web with better backgrounds. He may be excellent, although I have yet to hear of one who is and I prefer to stick with more valid and better written sources. I am still convinced, with my very limited knowledge 🙄 that the euro is Kaput although it maybe band-aided for a few years until the next crisis.
I am still perplexed how all this (yes, boring) stuff links in to Spanish property? If the euro collapses and Spain goes back to the peseta so what? The property won’t get any cheaper or the British owners (who are in a majority in tourist areas) just won’t sell!
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I am still perplexed how all this (yes, boring) stuff links in to Spanish property? If the euro collapses and Spain goes back to the peseta so what? The property won’t get any cheaper
This is where you are fundamentally wrong Katy. If the euro splits or falls apart, best guess is that Spanish property prices will, pretty well overnight, become some 30-40% cheaper for those in the UK and the stronger eurozone economies.
The state of the euro is VERY relevant to Spanish property however boring you may find discussions on it.
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Katy, he has mostly been a TEFL teacher in BCN – that’s not to say he is not a good macro economist and has been accurate since 2008 (maybe not so difficult i hear you say?). But as we say, those that can DO etc etc ………..
what spoils his work is his total commitment to the separation of Catalunya from Spain – it is common knowledge the harm the politics have done to the Catalan economy in the last ten years!! … just as well they have all those swarming downmarket tourists nibbling snack as they wend their way down the ramblas !!
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Yes they would become cheaper via the exchange rate but would the British want to sell if converting back to sterling, wouldn’t be worthwhile. You misunderstood what I was saying. eg. when we sold our villa we only had to exchange 1.10 euro for a pound…if the euro falls lower and I had to exchange at 1.40 to get a pound I wouldn’t have sold at the price we did, I would have asked a higher price for the villa or not bothered to sell. If you are getting peanuts for it, why sell. I know many other spanish property owners who feel the same.
I am not hijacking the forum….it’s a spanish property forum not an economic forum -
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First you say that you don’t see the relevance to Spanish property, then you go on to illustrate perfectly the relevance. I don’t know. Some women 🙂
In that scenario, there will be plenty of Spanish, Italian, etc sellers. Those of us who are looking to buy will initially get our discounted properties from them. In the end the market will sort it out and even reluctant Brits will be forced to accept the new reality.
You can’t buck the market.
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@katy wrote:
@UBEDA wrote:
BTW; SAIF (yes him) also had a degree from LSE!!! 😳 😳 😳 😳
Yup 😆 😆 😆
Which, according to your earlier post, would make him just as credible to you, as any other LSE graduate.
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@Chopera wrote:
The thing with economics is that it isn’t an exact science (in fact it isn’t a science at all) so you can have two people with all the qualifications in the world saying completely the opposite thing and there is no way of conclusively saying who is right and who is wrong. So you need to make up your own mind as to which ideas you think are good ideas and which ones you think are bullshit. Reading CVs doesn’t get you anywhere.
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Economics is an exact science. It is based on assumptions and has very well tested mathematical models. The main problem is that the Quants (i.e. brilliant ex-scientists from Harvard, Princeton, Berkeley , you-name-it, who have switched into finance) have made it much harder to
follow and understand. A degree in Economics is not enough to understand the current markets.There is a big difference between knowing what IS happening and knowing what IS GOING TO happen. Only science can offer models which predict what is going to happen. This is why the hedge funds owners, the employers of sharp minded quants, are getting filthy rich while everyday investors are losing their shirts.
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@brianc_li wrote:
I am still perplexed how all this (yes, boring) stuff links in to Spanish property? If the euro collapses and Spain goes back to the peseta so what? The property won’t get any cheaper
This is where you are fundamentally wrong Katy. If the euro splits or falls apart, best guess is that Spanish property prices will, pretty well overnight, become some 30-40% cheaper for those in the UK and the stronger eurozone economies.
t.The economic disaster determined by the potential breaking will be so big that few will still have the courage to buy properties in foreign countries.
Buying a house in Spain is one of the least priorities of UK people now and in the medium future.
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@brianc_li wrote:
First you say that you don’t see the relevance to Spanish property, then you go on to illustrate perfectly the relevance. I don’t know. Some women 🙂
In that scenario, there will be plenty of Spanish, Italian, etc sellers. Those of us who are looking to buy will initially get our discounted properties from them. In the end the market will sort it out and even reluctant Brits will be forced to accept the new reality.
