Do you remember the expression: ‘Boston or Berlin?’ The question concerned whether Ireland was closer to America or Germany. To anyone who cared to examine the choice properly, the evidence – culturally, linguistically, economically, genetically, historically and investment-wise – has always been Boston.
However, politically we are in Berlin’s orbit, so when it comes to playing politics, Germany is enormously important – but in every other aspect of Irish life, it is of less consequence.
Germany matters politically and therefore Germany’s next move matters hugely. Germany will choose to break up the euro to protect itself and other like-minded countries. As a result, the likely next big choice for Ireland in the next few years will not be Boston or Berlin, but Rome or London.
Historically, Rome rule versus London rule has a nice ring to it. In this decade of centenaries, there is a certain symmetry here.
One possible endgame for the euro is that it will split into a hard euro and a soft euro at Germany’s behest. The hard one will be the countries around Germany in the core. The soft countries will be those of us in bailout land, which will be Ireland, Portugal, Spain and Italy, with Greece grafted on because no one knows what to do with their problems, not least the Greeks themselves.
This weekend, all eyes are fixed on Spain’s deal. But this is a mere skirmish. The bigger picture is one where the European economy is split between the German zone and the rest.
Bailouts merely use public money to replace the private money that is fleeing the periphery to make sure the countries on the periphery don’t run out of cash. Bailouts have no hope of working in the medium term, because the only way that Europe will rebalance itself is by a big currency devaluation on the periphery. We all know this; it’s so obvious.
However, groupthink is taking over again. Before we plough on with what next for the euro and Ireland, a few thoughts on groupthink. In the boom, a shocking case of groupthink emerged with regard to the housing market and the credit-fuelled boom in Ireland. Lots of so-called ‘sensible’ people believed and espoused utter drivel – and they rounded on those who warned that the economy would crash, with calamitous consequences.
The groupthink ensured that most people in positions of power, whose opinions backed each other up, couldn’t see what was coming down the tracks. They simply couldn’t countenance the alternative.
Today there is a similar groupthink with the euro. The so-called serious people in Ireland can’t countenance the end. They can’t see that the euro is – and has been for about five years – a “dead currency walking”. They are in their own new bubble. It is not a housing bubble, it’s an intellectual bubble, and it will be pricked by reality. As the great economist JK Galbraith said: “The enemy of conventional wisdom isn’t other great ideas, but events.”
The ‘events’ in Europe are moving so quickly that mass default is likely, unless a proper solution is sorted quickly. The eurozone has the potential to bankrupt Germany. Germany knows it has to save the system, but knows that monetary imperialism has its costs.
Germany also knows that bailouts aren’t working. Anything patched together for Spain this weekend will only buy a bit of time. Like our bailout and the others, these infusions of cash, combined with austerity are not permanent solutions.
A notable development is that each bailout, intervention or default buys less and less time with more and more money.
Spain’s ultimate capitulation will also signal the unravelling of Italy. Already, Mario Monti, the imposed technocrat, is deeply unpopular and profoundly ineffective. The domestic economy in Italy – which is a proper economy that makes things – is grinding to a halt. New car sales in Italy fell by more than 20 per cent last month.
The most likely solution will involve a two-speed Europe with two euros, one centred on Berlin and Paris and the other centred on Rome and Madrid. There is no way the Germans will allow us near their new hard euro. We will be firmly in the soft currency, whether we like it our not.
The Germans and French – as they were in 1992 – will be ambivalent as to whether the Irish go back to their natural financial home with Britain – with our stated mutual love of no tax on financial transactions and low corporation tax – or whether Ireland hangs out with the Catholic axis of Madrid/Rome and Lisbon.
Indeed, by 2016, Unionists looking on the Rising commemorations may well feel vindicated – because Home Rule may well mean not quite Rome Rule but, at the very least, a Rome axis may be possibility.
Down here, some Europhiles will actually support Rome over London.
But unless the Irish government’s Europhilia has reached ludicrous delusional proportions, a new Irish punt suspended somewhere between London and both the euros is the only viable option.
