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It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complet

by guelo 10y ago

It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election. The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment. The problem is that each EU national leader is accountable only to voters in their own country. When countries have opposite interests there’s no good way for resolving the disagreement. The only way it could work would be if Europe-wide economic policy were made by the European Parliament so that taxation and bank regulation would be made coherently across the continent by accountable representatives. But voters, probably correctly, want to maintain national control. But that makes the shared currency a noose.

Hermel 10y ago
It would already help a lot if the European commission was democratically elected and if the European parliament was given the power to make laws. (It sounds like a joke, but the European parliament cannot propose new laws - even though that's the usual purpose of a parliament. It is the commission that proposes new laws in the EU.)
- LoSboccacc 10y ago
  It would also help if richer nation wouldn't be able to poison the parliament votes by baiting and switch poorer countries (in the form of give us votes, well'send financial aid - see Germany Greece and for the next episode, Germany Turkey)
- vidarh 10y ago
  For that to happen, Europe would need to go federal. You can't have a legislative parliament in the current system because it'd violate the constitutions of a large proportion of the member states to delegate sovereignty somewhere else. This is the big challenge. People complain about the lack of powers for the EU Parliament, but largely aren't willing to support a model that'd make it possible. This is also why the EU does not pass laws, and the Commission does not propose laws. It proposes directives, which can then be passed. It is still the national parliaments that passes laws, implementing the directives. This is because no EU organ has the power to legislate directly - to give them that power would require constitutional changes all over the place.
  - sievebrain 10y ago
    This sort of argument is merely playing with words and has no intellectual merit. The EU's directives MUST be passed into law due to the treaties involved. A country cannot simply refuse to implement directives it does not agree with, without also leaving the EU. Failure to obey the rules is met with fines and other forms of punishment. Whilst a handful of lawyers may pretend this is not a transfer of sovereignty, nobody else does, not even Juncker.
    - toyg 10y ago
      > A country cannot simply refuse to implement directives it does not agree with As long as it can afford the resulting fines, it absolutely can. I believe this is what happened with milk quotas, which were widely criticised: a lot of countries kept paying fines until related directives were changed with more amenable rules. Talking of Italy, they've been floundering EU rules on TV markets for some 20 years, paying fines and eventually side-stepping the problem by changing technology. I wouldn't be surprised if they were still technically afoul of those rules. They've taken judgements and fines on the chin and just kept going, because local political classes had no will to basically hit Berlusconi's interests in that market. Good ol' Joseph Jughashvili would have said "how many armoured divisions does the EU Commission or Parliament control?", and he would have been right. Enforcement mechanisms in the EU are really weak; which is why the dominant culture in Bruxelles is about reaching consensus, all the time and with all sorts of horse-trading if necessary. Because what are you gonna do when a country gives you the finger, send in the police? There is no police. The military? There is no military. So, what are you actually "sovereign" on, if you have no way of imposing your sovereignty? Lawyers get a bad rep but sometimes they're actually pretty right.
    - vidarh 10y ago
      The larger difference is that the member state is free refuse to implement the law and choose to leave - the directive can not be imposed. You may consider that just playing with words, but it makes the difference between being legal, and being a violation of constitutional law of a large number of member states, and as a result it makes a substantial difference in how the EU can be legally structured.
- liotier 10y ago
  > if the European parliament was given the power to make laws Yes - so you might like this petition I proposed: https://www.change.org/p/empower-european-parliament-with-legislative-initiative-and-pan-european-electorate https://www.change.org/p/empower-european-parliament-with-le...
glenndebacker 10y ago
"The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment." You are aware that the problem with the EU banking reforms (or lack off) was also that the UK didn't wanted stricter rules with regards of the city of London... ? They even wanted an exemption. In this regards I find it really intellectual dishonest that over the pound they are pointing fingers to the failure of Europe as they were part of the problem to begin with. I do hope that from the moment that the UK stops dragging their feet and leave the EU it will be able to make swifter decisions instead of losing energy in constant oppositions.
- sievebrain 10y ago
  There is no intellectual dishonesty. Fixing the Eurozone's banking problems (assuming you believe those regulations would do the trick) is not the UK's problem and it's not the UK that blindly insists on a one-track, one-speed Europe: it's Germany and France that are wedded to that concept. They could easily have introduced new rules only in the countries that wanted them. But regardless, the problem in Italy is simply that not enough people are paying back their loans. That's not something bank regulation is going to fix. Banks make loans, that's kind of what they do, and if a country collectively gets too bad at paying back those loans then it's gonna have a banking crisis.
