It's hard to steer all people in a certain direction, especially from quite different cultures.
We're not Europeans; we're Romanians, Greeks, French, Cypriots and so on. We have a sense of belonging, not to each other, but to our individual nations.
It is a "hodgepodge", but we must keep it together somehow. What happened last century must never happen again.
I'm really keeping my fingers crossed for the EU; not necessarily for my generation, but for my kids and grankids.
USA on the other hand is an "engineered" country, people got there relatively recently and said "Ok, that's it, let's do things this way". Of course you will see more homogeneity and agreement. And nationalism actually helps keep stuff together instead of dividing people.
The French for instance only commonly adopted the same language in 1914. (When literacy rates were high enough for everyone to know French instead of regional languages).
Most countries in Europe were the same less than 200 years ago. I can easily see us being Europeans 100 years from now.
I know Slovenians (where I'm from) still considered it a novelty to think of themselves as Slovenians as late as the 1840's.
I'm not sure what we're going to call ourselves, but if nothing "explosive" happens in the next 2-3 centuries, I predict we'll be mostly brown-skinned and speak some sort of English.
Go study up on the American civil war. It was an extremely brutal conflict, and you see lingering resentment today, in the 'red states' and the 'blue states' - hell, I still make (offensive) jokes about how "we should have let them leave when we had the chance" - I mean, I don't know how it compares to the Germany vs. France thing, but even today, there is a pretty significant north/south divide in US politics (and urban/rural divide.) From my understanding of things, we (the northern, industrial states) conquered the southern, agricultural states through force of arms, (well, through force of superior production) - and we've kept them in the union since through a generous application of money. (It's seen as funny, that the "red states" generally speaking, consume more federal tax dollars than they give back, and yet those are the people who make a lot of noise about cutting the size of the federal government. The "blue states" are the opposite. The way I see it, we just figure it's cheaper to buy them bread and circuses than to fight 'em again, while they are frustrated by their powerless position. From what I read, (and culturally, I think) we think of the south as producing brave, but poorly equipped soldiers. (and often we think of the southern leadership as having more guts than brains, that, or just having generally less concern for the lives of their soldiers. The south, at least by Northerners, is perceived as having a lot more respect for it's aristocrats, and less respect for it's peasants, vs "the only color that matters is green" north, which tends to style itself as a meritocracy.) The turning point of the war is often considered to be 'Pickett's charge' - A very brave, but arguably, considering the weapons the union had in the area, the space they needed to cross, and the range and effectiveness of the Minié ball, very stupid military action.)
My point here is that being more homogeneous (and we are... there are big cultural differences, but we all mostly speak the same language) does not save you from war. Civil war can be just as bloody and brutal as wars of conquest between different countries. When you get down to it, brothers will slaughter oneanother just as readily as strangers who don't speak the same language.
Perhaps the more powerful EU countries should get used to giving handouts to the poor EU countries in order to keep things quiet; that is how I think things work here
I think the origin of this and other problems is the lack of a significant EU-wide tax system. The US federal tax system serves as a wealth distribution mechanism (some states like NY and CA pay much more than they receive, and other states like OK receive much more than they pay). A similar system in europe would help the net import nations like Cyprus and greece.
It's one thing to spend money in exchange for goods and services, and another thing to give it away in exchange for nothing.
[1] https://en.wikipedia.org/wiki/New_Mexico#Federal_government
We're now witnessing what happens when states spending more than what they make are running out of money.
Of course socialists are trying to pretend it's a financial crisis and that without the financial crisis in the U.S. nothing would ever have gone wrong with all these highly socialists states in Europe spending more than they're making and creating an ever bigger state debt.
Seriously who's buying that? When you're borrowing more money than what you make at one point payback time comes.
And payback time is coming for socialists. And they don't like it.
Nor is it simply corruption, though there's PLENTY of that to go around. Lots of corrupt countries aren't about to spontaneously collapse. But it's not totally crazy to imagine Italy, Spain, and Greece collapsing into chaos by the end of April. Or, if you're a pessimist, by the end of March...
It's sectoral imbalances and a deeply broken EU.
That doesn't even touch on the UK or France. Which, although certainly having their problems, also aren't the same kind of basket cases PIGS are. I excluded them initially because although they seem to have more severe problems than, say, Germany, they're still pretty economically successful and stable. By the time any of them get to a hypothetical debt crisis, the PIGS will have long-since imploded, and it'll be a totally different ballgame anyway that resists prediction.
It's hard to really get your head around how wrong headed this decision is.
Government insurance means nothing when the government is broke (relative to the size of its banks). Nicosia does not have the €30 billion to reimburse accounts covered by the country’s deposit guarantee scheme. No bail-out means depositors being wiped out.
The Cypriot banks are going to find all of their deposits withdrawn as soon as they reopen, so they better figure out a new way to finance themselves.
In a theoretical free market, depositors would lose all their money if a bank goes bust, just as stock holders lose their money if a company goes bust.
Banks, however, hold a particular role in a modern economy that regular companies don't. As such, deposit insurance is a necessity for overall financial stability. In the case at hand, the decision by the Cypriot gov't to effectively cancel deposit insurance for smaller depositors is their biggest mistake, since it decreases confidence in both the banks and the gov't.
