UKC

Thought provoking article in the Graun;


https://www.theguardian.com/business/2016/aug/10/joseph-stiglitz-the-proble...

In reply to Big Ger:
I've often wondered how the US has seemed to manage to operate for over 200 years with a single currency for up to 50 states, whereas the same thing for 20-odd states in Europe was widely regarded as doomed from the outset. It's not as if there isn't plenty of economic diversity between the states in the US. California's GDP would put it easily within the top ten economies of the world - right up there with the UK, France and Germany - if it were not federated within the US. Conversely, some of the southern and rust belt states are close to being economic basket cases comparable to some of the worst performers in the EU.

What Stiglitz says about the different remits of the Federal Reserve vs the European Central Bank could be very relevant - although I've no idea how accurate his claims are. If he's even close to being right then it surely shouldn't be beyond the wit of man to reform the ECB to make it work more like the Fed, if that would genuinely help.

In reply to Big Ger: because it's a single country, so you can do things that are politically unacceptable in a confederation of nation states.

In reply to wbo:

That's it, people originally emigrated to the USA to become "Americans" to become part of a "family"

Whereas Europe is just a collection of countries with no binding purpose other than geography and that's pretty fragmented.

In reply to Martin W:

Is there internal migration within the US due to the factors you draw attention to ie the difference in economic performance between states? ie do people move from kentucky, etc, to california, new york to find work? That wouldnt seem too different from the situation in Europe being described in the linked article, except in Europe is more noticeable as national boundaries are crossed.

In reply to Big Ger: Yes, very much so. There are poor, and depopulating areas of the US, as the young move to more prosperous areas

But try implementing a tax regime in europe to directly redistribute Germany to Greece for example

In reply to wbo:

I don't suppose I can claim any economic foresight because I was just a teenager, but I remember as a teenager wondering how economies with different factors at work might all function well or healthily, when tied together in the way they seem to be by using one currency.

In reply to Timmd:

But it seems to work in the US, which is why I feel the need to ask what's different about Europe and/or the way the Euro has been implemented to date?

In reply to wbo:


AFAIAA the Federal Reserve does not set the tax regime in the US. Stiglitz seems to be arguing that the main difference between the Euro and US Dollar is that the Fed has a wider remit than the ECB. Are you saying that it would require a centralised taxation authority as well? (There already appears to be a redistribution mechanism of sorts within the EU. And of course the member states contribute to the central EU budget - although how they raise that money is largely up to them, I think.)

In reply to Martin W:


Does it work though? As per above, there are (large) states in the US doing very nicely, and states with long-term and seemingly insolvable differences? Whilst in Euroland....

If it does work, then the biggest differences to me are a) a common language makes migration easier, b) the federal structure is more relaxed and so structurally more flexible (you have state taxes and federal states overlaid - no-one has proposed a common, or harmonising VAT rate, for example and c) history - the difficulties have been worked out, or simply accepted and not being fixed, whilst Europe is still in painful transit.

In reply to mav:



I would imagine the main difference is having relatively similar levels of pay across the USA. There may well be significant regional variations in pay, and far better opportunies in the wealthier states, but nothing like the huge disparities across the EU.

A janitor in Texas won't be massively better paid than one in Idaho, for example. I'd also think that an experienced surgeon in Detroit wouldn't be able to easily double or quadruple his annual income by becoming a barrista in San Francisco. That's the big difference. The Eurozone is more akin to what you'd get if you had a common currency across the USA and Central America.

In reply to Big Ger:


Unemployment in Eurozone countries was already at around 9% on average before the Euro. Before 2008 it was down to 7%. Then back to more than 10%. And now it's decreasing again. Some eurozone countries have low unemployment, some very high. So it doesn't seem to correlate much with having the Euro.

However it does seems to correlate with countries that have been through labour market reform and those that haven't.
I worked in France, Spain, UK and Germany and it's very clear to me as to why countries like France and Spain have higher unemployment than the UK or Germany. They simply tax labour way more, and workers in permanent contract are way overprotected.

In reply to RomTheBear:

Evidence?

In reply to Big Ger:


Use google.

In reply to RomTheBear:

Oh god, here we go again.

I'l explain it to you once more Rom.

If YOU make a claim, then it is up to YOU to back it up with facts.

I know you're not an honest player, but this idea you have that you can make any claim you wish, no matter how far fetched, and then expect other people, people who do not believe you, to go and find evidence to prove you right, is beyond childish, it borders on pathological.

In reply to Big Ger: well what do you want evidence of? Trends , stats on Eurozone unemployment ? Id tell you to Google it too. Or his opinion for the causes - well , 'evidenve ' for that will be hard.

I dont agree with Rom , but Sieglitz is also an opinion rather than fact. And you've never been shy of stating opinion

In reply to wbo:

Anything which backs up his claim.



It's not an opinion, it's a researched theory.

Hmmmm.... Who to believe;

The book; "The Euro and Its Threat to the Future of Europe" by Joseph Stiglitz, ForMemRS, FBA
American economist Professor at Columbia University. Recipient of the Nobel Memorial Prize in Economic Sciences (2001) and the John Bates Clark Medal (1979). Former senior vice president and chief economist of the World Bank, Former member and chairman of the (US president's) Council of Economic Advisers.

Or "Rom's unsupported opinion"?

Gee, tough choice.

In reply to Big Ger:







Unemployement in Europe was high before the euro, and many euro countries have low unemployment . It therefore can't be "all the fault of the euro".
If you don't believe me, and since you can't be arsed googling, historical stats available there : http://www.tradingeconomics.com

In reply to Big Ger:

Seeens to me you have no evidence, all you've done is quoting another opinion.
It's not really hard to imagine - and easily verifiable - that there are multifactorial causes to unemployement

In reply to RomTheBear:


Where did you get the impression that it was all about unemployment?


That's an odd link, nothing about your fabled unemployment on it though.

In reply to RomTheBear:

What I did was offer an article for consideration.


No one claimed otherwise.

In reply to Big Ger:


What is it about then ?


odd link ? It's a well known reference. There are thousands of historical unemployment statistics for every country. Learn to read maybe ?

In reply to RomTheBear:

Can you not read? There's a link attached to the OP


I'll admit I cannot find them, link?

In reply to Big Ger:



What is your point then ?

In reply to RomTheBear:


"Thought provoking article in the Graun;"

That was my point.

In reply to Big Ger:

Doesn't sound like much of a point. What it is you meant with "It's all the fault of the Euro" then ?

In reply to RomTheBear:

It wan't "a point" at all, what makes you think it was meant to be "a point"?

It was just something interesting I thought I'd share, being the generous chap I am.


Did you not read the article?

It's entitled; "The problem with Europe is the euro.", I paraphrased it for brevity

I can get a bigger spoon if you like.

