Consider this quote from the Guardian, for example, in a piece about the EU summit last week:
The Chancellor Angela Merkel is to ditch years of opposition to common economic policymaking among Europe’s single currency countries today, in a major shift that will widen the gulf between Britain and the EU mainstream (emphasis added)
Or this one, from David Rennie, the brainy Political Editor of the Economist:
If 2011 does see a leap towards a two-speed Europe, securing a place in the slow lane will only mark the start of Britain’s worries (emphasis added)
Or Philip Stephens in today’s FT,
The German chancellor and French president want to couple only 17 of the Union’s 27 carriages to their refurbished train. David Cameron’s British government is perfectly content to wave goodbye from the platform. (emphasis added)
This borders on thought-terminating cliché – trying to end a debate with a commonly used phrase which is actually meaningless without some sort of definition, but that tends to discourage further reflection from the reader or listener. Or perhaps we can call this appeal to process. Circular reasoning which sees the process of EU integration, in and of itself, as determining the speed at which a country travels – by virtue of being, well, EU integration. The actual outcome is secondary. (To avoid bashing British media too much, here’s an example of a non-British paper, which consistently commits this fallacy without realising it)
To illustrate: Under the definitions in the articles that are cited above, countries such as Poland, Denmark and Sweden are confined to a life in the EU’s “slow lane”, while Greece, Spain and Italy, for example, can freely enjoy the “fast lane”.
Really?
So nothing on growth, employment rates, demographics – factors that seem pretty important to consider in any discussion about “fast” and “slow” in Europe…?
Let’s consider the division into a fast lane and slow lane, as defined by the cited articles (particularly the second one) in light of economic growth – just to illustrate how intellectually lazy the two-lane assumption is:
Not quite the same picture, is it?
Now, the articles are of course correct in that there are challenges for the UK, and other non-euro states, arising from the eurozone crisis and the drive for more economic integration in its wake – including the risk that the centre of gravity in EU-17 now moves in the protectionist direction. This is a valid discussion.
Without rehersing the pros and cons of the Single Currency, the question is also how being part of what increasingly looks like a debt union automatically puts you in the fast lane.
Throwing around assumptions and reducing multi-facetted discussions into oversimplified cliches is lazy journalism.
#1 by Sebastian on February 11, 2011 - 4:39 pm
I love this statement “Throwing around assumptions and reducing multi-facetted discussions into oversimplified cliches is lazy journalism. ” But now that you have applied it to others, I wanted to see how you measure up to it.
First of all, your article contains no mention whatsoever about the possibility of the geographic influence on the economic growth (for instance the fact that many of the Eastern European member states are not yet in the euro-zone and a lot of them have had a higher economic growth for years), as well as the fact that the Nordic countries are not in the euro-zone. In short, your article does not demonstrate that it is indeed euro that causes the discrepancy between the euro countries and the non-euro countries. Then you go on and claim that it is indeed so, committing a logical fallacy only to push your point. Journalistic laziness perhaps? I expected some more in-depth analysis from a think-tank such as yours, but instead all I get is opinionated politicised propaganda.
(Not to mention that in your table there, you picked higher than average growth countries for the non-euro area, while picking lower than average growth countries for the euro-area. I suspect this is not a coincidence, but please let me know if I am wrong).
#2 by Mats Persson on February 11, 2011 - 5:06 pm
Many thanks for your comment Sebastian. Where in this post do I claim that “it is indeed euro that causes the discrepancy between the euro countries and the non-euro countries”? In fact, this post is in no way about the economic effects of the euro, but interesting that you should jump to that conclusion.
I deliberately select low (or no) growth euro countries and high growth non-euro countries to illustrate how the definition of ‘slow’ and ‘fast’ lanes in Europe completely vary depending on which criteria you use, though average growth rate (which I also give) is certainly a valid criterion (again, without implying causality).
#3 by KG on February 12, 2011 - 1:27 pm
Good points. These cliches are far too often used by politicans in the EU debate and then repeated uncritically by journalists. I’m in favour of more EU integration in many areas but one of the problems with people at my end of the debate is that we don’t explain why we’re in favour or give real arguments often enough, its like we expect people to buy it at face value which is why we’re talking about fast-lanes etc.