Germany will be happy because it doesn’t care what we do. It would be one less hassle. Brussels will concede a cheap victory to London and we will do what we have always done, take what we are given and get on with it, keeping our corporation tax low and admitting to ourselves that we are what we have always known we are, an Atlantic entity, with good relations with the continent.
That will be our choice – London or Rome.For the EU, a new softer euro would be a great move for the integrationists. It allows them to snatch victory out of the jaws of defeat. It would allow the weaker countries to devalue against the stronger ones, thus going some way to rectifying the competitive imbalances at the core of Europe. It would allow countries like Poland, the Baltics and Croatia – as well as further east in the Balkans – to join the weaker euro and give them time to adjust to the rigours of Italy, not Germany.
So ‘project Europe’ goes on. The defeat allows a more democratic solution for the rest of non-eurozone Europe and it gives a united Europe more impetus just at a time when the project was stalling.
For Ireland, the ludicrous choice would be to put Rome ahead of London. But stranger things have happened.
The key is to look beyond the immediate crisis and see it as being the result of bad planning, rather than the cause of something new. The result of this bad planning is that we go back to proper foundations based on economic and financial ties. We will be given the choice of Rome or London, I know where I would prefer to be.
David McWilliams will be speaking at www.dalkeybookfestival.org next weekend
Berlin is running a calculation of the risk of the re-capitalization investment, or, cost of bailouts bond v bond repayments to German Banks.
The Germans will pull the plug the minute the odds turn against them and put us into liquidation and take what ever they can get from what is left.
I think you are wrong on this David,
Federal Europe was and is the endgame.
This is about politics above economics
Lets see…
“Germany will choose to break up the euro to protect itself and other like-minded countries”
Do you really think Germany will commit economic suicide? Because that is what your suggestion (and it seems to me your hope) would mean for Germany.
Why is David always pushing for the destruction of the Euro and Europe?
And so it will come to pass. We’ve only 4 million people and we should be able to eke a decent living out of the 63 million next door. At least the British will eat our produce instead of chucking it into the sea and a Nissan from Sunderland is just as well built these days as a Merc. And we could become the vaunted springboard for the Sino launch into European markets. Now that would really tee off the lads and lassies in Bonn. We also supply a critical amount of high end professionals to the Square Mile, who… Read more »
And not a mention of USA in all this ! Our big brother has a huge stake on Ireland – all their top companies – we are their gateway to. Europe – do you honestly believe Germany would say Ireland your euro is worth less than ours without any input about this decision from the USA ? make no mistake Europe needs USA and we are the 51st state strategically located in everything but name and common currency – big brother will be watching this space carefully and nothing will happen to Ireland without going through them
I agree with the first 9 paragraphs and then David, with utmost respect as always you conflate the issue with bailouts and euro dead currency and elites running things. Firstly, you say.. ‘Bailouts merely use public money to replace the private money that is fleeing the periphery to make sure the countries on the periphery don’t run out of cash. Bailouts have no hope of working in the medium term, because the only way that Europe will rebalance itself is by a big currency devaluation on the periphery. We all know this; it’s so obvious.’ SPOT ON. This is what… Read more »
[…] […]
Type – *sued* should read *used*
“We will be given the choice of Rome or London, I know where I would prefer to be.”
London?
How about if we stay in pull away from the Brussels nonsense factory, have an independent currency pegged to the Euro (because Sterling will eventually get caught out) and adopt a Swiss approach ?
What would Switzerland do ?
I am not in favour of mortgaging what is left of our sovereignty to a Britain which borrows as much every year, as a percentage of GDP as Greece does. It might not make sense either in the medium term.
