# Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our economy



## Smart_Saver (7 May 2009)

See article from D. McWilliams in  todays Independent.



Interesting reading.
Personally I'm not sure. If we drop out can we get back in later once more? That would be my worry.
feedback would welcome or other suggestions


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## Padraigb (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

McWilliams used to be an economist.

Now he is a controversialist in the entertainment industry.


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## Calico (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

I think he's right to float the idea.

I don't understand why our euro membership is not up for debate. It clearly contributed to our current mess in giving us artificially low interest rates over the years, and it is now severely restraining our ability to fix ourselves.

What exactly did the euro ever do for us anyway, except make going on holidays easier along with seeing how much we get ripped off compared to our european neighbours? 

People think that being in the euro has saved us, but it is hard to see how much of a worse state we could be in. Maybe 17% unemployment next year may be the reality check. 

It's just a pity we have to reach that point (or worse) before ~hopefully~ doing the obvious.


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## Bank Manager (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*



Padraigb said:


> McWilliams used to be an economist.
> 
> Now he is a controversialist in the entertainment industry.



Agreed - but he's probably also peeved that GL has been selected as a political candidate - and he hasn't ....  ego can be a terrible thing ...


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## elefantfresh (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

So whether or not he has an ego or you like/dislike him, does he not make a few points there?


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## Bank Manager (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

He's makes loads of points - as does every other commentator at the moment - what we can't seem to get is a general agreement from them all (the experts) on any of the points ...


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## Simeon (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*



Padraigb said:


> McWilliams used to be an economist.
> 
> Now he is a controversialist in the entertainment industry.



Well said. If you followed Ginger's advice to  buy oil/gold at various times you would now be worse off than you are . Unless you always got out at the top. Why he (and George Lee) didn't coin it in their chosen field is beyond me. Let's face it, journalism/politics is not the goldmine that "backing your hunches" is .......... especially when these two keep telling us that they get it right consistently. On a somewhat different note, Brendan McWilliams was a forecaster with a far better record than his offspring.


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## Smart_Saver (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

Lookit - can ye leave yer personal preferences on McWilliams out of this. Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.
E.g. here are a couple of questions.
If we did drop out - would all banks go under?
If they did waht happens to ordinary man on street with his mortgage??  
Is it taken over by someone else and can they then charge whatever rate they want on the mortgage??
What happens to your savings ?


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## Padraigb (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

If we dropped out of the euro our guarantee on bank deposits would be worthless (more exactly, worth less) and that would probably tip the balance and collapse the banks.

Our international debts would increase in line with any fall in value of a re-instated Irish pound, and our capacity for further borrowing (including rollovers) would all but disappear or be unaffordably expensive.

Whatever support we get from the EU and the ECB to help us address our difficulties would be lost.

Need I go on?


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## Simeon (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*



GoMayoGo said:


> Lookit - can ye leave yer personal preferences on McWilliams out of this. Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.
> E.g. here are a couple of questions.
> If we did drop out - would all banks go under?
> If they did waht happens to ordinary man on street with his mortgage??
> ...



In answer to your above four questions:
 No one knows.
 No one knows.
 No one knows.
 No one knows.
 The pundits can yak 'til they're blue in the face ........ but no one knows!


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## Sunny (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

Here is a good article on the subject.

http://www.voxeu.org/index.php?q=node/729

For what its worth, I don't think anyone could seriously suggest that Ireland leaves the EURO. Only time it will happen is if the entire euro project collapses.


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## Mpsox (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

I won't go into the economic plusses and minuses of being in the € (or not), but the cost of the system changes and impact on businesses at a time when many are struggling is not to be recomended

Secondly, if we want to become less dependent on the UK as an export market and export more to Europe, surely asking Irish exporters to factor in exchange rate risk when dealing with EU customers is not to be recomended?


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## Bank Manager (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*



GoMayoGo said:


> Lookit - can ye leave yer personal preferences on McWilliams out of this. Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.
> E.g. here are a couple of questions.
> If we did drop out - would all banks go under?
> If they did waht happens to ordinary man on street with his mortgage??
> ...



Fair enough - as another poster has already stated - not sure anyone could really answer any of your questions with absolute certainty - DMcW makes fair points - but I think he glosses over the many benefits Ireland inc has obtained from EU membership (part of which is our membership of the euro) - infrastructural funding, agri support - lower interest rates etc - as with all things in life there's always another side - and I think he's hit on most - obviously our adoption of the euro means we have lost monetary control (e.g. we can't move interest rates to suit our economy - but must adopt what suits our 'bigger' neighbours - but we knew this going in...).

