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Should the euro-zone's debt be mutualised? Advocates say mutualisation would both help reduce weak countries’ unsustainable borrowing costs and create a safe asset that banks could hold. Critics say joint bonds are a recipe for the profligate to spend wildly on the credit of others. Join our latest online debate and share your views via our website at: http://econ.st/NKiTiR
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Guillermo Nikus Telan's profile photo王石's profile photoDavid Prince's profile photoHari Kiran K's profile photo
52 comments
 
Looks oddly like a soviet symbol?
 
Since the Germans benefit from a lower currency due to the southern europeans shouldn't the balancing entry be the southern europeans benefiting from german borrowing rates.
 
Yes but from the german point of view this is clearly not desirable. They'd like everybody to be like germany, and maybe they are right too.
 
+Alessandro Muraro If everybody was like Germany the Euro would be considerably stonger and non eu exports would be very much less. In effect the Germans would be less German because their export picture wouldn't look so rosy. The Germans need to accept that they, like the Chinese have benefitted from an exchange rate which does not reflect their own economy. They cannot expect to take the money and run, and be holier than though in the process.
 
Kako su krenuli završiće kao SFRJ.
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Sorry, as far as the UK is concerned, it is about time that the government listened to the overwhelming opinion of the public who employ them to run the country, and work to pull out of Europe.  The situation with the European Union should never have been allowed to reach the stage that it has; some people say its due to the economic climate, I say in part yes, but it was mainly due to bad politics, greed and funding grants on the part of the EU.
 
GET US OUT OF THE E.U. NOW!
 
I never understood what's with the UK situation, are they europe or are they not? lol!
 
+David Robertson I think the way the Euro is structured seems to be creating more animosity than there was pre the Euro.
 
Until productivity throughout the EU is constant, there will always be currency issues. Each country essentially has a pegged currency and with that there is always risk of currency crisis a la Greece.
 
@ David Robertson: I can see your very pro-Europe, and that's fine. The idea of a united Europe was originally designed as a barrier to further conflicts? That's fine. What I disagree with is the policies that the EU make directly affecting the UK and its economy; and can you honestly say that all of the funding provided by the EU has been 100% sensible? I don't think so, and so do many, many others. Financially and politically its a failed experiment and I am tired of paying the price for it.
 
EU wide economic policy (and the proposed mutualized bonds) is simply unsustainable without an EU wide governmental structure with the power to enforce its rules on all EU members.  so long as local politics can play fast and lose with fiscal policy there will be no incentive for the weaker economies to maintain system wide fiscal discipline.
 
+Kowala Jay The UK government spends over £700 Billion a year on the UK public. A small fraction (less than £10 billion) of that goes to EU funding. The money flowing in and out of the EU to the UK isn't material when you actually look at the figures. 
 
Simple:  "Union" is a bad thing, no matter, how it's applied fiscally.
 
+Dee Fobez - please explain why that is?  Unions seem to be working quite well in the US, Canada and Australia, and strong central governments are slowly helping modernize countries like Brazil, China and India (Russia, not so much outside of a small handful of cities).  almost all these areas are bigger geographically than the EU and some have more people, including many more ethnic groups with different languages, yet they are making it work (even if not perfectly or to everyone's preference or benefit).  Why would a political union be a bad thing for the EU?
 
Cool way for italy and greece to spend Germany and Poland into bankruptcy.   You never give your credit card to a profligate idiot.   And that is what Mutualizaton is.  The sooner the idiots hit the wall, the sooner they will fix their own problems.  
 
+Gabriel Walsh As an Indian living in UK, I have been of the same view. I view India as a 'begotten' EU from Brits when they left us. It has worked well as a Political and Fiscal union. Of course, though not as a 'State', we were a 'Nation' in many respects prior to the empire.

EU has to succeed and I wish for that. We need such examples of peaceful coexistence that's not rooted in one ethnicity, language or religion.
 
I am reading a sci-fi book by vernor vinge (responsible for the technological singularity concept), and in his book there is an indo-european union :)
 
+Dee Fobez I have some sympathy for that remark. Having our own currency has allowed us to adjust to an economic shock. Hasn't stopped us trading with other European countries, same for Switzerland and Norway. It might have been very different for us if we were in the Euro.
 
