Two Tier Europe re ECB

[eurosceptic]

In the coming months we will be threatened constantly about a two tier europe. Worth noting that a two tier europe already exists. The executive board of the European Central bank has six members. the big four in the Eurozone (France, Germany, Italy & Spain) are permanent members with the other two spots availible to the remaining members (although iceland will be excluded if it joins the euro as its non-EU).

[seabhcan]

In the coming months we will be threatened constantly about a two tier europe. Worth noting that a two tier europe already exists. The executive board of the European Central bank has six members. the big four in the Eurozone (France, Germany, Italy & Spain) are permanent members with the other two spots availible to the remaining members (although iceland will be excluded if it joins the euro as its non-EU).

Iceland has been told that they cannot join the Euro without joining the EU.

[theyshootPDsdontthey]

In the coming months we will be threatened constantly about a two tier europe. Worth noting that a two tier europe already exists. The executive board of the European Central bank has six members. the big four in the Eurozone (France, Germany, Italy & Spain) are permanent members with the other two spots availible to the remaining members (although iceland will be excluded if it joins the euro as its non-EU).

Iceland has been told that they cannot join the Euro without joining the EU.

It could however adopt the euro as its currency without actually being in the EU. Merely issue all govt debt in € and set an exchange rate for a certain day and say that the krona ceases to be legal tender from that day.

[ivnryn]

It could however adopt the euro as its currency without actually being in the EU. Merely issue all govt debt in € and set an exchange rate for a certain day and say that the krona ceases to be legal tender from that day.

This could have issues with respect to their central bank acting as lender of last resort. If a bank 'needs' a loan in order to cover a short-term liquidity crisis, their central bank would not be able to lend them much as they have finite number of Euros.

What they would effectively be doing is saying that they will give EUR 1 for 130 ISK to anyone who asks and have all bank accounts redenominated. When a depositor withdraws money, the bank gives them Euros and 'cashes in' the ISK that were previously in their account.

This means that they need to have at least some Euros to actually pay out. If everyone tried to withdraw their money, the central bank would run out of Euros, even if it completely converted its reserves into Euros.

Maybe they could do the following.

Set a target rate and a range.

Say they will buy Euros at the low price and sell Euros at the high price (such to them having the Euros).

For example, 130ISK +/-10.

As time passes they could reduce the range (say by 2 ISK every month) and move the mid-point by 1 ISK every month. The midpoint would be moved towards the average exchange rate, perhaps based on the number of buys and sells. They have the ability to buy an unlimited number of Euros (as they in effect have infinite ISK), but they would be only able to buy a finite number of ISK as they don't have infinite Euros.

Once they have acquired enough Euros to cover all ISKs in circulation at the official exchange rate, they can switch to a pure currency peg.

However, they still lose the lender of last resort function.

[eurosceptic]

We have gone off track a bit re Iceland. The main point is that the bigger countries are clearly the senior members of the european club. I am reminded of what operates in a lot of golf clubs whereby an elite of members are full members and the rest are limited members. We are going to face a barrage of threats in coming months about getting stuck on a bottom tier in the European club. Such a two tier system clearly already exists and we are not on the top tier.

[Joe Ryan]

getting abck to the point of a two tier ECB is it not the case that the ECB interst rate has been effecitvely ignored by Irish financial institutions by their deison to abandon tracker mortgages, and the impact of the credit squeeze in Ireland appears greater than elsewhere in the EU?
Is regional econmics within the EU proving outside the ECB's ability to manage? Is the above not an acceptance of such?

[Clanrickard]

We have gone off track a bit re Iceland. The main point is that the bigger countries are clearly the senior members of the european club. I am reminded of what operates in a lot of golf clubs whereby an elite of members are full members and the rest are limited members. We are going to face a barrage of threats in coming months about getting stuck on a bottom tier in the European club. Such a two tier system clearly already exists and we are not on the top tier.

Thanks for reminding me of this. Also our "friends" the Germans stopped us from being on the board as we were too small.

[Respvblica]

We have gone off track a bit re Iceland. The main point is that the bigger countries are clearly the senior members of the european club. I am reminded of what operates in a lot of golf clubs whereby an elite of members are full members and the rest are limited members. We are going to face a barrage of threats in coming months about getting stuck on a bottom tier in the European club. Such a two tier system clearly already exists and we are not on the top tier.

Thanks for reminding me of this. Also our "friends" the Germans stopped us from being on the board as we were too small.

Stopped us particularly or just the small countries?
Was it the Germans or the French as well?

[blucey]

All this is claptrap my friends.
When we had our own CB I dont recall that it had representatives from the 26 counties on the board. It had a board that was charged with doing its job for hte economy as a whole. Now, if that meant more pain in westport than wexford, too bad.
Get real - monetary policy is not conducted this way.

[eurosceptic]

So how much pain are you willing to take for the european cause. Interest rates are set to suit germany at the minute, so they are going up to cool the german economy while irish mortgage holders like myself get shafted. How many defaulted irish mortgages is acceptable pain to you? Are you prepared to default on your own mortgage and go into negative equity to ease german inflation?