The Eurozone is doomed to fail and should be put out of its misery as soon as possible, the former governor of the Bank of England has said.
Lord (Mervyn) King of Lothbury says that further steps towards fiscal union will do nothing to address tensions in the currency area and may even cause it to fall apart. Unless the Eurozone is broken up, he says, there will be an “economic [and] political crisis” with endless bailouts, austerity and pressure from “elites in Europe” to create a “transfer union”.
Any further attempts at political and economic integration would likely lead to fierce resistance among the citizens of those countries, Lord King added.
“It will lead to not only an economic but [also] a political crisis. Monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy at the national level on the other. This is extraordinarily dangerous.”
The Telegraph reports that Lord King, who served as Bank of England chief from 2003 to 2013, also said it may be “too late” for the alternative, where struggling countries such as Greece are temporarily “relegated” from the currency bloc to regain competitiveness.
“The underlying differences between countries and the political cost of accepting defeat have become too great.
“That is unfortunate both for the countries concerned – because sometimes premature promotion can be a misfortune and relegation the opportunity for a new start – and for the world as a whole because the euro area today is a drag on world growth.”
Meanwhile, Germany faces a “terrible choice” of either writing blank cheques to keep the bloc afloat “at great and unending cost to its taxpayers” or calling “a halt to the monetary union project,” Lord King adds.
Indeed, keeping the euro is now more likely to result in chaos than abandoning it.
“The counter-argument – that exit from the euro area would lead to chaos, falls in living standards and continuing uncertainty about the survival of the currency union – has real weight, but… leaving the euro area may be the only way to plot a route back to economic growth and full employment.
“The long-term benefits outweigh the short-term costs.”