Perry Anderson, "Depicting Europe",London Review of Books (20 September 2007)
Our Union is more than an association of states. It is a new legal order, which is not based on the balance ofpower betweennations but on the free consent ofstates to sharesovereignty. From poolingcoal andsteel, to abolishing internal borders, from six countries to soon twenty-eight withCroatia joining the family this has been a remarkable European journey which is leading us to an “ever closer Union”. And today one of the most visible symbols of our unity is in everyone’s hands. It is the Euro, the currency of ourEuropean Union. We will stand by it.
The most likely scenario is that EMU (Economic and Monetary Union of the European Union) will occur but will neither end Europe’s currency troubles nor solve its prosperity problems.
The most serious criticism of EMU is that by abandoningexchange rate adjustments it transfers to the labor market the task of adjusting for competitiveness and relative prices... losses in output and employment (and pressure on the European central bank to inflate) will predominate.
Italians dream that the ECB (European Central Bank) will make their life easier than theBundesbank does now... The new central bank is certain to establish itself at the outset as a direct continuation of the German central bank.
Instead of increasing intra-European harmony and global peace, the shift to EMU and the political integration that would follow it would be more likely to lead to increased conflicts within Europe.
Although 50 years of European peace since theend of World War II may augur well for the future, it must be remembered that there were also more than 50 year of peace between theCongress of Vienna and theFranco-Prussian War. Moreover, contrary to the hopes and assumptions ofJean Monnet and other advocates ofEuropean integration, the devastatingAmerican Civil War shows that a formal political union is no guarantee against an intra-European war.
A critical feature of the EU(European Union) in general and EMU in particular is that there is no legitimate way for a member to withdraw... The American experience with the secession of the South may contain some lessons about the danger of a treaty or constitution that has no exits.
When the Monetary Union was founded in 1992, it was a common understanding amongeconomists that a monetary union of states of very different economic strength could function only if either economic policy was communalized as well or the strong states were willing to pay for the debts of the weaker states.Politicians ignored this warning. Thefinancial crisis showed that the economic experts were right. The Monetary Union deprives the states of a number of fiscal instruments such as revaluation or devaluation of the currency. This contributed to the crisis.
The fundamental problem of European monetary union lies in its incompleteness or lopsidedness. There was a much better preparation for the monetary side of monetary union than for the fiscal concomitants that should have underpinned its stability (and prevented the threat of large-scale monetisation of fiscal debt burdens). No adequate provision on a European basis existed for banking supervision and regulation, which, like fiscal policy, was left to diverse national authorities.
Harold James,Making the European Monetary Union, Harvard University Press, 2012. p.382
The eurozone’s significance was more than symbolic. It implied the gradual synchronization of its members’ economies, includingmonetary policy, nationalinvestment andtransfers between rich and poor regions. For northern Europe the euro boundGermany into ever closer union. ForSpain,Italy andGreece, it was a double-edgedsword. It signified merger with Europe’s most sophisticated economies, but also economic adjustments for which these countries were by no means ready.Britain had joined the Exchange Rate Mechanism, but dropped out with thepound under extreme pressure on ‘black Wednesday’ in 1992. TheMajor government declined to join the euro. It also ‘opted out’ of Maastricht’s ‘Social Chapter’, which covered areas such asemployment rights.
Simon Jenkins,A Short History of Europe: From Pericles to Putin (2018)
Europe’s political stability, social cohesion, economic prosperity and security are more threatened today than at any point since theCold War,Russia is destabilizing the Continent on every front. Indigenous factors – whether long-extantnationalism, design flaws in the Eurozone, lack of a commonforeign policy, orincapability at assimilating immigrants – certainly lie at the root of these crises.
The euro is bad for Europe. The euro is bad for theNetherlands, it’s especially bad because it is a stimulus for politicians to kill theWelfare State. I look forward to aEuropean economy using multiplecurrencies. In the end that will be much better: it will make us more resistant to shocks and makes us less vulnerable to what is happening now.
What has happened, it turns out, is that by going on the euro,Spain and Italy in effect reduced themselves to the status ofThird World countries that have to borrow in someone else’s currency, with all the loss of flexibility that implies.
EMU wasn't designed to make everyone happy. It was designed to keepGermany happy - to provide the kind of stern anti-inflationary discipline that everyone knew Germany had always wanted and would always want in future.
The clear and present danger is, instead, that Europe will turnJapanese: that it will slip inexorably intodeflation, that by the time the central bankers finally decide to loosen up it will be too late.
By trying to move prematurely to monetary union, we would run very serious risks. The dangers of forcing the pace have been amply demonstrated in Germany.Karl Otto Pohl, the director of the Bundesbank, has described Germany's experience as "a drastic object lesson" of the need for prior convergence before establishing a currency union. Reunification there has meant the rapid merger of two very different economies. The short-term consequences are a huge rise in the German budget deficit and risingunemployment in eastern Germany, but for the rest of the Community their experience is salutary.It shows the strains and tensions set up by moving to currency union before there is proper economic convergence. In the case of Germany one strong currency and one strongeconomy effectively took over those of a weaker neighbour. How much greater would those strains and tensions be if 12 very different states with different economies were now to adopt a single currency?
In a monetary union with irreversibly fixedexchange rates the weak would become ever weaker and the strong ever stronger. We would thus experience great tensions in the real economy of Europe. For this reason alone, monetary union without the simultaneous integration in fields like fiscal policy as well as regional and social policy is completely inconceivable... In order to create a European currency, thegovernments andparliaments of Europe would have to be prepared to transfersovereign rights to a supranational institution.
The idea that the euro has "failed" is dangerously naive. The euro is doing exactly what its progenitor – and the wealthy 1%-ers who adopted it – predicted and planned for it to do.
ECB [European Central Bank] PresidentMario Draghi’s famous promise to do ‘whatever it takes’ to preserve the eurozone was a masterly move to buy time. Butmonetary policy cannot solve the currency union’s problems.
Moving to a full monetary union in Europe is like putting the cart before the horse. A major shock would result in unbearable pressure within the Union because of limited labour mobility, inadequate fiscal redistribution, and a ECB (European Central Bank) that will probably want to keep monetary conditions tight in order to make the euro as strong as thedollar. This is surely the prescription for major future problems.
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