# If ireland set its own interest rates?



## z106 (16 Jul 2008)

Out of curiosity, can anyone hazard a guess out there as to what interest rates would be in ireland if we were setting our own interest rates as opposed to teh ECB?


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## Purple (16 Jul 2008)

Given that our currency would have collapsed they would probably be very high.


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## theoneill (16 Jul 2008)

I think our interest rate was around 7% before the euro. I'd say we'd be looking at 10%+ if we were outside the eurozone.


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## ccbkd (16 Jul 2008)

theoneill said:


> I think our interest rate was around 7% before the euro. I'd say we'd be looking at 10%+ if we were outside the eurozone.


 
Ouchs!!!!!!!


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## tiger (16 Jul 2008)

Even  is talking about the possibility of leaving the Euro.  Can't understand how we can even comtemplate it TBH.  What happens to all debt/mortgages, do they get converted back to the punt (or what ever we create)?


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## shnaek (16 Jul 2008)

tiger said:


> Even  is talking about the possibility of leaving the Euro.  Can't understand how we can even comtemplate it TBH.  What happens to all debt/mortgages, do they get converted back to the punt (or what ever we create)?



He always makes interesting comment, but this article was one of his weakest. Have a look at the comments on it on his website, as they give good argument against his idea that leaving the Euro would be a good idea. 

If we were to leave the Euro, money would race out of the country like rats ahead of a tidal wave. We made our bed, and we must now lie in it. If our government take the right decisions, the bed might be made a little more comfortable.


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## ClubMan (16 Jul 2008)

Many of _DMcW's _points seem to be made largely or purely so that he can come up with some catchy/witty neologism...


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## Caveat (16 Jul 2008)

..


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## z105 (16 Jul 2008)

For those....................

neologism      

   Main Entry:ne·ol·o·gism [broken link removed]Pronunciation:       \nē-ˈä-lə-ˌji-zəm\     Function:_noun_ Etymology:French _néologisme,_ from _ne-_ + _log-_ + _-isme_ -ismDate:1803             1     *:* a new word, usage, or expression          2     *:* a meaningless word coined by a psychotic   
    — ne·ol·o·gis·tic [broken link removed]  \-ˌä-lə-ˈjis-tik\  _adjective_


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## jpd (16 Jul 2008)

I would be happy if Ireland left the Euro, as long as I can keep all my savings and investments in euros. I can then sit and watch as the new punt slithers down - it will be like visiting a third-world country


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## messyleo (16 Jul 2008)

it's a bit of a useless question as if Ireland was setting its own rate the whole time, it would have been higher all along, and so the property market would not have inflated so much probably!

all hypotheticaal of course


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## z109 (16 Jul 2008)

gravitygirl said:


> it's a bit of a useless question as if Ireland was setting its own rate the whole time, it would have been higher all along, and so the property market would not have inflated so much probably!
> 
> all hypotheticaal of course


Probably not. With the major currencies of the world dropping their rates following the dotcom bust, Ireland would have followed the same course (or had a stinking recession caused by an over-valued punt).

I think it is true to say, however, that rates would be much higher now, just look at Iceland:
[broken link removed]
15.5%

(I think it is a fair comparison - island nation on the edge of Europe, small population, currency not converging with the euro, i.e. not in an exchange rate mechanism like the accession states).


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## Purple (16 Jul 2008)

What's the story with putting a few quid on deposit in Iceland?


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## shnaek (17 Jul 2008)

yoganmahew said:


> Probably not. With the major currencies of the world dropping their rates following the dotcom bust, Ireland would have followed the same course (or had a stinking recession caused by an over-valued punt).
> 
> I think it is true to say, however, that rates would be much higher now, just look at Iceland:
> [broken link removed]
> ...



And apparently support for joining the Euro has risen dramatically there too, as people are sick of the currency volatility.


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## ccbkd (17 Jul 2008)

Purple said:


> What's the story with putting a few quid on deposit in Iceland?


 
A Frozen Food Company? , You could stash it in the Frozen Veggies section!!


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## theoneill (17 Jul 2008)

An interest of 4.25% is not high. The problem was we were living in a 2% La, La land for far too long and we accepted that as *The Rate*. After a year or two of rates between 4 – 5.5% that will become the rate and we will have adjusted accordingly.