Considering the population, Cyprus is more like a middle-size city than a country. It joined the EU in 2004 and the Eurozone in 2008 - their problems are much older than that. Other than for humanitary reasons, the EU shouldn't and doesn't really care if they go under. If panicked investos withdraw their money they shall - smarter investors will pick up their holdings and realize gains; the doomsayers will end up as losers, like the US hedge funds ala Paulson betting against the EU the last years.
So you don't have to exit the eurozone area, you just transfer your money from the debtor states to the creditor states. That doesn't make the situation any better particularly it just drives up bond yields in the debtor countries and makes their situation even worse.
Essentially a decision has been made to save the currency and sacrifice the debtor countries which use it. This is just another example.
Because the Euro is stupid. You don't want your money to be as valuable as possible! Deflation, when not accompanied by fast growth in real GDP, is bad! There's no excuse for the European Central Bank to be running such a tight policy when aggregate demand in the European periphery is so depressed.
But of course nobody trusts the banking system in the periphery, so all the money from there is rushing into the center causing deflation in the periphery and inflation in Germany. And then the ECB sets policy to accommodate Germany, and threatens to screw the peripheral countries even harder if they don't make the supply side changes it wants.
You think it is something other than supply and demand? The Fed and BoE can print; The ECB cannot. The result (which is related to printing) you failed to quote: Greek deflation.
It's not complicated.
Individual (small) countries may fail, the system will be fine, and misinformed doomsayers will - as always - end up making fools of themselves.
The euro is up 16% because there are more dollars in circulation chasing the same number of euros. Same for the pound.
A deflationary environment in Europe (what are prices doing in Greece? What is the Spanish unemployment rate?) is exactly what you would expect, and the Euro up 16% against the USD and 23.3% against the UK pound is evidence of that.
Or to put it another way: You quote evidence that supports the point you are trying to refute.
(Perhaps you are being confused by the term "up" in currency exchanges? It makes exports more expensive, which makes the deflation worse since fewer employees will be needed.)
All I wanted to say is that in the long run, foreign exchange rates express some form of judgment about the soundness of a currency. The markets still consider the Euro a very sound and safe currency - at least more so than the USD and the UK pound. A weaker exchange rate might be preferable, but that is not a way Europe wants to go. Instead of printing money, the idea is to restructure the economy. In the short run this will of course be super painful and allow commentators to shout "Look, austerity has failed". Let's talk again in 2025, bond yields for Greece,Italy,Spain are already down...
No, you didn't. You compared two isolated data points.
If you look at the actual graph of the last ten years, the Euro has been both considerably higher and considerably lower against the dollar over that period.
Draghi said last year that the ECB is prepared to purchase "unlimited amounts", so if there is a bank run, the central bank will fill up the banks' balance sheets as necessary (in theory).
No. This is exactly the problem: The echoes of the German hyperinflation of the 1930s are still being heard, so Merkel and crowd have repeatedly stood against printing.
As for the ECB purchases, those were "sterilized" as opposed to "quantitative easing", which is what the Fed does. http://blogs.wsj.com/eurocrisis/2012/09/06/the-ecb-steriliza...
It does end up on the central bank's balance sheet, but there's no event that would force the bank to ever write it down. Those hundreds of billions in loans can stay unpaid for hundreds of years if necessary.
The EU should care. Do European officials and politicians think they are immune from the opinion of people in their own countries?
I expect this measure will generate a lot more hostility towards the EU among the European populace.
If the UK pound falls by X% against most other currencies, this is equivalent (in the long term) to all inhabitants of the UK losing X% of their income.
Though as they relate to market psychology, first in the other troubled nations of Europe, but secondarily for the entire world, the actions taken in Cyprus don't exactly resemble the dropping of a pebble. They're more like exploding a few sticks of dynamite on the already teetering mountaintop.
This will go down in history as a huge and pivotal economic policy blunder if it goes through.
"The Cypriot government on Sunday discussed with lenders the possibility of changing the levy to 3.0 percent for deposits below 100,000 euros, and to 12.5 percent for above that sum, a source close to the consultations told Reuters on condition of anonymity."
"According to a draft copy of legislation, failing to pay up would be a criminal offence liable to three years in jail or a 50,000 euro fine."
http://www.reuters.com/article/2013/03/17/us-cyprus-parliame...
It's also very risky and results in savers losing money. It's also less progressive than what they are proposing as it's strictly just a flat percentage of assets.
Everyone across the entire Eurozone now knows that their bank deposits can be confiscated without warning.
If I were a bank teller, I think I'd call in sick tomorrow. It's not going to be pretty.
This is so incredibly stupid that it would be funny if it wasn't so tragic. They're basically telling everyone in the Eurozone that their money isn't safe in the bank, and that if you want to make sure it keeps being yours you should wthdraw it and move it to a safer place. Either under your mattress or outside of the Eurozone.
They're basically asking for a bankrun across the southern European countries. Didn't any of these geniuses take econ 101?