European Fiscal Union may be Closer.

[Terxpahseyton]

@ metatron

Best post on this forum for years. Also best post on the topic of the "Eurocrisis" I've read anywhere on the internet since the whole farce began in 2009. Congratulation to you, sir

I need more time to put that all into context, others make good points, too, but for now I agree with Winner. Well done

 

[Akka]

How the hell is France's tax rate so loopholey... I can understand that the US corporate tax code is full more of exemptions and tax breaks than actual taxes, but France? What's going on there?

Sarkozy.
He's kinda the France's equivalent of Bush.

 

[Monsterzuma]

Sure, Germany has had little to no real wage growth over the course of the last 15 years. And Flassbeck, the Financial Times and their moronic readers can show that silly graph having everybody start with their real wage level at "100" in 1999 and everybody else but Germany being so "nice" and "fair" to give themselves a big fat raise every year.
There is one tiny problem. Not everybody started at 100 in absolute terms. And unfortunatly sometimes absolute terms are what matters. Whoever has lived on like this planet in 1999 knows that German wages were considerably higher than those in Greece and Sicily and Portugal. A lot higher actually.

When the main variable being concerned with (economic growth) is itself a rate of change, it only makes sense to examine the rate of change of other variables as well.

 

[Leoreth]

Um, and why exactly? Sounds like a superficial argument to me.

 

[Marla_Singer]

How the hell is France's tax rate so loopholey... I can understand that the US corporate tax code is full more of exemptions and tax breaks than actual taxes, but France? What's going on there?

France has indeed rather low corporate taxes, however we have heavy taxes directly related to employment, especially payroll taxes.

So to sum up, taxes are cheap in France to run a business, but high to employ people in the business.

That's why I personally support Sarkozy's recent move to increase VAT in order to reduce payroll taxes. Of course this is highly unpopular but the election is already lost for Sarkozy so it's indeed the right time to take such a decision.

Yes, what France lacks to stimulate growth through production is more affordable employees for companies. It's rather insane that now in France, there's no more human serving in hotels or gas station. Indeed, you pay those services to machines giving your hotel room key or unlocking gas.

Now of course, voters will be very unhappy because their consumption is more real for them than their job opportunities. But considering how unpopular is Sarkozy currently, I guess he just thinks "haters gonna hate".

 

[Marla_Singer]

Sarkozy.
He's kinda the France's equivalent of Bush.

Probably, but in the long run he's right (at the opposite of Bush).

The whole problem of the western world is that all our economical policies consisted in the end in stimulating consumption through public debt:
- Left wing politicians proposed more welfare (paid by debt) in order to allow people to consume more.
- Right wing policians proposed more taxe cuts (paid by debt) in order to allow people to consume more.

In the end, that's the same thing, and that's what's killing us. The next French President, François Hollande, hasn't understood yet that the time of consumption driven economy is over. However, I'm not really that disturbed as both Merkel and markets will teach him that lesson once in power.

So in the end, socialist voters will feel "betrayed" by Hollande who'll get elected on stuff he won't do, but that's always like this with the French left wing.

What the French economy needs is cheap jobs for companies... but of course in a country where people still believe in class struggle you just can't get elected with that message.

 

[innonimatu]

What the French economy needs is cheap jobs for companies... but of course in a country where people still believe in class struggle you just can't get elected with that message.

Why? Why does France needs cheap jobs for companies? So that they produce more for less? And who, pray tell, will do the consumption of this increased production? Not the cheap employees, surely? Your cunning plan is to... lemme guess... export it! And its great that no one else has the same plan! I mean, no one else is talking about increasing exports to solve the crisis, surely?

Oh, let's drop the sarcasm: everyone is doing it. And btw, seeing as Sarkozy has justified the VAT increase also as a way of discouraging consumption of imported products, how are the other countries with commercial deficits in the EU supposed to export? Where to? Mars, perhaps, as some economists (there are a few who aren't useless) sarcastically suggested? Because the exporters into the EU are not going to leave the race to the bottom either to become importers.

Everyone in the world wants to produce more, pay less to employees, and export. Cunning plan indeed! We're being run by Baldricks. Capitalism is saved!

Oh, sorry, I did say I was dropping the sarcasm.

 

[metatron]

[...]

 

[Mise]

Metatron, the point wasn't that Germany suddenly got a current account surplus after the Euro or that Portugal and Spain suddenly plunged into trade deficits - people aren't stupid enough to think that Germany had no exports before the Euro or that Spain was the great industrial powerhouse of Europe in 1999. Rather, the point is that the Euro was based around the idea that surplus countries like Germany and deficit countries like Spain would converge, so that they both had balanced trade. Convergence was central to the foundation of the Euro; it was supposed to come about naturally and necessarily from monetary union. But that didn't happen, as every single one of your charts amply demonstrates.

 

[Marla_Singer]

Why? Why does France needs cheap jobs for companies? So that they produce more for less? And who, pray tell, will do the consumption of this increased production? Not the cheap employees, surely? Your cunning plan is to... lemme guess... export it! And its great that no one else has the same plan! I mean, no one else is talking about increasing exports to solve the crisis, surely?

How's that a problem? All those emerging markets are consuming more than ever. They can import more than they currently do.

Currently the problem is that old economies only consume and new economies only produce. It's in the interests of everyone to balance things out.

