Re: sane discussion of the chocolate euro and italy's growing political problems....

Crowley wrote:

Traditionally they have bailed themselves out by devaluing their
currency but can't do it now the ECB are in charge. Perhaps they should
try a little more self-discipline, take the pain, and start living
within their means ? Not very 'Italian' I know but what's the
alternative ? Leaving the Euro is a non-starter as it would be economic
suicide.

They'll just have to become far more productive or accept a lower
standard of living.

They'll probably end up with both but that's socialism for you.

In fact its a general traditional socialist trait that prosperity for
the masses can be achieved by tinkering with courrencies so as to
adantage the noble debtor at the expense of the villainous creditor.
"It's not the pound in your pocket that has been devalued ..." for
those of you who remember that far back.

The remarkable things about the Euro is that it as lasted as long as it
has and is as sound as it is. It has not had an auspicious history.

First it was never ever even conceived from a commercial/economic
standpoint. It's purpose was and remains the federalisation of Europe.

The precursor of the Euro was the ERM. This mechanism as well as
facilitating the convergence of the then seperate European currencies
set out conditions of convergence for the qualification of members to
enter the next stage of single currency. It has been long forgotten
that at the end of the day every single member of the ERM failed these
criteria but the project went ahead regardless. Since then the Euro
countries entered into a stability pact which was promptly broken with
impunity by the major members.

The Euro has not brought the prosperity that was promised through
easier cross border trade. Quite the contrary the Eurozone has been the
planet's snail economic area ever since the Euro was introduced. It
hasn't even brought the promised vision and adventure. The rejection of
the Constitution has, at least for the present, stopped federalism in
its tracks.

Despite this the Euro is sound. It is sound because, thank God, it's
management has thus far remained in the hands of bankers who so far
have had little difficulty in fending off the attentions of
politicians. Unfortunately sound is not synonymous with good. Europe is
still a collection of disparate economies and monetary policy applied
by the ECB does not affect them all equally i.e. high interest rates
are not particularly appropriate in the case of sluggishness and vice
versa.

The $ has similar problems but advantages over the Euro. First it has
been there not only for a much longer time but though its value vis a
vis other currencies as varied in modern times, if at all, it has never
been formally devalued. Further, the Union predates all but the
original 13 of its constituent states. Necessary fund transfers in the
form of Federal spending that serve to even out economic
advantage/disadvantage do not engender nationalist overtones in the US
as is the case in Europe.

Much comment is made regarding the $8 trillion public debt currently
suffered by the US. falls more into perspective when we consider that
this is the product of not one but 50 economies. In GDP terms this
amounts to 64.7% of GDP. This compares with Germany 68.1%, France
66.5%, UK 42.2% and Italy 107.3%

On the face of it Italy really is a basket case.

Moreover thus far Italy along with the other Latin countries, France
and Greece has been a net recipient of EU funding. With enlargement
this state of affairs cannot continue unless EU payments by the rest of
us go up substantially. Could the partnership of sovereign nations
stand this? There is reason for doubt (and hope).

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