The Future of the European Union

Harry_BKK

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Coronabonds and the idea of European financial unity
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Deutsche Welle.com

Italian Prime Minister Guiseppe Conte:

"What do we want to do in Europe? Does each member state want to go its own way?" he asked in a televized interview on Tuesday evening, pointing to the huge aid package of $2 trillion the US is using to respond to its own coronavirus crisis.

"If the response is not a common, serious and coordinated response, Europe will become less and less competitive, including in the global market," said Conte. And German taxpayers shouldn't be afraid. Coronabonds did not mean that the Germans "had to pay even a single euro for Italian debt."

During the euro debt crisis around a decade ago, the German government could be sure that most of the leading economists shared their rejection of eurobonds. Now in the coronavirus crisis this is no longer the case.

Seven prominent economists including Michael Hüther, head of the Institute of German Economics (IW), Peter Bofinger, and Gabriel Felbermayr, head of the Kiel Institute for World Economy (IfW), are now drumming publicly for coronabonds.

"The strong have to help the weak. Now is the time when the much-praised community with a common destiny has to show its true colors," wrote the economists in an article that appeared in five European newspapers simultaneously.

Borrowing together 1 trillion euros would be "a clear sign that Europe is in a crisis together." The signal could not be missed. Not a single overwhelmed country would have to apply by itself. "Europeans manage the crisis together," wrote the economists.

...The decisive difference for Hüther is that coronabonds are not permanent, but a one-off solution. There is even a historical example for this, he says. In 1975, the European Community issued a bond to mitigate the effects of the oil price shock. "That was apparently not a problem at the time, why can't we do that in this crisis too?" he asked.

He sees coronabonds as a "litmus test for European solidarity." All countries that are doing badly wonder who is going to help them. "In the end, if it's just the Chinese or maybe the Russians, then I think the breakup of the European Union will be unstoppable." And that cannot be in the interest of the German economy.

"If we don't stabilize Europe, our markets won't be there either," he concluded.


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I wonder what the problem is if the german taxpayer won't end up having to pay italian debt?

It is tricky as always.

They set up the ESM in the aftermath of the 2008 crisis which basically guarantees the debt that a country would take. There is still EUR0.5 trillion left that can be used.

The country would be responsible for the debt, the ESM only a guarantor. Using the ESM, the interest rate can be held low and it attracts investors to buy the said country's debt bonds.

In turn, Coronabonds would be issued directly by the EU, meaning that all would shoulder it together.

Conte was offered to use the ESM and he refused, knowing well that Italy has already a massive amount of debt. So for him, it would be "nicer" if all EU countries carry the extra borrowing and the Italians can carry on splashing around with the cash as they have always done.
 
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nikantw

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"It is my guess that once the crisis is over most Countries will be on their knees."

Those countries were on their knees before they joined the EU/adopted the EURO. Portuguese Real, Spanish Peseta, Italian Lira, Greek Drachma, French Franc - none had any weight whatsoever. They got a favourable exchange for a hard currency that is on par with the USD and GBP. That was a real transfer, trillions not the few billions we are talking now to assist in a crisis.

I remember Italy just recently was screaming they do not care about the EU and will increase their debt as much as they want to fulfil their populist election promises, no matter what. Now they want the EU to help. So one day they spit on it, the next day they want help. Which is it?

Spain and Portugal, together with Greece and Italy were always the weaker links in the EU and would run into problems at the smallest onset of a crisis. If you look carefully (all is public information) they are some of the countries who are getting most out of the EU coffers every year anyway. You can always check which year they made a net contribution to the EU budget and if how much that was!!!

The EU will survive just fine, I have no doubt whatsoever. And it is not like they are doing nothing, just go back to the 2008/2009 crisis and check who bailed out all those countries???? Those mechanisms like the ESM are still in place.

But you can follow populist screamers if that is what you prefer.

