The euro lies at the root of Europe’s record unemployment rate and countries such as Spain and Greece should quit the common currency to return to economic health, said the head of Germany’s fledgling anti-euro party.
Southern European countries can’t cope with the competitive pressure exerted by the euro and are suffering because they can’t devalue the 17-nation single currency, Bernd Lucke, the Alternative for Germany party’s leader, said May 16 in a Bloomberg Television interview in Berlin.
“Greece should be the first country to exit the euro along with small countries like Cyprus and Slovenia,” Lucke said. “I would propose that Germany stays in the euro, that a return to a national currency in Germany might at best be the end of the process” of dissolving the currency area.
Four months to the day before German federal elections, Lucke’s unorthodox message risks undermining Merkel’s bid for a third term. While polls suggest broad public backing for the euro and for the chancellor’s “step by step” approach to tackling the debt crisis, they also show voter patience has run out with Germany’s role as the biggest contributor to euro-area bailouts since aid for Greece was first agreed three years ago.
The AfD, as the party is known in German, has attracted more than 10,000 members since it was founded a month ago and is polling 2 percent to 3.5 percent support. While that’s below the 5 percent threshold to win seats in parliament, the party may yet sap “vital support” from Merkel’s coalition in the Sept. 22 election, political analyst Jan F. Kallmorgen said in a May 2 Bloomberg View article.
Lucke, 50, an economics professor at Hamburg University who was a member of Merkel’s Christian Democratic Union for 33 years, rejects that he is putting her coalition at risk. The AfD draws support “from basically everywhere in the population, from people who are more on the conservative side as well as from people from the Social Democratic or the Green parties,” he said.
Lucke also denies that agitating for the euro’s breakup would cause renewed turmoil on financial markets. He foresees “a careful, graduated exit” whereby countries would introduce national currencies parallel to the euro, then gradually devalue to address “competitiveness problems slowly over many years.”
Germany’s economy would grow half a percentage point less each year if it didn’t have the euro, Bertelsmann Foundation said April 29, citing a study it commissioned from Prognos AG. That would cost 200,000 jobs and leave workers with 1,100 euros ($1,415) less per year to spend on average, Bertelsmann said.
“A return to the deutsche mark would do considerable economic damage” even if some of the loans to troubled southern euro members would have to be written off, Aart de Geus, the chief of the Bertelsmann Foundation, said. “Germans would lose income and jobs.”
Lucke has said that Germany would lose as much as 30 billion euros in an orderly insolvency and debt restructuring for Greece alone, according to an interview with Handelsblatt newspaper published May 16. Realizing these costs now is still better than waiting for bigger countries such as Spain, Italy or France to tap the European Stability Mechanism fund, he said.
Lucke, who decided to quit the CDU to form his own party when the forerunner of the ESM was established in May 2010, said the ESM will eventually turn into a mechanism “that operates like a Eurobond.” That means debt sharing, for all Merkel’s government’s assurances to the contrary, he said.
He advocates a return to the deutsche mark if a shrunken euro region without southern members can’t agree on enforceable rules that make bailouts illegal. France, Germany’s most important European partner, would be welcome to keep the euro if it can live with such an arrangement, he said.
“There would be benefits for countries coming out of the euro because their economies would be stimulated by the fact they can devalue,” Lucke said. All the same, there will “absolutely” be costs for Germany from debt restructuring “because we have guaranteed for the debts of these countries.”
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