The European Central Bank’s original chief economist has prophesied the collapse of the euro.
Professor Otmar Issing, who helped create the single currency at the turn of the century, told the journal Central Banking that “one day, the house of cards will collapse”.
He blasted the European Commission for bailing out Greece in 2010 rather than ejecting the country from the euro.
He said: “Realistically, it will be a case of muddling through, struggling from one crisis to the next. It is difficult to forecast how long this will continue for, but it cannot go on endlessly.”
And he added: “Market discipline is done away with by ECB interventions. So there is no fiscal control mechanism from markets or politics.
“This has all the elements to bring disaster for monetary union.
“The no bailout clause is violated every day.”
He also criticised the ECB for holding over £1 trillion of bonds at artificially low or negative yields, adding: “An exit from the QE policy is more and more difficult, as the consequences potentially could be disastrous.
“The decline in the quality of eligible collateral is a grave problem.
“The ECB is now buying corporate bonds that are close to junk, and the haircuts can barely deal with a one-notch credit downgrade.
“The reputational risk of such actions by a central bank would have been unthinkable in the past.”
Ray Boulger, senior technical manager of John Charcol, said: “Other people have made these points before – the important thing is the ECB’s chief economist has greater understanding and credibility.
“The rules that countries have to comply with to be in the euro have been flouted, particularly by Greece, which was allowed in despite not meeting criteria.
“Once the euro was established a number of countries have breached the rules and effectively got away with it.
“As long as you’ve got a project like the euro which is not underlined with political convergence as well as economic convergence you’re going to have problems.”
Boulger speculated whether just a few core countries will end up using the euro.
He reckoned the UK’s Brexit vote will fuel a wave of Euroscepticism that could damage both the Eurozone and the EU.
He added: “When Holland and France have elections next year the likelihood of a Eurosceptic party getting in power has increased.
“With Germany being such a big payer its contribution is going to have to go up by 50% to make up for the UK not paying.
“Once the German voters realise the cost of the UK leaving you have to wonder how that will influence their thinking.
“If one single country leaves the euro – and Greece has to be a candidate – there will be consequences.
“Because the whole euro project is on a long-term basis tied in with the EU, if the euro was to fail that would clearly have a profound effect on the EU.
“The danger for the EU and the euro is people can quickly lose confidence in the currency.”