EU countries should admit that the euro was a strategic error – Hungary’s National Bank governor
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European Union member states, both in and outside the euro zone, should admit that the euro has been a “strategic error”, the Governor of the National Bank of Hungary (NBH) Gyorgy Matolcsy, has said in an opinion piece published in the Financial Times.
Hungary, which has followed a go-it-alone mix of economic policies since Prime Minister Viktor Orban rose to power in 2010, is not member of the euro zone and does not have a target date for euro adoption.
The government and the central bank have said Hungary should not join the euro before its economy is sufficiently strong. Now NBH Governor Gyorgy Matolcsy said time has come for Europe to “seek a way out of the euro trap”.
“There is a harmful dogma that the euro was the ‘normal’ next step towards unifying Western Europe. But the common European currency was not normal at all, because almost none of the preconditions were met,” he said in the opinion piece published on Sunday.
In his article, Matolcsy said “We rarely admit the real roots of the ill-advised decision to create the common currency: it was a French snare. As Germany unified, François Mitterrand, then French president, feared growing German power and believed convincing the country to give up its Deutschemark would be enough to avoid a German Europe. The chancellor of the time, Helmut Kohl, gave in and considered the euro the ultimate price for a unified Germany. They were both wrong. We now have a European Germany, not a German Europe, and the euro was unable to prevent the emergence of another strong German power. But the Germans also fell into the trap of the “too good to be true” euro. The inclusion of southern European economies in the eurozone led to an exchange rate that was weak enough to allow the Germans to become the strongest global export machine in the EU. This windfall opportunity made them complacent. They neglected to upgrade their infrastructure or to invest enough in future industries. They missed the digital revolution, miscalculated the emergence of China and failed to build pan-European global companies. At the same time, companies like Allianz, Deutsche Bank and Bayer launched fruitless efforts to conquer Wall Street and the US. Most eurozone countries fared better before the euro than they did with it. According to analysis by the Centre for European Policy, there have been few winners and many losers in the first two decades of the euro.”
