A German government economic panel of ‘wise men’ says the eurozone needs a mechanism that’ll allow troubled economies to leave the currency as a last resort, and free taxpayers in creditor countries from paying the debts of “uncooperative” members.
It was the Greek debt crisis that stressed the need for urgent reforms in the eurozone, the German government's panel of five independent economic advisers said, Reuters reports.
"To ensure the cohesion of monetary union, we have to recognize that voters in creditor countries are not prepared to finance debtor countries permanently," said Christoph M. Schmidt, chairman of the council, in the report published Tuesday and obtained by Reuters.
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The long negotiations over Greek debt have made the experts debate the eurozone structure that allows entry, but doesn’t allow a country to leave. Even though the ‘wise men’ say that the union should remain intact, acknowledge that an ‘out’ mechanism should exist, even though as an "utterly last resort."
Member states that can’t afford being in the eurozone at the moment, shouldn’t lay the burden on other countries’ taxpayers.
"A permanently uncooperative member state should not be able to threaten the existence of the euro," the council wrote.
However, the group advised against setting up measures such as a eurozone treasury, a European unemployment insurance scheme or an economic government for the bloc, calling them "quick-win" policies.
"Making the euro area collectively responsible for potential costs without member states giving up any national sovereignty over fiscal and economic policies would - sooner or later - make the currency union more unstable," the council wrote.
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Greece and the troika of international creditors are negotiating over a third financial aid package for Greece that could amount to €86 billion in the next three years. The help will be provided in return for tax hikes, a pension age increase and other austerity measures.
German Finance Minister Wolfgang Schaeuble suggested that Athens should temporarily leave the eurozone to put its financial house in order. However, current EU rules don’t have a mechanism for leaving the eurozone.