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| quote: | Originally posted by TheNobleEu
Didn't you see the article in this forum that stated Europe was dead? lol
What follows is the short version of what I lost:
This was the plight of Italy before there was an EEC.
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Right, and the Italian escape from their predicament would be to devalue their currency in order to make exports more competitive, a tool that it no longer has at its disposal and now Italian economy must deal with the brunt of tight monetary policy head-on.
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Italy as a litmus test of the economic strength of the EU is a laughable suggestion (but I think this is the Economist speaking here, not you necessarily). |
It’s not a litmus test of the strength of the EU. If every other economy were doing fine, it would likely be immaterial. However, when the three largest economies of the Eurozone are facing some severe economic woes, that says something about the state of the Eurozone.
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Article in the recent Economist might interest you about a merger of Italy's largest bank, UniCredit, and Germany's second largest, HVB Group (4 June, p. 69 -- the article at Economist.com is pay-access only).
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Yea I read that article. One M&A of a bank hardly salvages the overall welfare of the German and Italian economy however (nor does it address the structural issues at play). Economic forecasters have pegged their GDP estimates at 1.1% and .3% respectively.
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The high unemployment in the Euro-area is the result of the extremely plump safety net provided by the social model, which promotes laziness (especially in the North).
Analysis of the Euro economies within the context of the social model is a problem senior economists don't know how to deal with yet.
I think the social model is a grand thing, but needs some serious attention.
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The problem isn’t that the Eurozone’s social model leads to a different level of full employment than the US (although Norway and Sweden have liberal social laws yet retain relatively low unemployment compared to the rest of Europe … however we shall ignore that in this discussion), the problem is that even taking this into account, the trend of unemployment has been consistently deteriorating to the point that Germany is at its highest level of unemployment in 6 years:
http://www.destatis.de/indicators/e/lrarb01ae.htm
And all German economic indicators that have come out so far this year seem to paint a picture that things are going to get a lot worse before they get better ... at least France has some nominal growth, Germany on the other hand is up a creek without a paddle with a weak labor market and weak growth. French unemployment has been trending upwards to the point that it is at its highest unemployment rate in 5 years:
http://www.washingtonpost.com/wp-dy...5061600391.html
Hardly a rosy picture of the Eurozone given the fact that these are the two largest economies, and the third largest, italy, is in a mess as we all know.
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The EU *doesn't need* to raise interest rates because it knows it doesn't need to in order to be competitive and still nonetheless outvalue the Dollar at a time when the Dollar is strong and the Euro is weak! That ought to tell you something about its "stength." Article in recent Economist about that too, more below.
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Why would the ECB raise interest rates to affect currency markets? That doesn’t make any sense … you would raise interest rates to combat inflation and preserve price stability. If anything, Germany and Italy would want the ECB to lower interest rates in an effort to stimulate their economies. However, the ECB won’t do so because several other Eurozone economies are overheated such as Ireland. My point is that the ECB has no monetary policy tool at its disposal with the exception of controlling price stability. As for the dollar vs. the Euro, the dollar is hardly strong. With twin deficits, the dollar is probably is at its weakest. And that should say something now that currency traders are starting to short the Euro. As for the Euro still “outvalue” ing the dollar, the actual value of the currency in most cases means nothing. After all, there are a ton of currencies that peg their currency to the dollar … does that mean their currency is in parity with the dollar? Hardly … what matters is the purchasing power of the currency.
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...But won't complain too loudly because it's largely their fault. They were the chief proponent of such rapid expansion, and they're the ones that wanted the former Soviet satellites in so badly. Makes you wonder how France and Germany sleep together at night.
Makes no sense to belliache after getting what one said one wanted, but Germany will.
This has been happening indeed, but this is the stuff of the Comedy Channel within the context of the above. Even moreso for Italy!
The EU is a product of the governments, not the people. I really think the biggest obstacle with the EU is the endemic apathy of the populace, which in Germany at least isn't going to make it's voice heard until the German election.
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And governments are the product of the people. Look I’m not saying that because 56% of the Germans want a return to the DM and now that Italian ministers are putting the re-adoption of the Lira back on the table that it’s going to happen tomorrow. I thought that I put the “unlikely” disclaimer in my text. What I’m doing is describing the environment that the Euro is viewed upon by these two countries. It’s not good which goes to characterize the cohesiveness, or success if you will, of the Eurozone.
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Rubbish. The Euro has been steadily declining lately because the polls virtually guaranteed the Constitutional ratification would fail in France.
