Professor compares eurozone to Hotel California

Conferences

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Eurozone is like Hotel California, where you can check in but never leave, Berkeley Professor Barry Eichengreen said at the National Bank of Hungary始s (MNB) 2020 L谩mfalussy Lectures Conference.

Image: Shutterstock.com

"My view for a long time has been that eurozone membership is forever. It鈥檚 like the Hotel California, where (as the Eagles said) 始you can check-in, but you can鈥檛 check out始," Eichengreen told financial services firm Danube Capital at the event, according to a press release sent to the Budapest Business Journal.

"Greece discovered this when Syriza came to power a few years ago. In case of Italy, we will again see talk about whether leaving the euro would solve the country鈥檚 problems. But governments that have talked about this in the past quickly realized that talking about quitting the euro would only make things worse 鈥 it could precipitate an adverse financial market reaction and even a panic 鈥 so they changed their minds. That鈥檚 the case of Syriza and Greece," he added.

The expert argued that since there is no way out, one alternative remains: making the eurozone work. According to him, the short-term goal to achieve this should be completing a banking union, while the long-term goal should be the creation of a Eurobond.

The professor also said that the international dominance of the U.S. dollar in cross-border trade finance could not last forever, with a multi-currency system being a feasible alternative, in which the U.S. dollar, the euro, and the renminbi.

Regarding trade conflicts, he said that the EU might become the United States始 next target.

"Now that the trade conflict between the U.S. and China in on the back burner, the new target could be Europe. So, SMEs in Europe that sell part of their output, part their products to the U.S., they have to worry about this," he said.

The full interview is available on the Danube Capital website.

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