I think the euro has been good overall and don’t see this post as a criticism against the euro but a challenge to how we talk about and present EU integration
#4 by George on February 14, 2011 - 9:51 am
A good piece but not without its own lazy generalisations.
“And to continue the illustration, look at how Sweden – a non-euro member who, for instance, has also vetoed moves towards common EU family law (=the slow lane presumably) – has strenghtened its position in Europe over recent years. Why? Hint: the economy.”
Sweden is not really a slow lane country, it is a rather avid integrationist on all points save the Euro and even that is more or less a matter of time (they are legally bound to adopt it and the constitution does not require a referendum, nor require the outcome to be adhered to were one to take place.). That Sweden is seen as quite a core country has to do with a lot more than its recent economic success. It has to do with its historic, business and cultural ties to Germany. It also has to do with Sweden’s avowed internationalism. Long has it been policy in Sweden to support all forms of multinational legal frameworks and to partake in as many of them as possible. They see this as a break on the narrow pursuit of self-interest by global powers. The tighter the ties that bind the better, for in this way the small states are protected from the dominion of the large. That has been Swedish policy since the 2nd world war. The EU is just an extension of this.
You’re quite right to point out that euro membership does not (yet) define the core. But you are lazy to think/hint that being economically successful makes a state a core state. There is an awful lot more to it than that.
But if the competitiveness pact goes through in anything like its present form there will be a dramatic move to further integration. Being core or peripheral has to do with how integrated a country is relative to the other EU members, not with how important or how wealthy it is. This is a very difficult thing to measure and there is bound to be some subjective assessments involved, but there are some clear cut features. Euro membership is one, as is Schengen membership. Trade, labour transfers, defence cooperation, cross border policing agreements, etc, etc.
The competitivness pact is a pact for economic integration for the euro countries. By definition this will lead to the euro countries becoming more integrated and so closer to the core. Sweden and other core but non-euro countries are likely to copy a lot of the things the euro countries adopt, and the pact is open to non-euro members so it wont necessarily result in a dramatic widening of the core from the periphery. But there are other countries, such as the UK, that probably wont join in to such a degree. And so the spread of integration between the core and periphery will widen.
Does this mean that the peripheral countries are going to suffer economically? No. Does this mean that power will shift within the union? Probably yes. Will that shift be dramatic? No,
#5 by Patrick on February 14, 2011 - 1:21 pm
However journalists want to describe it, the point is quite clear.
A country that does not participate in the core activities of the EU cannot expect to have much influence on its future development.
Go back to 1955 when the British were invited to participate in the Spaak IGC. They chose to leave early and so the architecture of the EU was conceived without them.
Now in 2011, the ECB President will soon be nominated, and it’s not going to be a Swede, Brit, Pole or Czech. EU economic policy will be formed without these countries and most, if not all, of them will some day have to live with the consequences of decisions taken in their absence. In this case, the consequence could be 17 Member States adopting the German model and – implicitly – rejecting the Anglo-American one. Latecomers then have the choice between going their own way or converting to the new religion.
Those who do not lead are doomed to follow.
#6 by Freeborn John on February 14, 2011 - 3:02 pm
Sebastian(1): There is a link between the euro, and the long-term performance of the eurozone relatibe the non-eurozone states in the EU, and non-EU countries. It is that the one-size-fits-all eurozone interest rate has economic costs. These costs are most significant for countries who domestic inflation diverges the most (either above or below) from the eurozone average. It is pretty widely known now that countries in the eurozone periphery, i.e. those with a high propensity to domestic inflation, suffer magnified economic cycles of boom and bust. Their economies are overly stimulated during economic upswings and then crash disastrously when the bust eventually arrives. i.e. the Celtic Tiger to Bust effecy. What is less well known is that countries with very low domestic inflation, e.g. Germany and the Netherlands also suffer below-trend growth, but for them the timing is reversed, with them doing relatively poorly during the economic upswing as their domestic savings are diverted to the eurozone periphery, thus depressing domestic demand below the ‘natural’ level. German was the worst-performing economy in the West from the introduction of the euro until the 2008 bust, and would/will suffer further when the significant percentage of its domestic savings which were diverted to feed the boom in the periphery is subject to a haircut.
The effect therefore, which you instinctively allude to, of long-term below-trend growth in both the eurozone periphery and core does exist with only those states (e.g. France) whose domestic inflation happens to be close to the eurozone average being unaffected by the costs of a monetary policy ill-matched to their needs.
