Vanya Walker-Leigh

"I think the Euro is here to stay,  there is political resolution to see it through," Malta´s finance minister Edward Scicluna told a high level seminar last Thursday.

In an introductory video message to  a seminar at MCCEI' entitled "Does the Euro have a future"? organised by Leading Talks and co-sponsored by The Malta Business Weekly, Prof. Scicluna added that " we need to be very frank about what the priorities are for it to become stronger. Criteria for its success have not been fulfilled to this day, it is flawed in principle."

"I don´t agree that there must be a fiscal union, that could take a decade or two. I have voted against austerity programmes which push countries into internal devaluation - cuts in pensions, wages to correct deficits and reduce debts - when there must be compensation by internal revaluation in strong economies. These should be responsible for  revaluing, increasing demand and wages. This is missing in the euro architecture, I hope this will come up when we start monitoring".

Government mismanagement, not the euro, caused the 2008 crisis according to Dan O'Brien, Chief Economist at the Dublin-based Institute for International and European Affairs. "The financial system went quite crazy in the 2000s, with a huge misallocation of capital, such as massive inflows into Iceland and the Baltics. The euro was the perfect transmission instrument for the crisis."

"In theory, the benefits of the euro are reduced costs in doing business and help to trade and investment, but gains seem quite small. In fact, the euro was created for France to support German reunification, but it has concentrated German power."

"The crisis has highlighted big differences between France and Germany in economic philosophy, monetary, fiscal and structural reform policies. Other EU political divisions have been created between north and south, periphery and core. There has been a breakdown in trust,  many members of elites in pro-euro countries are less convinced now about integration because of the crisis and how it is being managed."

"The crisis has been unprecedented and the eurozone economy, of which Germany, France, Italy and Spain account for 80%  is still smaller than seven years ago. GDP is rising slightly in the first two but declining in the latter two. There has been very little growth since the 1990s, maybe we are at the end of growth. EU growth shows signs of picking up, but it is not sure it will be maintained. Without growth, the future of the euro is bleak."

"Europe´s financial systems are based on growth, addicted to deficit financing. Stagnant growth means very big debt dynamics, with a threat of sovereign defaults - which if occurring would collapse the entire system. Grexit (Greece´s exit from the eurzone) could have extensive unforeseen consequences, while Brexit (British exit from the EU) would be very bad for Ireland and Europe as a whole."

"I am less optimistic than the minister about the euro's future, though it won´t break up in the short term. I have never met anyone who fully understands our financial system. This is a risk and cause for concern."

Michael Bonello, Governor of Malta´s Central Bank until 2013 emphasised that "the euro must have a future, we can´t afford not to keep it alive. However we often overlook the long-term perspective.  It is worrying that we have lost the plot, with no recipe for growth."

"I don´t share the minister´s optimism about political will, the history of euro is one of political will lacking being the root of the problem. As a member of the Governing Council of the Euroeean Central Bank I witnessed the frustration and inability of politicians to deliver on their promises. The ECB has been forced to stretch its mandate close to breaking point, to do things no central bank should be doing,  but left with no option, at times  the system has been very close to collapse."

"The euro has an inherent design fault as a currency without a state or common treasury. The only way to proceed and have growth and a more even distribution of work and investment is for surplus countries such as Germany, to invest more in deficit countries like Greece, despite the most severe austerity policies in living history.  The logic of monetary union does not foresee countries being permanently in surplus or deficit, adjustment must be symmetrical."

"However, while everyone is insisting that Germany should inflate so weaker countries can export the German constitution mandates a balanced budget now and for ever."

"A second major factor has been the failure or governments to abide by the rules. Prior to the euro, deficits were at 4 to 5 per cent of GDP, giving security, and narrowing risk premia. Under the Maastricth Treaty the 3 per cent of GDP rule for deficits and 60 per cent for debt were introduced. With the absence of exchange rate independence,  the onus of adjustment became prudent budget and structural policies. It soon became evident that many countries could not abide by the rules."

"What I think will save us are the costs of euro area breakup, worse than anything we have experienced so far. Several studies, predict disastrous consequences even for the UK.   Germany would also suffer, since the euro has been a boon for  its exports.  People are doing their best, but it is  not good enough. The reality we are up against is that financial markets have power to change governments. We must take a long-term perspective, look beyond national interests. Currently Europe accounts for 5 per cent of world population and 20 per cent of its GDP, in 2050 it will be 7 and 10 per cent. There is strength in unity."

Agreeing that growth was the only way out of the current impase, economist Gordon Cordina, managing director of E-Cube Consultants, said that since EU labour markets were not flexible jobs should be moved to people. Investments should be channelled through a centralised EU mechanism to deploy current account surpluses to areas where there was the highest potential, the lowest productivity, so as to build human capital - such as Italy, Spain, Greece, Malta.

"The euro did not cause our problems but made us more aware of them and helps to see costs more clearly in each country. EU needs to reinvent its business model. Are we measuring GDP correctly? How to measure services? The Growth and Stability Pact was predicated on an assumed 5 per cent  annual GDP growth rate, which has not happened. We need to rethink this equation."

"I cannot envisage how Greece can leave the euro. It may pull out of the ECB Governing Council, but still use the currency. The euro remains a fundamentally good idea and we should repair its flaws, but we have not  seen much effort so far in terms of rethinking fundamentals".