Sunday, September 2, 2012

Felix Zulauf interview part 5: The euro divides Europe, not unite it

The financial market expert Felix Zulauf expressed his opinion in an interview for Wirtschaftswoche Online that European integration is not dependent on the euro. The euro is not an integration project, but it divides Europe, thinks Mr. Zulauf.

Would it not be better if you do not let the people vote directly on this issue, as it would be in Switzerland?

The facts came to light, but that does was not due to the politics. The politics assumesthat the euro is an integration project. But European integration is not dependent on the euro. The euro is not an integration project, but it divides Europe. Originally the idea was pursued to eliminate the single currency, the currency fluctuations in the European Economic Area.

But because of the different competitiveness, we now have hard impact in the real economy. If you ask Spaniards, Greeks, Italians and Portuguese, you will come very soon to the conclusion that it was better than the exchange rate fluctuated and the economy is still fairly reliable, organized and developed.

And the euro was presented to the citizens with the fact that they would not need to constantly move money abroad?

I thought that was not bad. Of course it would be nice if we had a single currency that would work. But the euro was just a project at the wrong time, because the necessary preconditions were missing in the real economy. The Bundesbank at the time was absolutely right. It was stated that the European economies would have to first approach each other for about two to three decades. If this process was succesful then it would eventually end up being crowned by the Monetary Union.

Why has not it been done?

The French have prevailed. They thought that after the currency union the structural adjustments will be done automatically. And the majority of economists have supported it. But there was a minority that has addressed the concerns clear. But their representatives were always ridiculed and portrayed as anti-European. That was and is still wrong.

Will the European Central Bank (ECB) allow the end of the €?

The ECB will mount up again and again new guns. The LTRO loans to the banks, it has opened a Pandora's box. If they did not do that, Spain and Italy would have experienced a banking collapse, their economies would be broken completely. This step is followed by others, the ECB itself, however, do not even know how much they inflate their balance sheets in the coming years, and it must be done if it wants to keep the system together.

The ECB said it wanted to prevent a credit crunch LTRO in southern Europe.

This is not a credit crunch, this is a bankruptcy of the banking system and the governments of several countries. The failed banks have to finance the bankrupt states and to get the financing at favorable conditions provided by the ECB.

Would it not be cheaper for the taxpayer, if the ECB would directly fund the States at a rate of one percent, that is, without the expensive detour on the banks?

Sure, at first glance, it would be cheaper. But since there are legal hurdles, so we choose the detour. This monetary policy is of course very unhealthy. From the history of Germany to Zimbabwe, we know that after an average of five years in which funds a central bank than a third of the state budget, will be a currency reform. In the U.S. and the UK, we are already above that threshold, and also in Europe and Japan will be exceeded.

Did the ECB via LTRO also facilitate large foreign banks to withdraw from Spain and Italy?

That was not her idea. I do believe, however, not the far-sighted among the leaders are unhappy about it, when the European banking system nationalized, so keep as Spanish banks especially Spanish government bonds. A return to national currencies could thus run with less pain.

To be continued...

1 comment:

  1. It would be very helpful if you would find someone fluent in English to edit this blog. Many of the English sentences are grammatically incoherent.