Patrick (5): It is exceptionally unlikely the UK will ever join the euro. The Irish Celtic Tiger to bust is seen as proof of the ‘Walters critique’ of EMU. Public opinion polls show support in Britain for joining the euro down to only 7%, indicating the matter is settled. Furthermore Ireland had no significant influence on the euro, and is very much a ‘follower’. The republic is now reduced to a ‘fax democracy’ receiving approval for tax and spend and budgets from Brussels, with Irish elections being reduced to deciding who sits by the fax machine in Brussels awaiting the incoming instructions from the Commission.
#7 by Freeborn John on February 14, 2011 - 3:13 pm
Typo: the Irish Taoiseach of course sits by the fax machine in Dublin awaiting his orders (and automatic fines under the ‘European semester’ for not implementing them).
#8 by George on February 14, 2011 - 4:05 pm
“It is exceptionally unlikely the UK will ever join the euro.”
I agree that the UK as a whole probably wont, but Scotland probably would given its own way. An independent Scotland, were it to happen ( and that is by no means a far fetched scenario ,one more thatcher would do it) would have to choose between three options: create its own currency, keep Stirling, join the euro. The former is risky, and the second would be unacceptable for a newly independent nation. The Euro looks attractive from Scotland’s perspective.
And then Northern Ireland will also adopt the euro the demographics give the Catholics a majority and it rejoins its southern neighbor. That will happen in my life time as sure as almost anything can be in politic.
So while most of the UK may stand aloof from the Euro parts of it may very well not do so.
As to the old chestnut that it was the euros fault that Ireland and Greece had to get bailed out. this is overly simplistic in the extreme. The Euro set the prevailing conditions, but had Greece not lied to borrow, and had Ireland regulated its banking sector, they would be substantially better off than they now are.
As to growth in the eurozone, lets look a bit closer at Germany. In particular lets look at the statistic that actually means something, namely GDP per capita. Between 2000 and 2009 German GDP per capita went from 23100 dollars to 40000 dollars. The UK went from 25000 dollars to 35150 in todays money. The US went from 34600 to 46400. So per capita Germany managed to enrich its citizens by more in both absolute and relative terms than either the UK or the US.
Euro membership does not seem to be hurting the Germans very much does it?
#9 by Michael on February 14, 2011 - 7:23 pm
The two speeds metaphor was already used around the time of the Irish treaty veto when it was suggested a subset of the EU countries could pursue tighter integration alone, it was never a metaphor for economic prosperity.
The goals of the EU and thus what could be considered the desirable direction in the context of the EU is spelled out in the treaty preamble:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0013:0046:EN:PDF
You are free to declare the countries that are opposed to fully implementing these EU goals as being on some sort of economic fast lane, but these newspapers are absolutely correct in describing the EU fast lane based on what the EU specifically states as its goals.
#10 by Freeborn John on February 14, 2011 - 11:48 pm
George (8): Consulting my collection of The Economist ‘World in xxxx’ yearbooks, I see:
World in 1992:
GDP/person:
Uk: $17710
Germany: $25500
World in 1999: (euro introduction)
Uk: $23418
Germany: $27418
World in 2011:
Uk: $38360 ($35440 PPP)
Germany: $37680 ($36020 PPP)
I think it is pretty clear which country is in the slow-lane. ‘More Europe’ = ‘Less Growth’.
#11 by Freeborn John on February 14, 2011 - 11:55 pm
Slight correction: Uk 1999 GDP/person = $23478, not $23418. But the $60 difference does not change the trend of slower long-yerm growth in Germany.
#12 by George on February 15, 2011 - 8:52 am
Here is the link to the website I got my figures from. They are world bank figures!
http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_pcap_cd&idim=country:DEU&dl=en&hl=en&q=german+gdp+per+capita#met=ny_gdp_pcap_cd&idim=country:DEU:GBR:USA
Look at the graph. I defy anyone to look at that graph and come to the rational conclusion that germany has performed any worse than the UK since the introduction of the euro. It just is not true!
