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A Seuro wouldn't change that much.
This is where I think most go wrong in dismissing this project. Just having a monetary union seperate from the EMU and having that union set interest rates and the availability of finance to the needs of the periphery and start some recycling mechanisms would enable members to devalue their currency WRT the EURO, reducing the burden of debt on their people and boosting employment while improving terms of trade. This immediately eliminates many of the most oppressive aspects of the EMU on these societies. It would also better enable the members to deal with a likely financial collapse by adopting sane fiscal policies, for starters. Now other peripheral countries whose societies are suffering from inappropriate interest rates and fiscal policies would face economic pressure to join. These would become unbearable when a financial collapse occurs. And under this scenario the other peripheral countries currently suffering in a single union NOT addressing their needs would have a currency union available that is run in a manner that is appropriate to their needs.

This would lead to a situation where there are two separate currency unions with the current EMU containing the countries with export surpluses and some with deficits and another with countries that have almost exclusively consists of countries with current account deficits. But each could get fiscal and monetary policies suitable to their needs - i.e. two separate currency unions each of which much more resembles an optimal currency union than is the case now.

But the original founding countries of the SEURO Zone would have strong influence over the policies to be followed and a structure that is, inherently, left leaning due to the mutual social, fiscal and monetary policies and new entrants could be obliged to respect these policies. So Conservative led peripheral countries would be constrained in how right wing they could be due to the terms of entry. And they would join not because the liked the politics but because of massive political pressure and the alternative of chaos if they remain in the EMU.

I believe that all that is required is for two EMU members to form a separate currency union run along lines I described and for there to be a financial crisis for the above sequence of events to unfold.  

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 26th, 2016 at 01:01:59 AM EST
[ Parent ]
All of this assumes that Spain, Portugal, Italy, Greece and whatever other countries join a Seuro would actually pursue saner fiscal policies than they currently do as part of the Euro area. With the exception of Greece, their governments are all pretty right-wing right now, and have not shown any tendency to challenge ECB policies.

Euro interest rates and valuations are both pretty low for a few years now and no bar to getting their economies moving again. Devaluation can be a double edged sword, as it increase the burden of external debt held in Euros or $ or other external currencies and offers only a temporary reprieve in terms of improving cost competitiveness. Insofar as they seek to fund their deficits on sovereign debt markets, they would also have to pay a considerable risk premium on debts due to the risk of further devaluation and/or default.

Those economies do not trade with each other any more than they trade with their northern neighbours, and so wouldn't necessarily constitute an optimal currency area any more than they do now.  Ireland used to be in a currency union with the UK but had no control over Bank of England policies and the frequent bouts of devaluations and very high interest rates suffered by Sterling then did us no favours.  It made sense when 70% of our trade was with the UK, but no sense when our objective was to reduce our dependency on the UK as part of our wider project to integrate with the EU. Trade with the UK is now down to 15% and no one is even talking about re-joining a currency Union with Sterling or leaving the EU along with the UK.

The huge trade surpluses Germany runs with the rest of the Eurozone remains the key destabilizing factor and the Growth and Stability pact needs to be amended to penalise structural surpluses as much as deficits. I'm not convinced that a Seuro would address that problem much more effectively even with ongoing devaluations, and the overall effect could well be to tear the EU apart. There is no quick fix to the underlying problem - gross inequalities in economic development - which needs to be addressed at both a national and an EU level.  That was a problem before the Euro was ever created and would outlive its demise, if it comes to that.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Aug 26th, 2016 at 12:55:44 PM EST
[ Parent ]
Frank, you make good points in your first paragraphs, but then you say:
"The huge trade surpluses Germany runs with the rest of the Eurozone remains the key destabilizing factor and the Growth and Stability pact needs to be amended to penalise structural surpluses as much as deficits."

