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EXIT: THE EURO?

By ATWadmin On January 19th, 2009

So, will the Republic of Ireland be the first nation to LEAVE the Euro?

“This is war: countries have to defend themselves,” said David McWilliams, a former official at the Irish central bank. “It is essential that we go to Europe and say we have a serious problem. We say, either we default or we pull out of Europe,” he told RTE radio. “If Ireland continues hurtling down this road, which is close to default, the whole of Europe will be badly affected. The credibility of the euro will be badly affected. Then Spain might default, Italy and Greece,” he said. Mr McWilliams, a former UBS director and now prominent broadcaster, has broken the ultimate taboo by evoking threats to precipitate an EMU crisis, which would risk a chain reaction across the eurozone’s southern belt, where yield spreads on state bonds are already flashing warning signals. The comments reflect growing bitterness in Dublin over the way the country has been treated after voting against the EU’s Lisbon Treaty. “If we have a single currency there are obligations and responsibilities on both sides. The idea that Germany and France can just hang us out to dry, as has been the talk in the last couple of days should not be taken lying down,” he said.

Sorry David but taking it lying down is EXACTLY the deal that the EU offers and which Ireland has embraced. Threatening to bring the entire edifice down will not work since Ireland has sold its soul to EMU and now it is stuck with the consequences.

He adds…

“The only way we can win this war is by becoming, once again, an export country. We can do what we are doing now, which is to reduce our wages, throw more people on the dole and suffer a long contraction. The other model is what the British are doing. Britain is letting sterling fall so that the problem becomes someone else’s. But we, of course, have ruled this out by our euro membership. “We are paying twice for the euro: once on the exchange rate and once more on the interest rate,” he said. “By keeping with the current policy, the state is ensuring that Ireland turns itself into a large debt-repayment machine. Is this the sort of strategy to win wars? ”

No, but then again the Euro elite are already cross at the Irish people for daring to say No to the Lisbon Treaty and any notion that Ireland can blackmail the EU to bail it out of the severe meltdown it is experiencing is McWilliams fantasy.

20 Responses to “EXIT: THE EURO?”

  1. The comments reflect growing bitterness in Dublin over the way the country has been treated after voting against the EU’s Lisbon Treaty.

    It was Dublin that sided with a foreign, hostile power against the Irish people. Will Ireland reject the Euro? Not before the Dublin elite have utterly ruined the Irish people.

  2. Joining the Euro when we did was a disastorous decision. Our economy was overheating and we needed to increase our interest rates. The European Central Bank had a policy of low interest rates at the time. We got screwed.

    A gold-backed, Government-controlled currency is the only real way to prompt sustainable growth along with the abolition of interest.

  3. I can’t image Ireland leaving the Euro. It’s such a small country and having a micro-currency is a kind of barrier to trade these days.

    –abolition of interest–

    You want Islamic banking in Ireland?

  4. ‘Not before the Dublin elite have utterly ruined the Irish people.’

    Brian Cowen is not an elite, he’s from Offally (ancestral home of Barack O’bama) I have been drinking with him twice. He is a Guiness man could drink any of you (and me) under the table.

  5. He hasn’t meet up with me yet.

    If he’s a Guinness man, that’s a very good thing.

  6. Guba,

    You’re right about the straight-jacket of "one size fits all economies" interest rate policy – which is now destroyng Ireland.

  7. ‘I can’t image Ireland leaving the Euro. It’s such a small country and having a micro-currency is a kind of barrier to trade these days.’

    Switzerland and Norway done allright.

    ‘You want Islamic banking in Ireland?’

    no, just a sustainable monetary system. There is no need for interest. Creating money as debt is what brought us into this mess.

  8. "It’s such a small country and having a micro-currency is a kind of barrier to trade these days."

    I’m working in Norway. Both Norway and Denmark seem to be doing very nicely with their ‘micro-currency’ kroner. There is no barrier to trade because the currency of trade can be any currency at all, provided that the country has earned it and has it in its central bank.

  9. Gresham’s Law is Alive and Well in the Euro Area.

  10. There were other steps that could have been taken to cool down the economy, but the will wasn’t there. They can’t just blame Europe. Mind you I’m far from convinced the Eurozone is quite the rock it likes to pretend it is.

  11. He hasn’t meet up with me yet.

    If he’s a Guinness man, that’s a very good thing.’

    I may have to go on the Guinness myself. Heineken are after buying Beamish in Cork. Beamish is a mighty stout. They’ll probably dilute it with Heineken, it just won’t be the same. That lager piss is taking over the world. .

  12. Switzerland is considerably larger than the Republic and has a much longer history as a rich, developed nation.

    Norway I will give you.

  13. Jimmy,

    What steps do you think could/should have been taken to cool the economy and why was the will missing?

  14. The obvious example was the housing market. As soon as an overdue correction was on the cards there was a Dutch auction between the parties to cut stamp duty. Given the cultural obsession with land ownership it was very difficult for any Irish politician to break ranks. Of course everyone’s a Keynesian in a recession. Administering the medicine in a boom risks unpopularity, and few politicians will court that.

  15. David –

    1. The regulator allowed banks to relax lending standards to consumers. This allowed the unit price of housing the sky rocket.
    2. The regulator relaxed reserve ratios – allowing banks to fund lending out of wholesale borrowing
    3. The regulator allowed the banks to lend huge sums to developers who couldn’t then even meet interest payments until all their properties were developed and sold

    Ireland’s real economy also hit a break wall in 2001. In my industry (tech) it was nothing short of a depression. Monetary policy was loosened across the Western world, but only the Anglo-American economies (and Spain) went nuts selling each other property.

    Euro interest rates are at 2% and falling. We can’t blame the Euro for the bubble – Iceland managed their own credit binge just fine from outside it.

  16. David

    To expand on 1 above. Historically in Ireland couples could borrow 2.5 times the main income + 0.5 times the second income. This was relaxed to much more 6 times combined income (offered to me personally by EBS in 2007). Almost any one off additional bonus or overtime payment was included in salary calculations. Loans from credit unions for the deposit were ignored – there was no attempt to verify savings history. In the end some banks even offered 120% loans. Madness, utter madness.

  17. And again to expand on the above – terms were often loosened much further again on new builds. The suggestion being that banks thought a lot of small loans to owner occupiers or investors much less risky than a single big loan to a developer.

  18. Dell has moved to Poland, so I can see the population of Ireland halving, as they all decamp to the east.

  19. The whole housing bubble created a feed back loop once it got going.

    There are no rates in Ireland instead there is VAT on new homes and Stamp Duty (up to 9%) on homes bought by non-first time buyers. Tax revenues flooded into the gov. coffers allowing them to massively raise wages in the public sector (I see Electricity Supply Board workers have just taken a 3.5% pay rise – avg wages there already over €90,000). Who then rushed out and bought houses pushing the price of housing up.

    The increased price of housing led to increased demand for housing and by extension construction workers. It was not uncommon for builders to take home €100-€150,000 p.a. Many ploughed that back into the market with leveraged property investments.

    All this could have been stopped if the regulator had not allowed banks to relax lending standards.

  20. Whatever happens to the Irish economy, the Nigerians will be staying.