Economy

The euro is a 'trap' and countries should be allowed to ditch it, Hungary's central banker says

Key Points
  • Hungary is still yet to sign up to the euro despite repeated moves to ditch the forint.
  • Hungary has had a complicated relationship with the EU over the years and Prime Minister Viktor Orban is seen as a thorn in the side of Brussels.
A sculpture depicting the Euro logo is pictured in front of the former headquarter of the European Central Bank in Frankfurt, Germany, on Feb. 7, 2018
Daniel Roland | AFP | Getty Images

Euro zone countries should be allowed to stop using the single currency over the coming decades, the Hungarian central bank governor has argued in an article for the Financial Times.

The euro, currently used in 19 European countries, was introduced in 1999 and under EU rules every member of the wider political bloc should ultimately adopt the single currency. Hungary is still yet to sign up despite repeated moves to ditch the forint.

Gyorgy Matolcsy, in charge of Hungary's National Bank since March 2013, described the euro as a "French snare" that has not served its members well.

"The common currency was not needed for European success stories before 1999 and the majority of euro zone member states did not benefit from it later," Matolcsy said in the opinion piece.

"The time has come to wake up from this harmful and fruitless dream. A good starting point would be to recognise that the single currency is a trap for practically all its members — for different reasons — not a gold mine. EU states, both in and outside the euro zone, should admit that the euro has been a strategic error," he wrote.

European countries, mainly those that share the euro, were severely hit by the sovereign debt crisis of 2011. This crisis spread across different countries, impacting Greece in particular. A solution for the southern European economy divided governments for some time as they questioned how to handle its massive debts and dwindling growth. At the time, different politicians, including Germany's Former Finance Minister Wolfgang Schäuble, argued that Greece should temporarily stop using the euro.

"Europeans must give up their risky fantasies of creating a power that rivals the U.S. Members of the euro zone should be allowed to leave the currency zone in the coming decades, and those remaining should build a more sustainable global currency," Matolcsy added.

Hungary has had a complicated relationship with the EU over the years and Prime Minister Viktor Orban is seen as a thorn in the side of Brussels. In 2014, the European Central Bank told politicians in Budapest that a draft law that would apply sanctions to members of its central bank that failed to submit a wealth declaration was not compliant with EU law. The central bank itself has also been questioned by European lawmakers about its political independence.

Read the full article on the Financial Times' website here.