Germany: Expert reveals ‘issue’ for successor
The eurozone is on course for a double-dip recession after the second wave of COVID-19 infections during the last quarter of 2020 sent the bloc’s recovery into reverse. The eurozone’s GDP fell by 0.7 percent from October to December as national governments introduced new restrictions and lockdowns to try to curb the virus. GDP fell by 0.5 percent in the wider EU in the last three months of the year.
With lockdowns likely to persist through much of the first quarter of 2021 and the EU’s sluggish start of its vaccine rollout programme, analysts believe the bloc will almost certainly suffer a second bout of declining economic activity during January to March.
A recession is defined as at least two consecutive quarters of negative growth.
Moreover, the euro tumbled to a nine-month low against the pound in response to the figures and the prospect of a double-dip recession.
On the other hand, sterling rose to €1.1365 for the first time since last May, meaning one euro is worth 88p.
As many wonder whether the gloomy outlook could mean the unravelling of the eurozone, an interview with former German Chancellor Helmut Kohl, which sheds light on the “single currency’s undemocratic beginnings”, has resurfaced.
Germany‘s longest-serving post-war Chancellor admitted he would never have won a referendum on the adoption of the euro in his country and said he acted “like a dictator” to see it introduced.
In an interview conducted for a journalist’s PhD thesis, Mr Kohl said: “I knew that I could never win a referendum in Germany.
Eurozone on brink after German Chancellor admitted acting like dictator to bring in euro
European Central Bank (ECB)
“We would have lost a referendum on the introduction of the euro. That’s quite clear. I would have lost and by seven to three.”
The interview was conducted by Jens Peter Paul, a German journalist in 2002 – the year when the Deutsche Mark was replaced by euro notes and coins – but only published in 2013.
In it, Mr Kohl described adopting the euro as an emblem of the European project, which he said had prevented war on the continent.
He said: “If a Chancellor is trying to push something through, he must be a man of power. And if he’s smart, he knows when the time is ripe. In one case – the euro – I was like a dictator …
“The euro is a synonym for Europe. Europe, for the first time, has no more war.”
Mr Kohl justified overcoming the German public’s reluctance to relinquish the Deutsche Mark by saying that democratic politics had to be based on convictions rather than the ebb and flow of elections.
He added: “Political life is like this – elections go back and forth. Representative democracy can only be successful if one sits down and says – ‘that’s it. I will connect myself’ – as I did – ‘connect my existence to a political project.’
“Then you automatically have in your party a lot of people who say: ‘if that fails, so do I’.”
Mr Kohl, who won four general elections in a row, had intended to hand over to his successor in the middle of his final term, but changed his mind because of uncertainty over the introduction of the euro, he also disclosed.
He stated in the interview that he thought Wolfgang Schaeuble – who is now Germany’s finance minister but was his anointed successor at the time – lacked the political authority to handle the change.
Former German Chancellor Helmut Kohl
Mr Kohl also claimed much of the resistance in Germany was to the idea of a currency union without an economic and fiscal union, which is what, according to former President of the European Commission Jacques Delors, led to Europe’s debt crisis.
Mr Delors, one of the architects of the single currency, told the Daily Telegraph in 2011 that the lack of central powers to coordinate economic policies allowed countries, such as Italy and Greece, to run up unsustainable debt.
He also claimed that the debt crisis did not stem from the single currency itself, but from a “fault in execution” by political leaders who chose to turn a blind eye to the fundamental weaknesses and imbalances of member states’ economies.
The now 94-year-old Frenchman said: “The finance ministers did not want to see anything disagreeable which they would be forced to deal with.”
Mr Delors insisted that all European member states should share the blame for the 2009 crisis.
He said: ”Everyone must examine their consciences.”
Commenting on Britain, who objected to euro membership and claimed the currency could not work without a state, Mr Delors added: “They had a point.”
He also noted that the reaction of EU leaders had been “too little, too late”.
In particular Mr Delors identified “a combination of the stubbornness of the Germanic idea of monetary control, and the absence of a clear vision from all the other countries”.
In the late Eighties, Mr Delors’ plan was indeed received with high levels of scepticism by Britain and, in 1990, Margaret Thatcher’s Government proposed an alternative to the French politician’s full monetary union.
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Former President of the European Commission Jacques Delors
Former Prime Minister John Major
According to a BBC report of the time, then Chancellor of the Exchequer John Major announced the plan in a speech to German businessmen.
It was envisaged that the currency, called the Hard ECU, would be used initially by businesses and tourists and managed by a new European Monetary Fund (EMF).
According to a 2015 report by economist at Capital Economics John Phelan, the Hard ECU would have been “less economically and politically” damaging than the euro.
The economist argued several eurozone countries desperately need the tool of devaluation that the euro denies them.
He said: “The Hard ECU would have allowed them this tool until such time as they no longer needed it. If that time didn’t come, then they should not have joined the single currency.
“Politically, by giving democratically accountable domestic policymakers the ‘greater policy space’ offered by devaluation, the Hard ECU would have generated less of the resentment that the euro currently fuels.”