German economists say 'no' to euro banking union
BERLIN (Reuters) - More than 150 economists led by the head of Germany's influential Ifo think tank urged voters on Thursday to lobby lawmakers to oppose plans for a European banking union that Chancellor Angela Merkel signed up to last week.
The Frankfurter Allgemeine Zeitung newspaper released an open letter in which Hans-Werner Sinn and other experts said forcing Europe's biggest economy to extend its liabilities to weaker euro zone states and their banks was not the answer to the region's debt woes.
"The decisions which the chancellor saw herself forced into at the EU summit were wrong," wrote the economists in a letter addressed to "fellow citizens".
"We are deeply concerned about the step towards the banking union, which means collective liability for the debts of the banks of the euro system," wrote the economists.
"Neither the euro nor the European idea will be saved by the extension of liabilities to banks."
The letter reflects the deep frustration many Germans feel over the euro zone crisis and their growing impatience at bailing out their struggling partners.
A poll conducted for ARD television released on Thursday showed that while 58 percent of Germans believe Merkel has acted correctly and decisively during the euro zone crisis, an overwhelming 85 percent think the worst is yet to come.
The economists urged voters to take up these concerns with their members of parliament. "The people who represent us should know what dangers are threatening our economy," they said.
Under pressure to stem a two-year long debt crisis, euro zone leaders last week agreed to take a first step towards a European banking union and create a single banking supervisor for the area's banks based around the European Central Bank.
The deal, which also included a pledge to let the euro zone rescue fund inject aid into stricken banks and intervene on bond markets, has been portrayed in German media as a defeat for Merkel and a victory for her Spanish and Italian counterparts.
However, the chancellor insisted that the summit's agreements did not go beyond existing treaties and did not signify anyone was taking on additional liabilities.
"What we are talking about is establishing banking supervision, that is something that is urgently required," Merkel told a news conference with her Lebanese counterpart.
"This is not talking about additional liabilities to be assumed by a particular party," she added.
The outspoken Sinn, who does not shrink from controversy, has long called for Greece to leave the euro zone. He has also shone a spotlight on the costs to Germany of the euro zone's cross-border payment system which has allowed highly indebted states to build up credit at the Bundesbank.
However, the highly public move, jointly spearheaded by prominent Dortmund-based economist Walter Kraemer, marks a new step in Sinn's campaign to get his arguments on the euro heard.
The economists, who were mostly from Germany, argued that bank liabilities are three times the size of state debt.
"Banks must be allowed to fail," wrote the economists, adding that he main winners of a banking union would be Wall Street and the City of London.
The letter attracted a lot of attention in Germany and prompted critics of Merkel's approach to join the chorus.
"Politicians must now listen," conservative rebel Klaus-Peter Willsch, who has filed motions against the government's EU policies to the Constitutional Court, told the Handelsblatt business daily.
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