Both the UK and Germany have outperformed the US and both have grown per capita in step with each other. Germany had a slight dip when the euro was introduced and the UK had a larger dip from 2009-10, but basically they have grown almost exactly in step. If Britain’s use of the pound gives it a significant competitive advantage then the countries economy must be substantially worse in its fundamentals than the German economy. Or, as I deem more likely, the euro is not undermining the German economy and both are growing at the rate one would expect from western European countries.
#13 by George on February 15, 2011 - 9:34 am
And here is an article in the Ft that says exactly the same thing as I have claimed above.
Published in the FT
http://www.ft.com/cms/s/0/9323e120-387d-11e0-959c-00144feabdc0.html#axzz1E0uYkLUW
to summarise the article
1. France and Germany have weathered the recent crisis better than the UK.
2. They have accumulated less private and public debt than the UK.
3. The ability to devalue hasn’t made the UK any more competitive against Germany in terms of exports.
4. Had Britain been in the euro it would only have landed up in Ireland’s mess if it had failed to “run a tighter fiscal policy and imposed credit controls to offset lower interest rates.”
Its always nice to have the ft on your side.
#14 by Freeborn John on February 15, 2011 - 1:08 pm
George: The data you are using is unadjusted for inflation, which distorts multi-year comparisons, and is further distorted by being based directly on market exchange rates.
http://en.wikipedia.org/wiki/Gross_domestic_product#Adjustments_to_GDP
If you use the same source to compare (real) GDP growth per year, you will see that the UK has outgrown Germany almost every year since 1993.
http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&nselm=h&met_y=ny_gdp_mktp_kd_zg&hl=en&dl=en#ctype=l&strail=false&nselm=h&met_y=ny_gdp_mktp_kd_zg&scale_y=lin&ind_y=false&rdim=country&idim=country:DEU:GBR&hl=en&dl=en
p.s. The FT’s judgment has been wrong on every great economic issue of the last 40 years, so it’s reassuring they are ‘your side’.
I already explained in my first comment that the euro monetary policy, which is pro-cyclical in the eurozone periphery is contra-cyclical inthe eurozone core, i.e. suppresses German growth during the economic upswing (as its saving are diverted to the unsustainable boom in the periphery) but buttress growth in the downturns. Therefore the FT comment that France and Germany have ‘weathered the crisis better than the UK’ is short-sighted on two counts:
1. It fails to acknowledge that over the whole economic cycle France & Germany fares worse.
2. It fails to acknowledge that the UK is more like Ireland than France & Germany and would certainly not have ‘weathered the crisis’ had they been in the eurozone. The UK would have gone bankrupt in the eurozone during this recent crisis, where the monteary policy would have been (as in ireland) pro-cyclical, i.e. magnified the boom and bust wit a massive private sector overborrowing binge encouarged by too-low euro interest rates.
The Financial Times is the most notorious pro-euro propaganda organ in the UK, and Philip Stevens is one of their regular euro cheer-leaders. Nothin in that paper is relaible. They are desperately trying to row-back business opinion on the euro, which has turned around completely, now being very strongly against the UK ever joining the single currency. The FT is not going to win that battle in the face of the real-world evidence that EU-sceptic predictions about the effects of the euro came to pass. As with every other major economic issue of the last 40 years, the FT has been proved wrong abou the euro.
#15 by George on February 15, 2011 - 1:32 pm
GDP growth does not measure the degree to which the individual citizens of a country are benefited. Britain’s population is expanding, Germany’s is contracting. To correct for that you have to take the per capita figures.
What is more inflation has been consistently higher in the UK than in Germany over the period (roughly twice to three times the German rate). If we corrected for inflation as well your argument would be even weaker.
As for your “two counts” the second may well be correct, but if it is so that is nothing to shout about, but the first is just not true. I say again, on a per capita basis, and especially if one corrects for inflation, Germany has done just as well if not better than the UK in terms of the enrichment of its citizenry over the time that it has used the euro. What is more, it has done this without running up massive public and private debts and so will not now have to go through a protracted period of austerity.
And finally on the FT. The FT is a pro-business paper. It advocates whatever it thinks makes economic sense and whatever it thinks its capitalist readers want to read. It is also an international paper now, not a national one. Its target audience are the captains of global industry and commerce. That your local shop keeper, or whatever, does not like the euro is hardly going to trouble the readership numbers of the FT, and for the FT that is all that matters.
