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Eurosceptic Bloggers

Wednesday, January 24, 2007

Italy needs to leave the Euro

Not my opinion, but that of a respected journal, Euromoney. In an article in the January edition, entitled Europe: Will Europe burst asunder?, they analyse the forces pulling Europe's economies apart. Important points include

  1. Dividing the countries by current account surplus or deficits produces roughly equal size “half-Europe” economies in which the surplus countries’ current accounts are 5.5% of GDP and the deficit countries’ 3.3%.
  2. Without French and Spanish (and UK) growth, the already feeble performance of the euroland economy would have been a disaster, and the German transition to competitive labour costs would have crumbled into deflation.
  3. Financial imbalances reflect labour-cost and other divergences that threaten the integrity of EMU.
  4. Spain’s output/worker has barely increased in the past decade.
  5. The domestic boom was based on housing, borrow-and-spend and building. Housing affordability remains fine, as the euro’s “one size fits none” interest rates subsidize Spanish borrowers, but household debt has rocketed this decade from 60% of disposable income to 130%
  6. Italy needs to leave the euro to have much of a chance. But how?
All in all, the situation across Europe is dire. The problem is that a single currency could work, only if certain conditions were applied. Among these, one of the most talked about is big transfers of money, something that they would love to force onto us. Economic flexibility is even more important however. Without a single labour force, productivity & unemployment cannot adjust. The harsh truth is that most of us are born, live, work and die in the same country. Moving across borders for work is not even considered. The Euro can therefore never really flourish.

The people who were willing to enter this Euro experiment, for their own glory, and for the pursuit of a nebulous goal of every closer union, have been shown up for the irresponsible louts they are. The lives of countless people, help to ransom, for the vanity of the elite.

Thanks to Steve for sending me the article.

4 comments:

Proud_Europhile said...

If we all spoke Esperanto in all of the 27 provinces, er, member states we could all work in countries other than the one we were born in. You narrow-minded sceptics just don't understand: the solution to the EU's (very few) problems is always more EU.

Look out for the Languages (Standardisation) Directive soon - just as the euro abolished so many greedy bureaux de change in the eurozone, so will this directive save you money on phrase books and dictionaries. You really don't want to be paying for Spanish lessons and Lithuanian phrasebooks, do you? Just think, you'd understand your Czech au pair as well. When will you lot understand that the EU is always working for the consumer?

Lots of love,

Messrs Heseltine, Blair, Brittan, Patten et al

FranceSucks said...

Oooh poor Italy. At least 20% of their national wealth didn't evaporate on the conversion like Holland. Our ministers shold be hung for high treason.

Colin said...

The Euro was a Franco-German project. I read somewhere else that the French president Francois Mitterand didn't want to give his consent to Helmut Kohl's plan for a united Germany after the fall of the wall in 1989. The condition for his agreement to German Union was a deeper integration of Germany into the French dominated EU as well as the abandonment of the independent German Federal Bank and its strong DM.

I don't know if the story is correct but it appears to be likely. I still recall the visits of Mitterand to East Germany and his attempts to convince them for remaining an independent state. And suddenly, he changed his mind.

The Euro permits the government of France and of all the other Euro countries to print money, if they need more for their governmental programs. It's a form of hidden taxes which the population pays by inflation, i.e. losing the value of their money, pensions etc. leading to an increase of income taxes because of tax progression.

Dave J said...

I've been predicting exactly this for years before the Euro was a reality. I give it ten more years at the absolute most, more likely less.