  - visarga 10y ago
    > Banks make loans, that's kind of what they do, How naive. Banks have to take collateral and give loans only to people/companies that have good track record. What they did is to give loans to people who could not pay back, which is a fatal mistake for a bank.
    - pjc50 10y ago
      give loans to people who could not pay back The people they lent to seemed like reasonable credit risks at the time - this isn't the same situation as US "subprime". Fundamentally there's no way to know whether a lender will be able to pay back, you can only make statistical guesses at the time based on limited information. There's an additional problem in that NPL levels depend on the state of the economy as a whole, which can become a self-fulfilling prophecy. (See e.g. http://english.mps.it/media-and-news/press-releases/2016/Pages/Disposal-of-a-non-performing-loan-portfolio.aspx http://english.mps.it/media-and-news/press-releases/2016/Pag... Edit: MPS isn't even loss-making, at the moment. The cliff is not so close. http://markets.ft.com/research/Markets/Tearsheets/Financials?s=BMPS:MIL http://markets.ft.com/research/Markets/Tearsheets/Financials...
antr 10y ago
What does Merkel got to do with bad risk management and lax lending criteria by Italian banks? I struggle to find a link between your comment and the article.
- justincormack 10y ago
  Because the Germans lent a lot of the money, but they don't want it written down or they will have to bail out their banks.
- izacus 10y ago
  Because now Euro doesn't let them tank their own economy by devaluating currency to hide the corruption.
  - deleted 10y ago
    [deleted]
pjmlp 10y ago
As a foreign living in Germany I do appreciate the mentality that things "should be done the correct way", but many here don't understand you cannot just change a country's culture by forcing them to strictly follow EU rules. As it has already been proven by the lumping economies in the southern Europe, people will suffer and everyone will just make use of black market for jobs and goods to survive at any cost or just leave the country thus making it even poorer in available resources to lift it up. Now Italy is also in the game. Assuming the Brexit works for the UK, I am just waiting to see who's next.
- charlesdm 10y ago
  As often with things in life, is there really a correct way? I mean, yes, there are laws saying banks cannot receive state aid, but they were only introduced recently. Does that really mean we should let a massive bank (or multiple banks) go bankrupt? Given the global financial system is so interconnected, only a fool would think this would have no impact to the german economy. I don't mind rules, but every rule is meant to be broken if the situation warrants it.
  - simonh 10y ago
    You manage a German bank. You follow strict capitalisation rules, are careful about the loans you make and operate your business according to the highest principles. You clients start doing more and more of their business with an Italian bank that has poor capital reserves and a shoddy loan book and is losing money, but offers better terms to customers. The bank looks like it's going to fail, so the Italian government props it up with cheap credit and buys it's bad loans at above market rates so that it can stay in business - and keep winning business off you because it's still offering better terms to customers. Plus now those customers know the bank won't go bust and they can rely on it because the Italian government will support it no matter what. The customer's business is being indirectly subsidised by the Italian government through below-market banking fees. Why should they ever do business with you again?
    - bonzini 10y ago
netcan 10y ago
I'm not strongly opinionated on what's wrong with the euro currency, but this is a pretty major issue with the EU generally. There isn't a coherent democratic polity, it's being governed like a trade agreement while acting like much more. I think Brexit highlighted this big hole. Who spoke for the EU? You'd occasionally see a headshot with a "EU President" title attached to it, which would then be dismissed in favour of the opinion of Merkel or Hollande who didn't even notionally represent the Brttish in any way. If the EU is to govern so much, it needs a polity that Europeans jointly elect, with representatives that genuinely represent the EU, not local interests. The EU needs a face, parties with cross-border support, democracy, mandate... Even the UN has more of this than the EU. At least it has a face representing it. I'm not sure this leads to better monetary policy (I don't really believe we confidently know what better monetary policy is), but I do think it's necessary if the EU is going to govern so much.
- mattmanser 10y ago
  There was one point where the EU commission president stuck his fingers in his ears and walked away when being asked about Brexit by journalists. That would be career suicide for a politician, but not for EU bureaucrats. That's the sort of contempt they hold for the populace of the EU, they couldn't care at all.
  - Thimothy 10y ago
    Well, that's kind of what the Republicans have been doing when being asked about Trump, lately.
- visarga 10y ago
  Direct voting, like the UK referendum, can lead to impossible situations. People vote for what they wished was the reality, and many times it's just not possible.
  - guard-of-terra 10y ago
    You can learn to vote reasonably only if you do it.
legulere 10y ago
I still haven't seen a good reasoning why the Euro is to blame for the economic problems in southern Europe. It certainly is a issue that those countries can't devalue their currency anymore, but devaluing is not a miracle cure.
- return0 10y ago