In reply to Big Ger:


You really are lazy. In top menu "countries " select euro area. Then click on "unemployement rate" then click on the calendar icon and set a date before 1999.
As you can see, Euro area unemployement was already above 10% before the euro.

It really is common knowledge, one would assume, given that we were alive during that time, hence why I didn't feel it was necessary to link to it, but anyway...

In reply to RomTheBear:


Wel lthat was well buried, why didn't you link to it?


Yes, and?

It's only you that has tried to prove....something, not sure what... about unemployment in the EU zone.

How does this prove the article wrong?

In reply to Big Ger:
It's a bit overwhelming at first but seems like a really interesting website. Hopefully the link below will make the unemployment data easier to find (use the Max button for the easiest way to see the trend pre/post euro):
http://www.tradingeconomics.com/euro-area/unemployment-rate

In reply to Big Ger:

Hardly buried. If you can't go further than three click you can't be helped. You're not a sheep to be fed. I can't link directly because the this website does not allow it. There are plenty of other sites you could have checked yourself. Eurostat, oecd, world bank etc etc...


I've not tried to "prove" anything, I was simply making a point that unemployement in the eurozone is probably not all the fault of the euro.
You then had a tantrum because I had not linked evidence of it. (Even though it is widely available, common knowlegde, and easy to find)


Where did I say the "article is wrong" ?

In reply to Big Ger:
This doesn't surprise me. The Euro prevents countries using quantitative easing and benefitting from a lower exchange rate to increase exports and thus engineer economic recovery.

I'm near certain we'd be a worse basket case than Greece if we were in the Euro, and that Greece would have done far better if it wasn't.

TBH, I see why it was needed at the time, but I wouldn't mourn its passing now. We need to be an agile, open trading (and no fighting) bloc, not try to pretend a load of disparate countries are actually one economically.

In reply to RomTheBear:




Nobody claimed it was though?


Nope, asking you to provide evidence, is not evidence of any "tantrum", sorry, try again.



You claimed;


Was this not in relation to the article?

In reply to Neil Williams:

I agree, it is a bit of a straightjacket. But you have to put it in perspective with what there was before : huge currency instability, currency wars, and inflation.
The idea was not bad, eliminating transaction costs and exchange rate risks to increase efficiency and eliminate currency wars. The problem came when the rules regarding fiscal stability, and rules that were supposed to prevent countries not ready for it to join it, were systematically broken, or ignored, by member states. A classic case of putting bad politics before sound economics.

In reply to Big Ger:

Did I say otherwise ?


Call it what you want.


Yes, it is. Not sure where you see it says the article is "wrong" (not that there can be such a ting is what is an opinion piece). Some problems are multidimensional, not everyting is binary.

When I say that eurozone unemployement was high before the euro (which is verifiable), it makes it pretty clear that eurozone unemployement is most likely not all down to the euro. I don't think it makes the article necessarily "wrong".

In reply to RomTheBear:

So, you were answering a point that hadn't been made, with statistics irrelevant to anything.

God you're weird.


Ok, I'll call it Brian.


So, let me try to get some honest out of you, a futile task I know, but here goes;

You posted in relationship to the article;

"Unemployment in Eurozone countries was already at around 9% on average before the Euro. Before 2008 it was down to 7%. Then back to more than 10%. And now it's decreasing again. Some eurozone countries have low unemployment, some very high. So it doesn't seem to correlate much with having the Euro. However it does seems to correlate with countries that have been through labour market reform and those that haven't. I worked in France, Spain, UK and Germany and it's very clear to me as to why countries like France and Spain have higher unemployment than the UK or Germany. They simply tax labour way more, and workers in permanent contract are way overprotected."

To what relevance?


Ah; you've edited your reply now. I'll leave my point stand though.

In reply to no_more_scotch_eggs:


The Grapes of Wrath?

In reply to Big Ger:


Is that the rule, then ? Are we are not allowed to make any point related to the topic in the OP ? Or put statistics in historical perspective ?
What's your evidence that my statistics are irrelevant to anything ? You were the one asking for them !
You said yourself you weren't making any point, are we not supposed to reply to the thread then ?

I'll leave you to your paranoid delusions, you seem incapable to discuss any topic seriously, all you do is post some random article, and then just have a go at whoever tries to analyse / discuss / criticise / debate.

In reply to RomTheBear:





Your post above just confirms neatly everything I have thought, not only about your replies, but of you as a person.

Shall I tell you EXACTLY what happened here Rom?

You saw the OP, and the amuse-bouche except I posted.

Without reading the article, you posted your piece on unemployment thus;


You posted this thinking that the OP accused the Euro of being responsible for unemployment rates being high in the EU. After being challenged on your post, you went and read the article.

Realising that by now you were too late to edit/pull your comment, you continued to bluff and bluster about your intent in making your post.

If only you were man enough to say; "Whoops, my bad, I hadn't read the article fully, mea culpa" we'd have been saved all your twisting and weaving and avoidance.

In reply to Big Ger:

Have you read the article? Rightly or wrongly Stiglitz does blame the creation of the euro for the unemployment rate.

In reply to Big Ger:



Never mind that I had read this piece before you even posted it... Whatever...

In reply to Big Ger:

There are big differences in unemployment between countries both in level and trends. In most countries, unemployment fell in the boom years up to 2008, rose sharply following the crash, and have stayed high since. In Germany unemployment rose following reunification and peaked at over 12% in 2005. Since then it has declined steadily (apart from a blip in 2008) to 4.2% today, which is lower than the UK. Some EU countries outside the Eurozone, like Sweden and Denmark, have higher unemployment that the best performers in the Euro. The problem of the Euro is not that is overvalued. It is that, in the old days, countries like Italy and Greece, would simply let their currencies slide, which made exports cheaper and imports dearer and kept their labour costs down and interest rates would go up, which encouraged saving and discouraged borrowing. Without the option of devaluation, keeping their economies competitive would have meant making tough structural reforms, like reducing regulation, freeing up the labour market, shrinking the public sector. Instead they just borrowed taking advantage of the low interest rates on a currency underpinned by the industrial might of Germany. All that came unstuck in 2008. Now the Eurozone has put in place the fiscal controls necessary to stop this happening again. And the legacy of the past could all be sorted out through a round of debt rescheduling and forgiveness. However, the German people, having gone through a long and tough national belt-tightening following reunification, including labour market reforms, reductions in social benefits and pensions, raising the pension age, which led to a reduction in real wages, were not ready to let the improvident southern Europeans off lightly. So it's not about the Euro per se, but how countries adapt or fail to adapt to the realities of being in a currency block.