 

[Marla_Singer]

the point is that the Euro was based around the idea that surplus countries like Germany and deficit countries like Spain would converge, so that they both had balanced trade. Convergence was central to the foundation of the Euro; it was supposed to come about naturally and necessarily from monetary union. But that didn't happen, as every single one of your charts amply demonstrates.

Mise you're misleaded here. The convergence which was central to the foundation of the euro was about public debt, deficit and inflation. It has never been about international trade.

It's actually the crisis which made explode sovereign debts, which in turn destabilized the eurozone. The euro crisis isn't the cause of the debt crisis, it's actually the other way around.

 

[Quackers]

I am terribly sorry that i didn't reciprocate the typically kind, considerate and well informed attitude regarding Germany and everything German that is so widespread in England*. I'm sorry. I tried.

*No need to correct me. People might phrase it like that on purpose. ;-)

Ahh yes I'm well aware every German on this board still has a strawmen view of British views on Germany...

Jeeze, another myth. The legend that only England is anti-EU and that the lovely little nations of Scotland and Wales can't wait to be gobbled up by the EU..

 

[Traitorfish]

Ahh yes I'm well aware every German on this board still has a strawmen view of British views on Germany...

Jeeze, another myth. The legend that only England is anti-EU and that the lovely little nations of Scotland and Wales can't wait to be gobbled up by the EU..

Or, equally, that British opposition to the EU exists solely in the chest-thumping Anglo-chauvinist form which happens to receive the most attention today. To take only the most obvious counter-example, our fellow posters will recall that Old Labour, with two of its major electoral heartlands in South Wales and Central Scotland, generally possessed an anti-EU orientation. (An orientation briefly revived by the short-lived Scottish Socialist Party, which would suggest that it still has legs.)

 

[really]

Mise you're misleaded here. The convergence which was central to the foundation of the euro was about public debt, deficit and inflation. It has never been about international trade.

It's actually the crisis which made explode sovereign debts, which in turn destabilized the eurozone. The euro crisis isn't the cause of the debt crisis, it's actually the other way around.

While the implementation of the Euro had very specific goals around convergence of debt, deficit, inflation it is also part of a wider goal of the convergence of living standards etc across all members.

Transfer payments like the Common Agricultural Policy are one not particularly efficient way of doing this but there were other schemes to address structural unemployment, infrastructural deficits or urban decay. All these schemes aimed to alter countries economies in some way.

 

[Mise]

Mise you're misleaded here. The convergence which was central to the foundation of the euro was about public debt, deficit and inflation. It has never been about international trade.

It's actually the crisis which made explode sovereign debts, which in turn destabilized the eurozone. The euro crisis isn't the cause of the debt crisis, it's actually the other way around.

What Really said. They are all inextricably linked. Indeed, metatron's whole thesis is that the trade imbalances within the Eurozone are a direct result of negative net debt (whether public or private), caused by overconsumption. But here you have the problem: the Eurozone was supposed to converge on public debt, it was supposed to converge on public deficits, it was supposed to converge on inflation, but on all those things it has failed to do that. Metatron believes that trade imbalances are caused by debt and gov't deficits; well, fine, reframe the debate as one of debt instead of trade balances, but that doesn't disprove those British authors who said that convergence wouldn't happen without fiscal transfers. Because convergence didn't happen.

 

[Marla_Singer]

Convergence did happen, but everything has been messed up by the damn' crisis, which did hit countries in different ways.

It doesn't prove any "failure of the euro to make converge Europe", it just proves that the crisis has lead to unexpected consequences.

And as a matter of fact, they are many overgeneralization in the mainstream press that just doesn't make sense. The whole idea of a virtuous North facing an overspending South is just a myth. Italy is less indebted now than it was 20 years ago. On the other side, Germany actually got indebted at the same pace as France. As for Spain, it has actually very small national debt (but does suffer of strong deficits). And eventually Britain (which I guess is supposed to be Northern) is actually the country in the worst shape among the Euro big 4.

All this doesn't prove that "Europe is too different to share a common market", it only proves that we're facing since 2008 a strong economical earthquake with multiple repercussions. The only thing relevant for the future is to readapt to the new situation. That's all.

 

[Terxpahseyton]

I have just fallen in love with this thread.

 

[metatron]

Metatron believes that trade imbalances are caused by debt and gov't deficits;

I did clearly state that i consider sovereign debt fairly irelevent multiple times by now.

I do see private debt as a key factor. But the root cause in my book would be different attitudes to consumption and different incentives for consumption, savings and investment (in dwellings and the like on the one hand and in increasing productivity on the other hand).

People with different fundamental attitudes in different environments don't converge all that well, no matter if they share a mutual monetary policy or not.
A totally anti-Keynesian thought, isn't it?

 

[Akka]

Probably, but in the long run he's right (at the opposite of Bush).

No, he's quite not right, and he's been an unmitigated disaster (though not to the extend of Bush) as a whole.

 

[Marla_Singer]

No, he's quite not right, and he's been an unmitigated disaster (though not to the extend of Bush) as a whole.

Well, to clarify my position. He indeed was wrong in his economical choices at the beginning of his mandate, however I do believe his current stance will be proven right with time.

It's not on his economical choices that I'm irritated by Sarkozy, it's more on his societal positions that I have a severe problem (roms, foreign students, obsession for islam, constantly trying to find scapegoats for everything, etc.).