Galery

1

The main idea of ​​Eurogroup was that if there was a banking crisis, a bank would have to find additional funds to withstand the pressure. First, we will look for funds in the bank itself. If it has no funds, then we will go to the bank's shareholders. The shareholders of the bank are also responsible for overseeing the bank's board. If the money is not enough, we can turn to the bondholders of the bank. They are also responsible, because they have lent to the bank without checking its stability. Bondholders must be very careful before they lend to the bank, as it might not be able to pay this loan.

Eurogroup’s president made a mistake by saying that he would seek aid from depositors too. A citizen who has a deposit in a bank is neither a shareholder, nor the owner of bonds of financial institutions in order to make checks of the bank. So, the depositor cannot be held liable if the bank fails. The bank’s management, shareholders, bondholders and supervisors that are responsible for the financial sector bear the responsibility for the stability of the bank.

If the impression that depositors in any European bank could lose their money is created, the confidence in the entire financial system will be lost. This will have very bad consequences for the euro zone. People will start withdrawing their money from the banking system of the monetary union and will turn to other countries outside the euro zone such as Switzerland, USA or Asia. This will reduce the capital stock thus diminishing the opportunities for growth.

Another negative consequence of spreading doubts among depositors is that the people will become very careful as regards where they will deposit their money. They will be seeking the bank with the lowest risk, which hardly exists.

Banks exist exactly for the opposite reason. They collect the deposits of people in order to be able to fund companies at risk. In order to achieve economic growth, real business that always carries some risk must be financed. If we refuse to fund any business at risk, then there is no way to achieve economic growth. I'm not saying that we should put our money into companies at excessive risk, but the risk must exist in order to stimulate the economic activity.

In the end, was it a mistake in the speech or a real plan that can be applied in Europe in the future?

I do not think that what Dijsselbloem said was the result of a mistake, rather that it presents a course in the beliefs of the people of northern Europe - Germany, the Netherlands, Finland and in Austria to a lesser extent. Let's start from the fact that a closer banking integration should be established in order to preserve the euro. It will help Europe obtain an accurate procedure to deal with a crisis, as is the case in the United States. To achieve this integration, large funds must be accumulated. The Germans are aware that in order for this integration to happen they must put very large amounts into the joint account. The aim of Germany is for the process of integration to start with as few debts as possible. It promises that it will not allow any bank to fail in the future but now, it does not want to pay the unpaid bills accumulated to date (legacy issue). Dijsselbloem’s statement expressed precisely this view - if there is instability at present, someone must take on its burden. Then, there will be a new mechanism that will start functioning in order to absorb such crises.

Dijsselbloem’s statement has another perspective too. I am not judging whether it is right or wrong, but we just cannot omit it. The people in Germany, Austria, the Netherlands and Finland do not want to pay bailouts (to give aids). The response to the support programmes within the euro zone is very strong. Over 60% or 70% of respondents from these countries do not want the euro zone to continue giving money to rescue countries such as Ireland, Greece, Spain, Portugal, etc. When there is such a strong trend in the public opinion of democratic countries, it will inevitably give rise to political repercussions. The politicians largely reflect and present the public opinion prevailing in these countries. This is certainly not good for the euro, but if this is the reality in the countries of northern Europe, it is very difficult for their politicians to ignore the voice of the people.

The way the whole discussion related to Cyprus was held might have had some positive aspects, but it has created a sense of separation between the people from northern and southern Europe.  Germany’s behaviour towards Cyprus has caused very serious reactions in the public opinion of the European periphery. If this polarization continues, it will be very difficult for the southern countries to make the necessary reforms.

Although Germany is the strongest country today, has money and is the most powerful country in the euro area, it is unable to cope with the leading role in the European monetary union. It does not know how to manage a multinational organization. Germany does not have the experience of Great Britain or France, which have empires behind themselves. This is a country that has never played the role of a leader among others. It lacks the culture of leadership and many of the mistakes we see stem from this fact.

Is the euro at risk as a currency?

It is in the long term. The euro zone is not so much threatened by the economic developments but by the political and social polarization between northern and southern Europe, by the strain accumulated between the two "Europes". I do not want the euro to fail in any way but we must find a way to avoid extreme phenomena that threaten the integrity of the Union.