“16 countries sharing one currency is nonsense”
The European ministers recently agreed on a 110-billion euro rescue package for Greece, hoping this would prevent a default and stop the currency’s crisis from spreading through the rest of the bloc, and Germany has been opposed to the idea from the very beginning.
Dr. Wilhelm Hankel is one of the currency experts who filed a lawsuit in the German constitutional court against Greece’s bailout.
“The whole idea is illegal, because we have the treaty for the European community, and bailout is completely forbidden for a very simple reason: a country which can count on being bailed out will not follow the financial and monetary discipline, so no bailout is a precondition for a stable euro,” Hankel said.
Greece is only going to be the first case, Hankel explained, followed by Spain, Portugal, Ireland, maybe Italy and France; if these countries are bailed out, the euro will become a very weak and inflated currency.
“The treaty must be fulfilled, and not broken,” he added.
If the court rules on behalf of Hankel, Germany’s participation in the bailout action will be stopped. Beside that, Hankel said, Greece may be forced to opt out of the EU.
“Why not? A country with a weak economy cannot share a monetary club having hard rules for stability and hard currency.”
If Greece, Spain and Portugal are forced to pull out, there are two possible scenarios, Hankel said. The first option is for the Euro zone to become a smaller and harder monetary union, with only ten or eight member nations, against today’s sixteen.
Another option is to stop the Euro experiment entirely, and have all countries return to their national currencies.
“Sixteen countries sharing one currency is nonsense, in political as well as economic terms,” Hankel pointed out.
According to Professor Hankel, the euro zone’s falling apart may actually have a positive impact on the European nations’ economy.
“At the moment all countries have problems with the euro, because the euro gives them credit which is not worthwhile. In the euro zone all countries, even big deficit countries, countries with high inflation rates, are able to get credit. This is the reason Greece and others are over-indebted. So, after such an experiment every country will come back to stable conditions, they can, in one case, devalue the currency… Others will appreciate and maybe diminish export surpluses but gain more prosperity in their own markets. Each county of the union will fight its national crisis with national means… it’s a much better concept to master financial and the real economic crisis,” he said.