Many truths there but not the whole picture. For example, it is impossible to have all countries with a surplus. What you need is a mechanism to recycle the surplus of the rich ones through the poor ones. You help yourself by helping others.

Having a currency but not the Central Bank to manage it is the sure way to economic crisis.
For example, Greece had a 40 billion hidden debt when they entered Euro. No other huge real problems and no private debt. No toxic bonds affected by the US 2008 crisis, no big budget problems.

Yet, "managing" and "helping" Greece with the 40 billion debt, has cost the greek economy over 5 trillion* :eek::rolleyes:

Of course the Greek Government in 2009 started the crisis. And I am 100% pro-EU. But we can't fix a problem if we can't realize what the problem is.

Imagine a hunter and a chef living in an isolated island. The hunter gets the food and the chef cooks it. Both have something to eat. Introduce them to a banker and they will eventually starve to death!


* Using the same formula Thomas Wieser and other officials used to calculate the cost 2015 had to the Greek economy.

 

Harry_BKK

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Many truths there but not the whole picture. For example, it is impossible to have all countries with a surplus. What you need is a mechanism to recycle the surplus of the rich ones through the poor ones. You help yourself by helping others.

Having a currency but not the Central Bank to manage it is the sure way to economic crisis.
For example, Greece had a 40 billion hidden debt when they entered Euro. No other huge real problems and no private debt. No toxic bonds affected by the US 2008 crisis, no big budget problems.

Yet, "managing" and "helping" Greece with the 40 billion debt, has cost the greek economy over 5 trillion* :eek::rolleyes:

Of course the Greek Government in 2009 started the crisis. And I am 100% pro-EU. But we can't fix a problem if we can't realize what the problem is.

Imagine a hunter and a chef living in an isolated island. The hunter gets the food and the chef cooks it. Both have something to eat. Introduce them to a banker and they will eventually starve to death!


* Using the same formula Thomas Wieser and other officials used to calculate the cost 2015 had to the Greek economy.

Greece had already hidden debt when they changed to the EURO in 2002. Just like Italy and Spain. They promised reforms and nothing or very little was done.

Taking up your hunter/chef metaphor - a hunter can never hunt enough if the cook burns it all when he cooks it.

Greece, Italy and Spain were never fiscally responsible countries (well, not in the last decades) and instead of learning and changing, they still keep doing it "their way". That is until the "sh*t hits the fan" and then they demand that all should come together and help them. It doesn't work that way either.
 

nikantw

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Greece had already hidden debt when they changed to the EURO in 2002. Just like Italy and Spain. They promised reforms and nothing or very little was done.

Taking up your hunter/chef metaphor - a hunter can never hunt enough if the cook burns it all when he cooks it.

Greece, Italy and Spain were never fiscally responsible countries (well, not in the last decades) and instead of learning and changing, they still keep doing it "their way". That is until the "sh*t hits the fan" and then they demand that all should come together and help them. It doesn't work that way either.

I already said that Greece had a very small hidden debt in 2002.

You are wrong about everything else. Just look closer to the numbers. 40 billion cost many trillions.

To get back to you to the hunter/chef metaphor, the chef only burned 10% of the food and only one day. Don't you think that is a little bit different than saying burns all the food all the time? Do the numbers say that he burned all the food all the time?
 
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geordiecolin

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And if you go through the history records, some countries weren't exactly truthful with regards to those criteria. That transpired only after they adopted the EURO. Kicking them out again would have been though more devastating, so they were allowed to keep it as the union considered itself strong enough to support them.

Turkey has a lot of other issues than fiscal.
Are you suggesting that the capitalistic EU that you do not seem to have a bad word to say about have been consistantly guilty of neglecting due diligence when it comes to allowing Countries to join by deception?

And you didn't read properly what I said about why Turkey had not joined yet
 

geordiecolin

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Coronabonds and the idea of European financial unity
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Deutsche Welle.com

Italian Prime Minister Guiseppe Conte:

"What do we want to do in Europe? Does each member state want to go its own way?" he asked in a televized interview on Tuesday evening, pointing to the huge aid package of $2 trillion the US is using to respond to its own coronavirus crisis.

