Euro on Trial

Was the launch of the euro an expensive and dangerous mistake for the peoples of Europe? If so, who was to blame? And what are the escape routes — either in the form of bold reform or of break-up? These questions — and the responses — form the substance of the present volume. Only the last question — and the attempt to answer it by drafting detailed scenarios in which present member countries could exit from monetary union — is new. The potential costs and benefits and the motives or competence of the policy-makers had been extensively debated in the roughly three decades up until the realization of European Monetary Union (EMU) in 1999.

In the course of the famous conversations between the author Elie Wiesel and François Mitterrand there is an interchange which throws some light on the force of personal optimism — and belief in progress — that lay behind the process of European monetary union:

There is nothing in the Treaty of Maastricht about how countries can withdraw from European monetary union. Indeed, a withdrawal would be a breach of the Treaty. But broken treaties are the subject matter of much history! Past experience of monetary unions suggest that they do disintegrate. The very different nature, however, of today’s European monetary union from previous smaller unions founded under the gold or bimetallic standards limits seriously the value of studying past episodes.

A paradox in the process of monetary union is that it started with President de Gaulle sending Raymond Barre to Brussels in summer 1967 (as a vice-president of the European Commission). De Gaulle was an opponent of European federalism. He viewed with suspicion all granting of power to European supranational institutions, of which the not-yet-conceived European Central Bank would have been a prime example. He was in favour of European integration that took the form of direct intergovernmental co-operation in which the Bonn—Paris axis would call the shots. Such had been the design of the so-called Fouchet Plan (aimed at co-operation in foreign policy and defence matters) that the general had backed without success at the start of the 1960s (having become president of France in 1958).

However strong the case was against European Monetary Union and against the forced pace of the journey there, it failed to prevail. The grounds for that failure will long be the subject of historical, economic and political analysis. But that is not the end of the matter. The union consists of sovereign states. Any of these might decide in the future to leave the union either unilaterally or in combination. And any member governments can try to obtain the necessary support for effecting amendments to the Treaty of Maastricht or for issuing new EU directives that would bring important changes in the way that the union is run. In sum, whether monetary union should be created and how rapidly has been replaced by the question as to whether it should continue to exist and if so with what modifications to its architecture.