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EU finance rules


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#1 ckn

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Posted 11 April 2014 - 08:37 AM

I don't get this one.  I heard it the other day on the news and I didn't understand it then either.  So... Germany are running the risk of being fined for being too successful?  Surely, if German goods are so valuable, their companies are so good and reliable, that people and companies in other countries want to buy their goods then why is that anyone else's business?  It just stinks of rank hypocrisy from countries that have ruined their own manufacturing and exporting base through mis-management and underinvestment.  Surely, that's what capital markets are supposed to be about, rewarding good performance?

 

It's not as if Germany were one of these near slave labour countries that can sell cheap because they have virtually no labour or social protection costs, the German labour market is in a far better position than the UK's and they look after their workers a good bit better than we do as well.

 

I do understand the argument that they're exploiting the Euro, them being a strong country benefiting from a Euro market priced to reflect the weaker performance of most Euro members, but surely everyone knew that in bad times the Germans would keep the Euro alive and in good times the poorer countries would benefit from German strength, they signed that bit of paper that put them in the Euro, their fault if they didn't think it through.  It'd be a bit like the top RL clubs being fined because the poorer clubs couldn't compete with them.


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#2 stimpo-and-kat

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Posted 11 April 2014 - 09:12 AM

Not joining the Euro was the best thing labour ever did to give them credit. With a decentralised economic policy this situation I feel was always destined to happen.

#3 JohnM

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Posted 11 April 2014 - 11:09 AM

I think you may have started something with this!!    It'd be a bit like the top RL clubs being fined because the poorer clubs couldn't compete with them.


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#4 ckn

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Posted 11 April 2014 - 11:23 AM

Not joining the Euro was the best thing labour ever did to give them credit. With a decentralised economic policy this situation I feel was always destined to happen.

I'm not a fan of the Euro, it's just not right for the UK for many reasons.  BUT, right now, we'd be in a substantially better financial place it if we were a Euro country, we're currently getting penalised in the markets for having such a strong pound while the Germans are getting the bonus of a Euro dragged down by 2/3 of Eurozone countries being shambolic wrecks.  Our exports are overpriced right now while the German goods are underpriced.

 

I was listening yesterday on the radio to an article about two of the last three deep mines being closed in Britain mainly because the coal markets are in US$ and it's cheaper to buy foreign coal than get it from seven miles up the road simply because of the strong pound right now.  If we were a Eurozone country then we'd be able to sell that coal at a far more economically viable price.


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#5 Northern Sol

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Posted 11 April 2014 - 12:22 PM

It's fairly simple really. It's a case of regional policy within a multi-nation currecny union.

 

In a country like the UK, there is one central government to whom everyone pays taxes (unless Salmond gets his way with fiscal independence) which are then indirectly redistributed to the regions via government spending. Hence any region that does particularly well will end up paying more tax to the central kitty; any region with a particular unemployment problem or poverty issues gets cash injected automatically through the welfare system. 

 

A cliched but not entirely untrue example of this is that strong growth in London is automatically paying for cash injections via the giro system in sluggish areas such as Liverpool. The Eurozone doesn't have this system.

 

Added to which Germany has done very well out of the Euro, the weakness of the southern European countries has kept the Euro well below where the old Deutchmark would have been thus Germany has exported far more than it would without any Euro.



#6 Northern Sol

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Posted 11 April 2014 - 12:25 PM

I'm not a fan of the Euro, it's just not right for the UK for many reasons.  BUT, right now, we'd be in a substantially better financial place it if we were a Euro country, we're currently getting penalised in the markets for having such a strong pound while the Germans are getting the bonus of a Euro dragged down by 2/3 of Eurozone countries being shambolic wrecks.  Our exports are overpriced right now while the German goods are underpriced.

 

I was listening yesterday on the radio to an article about two of the last three deep mines being closed in Britain mainly because the coal markets are in US$ and it's cheaper to buy foreign coal than get it from seven miles up the road simply because of the strong pound right now.  If we were a Eurozone country then we'd be able to sell that coal at a far more economically viable price.

You seem to have it backwards. We have devalued the pound. The strong pound is not an obstacle to growth. The IMF have predicted that the UK will grow at 2.9% over the next year, the fastest rate in the developed world.

 

The reason why British coal is uncompetitive vis-a-vis US coal is that our coal is deep mined with mines running miles below the surface whereas theirs is scooped out with a crane.



#7 Northern Sol

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Posted 11 April 2014 - 12:29 PM

 

It's not as if Germany were one of these near slave labour countries that can sell cheap because they have virtually no labour or social protection costs, the German labour market is in a far better position than the UK's and they look after their workers a good bit better than we do as well.

 

Largely because of historic German growth not because of current German growth. Germany grew very, very quickly from 1945 to the late 70s and opened up a big lead over the UK. German growth was poor during the 80s and reunification really didn't help matters. The fact is that according to projections we will overtake Germany as the most populated country in Europe and the largest market.



