Europe at Risk of Weak Growth, Repeated Crises

Europe’s flawed political mechanisms condemn the bloc to repeated crises, and the notion of ejecting a member from the euro is an “evil genie” with destabilising consequences, a top central banker said on Thursday.

Kicking out a euro member would raise questions about which country is the next one to fall, destabilising the entire bloc, so the euro has to be irreversible, ECB executive board member Benoit Coeure said on Thursday.

Before Greece was bailed out this month, it was nearly ejected from the bloc. Some, including Germany’s finance minister, advocated a “temporary” exit, a proposal rejected by the central bank.

ECB President Mario Draghi has repeatedly said that the euro was irreversible. Greece’s brush with ejection shook confidence in that commitment and the ECB’s ability to hold the bloc together.

“The exit of a member country would inevitably lead economic actors to wonder who would be next, with all the potential destabilising effects that such speculation could entail,” Coeure told a meeting of French diplomats in Paris.

“The genie will not be put back in its bottle once and for all until it is clear that such a risk will not rear its head again,” he said.


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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.