  Blaming the euro masks the real reason that southern economies went south: The reasons are actually outside the EU. The un-competitiveness of the south was subsidized by the EU for decades, and has turned greece , spain and portugal to dependent nations with little innovation. People don't buy the idea that making their labor cheaper will bring prosperity. Instead, they opt to leave their countries in search of better pay, mainly because they can, and are educated enough. Unfortunately , ECB policy keeps pacifying these problems instead of ringing the bell. Devaluation inside or outside the EU has the same effect, the difference is the existence of the ECB.
  - mamon 10y ago
    >> The un-competitiveness of the south was subsidized by the EU for decades And one way of subsidizing them was through Euro currency. Bonds of Italy, Greece, Spain, etc. had lower interest rates in Euro that they would have if they were in their own currencies. Many financial institutions had just blindly been buying them as "EU bonds", without paying much attention which country they came from.
  - rhaps0dy 10y ago
    > Instead, they opt to leave their countries in search of better pay, mainly because they can, and are educated enough. The brain drain is very real. Guess where everyone (particularly scientists, and musicians) is going? To Germany.
- danmaz74 10y ago
  The big, big, big problem in Italy are pensions. Pension contributions eat 33.4%, before taxes, and this make our companies uncompetitive and lots of the best workers leave. Devaluation would allow to deflate pensions, and make our labor more competitive. Not without lots of other problems, but right now there is practically nothing we can do.
ZenoArrow 10y ago
> "The only way it could work would be if Europe-wide economic policy were made by the European Parliament so that taxation and bank regulation would be made coherently across the continent by accountable representatives. But voters, probably correctly, want to maintain national control." There's a plan from the leaders of the EU for creating a Eurozone Treasury by 2025. http://europa.eu/rapid/press-release_IP-15-5240_en.htm http://europa.eu/rapid/press-release_IP-15-5240_en.htm "Today, the five Presidents – European Commission President Jean-Claude Juncker, together with the President of the Euro Summit, Donald Tusk, the President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the President of the European Parliament, Martin Schulz – have revealed ambitious plans on how to deepen the Economic and Monetary Union (EMU) as of 1 July 2015 and how to complete it by latest 2025. To turn their vision for the future of EMU into reality, they put forward concrete measures to be implemented during three Stages: while some of the actions need to be frontloaded already in the coming years, such as introducing a European Deposit Insurance Scheme, others go further as regards sharing of sovereignty among the Member States that have the euro as their currency, such as creating a future euro area treasury. This is part of the Five Presidents’ vision according to which the focus needs to move beyond rules to institutions in order to guarantee a rock-solid and transparent architecture of EMU. Delivering a Deeper and Fairer Economic and Monetary Union has been one of the top 10 priorities of President Juncker in his Political Guidelines." "Unsustainable fiscal policies not only endanger price stability in the Union, they also harm financial stability. In the short run (Stage 1), the five Presidents propose the creation of an advisory European Fiscal Board which would coordinate and complement already existing national fiscal councils (see Annex 3). It would provide an independent analysis, at European level, of how budgets perform against the economic objectives set out in the EU fiscal governance framework. In the longer term (Stage 2), a common macroeconomic stabilisation function should be set up to better deal with shocks that cannot be managed at the national level alone. It would improve the cushioning of large macroeconomic shocks and make EMU more resilient. Such a stabilisation function could build on the European Fund for Strategic Investments as a first step, by identifying a pool of financing sources and investment projects specific to the euro area, to be tapped into." "Finally, while euro area Member States will continue to decide on taxation and the allocation of budgetary expenditures along national political choices, some decisions will increasingly need to be made collectively while ensuring democratic accountability and legitimacy. A future euro area treasury could be the place for such collective decision-making." The suggested Eurozone Treasury is meant to require changes to EU treaties. The question is, if the Euro continues to cause economic problems in its current form, will governments go along with the creation of a Eurozone Treasury or will they move away from greater economic integration?
cpr 10y ago
If you think the US has managed a recovery, I'm afraid you're in denial. The US unemployment picture is horrible, but being masked by official government figures that ignore the people who've given up looking for work, and including people working less than full time at marginal jobs.
- blablablame 10y ago
  Yes, but the EU numbers use similar data as the US, and while average is 9% unemployment, some countries are in the 20% range. And this is with a lot of 0-hour contracts or in 'courses' (doesn't count as unemployed).
  - cylinder 10y ago
    If you're averaging all the US, average all of EU as well.
paganel 10y ago
The problems Europe faces are structural, the same as Japan's. I'm on my phone and in vacation so don't have enough time to comment, but tgat's enough saying that Europe being behind the US has almost nothing to do with the Euro, it's just that the Americans work more (for better or for worse), there's a lot less labor regulation (for better or worse) and that's a totally different spirit present in America (I'm European). Capitalism can only win if it grows, like it does in the States, but the people of Europe have decided that it was time to take a break and start enjoying life for a moment (for better or worse)
