The Euro, the Misguided Adventure
Despite the successive UK governments in the last 20 odd years seeming a bit farcical, one thing that they, along with Denmark, did get right is to opt out, and stay out, of the euro.
I tend not to discuss matters of politics for a variety of reasons, but the subject of the euro and the Frankenstein called the European Union is proving to be too strong a temptation.The European Monetary Union reminds me of collateralised debt obligations with collaterals of mortgage backed securities. Mix a few good apples with a bunch of rotten ones, shake it around a bit, and voilà, you have a large, good looking basket of apples with multiplying worms.
I don’t see how a monetary union can be workable without a political union. I think that a free trade zone is a good thing, but to actually have a fully fledged common market requires a political union. I appreciate that there are plenty of politicians, bureaucrats and academics who believe that having a monetary union will eventually force a political union given its necessity. Money talks, as the theory goes.
Except the logic seems to ignore a critical factor or two: human beings and regional history.
It’s tempting to buy into the idea that ‘Europe’ must be equipped to compete with large economies like the US or China and that the way to remain competitive is to have a common market. However, buying into it requires that one starts with the fallacious premise that is held by many Americans: ‘Europe’ is essentially one entity inhabited by one cultural and ethnic group called ‘Europeans’ who live ‘European lives’, that just because these people inhabit the same continent somehow makes them culturally homogeneous or that they share enough characteristics to form one big nation called United States of Europe or whatever. Just because a famous crook like Kissinger once wondered out loud about whom to call when he wants to speak to Europe doesn’t give rise to a singular entity called Europe rather than just a designation for a geographic region. The popularity of conflating and confusing discrete elements does not transform a fallacy into a cogent inference.
It’s hard to imagine a viable monetary union without the platform for, at minimum, a common fiscal and monetary policies. I cannot see that platform being anything other than political union.
During the dot com craze at the turn of the millenium, there was no shortage of pundits extolling the inevitability and strategic imperative of convergence: media channels, content, distribution, etc. all coming together. Anyone remember the Time Warner – AOL tragicomedy? It was not the first or the last time that some people got all excited about convergence whilst history has proven many times that diversification or replacement, not convergence, is the likely outcome as new innovations enter the market. Convergence foretell a theoretically simplified world, so I can appreciate how sexy it sounds. However, it tends to betray one’s ignorance of history, if nothing else. Some of it isn’t even in the past; it is in the present.
I live in a tiny country with disproportionate problems related to unification, harmonisation and trust. Despite covering just 30500 sq km with only 11 million residents, Belgium has 3 officially recognised languages. The crown prince, now the sovereign, even has had for many years a foundation whose mission is to promote harmony amongst the 3 linguistic communities in the country. It sounds like a bad joke, but it’s anything but: the problem the foundation wants to address is real. Not a few in Flanders desire secession. Politically, it’s a mess partly because the Flemish politicians are not accountable to Walloon voters and vice versa, and the Brussels region exists in its own bubble.
Belgians are keen to refer to their nation as the capital of Europe given that many EU institutions are based in Belgium, namely, in Brussels. They are right in more ways than they perhaps intend. It is a tidy little illustration of why a Europe-wide political union is a pipe dream.
Belgium is not unique in having a segment of population who desire secession. Some Basques in Spain, northerners in Italy, Scottish and Catholics in the UK, just to name a few. All these people wanting to go their separate ways, and some well-meaning but unenlightened geeks want to force a larger union. Then, there are some deep-seated distrust of neighbouring countries based on history, preconceived notions and prejudices.
The lack of a common language is not to be underestimated. French has been designated as the final word in all official EU / EC documents mainly because the French language apparently is the most precise and the least vulnerable to diverging interpretations. Does that provide comfort to the Irish? I think not.
In theory, none of the above is insurmountable over time. I am more than happy to be proven wrong, but I think it is more unlikely than not. Regardless, implementing monetary union before achieving political union puts the cart squarely in front of the horse.
More recently, with the migrant issue hitting the headlines, there have been talks of re-introducing passport controls for movements between the Schengen Area member states. The irony.
Having a common currency is very convenient when travelling from one country to another. Trading with counterparties in other euro zone countries is easy and free of forex risks. I think that convenience should be available not for free but at a cost, whether direct or indirect. However, the cost of this particular convenience seems too high for the privilege. It seems evident that a collective of sovereign member states driving in different gears and in different directions cannot be expected to manage a single currency properly.
As far as I can see, the euro is a failed experiment, collapsing under layers of delusions and pretences. One cannot be half pregnant. It would be better for all concerned to cut the losses and revert to national currencies and the ECU. The cost savings from dismantling the enormous EU / EC machinery in Brussels might be sufficient to pay for the cost of discarding the euro. The euro can be revisted when political union is within reach, but I am not holding my breath.