Friday, January 6, 2012

Euro Architect: European Central Bank knew of tensions

One of the architects of the now-stricken euro says the European Central Bank was aware of tensions in the common currency which could lead to problems.

Professor Otmar Issing, now the president of the Center for Financial Studies in Frankfurt, was at the heart of the ECB when the common currency was introduced in 1999.

Issing, an ECB executive board member from 1998 to 2006, flagged up the risks associated with using a common currency across such divergent economies. He says it was known to be an "experiment" which could lead to a crisis.

"We petitioned Jean-Claude Trichet [ECB president from 2003 to 2011] with graphs and papers showing that unit labor costs were diverging in a dramatic way," Issing told CNN. "This was something that was known." Read More