In reply to wbo:

To a point. Federal versus (and often it really is versus) state legislative power in the US is quite complex (http://law2.umkc.edu/faculty/projects/ftrials/conlaw/statesrights.html or http://www.huffingtonpost.com/lesley-daunt/state-vs-federal-law-who-_b_4676... and the 10th Amendment here). You can glimpse this complexity in operation, as the Huff Po article highlights, in news stories about transgender bathrooms, marijuana legalisation, gay marriage. In many ways, that no doubt my compatriots would not like to admit, results in some similarities between the US and EU. Although willing to argue/discuss.

In reply to testagrigia:

Added to that, even in countries like Greece that are supposedly the victims of Euro rigidity, support for staying in the currency (and of course the EU) remains high.

Since economy is less science and more ideology/politics, you have to ask cui bono with any such opinion piece.

CB

In reply to RomTheBear:


I think that may be a useful strategy for stroppygob's threads.

In reply to mav:


...in Euroland, or just across its borders, certain people are forever saying that the Euro was doomed from the start, is the cause of all the economic problems in the Eurozone etc etc. I don't see people saying similar things about the US Dollar despite the apparent similarities you cite.


Which kind of brings me back to an earlier point: if the US has worked out how to do it, why couldn't/can't the Eurozone learn from that?

In reply to Martin W:


People like to blame one thing for everything, because it simple, and appealing.

The reality is probably more complex, the euro indeed created some problems, and fixed others problems (which commentators tend to forget).


It depends what your benchmark is. On what basis would you say it's been successful in the US ?

In reply to Sir Chasm:


He implicates it rather than blames it, but only as part of the more general malaise that is the EU.

In reply to Martin W:


The article clearly states why Stiglitz thinks not;

" It was not simply that the eurozone was not structured to accommodate Europe’s economic diversity; it was that the structure of the eurozone, its rules and regulations, were not designed to promote growth, employment and stability."

In reply to Big Ger:


So you couldn't even be bothered to read the article you posted. He explicitly blames it "While there are many factors contributing to Europe’s travails, there is one underlying mistake: the creation of the single currency, the euro.".

In reply to Ridge:

Are you sure about that? I have no idea about surgeons and baristas, but I do know what you are offered as an associate professor in Arizona vs California, and there is a massive difference.

CB

In reply to cb294:


A bit of back of the envelope number crunching shows that the coefficient of variation of median US wages is about 30%. It's about 45% for the EU between countries. So he seems right to say that the variation, in terms of absolute median levels of pay, is bigger between EU countries than they are between US states. It is not huge, but significant.

However I suspect that if we bring this to purchasing power parity we'd probably get closer to US variation, but I can't find the numbers for the US atm. Maybe we should do it with GDP PPP per capita instead as it's a good proxy and stats are more accurate and more standardised. Will check tomorrow maybe.

In reply to Sir Chasm:

Isn't that what I said? He implicates it.

Implicate: verb (used with object), implicated, implicating.
1. to show to be also involved, usually in an incriminating manner
2. to imply as a necessary circumstance, or as something to be inferred or understood.
3. to connect or relate to intimately; affect as a consequence:

In reply to Big Ger:



''He implicates it rather than blames it, but only as part of the more general malaise that is the EU.''

Number 3 seems pretty similar to blame to me.

eg: If I was to blame Bob for my head ache after him hitting me on the head, my head would be aching as a consequence of him hitting it. He'd be implicated by me blaming him for it.

If you're looking for a word which is about hinting, imply/implying might be the one you're after?

In reply to Timmd:


That would be a reasonable substitute.

In reply to RomTheBear:
So the Coefficient of variation of GDP per Capita PPP between US states is ~36%, for the Eurozone countries it's 40%.
So it seems the Eurozone is only marginally more "unbalanced" as a currency area than the US is, at least in this regard.

In reply to RomTheBear:

Thanks, confirms my gut feeling.

CB

In reply to RomTheBear:


As far as I am aware it has survived for over 200 years without significant criticism of its fundamental basis, individual states choosing to opt out of it*, or a major problem in one state leading to widespread predictions of its collapse. That's a pretty good record for any major geopolitical institution IMO, though I admit it's hardly a robust economic analysis.

I wonder if anyone has ever done any kind of counterfactual analysis of what the USA might have been like without a single currency?

* I wouldn't count the Confederate Dollar, which was created by a group of states attempting to secede from the Union altogether.

In reply to Big Ger:



I know that's what Stiglitz says (I did read the article). I'd like to know whether people who understand these things better than me think he's right, or whether there might have been other factors involved.

I've no idea why the post of yours I'm replying to has got 8 dislikes. Perhaps there are 8 people reading this thread who disagree with Stiglitz? If so, it would be nice if one of them could explain their disagreement in more detail!

In reply to Martin W:



My guess is simply that the US dollar was born at at time when paper money was basically just substitute for gold and silver, so it never really mattered for most of history.
I'm sure you could find plenty of example in recent history though where some states got screwed by fed monetary policy.

In reply to Martin W:


Economists are always going to have their own pet theories, it's what makes them their bread and butter.

People like Paul Krugman have been warning about the mismanagement of the EU and euro for years,.

In reply to Big Ger:

It's vaguely confusing, when implicate can mean to blame as well as to infer, or imply. It seems like they might come from the same 'root' as it were, in having similar beginnings and overlapping meanings.

In reply to Martin W:

>
It's a curiously incomplete article by Stiglitz (based on his book which may make broader points).
The difference in remits of the respective central banks is symptomatic of a much broader difference between the US and EU. The US is a fiscal and monetary union. The EU is a monetary union. This means that the US a federal tax system overlaying the State one, and that the US borrows via US bonds. The EU does not have EU bonds so each State has to finance its own spending. The US is a permanent fiscal transfer union, so that effectively money from New York can be funnelled to Alabama on a regular basis. THE EU does not allow for Germany to permanently transfer money to Greece (which the Germans would accept anyway).

All these differences mean that whereas in the US it is inherent in the structure that one part of the country can be financed by the the central state (in effect by other parts of the country), in the EU this is impossible, so the only solution is force an adjustment through austerity and falling living standards. This in turn creates obvious pressures for dissolution.

In reply to Big Ger:

More thoughts from Mr S

In reply to Big Ger:


Any thoughts of your own ? These long copy pastes are getting pretty spammy, and not very respectful of copyright.

In reply to RomTheBear:

I think he's right!

Some more thoughts from him, again from a hard-right-wing source;









Do you have any thoughts yourself Rom?

In reply to Big Ger:


Not sure what's you're on about. I've read this in the grauniad this morning.
I'm not sure why you're copy pasting these articles, a link will suffice.


On which particular question ?

In reply to RomTheBear:


I wa taking the mickey out of your inability to admit that you accused me of posting links from, and I quote; "hard-right-wing sources."


Oh, I think quoting a pertinent section to give a flavour of what the article contains is only polite.


