A short story of the euro birth and of its decadence
1. In the middle of last century, France, sitting among the winning powers of World War II, decided to promote an agreement with Germany that would have changed the tragic sense of the history of the Franco-German conflicts that had dominated the first part of the century. The great political protagonist was Robert Schuman, along with Jean Monnet, head of French economic planning.
The occasion came up with the historic agreement on the joint use of the coal of the Ruhr - a region of the North Renania- Westfalia, not far away from the border of the Eastern France - coal of which France had absolute need to advance the steel production essential to the development of its industrial planning. So, the ECSC, the European Coal and Steel Community, become the first transnational agreement in contemporary Europe, involving six countries.
The second stage was almost its natural development, with the establishment of the Common Market formed by the same six countries of the ECSC, including Italy and the Benelux countries. The results matched the expectations. Between the end of the 1950s and the beginning of the Sixties, the economy of the “European Six” grew amazingly, generating the famous “economic miracle” in Germany as well as in Italy.
With the advent of Charles de Gaulle, France came out of the deadlock of colonial wars in Vietnam and Algeria, and could devote itself to European construction by reaffirming and strengthening the Franco-German partnership.
For the general de Gaulle, the Community of the Six had to be extended until to cover, one day, the whole continent “from the Atlantic to the Urals”- as he liked to say - an ambitious and, at the epoch, a utopia that reflected the “gandeur” of de Gaulle's historical vision. Indeed, we can say that he had had a long view, considering that within twenty years the Soviet Union came to its ultimate crisis, and the old European community acquired a really continental dimension.
De Gaulle was convinced of the importance of a major Franco-German political alliance, for a strong development of Western Europe, freeing it from the U.S. hegemony. But it was also instrumental to the consolidation and the development of the German-French political partnership, as the engine of the new European pattern.
Germany was enthusiastically grateful for the chance of this special partnership that linked the two countries. The economic arrangements were appreciated, but for Adenauer and de Gaulle the political aspect was much more important than the economic benefits deriving from the construction of a large and progressively integrated European market.
The economic dimension and the advantages for both countries from the Common Market were important for Adenauer, but still more important for him was the political dimension that provided a historic alliance with France. On the other hand, France did not hide its ambitious, hegemonic, design in the realization of the European Community. An ambition backed by its international role, also supported by hits entry into the then limited nuclear power club, and its membership of the UN Security Council Permanent Group, alongside the United States, Great Britain, Soviet Union and China.
2 The Franco-German partnership remained the lever of the consolidation and the development of the European edification, passing through the chancellorship of Willy Brandt and Helmut Smith, on one side, and the French presidencies of Giscard d'Estaing and Francois Mitterand, on the other.
But for France, it was not enough. Over the course of 40 years, the economic weight of Germany had grown enormously, and the heart of its economic growth was, among other factors, the extraordinary stability of its currency, the Deutschmark.
During the Seventies, the capitalist world had been hit by the monetary crisis following the collapse of Bretton Wood's Agreement and the cancellation of the convertibility of the dollar to gold, that left the European currencies without the old anchorage. In that framework, characterized by the turbulence of the financial markets, that had been accompanied by the double crises of oil, France had repeatedly suffered from devaluations of the franc.
Francois Mitterand and Jacques Delors, the protagonists of the V Republic during the Eighties and the early Nineties, were persuaded that it was necessary to find a radical solution. It was the case to rediscover an old idea of the “Werner plan” dating back to 1970, but that had been soon abandoned due to the worldwide monetary crisis: that is, the institution of a single currency aimed at eliminating the monetary frontiers, and provide the European economic community with a unified powerful monetary instrument. A choice that, in the end, meant the transformation of the Deutschmark into the common currency of all the European community’s Member States – that is, the future Euro.
The idea seemed ingenious. All the countries in the Community would have the same monetary sign, recognized and respected all over the world. But, it was like dressing people of different shapes and sizes in the same-sized suit. The same currency - a transfiguration of the currency of Germany, the second western power after the US – to be used from Greece and Portugal, to give two examples of smaller countries, not forgetting that France and Italy had a monetary history characterized by precarious, fluctuating exchange rates.
Now, France was proposing to fix once and for all the relationship among the different currencies, independently from the economic structure and the monetary history of each country. That is, the hidden appropriation of the Mark as a free warranty for the stabilization of a basket of traditionally fragile currencies owned by countries, which could not show a comparable industrial structure and export-led economy.
3. We know the result. The decision to carry on the transition to the single currency was adopted in 1989. The same year that, before its end, witnessed the fall of the Berlin Wall, with the sudden overthrow of the Europe physiognomy and the beginning of the German unification process. Germany had no reason to combine its own unification along with the removal of the DM, its respected second flag.
But France was persuaded that sharing the Mark or, if you like, that translating it into a common currency was a necessary step to guarantee the future for the European Union. It was a bit like the coal of the Ruhr of forty years before when France proposed to the ECSC to share its exploitation.
