The euro and the pound

1. 22 August 2002,

Before the euro was launched, German policymakers worried that the European Central Bank would hold interest rates too low. The opposite has happened. Interest rates are currently too high for Germany’s economy. Corporate bankruptcies in Germany are higher than they were in the early 1990s. In France they are lower.

2. The Short View. James Mackintosh, Financial Times, 21 January 2011.

European Central Bank interest rate policy is influenced by problems in peripheral European countries.

The German economy has underperformed for two decades. But now Germany has its lowest inflation-adjusted interest rates since 1976, and last year it had its highest economic growth since 1991.

3. Gavin McCrone, The Scotsman, 28 October 2011.

Greece, Italy, Spain, Portugal and Ireland have become increasingly uncompetitive since they joined the European monetary union. They cannot devalue their currency, so have to cut wages and other production costs instead. The UK could have had the same problems if it had joined the Eurozone.

4. John Rentoul, 13 November 2011,
and Gavyn Davies, Financial Times, 29 November 2011.

In 1983 Bryan Gould and Peter Shore were Eurosceptic Labour politicians.
In 1992 Britain was ejected from the European exchange rate mechanism.
In 1993, with the Maastricht Treaty, John Major secured Britain’s right to opt out of the European Monetary Union.
In 1994 Bryan Gould left British politics and returned to New Zealand.
In 1999 the European Currency Unit, based on fixed amounts of national currencies, became the euro.

5. Martin Wolf, Financial Times, 7 December 2011,

Problems in the eurozone are more closely related to average current account deficits between 1999 and 2007 than to fiscal deficits or public debt.

Current account: Net flow of goods, services, and unilateral transactions (gifts) between countries.
Fiscal: relating to government finances, esp tax revenues.
Public debt: Issues of debt by governments to compensate for a lack of tax revenues.

6. Financial Times, 26 January 2015, Emiliano Brancaccio and Giuseppe Fontana.

The primary goal of the European Central Bank is price stability. The two per cent inflation target is seen as more important than growth, employment or financial stability.

7. Financial Times, 26 January 2015, Ferdinando Giugliano.

Greece’s public debt is about 175 per cent of gross domestic product. Lorenzo Bini Smaghi, a former executive board member of the European Central Bank, says that this is not important. The debt has a low interest rate and a maturity over 15 years.

8. What was good for Germany in 1953 is good for Greece in 2015.
Larry Elliott, 6 July 2015.

After the 1914-1918 war, the victorious Allied powers demanded heavy reparations from Germany. After the war in the 1940s, Germany received help through the Marshall plan. The granting of debt relief at a London conference in 1953 was more important than direct transfers of money.

Western Europe in the 1950s had debt/GDP ratios close to 200%, but for the new West German state, debt/GDP ratios were less than 20%.

9. Ferdinando Giugliano, Sam Fleming, Claire Jones. Financial Times, 9 November 2015. Data from the IMF.

Since 2007, by purchasing government bonds in “quantitative easing” schemes, central banks have increased their assets by 400 percent in the UK and the US, more than 200 percent in Japan, and more than 100 percent in Europe.

10. Paul Marshall, Financial Times, 29 February 2016.

After the 2008 financial crisis there was widespread agreement about its origins: an overleveraged US property market and overleveraged banks. Bank leverage is still on average higher in European banks than in the US.

11. Brexit. Alison Marshall, 6 July 2016.

The EU is too big. If all the world became grouped into a few mega-states, there wouldn’t be enough independent experiments looking for better ways of doing things. Cooperation need not be imposed from the top down. See “Imperfection and Cooperation”, in “Evolution of Communication in Perfect and Imperfect Worlds”, .

12. “Schauble blames ECB . . . “, Patrick McGee, Financial Times, 6 February 2017.

The Ifo Institute says that Germany had the world’s biggest trade surplus last year. The German finance minister said that the European exchange rate is too low for Germany. Critics in Brussels and Washington say that Germany should stimulate domestic demand to increase imports.


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