We all know it needs to be.
It will not be. Not until a crisis forces the thing to collapse. Because Germany has hugely benefitted from this (Germans may not have, but they have been told that it is because of those lazy Southerners). You say that if Greece did not leave with Syriza it never will - a much stronger similar argument should be made with the pact (Greece may eventually conclude that following the diktats is clearly disastrous, while dropping out would mostly bankrupt non-Greek banks).

So if something needs to be yet won't be, then the feared outcome will happen. Not because it is particularly straightforward for it to happen, but because you can't forever cheat arithmetics.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Fri Aug 26th, 2016 at 01:23:09 PM EST
[ Parent ]
Frank, you continue to dismiss or ignore the main arguments for having a SEURO Zone. The founders WOULD be the ones to set the basic policies of mutualism and surplus recycling and would set the terms on which other countries could join. Establishing such a union may have NO EFFECT until a collapse occurs. But then it becomes a safety net. In the event, should the EMU collapse, a country would have an option to join a currency union that had programs that addressed its needs and gave it more weight than it would have with just its old currency. Just those facts and the knowledge that each country that joins the SEURO union makes that monetary union stronger would force trade deficit countries to join.

If the EMU remains but changes, the countries that have trade deficits and remain will become the new victims in the EMU, being sucked dry by the surplus countries. That alone will give them a powerful reason to join the SEURO union, regardless of how they feel about the politics and entry requirements. As the EMU loses trade deficit countries to the SEURO union it will become pointless for Germany to remain in the EMU and it will reestablish its own new Deutschmark and quickly find just how strong it is. Meanwhile, the actual citizens of new members of the SEURO union will start to see the advantages of that system and may well elect new leaders. It is the leaders of the peripheral countries that dislike the mutual support, pro-growth polices of the SEURO union.

The most basic factor here is that, given even a two member SEURO union, designed along the lines I have outlined, events and pretty clear political and economic imperatives drive the rest of the developments until the SEURO union is the larger of the two monetary unions - or the only union remaining. As for the value of debts owed the remaining EMU members, if any, the response should be: "Lets talk!"

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Aug 26th, 2016 at 04:50:40 PM EST
[ Parent ]
The founders WOULD be the ones to set the basic policies of mutualism and surplus recycling and would set the terms on which other countries could join.
WOULD is the operative term here: there's no sign nor indication of anything of the kind to be any likely to happen, even in the eventuality of a catastrophic crisis of the EZ, so, no offense, but this is speculative fiction at this time, no matter how interesting as an intellectual exercise.
by Bernard on Fri Aug 26th, 2016 at 08:14:00 PM EST
[ Parent ]
I think we are agreed on one thing: you cannot have a stable currency Union where some countries are in permanent surplus and others are in permanent deficit.  You either have to address the structural imbalances, or one or other have to leave. The argument for the deficit countries to leave is that devaluations are less painful than internal deflationary policies. Probably the simpler solution would be for them to kick Germany out by systematically voting against everything Germany wants on the ECB Council. The problem is that none of them have the gumption to do so.

We are also probably agreed that nothing major will happen until the next big financial crisis.  That is because simple arithmetic is beyond the capabilities of our dear leaders and their instincts are to stay put for as long as they possibly can - like the frog in the cauldron of water being gradually heated up to an unsustainable level.

So we will have a continuation of current beggar thy neighbour policies and anaemic growth.  Until the next big bang.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Fri Aug 26th, 2016 at 10:27:47 PM EST
[ Parent ]
I suppose that, in the event, it is conceivable that Greece and Italy, or possibly just Greece with Cyprus and Malta could form a SEURO currency union in the days following a collapse. Were they to do so there is a chance the events I describe could unfold. Or, perhaps everyone will just want chaos and destruction. Few people have ever lost money betting on the social incompetence of our species.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 27th, 2016 at 04:09:30 AM EST
[ Parent ]
Malta is probably more likely to join Sterling than a Seuro based on trading patterns. Most trade in Europe is North South, not east west.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Aug 27th, 2016 at 12:04:35 PM EST
[ Parent ]
At least they would have a potential refuge that suited their needs.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 27th, 2016 at 11:07:06 PM EST
[ Parent ]
Why would Greece and Italy, or Greece and Cyprus and Malta be better off with a currency union than all alone?