Personally - I think the debate is somewhat academic - as I can't really see us leaving it at this stage - given the wider worlds view of Ireland at the moment would anyone really want to purchase our currency?  I think not - and if that were the case I think we can all work out what the consequences would be.

That's my 'tuppence worth - for what worth ...

Regards,

BM


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## darag (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

It's a silly suggestion.  I know he is smarter than that so I suspect the "controversialist in the entertainment industry" is a fair call.  He probably can expect a few spots on TV from the piece.

He ignores its immediate effect of effectively excluding the government from the bond market.  This is in a year when when it needs to raise at least 25 billion.  The majority of the benefits he extols are only as a result of the forced conversion of Euro denominated government bonds into bonds denominated in rapidly devaluing new punt.  This would be considered nothing less than default and would have Ireland included in the dubious company of failed South American economies and Russia.

The country would simply collapse like Zimbabwe.  Unable to borrow the 25 billion the government would have to stop paying public sector salaries and forget about maintaining schools, hospitals, roads, etc. or else they would have to print money.  Everyones savings would be  denominated in a rapidly devaluing currency.  Inflation would be rampant since we are such an "open" economy (i.e. we import so much), etc.


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## Askar (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

The government currently spends €2 for roughly every €1 it receives. Its spending is going up and its income is going down in this deflationary spiral. Perhaps a bit of competitiveness through devaluation and inflation is what is needed. It would lower cost base for FDIs who could still sell in euro as well as $ and £. I cannot see government imposing and public sector accepting the necessary wage cuts (as Ministers themselves are unable to take any more cuts).

I do not see the evidence that the existing measures i.e. increasing tax is working or has every worked previously. Incidentally, Irish governments have afaik never being able to reduce nominal spending. Last mini budget was completely vague about where savings could be realised. 

However, while McWilliams may have overlooked the borrowing and repayment of borrowing issue, presumably this was a problem also faced by Finland and Sweden. Also, is our cost of borrowing almost priced at default levels as matters currently stand?  What happens if we are squeezed out of the bond market by larger countries looking to borrow?


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## Padraigb (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*



Askar said:


> ... However, while McWilliams may have overlooked the borrowing and repayment of borrowing issue ...



Even though I said that he used to be an economist, I can't imagine that he would have forgotten so much as to make such a silly mistake. Especially as (disregarding government debt, which is not at present particularly large) we as a people have the some of highest levels of foreign debt in the world.


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## darag (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

I sort of gave up after the "Many investors who owed the Irish banks or invested in Irish government bonds would get burned. But that is the nature of markets. They would be paid back in the new currency, which would have to find its value." bit in his article which is simply rubbish.  Bonds getting redenominated into another currency is not "the nature of markets" but is (rightly) considered to constitute default.

The idea - as described by McWilliams - is simply daft.  Even modifying his idea - if the government were to honer existing bonds by continuing to pay the coupons in euros, a devaluing currency will mean that the cost of servicing the national debt would explode.  That's even thinking about the quagmire that is personal debt and savings;  would mortgages be redenominated into punts, thus pushing the banking system over the brink (as the banks would have to pay the cost) or leave it as is and have peoples mortgage payments balloon as the punt loses value?  How would the banking system survive the stampede of longterm savings out of punt accounts into euros to protect value?  How would the financial system survive without the 10s of billions of cash the banks have repoed from the ECB which it can access using Irish government euro bonds as collateral?

The piece reminds me of late night talk-show local radio hosts who start the show asking for opinions on something ludicrous - for example, should we be more understanding of asylum-seeking drug-dealing convicted pedophiles and let them out of jail early, welcome them back into society and lavish them with welfare money.  It's purpose is to provoke discussion which presumably will improve McWilliams' public visibility.


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## Ruam (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

11


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## Ruam (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

11


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## Purple (7 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*



Padraigb said:


> McWilliams used to be an economist.
> 
> Now he is a controversialist in the entertainment industry.





GoMayoGo said:


> Reason I posted this was not to get an artists impression of him but a disussion on the topic of whether we should or should not drop out of the Euro.



LOL  some excellent wit and repartee on this thread even if the topic, and posters view on Mc Williams, (and I agree with Padraig) is a bit thread bare at this stage.


