European Union? The Limits of The Single Currency

European Union? The Limits of The Single Currency


The financial crisis that hit the
European continent in the summer of 2008 has revealed the limits of the single
currency to provide the material reward that it promised at the time
of the Treaty of Maastricht in 1992. Apparently, the European
citizens were told in 2008-10 that the single currency had
not been granted the necessary tools to confront the kind of crisis
that affected the European banks and governments’ sovereign
debt at that time. The Euro, we were told,
had been poorly designed! This recognition of policy error
should not pass unnoticed. It shows that the most trumpeted
generation of pro-integration leaders the generation of Jacques
Delors, François Mitterrand, Helmut Kohl and Felipe González,
among others, did not know what they were doing or
were not honest with their citizens. They presented
the euro as a decisive, almost inevitable step towards
a better Europe for all. The 26% general unemployment rates and the 50% youth unemployment
rates that had been reached in Southern Europe
in 2014 proved them wrong, fatally wrong! The response to the
Euro crisis has been twofold. On one hand,
at the European level, a new design for the euro
area has been carried out. It has involved a more active role
for the European Central Bank, the reinforcement of collective
supervisory mechanisms at the macro-economic level, and the
emergence of a European Banking Union with common regulatory
mechanisms and bail-out funding. Whether the combination of
macro-economic co-ordination, penalties for wrong-doing and
the banking union will be enough to confront future crises within
the Euro-zone remains to be seen. Will the reinforced Stability
and GrowthPact success whereas, in 2005, Euro-zone member
states, including Germany, were able to disregard
macro-economic co-ordination and switch-off the penalties? The banking union which
will still take 20 years to be a reality if the present
policy planning is respected, which I very much doubt it will, has been presented in public
opinion terms with the same messianic language used for
the euro in the early 1990s. On the other hand, we have
seen the bail-out programmes. In most Northern EU member States, national banks holding toxic
assets were bailed out by the national governments and the bill
passed on to national taxpayers. This was the case of the United
Kingdom and the Netherlands, among others. In the cases of Ireland,
Cyprus and Spain, the banking bail-outs produced
such a deterioration in public finances that the whole country was
drained into a problem of solvency. The question of solvency
also affected countries like Portugal due to the long persistence
of lack of growth, or Greece due to the lack of credibility
of its ruling political elite. Whatever might have been
the origin of the circumstances eroding the market credibility, the
fact is that for a country bail-out, the solution came via
the European Union, but only after following
intergovernmental procedures. The European Parliament
was kept completely aloof, which would have not been the
case in a supranational programme. The emergency rescue
operations reinforced the intergovernmental
nature of the Union. The bail-outs which were
supervised by a troika, that is, the Commission,
the European Central Bank and the International
Monetary Fund, had strong conditionality
attached to them. The outcome of this process was that
the bail-outs of several members of the Euro-zone prevented
sovereign or banking insolvency but led to a growing disillusionment
both with established political parties and with the European
Union in general. At this point in time we could
ascertain that the Euro project is out of immediate peril, but the
whole European Union project is very much in
danger of collapse given the widespread
lack of popular support.

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