The German economist and President of the Ifo Institute for Economic Research in Munich, Hans-Werner Sinn, spoke in favor of a temporary exit from the Eurozone for countries such as Greece and Cyprus.
He suggested creation of a monetary union of the strong countries and said that if Cyprus is forced out during its economic crisis that the impact on the financial bloc would be minor.
In an interview with the German newspaper Frankfurter Allgemeine Sonntagszeitung, Sinn repeated that the temporary exit of countries facing economic problems could contribute to the strengthening of the common currency.
Regarding the newly-formed German euro-skeptical and conservative political party, Alternative for Germany (AFD), he said that the party’s arguments are logical and he admired AFD’s chief Bernd Lucke as an economist.
However, he clarified that he continues to believe that euro has a chance to survive, but only as the currency of the strong countries of Europe. “We have to defend euro. But I think it is a major mistake to keep at all costs into the euro the weaker countries of the European south. This way, we do not help these countries and at the same time we reduce the chances euro has to survive,” he said.
When questioned about the model chosen for the rescue of Cyprus, he noted hat it was an infection point and that when a bank goes bankrupt, the cost should be borne by the bank itself not by its depositors. Cyprus is confiscating up to 80 percent of bank accounts over 100,000 euros ($130,000) and forcing depositors to pay for the banks bad investments.
He said that the cost of a bailout for Cyprus, 10 billion euros ($13 billion) from international lenders, and another 7 billion euros ($9.16 billion) borne by the government and taxpayers, will turn out to be much higher than that.
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