THESEUS Public Lecture with Prof Tsoukalis and Prof Streeck

Was the European Monetary Union a bad mistake? Should Grexit be the first step for a new system?

On 26 October 2015, THESEUS Outstanding Award Winner Prof Loukas Tsoukalis, ELIAMEP, and Prof Wolfgang Streeck, former director of the MPIfG, held a lively discussion on the future of the Eurozone at the Fritz Thyssen Foundation in Cologne. They clearly agreed: the situation is severe, but there are no simple solutions at reach.


"The Eurozone will not survive the next five years" – with these words Prof Wolfgang Streeck, former director of the Max Planck Institute for the Study of Societies (MPIfG) opened his speech at the Fritz Thyssen Foundation on 26 October 2015. It was the beginning of a very critical as well as metaphorical reflection on the weaknesses of the European Union’s Monetary Union and its – in his eyes – foreseeable failure. The scientist was convinced that following Greece further countries will face severe economic and financial crises; next Italy, which is "about to blow up".

Streeck’s co-speaker Prof Loukas Tsoukalis, Hellenic Foundation for European & Foreign Policy (ELIAMEP), agreed. The Greek expert shares Streeck’s worries about developments within the European Union (EU). "The mistake is that people always speak of national crises, but this is only part of the problem", said Tsoukalis. "We are facing a Eurozone crisis, a systematic crisis linked to fundamental errors in its construction." Streeck shared this opinion. Planned by the French as a mechanism to contain Germany’s power, the Union has turned out as the exact opposite: A German hegemony, argued Streeck. This hegemony was reflected not only in the way Germany dominated decisions taken in the course of the economic and financial crises, but also in handling the high numbers of refugees coming to Europe.


"Monetary Union as constructed at Maastricht was against the law of gravity", stressed Tsoukalis. "An unbalanced construction based on a weak political base, member countries with different economic structures and different political economies – it does not work." EU actors were blinded during the early honeymoon period that hid growing economic divergence inside, argued Tsoukalis. "It was a bubble that finally burst." He compared the situation of the Eurozone with an unhappy marriage: "We are unhappy with the status quo, but terrified of a divorce, which might have even higher costs than those of staying together."

Consequently, solutions to problems were postponed and the whole economic strategy flawed, explained Tsoukalis. Austerity for everybody was not the answer. "How can Greece recover in conditions of financial strangulation and with the rest of Europe stagnating for years?", asked Tsoukalis. The Spardiktat of the European institution can live on, because Greece’s former finance minister Yanis Varoufakis had no credible Plan B to oppose the German finance minister Wolfgang Schäuble, added Streeck.

"The result has been eight wasted years for the Eurozone as a whole: GDP in 2014 was still lower than it was back in 2007", said Tsoukalis. "I would even speak of the prospect of a lost generation looking at the very high unemployment rates in the Southern EU member states." Growing divergence among EU economies and the growth of anti-systemic parties across Europe were part of the collateral damage.

The course of the debate showed: The two leading European scientists share their scepticism regarding the Eurozone, while developing their personal ways of approaching the problem. Prof Tsoukalis offered three and a half explanations for the "never-ending crisis". First, faulty construction of Monetary Union. Second, irresponsible behaviour of individual countries. Third, wrong policies when the crisis broke out. And the half explanation, which may prove to be the most important: a crisis that goes much deeper linked to the interaction between global markets and national democracies, globalisation and inequalities within countries.

Talking about solutions for the situation, even these two experts had no clear answer. "There is no obvious way out", said Tsoukalis. A return to national currencies would be extremely costly in economic and political terms. EU member states like Denmark or Sweden are doing fine with keeping their national currency, stated Streeck. Though, once having the euro it was difficult to go back. Tsoukalis spoke of a possible grand bargain to sustain the euro and European integration, but recognises that it is difficult and politically unlikely.

One important step is to accept the fact that one solution does not necessarily solve the same problems in several countries, argued Streeck. "We need to start understanding other countries' way of thinking". He referred to the example of treaty-making: "Whereas Germans think the debate ends with having a treaty, the French see it as start of the discussion", he said smiling.

The debate was opened and chaired by Prof Wolfgang Wessels, Jean Monnet Chair at the University of Cologne. Dr Frank Suder, Director of the Fritz Thyssen Stiftung, and Mirja Schröder, THESEUS Project Manager, introduced the event.

The speakers

Prof Loukas Tsoukalis is a renowned Greek professor of Political Economy at the University of Athens and the Hellenic Foundation for European & Foreign Policy (ELIAMEP). He will be teaching at Harvard University next year. His research covers a wide range of issues related mostly to European integration. In his studies, he develops strategies to deal with the current crisis within the Eurozone.

Prof Wolfgang Streeck is one of the leading German scientists of political Economy, dealing with the interdependence of politics and economy. He is former director of the Max Planck Institute for the Study of Societies (MPIfG) and published various works on the development of capitalism and its consequences on democracy, disparities among countries of the Eurozone and effects of austerity policy in Europe.