Brussels, 24/01/2013 (Agence Europe) - Introducing the European single currency was a mistake, said five economists in Brussels on Thursday 24 January 2013, where they unveiled a manifesto for euthanasia for the euro as a way out of the current crisis. There is nothing new about the idea, because there has been some talk of a Grexit (Greece/exit).
What is new about the current call by economists who say they are not eurosceptics is the way they suggest the euthanasia should proceed. They say that rather than it being the weaker links that leave the single currency, it should be the strongest countries as this would lead to a de facto devaluation of the euro, although in recent weeks the euro has been picking up and southern eurozone countries have become more competitive. The stronger countries leaving would either go back to their old currencies or have a common currency among economically homogenous nations.
This “Manifesto for European Solidarity” says it wants to give the countries worst hit by the crisis a way out of recession and an opportunity to return to growth. One of the economists, Alfred Steinheer (formerly of the EIB and once a strong defender of the single currency), admitted that it was a backward step. He said the euro had caused the crisis and cannot be seen as ideal as unemployment rises among young people. Some 60% of Spanish youngsters are now unemployed.
Hans Olaf Henkel, professor of international management in Germany, says the problem was substituting harmonisation for competitiveness. He said the euro was a social disaster in the south and an economic failure that has failed to meet its political objectives and it was time to recognise this.
The five economists do not recommend splitting the eurozone asunder, the spectre of which was on the horizon until recently but dispersed by ECB action to defend the eurozone and the recent agreement to make the Greek debt affordable, calling instead for a “managed fragmentation” which, unlike the scenario of
struggling countries being forced out, would protect the financial systems of southern countries from the danger of collapse.
To head off potential wars of currencies and wild fluctuations of exchange rates among European countries, a monetary coordination system would have to be set up. The five economists challenge the one-size-fits-all policy of the ECB. The Padoa-Schioppa group under the aegis of the Notre Europe thinktank, which hosted the conference in Brussels, has already criticised the ECB's policy for potentially widening the gap between member states (see EUROPE 10653). (EL/transl.fl)