No particular question, just if you had any thoughts on Mr Stiglitz's general appraisal of, and forecast on,the fate of the Euro.

In reply to Big Ger:


Can you show me, please, where I said that, or is it just a figment of your imagination ?

In reply to Big Ger:


IMO it's spammy, unnecessary, irrespectful to the author, and cherry picking doesn't help.


Just trying to avoid being accused of being "irrelevant" and "answering a point that hadn't been made" when discussing the topic.

IMO he is right on the solutions but he is mostly stating the obvious. For the rest I think he is mostly incomplete, at least in these articles. The plight of Greece, as an example, is the result of a combination of issues, which, taken together were a recipe for disaster, bit individually would have been benign. But he seems to suggest the Euro is the main culprit, that, IMO is wrong (and easily refuted BTW).

In reply to RomTheBear:

I'm not playing along with your lies again Rom.

Did you claim that I posted links; "From hard-right-wing-sources" or words to that effect?

Yes or no, for the second time of asking

In reply to RomTheBear:

You have your view I have mine, (your view seems to be that making passive aggressive personal attacks is better than debating the point. )


You're not "discussing the topic" though are you? You're just making little snipes at me.


There you go see, you can do it if you try, you do not have to get all personal about it. Well done, have a biscuit.

In reply to Big Ger:


Not true.


Not true.


" You're not "discussing the topic" though are you? You're just making little snipes at me."

In reply to RomTheBear:

How childish are you prepared to get?

Really Rom, grow up.

If you want to debate the points, I'll happily do that, but from now on I'm ignoring your childish attempts to rile me.

In reply to Big Ger:



How can anyone possibly know ? It's not up to me to prove your stupid accusations.


No Big Ger, as you said yourself, if you make a claim, it's up to you to provide evidence, but apparently your own "rules" never apply to yourself.

In reply to Big Ger:




Why don't you apply the advice to yourself ?
My first reply to you on this thread was on point.
You immediately started personal attacks, accusing me of dishonesty and irrelevance for no reason.
Now that I posted further thoughts on the topic you give me replies such as "well done, have a biscuit" instead of replying on topic.

In reply to Big Ger:


I'm waiting. Anything else to say other than "well done have a biscuit " ?

In reply to RomTheBear:



One last attempt to get honesty from you.

Are you now claiming that you do not remember posting that I post links from ""hard-right-wing-sources", and that I have imagined or made this up just to repeatedly ribbed you?

You know damn well that threads in the Pub forum are not searchable after a certain length of time.

I think you're being your normal dishonest self, but if you claim that you genuinely do not remember making that statement, then I will drop the accusation.

In reply to RomTheBear:


Not really, there's not much substance to your post to debate.

You claim;


So if it's "easily refuted", then refute away!

In reply to RomTheBear:



Wrong, I asked you for 'evidence" to back up your declarative claim,


to which your reply was; use google

I subsequently proved your claim false.

In reply to Big Ger:



Very easy, there are many counter examples.
Many countries with the euro are doing quite well. If the euro was the underlying problem, it wouldn't be the case.
Even in the case of countries that suffered a major banking crisis and sovereign debt crisis, such as Cyprus, they are recovering well and fast, after having done the proper reforms.

In reply to Big Ger:


You then replied with things such as "you're not an honest player" and "it borders beyond pathological". If that's not a personal attack, I'm not sure what is.


Where ? I explained to you step by step how get those unemployment statistics and obviously it matched with my claim...

In reply to RomTheBear:


Not really. Many countries have far bigger economies, better social systems, and more international leverage, which can protect them from teh buffeting of the Euro farce. That doesn't mean the Euro isn't holding back, and effectively undermining those countries. How big would Germany's economy be now if it were outside of the Euro?

Ps. you missed this;

In reply to Big Ger:


That's all opinions. What I'm seeing is that some countries have done very well with our without the euro, some have done really badly with or without, so the idea that having the euro is inherently bad/good is easily refuted.
Of course monetary control can be an important tool, but it's not going to save any country from unproductive economies within unsustainable levels of public debt and broken labour markets.


I did not. Will reply to you in a bit.

In reply to Big Ger:



No I do not remember doing that. It's not a reason to make accusations without evidence.



It would be nice also if you could drop the personal attacks for a bit.

In reply to RomTheBear:


I remember you doing it quite well, it was the reason that I started doing the jibe about "hard right wing sources". Still if you claim, honestly, you do not remember doing it then I will not hold it against you any longer. (I do not accept that you didn't post it, just that you do not remember posting it. Just so we're clear.)


Happy to do so. We'll see which one of us cracks and chucks out an insult first then.

In reply to RomTheBear:

What's wrong with having opinions?


Wrong. Just because some have done well and others badly, it does not mean that the Euro can be excused, as we do not know what the situation would be if none had had the Euro.

If a Nobel awarded economist gives a bookful of reason why the Euro is a bad thing,it behoves considering.

For example;



But having the Euro burden on top of any problem is not a good thing

In reply to Big Ger:
Actually you could argue that the euro is one of the causes of such disparities and locks them in. eg. Germany benefits from an undervalued currency, a trade surplus and low interest rates. Greece et al suffer from an overvalued currency, tarde deficits and inappropriately low interest rates.

In reply to Big Ger:


Nothing. But it's logically flawed to say when a country's economy fails it's all the fault of the euro, and when it succeeds it's because of something else.

I think I can indentify at least 9 factors that contributed to the Greek crisis, and the inability to control money supply is one of them, but by no means the more the important factor IMO, especially when you consider that too much devaluation creates other problems.


Self-contradicting argument.


I'm not questioning that the euro, at this point in time, did not help countries like Greece.
I'm questioning that it is the underlying factors behind some of the euro zone problems, which btw are all quite different country by country (in fact region by region)

In reply to Big Ger:

That Guardian article just showed once again that economics is not a science but ideology, and that handing out Nobel prizes for this charade gives it an air of respectability it does not deserve. Might as well give one for homeopathy and spirit healing.

It became obvious that one can disregard the article (other than that it informs the reader about the bullshit our decision makers are fed) when he refers to the banking crisis as Euro crisis (or sovereign debt crisis in other instances).

This rebranding and shifting of blame must be the best example of the Orwellian idea that controlling the past means controlling the future!

CB

In reply to Postmanpat:

Is it really ? I'm not so sure anymore. I have no doubt the inability to control monetary policy in times of crisis is a bit of a problem, but it's no magic wand either. And does that offset, on the aggregate, the long term efficiency benefits of a common currency ? I'm not convinced.

In the meantime I see many countries using the euro doing fine, and countries like Cyprus or Spain started recovering at a healthy pace as soon as they started doing the necessary reforms. They are clear factual counter-examples to the argument that the euro necessarily locks such disparities.

