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The problem - in Ireland's case - was that German banks were recycling their surpluses not in productive investment, but into an asset price bubble which rendered Ireland's economy still less competitive.

This dysfunctionality was exacerbated by the fact that banks, as surpluses recyclers, were predisposed to "safe" financialisation or property investments rather than "risky" productive investments, or long term infrastructural investments which might have rendered the irish economy more competitive.

Thus private banks or "markets" are ineffective rebalancers of surpluses, and what is needed is an EU directed infrastructural, regional, industrial and energy policy framework.

So yes, it is a problem of too little EU, but also a lot of the wrong sort of EU intervention - such as currently being peddled by the ECB.  The EU is not an unalloyed good which should be supported in all circumstances, it needs to be pursuing different policies in a much more effective manner.

Jerome has argued that administrative competence is a form of democratic legitimacy.  The EU has been losing legitimacy because it has been incompetent.  NOT because of the British, or there being too much English spoken in Brussels.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 30th, 2011 at 06:49:21 PM EST
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It's not as if SG and DB and the landsbanks didn't have profitable investment opportunities in the home countries either. But the big money and bonuses came from speculation in real-estate and in junk bonds.
by rootless2 on Mon May 30th, 2011 at 07:18:55 PM EST
[ Parent ]
This dysfunctionality was exacerbated by the fact that banks, as surpluses recyclers, were predisposed to "safe" financialisation or property investments rather than "risky" productive investments, or long term infrastructural investments which might have rendered the irish economy more competitive.

Bingo!

This is why relying on "the market" to determine the direction of investment is wrongheaded. Which means that the EU rule that the public sector must fund itself in the money markets is barking mad. But it's written into the EU treaties (the infamous article 123).

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:34:20 AM EST
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And the EU has been becoming incompetent as a result of the Reagan/Thatcher revolution and the hollowing out of Economics education by Friedman followers (and worse) since the 1980s.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Tue May 31st, 2011 at 01:35:52 AM EST
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