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Aug 28th, 2016 at 01:57:39 PM EST
[ Parent ]
Combined, their currency and economy would have greater weight and be less susceptible to gaming by hedge funds. Joining the Asian Clearing Union would have other advantages than just being able to clear payments without interference by the BIS, etc. It also would offer opportunities for investment in a SEURO zone by all members of the ACU, not least because of the signal it would send about alignment, which, itself, likely would have a paralyzing effect on other members of the EMU, NATO and creditor nations.

Another large effect would be the very existence and the policies of a SEURO Monetary Union. The SEURO would almost certainly be devaluated with respect to the EURO and fiscal policies would be more favorable to growth in the SEURO economies. This would improve the terms of trade for existing northern trade partners while creating new markets in states party to the ACU.

But, presuming this was done in conjunction with a financial collapse in the EU, it would provide a refuge for other EU trade deficit nations wanting a safe harbor for their own currency and monetary policies favorable to their own needs.

But the biggest effect might well be on the perceptions of German leaders. They would be faced with the danger of having numerous trade deficit members of the EU joining the SEURO and of the EMU being reduced to a union containing mostly trade surplus countries and Germany would rightly be concerned about where that would lead. As Frank has noted, there is much that Germany could do to change its relations with Greece and Italy.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 28th, 2016 at 03:04:28 PM EST
[ Parent ]
But you are proposing to join countries of very unequal sizes. Greece would dominate a Greece - Cyprus - Malta union, and Italy would dominate an Italy - Greece union. Politically, that is unsustainable.

And Cyprus and Malta are only in the EU as a sop to the UK to compensate the addition of Germany's sphere of influence in 2004.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

by Migeru (migeru at eurotrib dot com) on Sun Aug 28th, 2016 at 03:29:00 PM EST
[ Parent ]
I think - and I've said this before, that everyone is massively overestimating the difficulty of the problem.

In order to balance the european economy,
Germany needs higher wages and higher consumption. Germany has the productivity to back those up, so they can afford it.

It bloody well has to be possible to get popular backing in Germany for a policy of "Germans should be paid more money and have more fun for the greater good". Seriously. How is that not the easiest political message in history to sell?

So basically, what is required is simply that the arguments of Keynes be translated into German and circulated in venues where Germans will actually read them.

by Thomas on Sat Aug 27th, 2016 at 06:24:24 AM EST
[ Parent ]
Persuade Germans to be frivolous and have fun?  That is a hard sell!

But I agree, that is by far the easiest solution.  Greek holidays for all funded by the German Government!  Greek retirement homes for German retirees funded by the German Government - cheaper than keeping retirees in Germany - so it can actually be sold as a thrifty policy. A European health care policy where equivalent  treatment is provided in country of residence not country of origin.  (Already applies to emergency healthcare interventions, but extended to specialist and after-care).  Allows the Greek health care industry to modernise and expand funded by the German taxpayer.

It doesn't take much imagination to make this happen, and all can be sold as a net benefit to Germans as well.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Aug 27th, 2016 at 12:15:07 PM EST
[ Parent ]
Germany's Drag - The New York Times
So Germany's fiscal obsession has a sort of multiplier effect on Europe, and indirectly on the world, that is disproportionate even to Germany's economic size. And this makes me wonder whether all the sea-change in elite opinion that we've seen will do much good, since the government that most needs to change its policies isn't listening.


Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sat Aug 27th, 2016 at 12:45:53 PM EST
[ Parent ]
Excellent suggestion, Frank! How many Germans would prefer to retire in a warmer climate where the cost of living is lower and where their very presence would be aiding the Greeks? Most will have relatives still working in Germany so they can visit Germany for Christmas and New Year or whenever they wish and luxuriate in the warmth of the Aegean or the Adriatic for most of the year. Cyprus might want some of that action as well.

