The ‏ Euro

The Content

Introduction

The ‏ㅤ Euro, ‏ㅤ from ‏ㅤ launch ‏ㅤ to ‏ㅤ crash:1999 ‏ㅤ to ‏ㅤ 2010

Conclusion

The list of references

Introduction

The ‏ㅤ Euro ‏ㅤ is ‏ㅤ first ‏ㅤ and ‏ㅤ foremost ‏ㅤ a ‏ㅤ diplomatic ‏ㅤ creation; ‏ㅤ an ‏ㅤ act ‏ㅤ of ‏ㅤ will ‏ㅤ by ‏ㅤ the ‏ㅤ participant ‏ㅤ states ‏ㅤ using ‏ㅤ Europe’s ‏ㅤ more ‏ㅤ traditional ‏ㅤ and ‏ㅤ also ‏ㅤ newer ‏ㅤ instruments ‏ㅤ of ‏ㅤ diplomatic ‏ㅤ statecraft.As ‏ㅤ divided ‏ㅤ Germany ‏ㅤ became ‏ㅤ embedded ‏ㅤ in ‏ㅤ the ‏ㅤ two ‏ㅤ alliances ‏ㅤ dominated ‏ㅤ by ‏ㅤ the ‏ㅤ US ‏ㅤ and ‏ㅤ the ‏ㅤ USSR, ‏ㅤ West ‏ㅤ Germany ‏ㅤ sought ‏ㅤ security ‏ㅤ in ‏ㅤ the ‏ㅤ Atlantic ‏ㅤ alliance, ‏ㅤ and ‏ㅤ reconciliation ‏ㅤ with ‏ㅤ France ‏ㅤ through ‏ㅤ European ‏ㅤ integration. France, ‏ㅤ too, ‏ㅤ sought ‏ㅤ security ‏ㅤ from ‏ㅤ a ‏ㅤ repeat ‏ㅤ of ‏ㅤ the ‏ㅤ disasters ‏ㅤ of ‏ㅤ 1870, ‏ㅤ 1914, ‏ㅤ and ‏ㅤ 1939 ‏ㅤ through ‏ㅤ membership ‏ㅤ of ‏ㅤ the ‏ㅤ Atlantic ‏ㅤ alliance ‏ㅤ and ‏ㅤ by ‏ㅤ efforts ‏ㅤ to ‏ㅤ create ‏ㅤ a ‏ㅤ European ‏ㅤ political ‏ㅤ structure ‏ㅤ from ‏ㅤ which ‏ㅤ war ‏ㅤ would ‏ㅤ be ‏ㅤ banished. European ‏ㅤ economies ‏ㅤ were ‏ㅤ launched ‏ㅤ on ‏ㅤ the ‏ㅤ path ‏ㅤ to ‏ㅤ reconstruction ‏ㅤ through ‏ㅤ the ‏ㅤ creation ‏ㅤ of ‏ㅤ initial ‏ㅤ institutions ‏ㅤ designed ‏ㅤ with ‏ㅤ US ‏ㅤ support, ‏ㅤ to ‏ㅤ co-ordinate ‏ㅤ national ‏ㅤ economies ‏ㅤ on ‏ㅤ a ‏ㅤ European ‏ㅤ scale. Since ‏ㅤ the ‏ㅤ late ‏ㅤ 1960s, ‏ㅤ monetary ‏ㅤ politics ‏ㅤ have ‏ㅤ lain ‏ㅤ at ‏ㅤ the ‏ㅤ heart ‏ㅤ of ‏ㅤ Franco-German ‏ㅤ relations, ‏ㅤ as ‏ㅤ the ‏ㅤ DM ‏ㅤ began ‏ㅤ its ‏ㅤ ascent ‏ㅤ on ‏ㅤ the ‏ㅤ back ‏ㅤ of ‏ㅤ widening ‏ㅤ trade ‏ㅤ surpluses ‏ㅤ to ‏ㅤ replace ‏ㅤ sterling ‏ㅤ as ‏ㅤ the ‏ㅤ world’s ‏ㅤ second ‏ㅤ reserve ‏ㅤ currency ‏ㅤ after ‏ㅤ the ‏ㅤ dollar. ‏ㅤ French ‏ㅤ diplomacy ‏ㅤ quietly ‏ㅤ jettisoned ‏ㅤ its ‏ㅤ policy, ‏ㅤ inherited ‏ㅤ from ‏ㅤ de ‏ㅤ Gaulle, ‏ㅤ in ‏ㅤ favour ‏ㅤ of ‏ㅤ a ‏ㅤ Europe ‏ㅤ of ‏ㅤ the ‏ㅤ states ‏ㅤ and ‏ㅤ adopted ‏ㅤ a ‏ㅤ more ‏ㅤ integrationist ‏ㅤ stance ‏ㅤ with ‏ㅤ regard ‏ㅤ to ‏ㅤ the ‏ㅤ EU. ‏ㅤ French ‏ㅤ diplomacy ‏ㅤ focused ‏ㅤ on ‏ㅤ the ‏ㅤ Bundesbank ‏ㅤ as ‏ㅤ the ‏ㅤ bastion ‏ㅤ of ‏ㅤ Germany’s ‏ㅤ financial ‏ㅤ and ‏ㅤ corporate ‏ㅤ power ‏ㅤ nexus, ‏ㅤ and ‏ㅤ the ‏ㅤ prime ‏ㅤ partner ‏ㅤ of ‏ㅤ the ‏ㅤ US ‏ㅤ Federal ‏ㅤ Reserve ‏ㅤ in ‏ㅤ managing ‏ㅤ the ‏ㅤ central ‏ㅤ exchange ‏ㅤ rate ‏ㅤ between ‏ㅤ the ‏ㅤ dollar ‏ㅤ and ‏ㅤ the ‏ㅤ DM. ‏ㅤ As ‏ㅤ Bundesbank ‏ㅤ Council ‏ㅤ member ‏ㅤ Wilhelm ‏ㅤ Nölling ‏ㅤ has ‏ㅤ written ‏ㅤ about ‏ㅤ monetary ‏ㅤ politics ‏ㅤ over ‏ㅤ the ‏ㅤ creation ‏ㅤ of ‏ㅤ a ‏ㅤ European ‏ㅤ currency, ‏ㅤ the ‏ㅤ controversy ‏ㅤ is ‏ㅤ “about ‏ㅤ power, ‏ㅤ influence ‏ㅤ and ‏ㅤ the ‏ㅤ pursuit ‏ㅤ of ‏ㅤ national ‏ㅤ interests”.

