György Matolcsy found the solution: two separate euros would be needed

The post-World War II reconstruction of Western Europe, with the strategic support of the United States, created a Western economic rival for Washington. German unification and the euro have already created a political and financial rival. The weak European response to Brexit and then to the current crisis indicates that the US will no longer have to face competition from a Western power of equal strength. You just have to pay attention to the fact that a political alliance will not emerge from the system of economic relations between Western Europe and Russia, and then a military alliance, György Matolcsy emphasized in his recent article.

In other words, according to the president of the central bank, in the 2020s, America’s attention will increasingly turn to Asia, including China, and Europe may be left out of the competition between the two great powers. The EU could, in principle, use this decade of war to integrate Europe almost completely in the east (Ukraine), south (Balkans), north (Norway) and central (Switzerland), but it does not have the necessary political and managerial capabilities and the money is not. enough to do that, he adds.

The EU’s strongest point is also its weakest area: the common currency

Matolcsy believes. According to him, the euro was created by fear of a new war between the nations of Western Europe and the Eastern Empire. Today, two Eurogroups live together in a eurozone: the North and the South. The current crisis management has definitively indicated that Europe is not united not only in terms of economic development, but also in terms of lifestyle and perception of life. During the crisis, the North significantly increased their already significant advantage over the South. This will be the case throughout the decade.

During the crisis, the public debt of all Member States increased, this is the first level of public debt. Meanwhile, the European Central Bank has, rightly, significantly increased its balance sheet, saving the eurozone from economic collapse. This is the second level of indebtedness of states. Together, the eurozone governments and the common central bank spent roughly forty percent of their GDP on crisis management, but this could not have prevented the strengthening of the internal development fault line either. Meanwhile, the EU has decided to get the whole community on the path to indebtedness: the current € 750 billion bond issue is just the first step. This is a new, third level of indebtedness.

With this, the EU embarked on a Japanese journey that brought two lost decades and an accumulation of public debt of 260 percent of GDP for the Far Eastern island nation. It’s hard to get back from here

– states the Governor of the MNB.

The European Union is, in fact, trapped in the euro because of the common currency. The common monetary policy brings development to the North and further to the South. Triple indebtedness does not help this, because more money does not solve the quality disadvantage of money: the common monetary policy and the single exchange rate.

The North and the South would need a separate euro. This seems impossible today, but we are only at the beginning of the decade

– projects György Matolcsy. According to him, the new digital central bank money will create a theoretical opportunity to expand the European monetary space and introduce a dual exchange rate system.

Just as thirty years ago, the decision should not have been on the introduction of the euro, but on the creation of a single market for services, now the triple indebtedness, but the double euro, is the solution, concludes the head of the MNB.

Cover image: MTI / Koszticsák Szilárd

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