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Uriah Heap

Willy Hutton Calls For Uk To Join Euro

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Good find.

Our financial institutions are fighting for their lives and the Treasury may not be able to bail them out. The government needs to get serious to avert meltdown

:o

The enormity of the crisis is oh so slowly becoming apparent to the average Joe.

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Sorry cant click the link, if I try to enter the guardians website, my computer automatically shuts down for my own safety.

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I am more inclined to agree with Jeff Randall's and Ambrose Evans Pritchard's analyses in the articles linked article.

The strait-jacket of euro membership can never simultaneously satisfy such disparate economies as make up the eurozone. Unless or until (and I hope fervently that it never happens) Europe becomes a fully-fledged political union - the Federal States of Europe - a single-currency can never work.

Staying out of the euro has spared us a Spanish-style catastrophe

By Jeff Randall

Last Updated: 5:43AM GMT 09 Jan 2009

Half-built flats and soaring unemployment show that the boom has turned to gloom on the Costa del Sol. And it's a fate that could easily have befallen Britain.

For a place that's called the Sunshine Coast, Spain's Costa del Sol was unusually wet and cold last week. Friday and Saturday were particularly miserable in Marbella, as the rain lashed across the main promenade, forcing restaurants to bring in tables and pull down shutters.

It was as though the weather gods had decided to reflect the country's economic outlook – which is becoming darker by the day. What many in Spain had regarded (foolishly) as an eternal summer of expansion, driven by a breakneck construction boom, has turned into a winter of plunging property prices, failing businesses and an epidemic of redundancies.

Spain's traditional new year greeting is próspero año nuevo. But even in this part of Andalucia, a favourite playground of wealthy sunseekers and golf fanatics, it is hard to find locals who are expecting prosperity in 2009. For a growing number of workers and small-business owners, anything better than a sharp decline in income will be greeted as a triumph.

Like the toros bravos that die in the corrida, Spain's bull market began with impressive vigour but ended up being dragged off through the dirt. Unemployment hit three million yesterday, about 13 per cent of the workforce (double the rate in the UK), the worst it has been for 12 years. Nearly one million of those without jobs have lost them during the past 12 months.

The speed of descent, from fiesta into crisis, has shocked the country's political class and commentariat. Inflation has dropped from 5.3 per cent to 1.5 per cent since the summer. According to the newspaper El Pais: "This situation was impensable [unthinkable] in July".

As historians begin to assess damage from the credit crunch, Spain will surely be singled out as a classic study for what can go wrong inside a monetary union when the policy requirements of its members become hopelessly misaligned. It is simply not possible to pursue the best interests of every participant when some nations are running trade and fiscal surpluses while others clock up huge deficits.

Ten years after it was launched, the euro is propelling Spain towards disaster. In giving up control of domestic interest rates to the European Central Bank, Madrid handed over a vital instrument of macroeconomic management. It is learning to regret that.

For the early part of this millennium, that loss of power seemed not to matter: Spain's outrageous (and in some cases illegal) construction frenzy hid a multitude of sins. At the peak, about 800,000 homes were being built annually on the basis that demand from foreign buyers was limitless.

That dream has vanished, along with the over-supply of cheap money that funded it. Drive down the E-15, the main motorway link between Malaga and Gibraltar, and you will see block after block of half-built apartments, connected neither to essential utilities nor to financial reality. They stand as temples to a religion that ceased to exist when the bubble popped.

The Spanish economy is weak; it needs lower interest rates and a softer currency. Such a prospect, however, doesn't suit Germany, the eurozone's dominant force, so Madrid has to sit and suffer while its people cry for help.

Discomfort is palpable in tourist centres where the purchasing power of British visitors and second-home owners has played a pivotal role in boosting local enterprise. Germans and Swedes have been important, also, but it is on the British that the leisure sector in southern Spain has depended most.

A quick scan of the exchange-rate charts explains why. In the summer of 2000, about 18 months after it was launched, the euro was out of fashion on the world's currency markets. At that time, £1 bought €1.75, making British travellers feel especially wealthy when holidaying in Spain.

