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Alternative solutions to the Eurozone crisis - Presentation of the 'European Solidarity Manifesto', Brussels

24 Jan 2013

Open Europe and New Direction hosted a conference in Brussels, entitled, “Alternative solutions to the eurozone crisis – Presentation of the European Solidarity Manifesto”. The debate was chaired by Open Europe’s Pieter Cleppe and featured opening remarks from Dutch MEP Derk-Jan Eppink, of the European Conservatives and Reformists (ECR) Group.

To listen to an audio recording of the event, click here.

(l-r) Alfred Steinherr, Hans-Olaf Henkel, Pieter Cleppe, Stefan Kawalec, Brigitte Granville and Claudio Borghi Aquilini

At the event, five top European economists unveiled and signed a new ‘Solidarity Manifesto’ for the eurozone, in which they argue for “a jointly agreed [euro] exit of the most competitive countries. The euro may then remain – for some time – the common currency of less competitive countries. It would ultimately mean a return to national currencies or to different currencies serving groups of homogeneous countries.”

Hans-Olaf Henkel, former head of the Federation of German Industry (BDI), said that the eurozone crisis is the result of “too much integration, too fast” and warned that “the worse has yet to come” if things do not change. He noted that even the most fervent supporters of the single currency now admit that the euro “is much too strong for the South, including France, and much too weak for the North.” Henkel also stressed that, as by-products of the crisis, “Antagonism between eurozone countries is growing” and eurozone leaders “are giving up the idea of subsidiarity and replacing it with the idea of centralisation.”

Stefan Kawalec, CEO of Capital Strategy and a former Deputy Polish Finance Minister, argued that, due to the “paradox of the euro trap”, it is far more risky for Southern eurozone countries to leave the single currency than it is for their Northern counterparts. He stressed that the proposal in the manifesto does not amount to “abandoning” struggling eurozone members. On the contrary, a coordinated exit of Northern countries would be “the most effective way to support Southern countries, because a weaker euro would help them restore growth.”

Alfred Steinherr, former Chief Economist at the European Investment Bank, said that the benefits of introducing the euro had been “exaggerated” since the beginning. He warned that further eurozone integration would be “the condemnation of Europe” and suggested, “If we don’t know how to manage our being together…why not think seriously about taking a step back? Why not get out of something which doesn’t work properly?” He also questioned whether the European idea is still “respectable” in light of the high unemployment and the difficult economic conditions across the euro periphery.

Looking at France’s future in the eurozone, International Economics Professor Brigitte Granville argued that “internal devaluation is not an option, especially when long-term unemployment is already at 10%.” She suggested that France would instead benefit from leaving the euro, because that would allow Paris to press ahead with a “combination of devaluation and debt reduction as the necessary accompaniment for supply-side reforms.” To achieve this, though, France should be prepared to “sacrifice its alignment” with Germany.  

Italian economist Claudio Borghi Aquilini argued that Italy’s euro membership turned out to be “one of those weddings which is better not to celebrate”, since, in order to join the single currency, Italy had given up the “natural balancing tool” of fluctuating exchange rates. He noted that Italy is the perfect example of the risks involved in establishing a ‘fiscal union’ in the eurozone – given that there are the Northern regions (which he compared to Germany) sending money to the Southern regions (likened to Greece) via the central government in Rome (Brussels), with very little impact on closing the competitiveness gap between the two areas.

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