madshiva 10y ago
This is totally wrong. The current unemployment of EU is at 9%. That's the same unemployment rate of 2002-2004 before the "Great Recession" of 2007-2008. Then YES, the EU is recovering, but slowly and not all the country recover well. We all suffered from the recession, even in Switzerland where we have the less unemployment rate. This was not because of the EU, but because all bank was infected with subprime then this had slow done all the economies, US and EU.
- Fenntrek 10y ago
  I think you misunderstand. Yes, the EU as a whole looks good... It's when you peel away the EU flag and look at individual countries you see that some economies are in the gutter pretty much due to countries having vastly different needs. Whats in say Germany's interests isn't in Italy/Greece's interest economically, economies are having crisis points constantly and continuous band aids instead of enacting policy that will fix it with a solid foundation. I personally don't know whats needed to fix this, even Europe-wide economic policy is a hard sell because of the vastly different needs of individual countries within the union. Something needs to happen, there's a generation of young people being left behind with unemployment/underemployment and their future is becoming more and more murky.
  - speeder 10y ago
    This is not just a EU problem. I personally think the social changes, coupled with gold standard being dropped are good part of the culprit. For example I am in Brazil, that have "nothing to do" with EU and US. Yet I have a mountain of debts, negative net worth, finished university in 2009, and I am yet to get a legal job. Brazil, even at its "height", when people were praising Lula because it reached 7% of GDP growth and "Full Employment", if you looked into other numbers closely, would find out that most of the money went to the wealthiest, and that underemployment, illegal employment, self-employment, etc... that were on the rise, out of desperation of the people. Or you think I went since 2009 without eating? Of course if people offer me shady deal I accept it! Otherwise I can't even buy potatoes! Similarly, every single friend I have, except 1, are still single, of all friends I have, only 2 have kids, noone owns his own house and car, most of my friends never got legal full-time jobs either... This situation in turn removed lots of rights to me. For example, election rules say you can only use money you declared in your tax returns, and that donors can only use up to 10% of their tax return, since I, and my friends never did tax returns (because our income is not exactly legal), we can't join politics in any way. Similarly, since we never had a legal job, we can't claim unemployment benefits. Since we have no tax return, neither legal job history, we can't apply for more loans. And the list goes on... And this is not just in Brazil, people of my age I know in other western countries, are mostly in the same situation.
gortok 10y ago
The US is closing in on "Full Employment", if by Full Employment, you mean: January 2008 Labor Participation Rate: 66.2% July 2016 Labor Participation Rate: 62.7% 62.7% participation means 94 Million Americans are not working. (Source: http://www.cnsnews.com/news/article/susan-jones/labor-force-participation-improves-americans-not-labor-force http://www.cnsnews.com/news/article/susan-jones/labor-force-...) Full Employment only calculates people who are actively looking for work; anyone else is not part of that calculation. To make an easier example, if 20 people are in a room, and 9 say "I'm employed", 1 says "I'm looking for work", and the other 10 say "I've been out of work for so long I'm not even looking), then that means: 90% employment (10% unemployment rate); but the labor force participation rate is only 50%. Add another 5 people people to the mix (people that recently turned 18), and suddenly you have full employment, even if you have 10 of those 25 not looking for work or unable to work. So to say "The US has an OK recovery and is closing in on Full employment" is an empty saying because you can have statistical full employment and have half of the population not holding a job.
- slashcom 10y ago
  According to https://en.wikipedia.org/wiki/Demography_of_the_United_States https://en.wikipedia.org/wiki/Demography_of_the_United_State... 27.1% of the US is under 21 and 14.5% is over 65. I know 16 should be working but a good chunk should be getting education. That leaves only 58.4% even eligible for labor participation.
  - fosco 10y ago
    this x2 we are at full employment and those statements about only 62% employment might need to be looked at in more detail, they are wildly inaccurate when looking at the big picture, I am astounded this is even considered as reality. how many families have both parents working if there are two in a house? those numbers are based on use of welfare and unemployment. if those statements were alarming the people that are homeless would be astronomical at the moment. http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_14_5YR_S0101&prodType=table http://factfinder.census.gov/faces/tableservices/jsf/pages/p...
  - 10y ago
wahsd 10y ago
I know, let's institute the very policies and programs that have devastated Europe and continue to lead it to limp from one self-imposed beat down to the next by electing an establishment criminal that is above the law and treasonous. I get why people are attracted by the shiny parts of Europe from "afar" because they don't have any idea of the cruft, disaster, cost, and authoritarianism that underpins everything and lies just below the surface. Europe is really far more the depths of addiction than the good time the socialist, marxist, communist, and even social-democrat types tout even if they lure you with a free try of some social nirvana meth.

