A protest outside the ECB (DANIEL ROLAND/AFP via Getty Images)
On January 1, as the European Union ushered in another year of economic chaos and not-so-distant wars, no one was in the mood to celebrate the euro’s 25th birthday. No one, that is, but the Eurocrats.
As always, the EU’s top brass waxed lyrical about the single currency, but this year their musings sounded more delusional than ever. In an opinion piece published across the eurozone, the presidents of the European Central Bank, Commission, Council, Eurogroup and Parliament praised the euro for giving the EU “stability”, “growth”, “jobs”, “unity” and even “greater sovereignty”, and for being an overall “success”.
Such self-congratulatory back-slapping is common among Eurocrats. In 2016, for example, as Europe was still reeling from the disastrous consequences of the euro crisis, Jean-Claude Juncker, then President of the Commission, said that the euro brings “huge” though “often invisible economic benefits”. This year’s statement, however, had a particularly Orwellian feel to it. The euro has not brought any of those things to Europe: the EU today is weaker, more fractured and less “sovereign” than it was 25 years ago.
Since 2008, the euro area has essentially been stagnating — and its overall long-term growth trend has been negative. This has led to a dramatic divergence between its economic fortunes and those of the US: adjusted for differences in the cost of living, the latter’s economy was only 15% larger than the euro area’s economy in 2008; it is now 31% larger. Today, the euro’s share of global currency reserves is significantly lower than its predecessors — the Deutsche Mark, French franc and ECU — in the Eighties.
But this is far from the only result of the euro’s failure. When it was introduced, it was hoped that the single currency’s “culture of stability” would narrow the difference in terms of its members’ economic performance. In effect, as the IMF has noted, the opposite has happened: “the envisaged adjustment mechanisms under monetary union have been insufficient to support convergence, and have in some cases contributed to divergence”. Added to this, exports between euro nations as a percentage of total eurozone exports have been on a downward trend since the mid-2000s.
It seems clear, then, that the introduction of the euro was a mistake — but only if we take its proponents’ stated intentions at face value. For it is important to understand that the euro was always as much a political project as an economic one. And, from that standpoint, it has been an extraordinary success.
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SubscribeOne sometimes gets the impression that the European Union was in fact a diabolical conspiracy to discredit the idea of a united Europe forever.
I love how they blithely assume that a single currency and the economic entanglements and chaos with undoing the scheme are sufficient to perpetuate the scheme indefinitely. The dam though, only holds until it doesn’t. Put in enough water, apply enough force and it breaks, and the more water that had been held back, the greater the damage caused by the ultimate failure. The failure of this EU is likely to put Europeans off the idea of unification for a century or two at least.
Not so sure about that Steve. It’s extraordinary how easy it has been for the elites to keep control up to now. Yes, we had the gilets jaunes and the various Italian and Greek spurts of resistance, but the euro enriches the metropolitan professional classes as quickly as it pauperises everyone else, rather like the UK housing market. And they control the media.
Such minor and occasional disruptions simply aren’t enough to break the system. As I stated, the system is resilient enough to weather most ordinary conditions and ordinary problems. It will take more than an economic recession in a single country or a series of protests to overcome the inertia of such a large system.
What we have witnessed so far though is nothing next to what’s coming. Unchecked immigration, terrorism, energy poverty, deindustrialization, deglobalization, military dependency on the US, geopolitical conflict, trade disruptions, etc. It’s all going to pile onto a system that was conceived in better times. Things only hold until they don’t.
Dont forget the Fourth Horsemen..the one that sits above and defends more ardently than the captured State Media/BBC the 30 year Progressive New Order – our twisted human rights & Regulatory Laws imposed by the EU and then its willing Quislings in the State Machine.
The European Union: “Where Military, Political, Economic, and Diplomatic Genius Have Failed, Colorless Mediocrity Will Succeed!”
I was living in the Netherlands at the time the Euro was introduced. It effectively doubled the price of everything while slashing salaries in half.
Same in Germany as far as prices are concerned, I think. My German relatives dubbed the Euro the “Teuero” (“teuer” meaning “expensive”).
Same in Austria (although it was several years before I moved there). You’ll still hear people calculating amounts in euro back to Schillings.
I’ve still got a Zwanzig Schilling note at the back of a desk drawer somewhere, Katharine. Any use?
So everyone’s purchasing power was reduced to 25% of what it had previously been? I suspect that is a bit of an exaggeration.
I was living in France at the time, and whereas there was a definite tendency to “round up” rather than “round down” the impact wasn’t THAT huge.
Agreed. I don’t understand this argument that the Euro, at a stroke, made everything more expensive. What’s the Economics logic behind it? Would love it if someone could explain it to me,
I can only speak for Spain
I think my personal experience living there at the time was exactly that of the official figures- about 30% increases across the board over a 12 month period.
It started with “small change rounding up”.
(The Spanish loathe small odd numbers)
A coffee was 100 pésetas.
Slot machines likewise, or multiples thereof.
After entering the € the nearest coin upwards was €1
This was adopted universally overnight, and hence the first immediate effect on everyone was a 33% increase in your first coffee of the next morning.
The rest, as they say, is history.
It’s not pésetas, it’s pesetas. I lived in Barcelona October 1970 through September 1975.
In the Netherlands, many retailers simply swapped out the ‘f’ for florin for the ‘e’ for euro. What this meant was that many items that cost 4 guilders (florin) the day before now cost 4 euros (1 euro roughly being the equivalent of 2 guilders). This certainly didn’t happen with my salary, which was around 4000 guilders at the time. That was calculated down to the exact euro equivalency.
Thanks Pat……exactly right
Not unlike decimalization for those old enough…..I forget
All these things allow the super rich to gouge the poor.. if it wasn’t one form of theft it’d be another.. When I was young rich people paid tax ..imagine that!