Just looking at how many people lost the run of themselves over the past few years I think there is a strong case to be made for a mandatory money & debt management subject in School.


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## room305 (17 Jul 2008)

Purple said:


> What's the story with putting a few quid on deposit in Iceland?


 
So far the interest rate would be poor compensation for the slide in the krona.

http://www.exchange-rates.org/history/EUR/ISK/G/180


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## room305 (17 Jul 2008)

tiger said:


> Even  is talking about the possibility of leaving the Euro. Can't understand how we can even comtemplate it TBH. What happens to all debt/mortgages, do they get converted back to the punt (or what ever we create)?


 
Debts would remain in Euro, I guess you could convert your debt at some stage though if your bank was willing or able to facilitate doing so.


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## Persius (17 Jul 2008)

yoganmahew said:


> Probably not. With the major currencies of the world dropping their rates following the dotcom bust, Ireland would have followed the same course (or had a stinking recession caused by an over-valued punt).
> 
> I think it is true to say, however, that rates would be much higher now, just look at Iceland:
> [broken link removed]
> ...


 
Anyone know what the rate in Denmark is? It's a small (somewhat) peripheral EU state, joined the EEC in 1973 (like us), but opted out of the Euro. It might be a better comparisson. Or at least we might be somewhere between the two


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## gradgrind (17 Jul 2008)

Denmark a probably a better economically located country than Ireland, easy access to trading partners to the south and north.

But anyway while it's not a euro country, it's currency has been pegged to the euro, so while they've a choice in what they do with interest rates they still have to base their rates on euro rates. Tend to be a little higher.


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## shnaek (18 Jul 2008)

Persius said:


> It might be a better comparisson.


I think 'optimism' is the only reason for thinking it might be a better comparison! But you are probably right, somewhere between the two would be a good comparison. Denmark has a low corporate tax rate like ourselves (albeit a higher rate). Though it differs from Ireland in being home to many multinational companies (Carlsberg! Maersk, Lego, Bang & Olufsen etc.) and in not having such an inflated property bubble as ourselves.


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## setanta1 (31 Jul 2008)

Small countries like Ireland cannot sustain an independent monetary policy - we could never set our own interest rates and we never did in reality even if we had the legal possibility of doing so. 

If we were to opt out of the Euro the only option we would have would be to re-establish some kind of a link with Sterling. Going on historical data interest rates in the Irish market would be about 1% higher than those in the UK


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## leesider29 (31 Jul 2008)

Matt Cooper had an interesting article in the times on sunday, he basically said there needs to be a debate on whether we should pull out of the euro or not. The main reasons that it has not been as beneficial as some people thought it would be (ie our biggest trading partner is still outside it) and that it is out of kilter with our economy. You would have to agree with this but i suppose the problem is how would we fare by ourselves and from what I have read here not too well!!!


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## csirl (31 Jul 2008)

The UK is not in the Euro and has a much more robust currancy than the Punt ever was, yet it is fairing much worse that Ireland and the rest of the Eurozone in the current downturn. I would guess that if the Punt returned, its interest rate would be much higher than the Sterling one and the Irish economy would be hit harder than the UK.

Sweden has faired badly out of the decision not to adopt the Euro. The relative value of their currency to the old DM has halved since the introduction of the Euro.


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## z109 (31 Jul 2008)

leesider29 said:


> Matt Cooper had an interesting article in the times on sunday, he basically said there needs to be a debate on whether we should pull out of the euro or not. The main reasons that it has not been as beneficial as some people thought it would be (ie our biggest trading partner is still outside it) and that it is out of kilter with our economy. You would have to agree with this but i suppose the problem is how would we fare by ourselves and from what I have read here not too well!!!


The UK is our second biggest single export partner (after the US), but we export more in total to the eurozone (when you add all the eurozone countries together).

We import by far most of our stuff from the UK, so they are our biggest trade partner, but this is surely not a situation we want to continue considering we are being stiffed on this? Why should we be sourcing Dutch made fruit and veg., canned products etc. from the UK instead of directly from Holland? Next time you buy something, have a look at where it originates from!


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