Banking crisis is biggest threat to EU, says Lord Lamont
Struggling German banks pose a looming threat to the European Union, which will "hit a fence" as the bloc struggles with a series of crises over the coming years, former chancellor Lord Lamont has said.
Lord Lamont said the EU is at risk of buckling under the weight of distressed lenders not just in peripheral countries such as Italy, but also in its powerhouse economy.
"The biggest threat, I think, to Europe is the banking crisis.
"I think Italian banks are in a very serious situation, I think German banks are probably in a very serious situation too.
"I think the Germans would prefer that we all discuss the Italian banks rather than discuss their banks but actually I think their banks are in a dangerous situation," Lord Lamont said at an Institute of Directors convention in London.
His comments come just a day after Deutsche Bank's shares plunged to their lowest level in more than 20 years amid a stand-off with US authorities over a 14 billion US dollar (£10.7 billion) settlement. Chancellor Angela Merkel has given no indication that the German government might help the group.
Investor concern over the German lender subsequently sparked a sell-off across European banking stocks on Tuesday, including RBS and Barclays.
However, Lord Lamont suggested little could be done to preserve the EU in its current form, which is likely to "hit a fence" in the face of other pressures, including a looming constitutional referendum in Italy and a presidential election in Austria.
"Of course next year we have the French and German elections," he added.
Former Greek finance minister Yanis Varoufakis gave similarly pessimistic forecasts, suggesting the EU, and particularly the monetary union, is likely to look radically different in just a decade's time.
"The problem is much more structural. The architecture of the eurozone is simply not capable of sustaining itself," Mr Varoufakis said.
Without adequate reforms, the EU is likely to fall apart, leaving a core of the eurozone and a series of bilateral arrangements between former members, he said.
"While it is unsustainable, its disintegration will be hugely costly and not just for those who live in the eurozone.
"This is the reason that it was important that those of us who disdained its architecture and design to try and fix it," Mr Varoufakis said.