Twenty years of a single currency, but even die-hard Europhiles can’t fake it. Here’s why the euro is a failure.
If your teenage son had spent his whole life in juvenile prisons, had a drug problem and wasn’t very bright, you might buy him a birthday cake on his twentieth birthday, if for nothing else but to indulge yourself in the notion that his worst years are behind him and things can only get better from now on.
This is the kind of logic at work for many European Union leaders and EU officials in Brussels now on the 20th anniversary of the euro – a project which was a colossal political experiment which never achieved its main hidden objective of strengthening France’s hand and dampening the power of Germany.
Mitterrand pushed hard for it on the basis of throwing his weight behind Germany’s unification and Helmut Kohl, the German chancellor at the time, bought into it for that reason, but also because he believed that Germany was getting too powerful and he belonged to a generation of Germans who can’t cope with that idea.
The big thinking in Brussels was that it would give the EU institutions more power and prestige as it gave the EU the golden goose which it always dreamt of: decentralisation of power.
The euro was a considerable boost to this overall plan, which later included the Lisbon Treaty just seven years later – another grandiose plan to give the EU more clout but which has blown up in its face as, the bigger you are, the larger your errors appear to be.
Covid, immigration, foreign policy are all embarrassing disaster zones which have created an unprecedented crisis for the EU, which may well cause it to reinvent itself after its next parliamentary elections in 2024.
But in Christmas in 1999, there were no worries about the EU’s failing image both within the European Union (then 15 member states) and internationally. Indeed, the fretting from senior EU players was that the EU was not a big enough player with media and still not “connecting” with its citizens. Also, the so-called Franco-German axis worried many in the Belgian capital.
The euro had actually been around for a long time before 2000 in a different form as Benelux countries had tied their own national currencies to the Deutschmark, giving Germany the power to determine interest rates anyway – which explains where there was so much confidence about the plan.
But the thinking at the time was fatally flawed. There was absolutely no contingency plan in place for any kind of financial tremors in the global markets (one example of just how inexperienced those who were given the task to create the euro were) and so consequently failure was imminent. It was only a matter of time, in fact.
“The common currency was not needed for European success stories before 1999 and the majority of eurozone member states did not benefit from it later,” Hungary’s Central bank governor Gyorgy Matolcsy writes in the FT. “During the 2008 financial crisis and the 2011-12 eurozone economic crisis, most members were badly hit, having piled up huge government debts. There is no free lunch and cheap loans often cost a lot later.”
But it wasn’t just a mad capped idea thrown together by a pitiable French president and a weak German leader who was happy to ditch the Deutschmark in return for a less Germanic EU model.
It was also about the barmy blinded dogma from these so-called seminal characters and the trio of failed politicos they chose to produce the currency, its structure, legal framework for it to be handed over to the new central bank (ECB) in Frankfurt.
There were three key individuals behind the euro, including Dominique Stauss-Khan, France’s finance minister at the time and former managing director of the IMF - a position he resigned from in the wake of a sexual assault allegation.
But even the French finance minister, who might know a thing or two about money, was out of his league with such a task. The other two characters were Luxembourg’s ex PM at the time, Jacques Santer (who was EU commission president during that period) and an obscure French EU official called Yves de Silguy, a man so dull that even today people in Brussels struggle to remember even his name. Neither of these two individuals had any experience in finance, let alone international finance.
The euro’s failings are that it dreamt big but didn’t have the deep pockets to finance itself over troubled waters. No contingency plan but in some ways it was pretty impressive and spoke huge volumes of confidence. But in reality, it just couldn’t live up to the hype and just made Germany the ultimate super power of the EU today, with a whimpering Macron in Paris hoping for a slight change in the landscape after the next French presidential elections.
Today, the odd contingent of EU countries which don’t have any desire to join the EU - Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, and Sweden – consider themselves to be very lucky indeed as they saw the inflexibility of joining the eurozone and the rule of “once in, in for ever” not appealing.
For those in the 19 EU countries who are in it, there is growing discontent with it, which in itself is a whole new crisis for the EU, as only Germany and to some extent the Netherlands come out as winners, according to a recent study.
In many ways, the EU got off lightly with Denmark and Sweden not joining. If they had done in 1999, the pressure in those countries to leave the euro now would be a major calamity in itself (both home to powerful Eurosceptic political groups).
One of the hardest barbs for EU officials in Brussels to swallow is that the most progressive, advanced and exciting economy in the entire EU 27 is not even in the eurozone - Poland.
Celebrate its anniversary? It’s a failed project, hastily designed by France and Germany for all the wrong reasons and born from the loins of the Maastricht Treaty in 1992.
The fireworks display which the EU commission news crew filmed at midnight of new year’s eve in 1999-2000 and gave as handout video to international broadcast journalists in the Belgian capital was a warning shot. Belgians were not celebrating the euro, but the new year, which they do every year with fireworks.
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