Posts Tagged ‘Red Euro’

Scotland vote is devolving into “yes” for a pink €

August 24, 2014

I am trying from a distance to follow the arguments being aired in Scotland about the joys and sorrows to be expected from a “yes” or a “no” vote in the referendum on independence to be held on 18th September.

Most of the discussions / debates I have heard have just been so much hot air (shades of grey being presented as black or white). The only issue that I have found to be of any real relevance is whether Scotland really wants to become a Euro country or not. If Scotland votes “yes”, it will have to reapply to become a member of the European Union and while that membership will not be delayed too long, an independent Scottish pound will be swamped and Scotland will probably have little chance to avoid entering the European Monetary Union and adopting the €.

Though Alex Salmond seems to be saying that Scotland can continue with the £, that is just wishful thinking and is not within his control. He may still call it the Scots Pound and he could peg it either to the the £ or to the US$. But then it will probably become a target for currency speculation and there will not be enough weight in the Scottish economy to withstand such speculation. As fracking grows in the UK and the North Sea reserves shrink it can only get worse. For a small economy forced to join the €, there are – I think – more disadvantages than there are advantages. And for small countries dependent primarily upon tourism it is worst. Larger economies with large exports have the greatest benefit.

In any event, the Scottish referendum will effectively decide whether it will remain a Sterling country or will join the Euro. And if they decide to join the Euro, they may not have a completely Red Euro but it could well be pink.

Pink Scots Euro

Pink Scots Euro

Portugal moves closer to a Red Euro

April 7, 2013

The common thread running through the countries which are now in or entering the Red Euro zone  is that they have reached their current positions because they have all been incredibly profligate in their public sector while being incredibly lax in controlling the excesses of a rampant private banking sector. Of course the private sector “cowboys” have made obscene amounts of money and ridden off into the sunset. But a large number of public sector employees also made economically unjustified gains in the form of increased salaries and inflated pensions and reduced working hours. Now the piper has to be paid and of course those doing the paying are not necessarily those who gained the benefits. There is a pervading sense of the unfairness of it all.

It is only to be expected that those bearing the brunt of the consequences will fight to retain what they have. Portugal has been teetering on the brink of falling into the Red Euro zone and has been struggling to implement the austerity measures that are deemed necessary. Most of the austerity measures in Greece and Italy and Portugal postpone the day of reckoning but don’t really correct for the previous profligacy. Now Portugal’s Constitutional Court has rejected some of the measures for public sector salary and pension reductions as being “unfair”. Portugal continues “muddling through”  and Government sources are playing down the impact of the Court’s rejections but Portugal is one step closer to the Red Euro. There is an argument that formally establishing the Red Euro zone with a lower value than the Blue Euro rather than “muddling through” with all the Euro constraints, would be a better way to go.

(Reuters) Portugal’s constitutional court on Friday rejected four out of nine contested austerity measures in this year’s budget in a ruling that deals a blow to government finances but is unlikely to derail reforms two years after the country’s bailout.

The measures rejected by the court should deprive the country of at least 900 million euros ($1.17 billion) in net revenues and savings, according to preliminary estimates by economists.

…  Debt-ridden Portugal agreed to a 78 billion euro bailout in 2011 from the European Union and International Monetary Fund. The entire package of austerity measures introduced by the 2013 budget is worth about 5 billion euros and includes the largest tax hikes in living memory, which were mostly upheld.

“It’s a lesser evil. … Putting it into perspective, a good manager and leader should not have difficulty finding room in a budget to accommodate this cut,” said Joao Cantiga Esteves, economist at the Lisbon Technical University.

…. The government has called a Cabinet meeting on Saturday, and would not provide any immediate comment. It has to cut the budget deficit to 5.5 percent of GDP this year from 6.4 percent in 2012, when it missed the goal but was still lauded by its EU and IMF lenders for its austerity efforts.

Analysts consider the outcome manageable and say the government should be able to cover the shortfall with additional spending cuts it has been working on at the request of lenders. Analysts say the lenders could also give Portugal more leeway in terms of budget targets. 

…… On Wednesday, the government easily defeated a motion of no confidence, but the move united all the opposition in parliament against it. Socialist opposition leader Antonio Seguro said on Friday the court’s ruling “reinforces our position in d..emanding the government’s resignation.”

…… The 13 constitutional court judges have been scrutinizing articles of the 2013 budget since January when opposition parties argued that cuts to pensions and welfare benefits undermined workers’ basic rights.

The court rejected cuts in pensioners’ and public servants’ holiday bonuses, as well as reductions to sickness leave and unemployment benefits. They upheld tougher measures such as a reduction in the number of tax brackets, which alone brings in an estimated revenue of more than 2 billion euros.

Last year, the court also dealt a blow to government plans for more public-sector wage cuts, forcing it to resort to tax hikes instead. The austerity has provoked mass protests, but rallies in Portugal have been much more peaceful than in countries like Greece or Italy.

Red Euro, Blue Euro

April 5, 2013

The two-€ Europe is effectively here and it is advisable to keep any savings far away from the Red Euro zone:

Spreading Red Euro

Spreading Red Euro

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