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## csirl (8 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

McWilliams seems to be ignoring the benefits of stability. Financial markets hate uncertainty and instability - they price them way out of proportion to the actual risk. Having our own fluctuating currency, under the control of meddling politicians, just adds another layer of uncertainty and instability. In these unstable times, the rock that is the Euro is about the only thing that can be counted on.

Also, a comparison between Euro and non-Euro countries shows that there are greater risks with having your own currency. You can talk all the theory you like, but no Euro zone country has suffered an Iceland style catastrophy. So, what do you chose - the path that has had no dramatic crash or the path where some countries have had a dramatic crash? No brainer.


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## Duke of Marmalade (9 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

What a dreadful piece by D McW. Let us remember this and never take him seriously again. Of course we are in the wrong currency, should have stayed with sterling, but as _Sunny'_s useful link explains there's not a damn thing we can do about it. It is simply procedurally impossible to unilaterally get out without *completely* destroying our whole financial system and economy.


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## jquinn (15 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*

Stayed with Sterling? and give up control of our economy to a body we have absolutely no control over or input to?

There would only be one benefit from dropping out of the Euro - its a way of getting a wage-cut onto civil servants - these cuts have already happened to a big section of the private sector.

So - we default on our international loans, we pay 18+% interest on our mortgages and we definitely lose any goodwill we have in Europe - so that the government doesn't have to grow a pair and actually cut wages in government jobs - including ESB and all other gov backed bodies in this - including the banks.


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## jquinn (15 May 2009)

*Re: todays indo - Ireland should drop out of the Euro*

Askar - this wasn't a problem faced by Sweden or Finland - as they were just devaluing -  so all the loans, most government debt, etc were devalued too.
In our case, our mortgages, govt debt, etc would still be in Euros - so it would be a disaster.


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## Duke of Marmalade (15 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*



jquinn said:


> Stayed with Sterling? and give up control of our economy to a body we have absolutely no control over or input to?


_jquinn_, think Scotland, Wales, Luxembourg (before Euro), Kosovo (adopted the euro but not a eurozone member) etc. etc. also many US dollar reserve countries. 

The fact is small countries find it hard to sustain an independent credible currency - they must use the international currency most economically and culturally aligned to their own circumstances. 

The founding fathers of this State, despite their fierce hatred and rejection of everything British, knew that we had no choice but to use sterling. De Valera understood that, and he wanted Germany to win the war, but certainly wasn't going to adopt the D-mark. Cosgrove understood it and he pulled us out of the Commonwealth, but no question of out of sterling.

Why oh why did we think back in 1979 that the grand EMU project would free us from this reality? Okay, we were assured that we would never be allowed drift more than 2.5% from sterling under EMU, the Bundesbank underwrote this guarantee - the rest is history. As I have mentioned before, Luxembourg, less blinded by neighbourly xenophobia, judged more wisely. They did not enter EMU independently but stayed firmly aligned 1 for 1 with the Belgian franc. We should have done the same with sterling.


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## Coney (15 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*

On reflection perhaps we would be better off all around if we were still governed by Westminister.  

Not saying that UK governance is perfect, but the pros would outweigh the cons by a mile.


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## allthedoyles (15 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*

Please someone let me know the period that sterling was the currency in the ROI.


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## Perplexed (17 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*

From 1928 (I_rish Free State )_ to 1979 when we joined the EMS ( European Monetary System ) in preparation for a single European currency ( Euro


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## Sunny (18 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*



allthedoyles said:


> Please someone let me know the period that sterling was the currency in the ROI.


 
The Irish Pound was tied to Sterling until 1979. Its only then when we joined the ERM that the Irish 'Punt' came into being and the exchange rate was allowed float within a band. Before 1979, even our coins were the same denomination, weight and size as the UK.


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## Duke of Marmalade (18 May 2009)

*Re: Indo Wednesday May 06 2009 D McWilliams: Ditching the euro could boost our econom*

I think _doyles_ may have a slight technical point. The Irish Pound was "tied" to sterling but wasn't actually sterling. I would love to know the exact set up but can't find anything on Google.

I think technically there could have been a devaluation but the relationship was so firm and presumably backed by sterling reserves that, so far as I am aware, there was never any doubts about the parity being maintained, even during the dark days of the economic war with Britain in the '30s. As I said the Luxembourg Franc had a very similar relationship with the Belgian Franc. Luxembopurg chose not to enter the EMS independently of Belgium. 

With hindsight we should have done the same in respect of sterling. As it happened by the time the euro came along the damge was done, we were trading at about 87p and it was hardly practical to spurn teh euru and rejoin with sterling.


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