25 Jun 2013

Closer EU ties should be put on hold for five years, warns former ECB expert

Filed under: Business News

An influential former ECB official has called on European Union leaders to put further integration on hold for up to five years, work out where they want to take the project, and decide who should still use the euro.

Former European Central Bank chief economist Juergen Stark also said the EU should take on board some of Britain’s criticisms of the bloc and keep it in the fold where it is needed.

EU leaders gather in Brussels on Thursday and Friday to discuss progress on a banking union they launched a year ago to break the negative feedback loop between indebted banks and governments and to prevent future crises.

But Stark, a hawk who quit as the ECB’s top economist in 2011 and has since worked as a consultant, criticised the “piecemeal approach”, which he said lacked democratic backing and bore longer-term risks.

Instead, he called for a broad, open-minded discussion about Europe’s future, echoing concerns raised by British Prime Minister David Cameron in January that Europe is losing touch with its citizens.

“Let’s take some time out, a period to reflect of, let’s say, five years to think which direction Europe should take,” Stark said, saying EU and euro zone enlargement should remain on hold for that time.

During this break, political leaders needed to guide the debate to assure international investors of the irreversibility of the euro, Stark said, reiterating his view that unfit members should be able to leave the bloc temporarily to recuperate.

“The euro as a currency is irreversible, but not the composition of the currency union,” Stark said.

He said Britain should play a leading role in the debate about the future of Europe, along with France and Germany – the traditional drivers of European integration.

“We should take Britain on board, because there are many similarities in economic thinking between Germany and Britain, which could have a positive impact on a European level,” Stark said. “Europe would lose a lot if Britain abandoned Europe.”

Britain’s 40-year EU membership is in doubt after Cameron promised in January to claw back powers from Brussels and hold an “in/out” referendum by 2017, if he wins the next election in 2015.

Cameron envisages a looser, more flexible relationship with the EU in which “power must be able to flow back to member states, not just away from them”, a notion Stark shared.

“The success of Europe is not based on raising the number of newly implemented directives each year. That can’t be it. I don’t want less Europe, but the more for Europe needs to be clearly defined,” Stark said.

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