Italy’s austerity-fueled crisis is a warning to the Eurozone • Hacker News Board

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

#131

Post by jacobmoe » Sat, Apr 13, 2019, 4:12 PM UTC

keiferski wrote: post #117

jacobmoe wrote: post #86

Earlier quoted context omitted.

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.

Good thing for the overall economy, so in this case for the EU as a whole. Increasing productive capacity overall is good because it means a society can afford more of the things it values. But again, the EU is in a difficult place because it's not a cohesive country. If you can't convince a German to value the well being of an Italian in the same way he values that of another German, then increasing the productive capacity of the EU as a whole doesn't help Italy at all.

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

#132

Post by Udik » Sat, Apr 13, 2019, 4:14 PM UTC

david-gpu wrote: post #129

Udik wrote: post #126

Earlier quoted context omitted.

I don't think the two explanations are mutually exclusive. Yes, given the limitations of Italy's society and economy, the euro is probably causing damages (not in a absolute terms, it has also positive sides, but let's pretend it's a net negative). At the same time, Italy's economy and society are losing the pace with the rest of the world. This might be also a consequence of long economic stagnation due to the euro,…

You have described the political landscape in Spain to a T. I fear than in the upcoming general elections we will see the rise of the populist far right, and with it further polarization of the political landscape. Source: am Spaniard.

Sorry to hear that. I also wonder how much this depends on local, contingent events, and how much can be attributed to internet and social media, where the outrage is the driver of clicks and attention, and uninformed conversations thrive.

Populists are on the rise everywhere. On the side, the bursts of social justice outrage in the US might be just a different, leftwing expression of the same mechanisms that produced Trump on the right. We urgently need cultural tools to deal with the consequences of social media.

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

#133

Post by Udik » Sat, Apr 13, 2019, 4:34 PM UTC

avar wrote: post #128

Udik wrote: post #52

Earlier quoted context omitted.

But is the size of these wealth transfers comparable? I have the impression, maybe wrong (absolutely no data to confirm it, in fact) that wealth transfers within the EU are much lower than those that would take place between the regions of a single nation.

No, but does it matter? I'm pointing out that you structurally don't need a nation-state to do this. The EU isn't going to have some natural or legal tipping-point where the wealth transfer moves up or down by 0.1% and suddenly it structurally doesn't work.

You said that you don't need to be a nation state to have wealth transfers. And I agree, an in fact the EU has them.

But from a political and social point of view, while it's somehow easy to convince the citizens of a nation that they have to contribute from their own pockets to the common good, the situation is much harder in Europe. We are not a nation, we are culturally and linguistically different, we consider ourselves as separate entities. The euro is actually increasing reciprocal distrust. The whole EU political system is overly complicated (and, ironically, undemocratic) because it includes both a parliamentary democracy and a council of heads of states- because no European nation would trust decisions made by a shared parliament without having them vetted by their own national governments.

There should have been a major push in education to form citizens that would be at least able to understand each others- there wasn't, at least in part of the EU. Damn, we have major EU members that decide to wage wars on their own, it's inconceivable.

So how do you convince the citizens of rich, disciplined countries, to get money out of their pockets to heavily subsidize the citizens of other countries, speaking a different language, with autonomous armies, different legal systems, completely separate political class, very limited transfers of people across borders (and mainly in one direction, north)?

/rant :)

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

#134

Post by taysic » Sat, Apr 13, 2019, 4:43 PM UTC

behindmyscreen wrote: post #103

heavenlyblue wrote: post #79

Earlier quoted context omitted.

>> At one conference an Italian guy working in Switzerland told me at the company in England he was before the office was dominated by Greek and Italian developers. Yeah, but it doesn't mean they are brighter than British ones. It just means it's cheaper to hire a Greek or Italian developer (that and culture differences that British people would also need to deal with). Saying this as a developer from Lithuania worki…

Which is crazy.... in the US, a developer from Nebraska is just as expensive as one from California for any given company. The location of the company dictates the wages ( costs of living), not the source of the developer.... (unless we’re talking an H1B visa sham hire which isn’t the same as your situation)

If the developer from Nebraska plans to go back home after a period of time working in CA, they may be more likely to be content with lower salaries though. I wonder where these talented people in the EU plan to raise their kids/ retire.

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

#135

Post by taysic » Sat, Apr 13, 2019, 4:55 PM UTC

Udik wrote: post #47

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…

Armchair economist here. Is it correct to say that a country like Italy, with its low productivity, constantly needs to devalue its currency to keep its production competitive; and that while doing so would effectively lower the wealth of the country, it could still keep an apparent growth of the salaries, so that there would be an incentive to internal consumption? And that what happens in Italy instead is that the…

Yes devaluing currency is much less painful. But it creates risk for traders which the monetary union removes. Removing that risk may not be a great idea since one region is bound by a different political structure that is bound to play a role.

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

#136

Post by AlgorithmicTime » Sat, Apr 13, 2019, 5:52 PM UTC

roel_v wrote: post #90

zizee wrote: post #77

Earlier quoted context omitted.

The US has federal taxes and mechanisms to redistribute money from richer states to the poorer states to address this sort of imbalance.

While there are no EU direct taxes, there are redistribution schemes in the EU. I don't know how their magnitude compares to that of American interstate redistribution though.

My guess would be an order of magnitude less.

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

#137

Post by fileeditview » Sat, Apr 13, 2019, 7:05 PM UTC

wazoox wrote: post #123

thefounder wrote: post #89

Earlier quoted context omitted.

