Will Ireland have to leave the Euro to save itself?

[McDave]

No no no no!
There would be an almost garunteed run on our new currency. Defending it would mean jacking interest rates to the sky. This would cause widespread defaults and possibly the collapse of our already fragile banking system.
Not defending it would mean rapid inflation.
There are simply no good ways for leaving the euro at this time to pan out.

I agree.

And just to take your line a step further, the last thing we need is an immediate return to above-Eurozone-trend inflation - the symptom of what was going wrong with our economy all along! All this would do is prop up property prices, put upward pressure on wages and shut down the import side of our open economy (except for oil - the price of which would go through the roof - back to turf fires and bainins).

With all due respect to advocates of economic independence, talk of leaving the Euro is economic illiteracy. We need some form of discipline within which to reorganise ourselves. The Eurozone provides this discipline. What does Eurozone membership tell us? In essence, devalue your overvalued economy and start competing on price again. If we don't have this externally-induced discipline, FF will simply carry on kowtowing to vested interests until we're back teetering on the edge of the third world.

[SPN]

I'm missing something here.

Sterling and the Dollar are falling like a stone. Both economies are f*cked for the next 5 years at least.

Ireland is part of the Euro and has no exposure to exchange rate risk across the Euro zone.



What possible reason might there be for abandoning the link to Germany & France, and transforming ourselves into Iceland Mark II?

Total utter and complete stupidity!

What do you propose we use to back our currency? Where do you propose we get the foreign currency reserves to pay off our current borrowings? Who in their right mind is going to lend new money to a little rock in the Atlantic with massive debts, bigger contingent liabilities, no natural resources, and a floating currency?

Can we have a little bit of reality here please?


..
.

[Rebel CNC]

Leave the Euro??

What do you think our gombeen government would do if they had their own currency to play around with?
The Brits with the sixth biggest manufacturing economy and their North Sea oil can't stop sterling sliding to record lows. Cowen and Co would have us in a Zimbabwe situation within six months.

The money printing presses would be smoking at this stage as FF would be lashing out money to banks, saving developers and paying up on National wage agreements, etc

[Johnny Bluestar]

I know that turkeys usually lose their heads at christmas time.
I did'nt know it happened to people too.

Leave the Eurozone????

FFS.......

[FrankSpeaks]

I'm missing something here.

Sterling and the Dollar are falling like a stone. Both economies are f*cked for the next 5 years at least.

Ireland is part of the Euro and has no exposure to exchange rate risk across the Euro zone.



What possible reason might there be for abandoning the link to Germany & France, and transforming ourselves into Iceland Mark II?

Total utter and complete stupidity!

What do you propose we use to back our currency? Where do you propose we get the foreign currency reserves to pay off our current borrowings? Who in their right mind is going to lend new money to a little rock in the Atlantic with massive debts, bigger contingent liabilities, no natural resources, and a floating currency?

Can we have a little bit of reality here please?


..
.

I am with you on this one, leaving the Euro would be totally and utterly idiotic. Our mortgages and most of our borrowings are in Euro and reinstating the IR£ would not change that fact and this is thing that would cripple us the most.

[Respvblica]

Politically its bad because we would come under the thumb of Britain again. As a small nation our surivival as an independent state relies on a balancing act between larger groups. If England had a population of 10million, or we had a population of 30 million, we could have a balance in this part of the wprld, similar to what they have in Scandanavia were all the nations are relatively the same size. But England is the neighboring giant that can easily gobble us up. Ironically ceeding sovereignty to Brussels has allowed us more real independence, because it has freed us from the dictates of London. At least we have some say in Frankfurt.

Economically, it would be good to be harmonised with Britain, so there is a good argument to leave from the point of view of the exporters. However Ireland is more than the exports to England. In fact we now export a lot to Europe and if the Euro started to slide relative to the pound at some stage in the future we would be in exactly the same boat as we are now! So that argument fails the test. In any case we should continue to diversify our exports and not keep too many eggs in the one basket as a matter of national policy.

Theres a lot of problems with the EU and sometimes it acts scandoulously but leaving the euro would achieve nothing but moving us to again become part of the UK, if not de jure in the de facto sense. For me that is completely unacceptable.

[goosebump]

The elephant in the room regarding Ireland's future prospects as an economy is our membership of the Euro.

Is this elephant that you seeing pink by any chance?

[Oppenheimer]

(1) Our membership of the Euro was always a matter of politics rather than sound economics - no one really disputes this.

Incorrect, the stability pact was called that for a reason - to institute stability and access the scale of the Union by harmonising the currency used. If it was political well it would be one of the only examples in the history of politics in democratic countries where the politicians did not seek popularity! So just about anybody with a brain should dispute this and if you can back up your claim about no one really disputing it that would at least start increasing the credibility of your statement - one condition though, the back up should be from a sound economic thinker, i.e., not Myarse or some other opinionated but not expert commentator.

(2) Ireland has been consistently out of sink with the Euro economy. This is largely the fault of the Irish government rather than Frankfurt.

That Ireland has been out of "sync" is not a one-dimensional issue. Our economy was a basket case in the 80s prior to the devaluation and things being so bad that finally every stakeholder group got in a room and supported a collective plan. The stability (that word again) offered by EU membership and alignment gave specific targets for our economy to get on the road of convergence with the engine economy of Europe, Germany. This was always going to be a significant increase in growth in Ireland and a consequential asynchronous growth rate. That that growth was idiotically managed by the popularity-seeking politicians (back in form again obviously) I completely agree with you. By not storing in times of plenty they essentially excacerbated the problems we now have. McCreepy's policy of "spend when we have and we don't when we haven't" have probably the most immediate and damaging effects evident at this point. How any one thinks this idiot performed as a finance minister is beyond me.

(2) Now that the worm has turned the other way we do not have monetary policy to react and fiscal policy has been hopelessly compromised by the actions of government over the last decade.

True we do not have monetary policy - is that helping the Fed or the BoE at the moment? It seems that monetary policy is not the only tool that can help us in these unprecedented times. The Fed is at 0-0.25% - not much more by way of monetary policy they can do bar devalue - which they are doing by stealth with other policies and bail-outs.

(3) The currency situation now makes all previous predictions on the economy, including the ESRI, all redundant. I am now reckoning on GNP declining over 7% next year with unemployment hitting 15%, and 20% into 2010.

GNP maybe - I'd say 6% and unemployment to top at 15%. 20% is overshooting IMO.

(4) Consequently, the only way I see Ireland avoiding economic armagedon over the next 2 years (barring a worldwide economic upturn that is just not a realistic prospect) is to ditch the Euro. Radical? Yes. Necessary? Absolutely in my view.

So to take on the costly programme of pulling out of the Euro, reissuing a new currency, revaluing all goods and services in the economy to that new currency, reducing our buyer power (economy of scale leveraged from Europe), our supplier goodwill, our ability to enter new markets and sustain the ones we trade into (nobody will trade a new currency until it proves its worth - maybe ten years worth of history?), etc., at a time when we have no money to spend but have to spend other's money - how do you think we pull out of the Euro - by borrowing Euros?

[Respvblica]

When people say that Ireland is out of kilter with the rest of Europe, I think its a gross generalisation, or it implies Germany. Spain seems to be in the same cycle as ourselves and no one there is talking of leaving.

[Gimpanzee]

Leaving the Euro would be a disaster. That doesn't mean that being in the Eurozone is pain free. What we need is for government to use policy to smooth out the bumps - and not go on a spending spree simply because there are low interest rates without regard to other factors - like was done by McCreevy and Cowen.