'The Eurozone is a construction that is collapsing'
Moody’s ratings agency has downgraded the European Union's outlook from "stable" to "negative." The agency says the EU’s rating could further fall if other member states are downgraded.
Messerschmidt spoke to RT about possible alternatives to the Eurozone.
RT: Moody's said its decision to switch the bloc’s ratings outlook reflected issues that the EU’s richest members are dealing with. What are those leading countries doing wrong?
Morten Messerschmidt: The entire Euro construction is wrong because it’s trying to incorporate so many different economies and it’s getting increasingly clear that it’s not possible to have a common currency with so relatively different kinds of financial policies, labor market policies, and pension policies. Therefore, one has to unify Europe to create a federation. That’s what all this is about – a political federation which the Europeans predominately don’t want and a fiscal federation where the ECB is buying up the bonds, where everyone has to be liable to other countries’ debts so this is basically a construction that is collapsing.
RT: Today’s meeting of France's Francois Hollande, and Italy's Mario Monti is one of several this week between European leaders – and so far they don’t seem to be bearing fruits. How do you see the situation resolving?
MM: The first crisis will come this Thursday when Spain is issuing bonds worth 3 ½ billion euro. It’s quite obvious that no one in the private market wants to buy these bonds…so now the ECB is going to once again buy up these bonds. And that’s the major point of discussion right now between Germany and other major countries, whether it’s a stable policy to have the ECB constantly buying up the bonds which nobody in the free market wants. Basically, that’s just a sign of the illness of the euro – that the economies are so unstable that you need to have a public foundation such as the ECB to support the economies which need it. In a normal economy, countries would simply be refinancing their debt on the private market, but that doesn’t work in the Eurozone and has caused major concerns for the people who invented this.
RT: Bulgaria’s the latest country to put on hold its plans to join the common currency. Could that be seen as a sign that the Euro may indeed collapse?
MM: Right now is not the time to talk about more countries joining the euro. It’s more relevant to talk about which countries would be the first to leave the euro. We saw the other day that Slovenia is now planning for their public sector of their economy to go bankrupt. We know that in Finland they are working on a plan of what to do if countries begin to leave the Eurozone. Actually, the best thing that could happen for many of the countries within the Eurozone would be to leave the euro and thereby reignite their economy. But talking about new countries coming into the euro is entirely unrealistic as long as we are where we are now, where the Europeans refuse to give up sovereignty to Brussels which is necessary for making the euro work and where it’s obvious that taxpayers, particularly in the north, are fed up with paying with debt that they didn’t build up themselves.
RT: Recent leaked emails claim that the Troika of international lenders want Greeks – in one of the most debt-stricken countries- to work six days a week and longer hours to fulfill their financial obligations. Could that in fact be applied?
MM: There are two important points to be made here. First of all, this just proves once again what the euro is about, that more political decisions are to be taken by people who are not elected, political decisions being imposed on Greeks by people who are not elected there. The second one is that it’s not going to work because the differences between the north and the south in the Eurozone are simply so big that even though you make the Greeks work 6 days a week, the debt level and differences in level of competition between the countries are not at a degree where it makes sense to have a common exchange rate – and that’s what you have when you have a common currency. So even though you might push the Greeks into these dramatic reforms, it’s not going to rescue the euro. The only thing that is going to rescue the Greeks is to abolish the euro – abolish the country from the Eurozone.
RT: Many experts believe the bailout system is the reason why the EU is in such poor economic state. How could the need for them be avoided?
MM: Right now what we’re waiting for is for the European Stability Mechanism to be approved by the German high court. That’s expected within the coming two weeks. Then the instrument would be there for removing bad lending from the private banks onto the tax payers. Then I think Merkel and others will accept – when this economical risk is taken away from the German banks – to let Greece go. That’s the only way to reignite the Greek economy. Iceland for example was in a similar economic situation but they did the opposite of what the EU is imposing the euro member states to do. They let the banks go bankrupt instead of persuading the tax payers to bail them out. The devaluated their currency and today, Iceland is a sparkling star in a gray sky in Europe. I think the same plan could be adaptable for Greece or Spain or Portugal but it cannot happen as long as they are in this prison of the Eurozone. So I’m not going to give any suggestions for what can be done for political changes within the Eurozone to solve the problems because it’s the very structure itself that’s wrong.