I wish UK was part of the EU more than it is now, actually. Union makes strength.
 
I think it should, as the EU needs to think bigger picture
 
+gary harvey BTW, I don't agree with Hamilton way of black and white vision of Britain Vs EU. In late 2008, some of my friends in Berlin would ask me "how further should pound sterling erode before UK jettisons it and join the Euro". In just 3-4 years, the converse is true.

In many ways, it's rather ironical. Greece defended Europe from other civilisations, gave much of its political vocabulory and even gave the word Europe to the continent. In 2000 odd years, the wealthier nations are debating whether to keep Greece in Euro zone !
 
+gary harvey  ha ha ha... quite appreciate your candid, humour laced way of stating a painful thing. America also continues to have a 'positive' entrepreunerial spirit.

I honestly wish and hope all countries return back to less profligate, stable but unglamorous growth rate than one that harbours, out of fear or reprisal, a state where alpha profits  are ensured for Investment Bankers (who have landed via UFOs) and pauperisation of all else on terra firma
 
You're missing the point: the tax department on its own employs so many otherwise unemployable people that if you did that in one go, half the country would be unemployed.
 
And... the European political class has just realised that they are wrong about basically everything. I'd imagine that they are preparing for some sot of class war against anyone they haven't dragged down with them. Meanwhile, we Brits are likely to vote Labour back in because we're weak-minded idiots and the sort of degenerates that commonly use the excuse of calling themselves "working class" to justify our own unbelievable mix of ignorance and apathy.

As for Germany, like everyone else, they're looking for income on their debt with an undermined currency and can't find it, except through their bad investments in southern Europe. When it all goes FUBAR, their currency will soon appreciate, destroying their exports and they will lose all their savings because of having invested in bad debt. Their politicians will then have to explain how they have been lying to their population.

If Germany was in any way competent at managing its affairs they would realise that Britain and Germany have exactly the same problems within Europe and work together with the other Northern European countries to try and extricate ourselves from our present economic condition. If they were brave enough to do that, the rest of Europe would follow their leadership and sort themselves out with America's respectful backing. We've already seen that Europe (i.e. France) is too proud to ever follow Britain's example.

That could even save the Euro.

For Britain's part, on our own we are in trouble. With our "friends" like France, we are in more trouble. That's if the Labour party don't get there first.
 
Can't they just turn themselves into another USA and be done with it. That's all it is anyway.
 
Benevolent socialism, the experience of China, Spain, South Africa, all have taught us: if you can organise an income you could put a large fruit bat on a stick and call it a government, which brings us to America...
 
The EU social experiment of the last 10years is (in my opinion) a resounding success -- look at the improvements/infrastructure of the poorer countries and don't forget how much money the rich countries made in that time -- their mistake of course, may have been that they thought it could be done without a (private) "financial solution". Now they have a noose around their necks and the "Hamilton solution" is inevitable, hell or high-water. Or is it? 
 
Luis, we're now going to have to pay back all the money that they've spent. Not only are the next generation going to have to pay massive amounts into their pensions, but now they've inherited a massive amount of debt. Why don't they collateralise the debt against specific demographics from now on, say "People born between 1980-1990" and see how happy we are to vote for it then! We can evaluate their estates and deduct the shortfall when they die as a penalty for accepting terrible governance.
 
+Henry Sanders respectfully, that's just noise. Rich countries originate loans, justify projects in areas/countries which have resources (but for obvious reason can't seem to utilize it themselves) Then, their own conglomerates/consultants and financial wmd's extract interest profits/bonuses and all the accoutrements of a basterdized capitalistic Corporatocracy intent on consumerism -- (and repatriating profits) and you and I are left discussing "democracy". The "first law of thermodynamics" says it a fallacy

I suspect that the next step is to "explain" how incompetent we all are and that only a (private) financial solution can save us -- imagine! it would be less infuriating, if only it wasn't so hypocritically implemented. It seems to me that rich too, live off the earnings from debt -- but for some reason they seem to think their labour is meritorious compared to a schmuck hacking away at 2 jobs to pay bills. 
 
