It’s easy for Merkel to insist that Italy has to strictly follow EU rules since she doesn’t have to win an Italian election.
The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment.
The problem is that each EU national leader is accountable only to voters in their own country. When countries have opposite interests there’s no good way for resolving the disagreement.
The only way it could work would be if Europe-wide economic policy were made by the European Parliament so that taxation and bank regulation would be made coherently across the continent by accountable representatives. But voters, probably correctly, want to maintain national control. But that makes the shared currency a noose.
"The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment."
You are aware that the problem with the EU banking reforms (or lack off) was also that the UK didn't wanted stricter rules with regards of the city of London... ? They even wanted an exemption.
In this regards I find it really intellectual dishonest that over the pound they are pointing fingers to the failure of Europe as they were part of the problem to begin with.
I do hope that from the moment that the UK stops dragging their feet and leave the EU it will be able to make swifter decisions instead of losing energy in constant oppositions.
There is no intellectual dishonesty. Fixing the Eurozone's banking problems (assuming you believe those regulations would do the trick) is not the UK's problem and it's not the UK that blindly insists on a one-track, one-speed Europe: it's Germany and France that are wedded to that concept. They could easily have introduced new rules only in the countries that wanted them.
But regardless, the problem in Italy is simply that not enough people are paying back their loans. That's not something bank regulation is going to fix. Banks make loans, that's kind of what they do, and if a country collectively gets too bad at paying back those loans then it's gonna have a banking crisis.
> But regardless, the problem in Italy is simply that not enough people are paying back their loans.
Bingo! Guy who "owns" apartment upstairs from ours in Padova stopped paying for it several years ago. He doesn't pay the apartment fees either, meaning we have to pay for him. He had his furniture and other stuff repossessed a few years back. In short, as far as we can tell, he's insolvent. And yet, he's still there, and the bank won't take action against him, because if they do, then it shows up as 'bad debt', rather than 'temporarily in arrears' or whatever.
How naive. Banks have to take collateral and give loans only to people/companies that have good track record. What they did is to give loans to people who could not pay back, which is a fatal mistake for a bank.
The people they lent to seemed like reasonable credit risks at the time - this isn't the same situation as US "subprime". Fundamentally there's no way to know whether a lender will be able to pay back, you can only make statistical guesses at the time based on limited information.
There's an additional problem in that NPL levels depend on the state of the economy as a whole, which can become a self-fulfilling prophecy.
"So what you are saying, is that the problems in Greece are down to the UK? "
The problems in Greece where mostly introduced by abuse of the Greeks themselves. That is the small detail that mostly is left out.
"The UK has nothing to do with reforms concerning the EURO. That's up to France and Germany and the EU Central Bank."
The OP is talking about the measures the US has taking regarding the banks. We are taking about the reforms of the banks nothing regarding the currency. The thing the UK wanted an exemption for, the reason why a lot of measures couldn't be taken... .
"Those payments the UK makes is going too."
Yeah because that access to the single EU market will come for free... .
"Once this happens, I think you'll start to see other exit musings in other countries and it'll be the beginning of the end!"
What is that with that British obsession that some have with destroying Europe and bring instability to the continent?
That's not true. I have just read an interview with Juncker and Van Rompuy where they clearly stated that the UK didn't slow down the decision process and actually implemented directives faster than most countries.
Full Employment only calculates people who are actively looking for work; anyone else is not part of that calculation.
To make an easier example, if 20 people are in a room, and 9 say "I'm employed", 1 says "I'm looking for work", and the other 10 say "I've been out of work for so long I'm not even looking), then that means:
90% employment (10% unemployment rate); but the labor force participation rate is only 50%.
Add another 5 people people to the mix (people that recently turned 18), and suddenly you have full employment, even if you have 10 of those 25 not looking for work or unable to work.
So to say "The US has an OK recovery and is closing in on Full employment" is an empty saying because you can have statistical full employment and have half of the population not holding a job.
Economists have reasons for measuring the way they do, it's not some evil conspiracy or something, the EU measures unemployment similarly. Labor participation rate is complicated by the retiring of the baby boomers so it's hard to use it as an indicator of labor utilization. The measure you would want to look at is BLS's U-6 which includes the normal U-3 unemployment definition and adds "Discouraged" and part time workers that would like to work more. If you look up U-6 you'll see that it's getting back down to pre-recession levels.
In any case, the point is that the US has recovered better then the EU and that is true no matter which numbers you look at.
According to https://en.wikipedia.org/wiki/Demography_of_the_United_State... 27.1% of the US is under 21 and 14.5% is over 65. I know 16 should be working but a good chunk should be getting education. That leaves only 58.4% even eligible for labor participation.
The BLS only counts the people who aren't in prison, and are over 16 as the Labor Force participation rate. You aren't counted if you are thought of by employers as too young or too old to work; so there are a substantial number of seniors who aren't counted because they aren't in the labor force according to the BLS.
we are at full employment and those statements about only 62% employment might need to be looked at in more detail, they are wildly inaccurate when looking at the big picture, I am astounded this is even considered as reality.
how many families have both parents working if there are two in a house?
those numbers are based on use of welfare and unemployment. if those statements were alarming the people that are homeless would be astronomical at the moment.
The DoL counts Discouraged Workers, which is a better way of assessing what you're talking about than teasing it out of the participation rate. It also counts those who are part-time involuntarily, which I feel is pretty important.
There are 6 unemployment rates with different categories included and excluded.
I'm not strongly opinionated on what's wrong with the euro currency, but this is a pretty major issue with the EU generally. There isn't a coherent democratic polity, it's being governed like a trade agreement while acting like much more.
I think Brexit highlighted this big hole. Who spoke for the EU? You'd occasionally see a headshot with a "EU President" title attached to it, which would then be dismissed in favour of the opinion of Merkel or Hollande who didn't even notionally represent the Brttish in any way.
If the EU is to govern so much, it needs a polity that Europeans jointly elect, with representatives that genuinely represent the EU, not local interests. The EU needs a face, parties with cross-border support, democracy, mandate... Even the UN has more of this than the EU. At least it has a face representing it.
I'm not sure this leads to better monetary policy (I don't really believe we confidently know what better monetary policy is), but I do think it's necessary if the EU is going to govern so much.
>The EU needs a face, parties with cross-border support, democracy, mandate...
You know what's funny - US is constantly railing about inequality - meanwhile median income between poorest and richest EU members is close to 10x - in the US it's ~2-3 between states. It's no longer "the 1% are exploiting us" narrative and "democracy will save us" - these are similarly sized countries where people are 10x richer in one compared to the other.
And that's just one easily quantifiable difference of how diverse the EU actually is, broader point is - these are different countries with different culture, history, religion, economies, language, ethnicity, etc. pretending you can bunch them all up in to a single unit and that democracy makes any sense in this context is ridiculous.
Which is totally valid, since both are fruit, and we can e.g. compare their nutricional value to decide what to eat. Or their selling price, to decide what to buy. Etc.
>Country != state
That's kind of the parent's whole point. That countries are the closest thing the EU has to states, and that they must get much closer to states for EU to function properly.
Today, yes, but the ideological goal of the EU is to convert it into a US-style federal union (in recent times some of them try to deny this because reality is closing in, but it has always been there). Hence large transfer payments between EU countries in the form of "structural adjustment funds" and euro policy, etc.
For the EU to work, the countries need to function more as states. Maybe this is just the hard road for the EU to get to something resembling the states, or it will fall apart as a failed experiment.
> ...the EU to get to something resembling the states,
as:
EU member nations need to have their sovereignty diminished. That's extremely hard to swallow if you're the one losing rights/protections to a foreign institution.
It's hard to swallow if you don't trust the foreign institution you're losing your rights to.
And that's a problem for the EU, because many people don't feel like it does a very good job of listening to people (or even countries). Instead, they feel that it does what it wants, and runs over people who don't like the EU's self-decided plan.
That would be a problem for the US, too (see the approval ratings of either Congress or the president), but we're not having to hand over much new power to either one at the moment, so inertia is working for the US. It's working against the EU.
I agree, and that's the problem with the EU. It is what led to Brexit and may lead to eventual Grexit, then Italy and Spain leaving. The Nordic countries never fully joined for similar reasons.