You can’t buck the market.
It won’t happen. There are very few nationalities selling Spanish property in Tourist areas. I guesstimate that if you called to view 10 properties on the CDS, 8 would be owned by British. I think prices will fall lower…but hey, on the CDS they haven’t fallen much anyway, but you won’t get quality location properties for a song whatever happens to the euro.
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@flosmichael wrote:
@Chopera wrote:
The thing with economics is that it isn’t an exact science (in fact it isn’t a science at all) so you can have two people with all the qualifications in the world saying completely the opposite thing and there is no way of conclusively saying who is right and who is wrong. So you need to make up your own mind as to which ideas you think are good ideas and which ones you think are bullshit. Reading CVs doesn’t get you anywhere.
?
Economics is an exact science. It is based on assumptions and has very well tested mathematical models. The main problem is that the Quants (i.e. brilliant ex-scientists from Harvard, Princeton, Berkeley , you-name-it, who have switched into finance) have made it much harder to
follow and understand. A degree in Economics is not enough to understand the current markets.There is a big difference between knowing what IS happening and knowing what IS GOING TO happen. Only science can offer models which predict what is going to happen. This is why the hedge funds owners, the employers of sharp minded quants, are getting filthy rich while everyday investors are losing their shirts.
Testing a mathematical model ain’t the same as testing a theory in the real world. With economics there are no controlled experiments that you can perform to test whether the theories being suggested really do produce the results they predict. The theories are not falsifiable in the real world. Of course you can draw up a simulation, feed it some input data, and analyse the output data. But the conclusions only apply to the simulation. That’s not to say you can’t draw some extremely useful insight from performing such experiments, which might give you an advantage in playing the markets, but that’s about as far as it goes.
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@brianc_li wrote:
This is where you are fundamentally wrong Katy. If the euro splits or falls apart, best guess is that Spanish property prices will, pretty well overnight, become some 30-40% cheaper for those in the UK and the stronger eurozone economies.
How does that work for a Vendor then? Why would someone sell for so much less if they were converting back to Sterling or stronger eurozone economy? I just don’t understand all of that argument, and how does it help these stronger countries if no one in the poorer countries can buy anything from them because everything is 40% expensive? Just all becomes a vicious circle does it not?
Am confused! 😕
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I’m no economist but the simple fact and this applies to Brits (and not Eurozone residents) which I’ve said for ages, is this example:
Some years ago we received 1.64 euros per pound stg on buying Spanish property.
Now it’s around 1.10-1.14, a fall of just over 40% on exchange rate.
Spanish property prices have fallen by a similar amount (more in some cases)
Therefore, Brits buying in Spain are paying the same price in Sterling terms as they were years ago, so no savings whatsoever for them.
Those Brits who bought several years ago and who’ve taken a big hit on the valuation of their property, can at least get out fairly unscathed if, and it’s a big IF they can resell now and by converting back to Sterling. British purchasers who bought say in the last couple of years are likely to lose money if they try and resell to go home to Blighty.
With all the Euro uncertainty around at the moment I really don’t think Brits should be buying in the weaker Eurozone countries (club Med) which I know estate agents won’t want to hear.
However, if it’s for a complete lifestyle change and for the long term that’s different! 🙄
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Ok Chris, let me try to illustrate…..
I have 100k euro sitting in my bank in The Netherlands. Let’s call these A-euros. You have a property for sale in Spain at 120k euro. We’ll call those B-euros.
At present there is no difference in rates. One A-euro = one B-euro. As I do not want to borrow any money and as the vendor is not prepared to negotiate, I cannot at present afford to buy this property.
For the sake of argument, let us then say that the euro splits in two with separate A-euros for the stronger Northern economies and B-euros for the club Med countries. In such an instance the A-euro will gain value over the B-euro. Nobody knows how much. Again, for the sake of argument, let us say that the A-euro gains 30% in value over the B-euro.
What this now means it that my 100k A-euros is now worth 130k B-euros. I can now afford to buy the property and have money left over.
Now you could take Katy’s ‘Nobody will sell’ argument into account. Frankly that doesn’t wear with me. Yes, transactions may drop but there will always be a market. You could also argue that the person, who was previously selling their property for 120k euro, will now want 120k A-euros so will up their price to 156k B-euros. Again, experience shows that this will not, in general, happen.