No, we didn’t.
When I was young YOU were young Charlie.. sure, there was always tax evasion but tax avoidance was more difficult.. But I bow to your superior knowledge..
Indeed. Black Jacks went from a ha’penny up to 1 new pence each.
Exactly my recollection.
But who remembers that annoying kid brought onto the Today Programme to teach adults about decimalization
I assume it was the annoying kid that downvoted me
I wasn’t around for decimalisation, but one of my uncles maintained that the whole process was a “plot to cheat you out of 140 pennies”, on the basis that there were 240 “old pennies” to a pound, but only 100 new pence.
Yes it was the same in Spain, I remember a coffee went from 100 pesetas to 1 euro overnight, so doubled and like you say Julian salaries were slashed in half. I particularly remember a farmer who could no longer afford insurance and lost his home and animals in a forest fire. The house had been in his family for generations and he was left destitute. There were so many examples of this. Absolutely criminal.
..a tiny exaggeration perhaps?
Whilst I stand by my similar post above, I believe you are correct.
It was, I recall, a 30-35% increase (but anyone who wants to fact check €1 vs 1 Peseta will hopefully be able to verify
Repeat of post above: In the Netherlands, many retailers simply swapped out the ‘f’ for florin for the ‘e’ for euro. What this meant was that many items that cost 4 guilders (florin) the day before now cost 4 euros (1 euro roughly being the equivalent of 2 guilders). This certainly didn’t happen with my salary, which was around 4000 guilders at the time. That was calculated down to the exact euro equivalency.
Doubling prices and halving salaries !!!! that s a good one.
The Dutch, although frugal by nature, swallowed that one without a peep. What a wonderful people. Government’s dream.
I think the term bollox has been used further up. Mind if I borrow it ?
Data please.
So according to Mr Farrows the standard of living in the Netherlands dropped overnight to one quarter of what it was prior to the introduction of the Euro.
Clearly you are 100% innumerate and also somewhat hysterical.
Calm down and go back to scratch – start with your 2 times tables.
And don’t dare comment again in Unherd until you know them off by heart you naughty boy!
Germany fought, and lost, two world wars to dominate Europe and yet here we are and Germany is dominating Europe anyway. I have to admit I am amused by the irony of a bunch of bean counters succeeding where the Kaisers and the Nazis both failed. The obvious solution is to just overrule the German bankers and print more money to devalue the currency and get rid of bad debts like every other central bank in the world does and then deal with the consequences like every other government in the world does.
Nicholas Ridley’s observation that the EMU was a German racket designed to take over Europe cost him his job – in 1990. Just shows that it’s not enough to be right: you have to be right at the right time.
or be right at the Reich time …
An excellent reminder of what really happened. For more detail I recommend Adam Tooze’s “Crashed”, which makes the additional point that the financial flows which gave rise to the huge credit funded booms in the euro periphery came from the US, via the City of London.
No one forced them to take the money. No one forced the Greeks to fake their Euro memebership application. No one forced Hungarians to take out lower interest rate Euro mortgages whilst ignoring the quite obvious exchange rate risk. Caveat emptor.
I suppose so, but that’s not really the point is it?
That’s correct. But if left to the own devices (i.e. retaining the Drachma) they would have been responsible for their own misfortunes. By joining the Euro, the Greeks became like kids in a sweetshop, and thus not solely responsible. And the rich Euro states knew this all might happen. And, en-route, many European and US bankers made a fortune while the sweetshop was open.
Not so. see my response to Peter B
Peter, even as a simplification that isn’t quite right, though, is it?
The 1st mistake was allowing Greece to join the EZ – that was the joint mistake of the ECB and the Greek Govt. None of the S European economies were ready to join but the EU wanted to grow the Eurozone.
The 2nd was allowing interest rate spreads on sovereign bonds issued by Greece to fall almost to zero between 2002-07. Despite budget deficits and debt levels that far exceeded the limits of the Stability and Growth Pact, Greece was able to borrow almost as easily as Germany.
Some small part of the blame belongs to international investors who grossly underestimated risk, and some belongs to the rating agencies who proved as useless as indicators of European debt troubles as their US counterparts. BUT the majority of the blame must lie with the ECB – as, quite rightly, both investors and ratings agencies will point out that throughout the ECB was accepting Greek debt as collateral, on a par with German debt.
The largest error from the ECB was in the immediate aftermath of the 08/9 financial crisis. They broke all their own rules and took what might have only been an embarrassment for them and instead turned it into an existential crisis that bankrupted a member state.
When the crisis hit, the senior apparatchiks of the ECB deemed it “would not look good to the world” if a Eurozone member state had to turn to the IMF so they played for time. They presented the problem as one of mere illiquidity rather than insolvency, thus creating further problems as they kicked it down the road until German banks, now frighteningly exposed, persuaded the German chancellor – and by extension the ECB – that the EU would now step in and force a punishing austerity on Greece.
And so the Greek people were put on the hook for the mistakes of bankers.
None of the “Bail-out” money ever landed in Greece long enough to make a drachma’s worth of difference to the Greek people. All the bail outs were for (mainly German and French) banks.
What angers me is how left-leaning Europhiles supported this. It was indefensible. It seems so blatantly hypocritical until you realise that their belief in a benign EUtopia could not survive a truthful rendering of how a member state was sacrificed to cover bankers’ bad bets.
No. It is primarily the responsibility of the Greeks. They were not “mis sold” the Euro and cannot expect to claim compensation for mis-selling. The Greek government were sophisticated enough to know what they were doing. And the Greek electorate chose the government. The fact that they were dealing with spivs on the EU side is beside the point. Everything that happened to Greece after joining the Euro was predictable.
