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Founding father of the euro less enthusiastic over currency's future amid rise of populism

Pier Marco Tacca | Getty Images | Getty Images News

Otmar Issing, the European Central Bank's (ECB) first chief economist, told CNBC on Tuesday that his enthusiasm for the euro has waned amidst rising populism though was defiant that the future of the currency is secured.


Issing, who is widely regarded as the founding father of the single currency, argued that the question as to whether the future of the euro is under threat will always remain in spite of recent political events.

"All in all, Trump's win, Brexit and other political events are global risks whereas the euro itself is relatively stable… and I say relatively because the rest of the world is unstable right now," Issing told CNBC in a phone interview.

"I'm not as enthusiastic as I was but the future of the euro is not in doubt," he added.

Think carefully about ditching the euro

Italy's referendum regarding constitutional reform on December 4 has been argued, by some analysts, to be Europe's most significant political event of 2016.

A potential consequence of a 'no' victory from Italy's referendum, as championed by populist party Five Star Movement, could result in parties campaigning to have a vote on ditching the euro currency in an early election in 2017.

In spite of this possibility, Issing believes that any country in Europe would think extremely carefully in regards to turning their back on the euro.

"If people are given the chance to think about leaving the euro then they will do so twice, maybe 10 times or even 100 times," Issing said.

"If you look at Brexit, people were worried about serious contagion effects but the signal (that leaving the EU is a solution) is the opposite throughout Europe."

'Messy and volatile'

The euro-dollar was trading around 1.06 on Tuesday after benefiting from recent political developments which have eased the uncertainty surrounding next year's European elections in countries such as Germany, France and the Netherlands according to Reuters.

Adam Button, currency analyst at ForexLive, warned that enthusiasm for the Eurozone project as a whole has gone and it is a matter of time before the euro is to hit parity against the dollar.

"The euro is extremely vulnerable at the moment and so I expect to see euro-dollar at around 1.05 by year end," Button told CNBC in a phone interview.

"You can expect euro-dollar parity in 2017 and from there you can even get to 0.95 and 0.93 levels pretty easily… I mean, predicting what will happen next, especially in Italy, is impossible, but predicting that it will be messy and volatile is easy," he concluded.

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