Today, however, as the British economy sinks into recession, prompting the Bank of England to slash interest rates to 1.5 per cent (the lowest level in the central bank's 315-year history), it is sterling that looks like a six-stone weakling.

Many in the queue at Gatwick airport's Travelex desk last weekend were shocked to discover that the pound had fallen to below parity against the euro. For them, Spain has become an expensive experience. Old jokes about Costa Notta Lotta are no longer relevant, much less funny.

I was treated by a friend to a round of golf at Rio Real, a middle-ranking course, that is by no means among the priciest. He was charged £172 for two (no buggy). Dinner for three in a modest pizza joint came to £75. One must assume that hoteliers from Morecambe to Margate are cheering wildly.

Competing currencies invariably fluctuate on a daily basis, but not all in the City are expecting a swift recovery of sterling against the euro (even though it has picked up in the past few days). HSBC believes: "In the UK… a weaker currency seems desirable to policy makers… in our eyes all roads lead to a stronger euro."

If that analysis proves correct, parts of Spain will face devastation, and social policies that seemed generous during the go-go years will quickly become unaffordable. For example, in some instances the state pays 70 per cent of salary for up to two years when a worker is made unemployed. How will that be funded if, as some are predicting, Spain's jobless total reaches four million in 2010?

Adding to Madrid's woes is the extraordinary influx of five million immigrants, who boosted the population by about 15 per cent between 1998 and last year. It was always assumed that in tough times many would return home. But for penniless fruit pickers from Africa, life in Spain, even in the harshest economic climate, is often better than what they left behind. The number of foreigners claiming dole payments has doubled and there are mounting tensions as native job-seekers slip down the food chain.

Marbella is not used to life on a budget. Shopkeepers, newspaper vendors and bar staff seem baffled by the downturn in their fortunes. On Sunday, my family and I had dinner in a seafront bodega and were the only customers all night. "What has happened to los Ingleses?" asked the waiter.

The answer is that the United Kingdom never joined the euro. As a result, our government and monetary authorities are free to adopt policies that suit our needs. In today's circumstances, that means the freedom to live with a devaluing currency. This hurts those of us who can still afford to visit Spain, and is unfortunate for British pensioners living abroad, but is a small price to pay for the revival of our domestic industries.

Had Britain been locked into Europe's single currency, at an exchange rate far higher than today's, there is good reason to believe that we, too, would be suffering double-digit unemployment. You won't read this very often under my byline, but Gordon Brown played a blinder in keeping us out.

Monetary union has left half of Europe trapped in depression

By Ambrose Evans-Pritchard

Last Updated: 6:52PM GMT 17 Jan 2009

Events are moving fast in Europe. The worst riots since the fall of Communism have swept the Baltics and the south Balkans. An incipient crisis is taking shape in the Club Med bond markets. S&P has cut Greek debt to near junk. Spanish, Portuguese, and Irish bonds are on negative watch.

Dublin has nationalised Anglo Irish Bank with its half-built folly on North Wall Quay and €73bn (£65bn) of liabilities, moving a step nearer the line where markets probe the solvency of the Irish state.

A great ring of EU states stretching from Eastern Europe down across Mare Nostrum to the Celtic fringe are either in a 1930s depression already or soon will be. Greece's social fabric is unravelling before the pain begins, which bodes ill.

Each is a victim of ill-judged economic policies foisted upon them by elites in thrall to Europe's monetary project – either in EMU or preparing to join – and each is trapped.

As UKIP leader Nigel Farage put it in a rare voice of dissent at the euro's 10th birthday triumph in Strasbourg, EMU-land has become a Völker-Kerker – a "prison of nations", to borrow from the Austro-Hungarian Empire.

This week, Riga's cobbled streets became a war zone. Protesters armed with blocks of ice smashed up Latvia's finance ministry. Hundreds tried to force their way into the legislature, enraged by austerity cuts.

"Trust in the state's authority and officials has fallen catastrophically," said President Valdis Zatlers,

who called for the dissolution of parliament.

In Lithuania, riot police fired rubber-bullets on a trade union march. Dogs chased stragglers into the Vilnia river. A demonstration outside Bulgaria's parliament in Sofia turned violent on Wednesday.

