10 June 1999 Edition
Euroland `machonomics' hides ECB double standards
BY ROBBIE MacGABHANN
`The euro falls to a new low', `Euro declines', `Euro weakens'. `The euro plumbs new depths'. These are news article headlines culled from a myriad of similar ones over the over the past weeks.
The role of the euro in the European and Irish economies is a complex one, yet the reporting and the political bickering about it has been reduced to simplistic `machonomics'. This is the world of Euroland. We have the weak euro, the strong sterling and dollar. One currency rises while another falls. It is the language of imperialist economics and does not reflect the reality of what is really happening in the EU.
The actual news they are reporting on is the continuing depreciation of the euro against the dollar on international currency markets. By the end of last week the euro was 12% below it's 4 January high against the dollar.
The fall has increased turnover in hedge funds as international bankers and speculators seek to get the highest short-term return for their money. They are fearful of further falls in the value of the euro.
Double-edged outcome
The fall in the euro has been caused by differences in the U.S. and EU economic cycles. Both regions are trying to maintain economic growth and control unemployment and inflation. Both are right-wing conservative economies which will put short-term business profits before any other economic objective.
The change in value of the euro has a double edged outcome. On one hand it makes exports from the EU to states outside the EU cheaper. This increases exports and for those who work in export businesses times are good.
On the other hand it means that imports are more expensive and for those parts of the economy dependent on imports costs are higher, margins are tighter and ultimately jobs could be lost, all on the whim of currency speculation. The implications for the Irish economy are very serious and are dealt with in a side article on this page.
Euro stability
In the long run, the euro could easily rise again and then there would be a return to its January value. If the euro continued to rise there would be a reversal of the benefits and costs for different sectors of the economy. What the Euroland states really need and what it is impossible to give them is currency stability. The European Central Bank, the Bundesbank, and all the other economic institutions have sat back in recent weeks because they are effectively powerless in the face of international currency market speculation.
They have not, though, been totally inactive. The Italian government has been allowed breach the convergence criteria for participation in the euro. The Italians will in 1999 be allowed run a budget deficit of 2.5% of their domestic economic output. The actual debt to output ratio is supposed to not exceed 2%.
This is in stark contrast to the conditions set for the entry of the 26 Counties into the euro. Not only did we have to observe the debt/output ratio, Fianna Fáil Finance minister Charlie McCreevy also conceded that the £1 billion budget surplus amassed in 1998 would be spent reducing the state debt rather than on the underfunded health and education services.
£1 billion surplus
Now this week, exchequer returns for 1999 are up 15.5% on last year. This year McCreevy will again have a surplus of over £1 billion. This is even before the benefits of the Cablelink and Telecom sell offs flow into the state coffers. Will we be allowed spend this money on much needed social infrastructure projects?
It is unclear, because as with the fall in the euro, the Dublin government has been silent. They have failed to represent Irish interests at a euro level and they have failed to make sure that we get the best possible deal with the euro.
This week, economic figures from Germany showed that the falling euro was benefiting their economy. Economic growth will be higher in Germany this year than was previously estimated. Part of the reason for this possible turn around is the falling euro which is boosting German exports.
Yet again, it is startlingly clear who benefits and who pays for the euro. How much longer will the Dublin government let us be the also rans in this euro sham?
BY ROBBIE MacGABHANN
The European Central Bank, the Bundesbank, and all the other economic institutions have sat back in recent weeks because they are effectively powerless
Seán MacManus, Sinn Féin's EU candidate for Connaught/Ulster, canvassing in Sligo this week, highlighted the negative effects the slide in the value of the euro was having on the island economy.
``The Irish people have been repeatedly promised since entry to the EEC in 1973 that membership would make partition meaningless. Today in border areas the economic effects of partition are greater than ever before. said MacManus.
``Sterling reached a record low against the punt last week. Changing currency values leads communities on both sides of the border to continually seek the best means of increasing their spending power. Short run gains for consumers on either side of the border are no recompense for the long-term damage being inflicted on the border economy by this currency speculation.
``There is also the added danger of increasing inflation in the 26 Counties. It is one of the most open economies in the industrialised world. The slide in the euro value will aid exports but it will also increases the costs of imports. It will be the ordinary people who eventually end up paying these costs as supermarkets and other retailers pass on the price increases caused by the euro slide.
``Irish economic interests are being threatened yet the Dublin government is silent. The European Central Bank (ECB) has decided not to intervene in the currency markets. This policy is clearly not in Irish interests. Nor is the obvious dispute between the German Bundesbank and the ECB.
``Again and again, Irish interests are being ignored. The cracks in the euro are beginning to show. The policy of monetary union is inherently flawed. The longer the Dublin government fail to raise their voices to protect Irish interests, the greater the damage there will be to the Irish economy.''