For example, when sterling dropped 30% in 2008, people in the UK did not put their properties up by that amount. To the people there a pound was still a pound. Property in the UK did however become 30% cheaper for those who held their assets in other currencies.
If the euro does split it will cause a lot of pain, no question.
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The FSA has instructed all UK banks to prepare a strategy for the break up of the Eurozone and the failure of the Euro. Asian central banks are pulling their money out of the Euro and into safe havens.
Markets now believe the Euro will shatter in a disorderly manner hence the lack of appetite in this weeks German Bund auction.
With every blundering move Mercozy makes they bang another nail in the Euro coffin. Even the Vatican is appealing for some positive action.
One of the worst of these moves was to declare Greece a ‘voluntary default’ to avoid the CDS mechanisms kicking in. Now market investors have little faith the insurance on their investment they thought was in place against default will no longer apply.
If you have no protection against default you have no choice but to move your money elsewhere.
This thing grows worse with every passing week, yet Merkle is still adamant she will not agree to allow the ECB to fund sovereign debt under any circumstances.
In my opinion that is the only route to salvation for the Euro. Without it it’s doomed, there’s simply no other option which will work.
The consequences of the Euro failing completely are enormous but every investor I have contact with is preparing for just that.
Any Euro investment now needs to be moved before the inevitable happens.
http://www.guardian.co.uk/business/2011/nov/24/germany-rules-out-ecb-intervention -
Logan I had to smile when you said even the Vatican were appealing for some positive action, and we know why don’t we? They have so much wealth (billions) tied up in Euro cash, Euro assets etc that if it’s devalued drastically etc the powerful Roman Catholic church takes a ‘scalp, not a haircut’ and loses much of it’s worldwide influence and power, then of course they’re linked to the various Italian/Sicilian Mafia groups so more mayhem 😉 These Countries, their crooked leaders and ex leaders like Berlusconi, their Banks, their Corporate Businesses, are all so inextricably linked to each other it doesn’t bear thinking about!
Will the C of E with it’s huge sterling assets then start buying up the R.C. assets if they’ve crashed, we could go back to the dark ages 🙂 This is tongue in cheek but strange things do happen. Wars have started for less.
And, you’re right, most Gov’ts, and savvy institutions and wealthy individuals, and businesses are preparing for the breakup.
We now hear too that Germany’s position with it’s own finances are being called into question especially if they relent to all this pressure.Are those people with lots of Euro assets just in denial, or gambling on things coming good? I know several very worried Brits in Spain and even in France and Cyprus all desperately trying to sell now.
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@Chris McCarthy wrote:
@brianc_li wrote:
This is where you are fundamentally wrong Katy. If the euro splits or falls apart, best guess is that Spanish property prices will, pretty well overnight, become some 30-40% cheaper for those in the UK and the stronger eurozone economies.
How does that work for a Vendor then? Why would someone sell for so much less if they were converting back to Sterling or stronger eurozone economy? I just don’t understand all of that argument, and how does it help these stronger countries if no one in the poorer countries can buy anything from them because everything is 40% expensive? Just all becomes a vicious circle does it not?
Am confused! 😕
Spain and Italy can survive by buying national products. They produce good cars (Seat, Fiat), have extraordinary agriculture and are attractive for tourists. I am sure they will be able to assemble some decent TVs, refrigerators, etc. They do not need to buy from Germany. People can survive without BMW, Mercedes and Audi.
There is no vicious circle. The Germans have taken advantage of the EU and have bankrupted everybody around them.
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@brianc_li wrote:
Ok Chris, let me try to illustrate…..
OK thanks, I get all of that.
Angie makes a very interesting and valid point also about how so many Brits who bought have simply not lost out on their purchase in fact all things considered have done quite well from the scenario.
However, what I find continually perplexing is the view that ‘everyone must be desperate to sell’ in Marbella and the wider Costa del Sol, it is a plain and simple fact that when it comes to ‘resale’ properties we are at an all time, subterranean low level of listings from Private Vendors.
Katy is also right in that actually 9/10 of our properties would be ‘foreigners’ as Vendors, not all British but many northern Europeans also, and right about now, all the new listings that we do receive recognise a need to price competitively and or reduce sharply if they literally have to sell and move on.