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Umm so you’re saying that financial markets are shorting the Euro for completely non-economic reasons??? Look, if financial markets act on a political event it is because that political event has economic ramifications. In other words, if I start shorting the dollar because the US went to war in Iraq, it’s not because I think Bush is evil and that it’s morally incorrect, a trader would have a very short career if he made stupid decisions like that. I start shorting the dollar because of uncertainty about the cost of the war, success of the war, and all other factors that could economically affect the value of the dollar. The fact that financial markets are shorting the Euro is because there is some kind of perceived weakness with the currency which may or may not translate to a perceived weakness with the Eurozone.
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Come now. I doubt I need to spell this out...
It's "special" because for the first time, American corporations are actually bound by meaningful antitrust, not the American rubber-stamp policy which previously allowed mega corporations to do almost anything they pleased. Things happily passed along in the US immediately raised red flags in the EU, much to my delight.
Now the US has to prevent monopolization at home if it cares to sell anything outside the US (which it has to since EU countries own most big brand names and trademarks in the US). Kinda got them by the balls (or rather the pocketbook) now, eh?
And the EU being "forced to comply with the SEC and US anti-trust laws" is quote an amusing sentence on your part. This is like suggesting a player in the NHL is being forced "to deal with the competition" when playing in the Pee-Wee leagues.
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I do seem to remember a US anti-trust case against Microsoft that more or less expressed the same concerns. As for the EU owning most big brand names and trademarks in the US … huh?
http://www.forbes.com/lists/results...olumnClick=true
Hmmm actually maybe you’re right. I don’t think the US has to worry about monopolistic non-compliance from any EU companies any time soon  .
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As a side note, I haven't been enjoying the Economist lately. As is the fate of all things that become trendy and popular, it's starting to get trashy -- it was much better a couple years back. I've cancelled my subscription and only pick up issues when it prints several articles on some recent event. I much prefer Foreign Affairs, now.
BTW: do you think the Economist is pro or anti EU?
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I enjoy the economist. I don’t particularly think it has a pro or anti EU agenda at all. I think it is simply reporting on the economic situation of Europe and some of the failures of the EU. It rails on the US all the time about its twin deficits, it’s not like I’m going to suddenly accuse it of having an anti-US agenda for telling it like it is.
I’ve read a number of similar assessments in other business journals. Take businessweek for example:
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Squeezed By The Euro
Europe's single currency has not promoted growth. It has also failed to spark needed reforms and fiscal discipline
Were the skeptics right? In early 1998, University of Bonn Professor Manfred J.M. Neumann mobilized 155 fellow economists to protest the coming introduction of the European common currency. The euro was dangerously premature, they argued in open letters published in major newspapers. Big countries such as Germany and France lacked the flexible labor markets they needed to compensate for losing control over monetary policy as a tool to promote growth. Needless to say, the protests had little effect. The euro blasted off on Jan. 1, 1999, as planned.
Six years later, Neumann's warning seems ominously prescient. Far from becoming a powerhouse to compete with the U.S. and Asia, Europe in the past four years has been nearly stagnant, with average annual growth in the euro zone of of 1.2% since 2002. Meanwhile, it's hard to overlook the superior economic performance of European Union members that stayed clear of the common currency. Britain and Sweden have enjoyed healthy expansions and lower unemployment. Britain's jobless rate is 4.7%, compared with 8.9% for the euro zone.
Even common currency champions such as European Central Bank President Jean-Claude Trichet see little chance of a euroland boom anytime soon. Just as Neumann predicted, overregulated labor markets in much of the euro zone prevent pay scales from reacting fast enough to competitive pressure from abroad. And individual countries can no longer compensate for these rigidities by devaluing their currencies to boost exports, usually through the swift downward movement of interest rates. "Unfortunately," says Professor Neumann ruefully, "we were right."
That raises a larger question: Was the euro a mistake? Not even euro-skeptics such as Neumann argue that the currency should be scrapped now that euro coins and notes have become a fact of life from Finland to Greece. "It would be insane to give up the euro. We have to make the most of it," Neumann says.
IMPATIENCE ON THE RISE
Still, the question hangs in the air, especially amid evidence of growing popular discontent over core Europe's dreadful economic performance. A dramatic expression of that discontent came on May 22 when German Chancellor Gerhard Schröder's Social Democratic Party (SPD) was booted from power in North Rhine-Westphalia, an economically battered industrial state that had been ruled by the party for four decades. Schröder, in what amounts to an admission that his tepid economic reforms have failed, has called for national elections in September, a year early. In addition, French and Dutch voters may reject the proposed European constitution in referendums May 29 and June 1. If so, the votes will surely be interpreted as protests against a European system that seems ever more powerful yet ever more unable to deliver jobs and prosperity. The euro is integral to that system.
