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The corollary of this is that for quite a few Southern European countries (especially the small ones, but not only), if they go the way of "debt renegotiation" (as in Syriza, Podemos, ....) and opt for exit at some stage then the pain and turmoil will be unbearable in those countries. To the point that we will see suffering and the end of liberal regimes (as the necessary effort to put things "in place" will require some form of authoritarian ruling).

So no, I would not be for immediate exit. As I said: Rock, meet hard place.

by cagatacos on Tue Dec 2nd, 2014 at 09:49:17 AM EST
[ Parent ]
You can leave the Euro if your government has a primary surplus.

If you institute capital controls, you can leave the Euro if your economy is running a current account curplus.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Tue Dec 2nd, 2014 at 10:27:21 AM EST
[ Parent ]
Mesa thinks you are dead wrong.

If ones leaves the euro, it does not matter if ones has a primary surplus or not. If people flat out refuse to sell food and energy to you. This could even be disguised as punitive levy to recover the debt (which would have to be restructured when a country would leave the Euro and going into massive devaluation). Border controls (even refusing to buy your stuff killing the surplus), etc.

Whilst you are probably thinking the economics right, you are forgetting the (more important) political dimension of it: if a small country leaves the Euro there will be strong political forces trying to force that case to be a failure.

Short of autarky, leaving the Euro for a small country would be a massive gamble (probably a suicidal one).

by cagatacos on Wed Dec 3rd, 2014 at 06:53:33 AM EST
[ Parent ]
Er, this is getting a little paranoid.

Argentina did rather more than what would amount to Portugal leaving the Euro.
And many people were very, very angry at them.

I don't recall, though, any army patrolling their borders to ensure that no willing trading partner could trade.
If you are going to entertain those thoughts are likely, well then you can just as well write a scenario where France invades Ireland because of its low company tax rates.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Wed Dec 3rd, 2014 at 07:42:39 AM EST
[ Parent ]
If you are going to entertain those thoughts are likely, well then you can just as well write a scenario where France invades Ireland because of its low company tax rates.

Will they bring wine and promise to mandate decent bread?

by Colman (colman at eurotrib.com) on Wed Dec 3rd, 2014 at 11:58:29 AM EST
[ Parent ]
Why, sure. Last time we were invaded by Irish people, did they not bring smoked salmon?

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi
by Cyrille (cyrillev domain yahoo.fr) on Wed Dec 3rd, 2014 at 12:04:08 PM EST
[ Parent ]
I think people fail to see the symbolic importance of leaving the Euro: it means the unravelling of a centralizing project.

Up to now things would are going in a single direction: more globalization (which essentially means more control by a small cadre). The Euro is a part of that narrative (with the implicit notion that democratic control is replaced by the "specialists in Brussels and Frankfurt").

So, irrespective of the monetary value (and I would dispute that it would be less than Argentina, because it would make all the debt void - due to devaluation and obvious inability to pay - PLUS making the Euro very unstable - who would follow next?). Irrespective of the money issue, there would be a symbolic unravel of a project. That is ideologically intolerable.

Furthermore, there is no need for patrolling any borders. There are plenty of (legal) ways to destroy a country. For instance, just see what what the current fall in price in oil is doing to some exporter-only countries. It would not be difficult to devise a set of informal things to have a devastating effect.

And if you think this is paranoid, you probably have not been seeing what is happening in the so called periphery. Even it it was unintentional (and it was not: saving the banks of the centre was deemed more important than the lives of millions), the outcome was of "paranoid" impact: if somebody, 5 years ago, came to this site and suggested the disaster that is unravelling, that somebody would be labelled paranoid or crazy (extra paranoid, as almost no one was as pessimist as reality).

by cagatacos on Wed Dec 3rd, 2014 at 08:12:07 PM EST
[ Parent ]
if somebody, 5 years ago, came to this site and suggested the disaster that is unravelling, that somebody would be labelled paranoid or crazy (extra paranoid, as almost no one was as pessimist as reality).

I have to say, that personally I also did not expect things to go so horribly. I also think that there are clear mechanisms, of how Portugal would be attacked. One would be to sue against Portugal for lost property. All type of vulture funds would use this possibility. Most probably, all payments coming from Brussels would also stop.

Yet, still I do not see how things can improve with a ECB that doesn't to its job. At the very least, politicians from Portugal should remind the ECB of its Mandate. The discussion here, has convinced me that a threat to leave the Euro if the ECB doesn;'t credibly commit to 2% inflation could even do some good.  

I think the most important thing for a country leaving the Euro is how it treats its debts. If the debts gets payed, I do not think the repercussion would be such a disaster. If you leave the Euro you could in principle confiscate all savings of all your citizens and forcibly change them into new currency. The Confiscated Euro you can use to pay your debts. I understand clearly that this would be super unpopular. But as far as I can see it is the only clear way how to pay the debt and leave the Euro at the same time.

by rz on Thu Dec 4th, 2014 at 03:36:08 AM EST
[ Parent ]
The debts can be paid years later. First of all It is way easier to pay the debts once your economy is operating at full capacity. I agree, It is gonna be a mess.
by Kristjan on Thu Dec 4th, 2014 at 04:33:21 AM EST
[ Parent ]
While the project did not succeed in its primary objective, the USA did all it could to economically strangle Cuba after Castro took over. The Soviets came to Cuba's rescue. Perhaps Russia, China and the other
BRICS would play the same role today. At least buying the needed oil should be cheaper.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Dec 29th, 2014 at 11:01:56 AM EST
[ Parent ]
I'd like to note that leaving the euro, or rather break some of the rules in the EU collaboration surrounding the common currency, is punishable by a fine (if and when the EC takes the country to the Court).

Trade embargoes are not a regulated punishment, and the countries doing a trade embargo would violate many more rules then the country violating the common currency does. It would also jeopardise the EU, not only the EMU. I don't think that would happen. I do think there would be trash talk in the economic papers, there could be runs on the new currency, and there would be loud support for the opposition that wants to re-enter the EMU. But I think that is about it. Oh, and the new government would not be welcome to the right parties.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Wed Dec 3rd, 2014 at 07:52:18 AM EST
[ Parent ]
the pain and turmoil will be unbearable in those countries
It is unbearable for most of the population in (say) Greece, and getting worse. People are out of government, financial services because of debt, tax issues - they are just "lucky" that the state cannot handle them all. So they enjoy a cup of coffee per day on a primitive day to day living.

Euro exit would be a big difference for those who still have office (etc) jobs, do good business on touristic spots. They rely on the government to keep the status quo (including the turmoil threat).

by das monde on Wed Dec 3rd, 2014 at 08:36:51 PM EST
[ Parent ]

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