And he’s a prof at the Alma Mater too

One of the world’s leading economists will today admit he was wrong to back the creation of the euro – and call for it to be dismantled.

Sir Christopher Pissarides, who won the Nobel Prize for economics in 2010, was once a passionate believer in the benefits of the single currency.

But in an extraordinary change of heart, today he will warn the euro is creating a ‘lost generation’ of unemployed youngsters and is ‘dividing Europe’.

The Cypriot-British economist will call for action to ‘restore the euro’s credibility in international markets’ and to ‘restore the trust that Europe’s nations once had in each other’.

And restoring that credibility means:

He will say that unless there is a dramatic change of policy the euro should be broken up.

‘The euro should either be dismantled in an orderly way or the leading members should do the necessary as fast as possible to make it growth and employment-friendly,’ he will say.

It was a complete cocknob of an idea in the first place of course. And it’s also now an obviously failed experiment.

Get rid of it.

12 comments on “And he’s a prof at the Alma Mater too

  1. So: yours truly, a cornflake at the bottom of the packet was right for all the wrong reasons, and the eminent professor cornflake at the top of the packet was wrong for all the right reasons. But now he’s right for apparently all the right reasons. Delightful. But that’s why he’s made it to the top of the packet and will remain there.

  2. It was a complete cocknob of an idea in the first place

    That’s the inevitable outcome when politics trumps economics.

    Get rid of it

    Won’t happen until all of its political support has evaporated.

  3. I have to concede, as the resident euro-fanatic, that it is utterly ludicrous for Cyprus to bother with a common currency but capital controls in place for over a year. That seems several lengths too far to go.

    I still think it is more symptomatic of a parasitic banking industry holding us to ransom with the threat of Armageddon than any need for political support for the euro.

  4. Incidentally, I’ve always suspected if their was a genuine need for a common European currency one would have arisen irrespective of governments. Those transactions would have benefited from a common currency would have gravitated towards one of the existing ones, maybe the D-mark, and the everything else would have eventually followed. Not so much different from what happens in the wider world with $US or £GB being a more useful currency, in some places, than the domestic one.
    Possible?

  5. Incidentally, I’ve always suspected if there was a genuine need for a common European currency…

    There was a genuine need! The Europe of six was driven by two big nations of ‘equal’ standing though Germany was felt from the outset by France to have a slight but irritating edge because of its Deutschmark.

    The 2+4 Talks surrounding German reunification led directly to the adoption of the common currency since Mitterand’s quid pro quo for supporting Helmut Kohl’s rapid reunification project was the decoupling of Germany from its currency.

    Additionally, by inextricably binding an enlarged Germany (within Nato) to greater integration within the EU, Gorbachev felt he had the best deal he could hope for, in the knowledge that this would further guard against any recrudescence of German nationalism.

    The limited convertibility of some southern European currencies and their historical performance against the DM must have given the Euro an irresistible appeal to the southerners: easy credit combined with an innoculation of Bundesbank sagacity.

    Yum.

  6. There is a common currency in most of the world, it’s the $.
    Oil, most commodities, etc. Not to mention that the value of $ bills outside US vastly exceeds domestic circulation, and are used in preference to the domestic currency, even in hell holes like NW Pakistan and Zimbabwe.
    The euro? Just jealousy elevated to politics.

  7. He should return the Prize Money,with compound interest, to be awarded to the first “Economist” who writes something sensible and relevant. By the time that happens, the compound interest on the returned Prize Money will be sufficient to cover the Government debts of most countries in the world.

  8. JamesV, As soros said you can’t beat the market and that is what the Euro is trying to achieve. They turned currency crises into sovereign debt crises. It was inevitable really.

    Bif is a reserve currency a “common currency”, not sure about that, although there are lots of countries that use the US or peg thier currency to is (China for example although they might deny it), but they then hitch themselves to the Fed’s monetary policies and good luck with that. Ever wonder why Hong Kong property prices are so high,, because they have US interest rates and a finite amount of land, so lots of cheap money chasing very small property market so voila bubble city. When the Fed finally starts tapering and interest rates return to normal expect lots of property collapses around the place.

  9. bloke in spain – “Incidentally, I’ve always suspected if their was a genuine need for a common European currency one would have arisen irrespective of governments.”

    But the problem is not that there is (or isn’t) a need for it. The problem is that Italians are not Germans. The Euro might be a great idea and might solve many problems. But the feckless South is not willing to accept the discipline necessary to make it work.

    Sure, they all agreed they were feckless and incompetent so they loved the idea of the Germans giving them some tough fiscal discipline – along with a sound currency. But they have all baulked at the price to be paid. They will go no refusing to pay the price to be a grown up nation because it is in their nature to be feckless. You cannot make a German out of a Greek. You can make a Greek out of a German though and that is what they want. For the Germans to become feckless too. Let’s hope they won’t agree.

    If they wanted the benefits of a single currency, they should have tried a peg again. Every country, or even every region, with its own Euro, tied to the German Euro, all exchanged on a 1:1 basis, and with the politicians being personally liable for any loss of value if the peg drops, would have provided all the benefits of a single currency without the insanity of one interest rate. Of course the South would continue to be feckless and irresponsible so it would never work.

  10. @Offshore observer – total agreement. Your counterparty risk has changed from risk of devaluation to risk of outright default. The end effect for the creditor however is much the same.

    And on that market-bucking, my view is that the €-skeptics advocating withdrawal from the currency are the market buckers. Devaluation is an explicitly market-bucking short-term fix.

    I’m undecided as to whether the single currency actually boosts trade and productivity. My guess is short-medium term not very much, and long term just enough to be worth it. The main benefits are actually in price transparency, security over time (without it at least one party has to accept its contracts for future delivery in a foreign currency), making life a lot simpler for consumers, and slashing banking costs.

    The cost of the euro is fiscal discipline. Actually, I think that’s a benefit. And the governments will eventually have to realise it. I’d suggest next time around there is no bailout.

  11. Given the post about Worstallcoins, perhaps a way out for the Euro would be for it to become a crtpyo-currency. No fear of Germany running the currency for their own ends or France doing likewise, or Brussels for that matter, if it is all transparent and progresses along a known path.

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