Stagnation and political upheaval were obviously not part of the plan when the currency was launched six years ago. At the time, euro-optimism was running high. The idea was this: Before they could adopt the currency, countries like France, Germany, Italy, and others would rein in their budget deficits, and afterwards keep public spending in check to support monetary union. The existence of one currency, backed by fiscal discipline across the board, would then turn the half-fiction of a common market into reality. As Europe's various economies melded together into one, internal barriers to competition would tumble and the best-managed countries and companies would pull ahead. Countries that lagged would respond by loosening labor rules and cutting taxes to boost competitiveness. Like the Bundesbank, which had made Germany a beacon of monetary stability, the ECB would squash any hint of inflation with a rate hike. If countries wanted to grow, they would have to deregulate their economies and keep wage hikes in line with productivity.
Now check out what happened. First, the benefits. Currency risk within the euro zone is gone: no need to hedge the lira against the franc, for example. Finnish mobile-phone company Nokia Corp. (NOK ) estimates that it saves at least $6 million a year in transaction costs within the euro zone, and that doesn't count savings by suppliers that ultimately benefit Nokia. "It makes the whole supply chain more efficient," says Nokia Chief Financial Officer Rick Simonson.
Financial markets in Europe, meanwhile, have gotten a huge boost. Companies in countries whose national currency had been weak, such as Italy and Portugal, almost overnight saw their credit ratings improve. Italian companies were able to raise $82 billion on capital markets in 2003, more than double the amount they raised in 1999, says the ECB. Governments have saved billions by refinancing the national debt at lower interest rates. The euro, bolstered by initially high rates, has also ushered in an era of unprecedented low inflation in Europe.
That's the bright side. But the costs have been enormous. Europeans remain skeptical about the euro, which they see as a project driven by politicians with little regard for ordinary people. Huge majorities are convinced that shops and restaurants used the introduction of euro notes and coins in 2002 to raise prices, which in fact was often the case, even if overall inflation remained steady. These resentments have increased doubts about the whole European project. "Prices rocketed. Now we can't buy as much," says Catherine Dumont, 47, a secretary who spoke as she shopped at a Monoprix supermarket in Paris. "It will have an impact on my opinion on referendum day," she adds, leaving little doubt she will vote "no" on the constitution.
More important, the virtuous circle of competition and reform that the euro was supposed to kick off never materialized. The ECB, sworn to fight inflation, cut rates gradually from a high of 4.75% in 2000 to the current benchmark rate of 2% in June, 2003. That kind of monetary discipline was tough for Italy, which is having a hard time adjusting to a world where it can't devalue its way out of trouble, says Domenico Siniscalco, Italy's Finance and Economy Minister. "It's like taking a tiger and trying to make it turn vegetarian," he says. Germany would also benefit from a weaker currency, which would make its exports cheaper. "Things would have been better with the Deutschemark," says Joachim Preissl, owner and president of BING Power Systems, a Nuremberg-based maker of engine parts for customers including Porsche and BMW. Preissl says the strong euro makes it harder to compete with Mexican and Chinese rivals.
To compensate for the loss of currency flexibility, both Italy and Germany could opt to reform much faster. But not even the harangues of the ECB can get the Italians, French, and Germans to confront politically explosive tasks, whether it's changing rules in France that make it difficult and costly to fire workers, or getting Germany to allow Dutch plumbers to compete for business in Dusseldorf. "None of the big countries is fighting to create a European market," says Rafael Pampillón, an economics professor at Madrid business school Instituto de Empresa.
THE POLICY PITFALL
Even the fiscal discipline imposed as a precondition to monetary union is going by the board. Germany's budget deficit has exceeded the limit of 3% of gross domestic product since 2002. Now Italy and Portugal are also overdrawn. Rather than reining in spending, euro-zone countries earlier this year agreed to loosen the deficit restrictions.
While Germany, Italy, and France would suffer if rates rose, other countries in the zone could use tighter money. Spain has an inflation rate of 3.5%, vs. 2% for the ECB's benchmark interest rate. That means Spain effectively has negative interest rates.
The divergence makes it almost impossible for the ECB to formulate an economic policy that fits all the countries. Derek Scott, former economic adviser to British Prime Minister Tony Blair and a leading euro-skeptic, says the ECB can't risk hurting German growth by tightening the money supply, even if that means higher inflation in countries such as Spain. That in turn could undermine the ECB's reputation as a stern inflation-fighter. "With a single currency, you exchange the apparent stability of nominal exchange rates for greater instability of the things that matter: output, jobs, and inflation," Scott says.