These three states are all members of the Exchange Rate Mechanism (ERM2), the euro's pre-detention cell. They must join. It is written into their EU contracts.

The result of subjecting ex-Soviet catch-up economies to the monetary regime of the leaden West has been massive overheating. Latvia's current account deficit hit 26pc of GDP. Riga property prices surpassed Berlin.

The inevitable bust is proving epic. Latvia's property group Balsts says Riga flat prices have fallen 56pc since mid-2007. The economy contracted 18pc annualised over the last six months.

Leaked documents reveal – despite a blizzard of lies by EU and Latvian officials – that the International Monetary Fund called for devaluation as part of a €7.5bn joint rescue for Latvia. Such adjustments are crucial in IMF deals. They allow countries to claw their way back to health without suffering perma-slump.

This was blocked by Brussels – purportedly because mortgage debt in euros and Swiss francs precluded that option. IMF documents dispute this. A society is being sacrificed on the altar of the EMU project.

Latvians have company. Dublin expects Ireland's economy to contract 4pc this year. The deficit will reach 12pc of GDP by 2010 on current policies. "This is not sustainable," said the treasury. Hence the draconian wage deflation now threatened by the Taoiseach.

The Celtic Tiger has faced the test bravely. No government in Europe has been so honest. It is a tragedy that sterling's crash should have compounded their woes at this moment. To cap it all, Dell is decamping to Poland with 4pc of GDP. Irish wages crept too high during

the heady years when Euroland interest rates of 2pc so beguiled the nation.

Spain lost a million jobs in 2008. Madrid is bracing for 16pc unemployment by year's end.

Private economists fear 25pc before it is over. Spain's wage inflation has priced the workforce out of Europe's markets. EMU logic is wage deflation for year after year. With Spain's high debt levels, this is impossible.

Either Mr Zapatero stops the madness, or Spanish democracy will stop him. The left wing of his PSOE party is already peeling off, just as the French left is peeling off to fight "l'euro dictature capitaliste".

Italy's treasury awaits each bond auction with dread, wondering if can offload €200bn of debt this year. Spreads reached a fresh post-EMU high of 149 last week. The debt compound noose is tightening around Rome's throat. Italian journalists have begun to talk of Europe's "Tequila Crisis" – a new twist.

They mean that capital flight from Club Med could set off an unstoppable process.

Mexico's Tequila drama in 1994 was triggered by a combination of the Chiapas uprising, a current account haemorrhage, and bond jitters. The dollar-peso peg snapped when elites began moving money to US banks. The game was up within days.

Fixed exchange systems – and EMU is just a glorified version – rupture suddenly. Things can seem eerily calm for a long time. Politicians swear by the parity. Remember John Major's "soft-option" defiance days before the ERM blew apart in 1992? Or Philip Snowden's defence of sterling before a Royal Navy mutiny forced Britain off the Gold Standard in 1931.

Don't expect tremors before an earthquake – and there is no fault line of greater historic violence than the crunching plates where Latin Europe meets Teutonia.

Greece no longer dares sell long bonds to fund its debt. It sold €2.5bn last week at short rates, mostly 3-months and 6-months. This is a dangerous game. It stores up "roll-over risk" for later in the year. Hedge funds are circling.

Traders suspect that investors are dumping their Club Med and Irish debt immediately on the European Central Bank in "repo" actions.

In other words, the ECB is already providing a stealth bail-out for Europe's governments – though secrecy veils all.

An EU debt union is being created, in breach of EU law. Liabilities are being shifted quietly on to German taxpayers. What happens when Germany's hard-working citizens find out?

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Guest KingCharles1st

The answer is/was sooo simple- strict import controls, less easy labour transfer, impose senisible regulation on financial industries and free up building regulations and allow more land to be built on, keeping in mind new regulations that impose sensible minimum sizes on dwellings.

Oh no, we have to be the World's bitch instead- thanks Gordon you complete tosspot

Edited by KingCharles1st

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My thought is whether joining the euro is part of the socialist intent of the government. It matters not if it is sensible or whether it will work, as they will follow the doctrine of their political ideology come what may.

If the euro goes hand in hand with our slave box, pikey-next-door social inclusion then they will engineer it so it has to happen.

