Davos 2015: Weber casts doubt on future of euro

The former head of the Bundesbank has cast doubt on the future viability of the euro if countries do not follow Germany in imposing structural reforms to boost their longer-term growth rates.

Calling the probable introduction of quantitative easing by the European Central Bank on Thursday as "only part of the fix", Axel Weber, now the chairman of UBS, said that there were legitimate questions hanging over the viability of the single currency.

If countries do not reform, he said: “I think there will always be questions about viability of the project and Europe has not done enough to dispel these concerns”.

Mr Weber was speaking at the World Economic Forum in Davos and gave a traditionally German account of the problems in the eurozone that put the responsibilities on failure of government’s to reform rather than inadequate action from the central bank.

He said he expected a "sizable programme" of QE, adding, "but the real issue is the ECB has continuously bought time for Euroepan policy makers to fix the issue".

Saying the policies of structural reform, particularly in the periphery of the eurozone – Italy, Greece, Spain, Ireland and Portugal – were inadequate, Mr Weber, who was the president of the Bundesbank until 2011, said, “Now Europe’s not back, the problems are back”.

“The ECB can only be part of the fix in Europe, in part because the more they do they give a big incentive for governments to do less. The real problem is that if you continue to buy time and the time is not used for reforms, I think you have to ask yourself whether more of the same is the best recipe,” he added.

“Policy makers shouldn’t kid themselves. Policy makers are in charge of reforms. If they don’t deliver reforms, they don’t do their job. “

“The eurozone needs to continue to work at integration and they need to deliver policy reforms… if that doesn’t happen, the project of a single currency - which had benefits, very much so - becomes increasingly a difficult project to run”.

- Copyright The Financial Times Limited 2015