Netherlands to vote Nee on the European Constitution

[CapTVK]

Originally posted by lord of the mark


1. Most states have limits on deficits
2. No state is really large enough to deliberately manipulate the macro economy by its actions - to run their deficits so high, that they can impact interest rates, and force the central bank to accomodate them. A Germany, or France, can run deficits high enough to singlehandedly raise rates throughout Euroland, forcing the European Central Bank to respond. Or thats my understanding.

1) The US states are required to perfectly balance their budget right? Some EU countries should take an example of this...

[lord of the mark]

Originally posted by Spiffor

Maybe the rationale behind the stability pact is becoming like that, but it was definitely not the rationale at the beginning.

The Germans wanted the stability pact because they have an irrational obsession for monetary stability, and they didn't want the undisciplined French/Italians/Greeks/Portuguese to ruin this nice little currency (with good reason though: France and Italy had a history of competitive devaluations).

The stability pact was a way to create trust where there wasn't.

Im trying to respond to Ned, who seemingly didnt understand how a France or Italy could force a devalutation on the Euro, when, say, Arkansas, or even California, cant do so on the US dollar.

[lord of the mark]

Originally posted by CapTVK


1) The US states are required to perfectly balance their budget right? Some EU countries should take an example of this...

Not under the US constitution, but most State constitutions require it.

[CapTVK]

Originally posted by lord of the mark


Not under the US constitution, but most State constitutions require it.

There´s a lesson here!

[Ned]

I'm still a little puzzled about the Euro. Surely member countries have no authority to print Euro's. If they run a deficit, they have to borrow money on the open market. How is that different from any company borrowing money on the open market?

[Spiffor]

Well, the US had a rather cohesive society, with fairly similar aims, and a fairly similar history. All this created a feeling of national identity, which is always useful when creating a country.

European society isn't cohesive at all. We have 20 official languages, 25 different countries. We have millenia of history that shaped completely different worldviews. Ever since the 18th century (your point of reference), we managed to view eye-to-eye on the following: War is bad, democracy is good. It's a fairly short list of what can be considered as Europe-wide shared values

Nobody here realitically calls for a USE anytime soon. The very idea behind the EU is that the trans-border cooperations shouldn't come from the top (from the political area), but from the bottom (from economic cooperation). This was the driving idea for the past 60 years.
This must remain the driving idea for many countries: those that are the most attached to their national sovereignty, and those that have only recently joined.

But for several core countries, the time is now right to create poltiical cooperations along with the exisitng economic ones.

[lord of the mark]

Originally posted by Ned
I'm still a little puzzled about the Euro. Surely member countries have no authority to print Euro's. If they run a deficit, they have to borrow money on the open market. How is that different from any company borrowing money on the open market?

short answer: No one company is as large as the largest countries in Europe.

[Spiffor]

Originally posted by Ned
How is that different from any company borrowing money on the open market?

3% public deficit in France = 50 billion Euros yearly (roughly).
I think Italy has an economy similar to France's, so make it a similar amount for Italy.

100 billion Euros of yearly deficit is not something the average company can put off. And this is the accepted margin. Now, imagine a deficit crisis where the amount is doubled, and you'll get the picture

[lord of the mark]

Originally posted by Spiffor
.

But for several core countries, the time is now right to create poltiical cooperations along with the exisitng economic ones.

I still fail to see why.

AFAICT, the project of further centralizing the EU was heavily driven by the events of 1989 - 1991. Germany was united, and eastern europe, Germanys traditional sphere, was now out of Russian control and open to German influence. This was dangerous to everyone who wasnt Germany, since there was fear of German power, and dangerous to Germany as well, since fear of German power could lead to an anti-German coalition. Strengthening the EU meant that it would be the EU that would succeed Russia in Eastern Europe, not Germany per se, and that German binding to France would reassure everyone.

Well its not 1991 anymore. Its 2005, and the Eastern European countries have emerged as fairly solidly sovereign, with relations to all great powers, and not particularly easy to dominate. Germany, OTOH, has remained stubbornly pacifist. And whats more, the existing European institutions have proven adequate to bind it to Europe.

There IS a real issue that Europe works more creakily with its larger membership. But Im not sure that trumps all other considerations.

The only real impulse for significant further integration, is to maintain a larger European role abroad (larger than the individual powers could manage on their own). And frankly I dont see that most Europeans really care about that.

[Spiffor]

Originally posted by lord of the mark
I still fail to see why.

Democratization. Harmonization of economic policies (taxation, mostly)

You can only democratize the EU if you give more power to the European Parliament, at the expanse of the national governments. National Parliaments are very poor when it comes to haggle with 24 partners.

You can only further harmonize the EU's economic policies if the individual governments have less ability to block things.

Edit: besides, the efficiency of the European decision-making is terrible. The constitution would have made it a bit less creaky, but it would have still been very very bad.

[CapTVK]

Originally posted by Spiffor

3% public deficit in France = 50 billion Euros yearly (roughly).
I think Italy has an economy similar to France's, so make it a similar amount for Italy.

100 billion Euros of yearly deficit is not something the average company can put off. And this is the accepted margin. Now, imagine a deficit crisis where the amount is doubled, and you'll get the picture

Stick to the facts Spiffor!

You know it is -3.7% for 2004 (almost 60bn euros) and the year before that it was -4,2%

Italy is hanging on at -3,0% and i wonder when that figure is going to be revised.

http://epp.eurostat.cec.eu.int/portal/page?_pageid=1996,39140985&_dad=portal&_schema=PORTAL&screen=detailref&language=en&product=EUROIND_NA&root=EUROIND_NA/euro_na/na_geng/na200pc

[Spiffor]

CapTVK: I was talking about the accepted margin, whichj is already quite a load of money. When the Stability pact has been revised, I may have skipped some things. I thought the only significant changes for today's situation were that Germany's deficit that went to the East's modernization didn't count, and that there was more leniency in times of recession. Did the revision change something for France's current situation?

[Ned]

Originally posted by Spiffor

3% public deficit in France = 50 billion Euros yearly (roughly).
I think Italy has an economy similar to France's, so make it a similar amount for Italy.

100 billion Euros of yearly deficit is not something the average company can put off. And this is the accepted margin. Now, imagine a deficit crisis where the amount is doubled, and you'll get the picture

All this assumes that deficits cause inflation. They don't to the extent they spur growth and growth in the economy equals or exceeds the growth of debt. This "debt to equity" ratio could actually fall even as deficits rise. That is why the US has little or no inflation despite years of very large deficits.

The problem with Europe is that they cannot deliberately use fiscal policy to combat stagnation and promote growth. In such an enviroment, one is bout to have stagnation, which is what we actually see.