The problem with implementation is simply the ability to penetrate the minds of German leaders and voters. How might that come about?

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Aug 27th, 2016 at 11:20:30 PM EST
[ Parent ]
"But that would be socialism!"  And it appears Europe has become as imbecilic over that shibboleth of idiocy as the US always has been, with a German brass band leading the parade.
by rifek on Tue Aug 30th, 2016 at 02:03:12 PM EST
[ Parent ]
But how does it help the German hereditary oligarchs retain their dominant position?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 30th, 2016 at 05:23:23 PM EST
[ Parent ]
The German hereditary oligarchs will probably own most of the hotels and retirement homes in Greece... so the benefits to Greece will be limited to increased employment and tax revenues.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Tue Aug 30th, 2016 at 06:43:46 PM EST
[ Parent ]
So by creating a foreign absentee landlord class.

I can see no way that could possibly go wrong.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 30th, 2016 at 06:59:40 PM EST
[ Parent ]
All of this assumes that Spain, Portugal, Italy, Greece and whatever other countries join a Seuro would actually pursue saner fiscal policies than they currently do as part of the Euro area. With the exception of Greece, their governments are all pretty right-wing right now, and have not shown any tendency to challenge ECB policies.
Unless the Seuro has a true fiscal union.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Aug 28th, 2016 at 01:55:41 PM EST
[ Parent ]
Unless the Seuro has a true fiscal union.
The premise of my argument is that a SEURO Monetary Union would start with significant recycling mechanisms including a shared, portable unemployment, health care and retirement scheme, and both monetary and fiscal policies suitable to the needs of trade deficit countries. Another premise is that these conditions would have to be accepted by new members seeking to join.  

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 28th, 2016 at 03:21:10 PM EST
[ Parent ]
That's the reason why I think that it is even less likely to happen than the radical reform of the treaties proposed by Stiglitz.

And I am sure that, for political and ideological reasons, as well as national and individual pride, no political leader or party will dare to prepare a second class currency union until the crisis has happened. And once the crisis happens, it will be too late...

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Aug 28th, 2016 at 03:31:10 PM EST
[ Parent ]
And once the crisis happens, it will be too late...

To the contrary, the day or the day after the collapse has occurred would be the most opportune time to put such a plan into action. The shock will be paralyzing action by most and they will be trying to figure out what they can do. Hopefully, some discussions and a general plan will have been prepared. Hopefully, Yanis Varoufakis will be involved, preferably as a senior advisor or as head of the SEURO Monetary Union, and capital controls will immediately be put into place. Then events will drive the rest. As soon as another EMU member joins the SEURO perceptions will change. And, at the least, countries that join will be joining a Monetary Union run along the lines that the EURO should have been run - for the benefit of all members. I suspect that, even before any new members join, Germany will see the threat and be forced to respond. At least the ice dam will have been broken.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 28th, 2016 at 08:09:43 PM EST
[ Parent ]
Well that would be a very different response to the way they responded to the last financial crisis, which was to double down on austerity policies.  Is there any evidence to support your conviction the response would be any different now?

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Aug 28th, 2016 at 08:37:59 PM EST
[ Parent ]
My argument is hypothetical and analytical. I am a long time admirer of H.G. Wells and his fictive utopian novels and I believe it IS possible to make contributions through such fictive approaches.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 29th, 2016 at 12:37:35 AM EST
[ Parent ]
As you know, I sometimes like to take an argument to its logical conclusion to see where it might lead to, regardless of whether that accords with conventional views of reality.  But I also like to be clear where there is supporting evidence and where what I am saying is, at best, hypothetical, and at worst, counterfactual.

In the case of your argument, you seem to be making the assumption that Southern European leaders are secret admirers of Yanis Varoufakis and are intent on ensuring that, unlike Greece, they will not allow their countries to become isolated, bullied into defeat by the Euro Group, and sold down a river.