by guelo 10y ago

Hermel 10y ago

It would already help a lot if the European commission was democratically elected and if the European parliament was given the power to make laws. (It sounds like a joke, but the European parliament cannot propose new laws - even though that's the usual purpose of a parliament. It is the commission that proposes new laws in the EU.)

LoSboccacc 10y ago
It would also help if richer nation wouldn't be able to poison the parliament votes by baiting and switch poorer countries (in the form of give us votes, well'send financial aid - see Germany Greece and for the next episode, Germany Turkey)
vidarh 10y ago
For that to happen, Europe would need to go federal. You can't have a legislative parliament in the current system because it'd violate the constitutions of a large proportion of the member states to delegate sovereignty somewhere else. This is the big challenge. People complain about the lack of powers for the EU Parliament, but largely aren't willing to support a model that'd make it possible. This is also why the EU does not pass laws, and the Commission does not propose laws. It proposes directives, which can then be passed. It is still the national parliaments that passes laws, implementing the directives. This is because no EU organ has the power to legislate directly - to give them that power would require constitutional changes all over the place.
- sievebrain 10y ago
  This sort of argument is merely playing with words and has no intellectual merit. The EU's directives MUST be passed into law due to the treaties involved. A country cannot simply refuse to implement directives it does not agree with, without also leaving the EU. Failure to obey the rules is met with fines and other forms of punishment. Whilst a handful of lawyers may pretend this is not a transfer of sovereignty, nobody else does, not even Juncker.
  - toyg 10y ago
    > A country cannot simply refuse to implement directives it does not agree with As long as it can afford the resulting fines, it absolutely can. I believe this is what happened with milk quotas, which were widely criticised: a lot of countries kept paying fines until related directives were changed with more amenable rules. Talking of Italy, they've been floundering EU rules on TV markets for some 20 years, paying fines and eventually side-stepping the problem by changing technology. I wouldn't be surprised if they were still technically afoul of those rules. They've taken judgements and fines on the chin and just kept going, because local political classes had no will to basically hit Berlusconi's interests in that market. Good ol' Joseph Jughashvili would have said "how many armoured divisions does the EU Commission or Parliament control?", and he would have been right. Enforcement mechanisms in the EU are really weak; which is why the dominant culture in Bruxelles is about reaching consensus, all the time and with all sorts of horse-trading if necessary. Because what are you gonna do when a country gives you the finger, send in the police? There is no police. The military? There is no military. So, what are you actually "sovereign" on, if you have no way of imposing your sovereignty? Lawyers get a bad rep but sometimes they're actually pretty right.
  - vidarh 10y ago
    The larger difference is that the member state is free refuse to implement the law and choose to leave - the directive can not be imposed. You may consider that just playing with words, but it makes the difference between being legal, and being a violation of constitutional law of a large number of member states, and as a result it makes a substantial difference in how the EU can be legally structured.
liotier 10y ago
> if the European parliament was given the power to make laws Yes - so you might like this petition I proposed: https://www.change.org/p/empower-european-parliament-with-legislative-initiative-and-pan-european-electorate https://www.change.org/p/empower-european-parliament-with-le...

glenndebacker 10y ago

"The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment." You are aware that the problem with the EU banking reforms (or lack off) was also that the UK didn't wanted stricter rules with regards of the city of London... ? They even wanted an exemption. In this regards I find it really intellectual dishonest that over the pound they are pointing fingers to the failure of Europe as they were part of the problem to begin with. I do hope that from the moment that the UK stops dragging their feet and leave the EU it will be able to make swifter decisions instead of losing energy in constant oppositions.

sievebrain 10y ago
There is no intellectual dishonesty. Fixing the Eurozone's banking problems (assuming you believe those regulations would do the trick) is not the UK's problem and it's not the UK that blindly insists on a one-track, one-speed Europe: it's Germany and France that are wedded to that concept. They could easily have introduced new rules only in the countries that wanted them. But regardless, the problem in Italy is simply that not enough people are paying back their loans. That's not something bank regulation is going to fix. Banks make loans, that's kind of what they do, and if a country collectively gets too bad at paying back those loans then it's gonna have a banking crisis.
- visarga 10y ago
  > Banks make loans, that's kind of what they do, How naive. Banks have to take collateral and give loans only to people/companies that have good track record. What they did is to give loans to people who could not pay back, which is a fatal mistake for a bank.
  - pjc50 10y ago
    give loans to people who could not pay back The people they lent to seemed like reasonable credit risks at the time - this isn't the same situation as US "subprime". Fundamentally there's no way to know whether a lender will be able to pay back, you can only make statistical guesses at the time based on limited information. There's an additional problem in that NPL levels depend on the state of the economy as a whole, which can become a self-fulfilling prophecy. (See e.g. http://english.mps.it/media-and-news/press-releases/2016/Pages/Disposal-of-a-non-performing-loan-portfolio.aspx http://english.mps.it/media-and-news/press-releases/2016/Pag... Edit: MPS isn't even loss-making, at the moment. The cliff is not so close. http://markets.ft.com/research/Markets/Tearsheets/Financials?s=BMPS:MIL http://markets.ft.com/research/Markets/Tearsheets/Financials...

