The euro currency union has been a disaster that has led the German dominance of the European Union (EU), and is doomed to failure, the former head of the Bank of England has warned.
In an extraordinary attack on the Eurozone, Lord (Mervyn) King said the euro had weakened Europe politically and economically, and Germany’s rise to power on the continent had created “enormous tensions”.
In an interview with the Daily Mail, the former central banker said: “The attempt to create a monetary union has been damaging economically, and it has been damaging politically.
“There are no good ways out of it. It’s only a question of the least bad way.”
One of the most damaging consequences of the currency union, he added, was Germany’s rising power. To make it work, stronger Eurozone nations have had to bail out weaker ones such as Greece, Portugal and Ireland.
Germany has been the biggest lender, but due to a political backlash from voters fed up with their taxes paying for other countries, has insisted on tough austerity measures.
“As a consequence of monetary union, Germany has become the dominant economic, and therefore political, power,” Lord King said.
“So the tensions between, say, Greece and Germany, are greater now than before. The tensions between Italy and Germany are greater.
“Rather than create political warmth and good feelings, and co-operation, the single currency has created enormous tensions.”
This is the second time Lord King has spoken out on the issue. Earlier this month, he said the currency union had failed and created enormous tensions in the continent.
“It will lead to not only an economic but [also] a political crisis,” he said. “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.”
Earlier this week, Lord King’s successor Mark Carney was accused of pro-EU bias “beneath the dignity of his office” when he appeared before MPs.
The Bank of England had pledged to offer emergency cash to Britain’s biggest lenders in the run up to the referendum, leading ‘Leave’ campaigners to accuse them of scaremongering.
Conservative MP Jacob Rees-Mogg said: “This is what I think is doing your reputation and the reputation of the Bank of England harm – you are coming out with the standard statements of the pro-EU group.
“The statements you make about the dynamism of the economy could just as well refer to reforms introduced by Margaret Thatcher.
“It is speculative and beneath the dignity of the Bank of England to be making speculative pro-EU comments.”