In ‏ㅤ the ‏ㅤ following ‏ㅤ sections, ‏ㅤ we ‏ㅤ first ‏ㅤ discuss ‏ㅤ Franco-German ‏ㅤ relations ‏ㅤ over ‏ㅤ the ‏ㅤ four ‏ㅤ decades ‏ㅤ after ‏ㅤ 1971, ‏ㅤ the ‏ㅤ year ‏ㅤ when ‏ㅤ the ‏ㅤ world ‏ㅤ was ‏ㅤ launched ‏ㅤ by ‏ㅤ President ‏ㅤ Richard ‏ㅤ Nixon ‏ㅤ onto ‏ㅤ a ‏ㅤ dollar ‏ㅤ standard, ‏ㅤ obliging ‏ㅤ EU ‏ㅤ member ‏ㅤ states ‏ㅤ to ‏ㅤ negotiate ‏ㅤ a ‏ㅤ stable ‏ㅤ monetary ‏ㅤ and ‏ㅤ exchange ‏ㅤ rate ‏ㅤ order ‏ㅤ for ‏ㅤ their ‏ㅤ highly ‏ㅤ interdependent ‏ㅤ economies. ‏ㅤ Second, ‏ㅤ the ‏ㅤ end ‏ㅤ of ‏ㅤ the ‏ㅤ cold ‏ㅤ war ‏ㅤ in ‏ㅤ the ‏ㅤ years ‏ㅤ 1989-1992, ‏ㅤ prompted ‏ㅤ by ‏ㅤ the ‏ㅤ re-unification ‏ㅤ of ‏ㅤ Germany, ‏ㅤ saw ‏ㅤ both ‏ㅤ the ‏ㅤ birth ‏ㅤ of ‏ㅤ the ‏ㅤ single ‏ㅤ currency ‏ㅤ and ‏ㅤ the ‏ㅤ creation ‏ㅤ of ‏ㅤ political ‏ㅤ conditions ‏ㅤ for ‏ㅤ a ‏ㅤ more ‏ㅤ integrated ‏ㅤ global ‏ㅤ economy. ‏ㅤ By ‏ㅤ the ‏ㅤ time ‏ㅤ the ‏ㅤ crash ‏ㅤ came ‏ㅤ in ‏ㅤ 2008, ‏ㅤ the ‏ㅤ EU ‏ㅤ and ‏ㅤ its ‏ㅤ member ‏ㅤ states ‏ㅤ operated ‏ㅤ in ‏ㅤ a ‏ㅤ very ‏ㅤ different ‏ㅤ world ‏ㅤ to ‏ㅤ that ‏ㅤ prevailing ‏ㅤ in ‏ㅤ the ‏ㅤ early ‏ㅤ 1990s. ‏ㅤ The ‏ㅤ third ‏ㅤ section ‏ㅤ identifies ‏ㅤ the ‏ㅤ major ‏ㅤ fault-lines ‏ㅤ in ‏ㅤ the ‏ㅤ Euro ‏ㅤ project ‏ㅤ that ‏ㅤ were ‏ㅤ soon ‏ㅤ revealed ‏ㅤ by ‏ㅤ the ‏ㅤ crash. ‏ㅤ In ‏ㅤ the ‏ㅤ fourth, ‏ㅤ we ‏ㅤ assess ‏ㅤ some ‏ㅤ of ‏ㅤ the ‏ㅤ implications ‏ㅤ of ‏ㅤ Germany’s ‏ㅤ unabashed ‏ㅤ assertion ‏ㅤ of ‏ㅤ its ‏ㅤ leadership ‏ㅤ as ‏ㅤ the ‏ㅤ key ‏ㅤ arbiter ‏ㅤ of ‏ㅤ European ‏ㅤ affairs. ‏ㅤ The ‏ㅤ underlying ‏ㅤ theme ‏ㅤ here ‏ㅤ is ‏ㅤ that ‏ㅤ the ‏ㅤ Euro ‏ㅤ crisis ‏ㅤ could ‏ㅤ have ‏ㅤ been ‏ㅤ resolved ‏ㅤ immediately: ‏ㅤ it ‏ㅤ was ‏ㅤ not, ‏ㅤ because ‏ㅤ France ‏ㅤ and ‏ㅤ Germany ‏ㅤ had ‏ㅤ very ‏ㅤ different ‏ㅤ concepts ‏ㅤ of ‏ㅤ what ‏ㅤ should ‏ㅤ be ‏ㅤ done, ‏ㅤ and ‏ㅤ rather ‏ㅤ than ‏ㅤ back ‏ㅤ down, ‏ㅤ were ‏ㅤ prepared ‏ㅤ to ‏ㅤ let ‏ㅤ the ‏ㅤ European ‏ㅤ economy ‏ㅤ hang ‏ㅤ out ‏ㅤ to ‏ㅤ dry. ‏ㅤ The ‏ㅤ Euro ‏ㅤ crisis ‏ㅤ is ‏ㅤ a ‏ㅤ political ‏ㅤ crisis ‏ㅤ in ‏ㅤ relations ‏ㅤ between ‏ㅤ Paris ‏ㅤ and ‏ㅤ Berlin.