antr 10y ago

What does Merkel got to do with bad risk management and lax lending criteria by Italian banks? I struggle to find a link between your comment and the article.

justincormack 10y ago
Because the Germans lent a lot of the money, but they don't want it written down or they will have to bail out their banks.
izacus 10y ago
Because now Euro doesn't let them tank their own economy by devaluating currency to hide the corruption.
- deleted 10y ago
  [deleted]

pjmlp 10y ago

As a foreign living in Germany I do appreciate the mentality that things "should be done the correct way", but many here don't understand you cannot just change a country's culture by forcing them to strictly follow EU rules. As it has already been proven by the lumping economies in the southern Europe, people will suffer and everyone will just make use of black market for jobs and goods to survive at any cost or just leave the country thus making it even poorer in available resources to lift it up. Now Italy is also in the game. Assuming the Brexit works for the UK, I am just waiting to see who's next.

charlesdm 10y ago
As often with things in life, is there really a correct way? I mean, yes, there are laws saying banks cannot receive state aid, but they were only introduced recently. Does that really mean we should let a massive bank (or multiple banks) go bankrupt? Given the global financial system is so interconnected, only a fool would think this would have no impact to the german economy. I don't mind rules, but every rule is meant to be broken if the situation warrants it.
- simonh 10y ago
  You manage a German bank. You follow strict capitalisation rules, are careful about the loans you make and operate your business according to the highest principles. You clients start doing more and more of their business with an Italian bank that has poor capital reserves and a shoddy loan book and is losing money, but offers better terms to customers. The bank looks like it's going to fail, so the Italian government props it up with cheap credit and buys it's bad loans at above market rates so that it can stay in business - and keep winning business off you because it's still offering better terms to customers. Plus now those customers know the bank won't go bust and they can rely on it because the Italian government will support it no matter what. The customer's business is being indirectly subsidised by the Italian government through below-market banking fees. Why should they ever do business with you again?
  - bonzini 10y ago

netcan 10y ago

I'm not strongly opinionated on what's wrong with the euro currency, but this is a pretty major issue with the EU generally. There isn't a coherent democratic polity, it's being governed like a trade agreement while acting like much more. I think Brexit highlighted this big hole. Who spoke for the EU? You'd occasionally see a headshot with a "EU President" title attached to it, which would then be dismissed in favour of the opinion of Merkel or Hollande who didn't even notionally represent the Brttish in any way. If the EU is to govern so much, it needs a polity that Europeans jointly elect, with representatives that genuinely represent the EU, not local interests. The EU needs a face, parties with cross-border support, democracy, mandate... Even the UN has more of this than the EU. At least it has a face representing it. I'm not sure this leads to better monetary policy (I don't really believe we confidently know what better monetary policy is), but I do think it's necessary if the EU is going to govern so much.

mattmanser 10y ago
There was one point where the EU commission president stuck his fingers in his ears and walked away when being asked about Brexit by journalists. That would be career suicide for a politician, but not for EU bureaucrats. That's the sort of contempt they hold for the populace of the EU, they couldn't care at all.
- Thimothy 10y ago
  Well, that's kind of what the Republicans have been doing when being asked about Trump, lately.
visarga 10y ago
Direct voting, like the UK referendum, can lead to impossible situations. People vote for what they wished was the reality, and many times it's just not possible.
- guard-of-terra 10y ago
  You can learn to vote reasonably only if you do it.

legulere 10y ago

I still haven't seen a good reasoning why the Euro is to blame for the economic problems in southern Europe. It certainly is a issue that those countries can't devalue their currency anymore, but devaluing is not a miracle cure.

