Participation in the Euro helped us greatly during the boom years - if we had an independent currency at that time, our currency would have appreciated, and this would have quickly ended the boom.
In that scenario will we be prepared to suffer higher interest rates because it suits the German economy even though it may cause businesses to fail in Ireland or will we pull out of the Euro and regain control of our interest rates?
Very unlikely at the moment but it is possible that in three years time we will be out of sync with the main European economy. German could start its recovery, leading to higher interest rates while Ireland's recovery will be crippled by the hangover of the property bubble and will be further hampered by high interest rates. Basically we could have the reverse of the boom years.
In that scenario will we be prepared to suffer higher interest rates because it suits the German economy even though it may cause businesses to fail in Ireland or will we pull out of the Euro and regain control of our interest rates?
Wrong, wrong, wrong. Most of our trade is to the eurozone, that is, most of our export trade. The eurozone accounts for 40% of our exports, the UK and US together about 35%.Most of our trade is to the US and UK. Why are we in this euro club? You will see this debate pick up momentum over the next while.
Wrong, wrong, wrong. Most of our trade is to the eurozone, that is, most of our export trade. The eurozone accounts for 40% of our exports, the UK and US together about 35%.
The UK is our biggest import partner accounting for 35% of imports, so low sterling overall is of huge benefit to costs in the Irish economy, notwithstanding some undiversified exporters.
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Wrong, wrong, wrong. Most of our trade is to the eurozone, that is, most of our export trade. The eurozone accounts for 40% of our exports, the UK and US together about 35%.
The UK is our biggest import partner accounting for 35% of imports, so low sterling overall is of huge benefit to costs in the Irish economy, notwithstanding some undiversified exporters.
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Our trade with the rest of Europe (the major element in our exports) has been unaffected by the violent movements in exchange rates over the last two years. This provides stability and certainty for exporters. No currency hedging is required (look up KIKO hedges for how South Korean businesses have gone bankrupt on currency hedges gone wrong).Sorry yoganmahew, you are correct. Ive just checked my economist pocket world in figures. So we import almost twice as much as we export from the uk.
So other than low interest rates which helped to get us into this mess, what are the real advantages of the euro straight jacket??
However, something that many people seem to miss when discussing the merits of the euro is that it was the low-interest rate environment of the euro that has made our recession so much worse. We should have had rates at 10%+ to contain the property boom at a time when they averaged about 3%.
But to be fair, out polticians are so inept they probably would have gotten us to the same place even with the advantage of being able set interest rates...
I agree.Interest rates are not the only way of 'controlling' a property boom. What caused the property mess in this country is:
1) Cheap credit
2) Low/No stamp duty for new builds, first time buyers
3) Very high tax relif on mortgage payments
4) Tax incentives for developers
5) Tax incentives for investors
6) Unprudent/sub-prime lending criteria
To blame just the low interest is extremely simplistic. The government had plenty of tools at their disposal that would not have equated to throwing petrol on the fire.
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