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R K

Germany Might Exit The Eurozone - Lord Mervyn King

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Lord King also suggests that Germany, rather than Greece, might pull the trigger on the eurozone.

He writes:

Germany faces a terrible choice. Should it support the weaker brethren in the euro area at great and unending cost to its taxpayers, or should it call a halt to the project of monetary union across the whole of Europe?

The attempt to find a middle course is not working. One day, German voters may rebel against the losses imposed on them by the need to support their weaker brethren, and
undoubtedly the easiest way to divide the euro area would be for Germany itself to exit.

Mervyn King, the former governor of the Bank of England, has fired a fierce broadside at the eurozone - claiming the single currency block may be doomed.

In a new book, the man who steered Britain’s central bank through (and into) the financial crisis warned that the tensions within eurozone - and the huge debts piled up by struggling members such as Greece - can never be fully resolved.

Crucially, King also argues that any moves to harden up the single currency could also backfire. Closer political union (which would make it easier to forgive Greece’s debts) will actually inflame popular anger against the eurozone project.

As he puts it:

“Monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy at the national level on the other. This is extraordinarily dangerous.”

Breaking up the 18-member strong union may be the only way to allow Europe’s struggling Southern states to regain competitiveness.

Here’s more from King, via the Daily Telegraph (who have the serialisation rights):

The more likely cause of a break- up of the euro area is that voters in the south will tire of the grinding and relentless burden of mass unemployment and the emigration of talented young people. The counter-argument – that exit from the euro area would lead to chaos, falls in living standards and continuing uncertainty about the survival of the currency union – has real weight.

If the members of the euro decide to hang together, the burden of servicing external debts may become too great to remain consistent with political stability.

But if the alternative is crushing austerity, continuing mass unemployment, and no end in sight to the burden of debt, then leaving the euro area may be the only way to plot a route back to economic growth and full employment. The long-term benefits outweigh the short-term costs. Outsiders cannot make that choice, but they can encourage Germany, and the rest of the euro area, to face up to it.

If the members of the euro decide to hang together, the burden of servicing external debts may become too great to remain consistent with political stability.
As John Maynard Keynes wrote in 1922, “It is foolish… to suppose that any means exist by which one modern nation can exact from another an annual tribute continuing over many years.”

Here’s the full piece:

Daily Telegraph: Lord Mervyn King: ‘Forgive them their debts’ is not the answer

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The idea of a united Europe is a great idea that has been killed by arrogant politicians who forced closer and closer integration ahead of the consensus of the general population. Lets hope this is defused before it goes bang.

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and Varoufakis on the impact of EZ break up from a slightly different angle

http://yanisvaroufakis.eu/2016/02/28/is-greece-not-another-compelling-reason-to-vote-for-brexit-on-23rd-june/

To begin with, a new fault line will develop along the river Rhine and across the Alps, separating:

(i) a new Deutsch Mark zone (that will include Germany, the Netherlands, part of Belgium, Austria, Poland, the Czech Republic, Slovakia, the Baltics and Finland) mired in deep deflation – as a result of the fast appreciating new Deutsch Mark

from

(ii) a stagflationary Latin (dis-) Union (spanning France, Spain, Portugal and Italy) where currency(ies) devalue precipitously, spearheading runaway inflation with high unemployment.

Simultaneously, a second fault line will divide Eastern from Western Europe, with ultra-nationalism, toxic social conservatism and a beggar-thy-neighbour migration & economic policy mind-set taking hold in the East and making its way West-ward (boosting the chance of politicians like Marine Le Pen).

From an economic point of view, these developments will deprive Britain of a large share of its export markets, push the City of London into a deleveraging mode not seen since 2008 and, worse still, reinforce the already negative global developments in the US and the emerging markets (as the EU represents the world’s largest economic bloc) that will impose nasty secondary effects upon the UK.

From a political point of view, these same developments will create a European hinterland inimical to the values that British democrats cherish and hostile to a democratic Britain.

Edited by R K

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Europe will end up looking like this:

27ff3d1.jpg

everyone's going to want to be in the top right hand quadrant.

That's reserved for the 1%.

Edited by billybong

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Hope not.

2 hour traffic queues at borders in the Summer from France to Spain or Italy. Was a nightmare as I had to drive these routes regularly for my job.

Add in the commission paid to banks and money changers...a rip off.

EU needs reform not a return to the bad old days.

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Hope not.

2 hour traffic queues at borders in the Summer from France to Spain or Italy.

France and Spain will be perfectly entitled to come to any mutual visa/border arrangement that suits, them, including open borders.

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Merv predicting the future when he didn't predict what was coming in 2008 on his own watch?

Hmmmmmmmm

That is very unfair.

He was consistently above the 2% inflation target and having to write constant letters... once his pension fund was safely invested in inflation proof gilts and out of equities (which crashed)

Edited by RentierParadisio

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The idea of a united Europe is a great idea that has been killed by arrogant politicians who forced closer and closer integration ahead of the consensus of the general population. Lets hope this is defused before it goes bang.

Excellent point. ;)

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Lord King also suggests that Germany, rather than Greece, might pull the trigger on the eurozone.

They might. And they might not.

Actually, they most certainly won't.

Considering they pretty much run the Eurozone's industry, commerce, and currency it would be an act of nation-state suicide.

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I knew the EU was finished the moment they decided that the final solution to the Greek problem was an industrial strength dose of Neo Liberal austerity- not because they believed this would solve the problem but because it was the only course of action they could take without exposing the complicity of the European banking system as the source of the problem and as a result exposing their own cynical exploitation of the Greek population as human shields for the banking bailout they wanted to carry out but were too gutless to openly perform.

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Merv predicting the future when he didn't predict what was coming in 2008 on his own watch?

Hmmmmmmmm

At least Mr fish did not piss over your trouser legs and suggest it was not raining. Which is effecively what the central bankers have got away with - being both cause and effect.

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France and Spain will be perfectly entitled to come to any mutual visa/border arrangement that suits, them, including open borders.

Quite. Like all countries who have cross border daily traffic. I think they'll choose to keep current arrangements. Like the Irish currently have. Brexit won't change anything te. traffic on the Emerald Isle.

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