I do not think that there will be a Berlin-Paris line of consensus. Very soon we will see Paris veer down the Rome-Madrid approach. Hollande is about to get a majority in the National Assembly, and will veer away from Merkel’s austerity approach towards the Latin stimulus, centralized state in control, “currency printing to fill the gap” approach. Which incidentally was the French approach under Mitterand. It will not be a two speed Europe. It will be a multispeed Europe. Slovakia has a higher probability of lasting in the same currency zone as Germany, than France has – and that… Read more »
Great article and it describes the medium term game very well. I wish I knew how to make a decent killing out of it. The “groupthink” is a well know phenomenon and after looking at a review of a little book I am going to read “Wilful Blindness” – http://www.mheffernan.com/book-wb-reviews.shtml I am now convinced more than ever that this whole exercise is an insider manipulated. And it is not for any particular sinister reason – it is just what speculators do and we are nearing the end of a part of the monopoly game where someone gets to own Europe… Read more »
http://www.independent.ie
Seanie Fitz stayed in a €500 hotel for the match last night. Look @ the state of him.Not bad for a bloke on the dole.
I’ll say it again, this is engineered for a predetermined outcome a la shock doctrine.
Financial and some Economic collapse followed by here’s one we made earlier solution.
Euro may very well crash but that will only be to create shock, then we’ll have a fiscal union presented as the only proper long term solution with wither existing Euro or new Euro if there was a brief period where we return to national currencies.
regards
Hilarious take on banks and bankers from Charlie Brooker: http://www.guardian.co.uk/commentisfree/2012/feb/12/banknotes-not-worth-their-paper
A small taster: “Money is broken, and until we admit that, any attempts to fix the economy seem doomed to fail. We’re like passengers on a nosediving plane thinking if we all fart hard enough, we can lift it back into the sky. So should we be storming the cockpit or hunting for parachutes instead? I don’t know: I ran out of metaphor after the fart gag. You’re on your own from hereon in”
Mr. McWilliams, Great article and topic, If only there was away to make it PROVOCATIVE to get this debate started? Our country needs a discourse David article above. I hope you continually keep the above topic as much as you possibly can in all you coming articles. WHERE DO WE WANT TO BE? Culturally, are EU countries ready to advance integration-governances- taxes- loss of sovereignty? If answer is no then the euro is dead, if answer is yes and very soon the euro may survive. Should we be debating this here in Ireland and Europe, or is it too late?… Read more »
[…] David McWilliams » Rome Rule V London Rule. […]
10 points on the euro
1. Madrid has just added €100 billion to its foreign liabilities. Until yesterday, euro-optimists were assuring us that Spain was nothing like Portugal or Greece, because its debt and deficit figures were so much lower. Not any more. Deutsche Bank is now says that Spain’s government debt will hit 97.2 per cent of GDP in 2014-15.
10 points on the euro 1. Madrid has just added €100 billion to its foreign liabilities. Until yesterday, euro-optimists were assuring us that Spain was nothing like Portugal or Greece, because its debt and deficit figures were so much lower. Not any more. Deutsche Bank is now says that Spain’s government debt will hit 97.2 per cent of GDP in 2014-15. 2. It makes no sense to treat a debt crisis with more debt. 3. Spain had been due to contribute €93 billion to the European Financial Stability Fund. That now won’t happen, which means that everyone else’s liability will… Read more »
Either way, the €uro is doomed. Pace DMcW, there will be no two-tier €uro. Just Deutschmarks and an array of resurrected Drachmas, Pesetas, Lire, Punts, Escudos etc. All will be converted from €uros at one-to-one. Instantly, the Teutonic currencies will soar while the Med and Irish ones will plummet. No creditors will get paid, so everyone will be broke.
But Europe will at last begin to normalise.
pauldiv
http://www.youtube.com/watch?v=Wy6W-ZLYNHA&feature=youtube_gdata_player
Hello David,
Some time ago you posted about visiting Iceland. Any chance the next time you are there you might figure out if John Perkins is telling the truth in the video above?
Good viewing.
Whether you pro or anti Euro does not really make a difference. This is about facts. Euroland is too fragmented politically and culturally. It probably has about four seperate economic paces.
Though I agree with Wills that the Bankers and Investors are key players in attacking the Euro, the fact is they can because of the structural defects in Euroland and Euroland cannot keep defending itself by Germany throwing money at it.
Something big has to give whether we like it or not or voted yes or no.
I don’t like Attaching links, but this might cheer up some who are having trouble waiting for climax
http://www.nytimes.com/2012/06/11/opinion/krugman-another-bank-bailout.html?_r=2&hp
It would seem know that trying to use this crisis to achieve a political goal, is leaving the crisis completely unsolved.