In reply to Postmanpat:
May I add, if we had currency wars instead of the euro, I bet we would be blaming the lack of common currency, or other countries, for all the problems.

In reply to cb294:

I suspect the click bait articles in the guardian are probably a lot less nuanced and more sensationalist than his research.
But to be fair, I'm more aware of his research on inequality than his views on the euro.

In reply to RomTheBear:


Which EU member nation not in the Euro has done badly by not deciding to join the Euro?

There are some wannabe EU nations and some recent joiners who aren't doing well, but there is no long term EU member nation not with the Euro performing worse than the EU average, most are doing much better.

In reply to summo:



I am not sure what you think it tells us, other than these specific countries are doing ok at this point in time ?

In reply to RomTheBear:


I will ask again, you said some countries were doing REALLY badly without the Euro(I've re-quoted you to help you remember), I would like to know which EU countries they are? I am only asking you to substantiate your argument as you must have a country and their currency in mind? A simple one word answer will suffice.

In reply to summo:

Ha ok, sorry I see what you mean. I wasn't referring to EU countries. Many countries with their own currencies have had significant economic problems. The UK would be one example of one those inside the EU which had performed badly.

In reply to RomTheBear:


Perhaps given the topic of every post was about the EU and Euro, the title thread... folk might presume you knew of some EU country struggling because it never joined the Euro?

So you confirm that every long term EU member who chose not to join the Euro is doing better than the Euro average. Thanks.

In reply to summo:

I just gave you an EU example !
But my point was simply that having control of your own currency is not a magic wand that can erase every economic problem. Depending on the case, and how it is used, it can even make things worse.


I can't confirm nor deny given that I don't know which time period and measure you're talking about, nor what it is you define as "long term eu member"
I would suggest GDP per capita growth at purchasing power parity for the past decade as a good indicator ? I'll let you get the numbers, as I must go. to be continued.

In reply to summo:


Wales?

In reply to RomTheBear:

??? it's your claim you get the numbers, you said some EU countries NOT IN THE EURO WERE DOING 'REALLY BADLY', pick any country, any decade, any measure, name them? Just one that has over a decade faired worse than the Euro nations average?

Obviously you time frame is limited to the life of the Euro, so you must have very little research to do to prove your claim.

In reply to summo:


No this is not what I sahd, you are blatantly misquoting me.
And what is wrong with you ? I suggested that we try anyway your idea (even though it wasn't what I said) of comparing EU countries using a relatively standard measure, I couldn't get the numbers because I was boarding a flight, if you couldn't be bothered to do it, well it's lazy, but don't worry I'll do it.

In reply to RomTheBear:


This is what you said at 652 yesterday, that you have yet to substantiate;


Which country outside the Euro is suffering because it didn't join? A simple question, which requires a one word answer.

In reply to summo:

Do any of you guys have email or other platforms where you could hold looong pointscoring chats in more private settings. This is getting very boring

In reply to summo:


It is not. Let me requote:
"What I'm seeing is that some countries have done very well with our without the euro, some have done really badly with or without, so the idea that having the euro is inherently bad/good is easily refuted."

In reply to summo:


So here you go, one example, GDP growth per capita (at purchasing parity power) between 2004 and 2014:

U.K.: 5.2%
Euro area: 5.4%

In reply to goatee:


Remind me, what contribution have you made to the discussion ?

In reply to RomTheBear:


full marks (I won't ask for your workings). You must have worked hard find the timeline and parameters to give that result.

An annual growth difference of 0.02% per annum, isn't that likely to be a rounding error? Or justification to ditch the pound and move over?

In reply to summo:


Actually it took me five minutes, probably would take you as much if you could bother. But you're not interested in anything remotely backed up by facts, we got that by now.

In reply to RomTheBear:




Are you trying to say that being 0.2 percentage points lower than the average is doing "really badly"? That was the claim you were asked to verify by Summo. Being slightly below average is not "doing really badly" in any sane interpretation.

In reply to wintertree:

No, it was not my original claim, (you probably read summo's post where he blatantly twists my words), nor was it what he asked to be verified.


Totally agree but that was not the point.
Here is what he asked: "pick any country, any decade, any measure, name them? Just one that has over a decade faired worse than the Euro nations average?"

And that's exactly what I did.

In reply to RomTheBear:

Fair doos.

In reply to RomTheBear:

just to clarify, you said "some countries that hadn't joined the Euro were doing really badly".

There was no need for me to twist anything. Obviously, if you think 0.02% per annum is doing really badly, that's your view and I accept it.

In reply to summo:



I don't think that, another thing you made up.

In reply to RomTheBear:


but you keep saying that's not what you said, but every time I read your quote, it doesn't sound any different, your 'really badly' without the Euro example happens to be a relative gdp growth difference of 0.02%/yr?

In reply to RomTheBear:


Sure, for the the difference between US and EU employment. But it is pretty clear that unemployment in the EU is higher than it otherwise would be because of the euro.

In reply to summo:

FFS are you a bit slow or what ? That claim wasn't in reference to any EU countries nor time period.

You then didn't like this claim and asked the following :
"pick any country, any decade, any measure, name them? Just one that has over a decade faired worse than the Euro nations average?"
I gave you exactly that. Stop trying to make it look as if was an illustration of my original claim !

In reply to sebastian dangerfield:

How do you know ?
Eurozone unemployment was at around 9.8% at the start of the euro, over the lifetime of the euro it has gone significantly down to around 7% just before the financial crisis, now it's about 10.1%, virtually a similar level to pre-euro.
So I don't really know whether it would have been higher or lower without the euro, but I certainly don't see any obvious correlation.

In reply to RomTheBear:




It's hard to prove anything in economics, even retrospectively, but it's equally hard to ignore the opposing trajectories of, say, USD or GBP vs EUR employment since the great crash and conclude that the Euro has nothing to do with it, wouldn't you say? Even if by "Euro" we really mean the Greek (or PIGS) debt crisis, a direct consequence of the creation of the Eurozone.

In reply to BnB:


What do you mean opposing trajectory ? U.K./US unemployment is about the same now as it was before the financial crash, same thing for the euro area. Last year it fell in uk / us, so it did in euro area.

In reply to RomTheBear:


That's a contradiction your previous post in which you stated: "Eurozone unemployment ... has gone significantly down to around 7% just before the financial crisis, now it's about 10.1%"

That's a rise of >40% since c2009 isn't it?

I was quite clear in my post that I was talking about the period "since the great crash".

In reply to BnB:



But it's exactly the same for the uk and the US ! unemployment went up by around the same percentage, then down.
Same as the euro area.
Basically since the start of the euro, unemployment went slowly down , then rapidly up, and slowly down again, back to where it started. Pretty much the same thing happened at pretty much the same time, in the uk and the us.
The only difference really is that the euro zone was starting from a much higher rate of unemployment, that suggests that instead of currency, higher unemployment in euro area is structural to how some of their labour market work. If you over protect workers at the expense of the unemployed, you get higher unemployement, that's very much a policy choice.