"If the response is not a common, serious and coordinated response, Europe will become less and less competitive, including in the global market," said Conte. And German taxpayers shouldn't be afraid. Coronabonds did not mean that the Germans "had to pay even a single euro for Italian debt."

During the euro debt crisis around a decade ago, the German government could be sure that most of the leading economists shared their rejection of eurobonds. Now in the coronavirus crisis this is no longer the case.

Seven prominent economists including Michael Hüther, head of the Institute of German Economics (IW), Peter Bofinger, and Gabriel Felbermayr, head of the Kiel Institute for World Economy (IfW), are now drumming publicly for coronabonds.

"The strong have to help the weak. Now is the time when the much-praised community with a common destiny has to show its true colors," wrote the economists in an article that appeared in five European newspapers simultaneously.

Borrowing together 1 trillion euros would be "a clear sign that Europe is in a crisis together." The signal could not be missed. Not a single overwhelmed country would have to apply by itself. "Europeans manage the crisis together," wrote the economists.

...The decisive difference for Hüther is that coronabonds are not permanent, but a one-off solution. There is even a historical example for this, he says. In 1975, the European Community issued a bond to mitigate the effects of the oil price shock. "That was apparently not a problem at the time, why can't we do that in this crisis too?" he asked.

He sees coronabonds as a "litmus test for European solidarity." All countries that are doing badly wonder who is going to help them. "In the end, if it's just the Chinese or maybe the Russians, then I think the breakup of the European Union will be unstoppable." And that cannot be in the interest of the German economy.

"If we don't stabilize Europe, our markets won't be there either," he concluded.


-------------

I wonder what the problem is if the german taxpayer won't end up having to pay italian debt?
Maybe the only two buyers are either China or Russia? China are accused of being the biggest profiteers of the virus despite all of the critisisms leveled at it about the virus.
 

Harry_BKK

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Are you suggesting that the capitalistic EU that you do not seem to have a bad word to say about have been consistantly guilty of neglecting due diligence when it comes to allowing Countries to join by deception?

And you didn't read properly what I said about why Turkey had not joined yet

I have no doubt that some mistakes were made when the EURO was introduced. One side maybe looking away a little and the other cheating with the numbers to keep the train moving.
 

Harry_BKK

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I already said that Greece had a very small hidden debt in 2002.

You are wrong about everything else. Just look closer to the numbers. 40 billion cost many trillions.

To get back to you to the hunter/chef metaphor, the chef only burned 10% of the food and only one day. Don't you think that is a little bit different than saying burns all the food all the time? Do the numbers say that he burned all the food all the time?

Greece went past the 100% debt-to-GDP ratio before they introduced the EURO. They were admitted with the promise to introduce reforms. Nothing was done, e.g. they do not collect taxes from salaries etc., people declare them once a year and are always late, leaving the treasury out of pocket all the time. That is madness.

So to keep with the original metaphor - the cook burned the food already while he was an apprentice and still keeps burning it now. :rolleyes: :D
 
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nikantw

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1585822414516.jpeg

Debt under or just over 100% Then the EU "helped" Greece and "all is good" now.

I admit that many reforms were needed.
If you don't know it, all the bailout loans were given under strict reform terms closely monitored all the way and enforced even by closing all the banks.

The other comments about taxes aren't true and I don't even understand what you are trying to say.
The only truth is the over taxation of the public sector that strangles anything good together with the lack of funds (banks barely work, no public investments)

Many reforms were made, too many. Some absolutely necessary, some made no difference, some could help but in the wrong context did a lot of damage and some were really really bad. Every EU official admitted that mistakes were made. How can you not say that with many trillions damage to the Greek economy?
 

Harry_BKK

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View attachment 126932

Debt under or just over 100% Then the EU "helped" Greece and "all is good" now.

