Eye on France: 20 years of the Euro, the highs and lows of a single currency

The euro, the Old Continent’s single currency, will celebrate its twentieth birthday at the end of the month. Should we be cheering or weeping? Wednesday's Le Monde asks that very question, and the article carries a picture of the Eurozone finance ministers, taken at their meeting in Brussels earlier this month.

European Central Bank President Mario Draghi and eurozone finance and economy ministers celebrate the 20th anniversary of the euro at a meeting in Brussels, Belgium, December 3, 2018. REUTERS/Yves Herman

Mario Draghi, the president of the European Central Bank, is standing in the front line, clutching a giant plastic euro and looking like a poisoned pup. Pierre Moscovici, the EU’s economic commissioner, is beside him, brandishing a fixed smile and a pink cut-out reading “#EUROat20”. The 19 ministers are looking in at least 19 different directions.

That just about sums up the single currency.

The problem, according to the centrist French daily, is that the European monetary union has never worked properly. That has left individual governments struggling with the unhappiness and dissatisfaction of some of their own voters, some of the time.

So, why hasn’t it worked?

Le Monde reminds us that money is a symbolic affair before it’s a means of payment. Strength and unity are the vital components. Unfortunately, both of those ingredients have been missing from the European scene, at least since the global crisis in 2008.

That was the year the monetary union woke up to the fact that the supposed economic convergence practiced by member states was a barrel of worms. It turned out that Portugal, Italy, Greece and Spain, the infamous PIGS, had made it look like they were marching to the same tune as the rest of Europe only by pushing local interest rates through the floor. When the crisis hit, interest reality arrived with a bang and commercial banks were left sitting on piles of toxic debt. Central banks then came under pressure to bail the local lenders out. Athens couldn’t keep up and Brussels had to step in to prevent the entire Eurozone from imploding.

Europe entered the era of austerity and we began wondering if our euros were worth the paper they were printed on.

The other major currencies have the advantages of a central treasury and a dominant political line. The Eurozone has 19 different governments, with France and Germany only rarely in step, and Italy guided by a coalition which is, to say the best of it, skeptical on the question of European integration. The dominant political philosophy is for building walls, closing doors and looking after national interests.

The France of Emmanuel Macron, for 18 months the continental champion of a better, balanced Europe, has recently had to sacrifice its commitment to budgetary rigor to put out the fire started by the gilet jaune protestors. That won’t make dialogue with the other Eurozone nations any easier.

The tragic part of all this is that, with a 20 percent share of global cash reserves and 340 million paying customers, the euro has made a huge breakthrough in a very short time.

And, with Donald Trump’s USA using the power of the dollar to destroy multilateral trade, the euro would be ideal to help in getting the global economy unhooked from the greenback. Unfortunately, current divisions and divergences in the European household leave the single currency badly placed to make a claim for world domination.

Thinking outside the box

If the euro is ever to achieve that, says Le Monde, then it will be at the cost of a major overhaul of the basic mechanisms. Eurozone growth is at its lowest for four years. There is no evidence that the necessary stability for a global currency has been achieved, or can be maintained. Part of the problem is that the structures which would guarantee that stability are simply not in place, were never even thought of when the Eurozone was created.

Le Monde says we have to think outside the box in which the only options are federation or collapse. There is a third alternative in the form of a combination of risk-reduction and shared support for member nations who run into temporary difficulties.

Unfortunately, the current climate is not particularly favourable to talk of sharing and solidarity. Just as Europe is incapable of forging a coherent policy on immigration right now, it is probably not on the verge of a dramatic economic alliance either.