Conclusion

A ‏ㅤ number ‏ㅤ of ‏ㅤ key ‏ㅤ conclusions ‏ㅤ may ‏ㅤ be ‏ㅤ reached ‏ㅤ on ‏ㅤ an ‏ㅤ unfinished ‏ㅤ saga: ‏ㅤ first, ‏ㅤ the ‏ㅤ EU ‏ㅤ mechanisms ‏ㅤ continues ‏ㅤ to ‏ㅤ operate. ‏ㅤ But ‏ㅤ everywhere ‏ㅤ they ‏ㅤ turn, ‏ㅤ the ‏ㅤ demands ‏ㅤ of ‏ㅤ the ‏ㅤ sovereign ‏ㅤ states, ‏ㅤ and ‏ㅤ even ‏ㅤ more ‏ㅤ of ‏ㅤ their ‏ㅤ peoples, ‏ㅤ are ‏ㅤ demanding ‏ㅤ that ‏ㅤ national ‏ㅤ governments ‏ㅤ be ‏ㅤ held ‏ㅤ accountable ‏ㅤ to ‏ㅤ their ‏ㅤ electorates. ‏ㅤ Second, ‏ㅤ as ‏ㅤ Jean-Claude ‏ㅤ Trichet ‏ㅤ observed, ‏ㅤ the ‏ㅤ Europeans ‏ㅤ are ‏ㅤ learning ‏ㅤ the ‏ㅤ hard ‏ㅤ way ‏ㅤ that ‏ㅤ to ‏ㅤ form ‏ㅤ a ‏ㅤ single ‏ㅤ currency ‏ㅤ you ‏ㅤ have ‏ㅤ not ‏ㅤ only ‏ㅤ to ‏ㅤ have ‏ㅤ a ‏ㅤ monetary ‏ㅤ union ‏ㅤ but ‏ㅤ also ‏ㅤ an ‏ㅤ effective ‏ㅤ government ‏ㅤ of ‏ㅤ the ‏ㅤ economic ‏ㅤ union. That ‏ㅤ effective ‏ㅤ government, ‏ㅤ Germany ‏ㅤ is ‏ㅤ saying, ‏ㅤ and ‏ㅤ herein ‏ㅤ lies ‏ㅤ the ‏ㅤ novelty ‏ㅤ for ‏ㅤ the ‏ㅤ European ‏ㅤ Union, ‏ㅤ can ‏ㅤ only ‏ㅤ be ‏ㅤ a ‏ㅤ Europe ‏ㅤ of ‏ㅤ the ‏ㅤ states. ‏ㅤ Third, ‏ㅤ Germany’s ‏ㅤ behaviour ‏ㅤ during ‏ㅤ the ‏ㅤ crisis ‏ㅤ indicates ‏ㅤ that ‏ㅤ the ‏ㅤ country ‏ㅤ has ‏ㅤ finally ‏ㅤ recovered ‏ㅤ from ‏ㅤ the ‏ㅤ world ‏ㅤ war. ‏ㅤ War ‏ㅤ guilt ‏ㅤ is ‏ㅤ no ‏ㅤ longer ‏ㅤ sufficient ‏ㅤ for ‏ㅤ France ‏ㅤ to ‏ㅤ play ‏ㅤ upon. ‏ㅤ Fourth, ‏ㅤ Germany’s ‏ㅤ clear ‏ㅤ national ‏ㅤ interest ‏ㅤ is ‏ㅤ to ‏ㅤ preserve ‏ㅤ the ‏ㅤ EU ‏ㅤ status ‏ㅤ quo, ‏ㅤ with ‏ㅤ modest ‏ㅤ changes ‏ㅤ short ‏ㅤ of ‏ㅤ a ‏ㅤ federal ‏ㅤ Europe. ‏ㅤ Fifth, ‏ㅤ that ‏ㅤ means ‏ㅤ calling ‏ㅤ a ‏ㅤ halt ‏ㅤ to ‏ㅤ the ‏ㅤ permanent ‏ㅤ revolution ‏ㅤ of ‏ㅤ “ever ‏ㅤ closer ‏ㅤ union”, ‏ㅤ involving ‏ㅤ the ‏ㅤ transfer ‏ㅤ of ‏ㅤ powers ‏ㅤ from ‏ㅤ member ‏ㅤ states ‏ㅤ to ‏ㅤ the ‏ㅤ EU. ‏ㅤ Sixth, ‏ㅤ the ‏ㅤ two ‏ㅤ key ‏ㅤ countries ‏ㅤ now ‏ㅤ favouring ‏ㅤ a ‏ㅤ Europe ‏ㅤ of ‏ㅤ the ‏ㅤ states ‏ㅤ within ‏ㅤ a ‏ㅤ modest ‏ㅤ EU ‏ㅤ are ‏ㅤ Germany ‏ㅤ and ‏ㅤ the ‏ㅤ UK. ‏ㅤ To ‏ㅤ join ‏ㅤ the ‏ㅤ inner ‏ㅤ group ‏ㅤ of ‏ㅤ the ‏ㅤ emerging ‏ㅤ new ‏ㅤ EU ‏ㅤ of ‏ㅤ sovereign ‏ㅤ states, ‏ㅤ France ‏ㅤ has ‏ㅤ to ‏ㅤ liberalize ‏ㅤ its ‏ㅤ economy. ‏ㅤ Possibly, ‏ㅤ that ‏ㅤ prospect ‏ㅤ was ‏ㅤ put ‏ㅤ back ‏ㅤ by ‏ㅤ the ‏ㅤ election ‏ㅤ to ‏ㅤ the ‏ㅤ French ‏ㅤ Presidency ‏ㅤ of ‏ㅤ François ‏ㅤ Hollande ‏ㅤ in ‏ㅤ May ‏ㅤ 2012.