#16 by Patrick on February 15, 2011 - 1:46 pm
@ Freeborn John
No-one expected overnight results as a consequence of entering EMU stage III. This is a long-term project requiring years of convergence as well as structural and cultural change.
If we’re going to start comparing statistics, a far more worthwhile indicator is the decline in the value of the pound. A House of Commons research paper indicates that in the period from 1971 to 2009, the British Pound lost about 91% of its buying power.
I see a future where both Scotland and NI have adopted the euro, leaving England/Wales and one or two Scandinavian countries on the outside. I also believe Switzerland will be accepting the currency alongside the CHF.
#17 by Joan or archchch on February 15, 2011 - 2:24 pm
I think that there are some lazy assumption about Northern Ireland here. Several recent surveys have shown that only a MINORITY of the catholic population want unification with the south and i’ve never detected any great pro-europeanism in Scotland.
#18 by George on February 15, 2011 - 2:55 pm
Having looked at the stats and polls I am willing to concede that my info was out of date there. I was working from what I had heard from a friend of my father who worked there prior to the good friday agreement. Devolution seems to have taken the sting out of the issue, being something that both sides can and do support.
Scotland, and here I am talking as a scot, is more pro-european than England, however, it is not avidly so. In the context of an independent Scotland there is no doubt that it would be a part of the EU, and little doubt that it would adopt the euro (that being preferable to the alternatives). The big question is whether Scotland will become independent. As it stands at present I think probably not, but the risk is there. Any highhandedness a la Thatcher from south of the border feeds nationalism north of it. All it would take is for a tory government to neglect Scotland (and bare in mind how few tory MP’s there are North of the border) enough to tip the opinion scales by 15% or so and an Independent Scotland would see the light of day again.
Interestingly there was a survey of 500 bosses in NI on whether the UK should join the Euro in 2003 and 60+% of them said the UK should. I know that isn’t a measure of the popular sentiment, but still it is food for thought.
#19 by Freeborn John on February 15, 2011 - 3:07 pm
George: The IMF has data showing GDP per capita on a PPP basis in the UK and Germany from Sterling’s exit from the ERM in 1992 to today.
http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/weorept.aspx?sy=1992&ey=2010&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=87&pr1.y=12&c=112%2C134&s=PPPPC&grp=0&a=
Between 1999 (euro introduction) and 2010 the GDP/person on a PPP basis in Germany grew in real-terms by 43.5% and the UK by 44%. Between 1992 and 2010 , GDP/person grew by 77.1% in German and 106.6% in the UK.
This data does not suffers the distortions of yours in not accounting for inflation and being based on PPP. And it confirms (even if not as strongly) the earlier data from the Economist Intelligence Unit, that the UK has had faster growth (including on a per-capita basis) than Germany both since the euro was established in 1999 and since Sterling left ERM in 1992.
#20 by Freeborn John on February 15, 2011 - 3:33 pm
Sorry George, as with German growth, you are talking hogwash when saying the Scotts are more pro-EU that the rest of the UK. The Scottish executive website reports “The key finding is that Scots share the Eurosceptic views that prevail in the UK. The idea that Scots hold markedly less Eurosceptic views than citizens in the rest of the UK is not supported by research.”
http://www.scotland.gov.uk/Publications/2007/03/19134334/3
Scots have seen the economic devastation inflicted on Ireland by euro-membership. They won’t vote for any system that removes basic economic choices from the electorate, and has a high propensity for making countries on the edge of the currency zone go bankrupt.
#21 by George on February 15, 2011 - 4:02 pm
As to the euroscepticism of scots we will have to agree to differ. As I say, I do not hold that scots love all things EU, only that their outlook on europe in general is a bit more positive than south of the border. There are many historical and cultural reasons for this, most but not all of them in the distant past which is why the present effect is slight, but it is still there particularly among the older generation.
As to your stats:
From your website
Germany
1999- 25,030.116
2010- 35,930.367
UK
1999- 24,325.435
2010- 35,052.921
And now I quote myself above.
“Germany had a slight dip when the euro was introduced and the UK had a larger dip from 2009-10, but basically they have grown almost exactly in step.”
