The euro, in historical and institutional terms
Speech made in Paris on 30 June 2011 as part of the 22nd meeting on globalisation organised by the
Centre d’Analyse Stratégique, CEPII, Sciences‐Po Paris and CERI‐CNRS.
"I will try to follow the method of CEPII – that is, to examine changes (sudden and gradual) so as to decode what is important, what is lasting, and what underlying trends are driving Europe and the world. “The euro as a part of globalisation” was the title chosen. I will return to the past, because it seems to me that from past failures and advances we can take lessons for today, and above all for tomorrow. I will therefore deal first with the historical dimension of European cooperation. Behind the terribly difficult economic and monetary issues, behind the complicated institutions and rules, there are men and women who vote, and others who govern, in an atmosphere and context which changes. Circumstances have changed since 1948‐50 and this is why I do not always judge harshly those who have the responsibility of governing today.
I will then look at the euro’s institutional dimension, as a product of the Single European Act. People say now that Europe only ever makes progress when there is a crisis. But the Single European Act which preceded the euro was not the product of a crisis. In the mid‐1980s the economy was in a poor state. This explains why governments accepted an economic and institutional stimulus, the creation of the Single Market (the 1992 objective) and substantial new solidarity policies (economic and social cohesion).
Finally, I would like to deal with one last question, that of collective responsibilities in this crisis. It is true that Greece, Portugal and Ireland, among others, have behaved badly – but are they alone in their responsibility? As participants in a shared venture, should we not also look for the collective responsibilities? I would like to show you that the euro zone’s Council of Finance Ministers has, over the last few years, also been responsible for the current situation. It saw nothing coming and did not want to start the necessary debates on coordination of economic policies and on the dangerous rise in private debt.
The historical dimension
A little indispensable history: the pioneers of European cooperation were haunted by the past and had a vision for the future: “Never again will there be war between us.” At the beginning there were painful memories, and grudges. The climate was not easy. But there was also a desire to move beyond these differences and to go forward together. It was in this context that certain individuals had the courage to propose something new, and from this point of view Robert Schuman’s appeal is surely one of the spiritual high points of the last century in Europe. The appeal was based on something simple. Hannah Arendt described it in the following formula: Germany’s adversaries would offer “a pardon and a promise”. The pardon did not mean forgetting, while the promise was that new generations of Germans would be reintegrated into the international community. That is politics at its best, and it needs to be remembered today.
Once the desire was stated, the problem became “how”. And of course politicians tend to think of institutions: the European Defence Community, the Spaak project, and so on. But these fell victim to national misgivings about giving up too much sovereignty in a treaty. As a motor of cooperation, all that was left was the economy. Integration was therefore economic integration in the first place, with the treaty establishing the European Coal and Steel Community (which is the most complete such treaty for those looking for a balance between supranational and national, or between the economic, the social and the financial – it’s an example to think about). And European integration thus came about by the spillover effect: one measure brought about the next.
Of course, that is not the spirit of the founders. But that original spirit has sometimes resurfaced and I will give two examples.
There is firstly the case of the European Monetary System (EMS). Think about what is being said at the moment on the frictions and differences between France and Germany. In 1974 there was a crisis due to the oil price rise and the floating of the dollar. The French president, Valéry Giscard d’Estaing, responded to it by stimulating growth. But the German Chancellor, Helmut Schmidt, told Germans to tighten their belts, and imposed an austerity plan. It is difficult to imagine two more different positions. Yet these two men managed to create the EMS together. Imagine the trust necessary between these two leaders to act that way while they were conducting two different economic policies. There was no convergence to speak of. The example shows that there was a time when French and German leaders put aside their differences and thought of the future. The EMS had mixed success but it was there. There would be no euro without it. It is a beautiful example of staying true to the spirit of Europe’s founding fathers, and of vision for the future.
A second example was the Single European Act and its financial package. At the time Europe was not at the top of its form and I proposed to member states a market stimulation by means of the 1992 objective. A new treaty was signed, and it was necessary to find resources to put it into effect. In January 1988 European leaders fought among themselves in a way you cannot imagine. But they managed to negotiate a financial package which allowed Europe to launch the Single European Act measures, as well as the cohesion policy and a few significant social provisions..."
"...Jean Monnet was right. The institutions do not do everything, they do not do politics. But when people want to work together, institutions make those people more visionary and more wise. There have been the innovations of the Lisbon Treaty – unconvincing to me. More worryingly, since the euro’s launch we have not distinguished between the euro area countries (17 today) and EU countries (27). The Eurogroup is not independent: the finance ministers of the euro area meet on the night before an Ecofin Council which includes all EU members. To me it seems indispensable to have a distinction between what we can and must do as 17, and what we do as 27..."
The euro: a design flaw from the start
"...I come now to the euro. Financial and institutional innovations are not everything. The 1985 measures were taken against a gloomy economic backdrop. But within two or three years growth had passed 2%, job creation was picking up, and this was the sunny context in which it was decided to study the euro idea..."