David McWilliams: Ditch the Euro

[McDave]

Scolairebocht,

That's an interesting and impressive piece of research. But it's also a polemic. Equally impressive polemics can be produced to make precisely the opposite argument. I won't say I'm the man for that particular job, but here's my €0.02 worth.

I remember the sneering propaganda against EMU and the ERM dressed up as political dogma (there's right and there's wrong Maggie/Ronnie-type stuff) and economic common sense (the project can never hold together). This bile came largely from the Anglosphere and rested largely on post-1989 hubris and anti-German and anti-French prejudice. But the Euro came to pass, and thankfully based on the strictures of the Bundesbank model.

If you put the multitude of technical details to one side and take an overview of the Euro, the forces that will help it prevail include:

- the fact that it is a political imperative of the core Eurozone countries;
- that it is based on a bedrock of economic responsibility (ECB) which eliminates political interference in all but the most extreme circumstances;
- that the key Eurozone economies permit of state intervention in economic and social life (i.e. they actively seek to provide a bedrock of stability for the wider population).

All of these are significant background factors which are hard to quantify, the success of which can only really be judged over the longer term. They're a kind of strategic guiding hand, and not suitable fodder for quarterly reports.

Whether Ireland wants to, or can be part of this project, is down to us. If we can't hack it, well so what. We won't be missed by those who stay at the table. What it will say about us is that we can't hack being an even half-way decent economic actor and participant in European and international trade. That problem won't go away just by jumping the Euro ship.

Which brings us to the crux of the matter. Exiting and devaluation is a stroke. It solves the problem temporarily. The conditions that brought us to this impasse will not have been addressed. There will have been no consequences for the debased economic policies of the C****c T***r era that are understandable to our electorate. So we'll go on taking the same easy political and economic options until we need to devalue again, and again and again.

Basically, if we have the genius within us to solve the conundrum we're in, we're better off applying that genius within the Eurozone, and not bobbing around exposed solely to the whims of our dreadful domestic political system.

[pollyanna]

Excellent post McDave.

[X-ray]

At the moment it is in the political and economic interests of the most powerful countries in the EU that we survive economically. If we ditch the euro it is in their interest we do an Iceland to warn others off the same course. Sure the UK and USA can be relied upon to save us though.
We never really had a "punt", it was either tied to sterling or euro currencies. Floating alone is dangerous stuff.

[orbit]

I have been living abroad so I have a Euro account in another country. The moment I hear the government seriously consider leaving the Euro I'm moving my communion money abroad. I would not trust An Punt Nua to keep its value.

The first whiff that something like this is being considered (which it isn't), there would be a complete collapse of the banking system, caused by a run in the way you describe. I'm surprised by McWilliams. Early in the crisis, he suggested sensibly that "real" countries don't let banks collapse. What he is suggesting here, is just that, on a grander scale.

[Risteard]

Death to the Euro!

[X-ray]

The first whiff that something like this is being considered (which it isn't), there would be a complete collapse of the banking system, caused by a run in the way you describe. I'm surprised by McWilliams. Early in the crisis, he suggested sensibly that "real" countries don't let banks collapse. What he is suggesting here, is just that, on a grander scale.

I am already considering where to hide the fifty euro notes

[Risteard]

So we should return to having a punt linked to sterling?

It wasn't linked to Sterling.

[myksav]

Over the boom years I was on a fairly low income, but I managed to save about €50 a week.

That, combined with my communion/confirmation money means I have about €20,000 in the credit union.

I have been living abroad so I have a Euro account in another country. The moment I hear the government seriously consider leaving the Euro I'm moving my communion money abroad. I would not trust An Punt Nua to keep its value.

The effect my small action will be to reduce the money available to the credit union to loan to other people who would invest it in solid local businesses or further education. This will harm the economy.

Now imagine all those people with more money than me. If they did the same a huge amount of money would flee the country, at a time when we need it most.

Leaving the Euro is easily the most stupid thing I heard McWilliams ever say. I don't think everyone who suggests it is stupid. However, someone who is an economist should know better. The very suggestion reduces confidence in the Irish economy even further.

Well done, Imported, you're a better manager of personal economics than George Lee, who said he had no real savings on a much higher income.

[Risteard]

had 20 years of not being on parity with sterling.

As in not linked to Sterling. Thankyou for conceding the point.

[Ramon21]

Death to the Euro!

How smart, just keep your mouth shut.