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Topic: Who really benefits from Euro? (Read 792 times) |
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puzzlecracker
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Who really benefits from Euro?
« on: May 11th, 2010, 6:58am » |
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Although it is not the most common topics we discuss in this section, it would still be interesting to see how folks like ourselves view economic issues, as we're all affected by them.
In light of recent events surrounding crises in Greece and the rest of EU, the usefulness of European union and real winners of the system become questionable.
On the surface, France, Germany, Italy are the only beneficiaries of the European union, having most of the control of the currency and exploiting it. Less developed and economically unstable countries, such as Poland and Greece, appear to suffer from their participation. Even though Greece fiasco happened outside of the European union, its survival largely depends on European counterparts.
Do countries really benefit from the joining the union?
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towr
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Re: Who really benefits from Euro?
« Reply #1 on: May 11th, 2010, 8:41am » |
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First you need to distinguish between the European union (with 27 member states) and the European monetary union (the subset of 12 countries sharing the euro coin).
I really don't understand, though, how you could say Poland and Greece suffer from participating in the EU. The poles can now work anywhere in the EU and Poland benefits from that greatly. And Greece would have suffered from mismanagement just the same; in fact if they had followed the EMU rules, they wouldn't be in this trouble. And they would not have had anyone to help them out if they were not part of the monetary union. Frankly, it's the rest of the monetary union that suffers Greece at the moment, not the other way around.
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| « Last Edit: May 11th, 2010, 8:44am by towr » |
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puzzlecracker
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Re: Who really benefits from Euro?
« Reply #2 on: May 11th, 2010, 10:11am » |
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I am not taking a position on whether European union and/or the European monetary union is auspicious to some members and detrimental to the rest. It would be interesting to see and analyze from different vintage points -- where UA improved its states or, on the contrary, worsen them
I agree with you in regard to Greece.
Greece would not have been able to borrow so much money if they weren't an EU member. Private investors would have cut them off a long time ago if they were still using the Drachma. Greece benefited greatly because they were able to spend irresponsibly for many years and ultimately got bailed out at other countries expense such as Germany.
Another example is Spain. The EU pumped many billions of Euros into Spain to build infrastructure and tried to modernize the country at the expense of other EU member countries.
On the other hand, when a country is going broke and therefore increasing taxes (via EU, of course), restricting labor costs, making life harder for its citizens, is hardly appetizing.
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| « Last Edit: May 11th, 2010, 11:13am by puzzlecracker » |
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towr
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Re: Who really benefits from Euro?
« Reply #3 on: May 11th, 2010, 11:25am » |
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Quote:| On the other hand, when a country is going broke and therefore increasing taxes (via EU, of course), restricting labor costs, making life harder for its citizens, is hardly appetizing. |
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Those citizens have no one to blame but themselves. Money may be printed on paper, but it doesn't grow on trees. You can't expect your government to magic up money for whatever excesses you want them to pay for. For goodness sake, the Greeks can retire at 55, while we're making a fuss that our government wants to raise retirement age from 65 to 67. How can they not see that that's madness? Don't they realize someone has to pay for everything? You can't support an aging population if people stop working so young.
But the people demand, and the government panders, and so they end up living on credit. But of course they need to pay the bills just the same with interest on top. Countries shouldn't be living on credit as much as they do. Fine, if there's a recession and your economy is otherwise healthy, it can help you to tide things over for a while. But it is not a sustainable model.
Quote:| Another example is Spain. The EU pumped many billions of Euros into Spain to build infrastructure and tried to modernize the country at the expense of other EU member countries. |
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If the subsidies had the desired effect (which I don't know if they had) it would be money well spend. I don't begrudge other member states their development, and in the long run we will all be better off. As long as everyone contributes to the best of their ability, I don't mind we contribute more than we get out of it (we've been net contributor for I don't know how long).
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Grimbal
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Re: Who really benefits from Euro?
« Reply #4 on: May 14th, 2010, 3:15am » |
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When the euro was introduced I was wondering about something:
In the past, some countries have tried to fix the exchange rate between their currencies, but sooner or later they couldn't sustain it and the currencies drifted away. There seem to be powerful forces at work.
So I was wondering: if so many countries adopt the euro, in effect pegging their currencies, how will these same forces act? If the currencies cannot drift away, wouldn't something worse happen?
It seems that the answer is that the money is being drained from the less performing countries and accumulates in the more active ones. This leads to a split Europe, one side in effect owning the other side. I don't know how the USA, for instance, deal with different states having different economical strengths and weaknesses.
PS: I don't know much about economy, maybe what I say doesn't make sense.
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| « Last Edit: May 14th, 2010, 3:16am by Grimbal » |
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towr
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Re: Who really benefits from Euro?
« Reply #5 on: May 14th, 2010, 3:55am » |
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The same thing would/could happen in every country. Perhaps it does.
Certainly within countries, even within provinces/states, even within cities themselves, some parts do better economically than others. It poses problems, but doesn't tend to tear a country apart. And I don't think giving them different currencies and allowing drift would help matters. (On the other hand, inflation and whether or not wages are corrected for that, may work in a similar way.)
I don't really know what the advantages/disadvantages of currency drift are. If currency was backed by some actual commodity, say gold or oil, there shouldn't be drift. I'm not sure what actually makes one currency become more or less valuable compared to another.
Currency drift does have some effect on import and export, because things become cheaper to import if your currency rises, and easier to export if it goes down. (At the moment it is, apparently, advantageous for us in the Netherlands, because export ways heavier.)
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JiNbOtAk
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Re: Who really benefits from Euro?
« Reply #7 on: May 17th, 2010, 11:09pm » |
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Since my economics knowledge is pretty shaky at best, my thoughts could be wrong, but hey, since when does that stopped me ? 
The way I see it, pegging a country's currency to another standard is never a good idea. Even when you're in a stronger position, there are drawbacks, such as lower return on your exports. I've been meaning to ask the Europeans how using euro had influenced your particular countries, because there had been speculation from other part of the world, where the process might be emulated. But the question that's bugging me is that, who controls the currency ? Who sets the exchange rate ? Do you Europeans have a collective gold reserve to back the currency, or is euro in turn pegged to another hard currency ?
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towr
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Re: Who really benefits from Euro?
« Reply #8 on: May 18th, 2010, 1:08am » |
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I would expect the exchange rate with other currencies to be set by the market. As for who controls the Euro, I'd guess that's the European Central Bank.
And like most currencies around the world, I don't think it's backed by anything other than promises; few countries, if any, still have a gold standard.
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