Bernard Connolly: The next big bust looms

Investment guru Bernard Connolly foresaw the last crisis, and he sees another one on the way.

"Very, very few" economists have been vindicated by events in Greece, says John Dizard in the FT. "The one who has earned the most honour" is Bernard Connolly. He published a book in 1995 called The Rotten Heart of Europe, which said that monetary union was a misconceived mess designed to force countries into a political union. The experiment would end in tears, he claimed. Rather awkwardly, he worked in the European Commission at the time, so he was sacked and shunned.

But he was quite right. The key problem is that the southern countries are less competitive than the northern ones. Once the bubble induced by a one-off fall in interest rates burst, the south couldn't regain competitiveness by allowing its currencies to fall. It had to devalue internally, clamping down on wages and prices, which depressed demand giving rise to a vicious cycle. The way to alleviate this problem is for the rich states to subsidise the south. But without a single federal government to back the currency union as is the case in America it's not going to happen.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Andrew Van Sickle
Editor, MoneyWeek

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.