Sinn warns of Eurozone ‘self-service shops’
One of Europe’s most influential economists has unleashed an extraordinary attack on the continent’s political elite.
Hans-Werner Sinn – who heads the Institute for Economic Research (IFO) in Munich, Germany – has become one of the most outspoken critics of the European Union’s (EU) steps in reaction to the debt crisis of Eurozone members like Greece.
He told the Salzburger Nachrichten about the most recent decision of the EU’s finance ministers: “I’m not generally against an increase of the rescue measures. However, I do think that they have become too voluminous. The financial stability packages are about to become self-service shops.”
Asked by the Austrian daily what he thought of politicians’ fears of a destabilisation of the political system in Europe, Sinn said: “What they are afraid of is a destabilisation of the markets. They are under pressure by the markets. They don’t seem to be concerned about the political systems as they agree on one oversized aid package after the other.”
The IFO boss claimed it would be best for Greece to temporarily leave the Eurozone. Sinn said: “It’s the country’s very own decision. But at some point, the permanent financial support for them must come to an end.”
The German expert’s suggestion comes only days after ex-European Commission (EC) President Romano Prodi told Austrian magazine profil that the EU would “die” if the Eurozone was being split in some way.
Sinn recently claimed a “golden decade” would lie ahead for his homeland due to the economy’s ability to reassert itself after the recession. Now he warned that these “beautiful 10 years” were put at risk by the financial stability pact for Greece.
The economist and author said he was still backing the idea of the Euro as joint currency of most EU member countries. However, he pointed out speaking to the Salzburger Nachrichten: “I don’t accept politicians’ statements suggesting that everyone who is against their strategy is against the Euro. This reminds me of the (Communist) DDR (GDR, former East Germany) where leaders said everyone who was not in support of their socialist ideology was backing war.”
Meanwhile, Austrian economist Karl Aiginger said Italy’s troubles were less bad than the difficulties Greece was confronted with.
Aiginger, who heads the Institute for Economic Research (WIFO), explained Italy was much wealthier than Greece. “(Italy’s north) is an economic force. (…)”
He added Greece – which should focus on luxury holidays to attract more tourists, according to experts – was troubled by its weak manufacturing sector.
Austrian banks are strongly engaged in debt-ridden Italy compared to other countries, figures released recently have shown. Bank institutes based in Austria invested 15.8 billion Euros in the struggling Eurozone member state which borders it in the south. Banks based in Germany – Europe’s leading economy and 10 times the size of Austria – invested 82.8 billion Euros in Italy as of March. Austrian banks’ exposure in Greece is rather low at 2.3 billion Euros.
Austrian Freedom Party (FPÖ) member of the federal parliament (MP) Johannes Hübner branded EU leaders’ decision to expand financial support for Greece as “their own Ponzi scheme.” The opposition politician claimed: “The debt bubble was increased. This means it will burst later – but it will burst.”
Hübner claimed Austria will not ever see again any of the money it provided in credits and liabilities to Greece. The FPÖ official said the complete sum will be have to be written off.
Austrian Alliance for the Future of Austria (BZÖ) leader Josef Bucher warned that Greece’s problems could be transferred into the Eurozone.
Andreas Schieder of the Austrian Social Democrats (SPÖ) – who form a federal coalition with the People’s Party (ÖVP) of Foreign Minister Michael Spindelegger and Finance Minister Maria Fekter – said the most recent agreements by the EU-27 and the International Monetary Fund (IMF) were confirming that the EU was acting and thinking “reasonably and on the long run.”
Schieder, who acts as the SPÖ’s financial issues state secretary, vowed that his party will not stop vehemently demanding the introduction of a tax on financial transactions. He made clear that the SPÖ would not pull out from calling for the creation of a European rating agency to diminish the influence of the USA’s leading credit rating agencies, Standard & Poor’s (S&P), Fitch and Moody’s.