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20 years of the € - winners/losers

Discussion in 'Off-Topic' started by ori, Feb 25, 2019.

  1. ori

    ori Repair Guy Super Moderator

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    Some neighbors of mine at the Center for European Policy, a (lets say conservative) think tank dedicated to the tradition of economic policy along the Freiburg school of economics just issued an attempt at pinpointing who profited from the € and who did not - looking at eight € countries (Germany, France, Italy, Spain, Netherlands, Belgium, Greece and Portugal). Their conclusion is not likely to endear the € to anyone really, but here it is:

    While not terribly surprising (at least in general terms - and the specifics should be taken with a few truckloads of salt i guess) the fact that one of the more Merkel friendly think tanks essentially states that apart from Germany no one really benefits from the € is pretty interesting. So what to make of it?
     
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  2. Lexicus

    Lexicus Deity

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  3. stinkubus

    stinkubus Emperor

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    Those numbers seem dubious, to be quite frank. I'm not current enough on modern methods to have a strong opinion, but the paper consistently references computer modelling and algorithims to which no link is provided. This is a big red flag, imo. I'm also assuming this paper was self published and not peer-reviewed which honestly makes it less than worthless.

    Let's take the authors at face value. GDP in 1997 for Italy was $1.2T, in 2017 $1.93T. Which represents growth averaging about 3% per annum. The paper is suggesting, in the absence of the euro, that Italy would increase GDP to roughly $2.1T by 2017. This would require average annual growth of 4.5% which seems well outside the bounds of realism.
     
    Last edited: Feb 25, 2019
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  4. Hrothbern

    Hrothbern Deity

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    In The Netherlands the positive value is estimated at between 1% and 2% of GDP
    That is on average during that 1999-2017 period 7 and 15 billion euro per year... is between 140 - 280 billion over that period.
     
  5. Hrothbern

    Hrothbern Deity

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    Any link to details or details how those Numbers are calculaties, what assumptions ?

    Would also be interesting what the model he used calculaties for the period 1990-1999
    During that period the eurozone is in practice already there
     
  6. Lexicus

    Lexicus Deity

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    The numbers don't seem dubious to me at all. I haven't read much of the paper yet but the movements (no idea about the numbers) seem consistent with what I know, in broad outline, about the net positions of the various Eurozone countries. Germany has been accumulating net financial claims on most of the other Euro users.

    This is the description of the methodology of the paper and how it generated the aggregate numbers:
    I would say that it's unlikely that the average German citizen is 23,000 Euros richer than she would be without the Euro. My guess is that most of that extra wealth is concentrated at the top and in particular professions (like financial services, ahem).
     
  7. ori

    ori Repair Guy Super Moderator

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    I linked to the paper they put out - unfortunately while they do talk about methodology it is a bit sparse on details and beyond that 20 page pdf they do not offer more - given their summary they defined some kind of basket of other non-€ countries whose weighted GDP behaved similiar to the country of interest (Netherlands for example) up to 1996 and then compared the GDP growth of that synthetic "country" with that of the Netherlands - there are a rather large number of assumptions in there to lead you to a € effect, although the general gist of it might actually work out - in the end though it is more of a political publication than a scientific analysis based on verifiable numbers I guess...

    For the Netherlands they compare GDP growth vs a synthetic country consisting of Denmark (highly weighted), New Zealand, Singapore and Japan - the major problem there is that using weights like this allows for quite some posthoc adjustments to chose the outcome, however if one makes the major assumption that they did not select the countries and weights to secure the published outcome but looked at it atleast semi-agnostically it might actually get you into the right ball park.
     
  8. stinkubus

    stinkubus Emperor

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    Please see the quick and dirty math I edited into my original post. In order for Italy, in the absence of adoption of the Euro, to be in the position the authors claim they would've needed to average 4.5% GDP growth per annum for two consecutive decades. Not plausible in a "mature", first-world economy, imo.
     