I admit that many reforms were needed.
If you don't know it, all the bailout loans were given under strict reform terms closely monitored all the way and enforced even by closing all the banks.

The other comments about taxes aren't true and I don't even understand what you are trying to say.
The only truth is the over taxation of the public sector that strangles anything good together with the lack of funds (banks barely work, no public investments)

Many reforms were made, too many. Some absolutely necessary, some made no difference, some could help but in the wrong context did a lot of damage and some were really really bad. Every EU official admitted that mistakes were made. How can you not say that with many trillions damage to the Greek economy?

I got the tax thing partially wrong as I read about it some years ago and did not remember the exact details. However, Greece always had and still has to this day a tax collection problem as it has become the norm to evade paying taxes. Over the years, that has meant billions of Euro that were not collected by the treasury.

The trillions are what Greek companies have lost in business, not in real net profit. Please do not mix those two. But that has other reasons too, not just the country's debt.

Greece was very competitive with the Drachma, that changed dramatically when the EURO was introduced. And the increase in productivity was not sufficient to offset that. So the government borrowed more and more without a clear plan what to do in the future.

Reforms were only done when the EU/IWF requested them, not because the Greek government or politicians saw the problem.
 
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nikantw

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I got the tax thing partially wrong as I read about it some years ago and did not remember the exact details. However, Greece always had and still has to this day a tax collection problem as it has become the norm to evade paying taxes. Over the years, that has meant billions of Euro that were not collected by the treasury.

The trillions are what Greek companies have lost in business, not in real net profit. Please do not mix those two. But that has other reasons too, not just the country's debt.

Greece was very competitive with the Drachma, that changed dramatically when the EURO was introduced. And the increase in productivity was not sufficient to offset that. So the government borrowed more and more without a clear plan what to do in the future.

Reforms were only done when the EU/IWF requested them, not because the Greek government or politicians saw the problem.

As I said, I agree that reforms were needed. And yes, Greek governments are to blame for most of the crisis.
And yes the EU had to enforce even the necessary reforms.

But the crisis cost trillions and it shouldn't. Was under EU supervision, hundreds of billions from the European tax payers to cover a 40 billion debt. It doesn't make sense. It shouldn't happen.

I am not confusing anything about the cost of the crisis. I am simply using the formula Thomas Wieser and many other officials used to discredit the attempt in 2015 to avoid overtaxation and commitment to unrealistic surpluses, or asking for a debt payment restructuring that would end the crisis.

It all started with the euro. All prices got up, the first salary with a university degree wasn't even enough for rent+food. Banks started to offer loans to everyone. You could buy a house and the loan payments would be as much as the rent. Private debt rised.

2009: We should be ok, no toxic bonds in our banks, they say. Yet the gonverment wants to introduce some austerity and make some good reforms. Sensible thinking, but the opposed party wins the elections with the "there is plenty of money, no reforms needed". :rolleyes:

After the elections and for many months, daily statements from every official in Greece and EU said "Greece has a huge problem" and made sure the interest rate got so high that the relatively small debt became unpayable. Really? All that for just 40 billion? It was later revealed that the "there is plenty of money" prime minister was in talks with IMF even before the elections.

Imagine if the new Greek gonverment, after the elections, simply had announced reforms and a 4 year plan to cover the 40 bn hidden debt. No huge interest rates, no bailouts, no unemployment.

To go back to the first post, Greece needed reforms but that or the debt wasn't the reason GDP dropped almost 30% or unemployment got to 45% for young people (30% overall). Austerity and closed banks did that.
 

mack341

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If all the big firms and top 1% people didn't evade tax in the uk we'd have less govt debt too, even people working for the bbc, including high profile presenters, were also routeing their pay for years through elaborate schemes to dodge tax.

Not to forget the EU former presdent Juncker helping the massive corporations evade tax by setting up in luxembourg.

So it's not just a greek problem, although there it sounded like the everyday people weren't paying taxes, that was the impression the uk msm gave me.

