The ECB’s move to cut refinancing rates to a new record low will not solve the eurozone’s problems, believes Robert Oulds, chairman of the Bruges Group. A radical change of policy within the EU is needed to bring about economic growth, he told RT.

The European Central Bank (ECB) cut its refinancing interest rate to 0.50 per cent on Thursday, in a bid to kick-start the bloc’s sluggish economy.

The anticipated cut from 0.75% was the first since July last year, and came on the back of a raft of poor economic news in the 17-member eurozone. Figures released earlier this week showed unemployment in the area at an all-time high, inflation at a three-year low, and manufacturing declining in April.

RT: What does this interest rate cut actually mean for the Eurozone? Who does it help?

Robert Oulds: It won’t really make much difference at all. Of course we’re seeing the limitations of monetary policy which has been pushed as far as it possibly can, by having interest rates at 0.5%. What it will help is German exports to outside of the Eurozone, particularly to China because there will be some depreciation of the Euro. But of course within the Eurozone there won’t be any change because they have one currency. So it won’t actually help the economies of southern Europe, particularly Spain, Portugal, Ireland, Italy, and Greece, which we can all pound together as countries that are struggling as a result of being in the EU single currency. France is also suffering economically and has, unemployment rising. And we’re seeing a separation between the French and German economies. So cutting interest rates by this small amount won’t actually make much difference. We need a radical change of policy within the EU to bring about economic growth.

RT: You’ve been saying that for a long time. It’s not happening though, is it?

RO: Well, eventually it will be forced to happen and the euro will collapse. There’s only so much money that can be continually lent to countries like Spain or countries like Italy, which is in a deep recession as well. Of course those countries are too big to be bailed out and of course there will be a capital flight as difficulties continue because investors will be afraid there will be another Cyprus situation happening in other countries and because we’ve already been told that’s going to be the template for future financial rescues of banks and other financial institutions within the Eurozone so eventually, there will have to be a breakup of the euro. That’s the only way to restore economic growth. It’s the only way to get people back to work…if the Deutsche Mark were to be returned, that would increase in value and that would help the disparities within the Eurozone which has been created largely by the currency so there needs to be a radical change. Otherwise, unemployment will just keep on going up.

RT: The ECB chief warned indebted countries against 'unraveling' their austerity policies. But no one said it was going to be easy. Don't they have to take the medicine they signed up to?

RO: There is beginning a bit of a revolt within the EU against austerity. It doesn’t actually help. It’s actually creating a worse situation where the economies can’t grow and they can’t deal with the long-term debts that they have because there isn’t the tax revenue coming in – it’s actually declining.

RT: Does the ECB chief's comment mean that some countries are getting ready to jump?

RO: I think Italy is one to watch. That is a domino that will eventually fall. They’re in a recession and of course the Italians are beginning to get very fed up. There’s mutterings, and as we’ve seen in the recent elections, people are willing to take radical measures and vote for new parties because they’re fed up with the same old establishment parties that have one answer to the problem: austerity. But that of course just creates unemployment. So Spain and Italy are really the ones to watch and perhaps even France in the long-term.

RT: Manufacturing shrank across the EU in April - even in Germany, the bloc's biggest and strongest economy, it contracted for the second month. Why is the EU's most-powerful member now having trouble?

RO: Potentially, because the German economy has relied a lot on exports to other Eurozone states. It’s benefited in the short term from the single currency. But as countries’ economies dry up, the purchasing power in them will of course cease and they won’t be able to afford the German exports any longer. So in the long run, it will damage the German economy because there will be no one in Europe who will be able to buy their cars and their manufactured items. Some Germans are already beginning to recognize this. Professor Bernd Lucke in Germany who has established a political party is saying that Germany should leave the euro because it’s unbalancing the whole single currency. A strong economy like Germany being at the center of the Eurozone and of course in the long run it will actually help the German economy by exiting, because it will allow the other countries in the Eurozone to grow again, and then they’ll be able to afford to buy the German exports. So in the long run, it will actually be in Germany’s interest to exit the single currency because at the moment it’s just destroying everybody else.

• A Permanent Economic Emergency