There's No Clear Strategy of Quitting Eurozone, Founder of Euro Says

Professor Otmar Issing, who is one of the founders of the common European currency, assumes that having no clear strategy of quitting the Eurozone is a big mistake made by the founders of the Euro currency.

At the same time, he says that the existing economic instability in such countries as Italy, Portugal , and Greece eventually creates a considerable imbalance within the European Union. Otmar Issing, who used to be the ECB’s leading economist, also underlined the negative impact of negative interest rates as well as the vulnerability brought by the independence enjoyed by E.U. national banks amid growing political pressure thy have been feeling so far.

At the same time, he says that the Eurozone’s key problems still have to do with structural difficulties and rising public discontent with the currency union. At the same time, he believes that the common currency remains stable. Moreover, it behaves even better than expected, unlike Eurozone members themselves.

The countries that pushed the Eurozone into recession during the global financial crisis are still one of the biggest economic problems. In particular, Greece has been seeing a permanent crisis ever since, while Italy and Portugal have either suspended some of the economic reforms or even canceled them at all.

That’s why Otmar Issing, who also used to be Angela Merkel’s advisor, is now getting increasingly concerned about the future of his child, which is the common European currency. He warns that if the Eurozone authorities fail to implement all the necessary reforms, the Eurozone will simply cease to exist over time.

He says that introducing a lifetime Eurozone membership was a huge mistake. This gave unsustainable Eurozone members, who cannot comply with the Eurozone’s budget and economic rules, a chance to blackmail the others. At the same time, if Greece had a chance to quickly quit the Eurozone, the country could really clean up the mess in the national economy. Later on, Greece could rejoin the Eurozone as a more stable member of the currency union.

Moreover, Professor Issing assumes that some of the existing Eurozone members should have never been a part of the currency union. He didn’t specify the list of such countries. But we can figure out what some of them are…

Also, he is concerned about all of those zero and negative interest rates so popular today among the central banks of the Eurozone. Such tactics prevent the financial institution form recovering. If they keep on pursuing such policies, the entire Eurozone may well feel the negative impact, which will concern insurance companies and pension funds. He says that the longer the banks use zero or negative interest rates, the harder it is to get rid of them later. He assumes that by gradually increasing the rates, they won’t prevent companies from investing in growth.