I wonder if the free movement of people is an unworkable concept without also consistent laws.
Direct voting, like the UK referendum, can lead to impossible situations. People vote for what they wished was the reality, and many times it's just not possible.
I think it's the exact opposite. Direct democracy would lead to people voting for what they want much more granularly, whereas the Brexit vote was once-in-a-generation opportunity that conflated many many different issues (immigration, "ever closer union", single market, London vs. the rest of England, England vs. Scotland, economic inequality, ...). I people were given a chance to vote for each of these issues separately, I would expect much saner (and less contradictory) outcomes...
As a foreign living in Germany I do appreciate the mentality that things "should be done the correct way", but many here don't understand you cannot just change a country's culture by forcing them to strictly follow EU rules.
As it has already been proven by the lumping economies in the southern Europe, people will suffer and everyone will just make use of black market for jobs and goods to survive at any cost or just leave the country thus making it even poorer in available resources to lift it up.
Now Italy is also in the game.
Assuming the Brexit works for the UK, I am just waiting to see who's next.
> As a foreign living in Germany I do appreciate the mentality that things "should be done the correct way", but many here don't understand you cannot just change a country's culture by forcing them to strictly follow EU rules.
You mean like Germany's biggest car maker solved the disel exhaust correctly? I don't your generalization stands up.
What I can agree with is that the Germans are sticklers for sticklers sense. And I could argue that breaking more rules and being more aggressive during the financial melt down has left us much better of in the US. Vice versus in the EU being slow and not compromising enough has only paid the shit dividend they've been reaping since the melt down. Much of that fault lies with the Germans being sticklers for sticklers sake.
Finally, it seams pretty short sighted when DB (Deuche Bank) is it self a ticking time bomb, one with additional exposure on Italy.
Nobody is denying that Italy needs structural reform; that's obvious. Germany's instance to be a stickler for sticklers sake is not helping anybody (themselves included).
> Germany's instance to be a stickler for sticklers sake is not helping anybody
Which is why I mentioned "but many here don't understand you cannot just change a country's culture by forcing them to strictly follow EU rules.".
The VW case is seen by many as an exception and usually every corruption case tends to be dealt exemplary, whereas in my home country (PT) corruption, specially the small one (owning favors) is still seen as profitable, because no big fish really gets prosecuted and it is the only way some things are actually done.
We know for such that such cases will drag in court and be archived after a few years of public discussion on the media.
Good luck trying to live in the southern or eastern Europe trying to do without small favors. It is possible and many people strive for it, but it isn't easy.
Think you are painting a starker picture than it really is. I never paid a 'bribe' or a lunch to anyone in 33 years living here (Porto and Algarve). My parents have said to me the same. There was one occasion where a gov. official asked for one from my father for a license for either a building permit or some construction permit (not sure) and as soon as my father heard that, called his lawyer in front of him and told her what happened. Later in the day he got the license (lawyer contacted his superior the same day).
And for Germany and corruption, while there may not be as much corruption inside Germany, German companies are in the top when it involves other countries (Submarines in PT, don't remember what in Greece, etc). Heck, they were even tax deductible until recently: http://www.bloomberg.com/news/articles/1995-08-06/germany-wh...
> And I could argue that breaking more rules and being more aggressive during the financial melt down has left us much better of in the US.
Not sure the aggression and rule breaking are what has helped in the US. Considering the US debt and wasted bailout money I'm not so sure the US really is better off.
As often with things in life, is there really a correct way? I mean, yes, there are laws saying banks cannot receive state aid, but they were only introduced recently.
Does that really mean we should let a massive bank (or multiple banks) go bankrupt? Given the global financial system is so interconnected, only a fool would think this would have no impact to the german economy. I don't mind rules, but every rule is meant to be broken if the situation warrants it.
> there are laws saying banks cannot receive state aid
> every rule is meant to be broken if the situation warrants it
Why did anyone bother with the rule in the first place then? Wasn't this exactly the kind of situation it was supposed to cover? It's not like an Italian financial crisis was off the radar when this rule got written.
> Does that really mean we should let a massive bank (or multiple banks) go bankrupt?
We've let pretty much everything else go bankrupt in the past eight years. Maybe we should try a it with a bank or two?
> Given the global financial system is so interconnected, only a fool...
That's exactly what the banks said last time to get their bailouts. I think only a fool would believe them again.
1. What works for (relatively) small Cypriot banks will probably not work for larger system banks. The bail in rules worked well in part because the Cypriot banks held a lot of foreign, Russian deposits. If Deutsche goes bust.. winter is coming.
2. Bankruptcy will lead to local deposit funds having to reimburse €100,000 per person, per bank. Which will ultimately be paid for by the taxpayer. It might actually be cheaper for the taxpayer to just save the bank.
At least in Belgium, the government actually got quite a good return on the emergency funds they lent to the banks during the financial crisis. So we're looking at a possible return vs a certain loss.
I'm not saying all banks need to be bailed out, but it's only prudent to keep the option on the table if required. The world would be a different place if post Lehman governments would have let banks collapse.
It might actually be cheaper for the taxpayer to just
save the bank.
So, there are a few theories about why the financial crash happened:
Theory 1: The [banking system / market / bankers paid seven-figure salaries] actually had little to no understanding of what they were doing. Complicated derivative products and credit default swaps were mispriced because nobody really understands the maths and their risk models are all wrong.
This suggests, if we want to prevent the problem from recurring, the legislative intervention should be to either ban complex financial products or require much higher capital reserves for banks gambling on them.
Theory 2: The [banking system / market / bankers paid seven-figure salaries] had accurate models and understood the risks. They just decided they could go to the roulette table and put a trillion dollars on red, and the government would bail them out if the ball landed on black.
This suggests, if we want to prevent the problem from recurring, the legislative intervention should be to make bailouts radically less attractive for the people who benefit from such gambling. This could mean not providing bailouts, so banks that gamble and lose go bankrupt; or could involve some of the many other disincentives legislators have at their disposal.
If you follow this theory, and you adopt the policy that there will be no bailouts, you have to let the bank fail to prove to people that you really mean it.
You manage a German bank. You follow strict capitalisation rules, are careful about the loans you make and operate your business according to the highest principles.
You clients start doing more and more of their business with an Italian bank that has poor capital reserves and a shoddy loan book and is losing money, but offers better terms to customers. The bank looks like it's going to fail, so the Italian government props it up with cheap credit and buys it's bad loans at above market rates so that it can stay in business - and keep winning business off you because it's still offering better terms to customers. Plus now those customers know the bank won't go bust and they can rely on it because the Italian government will support it no matter what.
The customer's business is being indirectly subsidised by the Italian government through below-market banking fees. Why should they ever do business with you again?
> You manage a German bank. You follow strict capitalisation rules, are careful about the loans you make and operate your business according to the highest principles.
Like Deutsche Bank? They were chock-full of bad derivatives, Greek bonds, and whatnot.
Most of Italy's big banks are fine. They went just fine through the subprime crisis and the Greek bond crisis, and the government never had to save them.
How is this different from European governments buying Greek bonds held by German banks [1] ? (Banks from French and Italy got similar treatment, but German banks where the biggest lenders)
I read simonh's comment explaining why German banks were not particularly clean. That is, within the eurozone (or any equivalently open financial realm) if one country is willing to subsidise bad loans, then banks from all round will need to pile in on the scam.
> Assuming the Brexit works for the UK, I am just waiting to see who's next.
Given that the indications so far is that the Brexit vote has made attitudes towards the EU far more positive so far, it'd need to be amazingly successful for the UK for anyone else to leave at this point, and I don't anyone here that don't expect it to be a massively painful experience, even if they voted to leave.
The current poll shifts don't show an increase in 'positivity', they show a decline in people wanting to leave the EU. That's not quite the same thing.
This is totally wrong. The current unemployment of EU is at 9%. That's the same unemployment rate of 2002-2004 before the "Great Recession" of 2007-2008. Then YES, the EU is recovering, but slowly and not all the country recover well.
We all suffered from the recession, even in Switzerland where we have the less unemployment rate. This was not because of the EU, but because all bank was infected with subprime then this had slow done all the economies, US and EU.
It's when you peel away the EU flag and look at individual countries you see that some economies are in the gutter pretty much due to countries having vastly different needs.
