Commission will help euro survive

The euro will survive because of the strength of the European Commission, which will push through legislation sufficient enough to keep the monetary union in place, according to John Nugee, senior managing director with State Street Global Advisors.

Mr Nugee, who was formerly a director with the European Investment Bank, and who also worked at the Bank of England, said there has to be a move towards a federal finance ministry if the single currency is to remain viable.

However, there is little appetite among the electorates of member states to move towards federalism.

“The problem with Europe is that it does not have leadership,” said Mr Nugee. “In the US, the executive branch of the government is the president. In the EU, it is the 27 heads of state. In the US, the legislature is the Congress. In the EU it is the parliament, which is very weak. But in the EU the civil service is the Commission, which is very strong.”

Mr Nugee said that, in the eurozone over the next few years, the need for economic and fiscal integration will meet the limits posed by a democratic deficit. However, the Commission has sufficient power to develop and implement policies, which bypasses normal democratic means, and through this process a compromise will preserve the euro.

Whether there is a bubble in the triple-A rated sovereign debt markets depends on how soon central banks can return to normal policy setting, he said.