Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Webe... - 0 views
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Crippled eurozone to face fresh debt crisis this year, warns ex-ECB strongman Axel Weber
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Harvard professor Kenneth Rogoff said the launch of the euro had been a "giant historic mistake, done to soon" that now requires a degree of fiscal union and a common bank resolution fund to make it work, but EMU leaders are still refusing to take these steps.
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"People are no longer talking about the euro falling apart but youth unemployment is really horrific. They can't leave this twisting in wind for another five years," he said.
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Mr Rogoff said Europe is squandering the "scarce resource" of its youth, badly needed to fortify an ageing society as the demographic crunch sets in.
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"If these latent technologies are not realised, Europe will wake up like Rip Van Winkel from a long Japan-like slumber to find itself a much smaller part of the world economy, and a lot less important."
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Pierre Nanterme, chairman and chief executive officer of Accenture, said Europe is losing the great battle for competitiveness, and risks a perma-slump where debt burdens of 100pc of GDP prevent governments breaking free by investing in skills and technology.
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Mr Weber, who resigned from the Bundesbank and the ECB in a dispute over euro debt crisis strategy, said new "bail-in" rules for bond-holders of eurozone banks will cause investors to act pre-emptively, aiming to avoid large losses before the ECB issues its test verdicts. "We may see that speculators do not wait until November, but bet on winners and losers before that," he said.
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Sir Martin said the eurozone is pursuing a reverse "Phillips Curve" - the trade off between jobs and inflation - as if it were testing "what level of unemployment it is prepared to tolerate for zero inflation".
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Mr Rogoff said debt write-downs across the EMU periphery "will eventually happen" but the longer leaders let the crisis fester with half-measures, the worse damage this will do to European society in the end.
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He said Europe is falling further behind as the US basks in cheap energy and pours funds into cutting-edge technology. "A lot is at stake. If in 12 to 24 months no radical steps are taken to break the curse, we might have not just five, ten, but twenty years of a low-growth sluggish situation in Europe," he said.
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"People are no longer talking about the euro falling apart but youth unemployment is really horrific. They can't leave this twisting in wind for another five years," he said
