shakh your bootie

I'm trying to figure out how the current situation of the Eurozone states to prop up Greece is fundamentally different to Black Wednesday.....

I mean, aren't the underlying conditions (a group of Governments promising to back the Euro no matter what) the same as in the ERM fiasco?

I'm a bit of a dullard about these matters - but have just quoted a large contract in Euros, where our costs are payable in Stirling, and trying to understand the risks.

Millhouse

Can you not just swap the risk? The euro-gbp swap market is very liquid (read low cost), if the timing and amount of your cashflows is certain this would make a lot of sense. Assuming it's a reasonable size of course.

To be honest, GBP is way more in the shit than the euro. Greece may be screwed but there are several large economies bailing them out via the euro. We (the UK) have no such protection and probably have more debt than Greece (if only we would disclose it!).

The Dean

Don't agree with that last paragraph.

True, in terms of %age of GDP etc, the numbers in the UK look worse on the face of it, but the UK has a greater standing and reputation in the market (despite Gordon "Is A Moron" Brown's best efforts to destroy it).

There is no guarantee that the Eurozone countries will bail out Greece, if only because the other P.I.G.S. in desperate need (Portugal, Ireland, Greece, Spain) will simply shout "Me too!" (Italy is also in the stuff, albeit to a slightly lesser extent).

The Greek tragedy illustrates the folly of the Euro - a political project, an important and essential step towards political union which requires a single currency/economy to bring to reality. Unfortunately, the different economies are precisely that - different. We now have a situation where Germany and, say, Estonia have the same interest rate and external exchange rate structure. Folly.

Greece can't devalue, or lower interest rates, to suit their own needs - they have given that right to the ECB in Frankfurt.

Thank God we aren't in it.

The ERM was slightly different. We were in it at an exchange rate parity that was simply too strong for the underlying condition of the economy. The market forced the British government to think again. There is not the slightest doubt that the "over-paid, under-intelligent" young boys and girls in the foreign exchange market saved the British economy.

norsk

Never since the introduction of the Euro has the Sterling been in a worse position in terms of possibly being dumped...

You may say that having one single financial market with diverse economies is folly, but from a macroeconomical perspective it is actually closer to the opposite. Yes the individual countries "gave" up some of the control over their own house as it were, but all in all they are better off now than they were before (I know you can probably list things that are more expensive etc, but remember we are talking on a macro level here).

Oh great. I've even managed to bore myself with talking about stuff I have tried to forget since leaving business school a long time ago...

I'm sure other countries in the Euro will require assistance as well as time goes. Did you know that Norway only stopped giving foreign aid to Greece and Portugal in the late 70's (or even early 80's)? Puts things into perspective doesn't it..

For the record I hope the Sterling isn't dumped, but I strongly believe it depends on how the UK economy recovers (or not) over the next couple of years...

The Dean

Don't tell me that you think Norway should be in the EU??

You're out of your mind - they'll milk you as much as they have drained us.

norsk

I voted yes in the referendum back in the 90's, but that was before half of Eastern Europe and the Balkans joined. If there was another referendum today I don't know how I'd vote to be honest...

It's still a complicated question though as Norway might see the EEA agreement disappear due the remaining members only being Liechtenstein and Norway (if Iceland join EU as is expected) in which case we would really be on the outside. We have already enacted the bulk of legislation you have to do as a member of EU, but we have no representation in the EU Parliament. Of course there is the matter of payments to central etc, but I'm sure we wouldn't just accept any old agreement (unless we had to).

There is still a huge opposition to the EU in Norway though... (too many bloody farmers and fishermen)

shakh your bootie

Is part of the concept not that international stature and financial power is increased through Europe acting en masse?

After the end of the "Great Game" and the dissolution of Europe's colonies, the nations of Europe no longer have the resources or critical mass to compete with the USA, and nowadays India or China as individual nation states. Further, the make-up of the G8 will change significantly over the next decade or so.

Europe as a potentially unified political, fiscal and perhaps even martial entity could, it is argued, be a far stronger voice in world affairs than as a set of disparate nation states.

Not saying it's either workable or desirable, but would like to know your opinions.