Excerps from +The Economist 
the ultimatum:
"either we fix this design failure and move to a budgetary union; or we do not fix it, which means we will have to abandon the euro".

the solution:
"Second, an internal transfer mechanism between the members of the pool must ensure that the less creditworthy countries compensate (at least partially) the more creditworthy ones". 

"If yields are too low, there is no incentive for private investors to buy sovereign bonds"
 
Yep, a perpetually loaded financial wmd. But what do i know. i am just paraphrasing!
 
Your enthusiasm is commendable, but you live in stark socialist denial of the world around you. You can't buy fruit without money because the fruit vendor can't sell it without being paid. You can't borrow money without paying it back with interest because the Luis Rocha National Bank can't lend out its fruit vendor account holder's future retirement savings without you doing so. You seem to buy into this ideal that money comes from this wonderful paradise where rich people fly about in the clouds eating foi gras. Actually, it comes from the fruit vendor.

Just like the fruit market, you cannot tell the bank what to buy. Neither can you cannot steal from him. That's called fraud under a free market system.

Capitolism is simply a description of a large organization, corruption a symptom of mismanagement and bad governance, and the rules are there because when you break any of them you hurt the fruit vendor who owns the money to which you feel so entitled. He will suffer at your hands just as surely as if you had bashed him over the head and stolen his produce.

You are a small minded, socialist biggot, and you are so deluded that you can't for a second consider what my meaning is, or how my simple analogy indicates how socialism has caused this present situation by rotting the European markets from the inside over 2 decades to the point where no one will lend them any more of this expensively bought pretend money to give out to their populations and make them feel like they have a birthright to more out of life than people who actually generate value.
 
Lmao free market system... Is that the system where risks are socialized the profits capitalized and the bailouts mutualised? Do you know what the "Hamiton solution" is? Check 1790 US history -- darn thing has the tendency to repeat itself.
And if all the money in the world is earning interest, where does interest come from? I will ignore your other comments and attribute them to your ignorance of the first law of thermodynamics After all, this is an economics forum where, unlike energy, money can be printed with interest. good luck my friend, and profit. 
 
I deleted this last one because it's too late, I've been working too long, and I've had too much coffee. Barking at the crass stupidity of socialism is like having a go at god-botherers - I end up feeling like a bully. The Fed had the gold standard in those days and money being printed with interest is a political expediency for the salesmen we called politicians to flatter themselves by lying to their constituents. You have evidently not been watching the birdy and listening to your distracting national dialogue - it will you in the pocket.
 
Making widgets is good. Buying widgets with debt + interest is destructive. Widget end up costing twice as much as it was sold for. and all the money made from the sale of widgets can't pay for the debt + interest that bought the widgets. Eventually collapsing the widget system. So why do intelligent bankers allow people to do it? Because they make money? Or is it because we are willing to work twice as long, for widgets?... Just saying, 
 
Now my reply seems incoherent. Perhaps we have much more in common than our dialog seems to indicate at first glance. Cheers. 
 
Mutualizing EU debt == let's hope Germany never runs out of money. The whole point of a voluntary bond market is that if people don't have faith in a country's ability to repay, they won't give it money. If a country isn't responsible enough to raise money on its own, the problem lies with that country, not with Germany refusing to pay them to retire at 20.
 
Cheers, Luis. Perversely, I find such discussions fun!
 
+Daniel Hackney you walk into a bingo hall and offer to raffle a goat (have you heard this one?) problem is --- you dont own one. You sell 2 times the value of a goat (goats are valuable commodities in bingo halls, perhaps and everyone knows what they are worth). The guy with the winning ticket is payed the value of a goat in cash, and you buy your first goat, Congratulations! How often do you have to do this before you own all the goats?? Compounded interest is unethical and it's about time publications like the +The Economist and a myriad of academics/politicians debate this openly, honestly. but I am not hopeful, that greed would step aside, and I will go back to reading historical accounts of failed brave attempts -- it's an ages old thing. I am done here. Cheers. Peace. 
 
Definitely it is the time to get mutualised the burden of debt.All the European countries specifically France and Germany should play their role.Transfer of short term assets among countries could significantly reduce the debt.
 
+JUNAID ASGHAR Why should Germany and (to a lesser extent) France, the only adult countries in the room, pay for the irresponsible countries to retire at 20? The idea that the southern countries have experienced "austerity" is mostly false.
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