Mish's Global Economic Trend Analysis |
EU On Collision Course With Germany Over Tariffs; Yet Another Reason for UK to Exit EU Posted: 19 May 2013 10:41 PM PDT The threat by the EU to impose huge tariffs on solar panels from China has run into staunch opposition. The Financial Times reports Germany warns EU solar tariffs would be 'grave mistake' Germany's vice-chancellor and economy minister put Berlin on a collision course with Brussels by warning that imposing anti-dumping duties on solar panels from China would be a "grave mistake".Damage of Tariffs I do not believe it is possible to accurately predict the damage caused by inane tariffs. Much depends on how China would respond. But even if China did not respond, there is no advantage to artificially forcing up prices. Tariffs are simply a bad idea, period. As I have pointed out, much of the European overcapacity that led to the price crash was caused by European subsidies. Somehow it is OK for Europe to offer subsidies but not China. EU policy is also hypocritical in regards to its stated emphasis on clean energy. For further discussion, please see Paul Krugman "Was" Right. Yet Another Reason for UK to Exit EU Note the continual bickering by Germany with the EU and with France over trade, over eurobonds, over a political union, over agricultural policy, over everything. Why Cameron wants the UK to stay in the EU is a complete mystery, especially when the UK fears additional nannycrat idiocies like financial transaction taxes. Fortunately the UK tide is changing, as a recent Poll Shows 46% in UK Want to Exit EU, 30% Want to Stay In. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Folly of Preserving the Euro at All Costs; Should France Lead Breakup of Euro? Posted: 19 May 2013 08:47 AM PDT The Local, a website with German news in English reports Economists warn against German euro exit. "Even a believable rumour that Germany would exit the euro would result in a massive capital flight from the countries of southern Europe to Germany." Complete Rubbish As is typically the case in such articles, the eurozone proponents ignore the costs of staying in the euro and overly trump up the benefits. The article perpetuates the myth that German taxpayers will suffer the consequences of a breakup, but suffer no costs if the eurozone stays intact. Nothing could be further from the truth. As I have pointed out on many occasions, Germany is going to pay a steep price either way, and so will Europe. The cost to Europe on the current path will be another decade of Southern European depression, resentment, and capital controls. Somewhere along the line, citizens in one or more countries will decide they have had enough, and vote to exit the Euro anyway. It is a huge mistake to believe Germany can impose its will on Southern Europe forever while not paying through the nose with eurobonds or other transfer mechanisms. If Germany returns to the D-mark, it will get paid back in cheaper Euros, but it least its stands a chance of getting paid back. On the other hand, target-2 imbalances are so great the cost of a destructive piecemeal splintering of the eurozone coupled with outright default, will be much higher. Many economists don't see this simply because they do not want to. Should France Lead Breakup of Euro? I have argued that the best way to breakup the eurzone would be a German exit. Politically speaking that could be doable once Merkel is gone. But then aagin, perhaps not. The problem is Germany has been the biggest beneficiary of this failed experiment, and will not give up those benefits easily, even if mathematically it must eventually (and destructively) happen anyway. In a Bloomberg column, authors Brigitte Granville, Hans-Olaf Henkel, and Stefan Kawalec argue France Must Lead Breakup of Euro Many observers concede that the euro was a mistake but think there's no going back. They reckon that dissolving the monetary union would lead to economic chaos, first in Europe, and then around the world. European leaders are afraid that backtracking on the euro project would also be a lethal blow to the larger cause of European integration and could be the beginning of the end of the EU and the single market. These fears give rise to what we regard as the disastrous strategy of defending the euro at all costs.The authors present an interesting viewpoint, well worth a closer look. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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