These sort of problems will never be reduced until people and counytries start taking responsibility for their actions.
If you start pretending it is entirely someone else’s fault, you’ll never learn the hard lessons you need to. It is not clear that Greece actually has learnt the lessons though.
My Greek friends laugh (through gritted teeth) every time any media outlet describes what we had in this country as ‘Austerity’.
Look at what real austerity is, as imposed on the people of Greece, and then compare it to what we got here. That “Vicious Tory austerity” – by which they mean those merciless and savage cuts that saw public spending wantonly slashed from £780 billion in 2017 to only £842 billion pre-Covid.
In return for “helping” Greece, Brussels dictated an austerity regime that insisted on –
… Removing almost all existing employment protection laws – which allowed companies to fire staff without cause and drop their wages as they saw fit. (Imagine that here in the UK, if you can)
… ACTUAL pay cuts for public sector workers of 30% (as compared to capping pay increases to 1% in the UK) whilst at the same time lowering tax thresholds so that these people would still have to pay taxes at similar levels having just had their salaries cut by 30%!
… Cutting the minimum wage by almost a quarter. (As opposed to not increasing it as much as people would like here)
… Cutting 150 000 public sector jobs
… Genuine and deep cuts to both Health and Education spending – (as opposed to the UK which has continued to increase spending on both – yet this is described as ‘savage cuts’ by the press)
… Raising the retirement age, repeatedly
… Cutting pensions at the same time as announcing large tax increases on pensioners. (Whilst we in the UK complained about losing the triple-lock)
… Repeated tax rises that hurt the poorest the most, like VAT
… the State taking control of publicly owned companies with no choice or proper restitution for shareholders.
Try to imagine any of those things actually happening in the UK. You can’t, it would be unthinkable.
10 years of Brussels inflicted (and it is Brussels inflicted) austerity have seen the total Greek economy shrink by more than 25%. Read that again: more than a 25% drop in GDP.
More than half a million young skilled Greeks left their homeland. How many will return? Who knows? But in the meantime the brightest, boldest and best of a generation left the country because their life-chances were so damaged by austerity, imposed on them by a foreign power.
They would be the people to rebuild the economy, they would be the entrepreneurs, the future business leaders.
THIS WAS NOT THE FAULT OF THE GREEKS – even allowing foir their laissez-faire attitude towards paying tax. They were sacrificed to speare the blushes of the ECB and their poor decision making.
I’ll repeat:
Greece made up 2% of the eurozone in 2010, and Greece’s revised budget deficit that year was 15% of the country’s GDP—that’s 0.3% of the eurozone’s economy. In other words, the Greek deficit was a rounding error, not a reason to panic.
The treatment of Greece should have been the scandal that exposed the mendacity and heartlessness of the EU to even its most ardent admirers.
The Greek didn’t have join the EU. They made a decision essentially based in fraud and then got ‘caught out.’
What is rather surprising is that they didn’t throw their leaders from the Acropolis, as they so richly deserved, and still do.
Thanks for your comprehensive explanation, I agree with most if not all of your points.
Thank you. Nothing quite like the facts to nail down an argument.
That is too harsh Peter and unrealistic. Yes there certainly was profligacy on the part of the Greek people and government, but can we really plame the populace for the mishandling of greater economic matters? Surely the vote for their government but ordinary people have to put their trust in their ‘elected’ reps, in the UK we have have Labour party of Tories (enough said)? I didn’t want Sunak to give away 400 Billion, hardly a choice for us though was it?
Yes, Greece was sacrificed for the benefit of German & French banks.
It is also worth remembering that Greece passed the tests to be allowed to join the Euro while supposedly the UK failed them, (because we declined to join).
Some excellent points, are you a banker Paddy may I ask?
No. Former TV Producer & Documentary maker, now involved in private client research.
The Eurozone is stagnating because the German industrial economy has collapsed, thanks to Net Zero imposed imposed by the Greens in governing coalition, and off the back of switching away from NordStream gas under the onus of Washington which has a lot of (expensive) shale gas to export to Europe.
I think there’s the small matter of Putin invading Russia for the switch to US LNG…It was available before the war but the EU wasn’t buying and the USA had little success getting them to buy it before the war…
Invading Ukraine
That too!
The Germany economy has collapsed due to the (American started) war in Ukraine. Germany no longer experience the benefit of ultra cheap Russian gas, facilitated by the cosy machinations of Kohl and later Merkel. The US has been attempting to disrupt this for years and the CIA helping to overturn a fair election in Ukraine (2014) is evidence of this, The US loathes Russia and Germany and cares about no one but itself. (Probably not unique in that regard).
I think that staying out of the Euro is the best decision Britain as a nation has made during my lifetime.
Yes, but in order to maintain non-Euro membership, Brexit had to happen. Had the vote gone the other way in 2016, the UK would have almost immediately been subject to ever-increasing pressure join the Euro.
Yes, the UK would still have possessed a veto on this. But as of 2016 the UK also had a veto on its own EU membership, and yet we saw that in practice, a UK establishment unwilling to confront the EU’s process found itself in a supplicant position, allowing itself to be blackmailed into making all sorts of concessions that were not in fact necessary. The same would have applied post 2016 if the UK had tried to maintain non-Euro membership: all the same blackmail pressure over trade, the nonsense about “cherry-picking” etc would have been ruthlessly imposed on the British government, until the notion that a major European economy could stay out of the Euro would be effectively treated as an exorbitant and unfair privilege and a fundamental disrespect towards the principle of European solidarity. The fact that this would be complete bollox wouldn’t matter at all in terms of the political narrative because as the article above ably demonstrates, the whole Euro project is complete bollox on every level except the political.
Denmark has had no such issues staying out of the Euro.