Of course, European central bankers dispute such theories. "One size does fit all!" insisted Otmar Issing, a member of the ECB's executive board, in a speech to a Frankfurt audience on May 20. The divergence in member-country growth rates is below the historical average, he said, an indication that the euro is not pushing countries to move at different speeds. Likewise, ECB President Trichet was at pains to point out the euro's benefits to an Italian business audience recently. But in a sign of growing nervousness within the bank, he also warned political leaders to step up the pace of reform. "Many countries have not adapted their economic, social, and legal frameworks in order to face the new challenges," Trichet said.
Some governments have pulled off those changes, cutting taxes, rolling back job regulations, and eliminating barriers to competition. That's true of countries in the euro, like Ireland, and outside it, like Britain, Denmark, and Sweden, which focused on deep structural reforms after experiencing wrenching economic crises. Now, Germany may get a reformist government in September led by Christian Democrat Angela Merkel. A stronger dollar would also do wonders for Europe by making its exports cheaper abroad.
But the euro countries will enter uncharted territory if, say, Italy and Portugal continue to deteriorate or Germany proves unable to return to health. Some economists speculate that in the worst case, a country such as Italy might get into such trouble that it would seek to pull out of the currency union. Patrick Minford, an economist at Cardiff Business School in Britain, thinks it more likely that one of the weak countries will run into budget problems and seek a bailout from its neighbors -- provoking a political backlash in Germany, where the euro was never popular. That could strain the currency union to the point of collapse. "The weakest point is Germany," says Minford, a member of the EMU Monitor, a group of university economists from around Europe who issue periodic reports on European monetary policy. Minford considers the possibility of a euro meltdown remote but adds: "It could be a very uncomfortable decade."
Can the euro survive? That's a question no one wants to contemplate. The pressure is on European leaders to make sure they never have to. Zz
http://www.businessweek.com/magazin...36068_mz054.htm
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If you have acutally read said think-tanks, and not just googled them, you'll know the operational capacity of the missiles were withheld for quite some time before they hit "CNN."
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I have read the reports of think tanks. And the true operational capacity of the Taep'o-dong-2 is still conjecture on the basis that they have not completed a single reported test firing of the missile. As a matter of fact, Tenet saying that the N. Koreans had a missile capable of hitting the United States back in 2003, was an overestimation of N. Korean capabilities imo. The N. Koreans have only completed a test firing of the engine of the first stage rocket. And that was reported in the media: (Gertz, Bill, "N. Korea tests its missile engine", The Washington Times, 3, July 2001, pp. 1 and 7.)
The North Koreans have had trouble adapting the 3rd stage to the 2 stage rocket:
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North Korea has probably had considerable troubles with adapting the structurally heavy No-dong second stage to their new Taep'o-dong-2 first stage. It reflects on poor engineering design decisions both in its structural design and imposed performance penalties verses the PRC Chinese DF-4/CSS-3 design.
http://www.globalsecurity.org/wmd/world/dprk/td-2.htm
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And the Defense Intelligence Agency finally said that the missiles may be ready for testing in 2005! So once again, if the White House is trying to hide such information, why go out of their way to say that the N. Koreans have a missile capable of hitting the west coast when the N. Koreans have never even test fired it? And furthermore, what “panic” was elicited when Tenet made his statement?
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Didn't suspicions also boil over that the DPRK were recycling spent fuel rods? I think this is around the time the better-part of the US force in S. Korea was withdrawn.
This is all hindsight on your part, operant word "assume" in your text above. This is the source of the reneg, not a dispute that the reneg didn't occur without proof (do I hear a mob outside shouting "Iraq?")
Basically, both pointing the finger back at each other for diplomatic failure on both parts.
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I don’t understand what you are saying here. Perhaps you can clarify? The US discovered that the N. Koreans had restarted their nuclear weapons program back in the 90’s. When the US approached N. Korea with their evidence, the N. Koreans admitted to it and then dropped out of the NPT. That wasn’t the reason for the delay in the fuel shipments/KEDO project however. Those delays stemmed from the fact that N. Korea was conducting aggressive activities against its neighbors and the fact that they were non-compliant with IAEA regulations for the KEDO project in accordance with the 1994 framework agreement. Therefore, N. Korea itself provoked the delays that were the “justification” for it’s reactivation of its weapons program.
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I don't anything about it at all actually, but you would think it would factor considering these were two of the most costly campaigns the Brits ever engaged in. I doubt much has been done on it yet.
Cheers,
-Noble |
Well given the fact that the industrial revolution roughly began in the 1830s and that the Crimean war didn’t begin until 1856 and that the Boer war didn’t begin until the 1890s, I’m skeptical as to them being major players in causing the industrial revolution.
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Retro ...
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