Will the common currency still be around in 2020? Ridicule me in ten years, but I am certain that it will be. It is not very common these days to defend the euro; and it is even less common to praise it as one of the main, positive, achievements of the European integration project. This however, is what this article sets out to do. Voices defying the status quo in reporting and public opinion are needed to prevent the onset of a negative self-fulfilling prophecy. The constant reporting on and prognosis of a collapse of the Eurozone will lead to just that: the end of the common currency. Differentiated analysis of the euro’s weaknesses is in order; hysterical blabbering about the euro’s apparently imminent end is not.
The Eurozone faces real and serious problems
It would be naïve to leave the current problems engulfing the common currency unconsidered. Even an article meant to highlight the positives has to take the current crisis into consideration, if it wants to be taken seriously.
Yes the euro does not constitute an Optimum Currency Area; many, if not all the underlying problems surfacing now in the aftermath of the global financial crisis can be traced back to this fundamental condition. The missing common cultural identity, language barriers and insufficient economic convergence lead to a condition where the European economy cannot properly absorb economic shocks. The absence of political (and fiscal) union further makes it close to impossible for the EU to adequately react to such shocks by means of redistribution.
Due to the resulting macroeconomic imbalances, the euro is said to do more to divide Europeans than to unite them. This argument is made also by those generally well-meaning towards the European integration project who now fear that the Eurozone troubles will threaten hard-earned progress in EU as a whole. The peace that has been achieved in the last decades, not only between states, but also between citizens who looked at each other with less and less suspicion, suddenly seems threatened again.
We thought we had forever tamed them, but the old demons of prejudice and envy start creeping back up. As Jean-Claude Juncker put it: Europe’s demons were never dead, only sleeping.
This argument certainly has some power. But it is not the euro itself which is resurrecting the demons; it is us. First, we could simply put in an honest effort to put right what is currently wrong with the euro and the European economic system in general; but for whatever reason, we are not. Second, we generally have the duty to look past the apparently obvious facts, the national stereotypes that seem all too fitting, and constantly search for the complicated truths that defy the labeled boxes we keep ready in our minds. But all too often we fail and do not make an effort to take a differentiated look at the truly existent inadequacies of the euro, while at the same time realizing its positive impacts and potential.
Essential building block of united Europe
The positive impact the euro has had (and continues to have) is obvious in some areas and less so in others. Clearly the introduction of the common currency made it easier for Europeans to travel; not much thought has to be put into exchanging currencies before a vacation and spontaneous city trips are possible without much preparation. This is undoubtedly a factor helping the continent grow together. In a more general sense, the euro reduces transaction costs and exchange rate uncertainty. This is not only important for travelers (or those Europeans living, working and studying in different countries), but also for businesses. Supply chains that are ranging across the continent are able to function more efficiently because transactions are conducted in one currency.
There are however also positive aspects of the currency union that go far beyond the day-to-day advantages of the euro. The common currency has to be seen as part of a grand bargain between France and Germany; former archenemies that now join forces in and through Europe. This is of course a defining feature of European integration in general, but the euro reinforced the commitment of both countries, and especially Germany, at a critical point in time. A reunified Germany had to reiterate its unwavering commitment to European integration; the institution of a common currency was a fitting means to do so.
“It has always been the vision of Europe to overcome the monopoly that nationalism and patriotism held over our identity, and to offer another identity option at a higher level.” The euro certainly plays its part in overcoming the grips of nationalism, just as Thomas Pogge described it for the European idea in general.
Realizing the euro’s full potential
To enable the euro to play a truly positive role, and to confer to the role it is meant to play in the European integration project, its potential needs to be fully realized. This will not be the case as long as the Eurozone is not an Optimum Currency Area. The fact that it isn’t at the moment is due to our unwillingness to take the next steps towards integration: allow greater common themes and commitments in our lives (without giving up our cultural differences) and create a deeper fiscal and political union.
It is thus in our hands whether the euro can fully develop its positive potentials; we simply have to come to grips with our demons.
To go further:
On Nouvelle Europe
- Dossier May 2013, Why can we still be (pro-)European today?, 9 May 2013
On the Internet
- Paul Krugman, Revenge of the Optimum Currency Area, 24 June 2012
- Interview of Luxemburg’s Prime Minister Jean-Claude Juncker, The Demons haven't been banished, Der Spiegel, 11 March 2013
Photo source: GuySie