Tens of German economists have signed an open letter that warns about the decisions made by the eurozone leaders at last week’s summit aimed at saving the euro currency. The letter published by the Frankfurter Allgemeine Zeitung, signed by more than 170 mostly German economists, expressed "great concern" about the decisions taken at the summit. The economists say the adopted decisions are a "step towards a banking union, which means collective liability for the debts of all banks in the eurozone." They argued that this would mean the citizens of countries like Germany, which have strong economies, could end up paying other countries debt.
“Banks' debts are nearly three times higher than government debts,” the letter added.The economists said that “the taxpayers, retirees and savers in the so-far solid countries of Europe must not be made liable for backing these debts, particularly since gigantic losses are foreseeable from financing the southern countries' inflationary economic bubbles.” However, German Chancellor Angela Merkel has rejected the letter, calling it out of hand. During the eurozone’s summit on June 29 in Brussels, leaders of the bloc’s leading economic powerhouses agreed to directly support the struggling banks and bring down the borrowing costs for the stricken member-countries such as Italy and Spain. Backing the idea of a single banking authority at the end of the Brussels Summit, Merkel said that it was needed to prevent government debt from piling up. PG/PKH/AZ