I think I am born out by your website as much as by my own. Since the Euro was introduced Germany has performed pretty much as well as the UK, and it has done so without running up huge debts. Another interesting comparison you might want to look at is how Germany’s trade with the rest of the world has changed since it was part of the euro.
http://www.google.com/publicdata/explore?ds=d5bncppjof8f9_&ctype=l&strail=false&nselm=h&met_y=ny_gdp_mktp_kd_zg&hl=en&dl=en#ctype=l&strail=false&nselm=h&met_y=ne_exp_gnfs_zs&scale_y=lin&ind_y=false&rdim=country&idim=country:DEU:GBR&hl=en&dl=en
p.s The Survey you cite was conducted by the Labour Scottish govenment just before it got kicked out of office in an election that saw the SNP win on a Scotland in Europe ticket. I take that as anecdotal evidence that the SNP’s cause was hardly hurt North of the border by its avowed policy of taking an independent Scotland into both the EU and euro. Can you imagine a UK party winning on that ticket?
#22 by Freeborn John on February 15, 2011 - 4:52 pm
George: All data indicates the UK has a higher long-term growth rate than Germany, catching up and then overtaking German GDP/person in ~2002 and pulling further and further ahead until the start of the current downturn ~2008.
Your data deliberately exagerates German growth by choosing an end date during the economic downturn, and also using nominal GDP rater than PPP basis to skew the results with the Sterling devaluation of 2009/10. As mentioned previously the only time one can expect the eurozone core to grow faster than the periphery is at this stage of the economic cycle. Therefore any data sequence that ends 2010 is likely to flatter Germany by ending at the point where she grows fastest relative to anyone else. The Economist is already predicting the Uk will grow faster (1.3%) than Germany (1.1%) in 2011and we can expect the familiar pattern of low German growth to remerge as the economic cycle gets to the real upswing. with the UK then pulling further and further ahead of Germany again as has been the norm over the previous 17 years.
The probability that German taxpayers will have to shoulder the burden of regular “haircats” after 2013 is likely to be a new factor, further depressing the already low German trend growth rate in futue economic cycles.
AlsoGiven that the German population is falling (Germany will be overtaken in population by both the UK and France by 2050) it is very likely the UK will be the largest economy in Europe by ~2040. This has impliations for the sustainability of the model that assumes Germany will always be big enough and rich emough to bail out the uerozone periphery. She is getting smaller and poorer per person relative to the rest of Europe and the world.
http://news.bbc.co.uk/2/hi/7583776.stm
#23 by Steve Peers on February 15, 2011 - 7:11 pm
Another point about the ‘two-lane’ analogy is that it is not even accurate on its own terms. This is clear from the (probably) imminent decision to go ahead with enhanced cooperation as regards the EU patent between 25 EU countries – including the UK, Ireland and Denmark (the UK being among the biggest supporters of the idea) but not Italy and Spain, which usually participate enthusiastically in EU developments.
While the UK, Ireland and Denmark have JHA opt-outs, the UK and Denmark have EMU opt-outs, and the UK, Poland and in future the Czech republic have special rules (leaving aside what they actually mean) relating to the EU Charter of Rights, and there were only 14 participants (so 13 non-participants) in EU legislation concerning choice of law on divorce. A number of other Member States have yet to join EMU or Schengen in practice.
Other uses of enhanced cooperation are foreseeable in the near future, for example as regards corporate tax and possibly anti-discrimination legislation.
So while the UK is more often a non-participant than other Member States are, it is sometimes a participant, and the list of other non-participants varies. Therefore it is rather silly to talk about ‘fast lanes’ and ‘slow lanes’ generally speaking, or even about a ‘core Europe’ – except in the sense that there is still a reasonably large part of EU integration in which *every* Member State participates, in particular (but not only) the internal market.
#24 by Mats Persson on February 15, 2011 - 9:52 pm
Exactly Steve, and funny you should mention the patent: http://openeuropeblog.blogspot.com/2011/02/two-speed-eu-patent.html
@ George, good points re Sweden though you’re not quite capturing the complexity of the Swedish position within the EU I’m afraid. There are several areas where the country is anything but “avid integrationist”, e.g. consider the problems the Government is having in pushing through the Data Retention Directive at the moment, or the already meantioned refusal to sign up to EU family laws, or the resistance to abandoning the state monopoly on alcohol, or its position on the re-nationalisation of the CAP, or even the centre-right government’s scepticism to EU employment laws. You’re confirming my point that the “two-speed” distinction often is arbitrary and depends on where you choose to put your focus.