Helmut Kohl was destined to enter history as the chancellor of German unification. Indeed, he changed Germany and its role within the continental layout. And, in his vision, this historical step was well worth the abandonment of the DM. The Bundesbank and other institutions opposed it.
For many Germans, to give up the Mark was akin to a defeat in peacetime. It is not a coincidence that, about ten years later, Helmut Koll, no longer Chancellor, admitted that his choice was at odds with the opinion of the great majority of his fellow citizens. ( Macron, Merkel and the twilight of the euro [2], www.Insightweb.it, September-October, 2017).
France had won its battle aimed to convert the Mark, the strong, stable, worldwide respected currency, into the common currency, overcoming once and for all the permanent risk of the devaluation of the frank. Italy was equally satisfied. But that choice turned out to be a mistake for both countries.
The Eurozone at the very beginning of the new century entered a recession that, paradoxically, hit Germany and France, before any other country. And the euro became a problem rather than the solution. Monetary policy was accompanied by a strict discipline imposed on the fiscal policy aimed at complying with the decisions adopted at the Maastricht and Amsterdam conferences that were held in view of the transition to the single currency.
4. However, the moment of truth came with the global crisis of 2007-09. The eurozone countries, deprived of the traditional monetary and fiscal means to face the crisis, entered a tunnel in which many countries are still trapped , almost ten years after the beginning of the crisis.
The euro has turned out to be a failure. When France opened the way towards the European Community, the coal and steel agreement had been the first step for the establishment of the Common Market. France had benefitted from it in the framework of the Jean Monnet's economic plan and Germany benefitted from the expansion of the market to its industrial powerhouse; an important step in moving towards the famous "economic miracle" – indeed, successfully shared by Italy.
About forty years after, France had aimed to share not an ordinary, even though important, raw material like the coal, but nothing less than the Deutschemark. Germany reacted imposing its own severe conditions on the management of the eurozone countries’ economy, synthesized in the couple of austerity and structural reforms. Indeed, France had demanded too much, and it could not prevent Germany from imposing its conditions. Everyone knows the results. Germany has consolidated its role as a world economic power; France has lagged behind, with an ever-lowering growth and a more than double unemployment rate.
The euro, as an artificial metamorphosis of the Mark, has proved to be a virus harming not only the economic but even the political fabric of the countries involved in the single currency adventure. And the deceptive outcome of the euro, at its birth envisaged as an instrument for economic growth and social progress, began to throw its shadow over the democratic equilibrium of an increasing number of eurozone member States, and, indirectly, on the future of the European Union.
The right-wing parties have increasingly occupied the political scene, dividing themselves among the advocates of the euro, on one hand, and its opponents, on the other. The leftwing parties which were the most convinced apostles of the single currency now appeared to be its sacrificial victims.
On every election day in the eurozone, the center-left parties are suffering, more or less, huge defeats. The most striking being that of the French Socialist Party, essentially disappeared from the scene after having been with Mitterand, Delors, and Jospin, the central engine of the transition to the single currency. So, the country, once led by de Gaulle and Mitterand, is reduced to being ruled by Emmanuel Macron, proudly proclaiming himself “neither left nor right”.
During 2017, annus horribilis for the old European left, we have witnessed the crash of the Social Democratic parties in the Netherlands and recently in the Czech Republic, not to mention the PSOE, the party, that has long ruled the newly democratic Spain, now force to support the conservative minority government of Mariano Rajoy.
In Italy, the recent elections in Sicily have been characterized by the no-vote of the majority of the electorate, the victory of the rightwing coalition with the astonishing return of Berlusconi, the affirmation of the “Five Stars” - emerged like the first party - and the irrelevance of the Renzi’s Democratic Party.
But the most significant event of this year could be Angela Merkel's abandonment of trying to form a coalition government along with CDU-CSU, Greens, and Liberals. For the first time, the government instability hits the eurozone guide country. The warnings had been seen with the result of the September elections when the Merkel-led CDU-CSU alliance had experienced the worst postwar electoral results.
Now the alternative seems to be between a minority government and new elections, of which the results appear to be even more uncertain. Whatever the developments, the Franco-German partnership is weakened. Macron will have to deal with a stubborn German government, further aligned with the ole Schäuble line (See in this issue: R. Paladini - How to prepare the road at the end of the euro). So the Franco-German partnership emerges weaker, just when the eurozone suffers the most dangerous crisis since its birth.
All this does not mean the end of the euro. The empires have always gone through a long decaying period before their disintegration. The prophecies about the times and the ways of the crisis leave the time they find.
In this framework the main Italian political behavior is to obscure the impact of the eurozone problem , while waiting for the general elections of the next spring, when, according to most forecasts, it will be impossible to form a governing majority, except for a “Government of the President” - that is, appointed by the President of the Republic with the mandate to organize new elections.
Notwithstanding this alarming scenario, the topic of the economic and political crisis that involves the eurozone is not a real theme of discussion among the European leftwing parties. It is considered far away, a theme better to avoid, or an issue typically exploited by the so-called populists, either of right or of left. In the end, an issue to be exorcised.