Governor Matolcsy on the euro

HUNGARY - In Brief 05 Nov 2019 by Istvan Racz

MNB governor György Matolcsy, who has appeared as quite active in terms of public appearances on a wide range of subjects lately, made some interesting comments on the euro the other day. In an opinion published by the Financial Times, under the title: 'We need to admit the euro was a mistake', he claimed that the euro was in fact a trap, out of which members will have to find a way to escape. He wrote it was not true that creating a common currency was the next logical step towards the unification of Western Europe. The conditions necessary to operate the system, most importantly a common state and fiscal policy, are still missing.Mr. Matolcsy claimed that euro introduction was mainly pushed by France, as the French were afraid of the prospect of German predominance in Europe, and they wrongly thought the common currency was a way to avoid that. Germany also made a mistake, as they got into a very strong position in the Euro Area, but that made them complacent and they neglected the development of infrastructure and investment in key economic sectors. Most economies of the Euro Area performed better before the introduction of the euro than after that, and the 2008 financial crisis hit member economies hard. The EU and its member states should wake up from this dream and admit the euro was a strategic mistake. Euro Area member states should be allowed to leave the common currency in the forthcoming decades, and those who remain should aim at developing a more durable global currency.To us, these comments appear to be a collection of mainstream, though unofficial academic views, facts, half-facts, assumptions and conspiracy theories. They do not seem to be entirely cons...

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