TFH

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Guest KingCharles1st
My thought is whether joining the euro is part of the socialist intent of the government. It matters not if it is sensible or whether it will work, as they will follow the doctrine of their political ideology come what may.

If the euro goes hand in hand with our slave box, pikey-next-door social inclusion then they will engineer it so it has to happen.

TFH

Interestingly, IF (enter abusive prefix here) Gordon (enter abusive suffix here) were to take us screaming into the Euro and everything else that would eventually go with it, would that mean he would automatically get a go at being the head of the EEC?

Now that would really appeal to his megalomania, and put him on a more level playing field with Obama, he couldn't resist that now could he..?

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Sorry cant click the link, if I try to enter the guardians website, my computer automatically shuts down for my own safety.

Aha. Computer says no !

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Will Hutton is a very annoying t*at . Who does he work for the work foundation??? who pays for that????

We are not going to be joining the euro , things would be even worse . Things are easing slightly here , all anyone can do is keep your head down and look after number 1. Pull the ladder up jack , I m alright.

Dont believe any thing you read in newspapers.

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Can someone please explain to me why people are still talking about the UK joining the Euro when :

1. The UK economy doesn't meet the criteria for entry, and will not do so for many years.

2. Senior European politicians have already said it couldn't happen for this reason.

3. The UK public are firmly against it, as are the Tory party who now lead the polls.

4. It is clearer and clearer that screwed as the UK is, things would be worse if we'd been in the EU.

Why waste time discussing this? - it won't happen.

I'm in Ambrose' camp. The Euro is as doomed as the pound, the Krauts will not like it when they realise the banks are bundling up all the worthless PIGS debt and dumping it on the ECB, and they won't pay IMO. I wouldn't like to be a German finance minister when it's revealed that they knew what was happening.

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Will blundering in the dark as usual. The Germans won't come to the rescue of his BTL empire. One of the first things they will want is a "sane" housing market in the UK. Can't have that can we ;)

Edited by rover2000

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Judging by the comments, even Guardian readers are beginning to understand what a shambles we are in

Good point. This is the first time I can remember for a long time that the debate on a newspaper website was more interesting than on here.

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Will Hutton = Grauniad Euro fanatic.

His conditions for joining require any of the following to be correct;

1. UK about to go bust so we need shelter

2. UK doing great, so right time to join.

3. Euro falling apart, need to prevent Global War

4. Global warming (always in)

5. Planning agreeable French holiday.

6. Polly Tweedie wrote pro-Euro article so he has to top her.

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Looks like the passengers on the titanic have lost faith in their captain.

There is no way we could join the Euro now, and even if we could it won't save us. We have built a large part of our economy on sand. The sooner we accept we have to trade our way out and not print money the better.

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Hasn't Will Hutton been the intellectual genius behind Nu Labour's economic thinking?

I noticed he's not willing to admit his ideas of a 'asset and knowledge' based economy have totally failed.

Assets being ever rising house prices and knowledge being knowledge of financial instruments.

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dont things go bust in Euroland then?

would joining the euro save us?

Stupid is as stupid does.

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Will blundering in the dark as usual. The Germans won't come to the rescue of his BTL empire. One of the first things they will want is a "sane" housing market in the UK. Can't have that can we ;)

Correctomundo.

Why would they want the UK join the euro. The Eurozone might just be able to surive without UK, given the strength of Germany: the world's No1 exporter, no debt, lots of saving etc.

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The collapse of the Euro will be greeted with street parties across Europe. It'll be like the end of WWII.

People being liberated from the threat of oppression by a meglomaniac superstate.

The architects of EMU thought they were breaking the pattern of the past but in fact they were just the instruments of its repetition. How happy I will be to see it all end.

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Hutton had some value when he wrote "The State We're In".

He also had some sense when writing in the BIM house mag, Management Today back in the late 1980s.

However, since being seduced as NuLab's sort of equivalent of Sir Alan Walters, Hutton has become a mindless motormouth, spouting claptrap and fiscal and economic nonsense, in his vain support of his glorious leaders.

Consiged himself to the idiot league, thereby.

:rolleyes:

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  • 285 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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