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Post by bancroft on Dec 29, 2022 18:39:32 GMT
I've been thinking around the target II figures and thier implications for the EU. Basically Germany is always in credit and the 'PIGs' - Portugal, Italy and Spain all have large debit balances. Target II is the payment settlement system for the Euro. To me these imbalances signify Southern Europe is buying lots of goods from Northern Europe and especially Germany. This means the central banks of the 'PIGS' have negative balances, now as they have one currency this is not recognised as an issue. However if any of the 'PIGs' decided to leave the Euro area they would need to protect their currency. I also suspect this has severely damaged their home economies as business supply has shifted to Germany. www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/target2_balances.en.html#:~:text=What%20is%20TARGET2%3F,safely%20and%20easily%20between%20them. Thoughts anyone? |
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Post by buccaneer on Jan 1, 2023 14:24:03 GMT
This is where the Eurozone teeters on the brink. It's probably one financial crisis away from one of two outcomes: Target2 is clearly not a viable long-term solution to systemic Eurozone trade imbalances and weakening national banking systems. There are only two realistic outcomes. The first is full fiscal and political union – which has long been the objective of Europe’s political establishment, but is clearly not supported by the majority of Europe’s peoples. The second is that the Eurozone breaks up.As ever when a crisis occurs the EU use it as the perfect storm of opportunity to take ever more sovereignty from member states. Therefore, I wouldn't be surprised to see full fiscal and political union for all intents and purposes, forced onto member states in the future. openaccess.city.ac.uk/id/eprint/19674/1/Target%202%20v1.pdf |
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Post by Steve on Jan 1, 2023 15:05:58 GMT
I've been thinking around the target II figures and thier implications for the EU. Basically Germany is always in credit and the 'PIGs' - Portugal, Italy and Spain all have large debit balances. Target II is the payment settlement system for the Euro. To me these imbalances signify Southern Europe is buying lots of goods from Northern Europe and especially Germany. This means the central banks of the 'PIGS' have negative balances, now as they have one currency this is not recognised as an issue. However if any of the 'PIGs' decided to leave the Euro area they would need to protect their currency. I also suspect this has severely damaged their home economies as business supply has shifted to Germany. www.ecb.europa.eu/ecb/educational/explainers/tell-me-more/html/target2_balances.en.html#:~:text=What%20is%20TARGET2%3F,safely%20and%20easily%20between%20them. Thoughts anyone? The problem isn't that the € per se has damaged PIGS countries it's that its poor regulation enabled those countries to overspend for years whereas with their own currencies they would have either seen those currencies fall (more likely freefall) and have massive inflation or had to have massive interest rates. Both of which would have been unpopular with their electorates. It brings into question whether a unified currency can co-exist with individual sovereignty over economies. IMHO it can but the EU really hasn't got to grips with the issue. As for PIGS countries leaving the Euro, the sensible people in those countries know it would be a disaster but then sensible people don't always sway the day. |
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Post by oracle75 on Jan 1, 2023 15:45:05 GMT
It is difficult to have several currencies within one unified trade block where external money markets adjust their variable relative worth.
Consider the construction of a car where parts are made all over the EU under different relative currencies. The value of those is determined by many things in each economy so the cost of the final car is impossible to determine. So would the amount of VAT each part is valued at.
As it stands, the value of the Euro is stable and tested. Any attempt at reverting back to national currencies would mean the value of that would always be compared to the value of the Euro. This is why Greece stayed with the Euro. It is strong, the drachma would be very weak. The inflation the change would bring would have been disastrous.
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Post by Vinny on Jan 1, 2023 16:02:54 GMT
It's difficult to have a unified currency without unified tax systems and unified wages, unified costs of living etc.
The EU, however well intentioned needs massive reform as it does not work as intended. And they made the mistake of allowing incompatible economies into the Euro.
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Post by bancroft on Jan 1, 2023 18:27:37 GMT
The problem I see if Germany develops economic problems the Euro could suffer and then impact the whole block of countries.
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