Meanwhile, ‏ㅤ it ‏ㅤ remains ‏ㅤ true ‏ㅤ that ‏ㅤ the ‏ㅤ crisis ‏ㅤ could ‏ㅤ have ‏ㅤ been ‏ㅤ resolved ‏ㅤ as ‏ㅤ soon ‏ㅤ as ‏ㅤ it ‏ㅤ broke, ‏ㅤ and ‏ㅤ all ‏ㅤ the ‏ㅤ pain ‏ㅤ and ‏ㅤ anguish ‏ㅤ avoided. ‏ㅤ But ‏ㅤ it ‏ㅤ was ‏ㅤ not, ‏ㅤ and ‏ㅤ for ‏ㅤ multiple ‏ㅤ reasons. ‏ㅤ France ‏ㅤ and ‏ㅤ Germany ‏ㅤ were ‏ㅤ not ‏ㅤ in ‏ㅤ agreement ‏ㅤ about ‏ㅤ the ‏ㅤ EU’s ‏ㅤ future ‏ㅤ shape: ‏ㅤ France ‏ㅤ wanted ‏ㅤ a ‏ㅤ Keynesian ‏ㅤ EU; ‏ㅤ Germany ‏ㅤ most ‏ㅤ definitely ‏ㅤ did ‏ㅤ not. ‏ㅤ The ‏ㅤ political ‏ㅤ crisis ‏ㅤ proved ‏ㅤ highly ‏ㅤ damaging ‏ㅤ for ‏ㅤ all, ‏ㅤ and ‏ㅤ could ‏ㅤ still ‏ㅤ derail ‏ㅤ the ‏ㅤ European ‏ㅤ project. ‏ㅤ The ‏ㅤ small, ‏ㅤ poor ‏ㅤ powers ‏ㅤ were ‏ㅤ squeezed; ‏ㅤ the ‏ㅤ major ‏ㅤ and ‏ㅤ the ‏ㅤ rich ‏ㅤ powers ‏ㅤ took ‏ㅤ over; ‏ㅤ the ‏ㅤ Commission ‏ㅤ was ‏ㅤ sidelined; ‏ㅤ the ‏ㅤ ECB’s ‏ㅤ autonomy ‏ㅤ was ‏ㅤ put ‏ㅤ in ‏ㅤ question ‏ㅤ on ‏ㅤ account ‏ㅤ of ‏ㅤ the ‏ㅤ SMP; ‏ㅤ the ‏ㅤ Maastricht ‏ㅤ Treaty’s ‏ㅤ no ‏ㅤ bailout ‏ㅤ clause ‏ㅤ was ‏ㅤ infringed; ‏ㅤ contagion ‏ㅤ was ‏ㅤ not ‏ㅤ contained, ‏ㅤ as ‏ㅤ speculation ‏ㅤ against ‏ㅤ Greek, ‏ㅤ Portugese, ‏ㅤ Spanish ‏ㅤ and ‏ㅤ Italian ‏ㅤ and ‏ㅤ Irish ‏ㅤ bonds ‏ㅤ played ‏ㅤ out; ‏ㅤ Greece’s ‏ㅤ plight ‏ㅤ though ‏ㅤ served ‏ㅤ as ‏ㅤ a ‏ㅤ warning ‏ㅤ to ‏ㅤ other ‏ㅤ governments ‏ㅤ to ‏ㅤ retrench, ‏ㅤ despite ‏ㅤ the ‏ㅤ downturn. ‏ㅤ The ‏ㅤ policy ‏ㅤ of ‏ㅤ austerity ‏ㅤ in ‏ㅤ a ‏ㅤ downturn ‏ㅤ was ‏ㅤ rightly ‏ㅤ identified ‏ㅤ as ‏ㅤ German ‏ㅤ driven. ‏ㅤ National ‏ㅤ resentments ‏ㅤ grew, ‏ㅤ and ‏ㅤ the ‏ㅤ embers ‏ㅤ of ‏ㅤ old ‏ㅤ wars ‏ㅤ were ‏ㅤ rekindled. ‏ㅤ Not ‏ㅤ least, ‏ㅤ the ‏ㅤ combination ‏ㅤ of ‏ㅤ fiscal ‏ㅤ retrenchment ‏ㅤ and ‏ㅤ wage ‏ㅤ compression ‏ㅤ set ‏ㅤ Mediterranean ‏ㅤ net ‏ㅤ debts ‏ㅤ on ‏ㅤ a ‏ㅤ sharp ‏ㅤ upward ‏ㅤ trajectory. ‏ㅤ After ‏ㅤ all ‏ㅤ the ‏ㅤ years ‏ㅤ of ‏ㅤ anguish, ‏ㅤ moral ‏ㅤ hazard ‏ㅤ had ‏ㅤ not ‏ㅤ been ‏ㅤ contained; ‏ㅤ German ‏ㅤ and ‏ㅤ northern ‏ㅤ taxpayers ‏ㅤ were ‏ㅤ still ‏ㅤ on ‏ㅤ the ‏ㅤ hook. ‏ㅤ It ‏ㅤ is ‏ㅤ not ‏ㅤ impossible ‏ㅤ that ‏ㅤ the ‏ㅤ German, ‏ㅤ Dutch ‏ㅤ and ‏ㅤ Finnish ‏ㅤ electorates ‏ㅤ would ‏ㅤ opt ‏ㅤ against ‏ㅤ the ‏ㅤ Euro, ‏ㅤ if ‏ㅤ paying ‏ㅤ the ‏ㅤ price ‏ㅤ of ‏ㅤ staying ‏ㅤ in ‏ㅤ were ‏ㅤ higher ‏ㅤ than ‏ㅤ the ‏ㅤ price ‏ㅤ of ‏ㅤ exit.

