Euro may only last five years, says senior German government advisor

Euro may only last five years, says senior German government advisor

The euro has a “limited chance of survival” and may only endure another five years, Kai Konrad, one of the German government’s closest economic advisers, has claimed.

“Europe is important to me. Not the euro,” said Dr Konrad.

By Jeevan Vasagar, Berlin

3:15PM BST 24 Apr 2013

In notably outspoken remarks for a senior German figure, Dr Konrad, chairman of a scientific council that advises the finance ministry, said: “Europe is important to me. Not the euro. And I would only give the euro a limited chance of survival.”

Asked whether he thought the single currency would last five years, the economist said: “A concrete period is hard to identify as it depends on so many factors. But five years sounds realistic.”

This pessimistic judgment by a senior adviser runs counter to the official German government view that the euro must be held together for the sake of unity in Europe. Dr Konrad’s remarks came in an interview with the newspaper Welt am Sonntag, on the debt crisis in Europe.The economic adviser warned that: “No country can pile up debt without running the risk that their investors will pull the plug. It’s in each [country’s] interests to keep their own debts as small as possible.

“Where the limit lies has to be individually decided. That depends among other things on economic growth and the growth of population.”

Dr Konrad said that countries should have the freedom to get into debt, provided they carried the “sole responsibility” for these debts. He made his blunt remarks about the future of the euro, when the interviewer suggested that he was advocating a return to the nation state,

The German chancellor Angela Merkel has always insisted that she wants to preserve the single currency and maintain the eurozone in its current form.

In a speech to the Bundestag two years ago, she told German MPs: “Nobody should take for granted another 50 years of peace and prosperity in Europe … that’s why I say: If the euro fails, Europe fails.”

The German government’s official line is that the euro is essential for the prosperity of an export-oriented nation.

Rather than accept the break-up of the euro, the German government is demanding tighter, Europe-wide controls over national budgets.

Finance minister Wolfgang Schaeuble recently warned against increasing liquidity to promote economic growth, though he has also acknowledged that the soaring unemployment of southern Europe needs to be addressed.

Mr Schaeuble said in an interview for the economic weekly Wirtschaftswoche: “We are dealing with almost an economic schizophrenia. Everyone says we have deficits that are too large and a high level of liquidity would make everything more dangerous. And then some say, but we have too little growth, and so we need more liquidity.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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