21 February 2014

Issing criticises "perverse" euro solidarity

Former ECB chief economist Ottmar Issing is concerned that in the wake of the crisis the currency union will turn into a transfer union, where billions of German taxpayers' money will flow into ailing countries.

Translated from the German

As a member of the European Central Bank (ECB) Ottmar Issing once helped design the monetary union in Europe. But now he sees his legacy threatened by the, in his opinion, completely misguided eurozone bailouts. 

The ECB has gone too far in its rescue efforts and has taken over tasks that the euro area Member States should in fact be responsible for, Issing said in an interview with the print edition of the newspaper "Handelsblatt". He was referring to ECB chief Mario Draghi's announcement that, in an emergency, the ECB would be prepared to purchase unlimited amounts of government bonds. "The German Federal Constitutional Court has made ​​clear that an unlimited purchase of government bonds of individual countries is incompatible with the mandate of the ECB", said Issing.

Even within the euro countries themselves, Issing sees 'false policy' at work: "The call for a transfer union means the transfer of tax money from solid countries into those that have elevated levels of unemployment due to excessive wage increases", he said. This was "a perversion of the idea of ​​solidarity" and the "end of a stable currency area".

Issing also defended Germany against criticism from crisis countries: "Germany has contributed a major proportion of all financial bailouts, and that is unlikely to change", he told the paper. The accusations that Germany was doing too little were, therefore, not justified. The highly indebted countries in crisis should look instead for solutions at home, according to Issing: although the reform efforts in many countries were considerable, they were not yet sufficient. 

Another one of Issing's demands is unlikely to please politicians dealing with the euro crisis: Issing calls for the financial markets to play a more important role in the fate of the single currency, acting in the function of an "independent guard". Euro area countries that fail to tackle the necessary reforms and have unsound economies should be punished by high interest rates on their government bonds. This, he said, had nothing to do with speculation - the rise in interest rates in such cases had been caused by serious errors in national policy and were "well deserved".

Full article (in German)

© FOCUS Online