States should leave eurozone to save economies, say bailout sceptics

IRELAND, Greece and other struggling countries should leave the euro zone to return their economies to full health, the plaintiffs in a lawsuit against Germany’s involvement in euro rescue schemes told a news conference yesterday.

The five academics made no comment on what verdict they expect from Germany’s Constitutional Court tomorrow , when it rules on whether Berlin broke any laws by contributing to current and past eurozone bailouts.

The three cases brought by five academics and Peter Gauweiler, a lawmaker from the Bavarian sister party of Chancellor Angela Merkel’s conservatives, deal with the legality of the bailouts, rather than what amounts to a largely theoretical debate about excluding any euro member state.

Leaders of the 17-nation eurozone rule out forcing any member state to leave. Merkel said yesterday that the departure of any country could cause a “domino effect that would be extraordinarily dangerous to our currency system”.

But, ahead of the landmark ruling by the court in Karlsruhe, economics professor Wilhelm Noelling said that the euro could only be “made functional by limiting it to a maximum of seven strong countries”.

“The other countries should recognise the beauty and efficiency of individual made-to-measure solutions and/or alliances and reclaim them for themselves,” he told the briefing.

Experts do not expect the court to go as far as blocking euro bailouts. Instead, they expect it to rule that parliament should be given more of a say in future bailouts — something many German politicians are also insisting on before they vote on the European Financial Stability Facility (EFSF) in the lower house on September 29.

Merkel faces a revolt by some members of parliament from her own centre-right coalition on the issue of granting extra powers for the EFSF — although she says she is confident of getting her own majority and not relying on the support of pro-euro opposition MPs.

Another academic plaintiff, Joachim Starbatty, said exiting the eurozone was the only way that Greece and other indebted euro states could revalue their currency and gain competitiveness. Without that, the end of the eurozone was near, he said.

“It’ll go on for two more years, then it’s game over,” Starbatty told reporters.

Greece and its international lenders interrupted talks on a new aid tranche on Friday after disagreement over why Athens has fallen behind schedule in cutting its budget deficit and what it must do to catch up.

But the European Union and International Monetary Fund, who launched a €110 billion, multi-year bailout of Greece in May last year, will go to great lengths to avoid cutting Athens off from aid, for fear of the impact on financial markets and other countries in the eurozone.