The market has many thousand ‘old’ listings, which are on the market, but as it costs nothing to list, and people don’t mind waiting a year or four (incredbile but true) then that stock just sits to highlight the old market.
Look at interest rates – why would you sell if you can afford to maintain the property?
Look at the market – it is now at the bottom – why would you sell if you were at the bottom of the market, if you can afford to keep, and crucially use and continue to enjoy your home.
All time lowest costs to own a home, all time lowest market, and then ‘if’ it was somehow devalued by a B Euro, what… So now all of a sudden you are going to sell?
I can’t see it Brianc_li, thanks for the points, I get it, but I just don’t see it happening.
This whole Greek situation alongside the Italian malarky threw a spanner in our works from around mid October, it did the same for about six weeks – 18 months ago, but we past it now and we registered 5 offers and three new sales in the past couple of days alone.
People believe that we are – at the bottom of the market – they don’t necessarily subscribe to the view that it is going to rocket up anytime soon, but they don’t believe that it can or will go lower (on the particular properties they are buying) all this talk of a split Euro, or a collapsed Euro throws everything up in the air from time to time.
However, equally people feel that Germany is taking the right lead, and that there is absolutely zero appetite to change to something ‘new’ in the middle of this whole global mess. None of that makes sense to me or hundreds of other millions of Europeans.
This is all a great debate, but the Euro will not go, it will grow stronger and will be world reserve currency, and, well I worry about Britain quite frankly, I really do, I think Sterling and the growing notion or sense of isolationism really could bite us in the backside.
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@Chris McCarthy wrote:
Look at the market – it is now at the bottom – why would you sell if you were at the bottom of the market, if you can afford to keep, and crucially use and continue to enjoy your home.
All time lowest costs to own a home, all time lowest market, and then ‘if’ it was somehow devalued by a B Euro, what… So now all of a sudden you are going to sell?
People believe that we are – at the bottom of the market – they don’t necessarily subscribe to the view that it is going to rocket up anytime soon, but they don’t believe that it can or will go lower (on the particular properties they are buying) all this talk of a split Euro, or a collapsed Euro throws everything up in the air from time to time.
If the situation were not as bad as it is (future recession/depression, high unemployment, possible Euro breaking), maybe we could have been close to the bottom of the market. But in the current crisis, we are very far away from the bottom.
I do not think that even the most naive and uninformed person would believe that we are at the bottom of the market. Even somebody coming now from a 6 months hike in Himalaya who was without TV/newspapers/radio/i-pods/mobile phone. Does anybody you know fall for that?
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@flosmichael wrote:
But in the current crisis, we are very far away from the bottom.
It is the bottom alright.
On about 10% of our listings, I can promise you it just doesn’t go any lower than this.
But then I would know that far in ahead of you, because we are the ones providing the stats that you will read about in 12-18 months time and be then calling the bottom.
It is soooo, sure the bottom right now, doesn’t mean everything is bottom priced, lots of people have to come down but those at the lowest point, they don’t go any further.
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@Chris McCarthy wrote:
@flosmichael wrote:
But in the current crisis, we are very far away from the bottom.
It is the bottom alright.
On about 10% of our listings, I can promise you it just doesn’t go any lower than this.
But then I would know that far in ahead of you, because we are the ones providing the stats that you will read about in 12-18 months time and be then calling the bottom.
It is soooo, sure the bottom right now, doesn’t mean everything is bottom priced, lots of people have to come down but those at the lowest point, they don’t go any further.
I am sure you are joking.
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@Chris McCarthy wrote:
This is all a great debate, but the Euro will not go, it will grow stronger and will be world reserve currency, and, well I worry about Britain quite frankly, I really do, I think Sterling and the growing notion or sense of isolationism really could bite us in the backside.
I don’t know if the Euro will fall or morph into something else and I don’t share your confidence it will become the world currency reserve. Firstly Eurozone countries will have to reduce their massive debts, return to substantial growth and convince the markets they can service their future borrowings easily, whilst maintaining fiscal discipline. An almost impossible hill to climb in today’s financial climate.
Market confidence once lost takes a very long time to return. Investors simply move elsewhere and find more secure profitable investments.
