As a result of the Eurozone crisis, German academics are abandoning the concept of a “soft” single currency.
THE EUROZONE is transforming into a “soft currency,” according to German academics who are beginning to abandon the European Union’s legal tender.
Despite the global economic effects of the coronavirus epidemic, the eurozone’s GDP expanded by 2.2 percent in the second quarter of 2021 compared to the first. However, German scholars have expressed concerns about the eurozone’s long-term future, claiming that abolishing EU economic treaties would have “dire implications.”
Since the 2010 Euro crisis, “regulatory norms laid out in the EU treaties have gradually been repealed,” according to Thomas Mayer, founding director of the Flossbach von Storch Research Institute.
He said that the Eurozone was founded on “the principles of regulatory policy in the EU treaties, with the ECB’s political independence and the prohibition of monetary state funding, “rescue” of insolvent states, and debt mutualisation.”
“Solid money and a financially healthy state should lay the foundation for free-market competition,” Mr Mayer continued.
“This directive had aided West Germany’s economic recovery and the development of a globally desired currency in the postwar period.
“However, since the euro crisis, the EU treaties’ regulatory principles have been gradually repealed.”
Mr Mayer then claimed in a German newspaper, Die Welt, that the eurozone had adopted the Latin European business culture, which he claims “places greater emphasis on discretion than on rule enforcement.”
“The state intervenes in private sector planning, and the central bank plays a supportive role in the state’s fiscal policy,” he continued.
“Fiscal policy rules, allowing both the public and private sectors to pass on rising expenses to consumers while borrowing ever more…
“The Italian lira depreciated by 82 percent versus the Deutsche Mark between 1971 and the EMU’s introduction, while the French franc lost 52 percent.”
“As the experience in Italy demonstrates, the consequences for the euro area are likely to be that there are no longer any effective limits on public and private debt, the euro is mutating into a soft currency (a new lira), inflation is rising, and productivity and economic competitiveness are declining.”
Mr Mayer concluded by saying that Germany should be concerned about the eurozone’s acceptance of state debt intervention.
“Germany will not be able to avoid this, and it will be further burdened by its ambitious.”Brinkwire Summary News”, he said.