German adviser gives ailing euro 'limited chance of survival'
In notably outspoken remarks for a senior German figure, Dr Konrad, chairman of a scientific council that advises the finance ministry, said: "Europe is important to me. Not the euro. And I would only give the euro a limited chance of survival."
Asked whether he thought the single currency would last five years, the economist said: "A concrete period is hard to identify as it depends on so many factors. But five years sounds realistic."
This pessimistic judgment runs counter to the official German government view that the euro must be held together for the sake of unity in Europe. Dr Konrad's remarks came in an interview with the newspaper Welt am Sonntag on the debt crisis in Europe.
He warned that: "No country can pile up debt without running the risk that their investors will pull the plug. It's in each [country's] interests to keep their own debts as small as possible. Where the limit lies has to be individually decided. That depends among other things on economic growth and the growth of population."
Dr Konrad said countries should have the freedom to get into debt, provided they carried the "sole responsibility" for these debts. He made his blunt remarks about the future of the euro when the interviewer suggested he was advocating a return to the nation state.
German Chancellor Angela Merkel has always insisted she wants to preserve the single currency and maintain the eurozone in its current form. In a speech to the Bundestag two years ago, she told MPs: "Nobody should take for granted another 50 years of peace and prosperity in Europe ... that's why I say: If the euro fails, Europe fails."
The government's official line is the euro is essential for the prosperity of an export-oriented nation. Rather than accept the break-up of the euro, the German government is demanding tighter, Europe-wide controls over national budgets.
Finance Minister Wolfgang Schaeuble warned against increasing liquidity to promote growth, though he has also acknowledged the soaring unemployment of southern Europe needs to be addressed. "We are dealing with almost an economic schizophrenia. Everyone says we have deficits that are too large and a high level of liquidity would make everything more dangerous. And then some say, but we have too little growth, and so we need more liquidity."
Frequently Asked Questions about this Article…
Yes. Kai Konrad, chairman of a scientific council that advises the German finance ministry, said the euro has a “limited chance of survival” and that “five years sounds realistic” as a possible timeframe. That was his personal, pessimistic assessment reported in an interview about the European debt crisis.
Dr Konrad’s view is more pessimistic. He suggested the single currency might not last long, whereas Germany’s official position — echoed by Chancellor Angela Merkel — is that the euro must be preserved because its failure would threaten Europe’s unity and prosperity.
Konrad warned that no country can pile up debt without risking investors “pulling the plug.” He said countries should be free to take on debt but must carry “sole responsibility” for it, and that each country must decide debt limits based on factors like economic growth and population.
According to the article, the German government supports tighter, Europe-wide controls over national budgets as an alternative to accepting a break-up of the euro. This is presented as part of efforts to hold the currency together for economic and political unity.
Finance Minister Wolfgang Schäuble warned against increasing liquidity to spur growth, arguing it could be dangerous if deficits are already large. At the same time, he acknowledged southern Europe’s high unemployment and the need to address growth. For investors, this highlights a policy tension between avoiding risky excess liquidity and supporting growth in weaker economies.
Based on the article’s themes, investors should monitor political statements on euro stability (from advisers and leaders), European budget-control proposals, sovereign debt levels in member states, and signs of investor flight from sovereign bonds. These factors can influence currency markets, bond yields and overall market confidence.
Chancellor Angela Merkel said that if the euro fails, Europe fails. She has emphasized preserving the single currency and maintaining the eurozone in its current form, arguing the euro is essential for the prosperity of an export-oriented nation like Germany.
No. The article reports comments from policymakers and advisers about the euro, debt and policy debates. It does not provide specific investment advice. Everyday investors should interpret these views as indicators of political and economic risk and consider seeking professional financial advice before making portfolio changes.
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