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Eurozone is preparing to jettison the PIIGS: FT


kerrynorth

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Munchau writing in the FT.

I was confused when Wolfgang Schäuble, German finance minister, proposed a European Monetary Fund. I had not expected this. Was it an attempt to deflect attention from the fast-approaching bail-out of Greece, as one close observer suggested to me? It does not seem plausible. Or perhaps this marks a genuine change in the German position? Had I missed something?


When I read the whole proposal in detail, the fog lifted – or maybe my confusion just reached a higher level. I realised that the EMF is just a smokescreen. The real bullet in his proposal is that countries could leave the eurozone without leaving the European Union. This is not about helping countries in trouble. This is about helping them to get out.


I had previously assumed that Germany had a national interest in preserving the eurozone, as its exporters benefit more than anyone else from a stable exchange rate. Ergo, I thought, Germany – despite the rhetoric – would eventually do whatever it takes to prevent a breakup. It would be the rational thing to do. But I think I was wrong.
FT.com / Columnists / Wolfgang Munchau - Shrink the eurozone, or create a fiscal union
David McWilliams may just be granted his wish!
 


Cassandra Syndrome

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If we leave the Euro, I am going to organise on of the greatest benders of all time!
 

Schuhart

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If we leave the Euro, I am going to organise on of the greatest benders of all time!
Using what for money? Sure, even Lidl will expect you to pay them three gazillion Irish Pesos for a four pack of prestigious Excelsior lager.
 

evercloserunion

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Completely misleading thread title. There are no plans or preparations to jettison any country, let alone five of them, from the Eurozone.

First of all, the EMF is not law. Schauble is going to have to convince the other Eurozone member states of the plan's merit if it is to ever succeed. Currently France's Christine Lagarde is not to hot on the idea and that will definitely have to be resolved. Then you will need a treaty amendment to establish the EMF and that in itself is no easy task.

Even if the EMF were to be established, chances are that Greece will already have been bailed out by then and it is not certain that PIIS will need bail-outs.

Munchau has a valid point, though I disagree with him (I don't think the EMF is about getting rid of troubled member states, I think it is about forcing troubled member states into stricter compliance with budgetary requirements). But you are representing Munchau's position, particularly in your sensationalist thread title.
 
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CookieMonster

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This is more of the same nonsense. It isn't possible to either leave the euro or be expelled from it.
You're calling Wolfgang Munchau a liar?
 

PrinceMax

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Is there anything to stop us replacing the Euro in Ireland with the Canadian dollar or Norwegian Kronor? I think that would be a good move. 2 good strong currencies, and physically very appealing. The $5 note has a picture of hockey players on it.
 

sondagefaux

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The Schäuble proposal as it stands would require a full-blown change in the European treaties – and nobody wants to go down that route right now. Some of his suggestions are unbelievably extreme, for example depriving countries with excessive deficits of their democratic voting rights, or withholding payments under the EU’s cohesion fund. There will be no majority for any of this, let alone the unanimity that such a change would require. Conversely, I doubt Germany would accept the establishment of a formal bail-out mechanism without a simultaneous strengthening of the stability pact.
FT.com / Columnists / Wolfgang Munchau - Shrink the eurozone, or create a fiscal union
 

evercloserunion

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You're calling Wolfgang Munchau a liar?
I think seabh is overlooking the fact that Schauble's proposal would involve amending the treaties.

Or maybe he's calling KerryNorth a liar for twisting Munchau's words and making it appear as though expulsion is somehow imminent.
 

droghedasouth

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For technical reasons, it is not practical for a weak currency to leave the Euro unless you go to a command economy like North Korea overnight.

It is practical for a strong country to leave the Euro.
There would be nothing to stop Germany and a group of similar countries (Benelux and Austria) leaving the Euro to set up the Mittel Europa Mark.
 

kerrynorth

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I think seabh is overlooking the fact that Schauble's proposal would involve amending the treaties.

Or maybe he's calling KerryNorth a liar for twisting Munchau's words and making it appear as though expulsion is somehow imminent.
How could I have 'twisted' his words when I quoted full paragraphs from the article?
 

evercloserunion

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How could I have 'twisted' his words when I quoted full paragraphs from the article?
I was just trying to guess at what seabhcan was saying. But he has clarified now.

You reproduce Munchau's words but I think there is a very large leap from the content of the article to the title of the thread. I don't know if you'd call that "twisting" but I do think it is dishonest.
 

Cassandra Syndrome

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Using what for money? Sure, even Lidl will expect you to pay them three gazillion Irish Pesos for a four pack of prestigious Excelsior lager.
We need independent monetary policy and an exchange mechanism. As an extension of that, the Free Banking Model needs to be introduced, because the Fractional Reserve system is now on the brink, this time there can be no bailout.

March 31st the Federal Reserve runs out of its QE program and it has been a complete failure. What then? QE2 of no QE2?
 

CookieMonster

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Either that or an idiot.
Indeed. the FT has a habit of hiring idiots as associate editors. Funny how the abuse stars when somebody says something the Eurolovvies don't like, even against somebody like Munchau who has, throughout his career, been a strong supporter of the EU.
 

evercloserunion

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For technical reasons, it is not practical for a weak currency to leave the Euro unless you go to a command economy like North Korea overnight.

It is practical for a strong country to leave the Euro.
There would be nothing to stop Germany and a group of similar countries (Benelux and Austria) leaving the Euro to set up the Mittel Europa Mark.
That's another point that Munchau touches on in the article. He says that only a few nations could compete with Germany economically and politically. Ireland, of course, is not one of those.

But to create a new, lesser Eurozone would undermine the whole point of European economic integration. I don't think there is a political will for that.
 

seabhcan

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For technical reasons, it is not practical for a weak currency to leave the Euro unless you go to a command economy like North Korea overnight.

It is practical for a strong country to leave the Euro.
There would be nothing to stop Germany and a group of similar countries (Benelux and Austria) leaving the Euro to set up the Mittel Europa Mark.
Even a strong currency could not leave the euro without declaring restrictions on personal freedom.

Ireland can't leave because any announcement would instantly result in massive capital flight. Germany can't leave because it would instantly result in capital flight to germany. That would mean that Germany would have to convert all the currency on its territory, and if people feared that the Euro would fall after Germany left, then people would travel to Germany to exchange their euros.

Germany could only leave by simultaneously announcing the complete closure of their borders, and the ending of free capital movements. Germany's exporters wouldn't be happy with that to say the least.
 

kerrynorth

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I was just trying to guess at what seabhcan was saying. But he has clarified now.

You reproduce Munchau's words but I think there is a very large leap from the content of the article to the title of the thread. I don't know if you'd call that "twisting" but I do think it is dishonest.
"This is not about helping countries in trouble. This is about helping them to get out".

OK - please point out the big leap from the content of those two sentences that I highlighted and the thread title?
 

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