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Italy’s austerity-fueled crisis is a warning to the Eurozone

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Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#111

Post by behindmyscreen »

gridlockd wrote: post #25
k__ wrote: post #14

Earlier quoted context omitted.

Wasn't the problem of countries like Greece and Italy corruption?

The problem is the lack of free float. Nobody in Europe is as productive as the Germans, therefore they become uncompetitive while being tied to the same currency. The corruption narrative is just a diversion from the fact that the whole Euro concept was a bad idea to begin with.

Improperly conceived is more accurate. A strong political union is important for a common currency. They should have stuck with free trade and visa free movement ( not permanent relocation) for the level of political union they have.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#112

Post by kazen44 »

kmlx wrote: post #94
bjelkeman-again wrote: post #5

I thought it was going to be about Britain. They have been drivning towards the abyss in the last decades. I used to live in London. The difference in public infrastructure and company facilities between the UK and Northern Europe is quite staggering. Now, add the “Ever shrinking Britain” (Scotland leaving after Brexit…, Northern Ireland more part of EU/Ireland than Britain in the future?) to the events and it makes…

abyss? the UK is one of the best examples of capitalism and free trade in the world. London is the world capital of finance, with NYC and Tokyo on 2nd place. the UK is ahead of the RoW when it comes to finance by at least 2 years. northern Europe is too small to matter on the world stage. the Tokyo metropolis is larger than the whole of northern Europe in terms of population and wealth.

London might be doing great, but the rest of the UK has been left behind decades ago..

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#113

Post by behindmyscreen »

ironic_ali wrote: post #97
johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

Another major factor was the debt of each members after joining the euro: "All members past debts were in their home currency, including Germany. Upon joining the Euro, the past debts were also converted to the Euro because their old currencies were abandoned. What I mean by international value is if you look at the debts of all member states, when the euro doubled in value from 80 cents to the US dollar to $1.60, fr…

This was the genius (or good luck) of Hamilton. Taking on the debts of the US states at the federal level prevented this problem when switching to a common currency at the formation of the US.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#114

Post by behindmyscreen »

pjc50 wrote: post #34
johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

The logical conclusion of most of these arguments seems to be that the US should have floating currencies between the states, to stop unfairly benefiting the few net productive export states?

No

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#116

Post by paganel »

chewz wrote: post #93

It isn't fair to blame euro for Italy's troubles. You should rather look at poor governance: * high public debt and as a consequence high percentage [over 3%] of GDP going for public debt servicing. [Just stop and think about it - Italy is spending on debt servicing the same percentage of GDP that US is spending on military] * failure at attracting foreign greenfield investments * one of lowest percentage of youths w…

> low productivity at Italy's many small enterprises.

Just as an example the Italian white-goods industry used to be world class but it got almost obliterated first by Turkish competition and then by the Chinese and the Koreans (which probably also manufacture most of their stuff in China).

I’ll also whant to add a mention about Italy’s car industry (which was not small, I agree). The Germans somehow managed to keep their brands and most of their car manufacture going while the car industry in Italy is about to dissapear completely. I’m not exactly sure of the reasons of why that happened (as late as the 1990s the Fiat Punto was still the best sold model in Europe) but this has also had a very adverse effect on Italy’s lack of growth. Afaik the German car industry is responsible for almost 10% of its GDP, Italy wouldn’t have been in a as dire a situation as the current one if it still had a well-established car industry on its own.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#117

Post by keiferski »

jacobmoe wrote: post #86
coryrc wrote: post #31

Earlier quoted context omitted.

Floating currency is just a way to automatically renegotiate all of a country's contracts. It will not magically create more wealth or lower the costs of materials. In the end, if you're importing something for $1 and you earn $100/yr or it costs $3 because of your devalued currency but you earn $300/yr, nothing has changed. What sucks is the most productive people left and the already massive state obligations fell…

Generally, freedom of movement is a good thing, allowing the most productive people to go to places that enable them to produce the most. The issue appears to be that the EU isn't a real country. Taxing winners and transferring resources to losers of the open borders/single currency zone turns out to be really important.

Good thing for who? Framed in another way, you’re simply talking about brain drain, which clearly isn’t a good thing for the source country.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#118

Post by vixen99 »

Consultant32452 wrote: post #20
johnzim wrote: post #7

The Eurozone was never intended to do the damage it has done to PIGS economies but it has. What is worse, is that it has unquestionably been of benefit to Germany, which has one of the strongest hands in shaping the future of the EU. If a macroeconomist had sat down to devise a currency that suffocated Italy, Portugal, Greece and Spain - export driven economies (remember that tourism is an export as you have to buy t…

In my opinion the long term goal is to transition the EU (over the course of multiple human generations) into a single nation, similar to the way the United States operates. In that case, the conditions you described are an expected part of the process. In the US the states and local municipalities have different economic situations, different taxes, etc. And if our states broke off into 50 currencies, some would ben…

Even with Spanish and English, the US has a few issues. The EU has 23. Out of interest, after these 'multiple human generations' how many languages do you think the single nation will be speaking? You have an opinion. Fair enough but will it be a democratic decision to make the transition? One thinks of 2005, when on a turnout of 69% of French votes, 55% rejected the EU Treaty. It was accepted nevertheless.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#119

Post by hestefisk »

thefounder wrote: post #89
point78 wrote: post #82

Earlier quoted context omitted.

As someone else pointed out, the US has federal taxes and ways to distribute from rich states to poor states

So issue is really the lack of fiscal union in the EU. Better work on this than on divisive solutions.

The solution is federalism.

Re: Italy’s austerity-fueled crisis is a warning to the Eurozone

#120

Post by chewz »

paganel wrote: post #116
chewz wrote: post #93

It isn't fair to blame euro for Italy's troubles. You should rather look at poor governance: * high public debt and as a consequence high percentage [over 3%] of GDP going for public debt servicing. [Just stop and think about it - Italy is spending on debt servicing the same percentage of GDP that US is spending on military] * failure at attracting foreign greenfield investments * one of lowest percentage of youths w…

> low productivity at Italy's many small enterprises. Just as an example the Italian white-goods industry used to be world class but it got almost obliterated first by Turkish competition and then by the Chinese and the Koreans (which probably also manufacture most of their stuff in China). I’ll also whant to add a mention about Italy’s car industry (which was not small, I agree). The Germans somehow managed to keep…

Italy used to be export powerhouse in 60-ties, 70-ties - scooters[1], computers, textiles, everything. If they have stayed on track Italy would be 2nd economy in EU now, right after Germany.

No country in Europe had it easy in last 30 years. Germany, Netherlands had to fight tooth and nail to keep their position as export powerhouses against competition from Asia. But they did. Sweden, Finland have invested heavily in education to keep their small economies relevant in the game. Poland, Romania, Czech had to rebuilt their economies from ashes of communist central planning. Not to mention other countries like UK, France, Spain.

Somehow Italy didn't choose that path and just drifted. I disagree with narrative that there is a cabal of European countries conspiring against Italy's growth.

[1] In Thailand or Indonesia you can still find hundreds of old Vespas which dominated scooter market in Asia before Hondas and Suzukis came.

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