We have a completely dishonest approach to problem solving in Brussels.
Now some people are really getting into panic mode.
http://www.independent.ie/opinion/comment/john-bruton-if-the-eu-doesnt-act-decisively-we-could-lose-in-five-months-what-it-took-over-50-years-to-create-3136187.html
Paradoxically, the things that they fear the most, like allowing countries more sovereignty, currency breakups, and perhaps even deflation combined with intelligent reform, will solve the problems and get everybody back in good understanding.
The policies they advocate (political centralization) are only causing more aggravation and more time to be wasted.
subscribe.
Over at Zero Hedge, “European Surreality Goes Full Retard As Greek Neo-Nazi Sues Victim Of On Air Assault”.
http://www.zerohedge.com/news/european-surreality-goes-full-retard-greek-neo-nazi-sues-victim-air-assault
The Golden Dawn neo-nazi puncher is actually suing the TV station for provoking him!
This Greek neo-nazi clown, Mick “good faith” Wallace, Ming ‘it’s our turf’ Flanagan, David “London or Rome” McWilliams, UKIP in England….
….the motley crew of EZ seperatists are not coherent, hence not inspiring for the overwhelming majority of the public.
By default then, the arrow of the graph points back to Angela Merkel, John Bruton, Banking Union, Fiscal Union and USE.
The euro debate is a con.
The banking criminal syndicates are jeopardizing the euro through their ponzi scams.
No ponzi scams = stable euro.
Not complicated.
And behind the scenes they burrow away……..
http://t.co/xAxbY9g6
The Spanish fiasco just goes to show how deeply in thrall to the bankers and their apologist economists our European political elites are. It shows that either they do not understand what is happening; or they do, and are on-board with it.
The Spanish have driven a stake into the heart of their own nation and peoples.
When will the madness end?
The *euro sabotage* project run out of the City of London by its financier oligopoly.
Simples.
David, BBC is run by Chatham house. Chatham house works for the City of London. BBC basically engineers social realities for City of London. They do this through a number of different ways. One of which is to invite in a friendly way commentators on to espouse their views in a suspiciously amicable studio setting. Look at it like been invited into the manor house and into the *special room* and been thrown a question or two in an indirect way to be asked up to enter in to a conversation underway about something on which the lord of the… Read more »
Great classical art gets to the point, with searing truthfulness.
The bankrupt leading the bankrupt!
http://laroucheirishbrigade.wordpress.com/2012/06/11/the-bankrupt-leading-the-bankrupt/
One of the crazier things about the bailout of the Spanish banks is that the busted countries have to contribute for the new country’s bailout. The bankrupt leading the bankrupt. It could be a Bruegel painting.
Just one look at Bruegel’s faces in this great work shows exactly where the transatlantic is directly heading. Of course none of the cordon see where they are heading!
Strange that DMcW seems to think Eire is doomed to replace one Viceroy with another.
Seems like a fancy version of the Divil ya know and the Divil ya don’t know.
Why is this? Something got to do with the Pale maybe?
David what I have taken from your comment is that the european project,that is the one we have been having all these referendums for,is over. If you speak the truth & you have this view on it, how is it the political elite are soldering on deluded if what you say is true.I would suggest to you that if this is the case we wont have to worry about currencies here but the total political turmoil this country will face.We have sold our country for nothing.If this comes to be true I as a patriot will hold our politicians to… Read more »
Bonbon, the boy or girl with no name who quotes websites and posts links to prove he knows how to use Google Bonbons intellectual insights can be found below or at Google .com Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall Glass-Steagall… Read more »
David “The key is to look beyond the immediate crisis and see it as being the result of bad planning, rather than the cause of something new. The result of this bad planning is that we go back to proper foundations based on economic and financial ties. We will be given the choice of Rome or London, I know where I would prefer to be”. The current mayhem is NOT the result of bad planning. It is the result of careful planning by design. Chaos is created and people will look for shelter and help. The help offered will be… Read more »
Return to Glass-Steagall Says Financial Times Op-Ed
June 11 (EIRNS)–An op-ed in today’s {Financial Times} calls for a return to Glass-Steagall under the title “Why I Was Won Over by Glass-Steagall.” This clear and straightforward call was written by Italian Prof. Luigi Zingales at the University of Chicago Booth School of Business. He also writes regularly for the Italian daily {Il Sole 24 Ore} and the weekly {L’Espresso}.