  9. metatron

    metatron unperson

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    Ori you do realise that we are at an impasse of biases here? The fundamental hook of the (127 times stale) argument is that we are all good liberals (and that greek nepotism is made of fairy dust).
    This is at odds with the political orientation of the think tank.
    Like, we're generally not supposed to consider them to be competent enough to handle, you know... numbers.
    But since the argument is convenient enough here we are supposed to.
    Arguably we have to choose a status for a cake here.
     
  10. Lexicus

    Lexicus Deity

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    Italy is not really a "mature" first-world economy, though. It's like half mature first-world and half agrarian developing-world.
     
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  11. stinkubus

    stinkubus Emperor

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    So is the model assuming the agrarian areas rapidly industrialized or something? Italy is a G8 member, FWIW.

    I honestly don't even disagree with the author's premise, but the dramatic (and in at least some cases less-than-plausible) figures coupled with the opacity surrounding their methods has me thinking this is some bought and paid for anti-EU propaganda.
     
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  12. metatron

    metatron unperson

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    Erm... that statement is actually more true for the US than for Italy.
     
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  13. Kyriakos

    Kyriakos Alien spiral maker

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    It wont even take a think tank to guess what will happen to germany when tarrifs are introduced again.
     
  14. Lexicus

    Lexicus Deity

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    ori called the authors of the study "one of the more merkel-friendly think tanks" so I ruled out that it was anti-EU propaganda.
     
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  15. Hygro

    Hygro soundcloud.com/hygro/

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    Lexicus, El Machinae, and I are moths to the flame of this thread :lol:
     
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  16. stinkubus

    stinkubus Emperor

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    Germany is explicitly cast as the villain in this story.
     
  17. Hehehe

    Hehehe Emperor

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    This think tank certainly isn't the only one to suggest this, and I'm inclined to agree with them. I've been reading Geopolitical Futures and it's predecessor Stratfor for a long time, and they've suggested this as well. I guess I should also note that in terms of benefiting from the Euro, I believe Finland is neutral or slightly positive.

    The Eurozone has a lot of different types of economies, and tying them all together under a single currency with no centralized control was, in my opinion, problematic. And I'm not saying we should blame Germany, it's just that German economy is so competitive that many southern economies don't stand a chance against Germany. The way to mitigate this competition would have been for those countries to have their own currencies, or by Germany paying them (transfer of wealth from prosperous areas to the less prosperous areas). Of course, I realize that the latter one is politically impossible.

    It's a shame too, because I'm a fan of the European project. I think that European countries have a lot to gain from closer cooperation, it's just that the way we've gone about it is, in my opinion, less than ideal. The common currency might have been a little too ambitious of a project.
     
  18. Lexicus

    Lexicus Deity

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    And? I know nothing about this think tank, never heard of them before looking at this thread, but ori's characterization doesn't strike me as implausible after a bit of poking around on their website. The headlines for the various articles and publications don't seem to reveal any overt ideological bias or line.

    Indeed, looking up their parent organization:
    Stiftung Ordnungspolitik (German: [ˈʃtɪftʊŋ ˈʔɔʁdnʊŋspoliˌtiːk]) is a nonprofit organization dealing with the ordoliberal tradition of the Freiburg school of economics. It strives to maintain and further develop ordo-economics based on the ideas of Walter Eucken and Friedrich August von Hayek.

    suggests that they would be if anything ideologically pro-EU given that the EU itself has been interpreted as the apotheosis of the ordoliberal idea: the creation of a constitutional order of private property that would be immune from majoritarian/democratic political challenge.


    I've already made some juicy posts, put your wings where the fire is already
     
  19. uppi

    uppi Deity

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    So to arrive at the numbers for France the "basket" of "similar countries" consists of the UK and Australia and that's it. Do they expect anybody to take this seriously?
     
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  20. luiz

    luiz Trendy Revolutionary

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    I'll take a look later when I have time, but rather interesting that they say that even if most countries lost with the Euro, Greece of all places is still a net beneficiary, however slightly.
     

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