Mervyn King, the former governor of the Bank of England who is well-known for his views in opposing the European Union (EU) and the concept of having a single currency has predicted that the EU will eventually collapse. In a recently published book, King stated that the debt liabilities that burden the nations within the EU may become too much and threaten its political stability.
The book is titled ‘The End Of Alchemy: Banking, The Global Economy And The Future Of Money’. King goes into detail stating that under the EU, the centralized monetary union is in conflict with democratic forces at national level creating a dangerous situation. According to him deeper integration is the answer for success in the EU, which would involve governments writing off the significant debt of weaker nations but this, he predicts, is likely to anger general public and cause instability.
King has commented that the current middle ground, where countries like Greece are offered concessional loans on easy terms by the rest of the eurozone will not work in the long term.
In a statement, Mervyn King said
The attempt to find a middle course is not working. One day, German voters may rebel against the losses imposed on them by the need to support their weaker brethren, and undoubtedly the easiest way to divide the euro area would be for Germany itself to exit.
King added that while the breaking up of the eurozone would cause major turmoil and uncertainty, leaving the euro is the only way for countries to return to full employment and economic growth. King believes that the EU should go ahead with this move because the long-term benefits outweigh the short-term problems.
King has taken the time to explore the future of banking and the disparities in the global economy in his book. In his view, the world is likely to face more financial turmoil because issues surrounding the 2007-08 crises have not yet been resolved fully.
He has stated that the 2007-08 financial crisis was caused by systemic failure rather than incompetent or dishonest bankers and financial institutions. King has emphasized that financial regulators are not addressing the core problem afflicting the banking sector. His recommendation is to raise productivity and carry out major reforms in the banking sector to improve the situation, without which another crisis is unavoidable.
Discussing the current financial system, King criticized the tripartite system in Britain which splits the regulation of its financial sector between the Treasury, the Financial Services Authority and the Bank of England and results in poor supervision.