Ps. You’re also missing a crucial factor: the centre-right establishment in Sweden long saw the EU (and in particular the Single Market) as a way to circumvent Social Democratic domination in the country. This view is becoming increasingly dated which will have cosequences for how Swedish centre-right governments approach EU integration.
#25 by George on February 16, 2011 - 9:49 am
Mats:
Every EU country has issues with aspects of EU directives, and all of them protect national interests. France does it and so does Germany. As I say, the slow and fast lanes are decided by the proportion of common initiatives a country partakes in and the degree to which a country actively pursues them. No country is an avowed enthusiast on all things EU, but I think it is fair to say that one can roughly order EU countries by degree of integration. By decreasing integration an example list would be Luxemburg, Germany, Sweden, UK, Romania. Where you draw the line between slow and fast lanes is arbitrary, but I don’t think that line goes exactly where euro membership goes and I do think that Sweden falls on the fast side of that line.
FBJ:
I think I have presented more than enough stats (including your own) to justify the thesis that Germany has grown per capita at roughly the same rate as the UK since the intro of the euro in 1999. I took the dates I did as 1999 is the year the euro came into use and 2010 is the last year we have data for. Also Germany began to recover in 2010 so that marks the end of the trough. 1999 was also a trough, so it is a fair assumption that 1999-2010 is one period of the economic cycle. As you say, it is average growth over the cycle that is important. Over the last cycle the UK did little to no better than Germany. I think both you and I have provided enough information for the rest of the readers of this blog to make their own minds up on this now.
As to your other claims:
German exposure to haircuts is less than UK exposure to hair cuts as their private banks are less indebted than the UK banks and they are less dependent on the financial sector. Also, though Germany’s population is shrinking France’s is growing almost as fast as the UK’s. The two together will probably be more than enough to support any periphery countries that get into trouble, well into the foreseeable future.
Also German net borrowing is projected at 5.1% in 2011, while UK net borrowing is projected at 12.9% for the same year. The two presently spend the same proportion of their GDP on servicing their debts (Germany’s debt is a little higher but the pay lower interest rates on their bonds), but the UK is going to have to make drastic cuts in the public sector over the near term if this situation is not going to change.
http://www.economicshelp.org/blog/uk-economy/uk-national-debt/
As it stands, even with the austerity measures in place, which in themselves are going to retard UK growth over the next few years in a way that will not happen in Germany, by 2012 Uk debt is probably going to be around 100% of GDP whereas German Debt will be about 80% of GDP. Now recall that German bonds attract a slightly cheaper interest rate. At that time, in very rough figures the UK will be spending around 4-4.5% of its GDP on interest repayments, whereas Germany will be spending around 3.5%.
That extra 0.5-1% means that the UK will have to grow about that much more than Germany over the first part of the next cycle just to keep up in net terms. I just don’t see the evidence for the UK being able to do that. Hence, I don’t see that the UK will be able to pull further ahead (to paraphrase yourself) over the next cycle. She will have her hands full just keeping up.
#26 by George on February 16, 2011 - 9:56 am
Presently
UK 10 year bonds are 3.84%
German 10 year bonds are 3.29%
UK public debt 2010 is 68%
German public debt 2010 is 75%
#27 by Freeborn John on February 16, 2011 - 12:56 pm
George: You picked the only organisation (World Bank), the only methodology (nominal GDP at market exchange rate) and the only start and end date possible (2000 -2009) that could support your argument that Germany is a faster growing economy than the UK. It’s hogwash and the way you needed to go out of your way to find supporting data confirms it. You have picked data that is skewed both before the start period you select and right at its end. i.e after a 5-year decline in German GDP from $30901/person in 1995 to $23114 in 2000 (mainly due to exchange rate movements). And you picked an end date 2009 where UK nominal GDP at market exchange rate fell from $43261 to $35165 in a single year, again almost all accounted for by exchange rate movement. That is transparently biased selection of data.
I did not to pick my data sources to suit my argument. The EIU data is readily at hand and shows UK out-considerable performance relative to Germany, including during the 1999-2011 period. The IMF data does show only marginal UK out-performance during those years but it is still the UK which grew faster.
