Barroso: Germany ‘must stablilize the Eurozone’

Germany, Europe's economic powerhouse, should do more to "guarantee financial stability in the eurozone" European Commission chief Jose Manuel Barroso said on Tuesday.

Barroso: Germany 'must stablilize the Eurozone'
Barroso. Photo: DPA

"The single market as we have it very much allows Germany to play out its competitive advantages" in the technological and industrial areas, Barroso said.

In return, "Germany could do more to enable also the others to bring in their respective assets," he added.

Barroso warned that, "stronger economies paying for weaker economies is not the answer" for the public debt crisis affecting the 17-nation eurozone, with some member states like Greece heavily indebted and others like Germany helping to bail out weaker nations.

"What we do need in contrast is the correction of existing macroeconomic imbalances, notably in the euro area," said Barroso. "This is where Germany by its own legitimate interests can (make) a contribution."

"What we are asking Germany, as we are asking any other member of the euro area, is to do its homework so that we can guarantee financial stability in the eurozone," said Barroso.

"When we talk about need for rebalancing, we are not talking about weakening the competitiveness of the German economy," he added.

Barroso said that Berlin had "acted also in its own national interests (in the eurozone crisis), but that is not a problem as long as this is compatible with the wider European interests.

"This is precisely what Europe is about, to defend our national interests in a collective manner."

Barroso also called on German leaders "to assume the highest level of leadership."

"You can use it for the better," he said.  Barroso, who will quit his Commission post next year, also called the single currency a success story as it had brought Europe monetary stability and low interest rates.

"A vast majority (of Europeans) support the euro after five years of crisis," he said.

READ MORE: Germany hits back at US at criticism over economy

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The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.