Wednesday 13 December 2017

Euro faces ruin, says ex-German finance minister

Oskar Lafontaine
Oskar Lafontaine

Ambrose Evans-Pritchard

Oskar Lafontaine, the German finance minister at the launch of the euro, has called for a break-up of the single currency to let southern Europe recover, warning that the current course is "leading to disaster".

"The economic situation is worsening from month to month and unemployment has reached a level that puts democratic structures ever more in doubt," he said.

"The Germans have not yet realised that southern Europe, including France, will be forced by their current misery to fight back against German hegemony sooner or later."

Mr Lafontaine said he backed European Monetary Union but no longer believes it is sustainable..

He blamed much of the crisis on Germany's wage squeeze to gain export share. On the parliamentary website of Germany's Left Party he said that Chancellor Angela Merkel will "awake from her self-righteous slumber" once the countries in trouble unite to force a change in crisis policy at Germany's expense.

His prediction appeared confirmed as French finance minister Pierre Moscovici yesterday proclaimed the end of austerity and a triumph of French policy, risking further damage to the tattered relations between Paris and Berlin.

"Austerity is finished. This is a decisive turn in the history of the EU project since the euro," he told French TV. "We're seeing the end of austerity dogma. It's a victory of the French point of view."

Mr Moscovici's comments follow a deal with Brussels to give France and Spain two extra years to meet a deficit target of 3pc of GDP.

The triumphalist tone may enrage hard-liners in Berlin and confirm fears that concessions will lead to a slippery slope towards fiscal chaos.

German vice-chancellor Philipp Rosler lashed out at the European Commission over the weekend, calling it "irresponsible" for undermining the belt-tightening agenda.

The Franco-German alliance that has driven EU politics half a century is in ruins after France's Socialist Party accused Mrs Merkel of thinking only of the "German savers, her trade balance, and her electoral future".

Mr Moscovici conceded that the budget delay merely avoids extra austerity cuts to close the shortfall in tax revenues caused by the recession. (© Daily Telegraph, London)

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