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13 January 2011

FT: Issing warns debt crisis threatens euro


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Europe’s monetary union will be put in danger by the misguided response of eurozone governments to the sovereign debt crisis, according to Otmar Issing, the European Central Bank’s former chief economist.


In an essay that struck a distinctly pessimistic note on the euro, Mr Issing, one of the common currency’s founding fathers, said he feared Europe’s leaders would waste the opportunity presented by the crisis to strengthen the governance of the 17-nation Euro Area.

His essay on European monetary union, published on Tuesday by the Official Monetary and Financial Institutions Forum, a London-based centre for financial market dialogue, appears certain to stir debate in Germany and beyond about the wisdom of the EU’s handling of the crisis.

Mr Issing, writing after last year’s international financial rescue operations for Greece and Ireland, which amounted to almost €200bn, said: “The present seemingly unstoppable process towards further financial transfers will generate tensions of an economic and especially political kind. The longer this process is characterised by unsound conduct of individual member countries, the more these tensions will endanger the existence of EMU.
My conclusion at the start of 2011 is a sombre one. We have not yet reached the moment of truth for EMU. It has merely been postponed.”

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© Financial Times


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