4 ms·

I don't disagree with your summary of the situation but I don't think you portray the point of the article correctly which essentially boils down to this senten

I don't disagree with your summary of the situation but I don't think you portray the point of the article correctly which essentially boils down to this sentence... "During its first 10 years, the euro zone has not led to any measurable homogenization of its member states' economies." The real question isn't "is there a benefit to having a common currency" because everyone knows there is. That's simply logic (the money saved in currency conversion alone makes the point self-evident). I don't think he's disagreeing with that. The issue he's raising is whether these disparate nations can maintain their independence as nations while becoming one homogenized economy. Because political decisions (like over spending on a social safety net) have an impact on an economy and on the worth of that economy's currency. That's the point he's making. He's saying economic realities rely on political decisions and nations can't be politically independent while being completely dependent on each other economically

jayruy 16y ago
This is misguided: there is a definite cost/benefit tradeoff in having a common currency. Common currency means no independent central banks, which could use monetary policy to devalue independent currency and stimulate exports. Not having the ability to do this puts these countries at a serious disadvantage in a recession.
jacquesm 16y ago
One reason why there has not been much progress towards homogenization is that there is a lot of paperwork involved in intra-community trading. The local tax entities are paranoid about potentially missing out on some VAT and the rules for getting your VAT back border on the insane, effectively this causes businesses to prefer to do business with others in the same region. Paperwork can be a very effective barrier to trade. So because only the larger companies are used to dealing with the paperwork the smaller companies which could 'knit' together the member states at the borders are not engaged, which in turn stops the market from really working well and homogenizing the economies to the point where it no longer matters where you do business.
- jayruy 16y ago
  Language is another huge barrier to trade, especially in labor markets. In an alternate, culture-less dimension this problem is solvable by having high skilled workers move to Germany and low skilled workers move to Greece.
  - jacquesm 16y ago
    The labor markets are as fluid as I've seen them since I was born here, there are lots of Polish, Romanian and Czech workers in more western countries, but comparatively few people from western countries moving to the east. I'm more concerned with 'border regions' between countries anyway, and for instance, between the Netherlands and Belgium and the Netherlands and Germany there is a lot of cross-border commuting going on, but relatively little cross border trade between companies in the 5-20 employees range. Language is not as much of a problem here because there are two things helping, the Belgians and the Dutch in the border region speak the same language, and the Germans and the Dutch in their border region have a common dialect (you can speak that all the way from Aachen to Denmark and have a reasonable expectation of being understood).

jayruy 16y ago

This is misguided: there is a definite cost/benefit tradeoff in having a common currency. Common currency means no independent central banks, which could use monetary policy to devalue independent currency and stimulate exports. Not having the ability to do this puts these countries at a serious disadvantage in a recession.

jacquesm 16y ago

One reason why there has not been much progress towards homogenization is that there is a lot of paperwork involved in intra-community trading. The local tax entities are paranoid about potentially missing out on some VAT and the rules for getting your VAT back border on the insane, effectively this causes businesses to prefer to do business with others in the same region. Paperwork can be a very effective barrier to trade. So because only the larger companies are used to dealing with the paperwork the smaller companies which could 'knit' together the member states at the borders are not engaged, which in turn stops the market from really working well and homogenizing the economies to the point where it no longer matters where you do business.

jayruy 16y ago
Language is another huge barrier to trade, especially in labor markets. In an alternate, culture-less dimension this problem is solvable by having high skilled workers move to Germany and low skilled workers move to Greece.
- jacquesm 16y ago
  The labor markets are as fluid as I've seen them since I was born here, there are lots of Polish, Romanian and Czech workers in more western countries, but comparatively few people from western countries moving to the east. I'm more concerned with 'border regions' between countries anyway, and for instance, between the Netherlands and Belgium and the Netherlands and Germany there is a lot of cross-border commuting going on, but relatively little cross border trade between companies in the 5-20 employees range. Language is not as much of a problem here because there are two things helping, the Belgians and the Dutch in the border region speak the same language, and the Germans and the Dutch in their border region have a common dialect (you can speak that all the way from Aachen to Denmark and have a reasonable expectation of being understood).