Posts Tagged ‘Spain’
Liquidity is meant for the Internal market. Competitiveness is for External market?
Posted April 16, 2014
on:Liquidity is meant for the Internal market. Competitiveness is for External market?
Should the level of “Life-Style” be the same among the competitive and the challenged productive states within a Union?
This is not a fair condition to impose on States that managed to sacrifice and work hard for better life conditions.
States in financial crisis must have ready lists of 4 categories of enterprises:
1. The public institutions that are critical in the smooth transmission of liquidity to the various economic sectors
2. The mixed State/Private entities that have locations in many regions of the State and employ many citizens
3. The nationwide private companies
4. The medium and small productive companies that serve their local provinces
It is well know that medium and small productive companies constitute 70% of State production that cater for the internal market needs.
Any shortage in liquidity in these small private companies and employment hit the roof and the citizens experience shortages in most commodities.
Giving priority to the local economies in the distribution (infusion) of liquidity is the first step in preventing mass unemployment.
There are public economic sectors that cater to the general public needs, such as energy, water and transportation… and the stabilization of these functional sectors in matter of maintenance is another urgent priority.
Before the internal market is reinvigorated and underway, it is of no use planning for the export sections to external markets in order to get the influx of “hard currencies”
Stability and security are the basis for a shift toward State development.
Having the autonomy to print money in period of liquidity shortage is the key for stabilizing the internal market.
The disadvantage resides in the society structure that favor the oligarchy and wealth disparity that eliminate the benefit of printing more money.
The crisis in Greece, Ireland, Portugal, Spain and Italy have demonstrated that it is a priority that a State has to reform its public service institutions to discard redundant and politically influenced service appointments.
Without a drastic realization that the political structure should be reformed, and for actually feel the pain associated with uneven equal rights to jobs and opportunities in the institutions, all the remaining reforms will be within the “patching” process.
The crisis in Greece was deep rooted because it lacked the two preconditions: Lousy political structure and not having the right to print money.
Ireland, Portugal, Spain and Italy had political structures that could remedy to the “unfairly” political conditions and to reform the system within the single Euro currency.
The EU has learned the lesson:
1. First, the State that asks to join the union zone must demonstrate that it is serious to undertake political reforms and the structure be designed to react in timely manners to situations of political reforms.
Many States have been included based on historical and ideological “myths” that didn’t match their current unstable realities.
The EU dominant responsibility is to gradually transform the States who applied to join the union into politically viable structure.
The States in waiting must acknowledge that it takes time to achieve stable and valid political structure.
How a poor and unstable State can become competitive in the external market? This is an impossible condition to withhold liquidity infusion that is meant to support local companies.
The “productively challenged States” in the Euro zone should not expect the same level of life-style as the most competitive among them.
And equal rights in life-style is not an equitable and sustainable demand on State basis.
The Euro of the European Union (EU) currency is witnessing healthy devaluation compared to the dollar and needs to be lower to arond 1.1 to the dollar. The increasing difficulties experienced by many States in the EU result from initial weaker economies that could not compete efficiently in the European common market and then were buffeted by the US financial crisis. The European and international financial and political medias are breaking the taboo of discussing whether maintaining the Euro is a viable alternative in the short term.
The arguments of the group that staunchly defends the Euro is mostly based on political reasons: To them it is becoming a matter of safeguarding dignity and sovereignty. It beieves that the Euro is the major factor in the reconstruction of the European market and for the political stability and the cohesion of the European market. This group would like you to believe that without the Euro there would be no EU.
The taboo breaker group believes that the EU is in dire difficulty because it prematurly created a common currency before ironing out and strengthening common politics. Germany and its satellites States in the northern hemisphere benefited most from the Euro since their currencies were highly overvalued “stronger” than the Euro and thus, they managed to compete better and export more to the European common market.
The other States in the Union could not deal with a Euro that was much overvalued compared to their national currencies and thus, had to suffer in market competition. The financial and economic commotions in Greece, Ireland, Portugal, and Spain are symptoms of the financial and economic imbalance with respect to the vaster and stronger economies in Germany, France, and Italy. This group believes that the EU is heading toward a deflationary period within a couple of years if no structural institutions are installed.
The main source of imbalance is that the original six States in the Union had firmir and better tested administrative and political instituions that could apply regulations agreed on and the capability to supervise and monitor laws and regulations governing the union members. The weaker States are at great disadvantage: The main powerful States in the union have no confidence in the resilient determination of the weaker States to effectively executing the agreed upon regulations and second, the weaker States are prohibited to issuing (printing money) to satisfy liquidity in their internal trade and commerce.
It is not the Euro that created the common European market: the EU was already instituted and functioning well before the common currency was created on political grounds. The Euro was mainly to be the material “symbol” of the Union and this symbol degenerated into a calamity at the first major problem. The EU could have imagined much less costly symbols for its unification until political coherence was firmly established, tested, and thoroughly evaluated.
The Maastricht treaty set limits to budget deficit below 3% and public deficit below 60%. Currently, only Spain has kept its public debt at 54% and Germany its budget debt at 3.3%. The remaining States in the Euro have doubled and even tripled both limits. Joblessness is very bad all over the Euro zone averaging 10%; Spain has 20% and Ireland and Greece about 14%.
It seems to me that the Euro has encourage many mafia type “economies” to expand simply because it became much easier to transfer a unique currency and circumventing further money exchange regulations and constraints.
The financial institutions and the medias are sending waves of terrors claiming that there is lack of confidence in the Euro; they claim that this confidence is so low that investors are shirking the Euro zone States. I believe that the Euro should stay but be restricted to the main large economies such as Germany, France, Italy, Spain, Holland, Danmark, and Norway where the same homogeneous spirit for taking seriously the application of financial and economic regulations among the member States.
The other weaker States should have an alternative common currency, far devalued from the Euro and backed by the Euro until political coherence and institutions are equalized in efficiency and modernity. The weaker States should enjoy the privilege of pre-empting slow internal trade by issuing liquidity in the newer common currency within limits.
Currently, this Teutonic vital space of Germany is at work from an economical perspective after the fall of the Berlin Wall. Germany export is mostly oriented toward the eastern vast States that recaptured their independence from the Soviet Union in 1990. Germany would have rather have its own European Union formed of Holland, Danmark, Sweden, Poland, Tchekoslovakia, Austria, and Ukraine. The western European States and Greece are just added burden that Germany feels it was pressured to supporting. Probably, the European Union might adopt a second currency (alongside the Euro) just for internal trade purposes among the European States. The internal trade currency could be labelled “Euro E” referring to the eastern European States so that the current Euro, implicitely a “Euro W” referring to the western European States, be mainly used for external trades outside the EU boundries.