return0 10y ago
Blaming the euro masks the real reason that southern economies went south: The reasons are actually outside the EU. The un-competitiveness of the south was subsidized by the EU for decades, and has turned greece , spain and portugal to dependent nations with little innovation. People don't buy the idea that making their labor cheaper will bring prosperity. Instead, they opt to leave their countries in search of better pay, mainly because they can, and are educated enough. Unfortunately , ECB policy keeps pacifying these problems instead of ringing the bell. Devaluation inside or outside the EU has the same effect, the difference is the existence of the ECB.
- mamon 10y ago
  >> The un-competitiveness of the south was subsidized by the EU for decades And one way of subsidizing them was through Euro currency. Bonds of Italy, Greece, Spain, etc. had lower interest rates in Euro that they would have if they were in their own currencies. Many financial institutions had just blindly been buying them as "EU bonds", without paying much attention which country they came from.
- rhaps0dy 10y ago
  > Instead, they opt to leave their countries in search of better pay, mainly because they can, and are educated enough. The brain drain is very real. Guess where everyone (particularly scientists, and musicians) is going? To Germany.
danmaz74 10y ago
The big, big, big problem in Italy are pensions. Pension contributions eat 33.4%, before taxes, and this make our companies uncompetitive and lots of the best workers leave. Devaluation would allow to deflate pensions, and make our labor more competitive. Not without lots of other problems, but right now there is practically nothing we can do.

ZenoArrow 10y ago

> "The only way it could work would be if Europe-wide economic policy were made by the European Parliament so that taxation and bank regulation would be made coherently across the continent by accountable representatives. But voters, probably correctly, want to maintain national control." There's a plan from the leaders of the EU for creating a Eurozone Treasury by 2025. http://europa.eu/rapid/press-release_IP-15-5240_en.htm http://europa.eu/rapid/press-release_IP-15-5240_en.htm "Today, the five Presidents – European Commission President Jean-Claude Juncker, together with the President of the Euro Summit, Donald Tusk, the President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the President of the European Parliament, Martin Schulz – have revealed ambitious plans on how to deepen the Economic and Monetary Union (EMU) as of 1 July 2015 and how to complete it by latest 2025. To turn their vision for the future of EMU into reality, they put forward concrete measures to be implemented during three Stages: while some of the actions need to be frontloaded already in the coming years, such as introducing a European Deposit Insurance Scheme, others go further as regards sharing of sovereignty among the Member States that have the euro as their currency, such as creating a future euro area treasury. This is part of the Five Presidents’ vision according to which the focus needs to move beyond rules to institutions in order to guarantee a rock-solid and transparent architecture of EMU. Delivering a Deeper and Fairer Economic and Monetary Union has been one of the top 10 priorities of President Juncker in his Political Guidelines." "Unsustainable fiscal policies not only endanger price stability in the Union, they also harm financial stability. In the short run (Stage 1), the five Presidents propose the creation of an advisory European Fiscal Board which would coordinate and complement already existing national fiscal councils (see Annex 3). It would provide an independent analysis, at European level, of how budgets perform against the economic objectives set out in the EU fiscal governance framework. In the longer term (Stage 2), a common macroeconomic stabilisation function should be set up to better deal with shocks that cannot be managed at the national level alone. It would improve the cushioning of large macroeconomic shocks and make EMU more resilient. Such a stabilisation function could build on the European Fund for Strategic Investments as a first step, by identifying a pool of financing sources and investment projects specific to the euro area, to be tapped into." "Finally, while euro area Member States will continue to decide on taxation and the allocation of budgetary expenditures along national political choices, some decisions will increasingly need to be made collectively while ensuring democratic accountability and legitimacy. A future euro area treasury could be the place for such collective decision-making." The suggested Eurozone Treasury is meant to require changes to EU treaties. The question is, if the Euro continues to cause economic problems in its current form, will governments go along with the creation of a Eurozone Treasury or will they move away from greater economic integration?

cpr 10y ago

If you think the US has managed a recovery, I'm afraid you're in denial. The US unemployment picture is horrible, but being masked by official government figures that ignore the people who've given up looking for work, and including people working less than full time at marginal jobs.

blablablame 10y ago
Yes, but the EU numbers use similar data as the US, and while average is 9% unemployment, some countries are in the 20% range. And this is with a lot of 0-hour contracts or in 'courses' (doesn't count as unemployed).
- cylinder 10y ago
  If you're averaging all the US, average all of EU as well.

paganel 10y ago

The problems Europe faces are structural, the same as Japan's. I'm on my phone and in vacation so don't have enough time to comment, but tgat's enough saying that Europe being behind the US has almost nothing to do with the Euro, it's just that the Americans work more (for better or for worse), there's a lot less labor regulation (for better or worse) and that's a totally different spirit present in America (I'm European). Capitalism can only win if it grows, like it does in the States, but the people of Europe have decided that it was time to take a break and start enjoying life for a moment (for better or worse)

madshiva 10y ago

This is totally wrong. The current unemployment of EU is at 9%. That's the same unemployment rate of 2002-2004 before the "Great Recession" of 2007-2008. Then YES, the EU is recovering, but slowly and not all the country recover well. We all suffered from the recession, even in Switzerland where we have the less unemployment rate. This was not because of the EU, but because all bank was infected with subprime then this had slow done all the economies, US and EU.

