The United States of Europe

[Staffan]

*rimshot*

I was talking how the Euro and the lifting of trade barriers let them sell more of their goods to the rest of Europe.

The Euro has been shown to be a big mistake, and I'm glad that Sweden isn't part of it (even though younger me voted in favor of it way back when). A significant portion of Greece's problems come from not having their own currency, or rather that those problems would be much easier to solve with their own.

Normally, when nations differ in productivity and such, this will be reflected in the value of their currency. This makes their exports cheaper and imports more expensive, which stimulates the local economy. Currency fluctuations is a much smoother way of handling that kind of thing than renegotiating wages would be. But now, Greece has to use the same currency as Germany while having nowhere near the same productivity (Germany's GDP per capita is about twice that of Greece), which leaves them completely unable to compete.

In addition, there are many economists who say that Greece has been completely mishandled from the start of the crisis. When your economy is contracting, austerity measures are pretty much the worst way of handling things. Greece's economy has contracted by about 25% since 2007. Certainly, things needed to be done to deal with the widespread tax evasion and mismanagement in Greece, but the heavy-handed cutting of social services, pensions, and the like has only contributed to the crisis. It's like telling someone with weight problems and lung cancer at a hospital that he needs to go on a starvation diet while on chemotherapy - that will just reduce his ability to deal with the more urgent problem. Once the cancer is dealt with, sure, then a diet would be good, but first things first.

Of course, this is massively simplified, but it does give an overview of the problem.

 

[Dannyalcatraz]

When your economy is contracting, austerity measures are pretty much the worst way of handling things.

Yep.

While "something must be done", most austerity measures tend to do one very bad thing for an unstable economy: they greatly reduce the amount of money in circulation. Additionally, in a situation like Greece's, the measures also reduced the number of government employees- IOW, unemployment was increased.

IOW, the austerity program imposed on Greece contracted the money supply, reduced fluidity, and spiked unemployment. Nice job!

The geniuses who came up with this either forgot or didn't care that a good portion of what drives economics- at any scale- is human psychology. By aggressively protecting Greece's creditors, they made the people of Greece extremely uncertain...and thus begins a potential economic death spiral. The'd have been better off in the long run giving the creditors a "haircut", negating a portion of the debt, downgrading Greece's credit a bit, and adjusting their future lending models to make it easier for borrowing nations to repay their loans.

Don't get me wrong- Greece's politicians did a great job setting their country up for a fall. But in a real sense, the creditors gave the country a nice shove in the back.

 

[Kramodlog]

The Euro has been shown to be a big mistake

It was good for Germany. Its previous currency was worth a lot, so adopting the Euro, with the trade barriers going down, ment German goods were cheaper to export to other Euro zone countries.

A significant portion of Greece's problems come from not having their own currency, or rather that those problems would be much easier to solve with their own.

Printing money to pay the debt. Yup. It comes with its problems, but the human suffering the Greeks are going through would be alleviated.

Normally, when nations differ in productivity and such, this will be reflected in the value of their currency.

Consider the title of the thread. The US of E. In the US, states like California or Texas have great GDP compared to say Alabama [banjo music]. The US still has only one currency and avoids some of the EU problems tied to the Euro. It does so in part with federal transfers of money that help balance the whole act and maintain the union. This is what the EU is lacking. In part.

In addition, there are many economists who say that Greece has been completely mishandled from the start of the crisis.

It simple economics. Austerity is the product of neoliberal ideology, not actual economic science.

 

[Dannyalcatraz]

It does so in part with federal transfers of money that help balance the whole act and maintain the union. This is what the EU is lacking. In part.

On top of that, the US doesn't just have one currency, it has one entity in charge of the money supply- states can't print their own stuff.

The EU, OTOH, doesn't have that centralized control over the money.

 

[Scott DeWar]

*rimshot*

I was talking how the Euro and the lifting of trade barriers let them sell more of their goods to the rest of Europe. Or how the EU not only gives it legitimacy* to act on the international level, but the EU also gives Germany an identity and role.


*Needed because of that adventure with the little Austrian.

did someone say rimshot?

 

[MechaPilot]

I think it's possible (no one really knows what the future holds), but I think it's extremely unlikely.

Probably the best thing that I could compare it to would be the likelihood of the U.S. joining a federalist world government. The U.S. is not going to cede authority to a world government the way that the U.S. states did to the U.S. federal government. Now, it certainly could happen (because, again, no one really knows the future), but I wouldn't place any money on it.

 

[Dannyalcatraz]

I think of the many futurists who talk about a global government, the ones who say that it will arise from the existence of a global threat are correct. That's about the only way something like that would happen in the foreseeable future.

 

[MechaPilot]

I think of the many futurists who talk about a global government, the ones who say that it will arise from the existence of a global threat are correct. That's about the only way something like that would happen in the foreseeable future.

Even in the face of a global catastrophe, I don't think the U.S. would join a global government unless it were simply a matter of adding other countries to the list of U.S. states.

 

[Dannyalcatraz]

I think it depends highly upon the nature of the global threat- the USA might not have a choice...not in a meaningful sense, anyway.

 

[Mustrum_Ridcully]

Never say never, I guess, but it is not looking like it is to happen anytime soon, and I think even if it would happen, it would still be very different from the United States of Europe.

I think the EU is overall a good thing, but it lacks in some areas - for example, the democratic legitimation of its decision is very weak. The European parliament has very little influence and power, but that is the only place where all the citizens of the EU can actually directly vote for the members.
The main power is with the commission and the ministers of the different states, and many of those are not directly elected.
I think without a better democratic legitimization, it would be in everyone's best interest if the member countries retain their self-identity and integrity. Maybe the EU will get such reforms, but maybe it won't.

The relations between the EU states is quite different from those of most other states however, and for many practical purposes of the different nations citizens and their businesses, the EU is very close to a "united states of Europe". And at least in the business aspects where that isn't already the case, it's only likely to become more so.


But, there are even counter-trends. The UK for example has a significant minority (or maybe it's a majority even) that wants to get out of the UK. I doubt that it's actually in the interest of the British, but several of my friends and co-workers say they could leave and the rest of the EU wouldn't suffer for it. I don't know. The UK likes to isolate itself from the rest of Europe, or so it sometimes sees, but what has the UK actually left to offer other than it's financial business (aka banks?) It seems most of its big industry companies have been dismantled or sold. Will the people of the UK really fare better without easy access to the EU? Or do they believe this is a chance for UK's industry to rebuild itself? What do the banks think? Getting out of the EU a chance to avoid regulation? Or is it a greater risk?

Greece is in trouble, and I think a lot of the mutual trust and respect has eroded there. I don't think Greece is treated well here (particularly not by Germany and German media), but I also don't think the Greek government (and probably media) is handling it well, either.
And Greence might just be the first country in trouble -Spain and Italy aren't doing that great either.