Whats in say Germany's interests isn't in Italy/Greece's interest economically, economies are having crisis points constantly and continuous band aids instead of enacting policy that will fix it with a solid foundation.
I personally don't know whats needed to fix this, even Europe-wide economic policy is a hard sell because of the vastly different needs of individual countries within the union.
Something needs to happen, there's a generation of young people being left behind with unemployment/underemployment and their future is becoming more and more murky.
I personally think the social changes, coupled with gold standard being dropped are good part of the culprit.
For example I am in Brazil, that have "nothing to do" with EU and US.
Yet I have a mountain of debts, negative net worth, finished university in 2009, and I am yet to get a legal job.
Brazil, even at its "height", when people were praising Lula because it reached 7% of GDP growth and "Full Employment", if you looked into other numbers closely, would find out that most of the money went to the wealthiest, and that underemployment, illegal employment, self-employment, etc... that were on the rise, out of desperation of the people. Or you think I went since 2009 without eating? Of course if people offer me shady deal I accept it! Otherwise I can't even buy potatoes!
Similarly, every single friend I have, except 1, are still single, of all friends I have, only 2 have kids, noone owns his own house and car, most of my friends never got legal full-time jobs either...
This situation in turn removed lots of rights to me.
For example, election rules say you can only use money you declared in your tax returns, and that donors can only use up to 10% of their tax return, since I, and my friends never did tax returns (because our income is not exactly legal), we can't join politics in any way.
Similarly, since we never had a legal job, we can't claim unemployment benefits.
Since we have no tax return, neither legal job history, we can't apply for more loans.
And the list goes on...
And this is not just in Brazil, people of my age I know in other western countries, are mostly in the same situation.
What exactly does the gold standard have to do with economic troubles around the world? All the gold standard would do is subject any country that adheres to it to crippling deflation whenever the economy grows and crippling inflation whenever it contracts.
> All the gold standard would do is subject any country that adheres to it to crippling deflation whenever the economy grows and crippling inflation whenever it contracts.
If that was true, then why US, that of course had a recessions and booms at the time, still had prices mostly stable for more than a hundred years, while its population was expanding very quickly?
Or the same, for several other countries.
Gold, doesn't mean the money supply is completely static and constant. You can still have fractional reserve, can still debase your coins physically to cause inflation (Roman Empire in its last throes did that for example), Gold is still mined, and used to non-monetary products.
But Gold Standard also means you can't "inflate your way" out of problems 100% of the time, as is the default right now, we are seeing central banks all over the world with balooning balance sheets, while if you look the numbers for individual income since 1970s in advanced countries, you see the individual income is falling, meanwhile various financial items that are out of reach of the "average" person are balooning in value, and making the wealthy look even more wealthy (only "look" more wealthy, most of that wealth is purely theoretical, mostly money tied up in stocks, bonds, derivatives...)
From my point of view, all the lack of gold standard did was increase overall inflation, and create the most gigantic debt bubble in history, where all countries are accumulating ever increasing amounts of debt, not only from the governments, but individuals being more and more indebted.
I fully expect that the entire debt house of cards will collapse some time soon (ie: in decades scale at most, not centuries scale as most other major social change), and that people will realize how stupid it was to create an entire civilization based on debt and trust, something that breaks down when serious war show its head (I mean, why country A, would honor debts to country B during a war? Those are only numbers and derivatives, there is no "real" assets there!)
The global financial crisis was engineered to transfer more wealth to the elites and slow down population growth by making housing unaffordable to the millenial generation.
I said that the figures were wrong, the cause of the Recession is not only the fault of Europe since it was already the case before.
I life and work in the recession since the beginning. I can't handle anymore. Old people need to pay for the all the shit they have done.
The Europe need to collapse, I mean the EU economy but not in the mentality. I'm Swiss, I'm EU but only for the map, not for the economy. We are not together and like you say we will always see was it benefit for us, not for other. It's an human behavior. If they really want a global united EU, they need to make a big unique country but this will never happen.
It would already help a lot if the European commission was democratically elected and if the European parliament was given the power to make laws. (It sounds like a joke, but the European parliament cannot propose new laws - even though that's the usual purpose of a parliament. It is the commission that proposes new laws in the EU.)
For that to happen, Europe would need to go federal. You can't have a legislative parliament in the current system because it'd violate the constitutions of a large proportion of the member states to delegate sovereignty somewhere else.
This is the big challenge. People complain about the lack of powers for the EU Parliament, but largely aren't willing to support a model that'd make it possible.
This is also why the EU does not pass laws, and the Commission does not propose laws. It proposes directives, which can then be passed. It is still the national parliaments that passes laws, implementing the directives. This is because no EU organ has the power to legislate directly - to give them that power would require constitutional changes all over the place.
This sort of argument is merely playing with words and has no intellectual merit.
The EU's directives MUST be passed into law due to the treaties involved. A country cannot simply refuse to implement directives it does not agree with, without also leaving the EU. Failure to obey the rules is met with fines and other forms of punishment.
Whilst a handful of lawyers may pretend this is not a transfer of sovereignty, nobody else does, not even Juncker.
The larger difference is that the member state is free refuse to implement the law and choose to leave - the directive can not be imposed.
You may consider that just playing with words, but it makes the difference between being legal, and being a violation of constitutional law of a large number of member states, and as a result it makes a substantial difference in how the EU can be legally structured.
By that logic no law can ever be imposed, because you're free to try and secede.
The EU makes it as difficult as possible to 'secede' as evidenced by their actions post-Brexit. Their minds are 100% focused on how to make it as painful as possible to reduce the chances of anyone else leaving. This is the mentality of a law enforcer, not a peer.
> The EU makes it as difficult as possible to 'secede'
What? Its simple to secede from the EU. You just declare that you are doing it, and two years later you are out. In those two years, you may or may not be able to negotiate terms with the EU to provide for other-than-default relations after you leave, but its not at all difficult to leave, except insofar as by leaving you risk losing all the benefits you gained from being in the EU (but if you thought that you were getting a net benefit from being in the EU, presumably you wouldn't be electing to leave in the first place.)
No, the difference is whether or not a member remains sovereign. While the EU may make it difficult to withdraw, e.g. under UK law the UK Parliament is sovereign. Laws can't be imposed on any UK Parliament.
Likewise, any UK Parliament can revoke any law, including the European Communities Act, if Parliament wishes. In which case from a UK legal standpoint, the UK would cease to be a member of the EU regardless of what the EU might think. From a UK point of view, invoking Article 50 is the polite thing, not a legal requirement.
Again, your entire argument is pointless lawyering. The European Communities Act 1972 specifically says that UK domestic law has effect "subject to" EU law, and that's been interpreted by the courts to mean EU law has primacy over domestic law:
British Ministers have spoken repeatedly about their frustration at finding out they cannot implement law changes wanted by their constituents because they conflict with EU law.
Yes, the European Communities Act can be repealed at any point as part of the process of exiting the EU. But until that happens, EU law has primacy over Parliament's own laws both by widely held legal understanding and social convention.
To reinforce it one more time: by your logic everyone is sovereign and can simply choose to ignore the state at any point. It's an intellectually useless argument because it ignores the behaviour of the courts, the existence of laws stating the opposite and the ability of the state to force you to comply (which may in fact be via fines rather than jail sentences).
No, I'm saying that the current governing structure of the EU is a hack to get around constitutional restrictions.
Everything the EU does can be done without these hacks (one alternative would be to negotiate acceptance of the directive as individual treaties), but the governing structure streamlines what would otherwise cause a whole lot more bureaucratic hassle by having created a legislative process which isn't really a legislative process, except that the member states have committed to taking the output (the Directives) and implementing them into law. This ensures that no legal delegation of sovereignty needs to be done, because national parliaments can choose to say no. There would be consequences, but they have the right to.
It also, despite the many flaws in how it is done, delegates some of this decision-making authority to the EU Parliament, something which is only possible because they're involved in deciding on Directives, not laws, because there is no legal basis for them to legislate. Even so, this involvement is limited because there is also no legal basis for Parliament to exercise the executive powers of the member states that is used by to actually bind the member states under the relevant treaties.