#8 ckn

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Posted 11 April 2014 - 12:57 PM

You seem to have it backwards. We have devalued the pound. The strong pound is not an obstacle to growth. The IMF have predicted that the UK will grow at 2.9% over the next year, the fastest rate in the developed world.

 

The reason why British coal is uncompetitive vis-a-vis US coal is that our coal is deep mined with mines running miles below the surface whereas theirs is scooped out with a crane.

There's a difference between net export surplus as the main article describes and growth.  We'll still have a massive public sector borrowing deficit, large net export deficit and growing debt.


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#9 ckn

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Posted 11 April 2014 - 12:59 PM

Largely because of historic German growth not because of current German growth. Germany grew very, very quickly from 1945 to the late 70s and opened up a big lead over the UK. German growth was poor during the 80s and reunification really didn't help matters. The fact is that according to projections we will overtake Germany as the most populated country in Europe and the largest market.

You could have the population of China but if you don't improve your manufacturing base and export potential then you're just going to end up importing even more than you export.


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#10 JohnM

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Posted 11 April 2014 - 02:32 PM

The EU  used to redistribute money from the richer countries to the poorer ones with huge infrastructure investments in Greece, Portugal and more

 

The main goal of regional policy in the European Union is economic and social cohesion. This is based on financial solidarity, whereby more than 35 % of the Union's budget is transferred to the less-favoured regions (EUR 213 billion in 2000-06). Those regions in the Union lagging behind in their development, undergoing restructuring or facing specific geographical, economic or social problems are to be put in a better position to cope with their difficulties and to benefit fully from the opportunities offered by the single market.  See http://europa.eu/leg...s/g24203_en.htm

 

Doesn't seem to have  evened things out much and the Euro seems to take away  some of the tools that countries might use to balance things out- mainly exchange rates and interest rates


Edited by JohnM, 11 April 2014 - 03:08 PM.


#11 Northern Sol

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Posted 11 April 2014 - 09:52 PM

You could have the population of China but if you don't improve your manufacturing base and export potential then you're just going to end up importing even more than you export.

And?

 

What would that give you sleepless nights?

 

I thought an obsession with trade deficits died out in the 80s.



#12 Northern Sol

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Posted 11 April 2014 - 09:53 PM

There's a difference between net export surplus as the main article describes and growth.  We'll still have a massive public sector borrowing deficit, large net export deficit and growing debt.

There is a terrific difference. Growth is the important statistic featured in the headline. Net export surplus is a detail tucked away on page 23.



#13 ckn

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Posted 11 April 2014 - 10:22 PM

There is a terrific difference. Growth is the important statistic featured in the headline. Net export surplus is a detail tucked away on page 23.

For me, that's a modern fallacy concentrating on "growth" rather than exports.  Growth means simply that we're making more money as a country, we abandoned tracking export/import figures when we realised we'd ballsed up so badly in this regard that we're unlikely to be a net exporter anytime soon, our "growth" typically comes from the City and goes into the pockets of the City.  Just like the net job creation/loss segments on the news most nights, with genuine stories about real jobs made and lost, they were abandoned when it became politically expedient to manipulate the figures away from the truth.

 

If we're exporting more than we import, that typically means we're manufacturing enough high quality goods that foreign countries want, with the jobs to go with it.  If we grow our GDP a bit, that typically means that the City has done rather well, just because companies make more money does not mean it cascades downwards, it usually doesn't.

 

Just like we're fixated with rises or falls in the FTSE100/250 when realistically they're just manipulated by gamblers in suits who will happily exploit everything they can to make the day's figures a wee bit better.


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#14 Northern Sol

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Posted 11 April 2014 - 10:37 PM

For me, that's a modern fallacy concentrating on "growth" rather than exports.  Growth means simply that we're making more money as a country, we abandoned tracking export/import figures when we realised we'd ballsed up so badly in this regard that we're unlikely to be a net exporter anytime soon, our "growth" typically comes from the City and goes into the pockets of the City.  Just like the net job creation/loss segments on the news most nights, with genuine stories about real jobs made and lost, they were abandoned when it became politically expedient to manipulate the figures away from the truth.

 

If we're exporting more than we import, that typically means we're manufacturing enough high quality goods that foreign countries want, with the jobs to go with it.  If we grow our GDP a bit, that typically means that the City has done rather well, just because companies make more money does not mean it cascades downwards, it usually doesn't.

 

Just like we're fixated with rises or falls in the FTSE100/250 when realistically they're just manipulated by gamblers in suits who will happily exploit everything they can to make the day's figures a wee bit better.

If it's a fallacy then it's one that economics has had since we've been able to measure GDP. Growth means that we are making more money as a country - yes. And that's why it's the most important stat. It's like the score in the grand final. If you win on the score, nobody cares that your opponents got more offloads away and made more tackle breaks. That kind of stuff is nice and helps you win games but if you are winning games without these things consistently then perhaps they aren't as important as everybody else seems to think.

 

The trade deficit and manufacturing sector are just like this. People were very worried about them in the 80s, but since then we've been growing strongly (relative to the West European norm) so perhaps it is time to stop giving so much emphasis. 






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