Ex-German Finance Minister: ‘Catastrophic’ euro should be scrapped, economy worsening

Former German Finance Minister Oskar Lafontaine, who helped launch the euro in 1999, is warning that the economic situation is getting worse with each passing month, which is why the single failed currency should be scrapped in order to allow nations in southern Europe to recover.

The current course is “leading to disaster,” according to the former German minister. With the economic situation depleting and unemployment levels threatening democratic states, such as France, Italy and Spain, Lafontaine believes euro countries will be “forced by their current misery to fight back against German hegemony sooner or later.”

Iterating his remarks on Germany’s Left Party website, Lafontaine took aim at Chancellor Angela Merkel and predicted that once Germany becomes a victim of the present crisis then will she finally “awake from her self-righteous slumber.”

“The Germans have not yet realised that southern Europe, including France, will be forced by their current misery to fight back against German hegemony sooner or later,” said Lafontaine. “Hopes that the creation of the euro would force rational economic behaviour on all sides were in vain.”

Lafontaine’s remarks come as data confirms exactly what he is warning about. Germany’s economy declined for the first time since November: the manufacturing industry dropped at the fastest pace in five months, while output for its services industry also fell for the first time since November.

Germany should exit (in theory)

Other finance experts and politicos are reiterating Lafontaine’s sentiments. Speaking in an interview with Die Welt on Monday, influential economist Hans-Werner Sinn stated that Germany could survive and prosper from exiting the eurozone.

“Naturally Germany can exist without the euro. The exit horror stories painted are all overblown. In particular, it’s not true that the export industry would collapse,” explained Sinn. “A bit of an increase in (currency) value would do Germany good because the cheap imports would more than balance up the worse export business.”

Despite Sinn’s remarks, he only agrees with Germany dumping the euro in theory. Instead, Sinn believes Germany should assist other countries to leave the euro.

“Germany shouldn’t leave the euro for political reasons because the euro is a central European integration project,” said Sinn. “If a country can’t deal with the euro because it is no longer competitive then it should leave and Germany should stop keeping them in the euro with loans that will never be repaid.”

Nigel Lawson, Margaret Thatcher’s longest-serving Chancellor, labelled the European Union as “a bureaucratic monstrosity,” according to an op-ed he wrote Tuesday in The Times. Lawson thinks leaving the euro would outweigh the costs and “the case for exit is clear.”

Finance guru Jim Rogers said earlier this year that he sees the euro collapsing following the German election in September. The demise of the euro will come from ballooning interest rates, high debt loads and bankruptcy.

“Out of Europe you are going to see currency turmoil, interest rates going to the roof , bonds defaulting, bankruptcy, it is not going to be a lot of fun it might lead to an ultimate solution, there is nothing like a crisis to cause people to address issues, but often when n they have the crisis the politicians look for the easy way instead of the right way and they just make it worse down the road,” iterated Rogers.

The little currency that could (sort of)

Not everyone sees the euro as a bleak currency. Speaking to Bloomberg News last week, Finland’s Europe Minister Alexander Stubb defended the euro and said it is the most stable currency in the history of Europe. He doesn’t see the euro being abolished in his lifetime.

“The human mind has a tendency to forget, but look at the devaluations, revaluations, the peggings to the Gold Standard, the inflation rates and the monetary instability that we’ve had throughout European currency history,” stated Stubb.

British Deputy Prime Minister Nick Clegg slammed Lawson’s comments and said policy shouldn’t be made through knee-jerk reactions.

“I know the Conservatives are struggling to work out how to deal with UKIP and they keep now changing their minds: one minute they want to be in the European Union, now senior Conservatives like Nigel Lawson say they want to go out,” Clegg told ITV. “I think we need to transform the European Union to make it more transparent more efficient, more democratic where we can, but not turn our backs on it because doing so would make us less safe and less prosperous.”

The eurozone has been experiencing high unemployment levels, astronomical debt levels, weak economies and political instability.

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