As ‏ㅤ the ‏ㅤ wayfarer ‏ㅤ in ‏ㅤ Ireland ‏ㅤ heard ‏ㅤ in ‏ㅤ reply ‏ㅤ to ‏ㅤ his ‏ㅤ question ‏ㅤ about ‏ㅤ what ‏ㅤ direction ‏ㅤ he ‏ㅤ had ‏ㅤ to ‏ㅤ get ‏ㅤ to ‏ㅤ his ‏ㅤ destination, ‏ㅤ “I ‏ㅤ wouldn’t ‏ㅤ have ‏ㅤ started ‏ㅤ from ‏ㅤ here”. ‏ㅤ But ‏ㅤ that ‏ㅤ is ‏ㅤ where ‏ㅤ the ‏ㅤ Euro ‏ㅤ project ‏ㅤ has ‏ㅤ placed ‏ㅤ the ‏ㅤ European ‏ㅤ publics. ‏ㅤ It ‏ㅤ is ‏ㅤ too ‏ㅤ early ‏ㅤ to ‏ㅤ assert ‏ㅤ they ‏ㅤ will ‏ㅤ take ‏ㅤ the ‏ㅤ way ‏ㅤ their ‏ㅤ unpopular ‏ㅤ élites ‏ㅤ have ‏ㅤ indicated.

London ‏ㅤ and ‏ㅤ Fontainebleau, ‏ㅤ December ‏ㅤ 2012.