I don't think anyone (other than lawyers making money advising on it, perhaps) actually likes the current system. But it sort-of works, and the poblem with trying to reform it is that people dislike it for diametrically opposing reasons: Some wants a federation, some wants powers pulled back. So it's one of those compromise that makes everyone equally miserable.
Not really. Countries have different juridical systems, with governing bodies based on completely different principles. UK law text would be gibberish in a German context, for example. (Or Chinese, or Brazilian.) So international law is made by treaties to be implemented nationally. An EU directive specifies certain limits but the corresponding law differ from country to country.
If the EU had direct legislative powers, it would most likely be structured by letting it legislate EU law, not the national laws of the member states, the same was US federal law is interpreted under US federal law, not under the laws of individual states.
We already have experience with this, in that the ECJ is already the highest court for matters of European Union legal matters, such as the interpretation of directives, and national courts in EU member states will often need to interpret cases in light of EU law.
> A country cannot simply refuse to implement directives it does not agree with
As long as it can afford the resulting fines, it absolutely can. I believe this is what happened with milk quotas, which were widely criticised: a lot of countries kept paying fines until related directives were changed with more amenable rules.
Talking of Italy, they've been floundering EU rules on TV markets for some 20 years, paying fines and eventually side-stepping the problem by changing technology. I wouldn't be surprised if they were still technically afoul of those rules. They've taken judgements and fines on the chin and just kept going, because local political classes had no will to basically hit Berlusconi's interests in that market.
Good ol' Joseph Jughashvili would have said "how many armoured divisions does the EU Commission or Parliament control?", and he would have been right. Enforcement mechanisms in the EU are really weak; which is why the dominant culture in Bruxelles is about reaching consensus, all the time and with all sorts of horse-trading if necessary. Because what are you gonna do when a country gives you the finger, send in the police? There is no police. The military? There is no military. So, what are you actually "sovereign" on, if you have no way of imposing your sovereignty?
Lawyers get a bad rep but sometimes they're actually pretty right.
The EU's directives MUST be passed into law due to the treaties involved. A country cannot simply refuse to implement directives it does not agree with
You're leaving out the part where every single nation has a veto on every single directive before it takes effect.
It would also help if richer nation wouldn't be able to poison the parliament votes by baiting and switch poorer countries (in the form of give us votes, well'send financial aid - see Germany Greece and for the next episode, Germany Turkey)
The problems Europe faces are structural, the same as Japan's. I'm on my phone and in vacation so don't have enough time to comment, but tgat's enough saying that Europe being behind the US has almost nothing to do with the Euro, it's just that the Americans work more (for better or for worse), there's a lot less labor regulation (for better or worse) and that's a totally different spirit present in America (I'm European). Capitalism can only win if it grows, like it does in the States, but the people of Europe have decided that it was time to take a break and start enjoying life for a moment (for better or worse)
What does Merkel got to do with bad risk management and lax lending criteria by Italian banks? I struggle to find a link between your comment and the article.
Devaluation definitely worked for the Italian economy.
This plot shows the difference between the Italian GDP per capita and the Eurozone average GDP per capita. The vertical blue line marks the day the exchange rates between European currencies were fixed.
That is a fairly stunning graph. Thanks for the data.
One question that has always played on my mind is why these countries find it so much easier to lower their costs via playing games with the currency (e.g. printing more to devalue) than simply lowering prices. Italy could have kept its competitive advantage by simply lowering its wages and export prices, much as Germany has done, but never did.
do you think that the euro is the only reason? If you ask people on the street the real reason behind Italy's fall is the rise of China, Italy used to have a lot of small manufacturing businesses, which are now pretty much gone or dying, and leading to the issues you are seeing with the GDP as well as contributing to the bank problems (small businesses can try to stay afloat with bank loans for a while)
It also didn't help that when the Euro came in many, many, many shopkeepers repriced 1000 lire = 1€ (basically raising prices by 100%) which although I don't think was tied to GDP issues, it sure caused major pain for normal working folks.
No, it's not. It exposed some structural problems of the economy which could have gone unnoticed for, say, ten or twenty years.
Italy has a very high state spending, which is not matched (as in e.g. Northern countries), by a very high level of state-provided services. The Italian state indebted itself by granting privileges in the 60s, 70s and 80s, notably in form of unsustainable pension, so that today's retired people are getting more money than they gave through taxes, creating more debt.
This gigantic, bloated ship has been kept afloat by devaluating the currency (while we could) and by a high taxation.
And, yes, the taxation level in Italy (red line) is inversely correlated to the increase/decrease of the GDP (in blue).
On top of that civil justice is painfully slow and uncertain, bureaucracy is rampant, setting up a business requires tens of authorization and months.
> If you ask people on the street the real reason behind Italy's fall is the rise of China, Italy used to have a lot of small manufacturing businesses
I'm not sure about it. An embarrassing number big Italian brands has been sold abroad, so I don't think the dimensions of the business are a factor here.
Italy it's simply no longer a good place to do business. If you can go abroad, you go there. Most new activities I see in my city are restaurants or retailers goods produced elsewhere.
Runaway balance of trade deficits and superavits. If a country consistently runs a trade superavit, it will, in infinity, suck all other countries dry of money.
Traditionally this is compensated by currency fluctuation. The Deutsche Mark rises, cancels German advantage against French exports and the trade balance evens out.
The euro prevents this correction mechanism.
The US largely uses investment flows as a compensation mechanism, mostly via the industrial military complex. Europe has no such military, but must come up with some type of investment flow to counter trade imbalances.
As it is now, we have fines. Germany is in line to be fined for having too much of a trade superavit (idiotic fine, which won't happen anyhow)
The big, big, big problem in Italy are pensions. Pension contributions eat 33.4%, before taxes, and this make our companies uncompetitive and lots of the best workers leave. Devaluation would allow to deflate pensions, and make our labor more competitive. Not without lots of other problems, but right now there is practically nothing we can do.
That points to an underlying political problem: the government is unable to deal with pensions directly, and can only cut them by the somewhat underhanded means of inflating/devaluating them away.
There's no political will or consensus to change some of what's wrong in Italy. To be fair, though, it's not easy anywhere, but Italy seems particularly stuck.
I see your point David, but directly cutting pensions (not just the rich pensions, which outrage so many people but in aggregate are little more than a drop in the ocean) is something that would be political suicide for anybody, and I guess not just in Italy.
Blaming the euro masks the real reason that southern economies went south: The reasons are actually outside the EU. The un-competitiveness of the south was subsidized by the EU for decades, and has turned greece , spain and portugal to dependent nations with little innovation. People don't buy the idea that making their labor cheaper will bring prosperity. Instead, they opt to leave their countries in search of better pay, mainly because they can, and are educated enough.
Unfortunately , ECB policy keeps pacifying these problems instead of ringing the bell. Devaluation inside or outside the EU has the same effect, the difference is the existence of the ECB.
>> The un-competitiveness of the south was subsidized by the EU for decades
And one way of subsidizing them was through Euro currency. Bonds of Italy, Greece, Spain, etc. had lower interest rates in Euro that they would have if they were in their own currencies. Many financial institutions had just blindly been buying them as "EU bonds", without paying much attention which country they came from.
If you think the US has managed a recovery, I'm afraid you're in denial. The US unemployment picture is horrible, but being masked by official government figures that ignore the people who've given up looking for work, and including people working less than full time at marginal jobs.
Yes, but the EU numbers use similar data as the US, and while average is 9% unemployment, some countries are in the 20% range. And this is with a lot of 0-hour contracts or in 'courses' (doesn't count as unemployed).
> "The only way it could work would be if Europe-wide economic policy were made by the European Parliament so that taxation and bank regulation would be made coherently across the continent by accountable representatives. But voters, probably correctly, want to maintain national control."
There's a plan from the leaders of the EU for creating a Eurozone Treasury by 2025.