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

Yes, and Germany explicitly rejected all attempts and proposals: no Eurobonds, no Green Fund, no fiscal union, no transfers, no nothing. They'll stick to their guns until the whole thing come apart (real soon now: you liked the Brexit? Wait for Italexit. Or Frexit. Sooner than you think).

You also see that leaving the EU is not a clear benefit despite "evil" Germany is on its throne...

That's why "Brexit" is taking almost 3 years now and still there is no ultimate progress. Other countries will surely be interested in how this experiment turns out before doing the same..

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

#138

Post by geezerjay » Sat, Apr 13, 2019, 7:34 PM UTC

despera wrote: post #62

geezerjay wrote: post #30

Earlier quoted context omitted.

Countries get recessions when they pile double-digit deficits and triple-digit sovereign debts hidden from the world with years of accounting fraud, and suddenly banks cease lending them the money they need to keep burning through the cash they don't have.

Greek debt crisis begun when they had 160% of GDP debt, after years of recession, "bailing" packets and the heroic efforts by EU/IMF they now are at 190% of debt. Great success.

You're somehow leaving out the fact that Greece's debt/GDP ratio went up in good part because the true extent of Greece's sovereign debt and structural deficit was uncovered after the inception of thr bailout program, which by itself led to a higher debt ratio.

Also, having to reign in a double-digit deficit by cutiting the state's chronic overspending also lowered the GDP that was kept artificially high by injecting into the greek economy all that borrowed cash.

So, it's disgenuous to insinuate that Greece's bailout program caused any problem when you're actually referring to the natural consequences of:

1) finding out the true extent of Greece's overspending by fixing their accounting incoherences

2) the impossibility of continuing overspending well over 10% of the nation's GDP.

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

#139

Post by avar » Sat, Apr 13, 2019, 7:38 PM UTC

Udik wrote: post #133

avar wrote: post #128

Earlier quoted context omitted.

No, but does it matter? I'm pointing out that you structurally don't need a nation-state to do this. The EU isn't going to have some natural or legal tipping-point where the wealth transfer moves up or down by 0.1% and suddenly it structurally doesn't work.

You said that you don't need to be a nation state to have wealth transfers. And I agree, an in fact the EU has them. But from a political and social point of view, while it's somehow easy to convince the citizens of a nation that they have to contribute from their own pockets to the common good, the situation is much harder in Europe. We are not a nation, we are culturally and linguistically different, we consider ou…

Most of your skepticism of inter-EU wealth transfers applies equally to intra-EU wealth transfers from metropolitan to rural areas.

I live in one of the wealthiest NUTS3[1] regions in the EU. Why should I be paying higher taxes to send someone's kid living in the boonies in my country to school? Let's just form a city-state instead. We even have a handy historical defensive wall we could resurrect for that purpose.

Of course most people would think that's absurd, but it's worth mentioning since this notion that you should subsidize your "countrymen" was once just as novel as the idea that the Dutch should subsidize the Greeks is to some today.

You're only taking this for granted for nation states because you grew up in the era of nation states. There's no intrinsic reason for why someone born in the EU area in 2100 wouldn't find the idea that you shouldn't engage in wealth transfers within that area as quaint as the idea that we should being going back to city-states is today.

I think if anything what the WTO, NAFTA, EU etc. show is that in the future the idea that you need to sign up for some "package deal" of a nation state for everything from tariffs to defense will be viewed as too monolithic.

1. https://upload.wikimedia.org/wikipedia/commons/9/90/Map_of_G...

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

#140

Post by Udik » Sat, Apr 13, 2019, 9:05 PM UTC

avar wrote: post #139

Udik wrote: post #133

Earlier quoted context omitted.

You said that you don't need to be a nation state to have wealth transfers. And I agree, an in fact the EU has them. But from a political and social point of view, while it's somehow easy to convince the citizens of a nation that they have to contribute from their own pockets to the common good, the situation is much harder in Europe. We are not a nation, we are culturally and linguistically different, we consider ou…

Most of your skepticism of inter-EU wealth transfers applies equally to intra-EU wealth transfers from metropolitan to rural areas. I live in one of the wealthiest NUTS3[1] regions in the EU. Why should I be paying higher taxes to send someone's kid living in the boonies in my country to school? Let's just form a city-state instead. We even have a handy historical defensive wall we could resurrect for that purpose. O…

> Most of your skepticism of inter-EU wealth transfers applies equally to intra-EU wealth transfers

I know very well the issue because it's been at the center of a bitter north- south dispute in Italy for decades. (the rich, productive north complains that too much money has been given to the south without appreciable results).

But in the national case the transfers are decided at national level, the regions have no say in it; if there are protests, a national police keeps order. The tax money is collected by state entities, and then redistributed to the regions. There have been pushes to partly change this, but there is also a strong cultural resistance because there is a sense of national unity, of shared history, cultural and family ties, and a historical foundational myth.

All this stuff is weak or non-existent for the EU as a community. It's not impossible in principle, it's simply not there now, and given all the differences- especially linguistic- it seems that it's going to take a long time and a lot of effort to create, provided that there is even the will to do so.

I don't think we fundamentally disagree. I agree that it's possible, it's just that there is going to be a lot of resistance along the way and that the national governments, which still hold the majority of the power in the EU and are still the intermediaries between their citizens and EU institutions, will be extremely cautious in implementing such a system without a complete support from their citizens.

Ah, 2100 is very, very far away. I'm not sure we can wait that long.