So from a British perspective, it’s all turned out for the best then.
Clearly.. Britain’s amazing financial success is testament to that isn’t it?
I think we are almost bang on average GDP growth since 2016 compared to the EU block, no?
Slightly down on Germany, same as France, better than Italy.
Admittedly not great, but given that we have failed to take advantage of “Brexit” in any meaningful manner, I’d politely ask, “What’s your point?”
I wondered what would have happened to all those EU countries’ economies without the Euro.. I thought GB’s story might have been repeated many times in other states without the Euro? Ireland’s currency was under serious attack from speculators so the Euro was a Godsend to us..
I think there is a lot more to a nation’s financial health than its GDP.. Ireland’s GDPpc is almost the highest in the world but it doesn’t give a true picture. However, despite the ECB screwing us and all the other issues, we do very well in the EU and using the Euro.. We did very badly without them.
My point is balance and comparison always gives a truer picture, especially when the issue is as complex as this one. I felt the article was light on both.
Ireland has good education system and plenty of artistic, cultural and scenic attractions. If it focused on developing it’s own technology it could copy Switzerland, Israel or Singapore. Being a highly skilled, healthy technologically advanced cultural and neutral country which avoids military and political conflict has many advantages.
Ireland did extremely well in the brief period between being run as a weird, ultra-conservative, catholic luddite hermit state and joining the Euro.
Since then it has had the mother of all economic crises, and as you say, illusory GDP as the place where American mega-corporations park the profits of their EU sales.
I think the real point of the Euro was to fail in narrow terms and in doing so create a ‘demand’ to improve it, by creating a single fiscal policy across the zone.
Once you have a single monetary system combined with a single fiscal policy I think in effect, you have political union.
Others seem to agree, hence that fairly recent talk around a two speed Europe, with the inner core, in the Euro and fiscally united, and a slower lane of non Euro countries, as well as awkward club Euro members possibly refussing to join a single EU treasury mechanism.
In a way the EU and Euro are victims/beneficiaries of the strengths/weaknesses of the systems they have cobbled together that ensure dissolution is very difficult, but not quite as difficult as ever ensuring full union.
I love how the free-thinking readers of UnHerd flock to ‘unlike’ your comment, despite it being true.
Ho Hum.It seems that almost no-one likes to discuss what’s really happening. Most seem to prefer their ideological silos.
One can’t put a price on freedom.
And joining the EU was the worst.
It wasn’t the EU when UK joined the common market, and there was no UK referendum after Maastricht until 2016. In the meantime we saw what happened when Ireland and Netherlands voters tried to reject Maastricht – they were overruled. So in 2016 it was a case of “now or never”.
Spot on…. one fact that I see little analysis of, or even ackowledgement of, is that the generation that voted for (remaining in, as we were never consulted about joining), the EEC are exactly the same people in the age cohort, usually referred to as ‘Gammons’ now, who went heaviest against remaining in the EU in 2016.
I suggest the reason can be found in the different initials on each ballot paper 43 years apart.
And the reason arguments to the contrary has so little traction was the powerful force of lived experience in seeing and living the mincing, tiny, but remorseless, baby-steps progress to full union.
Yes, left to their own devices, our political elites would have joined. It was only that they knew they could never sell it to the people that they didn’t. European politicians had no such concerns.
Blair was desperate for the UK to join, as part of his ‘retirement plan’ to be one of the several EU Presidents. Brown therefore blocked it, the only correct financial decision he took during his reign as the Enron Chancellor.
This is bang on.
Yes indeed but the U K will sometime this year have a Prime Minister who is a fervently pro European Union and single currently so maybe the Euro will become our currency after all!?
It’s strange that people now expect Governments to ‘manage’ the economy, but not strange at all that Governments make a hash of it. There’s nothing that a politician (or bureaucrat) won’t try to ‘manage’ whether it requires fixing or not.
In times past Classic Liberalism included laissez faire economics as a policy. While this meant that people sometimes suffered from the economic ‘weather’ at least there were offsetting ‘good times’ too.
By any objective measure, markets should have savaged the Euro. Yet in all 25 years of rising debt, stagnant economies, and corporate malaise it has never faced any serious market tantrum. The reason is, despite all the evidence that it is bad economics, the Euro’s technocrats are on trend with current economic orthodoxy, banking fashion, and that’s all that matters.
Within the Euro there was an example of an unorthodox economic policy managed by politicians that did rather well and yet faced constant tantrums from markets and today is, bizarrely, often cited as an example of a bad economy and a justification for the technocrat’s Euro. That economy was Italy and its Lira. From 1945 to the abolition of exchange controls in 1990, Italy’s growth outperformed Germany’s. In 1990, Italy’s dollar GDP per capita almost matched Germany’s, was far above the UK’s and was only 10% short of the USA’s. And these were high benchmarks for Italy because living standards had greatly increased across the West during this period.
In fact, the 1990s represent something of a watershed moment for economies across the West. For in this period, political control of Western economies everywhere, not just the EEC, was entirely handed over to technocrats. It was said political control was too short termist, too populist, and that was bad for the economy. Yet Italy’s stellar performance, and Western rises in living standards generally, slowed and have now stagnated since the technocrats took over. The economies of the West are doing less well now the technocrats run things.
Unfortunately, our citizen view of the health of the economy is from a different perspective to the financiers and bankers. From their perspective, the period since the 1990s has been a bonanza. The technocrats running our economies today are insulated from political influence and drawn from the ranks of finance and banking so an economy that works better for finance and banking than citizens is going to be the result.
The big lie is that we are told this technocratic control is good for us. TINA: there is no alternative, apparently. The rising living standards of the 45 years between 1945 and 1990 were “chaotic”, and the unprecedented near stagnant living standards of the 15 years since 2008 are unavoidable in the name of “stability”. Stability for whom and for what benefit?