"Today, the five Presidents – European Commission President Jean-Claude Juncker, together with the President of the Euro Summit, Donald Tusk, the President of the Eurogroup, Jeroen Dijsselbloem, the President of the European Central Bank, Mario Draghi, and the President of the European Parliament, Martin Schulz – have revealed ambitious plans on how to deepen the Economic and Monetary Union (EMU) as of 1 July 2015 and how to complete it by latest 2025. To turn their vision for the future of EMU into reality, they put forward concrete measures to be implemented during three Stages: while some of the actions need to be frontloaded already in the coming years, such as introducing a European Deposit Insurance Scheme, others go further as regards sharing of sovereignty among the Member States that have the euro as their currency, such as creating a future euro area treasury. This is part of the Five Presidents’ vision according to which the focus needs to move beyond rules to institutions in order to guarantee a rock-solid and transparent architecture of EMU. Delivering a Deeper and Fairer Economic and Monetary Union has been one of the top 10 priorities of President Juncker in his Political Guidelines."
"Unsustainable fiscal policies not only endanger price stability in the Union, they also harm financial stability. In the short run (Stage 1), the five Presidents propose the creation of an advisory European Fiscal Board which would coordinate and complement already existing national fiscal councils (see Annex 3). It would provide an independent analysis, at European level, of how budgets perform against the economic objectives set out in the EU fiscal governance framework. In the longer term (Stage 2), a common macroeconomic stabilisation function should be set up to better deal with shocks that cannot be managed at the national level alone. It would improve the cushioning of large macroeconomic shocks and make EMU more resilient. Such a stabilisation function could build on the European Fund for Strategic Investments as a first step, by identifying a pool of financing sources and investment projects specific to the euro area, to be tapped into."
"Finally, while euro area Member States will continue to decide on taxation and the allocation of budgetary expenditures along national political choices, some decisions will increasingly need to be made collectively while ensuring democratic accountability and legitimacy. A future euro area treasury could be the place for such collective decision-making."
The suggested Eurozone Treasury is meant to require changes to EU treaties. The question is, if the Euro continues to cause economic problems in its current form, will governments go along with the creation of a Eurozone Treasury or will they move away from greater economic integration?
Well, nothing written in that massive quote you've given mentions unemployment as a problem to be managed using fiscal policy, so I think that predicts how well it will really work out.
Aside from employing some public sector workers, governments don't fix high unemployment directly, they can only do so indirectly (by promoting stronger competition in the marketplace). Therefore, I don't find it surprising that unemployment isn't directly named in the summary I provided (though it may be mentioned in the full Five Presidents report, I haven't read the whole thing).
The Economist has often badmouthed Italy. The title is way too sensationalist. The comment section also highlights this ethnic bias. I will never forget their insulting cover from years ago: http://static.fanpage.it/socialmediafanpage/wp-content/uploa.... Just clickbaits and provocations.
There's just been three digs at Berlusconi on the NA cover (plus another on the EU cover that wasn't on the NA cover that I'm aware of)--one of which was nothing more than an addition on the bill of bailouts of Eastern Europe saying "Silvio to go (if only)".
In 1998 alone, there are 5 digs at Clinton over the Monica Lewinsky scandal. Three in 2000 at Bush, and several more over the course of the presidency (to be fair, Bush kinda was an easy target for this sort of stuff)--and they endorsed him. Vladimir Putin has also been a sore point for them (Vlad the Impaler all the way back in 2003? I'd forgotten Putin's been around that long...). The 2008 Super Tuesday issue had Mike Huckabee shaking hands with a pig in a field of mud.
That's not counting the number of world leaders or potential world leaders they hate... which tends to round to about all of them. The Economist doesn't try to represent facts neutrally, but rather finds something to criticize about everything (even things they like, usually because it's not as far as could be gone) to exhort people to do what they think people should be doing.
Sure, Berlusconi has had it a lot, but that's because he's the rare example of a (to them) incompetent leader actually gaining power and keeping it for a long time. If someone like Trump or Le Pen or Farage were to be elected, you'd see equally, possibly more, relentless negative coverage of them. Hell, they're still appalled that Trump actually won the nomination.
>In 1998 alone, there are 5 digs at Clinton over the Monica Lewinsky scandal. Three in 2000 at Bush, and several more over the course of the presidency (to be fair, Bush kinda was an easy target for this sort of stuff)--and they endorsed him. Vladimir Putin has also been a sore point for them (Vlad the Impaler all the way back in 2003? I'd forgotten Putin's been around that long...). The 2008 Super Tuesday issue had Mike Huckabee shaking hands with a pig in a field of mud.
I think this is more of a general British attitude than The Economist in particular. You see a lot of the same kind of stuff from the BBC. Arrogant, anglo-centric, looking down the nose at anyone foreign.
The BBC is clearly doing a pretty good job at being unbiased (as per its mandate) as _everyone_ thinks it's biased against _them_.
In reality, in an attempt at balance, the Beeb generall gives too much time to fringe views, often lending the appearance of legitimacy to them. (cf. Their climate change coverage up until fairly recently)
At the time of those videos, the Labour leadership coup wasn't in full effect, the questions instead were focused on hammering on the 'unelectable' narrative the BBC and other mainstream media outlets have been aiming at Corbyn since he got in the leadership race.
Contrast this with the softball questions that Cameron was getting. Worth remembering there's plenty of controversial decisions that the Conservatives made in the recent past that they could've discussed, that 'no journalist can ignore', I can go into details if you like.
Additionally, I could point out plenty of other examples of media spin from the BBC against Corbyn. Would be willing to share more.
Based on what? The fact he won the Labour leadership election by a landslide? The fact that the Labour party membership has nearly doubled compared to last year? The fact that Labour have held all 4 seats contested in by elections since he was elected leader ( http://www.parliament.uk/about/how/elections-and-voting/by-e... )? The fact that Labour largely maintained their lead in local government representatives during the last local elections?
You could probably point to some poll or other that claimed he was unelectable, but as I said before, the media has been attacking him from day one, and many people are swayed by what they read in the media. There's also the issue of the rise of the SNP in Scotland, but that's got very little to do with Corbyn.
Winning the leadership isn't the same as winning an election, both Labour and the Tories have a history of choosing leaders from the extremes of their party then not being able to get into power.
Labour needs to stop blaming the media for their woes and get on with making themselves acceptable to the general electorate.
> "Winning the leadership isn't the same as winning an election, both Labour and the Tories have a history of choosing leaders from the extremes of their party then not being able to get into power."
With that you're implying that Corbyn's views are out of sync with the general public. Which views in particular do you believe are the most extreme in this regard?
> "Labour needs to stop blaming the media for their woes and get on with making themselves acceptable to the general electorate."
Like it or not, the media plays a massive role in shaping public opinion. Whilst the current civil war in the Labour party is damaging the respectability of the Labour party, a large portion of the public will accept whatever they're told in the media as gospel. You only have to look at what happened as a result of the Brexit media campaigns to see how easily people on both sides were swayed by demagoguery, but if you want more specific examples it'd be easy enough to provide some.
Just his policies on nationalisation are enough to put me off, some of us are old enough to remember what a disaster nationalised industries were in the past.
It covers, amongst other things, how public services are mismanaged on purpose to make privatisation seem like progress. One of the sources of information it touches on is a book by the Conservative MP Oliver Letwin that lays out the approach taken for privitising public services, so it's not some form of conspiracy theory, the book is publicly available.
Sorry, I don't understand. Here's my summary of our current conversation.
1. You say Corbyn can't get elected.
2. I ask you why.
3. You imply that his views do not line up with what people want.
4. I ask you which of his views are out of touch with public opinion.
5. You suggest the main problem you have with his views is that he believes in re-nationalising, and you remember how badly public industries were run.
6. I provide evidence that public services were badly run on purpose in order to pave the way for privatisation.
7. You reply that it's interesting but it's immaterial because Corbyn can't get elected.
If I've misunderstood something of this conversation in your opinion, please clarify what that is.
I personally don't see the problem with re-nationalising the railways in the UK (to give one example of a Corbyn policy), especially if the incentive to run them poorly on purpose is taken away (i.e. not having a government that's interested in privatising it). The rail service in the UK has become vastly overpriced (compared with other developed nations) since the railways were privatised. Delays and cancellations are still commonplace too. I don't see what great benefits the privatisation of the the UK rail system has brought us.
What do you think the likelihood is of a run on Italian banks? I'm curious if you're average Italian citizen is aware of what a supposed bail in would subject depositors to (anything above a certain euro amount would be wiped out, such that occurred in Cyprus as one of the links in this thread notes).