I don't know (say) Italian politics well enough to be definitive, but I struggle to find any evidence to confirm your hypothesis. In fact, what evidence I see appears to confirm the opposite: That the hard nationalist right is in the ascendant and we are more likely to see a reversion to national currencies and nationalist/fascist policies than the creation of any grand redistributive schemes such as the Seuro.

The irony is that it turns out it was the UK, which has done relatively well out of the EU, which has been the first to call time on its participation in the European project. Greece probably had a much better cause for doing so.  But the consequence is that the EU is now in retrenchment mode and we are in the business of saving what we can rather than in engaging in new, collective, imaginative initiatives.

Even I am pushing the boundaries of political reality when I call for the development of much greater EU integration of health care, education & training, social welfare, pensions/retirement, procurement, energy sustainability and security, infrastructural development, and Governance systems even though you can make a very good rational case that such integration could deliver much greater collective benefits at reduced cost than isolated initiatives by individual member states. Thus, even though such policies would have a progressive redistributive impact, all members states could still be winners.

I am hoping that the shock of Brexit combined with the persistence of anaemic growth despite all monetary stimulus will enable a re-think.  The UK has always had a baleful influence on all community social market and integrationist initiatives, and so it's absence from the decision making process could be a positive.  However the tide may be going out on the European Project.  Merkel was the last European leader of real stature who could have made it happen, but her authority has been eroded by the refugee crisis and its impact on Germany. Hollande and Rajoy are lame ducks and the trend elsewhere is almost all in rightward, nationalist directions. What progressive movements there are are almost all marginal.

I hope I am wrong...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon Aug 29th, 2016 at 07:45:32 AM EST
[ Parent ]
I have made it abundantly clear that the most I would hope for is that the intital founders of a SEURO would actually take the steps to form such a union. The rest would be driven by events and consequences. Else the whole argument would be pointless, as most already assume it is.

As to justification, all I am arguing is that it is better to have some prepared position that is inherently left compatible into which EMU members that are unable to endure a collapse of the EURO and the chaos of again having a small economy and currency could take refuge or fall. It is, inherently, as strategy for desperate times. If it is better than nothing it will have achieved something.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 29th, 2016 at 01:42:48 PM EST
[ Parent ]
I think we're about due for a Wall St Crash Mk II, followed by a move to fascism and violent dictatorship, followed by war, which may be terminal. (Most of Europe would be reduced to a radioactive swamp.)

Isn't that how these things usually end?

Progressives tend to forget that left-leaning movements only make headway when they have the support of the bourgeoisie.

In the UK, Labour would have gotten nowhere was a movement of workers. It was the support of the upper classes that made it a viable political movement.

And then after WWI, aspirations to communism and support for the Soviet Union were a right of passage for most of the Oxbridge crowd.

Today? The Oxbridge crowd mostly want jobs in finance and/or a nice property portfolio. Organised idealism is rather hard to find.

The Parliamentary Labour Party and the Fabian Society are practically camping out of the doorstep of the Tory party. There are some vague lingering remnants of interest in Social Democracy - certainly no Socialism - but even plain old centrism is considered extremist left-wingery now.

And there's nothing new to take the place that socialism used to have. Occupy failed, mainstream progressives in the US are a wholly owned subsidiary of Washington Inc, and Trump is taken seriously as a presidential candidate.

As is Hillary.

There's very little to be optimistic about. Technologically, there's endless scope for change. But it's unlikely to happen without a convulsion that clears away the old zombie form of insane neoliberalism and replaces it with something fresher and better able to imagine and create a humane future.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon Aug 29th, 2016 at 03:29:22 PM EST
[ Parent ]
Yes.  All the "something less than a train wreck" scenarios rely on the classical liberal axiom of rational actors acting rationally, when history indicates we'll be far more likely to get, "When in danger or in doubt, run in circles, scream and shout."
by rifek on Tue Aug 30th, 2016 at 02:48:51 PM EST
[ Parent ]
Hopefully, some discussions and a general plan will have been prepared.