“Stability for whom and for what benefit?”
Well, stability suits everyone who’s already at the top, doesn’t it? Social mobility, conversely, sounds like a great idea for anyone who thinks they might do better themselves, but sounds quite dreadful to anyone who’s already sitting pretty.
I suspect the current period in the history of the West may well be written most accurately in Mandarin. Funny how we can see that the ship’s heading for the rocks and yet seemingly can’t change course.
Yet Italy’s stellar performance, and Western rises in living standards generally, slowed and have now stagnated since the technocrats took over.
If only there was a field of study dedicated to this topic, where one might study the cause and effect of various policy ideas before implementing them. A cynic would say stagnation was the goal. Glad I’m not cynical.
Also, once a country had joined a monetary union, it is effectively locked in.
Joining and leaving a currency union both have logistical hurdles, but they are asymmetrical in one major way.
If you join a monetary union, the legacy currency ceases to become legal tender, so holders have no choice but to convert their holdings and assets to the new currency.
However, if a nation decides to leave the union, and (re)introduce a national currency, the union currency still exists, and holders may not wish to convert to the new national currency, leading to a chaotic situation where both currencies are effectively legal tender. I don’t see any of the Euro members ever risking such an undertaking.
Yes. The Euro is like Hotel California:
“You can check out any time you like, but you can never leave”
This may sound counter-intuitive, but would it not simply be a matter of the exiting nation printing local ccy notes proportionally (in exchange for) burning Euro notes?
No, not that simple – if one country left the Euro would continue to exist and a law would have to say whether a particular contract stays in euros or a new currency. Not easy to determine on transborder transactions. Even more difficult if many or all countries set up their own currency. You would have lots of people keen to switch a transaction to a preferred currency. Without the euro EU countries would become more insular with cross border transactions denominated in dollars. The article ignores the inconvenience of multiple currencies. The pound was over valued when the euro started so was best out of it. The UK is likely to have a higher inflation rate and will need to devalue to stay competitive in international trade. Merkel’s financial naivity that you saved first then spent caused more problems than the euro. Economic stability requires borrowing and saving to match. You could address regional differences with devaluation but it creates other problems, would you really want a different currency in the north of the UK?
No, not at all, because if I chose to hang in to my Euros rather than exchanging them for e.g. “new” Italian lira, the Euros would still have value, as they would be still in use outside Italy, and may even appreciate against the lira.
The only way I can see any country leaving the Euro is if the whole thing goes completely pear-shaped, and they all leave it together so that the Euro no longer exists (something which can’t be ruled out, of course).
Not so much printing cash in general, but paying government salaries, invoices for domestic purchases and state pensions in the new drachma or whatever; and demanding taxes in that currency. The euro might still be legal tender for other private or commercial transactions, but in a state with half GDP being government tax and spending in the new currency. I believe there was a plan for this by some Greeks, rather than submit to the German-led Troika.
So, what issue was topping the agenda for the ECB’s New Year message, one wonders? Why, it was the new design for the Euro banknotes – which Christine Lagarde promises will be “even more beautiful” than those currently in circulation. Ms Lagarde, as ECB president, was keen to reassure the proles that after 25 years of the Euro, it “continues to unite Europe, make it easier to work, conduct business and ensure price stability.” Really? Tell that to the Greeks. Their economy is now slowly recovering, but anyone who can look at the decade of economic ruin – imposed by the ECB – and think joining the Eurozone was to Greece’s benefit is so rose-tintedly optimistic that they’d probably describe the Parthenon as “A bit of a fixer-upper”.
Alongside anyone not blinded by Europhilia, I never believed the wildly different economies contained within the EU could ever be an optimal currency area.
The Eurozone was a folly born of hubris and poor political calculation. Trying to maintain a single currency among countries with such radically different economies, with no proper political and fiscal union, was always going to be risky – if not downright impossible, but Brussels wanted to grow the Eurozone because bigger was perceived – wrongly – as safer. In their zeal to expand the EZ the EU admitted member states who were, by any honest metric, not in any way ready to join.
It has only been eye-watering sums of QE that have maintained the illusion that the Eurozone is even afloat. For many years it has been, in effect, a public-funded Ponzi scheme. Unlike a private Ponzi scheme, it can (theoretically) go on indefinitely – but only full fiscal union, with centralised tax resources and mutualised debt has a hope of actually rescuing it. Something that the wealthier Northern nations simply won’t countenance, as they still blame the Eurozone’s problems on the profligacy of their neighbours to the south.
For all the talk of “the club” and “the European family”, it was telling that the wealthier members showed no enthusiasm for helping their poorer brethren. Covid merely highlighted the gap between the rhetoric and the reality. When Italy, a founding member of the EU club, in extremis, asked for assistance from fellow members, what was the response? A Gallic shrug of indifference swept the corridors of the Berlaymont like the world’s most apathetic Mexican-wave.
The ONLY surprise is that there are still legions of EU supporters in this country (even among regular contributors here) who would wish to see us rejoin this broken club.
The ECB’s ‘solutions’ to the problems since the debt crisis of 2008 have merely papered over the cracks, they’ve never addressed the fundamental flaws at the heart of their project.
For all that hard-core Remainers always claim they’ve “never heard a sensible reason for Brexit”, I have to say I’ve never heard a Europhile give a sensible answer to the following issues:
• Do you believe you can fix the Eurozone’s inherent weakness and imbalance without full fiscal union?
• Do you think full fiscal union is possible without full political union?
• Do you see any politician in Europe with the guts (let alone the popularity) to openly make the case for such a future?
• If not, then how do you see this playing out?