`The euro falls to a new low', `Euro declines', `Euro weakens'. `The euro plumbs new depths'. These are news article headlines culled from a myriad of similar ones over the over the past weeks.
The role of the euro in the European and Irish economies is a complex one, yet the reporting and the political bickering about it has been reduced to simplistic `machonomics'. This is the world of Euroland. We have the weak euro, the strong sterling and dollar. One currency rises while another falls. It is the language of imperialist economics and does not reflect the reality of what is really happening in the EU.
The actual news they are reporting on is the continuing depreciation of the euro against the dollar on international currency markets. By the end of last week the euro was 12% below it's 4 January high against the dollar.
The fall has increased turnover in hedge funds as international bankers and speculators seek to get the highest short-term return for their money. They are fearful of further falls in the value of the euro.
Double-edged outcome
The fall in the euro has been caused by differences in the U.S. and EU economic cycles. Both regions are trying to maintain economic growth and control unemployment and inflation. Both are right-wing conservative economies which will put short-term business profits before any other economic objective.
The change in value of the euro has a double edged outcome. On one hand it makes exports from the EU to states outside the EU cheaper. This increases exports and for those who work in export businesses times are good.
On the other hand it means that imports are more expensive and for those parts of the economy dependent on imports costs are higher, margins are tighter and ultimately jobs could be lost, all on the whim of currency speculation. The implications for the Irish economy are very serious and are dealt with in a side article on this page.
Euro stability
In the long run, the euro could easily rise again and then there would be a return to its January value. If the euro continued to rise there would be a reversal of the benefits and costs for different sectors of the economy. What the Euroland states really need and what it is impossible to give them is currency stability. The European Central Bank, the Bundesbank, and all the other economic institutions have sat back in recent weeks because they are effectively powerless in the face of international currency market speculation.
They have not, though, been totally inactive. The Italian government has been allowed breach the convergence criteria for participation in the euro. The Italians will in 1999 be allowed run a budget deficit of 2.5% of their domestic economic output. The actual debt to output ratio is supposed to not exceed 2%.
This is in stark contrast to the conditions set for the entry of the 26 Counties into the euro. Not only did we have to observe the debt/output ratio, Fianna Fáil Finance minister Charlie McCreevy also conceded that the £1 billion budget surplus amassed in 1998 would be spent reducing the state debt rather than on the underfunded health and education services.
£1 billion surplus
Now this week, exchequer returns for 1999 are up 15.5% on last year. This year McCreevy will again have a surplus of over £1 billion. This is even before the benefits of the Cablelink and Telecom sell offs flow into the state coffers. Will we be allowed spend this money on much needed social infrastructure projects?
It is unclear, because as with the fall in the euro, the Dublin government has been silent. They have failed to represent Irish interests at a euro level and they have failed to make sure that we get the best possible deal with the euro.
This week, economic figures from Germany showed that the falling euro was benefiting their economy. Economic growth will be higher in Germany this year than was previously estimated. Part of the reason for this possible turn around is the falling euro which is boosting German exports.
Yet again, it is startlingly clear who benefits and who pays for the euro. How much longer will the Dublin government let us be the also rans in this euro sham?
Euro slide distorting island economy
BY ROBBIE MacGABHANN
The European Central Bank, the Bundesbank, and all the other economic institutions have sat back in recent weeks because they are effectively powerless
Seán MacManus, Sinn Féin's EU candidate for Connaught/Ulster, canvassing in Sligo this week, highlighted the negative effects the slide in the value of the euro was having on the island economy.
``The Irish people have been repeatedly promised since entry to the EEC in 1973 that membership would make partition meaningless. Today in border areas the economic effects of partition are greater than ever before. said MacManus.
``Sterling reached a record low against the punt last week. Changing currency values leads communities on both sides of the border to continually seek the best means of increasing their spending power. Short run gains for consumers on either side of the border are no recompense for the long-term damage being inflicted on the border economy by this currency speculation.
``There is also the added danger of increasing inflation in the 26 Counties. It is one of the most open economies in the industrialised world. The slide in the euro value will aid exports but it will also increases the costs of imports. It will be the ordinary people who eventually end up paying these costs as supermarkets and other retailers pass on the price increases caused by the euro slide.
``Irish economic interests are being threatened yet the Dublin government is silent. The European Central Bank (ECB) has decided not to intervene in the currency markets. This policy is clearly not in Irish interests. Nor is the obvious dispute between the German Bundesbank and the ECB.
``Again and again, Irish interests are being ignored. The cracks in the euro are beginning to show. The policy of monetary union is inherently flawed. The longer the Dublin government fail to raise their voices to protect Irish interests, the greater the damage there will be to the Irish economy.''