Euro area countries that have gone trough tough reforms to get rid of these structural issues, have low unemployment, in fact sometimes lower than UK/US, despite using the euro. That's pretty much indisputable proof right there that it is perfectly possible to have the euro, and low unemployment.

In reply to RomTheBear:


When, between 2009 and 2016 did UK unemployment rise by 40%? I challenged you to question your assertions for the period post crash and instead of just acknowledging the fallibilty of your original statement, you throw a different timescale back at me. Again.

You're obviously an intelligent fellow and I enjoy the enthusiasm and usually well-informed nature of your observations, but it gets tiresome debating with someone who keeps moving the goalposts to conceal their mistakes.

In reply to RomTheBear:



not sure how many under 25s in southern Europe would agree with you.

In reply to BnB:

Between 2009 and 2011. It went from from ~6% in 2009 to ~8.5% in 2011, that's an increase of ~40% in the unemployment rate.


I get you, I don't deny that unemployment decreased more slowly post crash in the euro area than in the UK/US (and that goes back to my point about the flexibility of labour markets. U.K/US have usually faster ups and down in unemployment, again, something that was already the case prior the euro).
But what is the point of this cherry picked period of time ? I could find a period of time when the euro unemployment went down and then claim the euro decreases unemployment, its nonsensical to cherry pick a period of time, you have to look at the whole lifetime of the currency to have the whole picture, don't you agree ?


What mistake exactly are you taking about ?
I'm simply trying to show you that over the lifetime of the euro, countries that have the euro and countries that don't have had similar ups and downs in terms of unemployment, although at slightly different times/speed, but basically all ended up where they started.
I'm moving the goalposts simply because you put them in the wrong place. Surely if your argument is that the euro creates unemployment, you have to look at the whole lifetime of the euro, not a cherry picked period of time where unemployment went up, otherwise it's completely biased.

In reply to summo:

How can they "agree" or "disagree" with an official statistic ? It's not an opinion, it's a fact. (Unless they question the validity of the official statistics).
Given that many move to Germany (an euro area country where unemployment is low) it looks like they are aware of it.

In reply to RomTheBear:


So what you are saying is that the Euro benefits economies like Germany, so the workers from countries like Spain which have horrendous youth unemployment can go there to live & work instead?

And, if you ignore individual countries economic problems and simply average them out across the EU you can make it look better and more acceptable?

In reply to summo:

That's one of the best thing about freedom of movement, when your country f*cks up you still have the opportunity to find a job somewhere else.
The young Southern European didn't get shafted by Europe or the euro, (although they didn't help with the aftermath), they mainly got shafted by their previous generation who have piled on unsustainable debt on them, over protected their overpaid public sector job.


I don't ignore them. On the contrary, I just try to avoid simplistic one dimensional, europhobic explanations. Some countries do quite well with the euro, some don't, that is indisputable proof that it is possible for a country to do well with the euro. Blaming all their problems on the evil euro is pure fantasy and is not going to achieve the needed reforms.

In reply to summo:


FTFY

In reply to RomTheBear:

If you call selecting the single greatest economic disaster since WWII and its aftermath as "cherry picking" then good luck to you. The existence of the Euro restricts policymakers, particularly in the countries of Southern Europe, in ways that have exacerbated the weaknesses in their economies. Add those shackles to the debt crisis caused by the over-enthusiastic embrace of those fallible economies by the Euro Project and you have a dangerous cocktail.

Taking the last 10 years these graphs give the lie to your fanciful notion that the trajectories of the Eurozone and the U.K. are similar.

http://www.tradingeconomics.com/united-kingdom/unemployment-rate

http://www.tradingeconomics.com/euro-area/unemployment-rate

A picture paints a thousand words.

In reply to RomTheBear:


But the Euro disadvantaged many countries economies the minute they started on it. Countries in northern Europe were happy to 'flex' the joining criteria, even though they knew it would mean problems, not an issue for the big economies like Germany, devastating for others. The Euro is win win for Germany, lend money to southern Europe and gain interest payments, southern Europe then buys german products and on the cycle does.


at the expense of others.

Sometimes a single simplistic view is all that is needed, or you can around the houses ten times and hope that people have forgotten what the original problem was by the time you get back.

In reply to BnB:

Do I need to explain how self contradicting this statements is ? Not only you are cherry picking a time period, but you are cherry picking a pretty exceptional one.
If you want to assess whether the euro is good/bad for unemployment, don't cherry pick the only period with historical a massive economic crash, look at the whole picture.



??? Are you being totally dishonest or what ? The two charts you posted show the same broad trajectory for unemployment in the Euro area and the U.K. Up from 2008 to circa 2013, and then down.

Yes the U.K. has recovered all the ground whilst the Euro area still hasn't fully recovered. But it also took more time for things to get bad in the first place, which of course, you can't see if you artificially select the last ten years.

As I said before, broadly same trajectory, same ups and down, the booms and busts just seem to be sharper and shorter in the US and UK, (which has been the case well before the euro btw), probably due to the more flexible nature of their labour markets.


Indeed, but one has to actually open his eyes, and not look at only the bits they want to see !

In reply to RomTheBear:

Then you are looking with very skewed eyes. The graphs show that UK unemployment is today below its pre-crash level. Eurozone unemployment languishes 40% higher than its pre crash level. I don't understand why you need me to point that out unless your need to for self-justification is so over-developed that you don't care about enjoying the respect of your interlocutors.

And on that note, I'm out.

In reply to BnB:

Yes ! And what does it tell you ? Just that in that specfic, cherry picked exceptional period, the euro area has recovered more slowly than the uk, that's it, it tells you nothing about what the euro has done to unemployment overall, and in more normal times.

You can't just blame the euro when things are bad and not praise it when things are good, it's almost a perfect example of confirmation bias, unfortunately that's been reinforced by national politicians, they like to take credit when things go well, and blame "Europe" or "euro" or whatever when things are bad. I don't buy it. I think it's complicated, and also it's undeniable that the euro has made it more difficult for SOME countries at this specific moment in history, overall it's difficult to say whether on balance, and over time, it has benefited or been a drag.


Ok now you're just playing the person instead of the ball.


See my point above, you artificially cherry picked the last ten years, I could move the timeline and get the opposite finding. It's really biased to look only at the part of the picture you want to see !

In reply to RomTheBear:

Surely the last 10 years is the most pertinent data?

Go ahead and present the "alternative" data then, if it's that easy

In reply to Big Ger:

Why ? Surely you have to look at all the data available, or at least find a statistically representative period of time, instead of cherry picking ?