…
FDIC Director Thomas Hoenig Endorses Glass-Steagall
June 11 (EIRNS)–Former Kansas City Fed chairman Thomas Hoenig today writes another strong endorsement of Glass-Steagall, under the headline “No More Welfare for Banks.” Saying he has a “proposal to strengthen the US financial system by simplifying its structure and making its more accountable,” Hoenig calls for a “Glass-Steagall for today.”
….
DMcW observes that the time between bailous gets shorter. Well this takes the biscuit:
SPAIN BANK BAILOUT FAILS IN ADVANCE — A NEW SPEED RECORD! NOW THE QUESTION IS, TO GO THROUGH WITH IT, OR NOT
June 11, 2012 (LPAC) — Surprising even hardened financial “experts” who expected the Spain bank bailout to “work” for as much as several hours, the bailout has actually failed before being formally announced — a new speed record that should, by all reason, be allowed to stand forever. The causes of this lightning collapse should be understood, so that bank bailouts be buried forever.
This is neither about London or Rome . It is about the real facts that we are in the land of Atlantis a maritime country and that the Atlantic Ocean imbues into us what and who we are ie The Spirit of The Nation .
Everything else is transient.
tic tac tic tac tic tac
http://www.bloomberg.com/quote/GBTPGR10:IND
http://www.bloomberg.com/quote/GSPG10YR:IND
….Japan…. USA…. Game over!
Maybe if all those football supporters had a nice time in Poland, you could join the Zloty. Ever since the Poles arrived in Ireland I’ve had the impression that the two countries, separated at birth: both live on a staple diet of sausages, potatoes, cabbage and beer; both hard working and willing to put up with any amount of crap provided these items keep coming; and both roughly 10 times more catholic than your average pope. (Both also approximately equally shambolic in many areas) You could just merge the two countries — just imagine being part of a 45 million… Read more »
Germany will intervene, the euro will be saved, they are just going through the motions, seeing periphery nations weaken themselves out, I sense we are close to a decision from Berlin on the next stage and of course it will be one that favours Germany. As for Ireland, led off a cliff by amateur politicians interested only in the quick buck and re-election, no long game players or statemen in the Dail, up to the Irish people to put their house in order, sadly most of the decision making has been given away while the people that led us to… Read more »
+1 Ireland, Irish politicians, Irish people – there’s no strategy. We’re like back office workers – we need to be given a plan to work to, and we just get on with that. Deliver deadlines, hit targets and the rest of it. We are in a bailout programme. If we fulfill the terms in a timely manner, we’ll return to normality, independence, etc. This requires patience, perseverance, plodding from each target to the next. Environmental and ground water quality targets, planning targets, property tax and water rates targets, etc. to fit our country into a core EZ template. This is… Read more »
Yesterday news media reports that the” EU plans ATM limit if Greece leaves euro”
Is this fear dynamic sent to the Greeks by the EU before their elections?
Given that we are an “Atlantic entity”, should Ireland not consider joining NAFTA..? Especially if the British decide to go down this road. And it’s entirely probable that as the EU become’s further integrated that the British will end up having a referendum on their membership of the EU, as it’s no secret that the European project is deeply unpopular among the general public in Britain. When one look’s at the level of trade between Ireland and Britain and the level of investment from United States in this country, should we really not stop fooling ourselve’s that we’re “at the… Read more »
Maybe we could slap a 120% tax on German beer and beach towels as well, just to make them more welcome.. Could be a money spinner..!
David McWilliams
“I will be on Pat kenny tomorrow discussing the latest in Euro saga. Tune in.”
Is it not strange that a failed self confessed FG supporter appears on a documentary program with over the top dramatic effects on RTE one TV last night, “the neutral state broadcaster?”