As Migeru pointed elsewhere, if such a plan was prepared in advance, it would raise a lot of political opposition, unless it is kept secret, which would be impossible.

And I can say I seriously doubt Yanis Varoufakis would support a SEURO union.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet

by Melanchthon on Sun Aug 28th, 2016 at 09:20:15 PM EST
[ Parent ]
Informal discussions between principals could be kept contingent, hypothetical and fairly confidential. Those involved would have to be careful not to deny the rumors, just dismiss them as mere rumors based on hypotheticals. "It is never official until it is denied."

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 28th, 2016 at 09:34:23 PM EST
[ Parent ]
It would make perfect sense for Italy or other countries faced with the prospect of the collapse of the Euro to consult with Yanis Varoufakis if he agrees. After all he almost certainly has the best grasp on all of the problems involved from his experience with Greece. And it would be impossible to distinguish whether those discussions also included a possible SEURO Union - unless a party to the discussions spoke publicly, and even then...

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Aug 28th, 2016 at 09:43:44 PM EST
[ Parent ]
Yanis Varoufakis is politically toxic as far as Europe's political and financial elite are concerned.  Anything involving him will immediately be dismissed as:
  1. academic
  2. not serious
  3. wrong headed.

So yes, if a Seuro actually emerged from any discussions involving him it would come as a complete shock to Europe's elite as they will have steadfastly ignored everything involving him. He could have been blogging about it for months and presenting academic papers on the topic, and it would still come as a shock to them.

Index of Frank's Diaries
by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun Aug 28th, 2016 at 11:39:09 PM EST
[ Parent ]
So much the better. "Europe's political and financial elite" NEED a whack up side their collective heads with a 2X4 to get their attention. Might even get some to pull their heads out of where they have so long been - though I cannot imagine how the mechanics of that metaphor might work.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Mon Aug 29th, 2016 at 12:03:21 AM EST
[ Parent ]
Agreed. His ideas would seem to be more along the line of creating a parallel currency in the deficit country, which under Lisbon is legal.
This would seem easier to organise than SEURO by an order of magnitude and make sure that most of the stimulus happens locally until such time as this currency is recognised abroad, which may be never. So that makes two advantages. Not sure how it could be gamed by the financial sector as convertibility would be restricted.

There is a possibility that in a second phase such currencies could join a SEURO I suppose, but that could not be an immediate response to a crisis.

Earth provides enough to satisfy every man's need, but not every man's greed. Gandhi

by Cyrille (cyrillev domain yahoo.fr) on Mon Aug 29th, 2016 at 06:38:58 AM EST
[ Parent ]
There is a possibility that in a second phase such currencies could join a SEURO I suppose, but that could not be an immediate response to a crisis.
That would depend entirely on the desires of the first two members of a SEURO. An Itallian 5* led government and Greece could very well decide to set up such a SEURO just for the reasons I have indicated. That step alone might bring about a change in the attitudes of the German Government which could obviate the need - or not. But the very existence of such a union would be an existential threat to Germany's current dominant position - if Germany has the wits to see that and act on it.


"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Aug 30th, 2016 at 09:52:29 PM EST
[ Parent ]
Just having a monetary union seperate from the EMU and having that union set interest rates and the availability of finance to the needs of the periphery and start some recycling mechanisms would enable members to devalue their currency WRT the EURO, reducing the burden of debt on their people and boosting employment while improving terms of trade.
"Just"

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Sun Aug 28th, 2016 at 01:54:17 PM EST
[ Parent ]
There is also a very high risk of captal flight and its consequences for the European Union: the day after a split takes place, money will flow from SEURO countries to NEURO countries, and capital controls will have to be put in place in order to prevent a collapse of the SEURO countries financial sector, with dire consequences for the EU.

"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Sun Aug 28th, 2016 at 03:20:08 PM EST
[ Parent ]

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