Very easy, between 2000 and 2008, unemployment rate in the euro area went down by ~25%, in the UK it went up by ~10%. Same source as above.

In reply to RomTheBear:


10 years is statistically useful surely?


Chart? Diagram? Source?

In reply to Big Ger:


It would potentially be only of those ten years you cherry picked were statistically representative of he whole dataset.
Given that we have the whole dataset, there is little point cherry picking any specific period of time, unless you are trying to paint a biased picture.



Are you blind, or really really lazy ? I said same source as above.

http://www.tradingeconomics.com/united-kingdom/unemployment-rate
http://www.tradingeconomics.com/euro-area/unemployment-rate

In reply to Big Ger, BnB and Summo:
Rom's point is that the enomployment rate in the EU area has always been higher than the UK / US. If you only look at the last 10 years of data you'll see a correlation but not necessarily causation.

Take Spain as an example where the unemployment rate was over 20% in 1986 and again in 1995 before steadily decreasing during the "great moderation". It wasn't until the crisis that the rate shot back up again ( see chart).

http://www.tradingeconomics.com/spain/unemployment-rate

So it's reasonable to ask, is high unemployment in Spain the fault of the euro or the fault of restrictive labour laws? Spain has collective bargaining which locks in inflation-linked salary increases for whole industries and employees are obliged to pay 30 days salary for every year of service when they make someone redudndant. So companies are reluctant to take on more permanent staff. Instead they employ "trainees" which are often over 25, earn a pittance, don't get any training or development but have the virtue of not attracting high national insurance payments and you can get rid of them by letting their contracts expire. To its credit the Rajoy government has pushed through reforms in this area (it used to be 45 days per year of service and trainee contracts are now limited to 2 years) but the employment market is still significantly more rigid than the UK.

http://www.tradingeconomics.com/spain/unemployment-rate

[edited for clarity]

In reply to RomTheBear:

Ten years is what the linked charts give, along with one and five, I wonder why? Could it be that ten years is a easily understood period for statistical analysis.


Not at all, you could be looking at the long term, and including relevant events such as teh 2008 collapse.




Now then, what did we say about seeing who'd be the first to insult? You win. You dishonest scumbucket.


I said same source as above.




So they give 1, 5, and 10 year spans.

Which time scale of them shows;


I don't see it myself.

In reply to Big Ger:

Europe is falling into small pieces. Lucky that I have left it.

It is only some years, I do not know how many when it will broke.

In reply to Bob Hughes:

Since when though? Since the introduction of the Euro mayhap?

(If only Rom could express it that way, and without resorting to insult.)

In reply to RomTheBear and others:

Just skimmed over this thread, and find the whole discussion rather one eyed.

IMO, the question should be whether the fiscal discipline associated with Euro membership that was imposed already in the runup to the Euro introduction (Greece of course being the exception) had some positive effects when seen over the entire time rather than looking at the last ten years dominated by the crisis, when Euro membership has indeed prevented southern European countries from devaluing their currency.

This may have slowed down their recovery somewhat (as always in economics, no reruns or controls...), but if you compare the overall standard of living in, say, Italy from the repeated Lira devaluations to current Euro times there is just no comparison, and therefore little appetite to ditch the Euro. I have less experience with Spain and Greece, with the latter of course having additional, structural problems that are hard to fix in crisis times.

So Rom is correct to argue that one should take the longer view, noone denies that the inability to devalue is a cost associated with Euro membership, but the same countries also massively benefited before the banking crisis (especially in terms of borrowing costs). To say that the Euro is just a tool of German trade and financial hegemony is just plain idiocy, as usual it is a tradeoff with different costs and benefits for different parties.

Whether the ideology driven austerity politics of the current German government (but not them alone!) is the correct way to deal with the aftermath of the banking crisis for the entire Eurozone (and even for the countries of the German block) is an entirely separate question.

I would much rather prefer to see the mandate of the ECB expanded to economic stimulus rather than having a narrow focus on price stability that was modelled on the remit of the German Bundesbank. Unfortunately, at the time this was broadly seen as the best template, which now makes it too easy for the austerity ideologues to bang on about the letter of the law. Nevertheless, the ECB slowly gains these powers, their interventions work (remember the "whatever the cost" speech), the PIGS countries can again borrow to boost their economies. Unfortunately, the continued resistance from the austerity crowd slows down the process, and is therefore largely to blame for the delay in recovery relative to some non Euro countries.

The very same ideological issues apply to the UK as well, who could be way ahead without the focus on austerity.

CB

In reply to Big Ger:

1, 5, 10, and a button labelled MAX.

CB

In reply to Big Ger:


No. That's precisely the point. The high points in Spanish unemployment are 1984, 1996 and 2010 (all approximate dates). Only one of those was under the euro and arguably was more to do with the financial crisis than with the euro. In fact the lowest unemployment rate in Spain since the 70s was in 2007-2008 under the euro. When it comes to explaining unemployment, it really seems that something other than the euro is going on.

In reply to Bob Hughes:


migration, number of workers exiting? Moving to economies that benefitted from the Euro? Of course it's more complex, at the time they had net inward migration, but how many were Brits etc.. retiring, versus nationals exiting for work?

I'd say Spain problems were very low interest rates at the early euro days causing massive borrowing for property construction, catering for all those Brits! Rather bizarre employment laws mentioned earlier, but they also encouraged inward migration for work in housing and agriculture as it wasn't popular with the local ( a little like the UK), then when the bubble burst everyone was left just standing around. It's banking system was in part pretty corrupt, with some going and others bailed out by the ECB - this tied in with the property boom as many were lending money to business people who were never going to repay. Their education system is generally considered to be poorer than the EU average and not training people for the modern world, with very little investment in adult training or R&D.

All of Spain's problems aren't and weren't Euro related, but if you look at all the PIIGS nations, they have their own quirks but somewhere in the detail will be measures or impacts directly related to the Euro, or a lack of control of their own currency, meeting Euro criteria in the very beginning and so forth. Often the foundations or fundamentals of a stable economy or finances were never met in the first place, before the Euro arrived, so it was of course bound to fail or meet serious problems. The wealthy Northern European Euro country's politicians were happy to ignore this, not so fun for the actual citizens living in the piigs though.

In reply to Bob Hughes:


There are structural reasons why in France and many southern European countries there is endemically high unemployment.

However, overlaying this is the problem that Eurozone monetary policy has been essentially run along German lines. This meant monetary policy which was overly easy for the south, which reduced unemployment in the run up to 2008 but also ignited an unsustainable credit boom, the unwinding of which has led to very high rates of unemployment. The Eurozone, because it is not a fiscal union and has limited monetary powers was not in a position to alleviate the unemployment caused by the unwinding.