Furthermore there is no data set you could pick from any organisation using any method which could deny that over the entire economic cycle, starting with Sterling leaving ERM in 1992 until the exit from the current recession, that the UK has very significantly outgrown Germany. That is a fact which no data from any reputable source can deny, and it confirms that floating exchange rates work better than fixed ones.
As with GDP/person you deliberately chose skewed data to support your argument rather than looking at the bigger picture, in this case a myopic focus on 1-year’s public debt (an election year in the UK when the outgoing government was spending to try to stay in power). The bigger picture is that Germany has a higher total stock of debt than the UK, having persistently flouted the Stability and Growth Pact’s 3% limit on public deficits for most of the 2000-2007 period when German growth was historically low. Indeed the UK went into this downturn with much lower public debt than France, Germany and Italy.
http://www.bbc.co.uk/news/10150007
If you want to compare 1-year deficit figures, the relevnt example for the UK would be Ireland’s 1-year deficit, where the euro-induced bust has fed through to 50% negative euity, whose flip side is NAMA and a 1-year public deficit of 32% of GDP! That is the type of deficit the UK would have had in the euro.
Your problem is that all your arguments are based on the logic of ‘my enemy’s enemy is my friend’. Which leads you to advocate measures that would cut of the Scottish nose to spite the English. My arguments are based on what is good for the British people; more democracy outside the EU, and floating exchange rates with more stable and ultimately faster growth in the long-term.
#28 by George on February 16, 2011 - 1:29 pm
“Germany is a faster growing economy than the UK.”
Straw man. No where did I claim this. I did initially claim that German gdp/person growth was better than the UK, but for most of these posts I have only argued that its gdp/person growth was roughly similar to the UKs over the period since the euro came into being.
“It’s hogwash and the way you needed to go out of your way to find supporting data confirms it.”
I did not cherry pick the data and I think everyone reading this will understand that. Particularly it was I who presented the graphic that showed the gdp/capita corrected for inflation growth of the two countries over the past 40 or more years. I ask everyone simply to look at that figure and decide for themselves whether over the past 11 years German per capita growth has been comparable to the UK’s.
Your response to my point about public debt is distinctly underwhelming, and your point about the UK doing an Ireland had it been in the euro is built entirely on conjecture. There are plenty of countries inside the euro that have not done an Ireland, and there are some outside the Euro that have. The FT article above discusses the scenario and comes to the conclusion that though what you say might have come to pass, there is no necessity to it. Who knows how the UK would have reacted to fixed interest rates after the euro was a reality. Who knows what the euro would be like today had the UK joined it. I surely don’t, and I doubt that you have special insight here either.
#29 by George on February 16, 2011 - 1:34 pm
Correction. The figure was not adjusted for inflation, but as we established later, correcting for inflation doesn’t alter the general picture.
#30 by Freeborn John on February 16, 2011 - 1:55 pm
More Hogwash George. Everybody knows how people react to lower interest rates; they save less and borrow more. That is the signal that low-interest rates are meant to send! They have no other purpose than that. Over-borrowing is what the Irish did in response to the too-low for them eurozone interest rates, ultimately resulting in a house price boom and a bust with negative equity of 50%, and the hard choice a complete meltdown of the financial system or national bankruptcy to rescue the banks.
You can’t have it both ways in saying that UK is borrowing too much, while also saying we should have been in a currency union whose interest rate would have been lower than Sterling’s and so have encouraged much higher borrowing over the last decade!
You are also wrong thyat using figures adjusted for inflation would not have altered the picture of your skewed data. The PPP figures are adjusted for price differentials in different countries and show the picture you were trying to deny, i.e. that the UK was the fast growing country over any long-term period you care to pick, including 1999-2009.
#31 by George on February 16, 2011 - 2:08 pm
If “hogwash” is going to be your response then I guess this interesting discussion has come to an end. I leave it to whatever audience we may have had to decide on who has the right of it.
#32 by BRUCE IRWIN on February 18, 2011 - 1:27 pm
Thanks for having me again,I am very grateful.The german chancellor and the french president want to couple only 17 of the union’s 27 carriages to their refurbished train,will happen.It will keep right on track and will eventually be 10 when it gets to the station.What Mr,David Cameron said about be content to wave goodbye to the platform,will take place.But to the downfall of the British Government.
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