Paola Subacchi: 'The euro was a bad idea'

At a Chatham House event last week, Dr Poala Subacchi, Research Director, International Economics, discussed the euro and immigration as causes of problems within the EU area. The event was broadcast on the Parliament Channel.

On the euro
“The euro was a bad idea. But it happened, and we have to live with it. Because dismantling this bad idea could be extremely difficult and extremely complicated.

“So we have to live with that and we have to make it work. And the only way to make it work is to deepen the integration and, in a very sad way, not having the UK as part of this mix will help.

“Because we had a single market and a single currency (but they) didn’t overlap because of this large financial sector (London) which was, and still is outside the Eurozone.

“So you had to manage the single currency when you had all these financial services somehow ‘offshore’ but which are not (really) offshore because the UK was part of the EU. It’s (been) very difficult to manage.

“So this” (the UK’s referendum result) “will really help the Eurozone to integrate more, and more integration means a fiscal union, banking union, capital market union – everything necessary to make this non-optimal area into something which looks more functional.”

On immigration

“The problem is immigration. From an economic point of view immigration makes a lot of sense because in an optimal currency area immigration helps to rebalance – where you have unemployment, people are able to move (to where there is employment).

“But the problem here (Europe) is identity, integration and the perception of integration.

“So the EU has this very difficult problem. It needs to have people moving around so it can rebalance, from an economic point of view, the whole single currency area.

“But it is very difficult from a political point of view. And I can’t see where the solution is. Because many studies show that immigrants do not take away the jobs of locals, but the perception is that immigrants take away jobs and take welfare.”

Note: Dr Subacchi did not discuss, in this section at least, the dichotomy of people leaving ‘sub-optimal areas’ in order to find work in ‘optimal areas’. As an ongoing policy this obviously serves to make the poorer countries of the EU even poorer and the division between wealth and poverty even greater.

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