If you agree the Eurozone cannot survive unless it adopts a full fiscal union, then it must surely federalise. And this is where the Euro-lies unravel …..
• If you believe that federalism is the best way forward, then do you think that should simply be imposed without recourse to the ballot box, or should each of the member states seek a democratic mandate from the people of this new federal EU?
• If the latter, what should happen (as seems nailed-on certain) if one or more member states reject that future?
• If full federalism is the only solution (and I can’t think of another one) should it be forced through without democratic consent?
• If so, would that not make the EU the totalitarian state that Remainers usually suggest is only a “head-banging ukipper’s fantasy”?
But no, rather than confront existential questions, it’s far easier for the pachydermaphobes to ignore the gigantic elephant in the room, and instead quibble over whose picture should grace the new bank notes.
Maybe President Xi would agree to, if the price was right.
You may recall back in the late sixties we were in rather a mess and had twice been rebuffed by the ‘Cross of Lorraine’ from getting into the Common Market as it was then called.
Then ‘third time lucky’, and general rejoicing all round, except for the Siren voices of Enoch Powell and Tony Benn. How prescient they both were, although still reviled to this very day.
Yes. In persuading the founding members to let Britain in, it might be said that Ted Heath scored a massive own Gaulle.
Very good!
Why is Tony Benn reviled today? Is he seen as a fraud because of his start in life?
He made elaborate arrangements to avoid inheritance tax. A socialist, basically.
The folly, hubris and astonishing arrogance of the so-called elite has led us, Europe and the West in general, up the proverbial creek and left with us without a paddle and they’re still at the helm. That’s the problem.
Only so long as people are reconciled to getting a little bit poorer every year.
The elephant in the room here is T2 money transfers.
I first raised this issue around 2015, and as far as I can see, there never actually was a “German Economic Miracle”- all smoke and mirrors.
Basically, Germany “gave” the money to other countries to buy their cars and tractors etc, and kept their employment and economic output buoyant.
The fact that they never were, and never will be repaid the (now) €1 trillion T2 deficit is still being kept from the German people.
All this is readily available information on the EU’s own websites, so I’m pretty certain it’s factually correct.
Target 2 is the foundation of the ponzi scheme. When – and it is more a question of when than if – the ponzi scheme unravels, it really won’t be pretty.
And it will be those S European countries that bear the brunt – not the countries that benefitted the most from T2.
Any financial “help” on offer to southern EU member states will very quickly turn into an obligation that will destroy their already fragile economies in order to pay back the stronger economies of their neighbours to the North.
Forget “timeo Danaos et dona ferentes” – look to Greece’s example and beware anyone from Brussels seemingly bearing gifts.
There is a great similarity with the abolition of the currency borders between Naz-Germany and the conquered lands. Manufacturers in those lands that delivered goods and services to Germany got paid in a receivable on their central banks, who in their turn obtained a receivable from the Reichsbank. Only the find out that those receivables had no value once the whole scheme collapsed. T2 is sui generis, as is everything in the EU, which is the way of stopping any discussion on the matter. But, ultimately it is bad bank in the making.
I’m sure the elites that conceived of the EU in its current form would have jumped at the chance for a full political union. They knew that even in those heady days of the nineties when optimism for globalism was peaking, they could never get democratic consent of the people for such a union.
FWIW, the original thirteen US states that created the original federalized political union never submitted the matter to a popular vote. The Constitution was passed by the elected legislatures of the states. The US wasn’t, and technically still isn’t, a democracy but rather a representative Republic. It would be the equivalent of a parliamentary vote rather than a popular referendum. Even so, the Constitution would never have been passed without a profoundly undemocratic Senate where small states were given equal representation as large ones, something to even the playing field between the Italys and the Germanys. Black slaves were counted as 3/5 of a person. The complexity of the American federal system is due to the fact that it was always a compromise between unequal states. Of course, that didn’t stop the Civil War, so how successful the Constitution was depends on who you ask and when.
I don’t see any such thing happening in modern Europe, for the reasons you noted. Germany is richer than Italy and wants to stay that way. They don’t want ‘their’ national wealth going to pay for Italian spending. The US is only sort of beginning to become aware of who the ‘givers’ and the ‘takers’ are when it comes to states relation to the federal union. California is starting to complain that they pay more in taxes than they get in federal funding. This is somewhat novel, but it’s a growing sentiment. If the US weren’t already a federal union, it probably couldn’t be unified today, and the differences between the nations of Europe are on a completely different scale than the differences between states. I suppose the moral of the story is that if you want a successful federal political system in the modern era, you first need to have a successful federal political system carried over from an earlier era. Barring someone inventing a time machine, this is the closest to unified Europe will ever get.
Good analysis. One issue i foresee for the EU is that it’s impossible historically to form a nation (United States of Europe) without a civil war at some point. Every nation has had one at one time. Right now the EU doesn’t have an army , but post-Ukraine I imagine there will be a even stronger drive to have one. Things could get scary.
Good insight and comparison – though just because there is no appetite for further integration among the population that has little to no bearing on its future direction.
Macron is a committed and quite explicit Federalist. He’s written several books and given countless speeches on the subject.
Ursula von der Leyen is another avowed and explicit Euro-federalist. This is a woman who announced: “I imagine the Europe of my children or grandchildren not as a loose union of states trapped by national interests.” …. “My aim is the United States of Europe”
Charles Michel – failed Belgian PM and now President of the council is of a similar bent.
J-C Juncker – Another Federalist from top to toe.
Guy Verhofstadt – probably the most vociferous federalist of the lot. Author of Verenigde Staten van Europa (“United States of Europe”)
Martin Schulz, former President of the Parliament
Frans Timmermans, Former Vice Pres of the Commission
Martin Selmayr, former Sec Gen of the commission .