The limit is 100k Euro. There is a fund to save deposits under 100k if a bank collapses. The problem is that there is no enough money to save every single depositor under 100k if enough banks are in trouble. That in Italy and everywhere else.
That limit either was, or was very close to being, ignored in Cyprus. You'd be foolish to bet €100k on that limit being hard if the shit hits the fan in Italy (which is a lot bigger than Cyprus and doesn't have anywhere near as much dirty Russian money they can grab instead). Also, the limit is for nought if Italy leaves the Eurozone and your savings are forcefully converted to "New Lira" (which are then "protected", but worth a lot less).
TL;DR: If you have cash in Italian banks, GTFOASAP. If you're a "good guy", buy hard Italian assets (perhaps property), so the money (perhaps) stays in the country, otherwise, get an offshore account (even if declared, and thus perfectly legal, it's much less likely that the Italian government will be successful in grabbing the money, especially if you pick a non-EU jurisdiction, but IANAL).
Excuse my really basic understanding of Economics, but how "investing everything" does keep you away from losing money to the bank in which your funds are?
Aren't, the money you invest, already in a bank, and associated to your fund? If the bank fails how can you manage your investments (as I suppose you will lose your bank account if the bank fails)
Putting cash in a bank account is actually you lending money to the bank (for them to lend to other people), not a neutral store of an asset, like if you put physical bills or gold or whatever in a safe. If the bank goes bankrupt, that mean it's creditors (you) don't get paid, or get paid less than they're owed. To prop up trust in the banking system, governments insure bank deposits, in the Eurozone up to a value of €100k.
If you invest instead, you own (a piece of) something physical - a business or a property, typically. A house can burn down and the business can go bankrupt, in which case you lose your investment (unless you're insured). Banks in Italy are incredibly unhealthy at the moment, so to protect your money, you would want to put it in something more healthy, which might simply be a bank account in a not-Italian bank, or as proposed, assets of healthy businesses.
Reneging on an insurance guarantee or forcefully converting deposits to a different currency is a substantially different legal beast than confiscating property (which your shares would be). Perhaps, given that they serve roughly the same end, that shouldn't be the case, but it is.
Thank you for the quick anwser. I understood your answer to my first point, but, if you know, can you clarify the answer to my second question?
If the bank fails, and my account in the bank, where I manage my investments, gets deleted.. where all my investments goes to? How can I manage them?
They don't "get deleted". When a bank manages your stock holdings, it's actually a different part of the business from the bank that you deposit cash into. All they do is hold in their computer systems (for a fee) the document that certifies that you own a piece of stock in company X. Just like you don't lose your stored stuff if a self storage business goes bankrupt (they or their creditors never have a claim on the stuff, the stuff is unequivocally yours), you don't lose your stock certificates if the bank goes bankrupt.
the real issue here is the central bank authority which should do the supervision on private banks. a significant number of italian banks right now are under a commissioner from the central bank for being near death in the past decade after the subprime crisis.
that's a serious thing: the whole cda gets thrown out and replaced by cronies from the central bank. now it's surfacing that these cronies, who should have done nothing but supervise, have no idea of how deep the bank they're directly supervising rabbit hole is. (the central bank supervises all others indirectly at least)
but this is kept under wrap for now from the general public. it's very easy to keep these thing from people minds as everyone just want to look elsewhere when faced with a problem larger than their close group of friend.
and that's making matter worse. a new kind of financial crisis is brewing here.
I fear the EU will use the (huge) Dutch pension funds to bail out Italy. Just last week the Dutch parliament hurriedly accepted EU regulations that allow the Dutch pension funds to move to other EU countries, which would put them out of scope of Dutch (strict) regulation and could possibly be used in the future by the EU to bail out countries like Italy. One way to achieve this would be by requiring a certain percentage of funds be invested in bad bonds.
More surprising was that Germany decided not to accept these EU regulations for pension funds, which makes some wonder why the Dutch did accept.
Most surprising of all was that all parties in the government promised during last elections that Dutch pension funds would stay under Dutch control. And almost all opposition parties shared the same view. I.e. almost all broke their election promises, which makes no sense at all, unless EU priorities are regarded as more important than Dutch priorities.
If these pension funds are throwing large amounts of money into a dangerous market, that would solely be the fault of Dutch pension fund managers. There are plenty of other non-Dutch instruments they can, and should be investing in.
As far as I can understand DB troubles aren't that urgent, but this way Germans believe they're the ones needing bailout so Merkel can get away with saving MPS without losing much consent.
The UK while it still remains. They have managed to push housing affordability to levels not seen since the last crisis. Rather than try to solve the problem, governments have done everything they can to keep things like they were before.
They have 20% of the deposit, but they are warranting the money of the financial assets they created.
With lever effect, this account to 50 x more money.
In France, banks systematically do all their possible to block customers to access the money from their life insurance contracts.
There is as much fraud in bank industry in Europa as there is in food industry in USA.
Yes, in fact about $100k worth in order to learn about the very subject you're incorrectly making a snarky comment about!
A down payment on a loan? That makes zero sense. I think you're talking about unsecured loans (i.e when there isn't an asset that can be repossessed if the debtor defaults). The fact that the loan is "unsecured" is precisely why the resulting interest rate will be higher. I am paying to borrow that money, and it's more expensive to borrow because of the increased risk assumed by the bank.
However, fractional reserve banking is entirely functionally different.
the big problem in Italy are taxes, I pay 38%, but for more than 55k you pay 41%, how politicians pretend Italy can survive? In Switzerland you pay 16%.
38% is the marginal rate; that is, if you earn less than 55k you aren't paying 38%, you pay 38% on income between 28k and 55k. If you do the math, you are paying somewhere between 25% and 31%, probably less because of various returns that you get ("detrazioni").
In fact the actual % is around 35% on 75k euro income, and it doesn't reach 41% until around 200k euro (where the marginal rate is 43%).
In the US, if you earned $50k you'd have a federal income tax around 15%, plus a state income tax (around 5% for California), plus possibly a municipal income tax (around 3% for New York City for example). We're already at 23% and you're getting much worse healthcare than in Italy (even assuming your employer is paying for it, which is not a given) and hardly any retirement plan.
If you're employed the problem is that Italian wages are low (especially in IT), not that taxes are high. Really, taxes in Italy are only high for self-employed people.
What you're saying is basically true, but to make a fair comparison you need to consider that in Italy as well you need to add municipal and regional tax (which together are probably around 1%) and particularly that you do pay for you mandatory retirement plan - not with your taxes, but with an additional mandatory withholding that goes from 25% to 35%; plus your employer has a 5% tax on its "profits", but said profits don't consider expenses for your wage, so it's effectively a 5% tax on your wage (this is of course in addition to the regular 26% tax on company profits, from which you can discount employee wages as expenses).
My impression is that the whole system is willingly structured in an overly complicated way, with taxes split between several payers and several taxable bases, so that you cannot know how much of your income are paying.
Also, the taxation is really similar between employees and self-employed workers; it's just that the latter have a marginally better grasp on how much they're paying.
In the US, you also forgot federal social security tax, (7.65% * 2), Medicare tax (~3%)... And hey, looks like your tax bill just hit 35%. Oh, and feel free to drop another ~$3-10,000 on healthcare.
... and they do not mean you pay 38% if you're below 55,000. With the tax bands above, you'd pay ~32% if you earn 55,000
That does in fact place Italy quite high, but OECD ranks Italy below Belgium, Austria, Germany and Hungary in overall tax wedge amongst OECD countries [2] (note that if the numbers look surprising, it is because the OECD is ranking based on total tax wedge including employers social security payments, which often seems weird if you're used to comparing based on the contracted salary - these tax rates are not the percentage paid on the salary in your employment contract, but by the sum of your salary and the employers contributions). Looking only at the actual income tax, it'd rank much lower - it's not a particularly high income tax level relative to the average income.
Switzerland is low in proportion in large part because its overall income levels are very high, and it's income from other sources is very high.
The bigger problem in Italy seems to me to be that you have on of the least progressive income systems I've seen, so low earners gets hit particularly hard.
> The bigger problem in Italy seems to me to be that you have on of the least progressive income systems I've seen, so low earners gets hit particularly hard.
