German economists hit back at Merkel’s banking union dreams

City A.M. Reporter
MORE than 150 economists led by the head of Germany’s influential Ifo think-tank yesterday hit out at Europe’s plans for a banking union, as set out by Chancellor Angela Merkel last week.

In an open letter to a German newspaper, Hans-Werner Sinn and other experts said forcing Europe’s biggest economy to extend its liabilities to weaker states and banks in the currency union 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.”

A poll conducted for ARD television released yesterday showed that while 58 per cent of Germans believe Merkel has acted correctly and decisively during the Eurozone crisis, an overwhelming 85 per cent think the worst is yet to come.