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Unread 28-07-2011, 10:21   #17
Thomas J Stamp
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Join Date: Dec 2005
Location: The Home of Hurling
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more on topic, can we afford to leave the euro?

As mark as pointed out, we had some tools to use to adjust our ecomony when we had our own currency and banking policy. By being tied to Sterling and the ERM we restricted that policy in the interests of keeping exports viable.

So we had the option of Devaluation, Rising or Lowering Interest Rates, Printing Money.

It is hard to see if any of these options would actually help us now, and in that regard look at the UK. They lowered interest rates to almost nothing, they printed money and that resulted in an effective devaluation of 20%. They are still in the mire, almost to the same extent we are, and they are embarking on an austerity programme much the same as we are.

Same in the US, oddly enough.

So, moving out of the Euro is in itself not the answer, although soem have saidf swap one union for another and go with Sterling again. Pegging to sterling would help exports as it would mean instant devaluation, but make imports more expensive. It also could be just a short term solution as I feel the UK is only a year or so behind us anyway.

I think the euro for now is the safest harbour we have, but that is not saying much. The fact is that the core is stable, and is because they have been reasonably pragmatic and level headed in their economic approach over the years. Yes, this has not always helped us, but lets face it, we the UK and the US all liked to have eveything we could in terms of public spending whilst also not wanting to pay any taxes for it.

I mean, we seem to ahve forgotten that we actually re-elected FF twice, and in the UK when the Lib Dems wanted a 1p rise in tax to pay for education they were laughed out of it.

Thats the real difference.
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