There are other mechanisms to make things more progressive. These include special regimes for low income self-employed people and extra returns keyed on stuff such as children (which progressively reduce and finally disappear as your income grows). You end up not paying taxes at all unless you earn at least ~8,000 euros. On a 30k euro income (about average for a secretary with 10 years experience) the overall final rate is around 23-24%.
I really doubt you only pay 16 % of taxes in Switzerland. When talking about taxes, especially comparing between countries, you need to be very careful about what you are talking about.
FWIW, income taxes are 40 % for income above ~32k, and the UK are not considered heavily taxed in Europe.
That's actually 40% marginal tax on income over £43,000, not £32,000, if you earn under £100,000. It's only 40% from £32,000 if you earn over £122,000.
true, but that already starts to depend on your personal details, which is why comparing countries is hard. For example, while many countries take into account your marital situation when calculating brackets, the UK almost doesn't: it is much better, from a tax perspective, for a household to have 2x 40k earners than 1x 80k earner.
And then of course, you need to compare the services you get for the money the state take from you (e.g. in the UK, state pension is close to nothing so you need to remove 15-20 % of your pre-tax income, and then you need to consider mediocre health system, expensive child care, etc...).
Swiss taxes vary hugely between cantons (equivalent of a state in the US) and you pay even less than 16% depending where you live. An example based on the official Swiss Federal Tax Administration online calculator [0]. Single no children living in canton Zug Switzerland (one of the Swiss tax havens):
Gross income CHF 120'000 minus deductions you end up with 100K taxable income and the total tax burden (federal, cantonal and communal) is about 11K.
Edit: the same example for a canton with higher taxes (Bern) gives a total tax burden of 22K
Switzerland's median income is between 2.5 and 3 times that of Italy. They have a smaller black market economy than Italy, so they're likely deriving a higher actual share of taxation out of it.
Further, the 16% referenced isn't complete. If you cap out the federal income tax in Switzerland, it's more likely you're paying a total of closer to 25-30% in income taxes (depending on what part of the country you're in), between federal, cantonal and municipal income taxes.
Also there are lots of hidden costs. Health insurance and mandatory unemployment insurance etc. A lot of stuff is pushed onto the private sector but made mandatory, so you have to buy it.
This is because it's only an average not a real fact. Some people pay more, some people pay less. When you can't have more than 25K in a year, you don't pay income. If you have million you don't pay because you are smarter and can escape the tax... or at least fix it with a flat tax of 15%. Medium class pay the most but this is hidden, hidden in all the small tax.
More realistically it is because average income in Switzerland is about 2.5 times as high as in Italy. A 16% tax rate across the board in Switzerland is comparable to an across the board 40% tax rate in Italy, which is relatively in line with the actual tax rates in Italy, especially when considering that an overall poorer population may also result in substantially higher welfare costs.
if italy gets into trouble the EU will just force its members to give up more sovereignity so it can deal with the issue. they will go along because only the EU would be strong enough. which is very bad for the populist nationalist exiteers who have been causing so much trouble lately.
well therein lies the problem. they knew they could never sell that to the public so they created a union which explicitly allowed member nations a great deal of autonomy. Part of the BRexit and possible exits of the French and Dutch is because the politicians in Brussels are trying to end run that agreement and impose it.
America had one super super advantage, it started out by rebelling against one nation and winning. Then the second advantage Europe never had made it easier to stick together, it has a common language. It also does not have hundreds of years of brutal wars between member states that Europe has experienced and experienced within just a few generations.
So unless they really can convince countries to cede the majority of their sovereignty and go to the routes of states in the US there will always be strife and situations like this.
I will say, the current restrictions and such they do have run contrary to allowing for any individual nation getting out of trouble without a lot help
Oh noes a bank is in trouble? Well not to worry, tax payers will gladly bail it out, while the bankers collect their bonuses and leave "for the next big challenge". Fuck I love banking.
You're beef should be with government (crony-capitalism), not banking. A bank can't force you to bail it out, only government can do that. The "force" 100% resides with the government, not the bank.
Two lessons: US banks are much better capitalised in the eyes of the market, and it is Deutsche Bank, not any Italian bank, which appears to be the biggest risk to European (and global) banking systems. It has a balance sheet of 1.6 trillion, supported by a market equity valuation of only 16 billion. Deutsche also has a reported 55 trillion notional of derivatives exposure.
Sources: Yahoo finance for assets as of 2015, Bloomberg terminal for latest valuation.
I am really amazed and frighten everytime I read anything about politics - economics on HN.
So we see all this BS about "work less", "meditation", "how trees calm us down", etc. but in fact when you do read across the lines you only see a crowd of hypsters totally obsessed with economics, money-money-money, free market, productivity, basicaly : materialism as the holy grail.
Allo ? Is there any European in these comments ?
I mean, we all know the USA where a European colony from the XVI century, but the country as it is today seems to be born only 250 years ago, and maybe more acurately with the secession war and the yankees take over. That my friend is just nothing, dust in the wind, in the scale of history.
So we have this bunch of unsocializes nerds IT guys asking for every European nation to give up their own culture and souveirgnty for a centralized Federal State, certainly in the model of the glorious USA, and if possible infeodated to it. What's the next move, maybe get rid of any state currency to go all the way with bs bitcoins ?
France was born in 496 when Clovis was baptized as a catholic. Our history and culture is not about cars, movies, fast foods and Wall Street. Just come and visit to check it out and learn a few things about the history of the world.
There is more than Banking and Wall street and metrics and GDP in life. Actually, let me correct this, these are all the things which are actually not Life. So just respect the right of a nation to exists as it is and to give to her childrend what her parents gave her since centuries.
So Brexit is all in the rage now, great, the world is collapsing, maybe Germany will engage war with UK and laucnh a bunch of V2, who knows ? Bullshit. UK will go fine walking away, much better in fact that France and Germany are right now, our corrupted politics just fear that all the nations figures that sooner or later and ask to leave EU asap.
LET ME REMIND ALL THE HN READERS OF SOMETHING RIGHT NOW : Brexit is no a unique event, some want not to remember that France, Netherlands and Ireland had their own "Brexit" moments and the EU did denied the rights of these people to leave. I urge you to refer to the 2005 french referendum about the EU constitution, who was rejected by the french people, just to have it passed a few month later by the parliament denying any direct democratic right to the nation. That went also in the Netherlands. And they made people of Ireland vote twice, just till they vote what they wanted them to.
Please, do not make Europe another heartless Silicon Bullshit Valley with absolutely no history except the atrocious gold rush and the infamous tech boom. Facebook is not history, let us keep Pascal and Academie Française in lieu of Snapchat and Tinder, if you please, in the name of the french people.
Money does not need to be based on debt. Money is just a medium of exchange. There is no requirement for the creation of money to generate profit for the money creators, especially as the cost of creating digital money is near zero.
If you want to look into it more, I'd suggest taking a look at debt-free money.
There's a few different ways of creating debt-free money.
Government-created debt-free money has existed in the past, and can exist again. Using the UK system as an example, the minimum that would be required would be to update the Bank Charter Act of 1844 to include bank credit, so that private banks couldn't create money:
It would then be the sole responsibility of the government to create money and spend it into the economy. In order to prevent hyperinflation, you could create an independent body responsible for setting how much new money could be created, which would be separate from the those who decided what the money was spent on.
As for other forms of debt-free money, cryptocurrencies like Bitcoin also qualify. You do not owe interest to Bitcoin miners, when you own a Bitcoin it is debt-free, and it cannot be destroyed by paying off a debt.
All it requires is for people to choose democratic representatives that stick up for the interests of the masses. Even if a few rich people disagree with the policy, it doesn't matter if the masses have decided what they want to happen.
If you want to make a substantial point, you'll need to address the content of the points I raised rather than wasting our time with ad hominems. Why do you find it far fetched that people can choose to vote for those that will represent their best interests?
I told you that "people to choose democratic representatives that stick up for the interests of the masses" is an impossible task. You prefer to ignore that and/or pretend that it is not true.
So I told you that your idea cannot be put in practice because we don't live in a perfect world but you don't acknowledge that. What is left there to say?
> I told you that "people to choose democratic representatives that stick up for the interests of the masses" is an impossible task. You prefer to ignore that and/or pretend that it is not true.