.. all of these people, and many more beside, are openly and explicitly pro federalism. At some point it becomes tricky to deny that there is a cabal who fully intend to push for a united states of Europe, a fully federal EU.
Public antipathy for a USofE is no impediment in the minds of these zealots because they are quite explicit that the views of the little people should never stand in the way of the wider ambitions of a federal EU superstate.
Sterling and the US Dollar are also massive Ponzi schemes supported by QE.
Politics created the Euro … and politics will be it’s downfall.
I am not sure it is feasible at the moment for us in Ireland to walk away from the Euro, but I devoutly hope that it will become so in the near future.
A huge expectation for a small country unless they are able to back it up with their gold reserves.
Perhaps aligning to another currency $ or £ would be a short term route?
They could apply to rejoin the UK
An excellent idea, if ‘they’ can swallow their pride that is.
We in the UK could give you directions on how to do it, but as one might say “i wouldn’t be starting from here”.
Good article . The Single Currency was a trap set by European Federalist Technocrats to ensnare “ Elite” European Utopians, who could then be relied upon to unwittingly play the role of Judas Goats. Sadly, escaping the from trap will be extremely difficult, if not impossible. The United States of Europe seems likely to be a relatively poor place to live – unless your income is in eg Dollars or Yen – or even maybe Sterling.
It is the predominance of the EU’s Regulatory Bureaucracy which has consigned the new Empire to permanent stagnation, far more than the inherent flaws in its half cooked monetary policy. It is just like the Soviet Union where a detached privileged but incompetent over controlling Army of Gosplan Planners choked all enterprise snd dynamism with top down diktat and coercion. The UK also is governed by Regulatory Bureucracy. We too still have since the 1990s given power to these destructive Kremlin like Blobbers issuing 5 Year Climate Plans, DEI diktat and Net Zero folly. We have yet to cut back the vast jungle of anti growth codes and laws which only ever deliver stagnation and ruin. And the Starmerite Party of State control and the Regulatory Blob looks set to entrench it further if we let it.
Actually the French adopted the euro for the same reason de Gaulle insisted on the CAP: it’s a mechanism that enables them to collect taxes from the Germans and thereby run a budget deficit for decades on end.
Thank God for Gordon Brown’s resentment of Tony Blair. What a close shave that was!
The attraction for the elites of complex supranational structures is quite simply that it enables them to operate with minimal accountability. The deeper the structures, the higher the cost of overturning them. It’s the institutional equivalent of earning a professional qualification that guarantees you a good income for life, because it’s impossible to challenge the experts.
It would have been instructive to consider what might have happened individual nationsl currencies in the absence of the Euro.
The fact that no EU nation went to war with neighbour should have been given much greater emphasis. War is the absolute worst outcome, so be fair.
In British minds the need for the EU and the Euro to fail (along with the British economy) is perhaps a little ‘distorting’.
When it was introduced, it was hoped that the single currency’s “culture of stability” would narrow the difference in terms of its members’ economic performance.
Wait. You mean ham-fisted, forced attempts to manufacture equity don’t work?
Much that’s valid in this. Albeit as some already noted the UK’s performance outside the Euro not exactly been any better since 2008. So that suggests it’s not the just a currency issue that holds Europe back. There is something else going on about the investment culture and how we run the rules of the game that certainly seem to favour a certain ‘financial elite’.
I saw that despite the issues overall satisfaction with the Euro remains high in most recent surveys – c70% – across EU. That does hide a range of differences and is a year now behind, but still an interesting point.
Decision for us to stay out of it, retaining all our Veto’s, bridge to the US etc, gave us a remarkably unique position in the EU…which we then chucked away. Could be leading it now and in slightly different directions but alas.
Sorry jw, but that last point is simply moonshine.
Maybe but not as far fetched I think as perhaps it might have felt in the early 2010s
I have some sympathy with what you say, although I personally doubt we could have changed much by staying in the EU.
I consider myself half-Spanish, have lived and worked in Spain for decades, and here in the UK have benefited from the excellent work ethic and overall “niceness” of Poles, Rumanians, Spaniards and all.
So in NO way am I “anti-Europe”.
I genuinely feel that in many ways our European allies have every right to feel “let down” by our leaving the EU- if not actually betrayed.
Despite all I have said, I still maintain that leaving the EU as it then was was our only real option.
The article succinctly explains why the euro was created. However, it fails completely to explain the financial reality which has been kept hidden by the Target2 system. The following link provides an erudite explanation of the ghastly chaos which has been steadily building since the 2008/09 financial crisis (the video is over 5 years old)
https://youtube.com/watch?v=q2QYaJGgtw8&si=ip8pHnJ0HeicWVou
As will be made plain, the concept of what was once an ultra strong German economy is now pure illusion. In reality, the Germans have been paying the costs of virtually everything they have exported to the rest of the eurozone, via the creation of loans which now total over a trillion euros and those loans will, seemingly, never be repaid. In effect, the Germans have been working for nothing. See further in the attached link and pdf
https://www.bundesbank.de/en/tasks/payment-systems/target2-t2s-consolidation/target-balances-626782
https://link.springer.com/content/pdf/10.1007/s10797-012-9236-x.pdf
Maybe they have just been living off cheap Russian oil and gas inputs? Also their infrastructure is in decline too and they cheated on emissions…
The Euro allowed the Greek government to borrow at preferential rates to fund a huge expansion of government jobs. That ended really well didn’t it?
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P.S. I see parallels with UK government jobs distributed to the de-industrialised N.E. etc. in the name of boosting employment there. Paradoxically, all those tax funded jobs at near-London salaries, distorted the jobs market and cost of living to the point where they suppressed private job creation. Government subsidies usually end up doing more harm than good.