The inability of Eurozone nations to agree anything substantial to turn this mess around has damaged Europe’s credibility almost as much as Greece, Ireland and Portugal put together. The political process has been found to be wanting in many aspects. Even if they agree further treaties on future fiscal union the damage has been done.
I have no idea where the future growth is going to come from for Europe. EU Economies are hopelessly uncompetitive on a global scale.
Any optimism is badly misplaced but I guess that’s how some people prefer to see the world. I personally prefer large doses of realism. -
@logan wrote:
@Chris McCarthy wrote:
I have no idea where the future growth is going to come from for Europe. EU Economies are hopelessly uncompetitive on a global scale.
Thats simply not true. The EU economy is the biggest in the world.
The second biggest and half of the top ten exporters is in the EU. Airbus for instance has come from nowhere to be the dominant civil airline manufacturer. On the other end of the scale as an example, China is moving textile manufacture to Poland.. becuase its cheaper/better than in China.
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Although the EU countries together statistically has the largest GDP in the world many of the member states have uncompetitive labour markets, restrictive practices and are burdened by excessive social spending, taxation and public debt.
GDP is the formal measure of economic performance however there is such a thing as the informal economy which represents a significant part of some countries real economy, particularly in Asia.
The informal economy contributes significantly to the actual competitiveness of a ‘real’ economy because it’s unregulated or measured and is often more efficient. Greece for example has a large informal economy which is impossible to quantify but helps to maintain living standards for many during a downturn. Spain also has something similar and goes some way to explain why families can survive reasonably well without formal employment. -
@logan wrote:
Although the EU countries together statistically has the largest GDP in the world many of the member states have uncompetitive labour markets, restrictive practices and are burdened by excessive social spending, taxation and public debt.
A fiscal union would largely solve that. Very Difficult.
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Here is an interesting study by B of A Merrill Lynch on the value of currencies should the Euro fall.
It’s interesting to note that Merrill Lynch believe that currently the fair value Euro in Spain is 20% overvalued against the US Dollar.
So should the Euro fall and Spain return to the Peseta imagine what a shot in the arm that would be for the property market and their economy generally.
It’s starting to look like the only salvation for the peripheral states is to leave this slow car crash which is the Euro. I see no alternative. -
@logan wrote:
Here is an interesting study by B of A Merrill Lynch on the value of currencies should the Euro fall.
It’s interesting to note that Merrill Lynch believe that currently the fair value Euro in Spain is 20% overvalued against the US Dollar.
So should the Euro fall and Spain return to the Peseta imagine what a shot in the arm that would be for the property market and their economy generally.
It’s starting to look like the only salvation for the peripheral states is to leave this slow car crash which is the Euro. I see no alternative.As I have said on many occasions in the past, economies such as Greece and Spain are between a rock and a hard place when it comes down to either staying or leaving the euro. They should never have joined the euro.
As far as the Merrill Lynch report is concerned, I think their view of a 20% overvaluation of the (spanish) euro is about right and in line with what I have read from other sources.
However, I can see nothing in the article to substantiate the reporter’s own headline that “Return to sovereign currencies wouldn’t be as traumatic as assumed”
Richard
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@logan wrote:
I personally prefer large doses of realism.
And you have them. It is a fact, we are drowning in them.
I see and hear all of that. I can’t argue with that.
But then things do get better at some point do they not? It has been more than 3 years now since the credit crunch.
It is what it is, at some point it become a – was, and things improve. The milk was long spilt, the consequences have been very real and traumatic. Is that not a fact which is effectively done and dusted?
There is much that will continue to be burden, there may well be an ‘official double dip recession’ but at what point do we accept what is fact and start to look forward?
Can we not have a tablespoon of acceptance and a teaspoon of optimism?
Is there no area of opportunity in adversity?
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@Chris McCarthy wrote:
Is there no area of opportunity in adversity?
Normally yes, downturn’s usually present some relative opportunities. However this is no normal downturn and for Europe it’s nothing short of a financial catastrophe. There are no positives in that.
There are investment opportunities in Asia and the Far East, even America shows some positives but Europe’s a basket case for too many reasons.
I saw an interview today with the MD of Pimco who when asked what investors in Europe should currently be doing with their money he advised a flight to safety, anywhere but Europe basically. Pimco are the worlds largest bond traders so you can bet yields and credit ratings are about to rise and tank respectively.
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