I'm still pretty comfortable with Jan. 1, 2013, Dan.

You still doing your Kevin Bacon impression?

It was your prediction, not mine. But yes, I think that Spain and Italy will still be using the same currency as Germany at the start of next year.

Heh. Actually, the way things are going, you may be right...however that currency may be gold (or canned goods)!

Setting aside the specifics of who said what to whom over the lengthy course of this thread, I'd be interested to know whether you satill believe the Euro is going to be sustainable in the medium to long term. I think it's fair to say now that the analysis from both left and right of the spectrum is that the Euro is the fundamental cause of the economic crisis. An apology to the 'swivel-eyed little Englanders' who called this all along is yet to be forthcoming of course, and I don't expect we'll ever see it, but nevertheless it's now commonly understood that the gross trade imbalances brought about by monetary union among such disparate economies is forcing the southern nations into penury and that the situation is very unlikely to improve for some of them, notably Greece, without exiting the Euro.

So what will we see Dan ? Will it be an enforced fiscal convergence against the wishes of the people of Europe or will it be a collapse of the currency ? Personally I don't see how the former could work. Germany, Holland and the other rich nations of the north won't accept a pooling of debt across the Eurozone without centralised control over fiscal governance and the enforcement of grinding poverty for the weaker nations and the people of those nations won't accept, and by the evidence of recent elections won't vote for, years and years of austerity with no end in sight.

We are not arguing about what Mach said - we concur on what he said. We simply disagree on whether his prognostication will come to pass.

Sassenach wrote:An apology to the 'swivel-eyed little Englanders' who called this all along is yet to be forthcoming of course,

Well, they see that 'Europe' is the problem, not the Euro itself. And a stopped clock is still right twice a day...

The problem was not 'the Euro' per se, but the way it was set up. But it's not the only problem - even according to the rules, pretty much every member broke the limits as they saw fit. Germany even breached the fiscal rules, and so can't play the schoolmistress with total integrity. In fact, Germany was one of the first to do it, and because it was Germany, they got away with it and that gave all the other nations carte blanche.

So what will we see Dan ? Will it be an enforced fiscal convergence against the wishes of the people of Europe or will it be a collapse of the currency ? Personally I don't see how the former could work. Germany, Holland and the other rich nations of the north won't accept a pooling of debt across the Eurozone without centralised control over fiscal governance and the enforcement of grinding poverty for the weaker nations and the people of those nations won't accept, and by the evidence of recent elections won't vote for, years and years of austerity with no end in sight.

I don't think it's a case of an either-or, to be honest. In some ways there is support for more integration, as well as opposition. It depends what the integration is.

Holland is interesting - they are supposed to be one of the 'prudent' northern states, but they couldn't agree a budget with enough cuts to satisfy the austerity hawks or remain within the Eurozone rules, collapsing the government. How can they lecture Greece with a straight face?

Frankly, I think the main challenge for Europe is how to get the recovery going again in the short term. It's from that a lot more will extend - if growth can be increased, confidence in the economies will increase, banks will be under less pressure, and fiscal pressures will ease. But to do that requires a re-think, which I guess is where M. Hollande comes in. What the Greeks will do is anyone's guess, but if they do leave the Euro there will be a lot of pressure put on other members by the markets, and Greece still wants to stay in, so nothing will happen quickly.

Medium term, I think there will be a reconfiguration of the Euro, a relaxation of some rules and controls in exchange for a tightening in others. There will have to be a dose of realism in the corridors of power, and to an extent out in the countries themselves.

Well, they see that 'Europe' is the problem, not the Euro itself. And a stopped clock is still right twice a day...

Oh come on. Bill Cash, John Redwood etc saw the Euro as a trojan horse for full-scale centralisation of economic sovereignty. The reason for this is that they knew a common currency would be unsustainable without a common fiscal policy and so understood that the inevitable logic of Euro membership would lead to a loss of fiscal independence. They made this argument explicitly at the time and everything they predicted has come to pass. Is it really so difficult to admit that they were right all along ?