Maybe I’m not paying attention but you know I haven’t really noticed any seismic changes/differencesbetween Ireland, the UK, or continental European countries because of the euro.
Delors was a cunning old fox. He knew perfectly well that the Euro was an economic millstone without monetary union and federalised debt. He also knew that the inevitable economic crises could be used by the Commission and the ECB to ratchet up their “ever-closer union” political project.
Apparently, economic stagnation was a price worth paying. The peoples of Europe are just starting to express their disagreement.
Rubbish, you credit him with too much foresight and economic genius.
Fine analysis as always from Thomas Fazi.
Why is a single currency for the Euro-zone a mistake while that for the ‘US-zone’ is a success?
The aim of the EEC was to prevent France and Germany going to war. de Gaulle said ” Europe is France and Germany, the rest are the trimmings “. The only countries to withstand Nazi/Communist dictatorship in the 1920s and 1930s were the Anglophone Countries because we had a sufficiently tough democracy. In the 1930s France was practically in a Civil war between RC Conservatives and atheistic Marxists .
Post 1948 largely RC bureaucrats were fearful of a return of the Nazis and were threatened by Communists, who were the largest parties in France and Italy. The EEC was created as a bureaucratic oligarchy run by French Civil servants to prevent the political conflict of the 1930s which ushered in dictatorship. The EEC was to be the French jockey on the German horse.
De Gaulle was excluded from the 1945 Potsdam Conference which decided upon Europe and turned against UK/USA. Konrad Adenauer was a RC Rhinelander who loathed the Prussians and disliked the British because he was sacked as Mayor of Cologne. Rhinelanders being RC have largely been most pro French of Germans.
The centre of the EEC was close to Aachen the capital of Charlemagne. The EEC is an attempt to recreate the Empire of Charlemagne, the last time France and Germany were united.
Mitterand came up with the Euro to control Germany’s economic power. The Euro stopped Italy devaluing the Lira which was used to make Italian cars and white goods ( fridges , etc) economically competitive with German goods. Consequently, the German manufacturers opposition was changed to support. The Euro is a economic tool to maintain the power of France and Germany over the EU.
What British voters largely ignore is the massive trauma suffered by France in being beaten by Germany three times in seventy years and other countries being invaded. What is not spoken about is the trauma of collaboration by occupied peoples and in the case of Spain and Greece the cruelty of Civil War.
I suggest people read Peter Shore’ ” Separate Ways ” about the UK’s relationship with the EEC/EU and Bailey’s Forgotten Voices of the Secret War about the horrors witnessed by SOE in occupied Europe.
The idea of a monarch ruling through consent via consultation with the Witan originates with Aethelbert of Kent drafting his laws in about 650 AD. Continental Europe adopted the concept of the Divine Right of Kings from the Roman Emperors which was why Charlemagne was anointed by the Pope. William agreed to rule using the laws of Edward the Confessor which date from Alfred the Great. Henry I issued the Charter of Liberties in 1100, Magna Carta dates from 1215 and by 1295 we had a Parliament of a House of Lords and House of Commons of about 270 MPs representing four million people which voted on taxation.
The English constitutional history is very different to Continental Europe and is a product of over a thousand years of trial and error, of very slow growth. All hardwoods, such as oak, grow slowly which may live 800 years and when turned into timber, harden further with age. The Anglo Saxon Witan was held beneath the oak. For any constitution to endure it must recognise the whole spectrum of human vices and virtues. Support virtue and undermine vice of which cowardice, venality and sloth being prominent.
The EEC has always been political and any decisions whether economic, social or defence have to promote the political. The EEC/EU is a bureaucratic oligarchy run by French civil servants whose aim is to prevent the chaos of the 1920s and 1930s caused by weak democracies which led to war. France was practically in a state of civil war in the 1930s. The aim is to recreate the Empire of Charlemagne, the last time France and Germany were united. de Gaulle said ” Europe is France and Germany, the rest are the trimmings “. The French jockey rides the German horse. France defines foreign and defence policies and Germany provides the money.
The Euro was the idea of Mitterand to control German economic power post 1990.Tne Euro was opposed by German industry until realised it would stop the Italians devaluing the Lira which gave them the price advantage when competing in top end cars and white goods. The pay of civil servants and MEPs and other politicians is sufficient to give them an upper middle class of life so the EU is supported by them .
De Gaulle was not invited to the Potsdam Conference in 1945 and along with Adenauer they turned against the Anglophone World and decided to recreate the Empire of Charlemagne with France in charge. Adenauer was a Rhineland which is culturally close to France and loathed the Prussians so did not mind the French being in control. Spain was in a state of conflict from 1931 to 1940 and only became a democracy after Franco’s death; Greece had a civil war from 1944 to 1947 and had a military dictatorship as did Portugal. Therefore the EU for most countries provides protection from dictatorship and the secret police, a lack of run away inflation, a certain control on corruption and stability, they have not enjoyed previously. Britain’s history is different.
You could call what happened in the EU a conspiracy, even though the left has done a pretty good job turning that word into an invitation for sniggering. Conspiracy theorist? — haw haw haw! Yet the Covid pandemic, the dangerous vaccine, the monstrous profits Big Pharma hauled in despite 17 million deaths worldwide with more to come, is a most excellent example of conspiracy. Tucker Carlson, one of the world’s foremost journalist now that FOX News cast him adrift and he is on his own with a deep staff, had a deeply disturbing interview yesterday with Dr. Bret Weinstein. Covid, he said, will prove to be the means of shackling mankind when the lessons WHO took from population and thought control learned during the pandemic are applied to the next one that will strike. A treaty is being worked up under its malign auspices that is to be presented to the UN in May.
https://tuckercarlson.com/the-tucker-carlson-encounter-bret-weinstein/?