You made a large claim that was completely unsubstantiated. ZenoArrow didn't ignore the claim; he/she didn't believe it. On HN, that's your cue to provide some evidence to back up your claim. That's what's left to say. Provide some evidence that "people to choose democratic representatives that stick up for the interests of the masses" is an impossible task.
There is no one "interest of the people". There is no "people". There are different groups with different interests. Or are you proposing dictatorship of the proletariat? Because we know how that turned out, don't we?
If you want evidence of the above you need to look no further than a couple of weeks back to the Brexit vote. You have it there all.
- There is no disproportionate political influence by the rich. The majority of the rich said "don't do it! PLEASE FOR THE LOVE OF GOD DON'T DO IT!".
- There is no rich vs. poor. One of the richest, most influential people on Earth, Rupert Murdoch, used his media influence to sway the vote in favor of leaving.
- People unable or not interested in forming a balanced opinion. The decision was made because of demagoguery and blatantly false claims.
- Power-hungry, opportunistic politicians riding the wave, no matter what the wave is and then back tracking on their promises and claims.
Same thing happened in the Greek elections. A politician came, promised all sort of things, and in the end did exactly the opposite of what he promised.
So in the end people acted against their self-interest. Because they don't know what their interest is and because politicians tricked them. Story as old as mankind itself. There should be no need to "prove it". If it wasn't self-evident, then you are just out of touch with reality. But here you go, I spent 10 minutes explaining things that should be self-evident, to people who claim that they understand the politics and science of reconciling interests and opinions.
> "So in the end people acted against their self-interest. Because they don't know what their interest is and because politicians tricked them."
You fix that by having a more informed population. You can do this in multiple ways, but primarily the fight is in breaking the stranglehold of the mass media by popularising news outlets with more in-depth and clear analyses of the issues we face. It's not an impossible fight, it's one we can make a difference in. If you don't believe things will change, then step back and let people who are willing to make a difference put in the work to do it for you.
Oh, so people who pick apart your flawed plans should just shut the fuck up and let you agitate for a global revolution? Because that's what you are doing. You did not argue for better education. You argued for a change in the financial system. One that requires a massive change in people's reasoning abilities in order to work out as advertised.
"Oh hey guys, let's do this very cool thing where we will all live way better. just don't read the fine print which says that everybody needs to be very smart and educated in order for all of this to work." And when they follow you and your idea touches reality and your plan shatters? What then? Because we have it very good now and you want to improve it a bit, but if (when) you fail we will have it A LOT worse. Risk vs. reward is not there at all.
If you want to improve things, go for it. But you are proposing to cure a common cold with a surgery.
> "Oh, so people who pick apart your flawed plans should just shut the fuck up and let you agitate for a global revolution?"
I'm all for debate, but if you were interested in debate before you wouldn't have dismissed it as 'impossible' without explanation. Just because you say something is impossible doesn't make it so, you have to elaborate on why. If you're interested in engaging in the implementation details now I'm all for a debate.
> "You did not argue for better education. You argued for a change in the financial system."
I argued for both. I argued for a change in the financial system, and as I elaborated on how I could see this come to pass, I argued for better education. To me there is no conflict, to have an effective democracy you need an informed populace, otherwise people are too easily swayed by demagoguery. If you think this represents a shift in my argument, I'd invite you to read my comment history, I have been clear with my position on how the mass media plays a big role in influencing the masses. Breaking through the misinformation spread by the mass media is an important prerequisite for societal change that benefits the many. In terms of how to break through media manipulation, I could go into implementation details if you're interested.
> "Because we have it very good now"
Maybe in your world, but economic inequality is an increasingly pressing issue, and one that needs to be addressed. Take a look at this story...
If that is accurate, 62 people have the same level of wealth as half the population of the world. Do you recognise the types of problems that concentration of power can create?
Because deflation is seen as more risky than inflation. In principal prices could drop to stretch the spending power of money, so that the money supply didn't need to increase along with population. In practice this is seen as risky as during the period of transition to lower prices you risk going through a period of economic slowdown and reduced spending power of the population. These problems are especially problematic in a system of globalised trade, as foreign investors can take advantage of the deflationary period to gain further control of local assets.
In other words, inflation is required because the world's economy is based on growth, and inflation and deflation are not equal in this scenario. If the world's economy was based on a steady state economic system, then we wouldn't need to create more money.
To add to your (correct) answer, world's economy has to based on growth for physics reasons. In the real world, almost all things that we produce slowly depreciate due to entropy. So to even maintain the living standard, you need constant production, and thus constant investment. Deflation doesn't incentivize investment (which is an irreversible decision), so the only alternative is, in the face of risk, (small) inflation.
The rich people will be less rich in that situation. They are in a similar situation now with the current inflation, but growth of money has to be tied to economic growth or otherwise the rich will feel screwed.
I'm not saying it's good, but you cannot screw the rich. The current situation is a compromise and a very sensible at that I might add, despite all the noise from tin-foil hatters.
There are also other, practical consideration which will make what you are proposing impossible to put in practice for a prolong period of time.
> "The rich people will be less rich in that situation."
> "growth of money has to be tied to economic growth or otherwise the rich will feel screwed."
> "I'm not saying it's good, but you cannot screw the rich."
Two points:
1. Aside from the financial services industry, the rich would be just as capable of getting rich regardless of how new money was put into the system. The pot of available money to grow their businesses would still exist.
2. What is stopping a group from "screwing the rich"? Furthermore, why are you framing addressing economic inequality as "screwing the rich"? Economic inequality will get addressed one way or another, the divide between the rich and the poor shouldn't be allowed to grow unchecked.
> "the noise from tin-foil hatters."
If you're referring to me, I was merely pointing out how the money system works and pointing out that alternatives are available. If you want to refute the accuracy of what I've stated, then please feel free to do so.
The rich do better than everyone else in times of inflation. Their assets are heavily liquid and easily moved. They have very little to fear from higher rates of inflation, it enables them to outperform everyone else that is more income dependent and less asset rich. The poor have the most to fear, by far. That's also why the rich have done so well since the year 2000, the Fed's policies have been heavy on dollar debasement since then, which has eroded the median while the rich have been able to benefit from the Fed's monetary support of asset prices. The Fed's asset inflation policies are a prime driver of the growth in wealth inequality in the US.
I would say it's not a rich vs poor issue. The people who lose money with inflation are the ones who are over exposed to their currency: pensioners close to retirement, forex traders or foreign governments who bet on that currency, black market players who have to hold large amounts of cash without investing it, banks with a lot of fixed 30 year low interest rate mortgages outstanding. Forex players, banks, and foreign governments can be rich, pensioners and black market players can be poor.
Banks actually sell most of the mortgages back to the federal government in the us. Maybe that's the reason us government isn't inflating the dollar too much. They themselves hold most of it through mortgages.
> The vast majority of the money supply is based off debt.
That's because of the money supply measure you choose, so it's a pretty meaningless thing to complain about.
M0 for example is a measure of the money supply that is not based off debt. Most of the other measures include demand deposits in fractional reserve banks which are primarily debt.
It's all hearsay...but, an inlaw (wife's uncle) who passed recently had a lot to say about his native greece, the work ethic, and why he decided to stay in Germany (he and his wife did have a place in Greece).
Those stories over the years dovetailed almost word for word with former colleagues who actually moved to Milan and other places in Italy to work.
Personally, the US approach to work is kinda backward as are other areas, balance should be most important. But, the article and stories I've heard over the last 10 years just ring a bit. I know this is about banks, but the larger culture is at play -- just like in the US, Enron, Lehman, etc. were extremes of those values we espouse.
Be aware: the above links point to press releases from the Citizen's Electoral Council - this is the most batshit insane political party I am aware of in Australia.
You don't get to print and distribute pamphlets talking about lizard people running the world and then get to be taken seriously.
The Euro just seems like a complete failure. Giant economies are limping along with 20% unemployment, unable to recover 8 years after the recession. In contrast the US has managed an OK recovery, now closing in on full employment.
The problem is that each EU national leader is accountable only to voters in their own country. When countries have opposite interests there’s no good way for resolving the disagreement.
The only way it could work would be if Europe-wide economic policy were made by the European Parliament so that taxation and bank regulation would be made coherently across the continent by accountable representatives. But voters, probably correctly, want to maintain national control. But that makes the shared currency a noose.