On currency and its proper use

Two months were scheduled, but two weeks would have been enough for euros to replace francs in everyone’s wallet. The polls tell us that nine out of ten French people are satisfied with the way everything has gone. A swift and efficient success: for the first time in history, twelve countries have merged their national currency. A historical event from which some lessons can be drawn.

First of all, real political courage has been rewarded. The visionaries who set the European Monetary System in motion – Valéry Giscard d’Estaing and Helmut Schmidt – received due recognition at the time. However, there is less awareness in France of the real political heroism shown by Helmut Kohl following German reunification: while the mark was the symbol of Germany’s post-war success, while the strength of its national currency reassured a people beset by the rampant inflation which brought Germany to its knees after 1919 and again after 1945, while the all-powerful Governor of the Bundesbank officially called the plan for monetary union ‘manifestly absurd’ and 80% of Germans were opposed to it, Chancellor Kohl pressed ahead with the European currency to secure reunified Germany’s place in a Europe definitively united in this way. He may have lost power, but Germany’s place has been secured.

The most surprising thing, however, is that this courage spread throughout Europe. Merging currencies means pooling debts as well as assets: in 1991, there were substantial deficits in all the European countries and nobody wanted to pay for other people’s debts. A balance needed to be found before any merger. A fatally unpopular policy – raising taxes and cutting state subsidies – was launched in all the countries, and, with the exception of Luxembourg, the team in power was swept away at the next elections; in all the countries, the opposition continued with this unpopular but necessary policy when it took power. So much so that, nine years later, on the scheduled date and in line with the conditions set in advance, twelve countries had their rendezvous with the euro. Courage has paid off.

Second lesson: people are more European than many leaders think. How many times, since 1991, have we heard ‘if it was up to me, I would do it, but public opinion needs to be carefully handled …’? It is no longer possible to hide behind citizens’ alleged euroscepticism. Eurobarometer surveys have for years shown that Europeans want more Europe on major issues, and less interference from Brussels on local issues, and that they are not satisfied with the way in which Europe is currently being run.

Lastly, at a time when Europe was celebrating the success of its fledgling currency, Argentina was being plunged into chaos as a result of the mishandling of its own. An event which provides us with a third lesson: currencies are closely linked to politics. Argentina thought the best plan was to align its currency with the dollar, at a rate of one peso to one dollar, and to stick to that rate come hell or high water. The problem is that there is much more trade between Argentina and Brazil than the far-off United States, and Argentina has no way of influencing the American monetary authorities: at the first sign of problems, the whole house of cards collapsed. The twelve euro countries have got through the post 11 September fallout without any economic drama, however, because most of their foreign trade is with one another and they are equal partners in the European Central Bank.

This needs to be borne in mind. Now that the euro is here, our twelve countries should coordinate their economic policies even more closely than they did in the preparatory period. We are all in the same boat. What we now need to do is to appoint a captain. Urgently.

Alain Lamassoure, 17 February 2002