Jason OMahony - Irish political blogger, Irish politics, EU politics
 

Should we devalue the Euro?

Posted by Jason O on Oct 23, 2009 in Irish Politics |

Time to trim?

Time to trim?

I’m not a fan, usually, of devaluation, as it tends to be a short-term fix to more deep-rooted problems in an economy. Indeed, one of the benefits (Aside from cheap holidays) of a strong currency is that it makes raw materials cheaper, but also forces the economy to become more structurally competitive.

However, recent noises from the Elysee Palace, pointing out the damaging effect the (Artifically high?) strong euro is having on Eurozone exports, particularly with regard to Airbus, have suggested that it may be on the agenda. Or perhaps it’s been put on the aganda to encourage a weakening of the euro in the markets.

What would be particularly interesting would be the effect of euro devaluation on the UK. Would it stifle UK exports to the Eurozone? From an Irish perspective, we’d gain twofold, as our exports to the US and the UK would be strengthened, and with global resource prices at low-ish levels we could afford to import a little inflation into the economy. On top of that, the fact that we are inside the Eurozone means that the effect would be far less damaging than if we had a solely national currency.

It’s worth thinking about. 

5 Comments

david morris
Oct 28, 2009 at 6:25 pm

Further to my previous comment on Oireland being yolked with the other Europroles in supporting the single currency :-

There’s a whole lot of schadenfreude goin’ on, now that MacDonald’s has announced they
will no longer be peddling their filthy-but-delicious wares in Iceland.

“McDonald’s is pulling out of Iceland next week, in a fresh blow to the island nation a year on from a financial crash that nearly left it bankrupt” (gloats the Grauniad) A ‘fresh blow’? How so ?

All the pro-European droolers are delighted. “See what happens if you’re not protected by the super-state?”, they crow. “No more yummy burgers!”

But (bear with me) MacDonald’s care about one thing only. Their profits. They’re not running away because they disapprove of Iceland, or are concerned by its banking crisis, or disagree with the steps Iceland is taking toward recovery.

No, they’re giving up on Iceland purely because the difference between what it costs them to put together a disgusting, dripping Big Mac and what they can sell it for in Reykjavik is too small. They won’t make any money.

So why would they carry on? There are hundreds of other countries where they can flog their loathsome heart-stoppers at a handsome margin. And the Icelandic people probably don’t care much either. They’ve got a weak currency, so they’re going to import less crap across the board. They’re also supporting local businesses, and beginning to export more.

Why? Because they are in control.

Iceland’s economy is recovering a lot faster than Ireland’s. Why? Because Ireland is stuck with fixed exchange rates because of its membership of – guess what? – the Euro.

And what of the UK? (you may ask) Well, we’ve certainly got all the MacDonald’s we need, thanks. Whole towns seem to live on little else.

So, what do you prefer? Control over your own economy or a centrally controlled economy with MacDonald’s?

(And would you like fries with that?)

Extravagant H/T CF

Kind regards


 
Jason O
Oct 28, 2009 at 10:09 pm

As someone in business, I can tell you that the strong Euro is a factor. A factor. As higher interest rates would be if we were outside the Euro. You forget the 100% stability the Euro gives us for trading within the Eurozone. Chris Patten, one of the best PMs Britain never had, summed it up right, and I paraphrase: Listening to eurosceptics, you would think the rest of Europe lives on food parcels. The Euro brings challenges, but on balance, we’d better off in.


 
david morris
Oct 29, 2009 at 9:50 am

Chris Patten ?

I ‘ad ‘im in the back of my cab once. Lousy tipper. Even worse economic pundit. Soundly rejected
by the Burghers of Bath before transmogrifying into his alter ego : Fat Pang.


 
Jason O
Oct 29, 2009 at 11:59 am

Heseltine, Patten, Clarke, John Major, Ted Heath, back when the Tories had (A bit) of common sense and decency.


 
david morris
Oct 30, 2009 at 7:07 pm

Showing your colours old chap. All of your mentioned names should have been tried for Treason.
Come the Glorious Day, CallMeDave will join these traitors & dance with the hempen rope.

Off Topic (a bit)

It’s all gone crackingly well since the votes were counted in the manner approved by Brussels Central, hasn’t it ?

I see The Irish stock exchange has fallen nearly 12% in the trading month since the Yes Vote.

Yes to jobs, Yes to investment indeed.

Oh deary me.

Kind regards


 

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