In reply to Postmanpat:


Agreed

>The Eurozone, because it is not a fiscal union and has limited monetary powers was not in a position to alleviate the unemployment caused by the unwinding.

Also agreed but i think in the case of Spain (the country i'm most familiar with), the fact that the government was unable to devalue the currency has helped them to push through structural labour reforms which faced significant opposition.


(sorry to chop up your post but i wanted to answer this first point last) If you look at the labour force participation rate the picture is more complex and more interesting. The US's LFP has been steadily declining since 1995. In Spain it has increased steadily since the 60s and is now higher than the US.

https://data.oecd.org/emp/labour-force-participation-rate.htm#indicator-cha...

In reply to Postmanpat:

As I posted in reply to RtB, the issue is not so much about whether the Eurozone is a fiscal union, but what the mandated of the ECB should be. A narrow focus on price stability (aka the German Bundesbank model) seemed like a good idea at the time, as all Eurozone countries agreed. Post 2008 it turns out it is not, but changing the mandate to include economic stimulus means fighting resistance from the austerity ideologues at every step, slowing down the in fact rather effective expansive measures of the ECB.

I am glad that you agree that Eurozone membership was beneficial for Spain and other southern countries pre 2008 (the focus on the building industry, not only in Spain but also Ireland, that made them particularly sensitive to the crash was not so clever, but these countries could have spent the money they were able to borrow cheaply more wisely, that is not the fault of the Euro).

Unfortunately the discussion now focusses on the the single point of these countries´ inability to devalue (see e.g. the thread title), as if the benefits of Eurozone membership would not always come at a certain cost. Also, the countries in question all massively benefitted from the convergence programs even before Euro introduction (Greece excepted for the known reasons). This is commonly ignored, and people act as if the repeated devaluations of the Italian Lira really worked and made the place an economic paradise....

CB

In reply to Bob Hughes:


>
Yes, what is happening is that because the normal safety valves have been removed there is not much option but to accept reform, sort of like having a gun their heads.

Agreed, but they are both outliers.The US is about the only major developed economy with a declining LFPR and Spain's has been notably strong. But remember that this measures those looking for work in addition to those working, so it could partly reflect the fact that a lot of Spanish want but cannot find jobs.

In reply to cb294:
>
I don't think the argument is that Euro membership was negative in the first few years. A combination of EU subsidies and loose money was going to create economic growth and reduce unemployment. But this was made possible by a credit boom based on inappropriately low interest rates and the implicit assumption that government borrowing was guaranteed by the EU. Uncontrolled credit booms have a habit of misallocating capital (often in construction and property) and building up problems in the future, which is exactly what this one did.

It's not really just about the inability to devalue. It's about the inability either of individual States to adopt independent and appropriate policy or of the EU take the necessary fiscal steps. The situation is a bugger's muddle. It's true that the ECB was relatively slow to adopt the necessary monetary responses in 2008 because their mandate is limited, but ultimately there need to be fiscal tools available, and the Europe wide monetary tool is always going to be blunt of even destructive when the economies of Europe are so different.

The mistake was naively to think that the introduction of the Euro and supposed "convergence" would lead to Greece turning into Germany. Because that hasn't happened the EU is trying to enforce it through austerity and structural adjustment. As Bob points out, in Spain there have been some successes, but it hard to see that it can be made to work wholesale across southern Europe. You get back to the fact that the Euro can only work if, having taken away the "safety valve" of devaluation, it is replaced by some sort of transfer union and there is not the will in either Germany or the Southern countries for that to happen.
The further problem,is that, as you point out, the devaluation safety valve basically just enabled countries to avoid structural reform. The German fear, which is probably justified, is that a permanent transfer union within the eurozone will similarly enable countries to avoid structural reform . This is the experience within, for example Italy, and that is supposedly a unitary State. What chance the EU doing any better?

In reply to RomTheBear:


We had a recession. Unemployment in the euro area rose significantly from 2008. The euro has been responsible for a number of things that make getting unemployment back down more difficult

1. exchange rates can't devalue in oountries with high unemploymen
2. monetary and fiscal policy have been less loose than it should've.

In reply to sebastian dangerfield:




I agree, but the question was whether unemployment in the EU is higher than it otherwise would be because of the euro, not whether it made it more difficult to lower unemployment post crash.

In reply to RomTheBear:

If we've had an increase in unemployment and the euro is slowing its fall, then the euro's making unemployment higher than it otherwise would have been.

In reply to sebastian dangerfield:

Sorry butt don't see how you can make that conclusion. The fact that it slowed down the decrease in unemployment post crash, doesn't mean the overall impact on unemployment is negative. You're basically looking at only one side of the equation.
You could say the same of any currency cherry picking any point in time when it caused problems and ignore when it was an advantage.

In reply to RomTheBear:

ah, you mean post crisis the euro has been bad for unemployment but this might be (is?) outweighed by a positive impact on employment in other times?

In reply to sebastian dangerfield:


Well, yes, as explained many times in this thread, the euro facilitated a credit boom in Southern Europe which allowed them to substantially reduce unemployment, and increase their standard of living tremendously in a short period of time. Obviously as soon as the crash happened, what was a benefit turned out to be a curse. Which obviously with the situation pre-euro, the ability to devaluate was beneficial at first before becoming a curse, which was one of the reason behind the euro... There are no magic currency option that can fix structural problems.

How much of the decrease in unemployment pre-crash and how much of the increase post crash can be attributed to currency effect alone, it's very difficult to say, I don't know for sure, nobody can, but comparative data hints to a relatively neutral effect on the aggregate.

I note though, that countries that have finally gone through the process of going through the tough reforms needed are lowering their unemployment quickly, and in terms of standard of living, despite losing a big part of the gains made during the credit boom, they are still well up overall.

In reply to RomTheBear:

Are you just making the point that, to date, the over all impact on total unemployment's not clear? Or suggesting that perhaps the euro's been a good thing over all? To put it another way. If it were shown that overall unemployment had been lower because the credit boom boost outweighed the negative impacts post crisis, would you see that as a vindication of the euro?

If you're arguing that over all maybe the euros a good thing, or even that it's not clear that it's bad, then please think about the following:
1. you're right there is no currency that can fix structural problems. But there's certainly currencies that can make things worse or better.
2. post crisis negative impacts of the euro on unemployment are definitely a bad thing. pre crisis boost to employment through a credit boom - less clear that's a good thing
3. distributional effects on employment also worth considering. credit boom aside the euro makes richer members more competitive and poorer countries less competitive. normally this will be mitigated to some extent by transfers from rich areas to poor ( via unemployment benefits, tax credits etc)- that doesn't happen so much in the euro zone.
4. not all unemployment is equal - it's worse when it's concentrated in certain areas or times. it's worse when it's long term etc.

In reply to RomTheBear:

ps you didn't get that dislike from me