Time to leave the deutschmark... errr I mean euro?

[Big Bobo]

The right wing economists will always tell you we need to slash wages by 10-20% to remain "competitive". This would most likely just result in a shift of money away from workers and into the hands of the bosses. Competitiveness is just a euphamism for how much the bosses can milk workers for. Jobs would be saved but living standards for the workers would decline while the bosses land bonnanza profits.

However if we had our own currency we would be able to devalue it by say 10%. Wages would remain the same and manufacturing jobs would be saved. Some prices may rise but at least everyone would be hit proportionately.

Of course this is not a long term solution. What people all over the world need to do is break with the market economy altogether so that capitalists and investment bankers cannot force the workers of the world into a race to the bottom. The so called free market only makes the rich richer and forces down wages and conditions for everyone else.

[Bobert]

Same thread, different day.

[advertismo]

Weren't the BBC reporting on how the Irish economy (or more particularly, the broadening difference between the interest rates charged on our borrowings and those of other member states) was de-stabilising the currency a couple of weeks ago ?
Better get on with the business of who we're goin' to put on the new punt note (forget your €50s, my friends...) before we're kicked out.

[Hazlitt]

Hi there Bobo,

I think that for reasons that differ to yours it would be a good idea to leave the euro.

I don't think that devaluing the currency is beneficial, this would essentially be a 10% tax on everyone, their spending power would be reduced and their savings would be eroded. I don't think the devaluation would be ethical or wise.

I also think that to replace the euro with another fiat system that is essentially the same but with different people in control and different names on the notes would be pointless.

I would be in favour of repealing the current legal tender laws and allow competition for currencies. I would also amend current legislation to ensure banks kept 100% reserves.

Also, the timing of opting out of the euro would have to be chosen wisely with the current financial crisis. I would like to see any papers/reports that may be written on countries potentially opting-out of the euro currency, if anyone knows of any links please post them here.

Two of the first links to such reports on google are:

1. Morgan Stanley - Global Economic Forum

2. No good way out of euro - International Herald Tribune

[subaculture]

How many times is this thread going to be re-run? We should and will not leave the Euro. Our fundamentals are wrong (wages, costs, worker expectations, bad loans), and the only way is to grin and bear a recession and utilize that time and the opportunities it provides to restructure the economy. Having a new currency with zero reserves would cause speculators to cause a run.. and we would end up a basket case.

[Edo]

Ok Bobo - 3 points -

the problems we have and that are going to make our recession virtually worse than anybody's elses in Europe (bar the UK - who you may have noticed, are not in the Eurozone) will still be here even if we change currency - ours are long standing and internally structured - ie the domestic economy (banking,Property,Health,retail and legal) and public services have all been paying themselves way too much in relation to our international competitors - our international export sectors have remained quite competitive , ie wages have increased only incrementally - but the domestic inputs have been crippling it.

2: Demand - demand is down everywhere period - quite simply it doesnt matter if you want to be paid in punts,sterling,euros,yen,dollars,sea shells,pigeon droppings or U2 Pop albums - people do not have the readies - changing the colour of your money is not going to change that.

3: Being in the Eurozone is probably going to be the difference between having a serious recession and going bankrupt - provided the rest of our European brothers and sisters haven't had it up to here with us after the being lectured from a height over our brilliance less than 2 years ago and how they all should get with the "Irish economic miracle" - hopefully the EU will come and rescue us like they did behind the scenes in the late 80s - borrow money for us as we have got about as much economic credibility as a drunken gambler with a cocaine addiction on the international bond markets - set out a real long term plan - something we are completely incapable of - give whatever government the backbone to make tough decisions and stick with them -and slowly nurse us back to health.

Its getting to this stage already - National bankruptcy is already being considered by the International bond markets - all that is between us and going bust is the Euro - we need good friends to vouch for us - lets not make more enemies than we have to.

[Ramon21]

Another useless thread, but what do you expect from Big Bobo.

[hiding behind a poster]

The right wing economists will always tell you we need to slash wages by 10-20% to remain "competitive". This would most likely just result in a shift of money away from workers and into the hands of the bosses. Competitiveness is just a euphamism for how much the bosses can milk workers for. Jobs would be saved but living standards for the workers would decline while the bosses land bonnanza profits.

However if we had our own currency we would be able to devalue it by say 10%. Wages would remain the same and manufacturing jobs would be saved. Some prices may rise but at least everyone would be hit proportionately.

Of course this is not a long term solution. What people all over the world need to do is break with the market economy altogether so that capitalists and investment bankers cannot force the workers of the world into a race to the bottom. The so called free market only makes the rich richer and forces down wages and conditions for everyone else.

Sorry Bobo, but no. Sure "we could devalue our currency by 10%", but the international markets would devalue it by a lot more - all for reasons you don't like, but that fact doesn't make a colossal drop in value any less likely. And this drop in value causes two catastrophic related problems - firstly, virtually all our debt, both national and personal, is denominated in Euro, so if our currency loses value relative to the Euro, the cost in our own money of servicing our debts goes up. Given our current problems of rising unemployment, a balance of payments crisis and a dodgy financial sector, it is beyond question that our currency would plummet in value as soon as it is floated - which brings us to the second problem - the fact that every last penny of capital would leave the country immediately.

In short, we would be North Korea within a week - which you'd probably like.

[TradCat]

Leaving the euro is as unthinkable now as nationalising the banks was before the last election.

It's an idea that will not go away but will only happen when we're in the last ditch.

Our best bet is for the euro to fall apart. We wouldn't stand out so much then.

[TommyO'Brien]

Leaving the Euro would be political suicide right now. I originally thought the argument would have some merit, but when I looked into it I realised that it would be suicide.

You cannot leave the Euro quickly. Even at its quickest it would take weeks. So speculators would be ready and waiting for it. The second the new currency went live they would speculate against it. Experts who looked into it believe that a new Irish currency would collapse within 24 hours. Some believe it would collapse within an hour.

The only way you could survive it would be to launch a new currency with such speed that you would catch the speculators unaware. But that speed is impossible. The sheer amount of preparation needed would mean every speculator on the planet would know well in advance all your plans, so you would be a sitting duck.

Put it this way - right now we are like a small animal in a pack being chased by tigers (speculators). What you are suggesting in effect is that we break away with the pack and hope to escape the tigers following behind. In practice, all you would be is an easy target, separated from the protection of the herd.

Not being able to devalue is hurting us. Breaking away from the Euro and throwing ourselves at the mercy of speculators would cause far more damage than staying in the Euro. The damage they would do would be far greater than the damage being caused by an inability to devalue.

So leaving the Euro would be committing economic suicide. That's why countries without the Euro all want to get into it. For all its weaknesses it is safer than being outside right now.