The problem was not 'the Euro' per se, but the way it was set up. But it's not the only problem - even according to the rules, pretty much every member broke the limits as they saw fit. Germany even breached the fiscal rules, and so can't play the schoolmistress with total integrity. In fact, Germany was one of the first to do it, and because it was Germany, they got away with it and that gave all the other nations carte blanche.

This problem was pointed out at the time by critics of the Euro and they were ridiculed for it. When you say 'the way it was set up' what you really mean is the fact that a common currency was imposed upon the people of Europe without common fiscal governance. What you conveniently gloss over of course is that this is the only way it could ever have been set up because the people of Europe would never have agreed to common fiscal governance in advance. Some very smart people were involved in the creation of the Euro, do you honestly think they were all blissfully unaware of the fatal flaw in their creation ? That clearly can't be the case, but they went ahead and did it anyway. This suggests that the political imperative was always more important than the economic case for the Euro, which in turn suggests that the British eurosceptics were dead right all along.

A stopped clock ? Do me a favour. Their analysis of the situation was bang on the money at every stage.

Who coulda knowd?

You should note, Dan, that my predictions for catastrophe for the Euro have always been based on my certainty that monetary union without fiscal union would not work, that fiscal union required political union and that political union just was not going to happen within our lifetimes.

Picking precise dates months or years in advance is a bit tricky, but the general train of events has played out much as I (and, as Sass correctly notes, many who were not carried away by Euro-integration hopium) expected. I think it's also worth noting that the pain of the Euro's collapse will more than reverse the gains it has created (as the poor starving buggers in Greece are learning).

I'll also stick to my promise to send you that case of baked beans, Dan, should things get really bad. You may well need them.

Dude, I have loads of baked beans! Did you not read my response?

Nice couple of articles in the Atlantic on monetary unions:

http://www.theatlantic.com/business/archive/2012/05/the-difference-between-the-us-and-europe-in-1-graph/256857/

Still not sure how to square this circle when countries independently adopt a foreign currency to use as their own, as the several countries that use the US dollar without any form of union. From my understanding, the currency stability of using the dollar has really helped places like Panama, Ecuador & Zimbabwe, even though their standards of living are much lower than Mississippi or Greece.

Dude! You're gonna need 'em (then again, I might, too)!

Since Dan doesn't live in the Eurozone I'd say his exposure is somewhat less than you're making it out to be. Granted, an economic collapse in Europe is going to hit us all, but that applies to the US just as much as it does to Britain.

Sadly true, Sass.

Here's an interesting post on the fallout of the looming Greek exit:

http://www.zerohedge.com/news/if-greece ... at-happens

I think enough people realise the consequences of Greece defaulting. Portugal and then Spain would be in the cross-hairs.

I notice that last week the Spanish government, the right wing government elected to 'sort things out' is announcing a bailout of the Bankia group. Which was created less than a year ago by the same right wing government in order to create a more stable bank from several regionals which are strong in their areas of support. A good job these conservative parties know how to deal with fiscal crises, huh?

Oh, and the idea that Germany and ther Germans only want austerity? Not being borne out at the ballot box.
http://www.guardian.co.uk/world/2012/ma ... westphalia

50/50 on whether there's a full-tilt Greek default tomorrow. $450 million euros in bond maturities coming due.

As for Spain--conservative/liberal/socialist--makes no difference. The Euro was doomed the day it was created.

You're a better man than I to interpret Westphalian election results, Dan. I don't speak German, and only read Der Spiegel in translation, but I was under the impression Merkel is under criticism for being too lax on the periphery, not the other way 'round. You're closer to it than I, though, so I'll take your word for it. Doesn't matter, though. Austerity or no, there's a hard crash coming in Euro-land.

We'll see. The German government is talking tough but M Hollande is going over for a chat today with F Merkel.

The problem is that of all the countries Greeks are going to be listening to, Germany (the last foreign power to occupy them) ranks a little above Turkey (the one that occupied them for centuries). As in, the more the Germans lecture Greece, the more likely Greeks will react. Best thing Merkel and Fuchs can do is be a little less strident.

Interesting fact - German public debt is higher than Spain's (both in total Euros and as a proportion of GDP).