Eurozone 'black hole' has trapped its members forever in EU crisis, warns currency expert

The Eurozone has turned into an inescapable “black hole” for its 19 members, a financial expert has warned, a quarter of a century after the launch of the single European currency.

The euro was launched in a blaze of publicity on January 1, 1999, with the aim of establishing a massive single market with the potential to compete with the United States, Bob Lyddon told Express.co.uk.

However, the founder of Lyddon Consulting Services says in the 25 years which have followed, reality has bitten – hard.

Mr Lyddon, who has outlined his concerns in an article published on the Global Britain website, said: “Implementing the Third Stage of Economic and Monetary Union – introducing the euro – was a contract between the EU’s political-financial elite and the EU’s citizens and businesses, not that citizens and businesses were allowed to vote on whether they agreed: the EU’s political-financial elite supplied both signatures on the contract without consulting them.”

So the theory went, in exchange for giving up what Mr Lyddon called their “legacy currencies”, citizens and businesses would be able to access a “large, innovative, barrier-free economic zone, enabling new competitors, new products and new services”, Mr Lyddon explained.

He continued: “In other words a dynamic and competitive market in which prices would tend towards static or downwards as economies of scale took hold: citizens and businesses would experience an increase in wealth.

“All that EU’s political-financial elite needed to do was to follow the opportunity through by not spending too much public money, by not putting new money into circulation and by keeping inflation under control.”

Unfortunately for those who signed up, including France and Germany (though not Britain) there had been overspending “at every level”, Mr Lyddon pointed out.

He said: “Through member state governments, through EU institutions, through other public entities, and through shadowy Ponzi schemes mainly arranged through the European Investment Bank Group (eg InvestEU).

“Then the European System of Central Banks engaged in money printing. Lastly the European Central Bank pursued an interest rate policy that caused a credit and real estate binge up to 2011-2 and that enabled ongoing inflation from 2022.”

In doing so, the bloc’s financial leaders had “comprehensively broken” their contract with the EU’s citizens and businesses, and was now pretending that the euro was “all about reducing the frictional costs of dealing with different currencies”.

In other words, it was now being characterised as the difference between the selling price and the buying price for the currency of another member state, the volatility of foreign exchange rates, the cost of making payments across a member state border, and the extra time and paperwork involved in such a payment, Mr Lyddon stressed.

He added: “That is a smokescreen: these elements had been brought under control before the euro. The main event of the euro remains a dream, but one the EU is heading away from, with its bureaucracy, intervention, subsidies and protectionism, and the public sector directing an increasing proportion of economic activity.

“COVID-19 and Net Zero provide the elite with cover stories for what they wanted to do anyway: increase the scope of the system of economic patronage upon which their own careers are based.

“The Eurozone is a black hole: it sucks resources in and destroys them, and there’s no way out.”

Speaking last week ahead of Thursday’s Governing Council of the European Central Bank (ECB) in Frankfurt, its President, Christine Lagarde, warned cutting interest rates too soon could jeopardise Europe’s progress in battling the inflation that has ravaged the economy, amid widespread speculation that the bank soon will lower rates from record highs.

The French financier, faced with market expectations for rate cuts as soon as March or April, underlined the ECB’s intent to keep its benchmark rate high for “as long as necessary” until it’s clear that inflation is back to the goal of two percent.

Speaking at a Bloomberg News event during the World Economic Forum’s annual meeting in Davos, Switzerland, she acknowledged concerns the bank had gone too high too fast with borrowing costs.

She said: “I know some people argue that maybe we are overshooting, maybe we’re taking risks.”

But the bigger risk would be letting inflation get loose again and have to launch rate hikes again, she warned.

Speculation that central banks including the ECB and the US Federal Reserve were about to start cutting rates helped spark a surge in stock market indexes over the final weeks of 2023.