German economists 'not in favour' of euro banking union

6 July 2012

Some 172 German economists have written an open letter to chancellor Angela Merkel noting their displeasure at the prospect of a euro banking union.

Published in the Frankfurter Allgemeine Zeitung newspaper, the contributors are not in favour of a scheme that will see the nation extend its liabilities to weaker eurozone states.

"We are deeply concerned about the step towards the banking union, which means collective liability for the debts of the banks of the euro system," wrote the economists.

The group is being led by Hans-Werner Sinn, who is president of the influential Ifo Institute for Economic Research thinktank.

Mr Sinn is an advocate of Greece leaving the single currency and thinks no bank is too big to fail.

It comes after a recent meeting of the eurozone leaders saw the decision taken to allow the European Financial Stability Facility and European Stability Mechanism to fund struggling banks directly.

By Gary Cooper

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