If the germans and greeks had a common currency, were macro economic problems likely to occur down the line due to this? The answer was yes, but the EU and single currency project was more important, and any problems can be dealt with later was likely the thinking...:rolleyes:
 
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Kroffe

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If all the big firms and top 1% people didn't evade tax in the uk we'd have less govt debt too, even people working for the bbc, including high profile presenters, were also routeing their pay for years through elaborate schemes to dodge tax.

Not to forget the EU former presdent Juncker helping the massive corporations evade tax by setting up in luxembourg.

So it's not just a greek problem, although there it sounded like the everyday people weren't paying taxes, that was the impression the uk msm gave me.

If the germans and greeks had a common currency, were macro economic problems likely to occur down the line due to this? The answer was yes, but the EU and single currency project was more important, and any problems can be dealt with later was likely the thinking...:rolleyes:
I thought about the tax-dodging and sports a while ago.
Alot of Swedish players that reach higher divisions in football,hockey etc are real quick to get an adress in some tax-haven so they can avoid the rather large Swedish tax.
I mean, i can understand wanting to avoid paying millions in tax, but its not like they cant afford it.
And the education&Training they got while young were most probably "free" since it was paid for by taxes.
Pretty shitty thing to do imo.
 

mack341

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I'd forgotten about the football players, agents etc.. they always say you collect more tax with a lower rate as people/firms won't seek to avoid it, but with luxembourg letting multinational firms set up there and pay 1% or less, how low do we need to go :confused:
 

Kroffe

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I'd forgotten about the football players, agents etc.. they always say you collect more tax with a lower rate as people/firms won't seek to avoid it, but with luxembourg letting multinational firms set up there and pay 1% or less, how low do we need to go :confused:
Yeah, its kind of hard to compete with that.
 

nikantw

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I saw 2 movies related to war and hate,
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It makes me very sad to see people talk about closing borders and pointing fingers to minorities and blaming them for their problems. The same thing started world war 2.

Since I was a kid I thought the natural evolution of humanity would be to open borders and work together as one. Yet since I was a kid I only see us finding new (or remembering old) reasons to hate each other. :(

The biggest problem is bad economic policies. Money shouldn't stop us from doing what needs to be done, it is as simple as that. We created money to help us, not to enslave us. In Europe the "banker" doesn't care how good the "hunter" or the "chef" is. Closing the banks of a country was an unbelievable act of cruelty and stupidity and that is just one small example.

UK, having kept control of its central bank, did many good steps since 2008. But being a reasonable country in a stupid Europe led millions of people to the UK for a better future. That is why we had brexit.

My only hope now is that the new crisis will help us unite and do what needs to be done. Use money as a solution and not as a problem.
 

geordiecolin

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When it seemed like Italy was about to throw the towel in with the EU over the past few days it seems that the EU have came back with a grovelling apology.
"It is true that no one was really read for this.It is also true that too many where not there on the time when Italy needed a helping hand at the very beginning.And yes,for that Europe Europe as a whole offers a heart felt apology"
I hope that it is too little and too late.
Lets see how they will eventually help Italy,Spain and others.
 

geordiecolin

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The EU are signing off the EU Crisis package is about off but Italy,Spain and France will not be given a bail out but a EU loan. Will Italy agree to it or will they just sell Italian bonds instead? Will Italy decide to leave the EU instead? It seems like the Italy public are not impressed.
It is looking very rocky
 

dionysus

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I saw 2 movies related to war and hate,
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It makes me very sad to see people talk about closing borders and pointing fingers to minorities and blaming them for their problems. The same thing started world war 2.

Since I was a kid I thought the natural evolution of humanity would be to open borders and work together as one.
I think it's entirely possible to have a unified (ish) planet, race utlimately wont be the factor as we blend races and cultures and focus on 'human' race as one race; but it won't ever happen until religion takes a backseat to cooperation
 
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