Fenntrek 10y ago
I think you misunderstand. Yes, the EU as a whole looks good... It's when you peel away the EU flag and look at individual countries you see that some economies are in the gutter pretty much due to countries having vastly different needs. Whats in say Germany's interests isn't in Italy/Greece's interest economically, economies are having crisis points constantly and continuous band aids instead of enacting policy that will fix it with a solid foundation. I personally don't know whats needed to fix this, even Europe-wide economic policy is a hard sell because of the vastly different needs of individual countries within the union. Something needs to happen, there's a generation of young people being left behind with unemployment/underemployment and their future is becoming more and more murky.
- speeder 10y ago
  This is not just a EU problem. I personally think the social changes, coupled with gold standard being dropped are good part of the culprit. For example I am in Brazil, that have "nothing to do" with EU and US. Yet I have a mountain of debts, negative net worth, finished university in 2009, and I am yet to get a legal job. Brazil, even at its "height", when people were praising Lula because it reached 7% of GDP growth and "Full Employment", if you looked into other numbers closely, would find out that most of the money went to the wealthiest, and that underemployment, illegal employment, self-employment, etc... that were on the rise, out of desperation of the people. Or you think I went since 2009 without eating? Of course if people offer me shady deal I accept it! Otherwise I can't even buy potatoes! Similarly, every single friend I have, except 1, are still single, of all friends I have, only 2 have kids, noone owns his own house and car, most of my friends never got legal full-time jobs either... This situation in turn removed lots of rights to me. For example, election rules say you can only use money you declared in your tax returns, and that donors can only use up to 10% of their tax return, since I, and my friends never did tax returns (because our income is not exactly legal), we can't join politics in any way. Similarly, since we never had a legal job, we can't claim unemployment benefits. Since we have no tax return, neither legal job history, we can't apply for more loans. And the list goes on... And this is not just in Brazil, people of my age I know in other western countries, are mostly in the same situation.

gortok 10y ago

The US is closing in on "Full Employment", if by Full Employment, you mean: January 2008 Labor Participation Rate: 66.2% July 2016 Labor Participation Rate: 62.7% 62.7% participation means 94 Million Americans are not working. (Source: http://www.cnsnews.com/news/article/susan-jones/labor-force-participation-improves-americans-not-labor-force http://www.cnsnews.com/news/article/susan-jones/labor-force-...) Full Employment only calculates people who are actively looking for work; anyone else is not part of that calculation. To make an easier example, if 20 people are in a room, and 9 say "I'm employed", 1 says "I'm looking for work", and the other 10 say "I've been out of work for so long I'm not even looking), then that means: 90% employment (10% unemployment rate); but the labor force participation rate is only 50%. Add another 5 people people to the mix (people that recently turned 18), and suddenly you have full employment, even if you have 10 of those 25 not looking for work or unable to work. So to say "The US has an OK recovery and is closing in on Full employment" is an empty saying because you can have statistical full employment and have half of the population not holding a job.

slashcom 10y ago
According to https://en.wikipedia.org/wiki/Demography_of_the_United_States https://en.wikipedia.org/wiki/Demography_of_the_United_State... 27.1% of the US is under 21 and 14.5% is over 65. I know 16 should be working but a good chunk should be getting education. That leaves only 58.4% even eligible for labor participation.
- fosco 10y ago
  this x2 we are at full employment and those statements about only 62% employment might need to be looked at in more detail, they are wildly inaccurate when looking at the big picture, I am astounded this is even considered as reality. how many families have both parents working if there are two in a house? those numbers are based on use of welfare and unemployment. if those statements were alarming the people that are homeless would be astronomical at the moment. http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.xhtml?pid=ACS_14_5YR_S0101&prodType=table http://factfinder.census.gov/faces/tableservices/jsf/pages/p...
- 10y ago

wahsd 10y ago

I know, let's institute the very policies and programs that have devastated Europe and continue to lead it to limp from one self-imposed beat down to the next by electing an establishment criminal that is above the law and treasonous. I get why people are attracted by the shiny parts of Europe from "afar" because they don't have any idea of the cruft, disaster, cost, and authoritarianism that underpins everything and lies just below the surface. Europe is really far more the depths of addiction than the good time the socialist, marxist, communist, and even social-democrat types tout even if they lure you with a free try of some social nirvana meth.