Is That It For The Euro?


"A day will come when the only fields of battle will be markets opening up to trade and minds opening up to ideas. A day will come when the bullets and the bombs will be replaced by votes, by the universal suffrage of the peoples, by the venerable arbitration of a great sovereign senate which will be to Europe what this parliament is to England…and what this legislative assembly is to France."

Those words could have been written yesterday. Yet, in fact, they date to the mid-19th century. Victor Hugo, the great French novelist, wanted the unification of Europe into one state with a single market. In 1849, he proposed a "United States of Europe", which in his view ought to replace the national states and empires constituting the Europe of his day.

Hugo’s idea was partially realised a century later in the ruins of the World War II. The European Union was founded on the idea that economics play a central role in determining diplomatic relations between nations.

After the war, plans to integrate Europe’s coal and steel industries, the crucial industries supplying European armies, were made. The idea being that no nation would be able to plan a war unilaterally if these industries were managed in common.

Ever since then, economic union has given rise to further political union. The steel union led to the creation of the European High Authority, today’s European Commission, the bureaucratic body that runs the EU.

The idea that economic unity fosters political unity also led to the creation of the Euro in 1995, which was to help the continent’s nations better realise a European common market. Yet today the idea that closer economic links lead to political harmony is looking shaky.

The financial structure set up to support the currency is regarded by many as a crucial factor contributing to the near bankruptcy of several European nations, most prominently Greece, which last week called for another aid package. The previous €110 billion package agreed a year ago failed to help the country finance its public debt.

And EU efforts to solve the sovereign debt crisis appear to have fuelled hostility between member nations, contrary to the very spirit according to which the EU was founded.

Austria’s Der Standard explains the nub of the problem with the Euro. The paper’s financial analyst says the currency itself is not to blame for credit agencies underestimation of the risk posed by the government debt of certain Euro-members.

Rather, what is to blame is the equity capital regulations for the Eurozone, introduced at the same time as the currency union. These technical regulations meant that "banks did not have to underwrite" loans to EU member nations, and the debts of all Eurozone nations were rated as "failsafe" by international ratings agencies — without there being any guarantee of this status in practice.

This then led to huge amounts of lending to weaker member nations thanks to higher interest rates in those nations, continues the paper. That meant that the banks’ loans yielded higher repayments — and led French and German banks to favour lending to the Greek government over loans to nations with lower interest yields, such as Germany.

"It is for this reason that is impossible for the other states of the Eurozone to let another member state fail," concludes der Standard — for the consequences for the French or German economies of a Greek bankruptcy could be devastating.

Yet the failure of several countries, with flow-on financial risks for the rest of the Euro zone, remains a strong possibility, says Argentina’s La Nación, which profiles different positions on the future of the currency.

The paper says the currency’s detractors remain "Anglo-Saxons and ultra-conservatives". These groups continue to prognosticate the collapse of the currency within the next five years, says La Nación. On the other hand, supporters of the Euro want more European financial integration, rather than less. Jacques Attali, the French Socialist Party financial guru, has been calling for a European ministry of finance and the pooling of European debt — which would mean that Greece, Portugal and Ireland wouldn’t have to repay the debt accrued over the past decade for another 20 years.

However, the chances of further financial integration appear slim today as both weaker and stronger economies in the Eurozone consider exiting the currency union.

Portugal’s I Informaçao asks whether it is "worth the pain" for Portugal to continue with the Euro as its official currency. The paper argues that it is worth beginning a debate on leaving the union in order to ratchet up the pressure on the European Union to do more to help the southern European nation. It says in retrospect the decision to enter the currency union was wrong for Portugal, a country which is "backward" as regards its "industry, education and institutions" — and which has gained little from being a member of a currency that’s been run in view of economic policies appropriate for its "larger member nations".

Meanwhile Germany’s Die Welt wants the EU’s largest economy to also consider exiting the Euro, founding a "hard northern Euro" comprised of those countries sharing a "common economic culture". The conservative daily says all the attempts to "save the Euro up until now have concealed attempts to save the banks," as the involvement of the non-Euro member Britain in the "rescue" of Ireland proves.

Die Welt says the financial crisis should be solved at a national level, through a "temporary nationalisation" of banks similar to that undertaken by some nations like the USA and Sweden shortly after the 2008 collapse of Lehman Brothers.

Others argue that Greece should not have to pay its debt, such was the extent of its earlier mismanagement by prior governments. Spain’s El País says that just as "children are no longer considered to be liable" for the debts committed by parents, nations should not be liable to pay for the debts incurred by irresponsible governments. El País says that if one reviews financial history, "few would be in a position to cast the first stone," for basically every major nation has defaulted on its debt.

The paper concludes with a lesson in Greek financial history that is unlikely to hearten European debtors: the nation has "more than half the time since 1800" been unable to repay its debts.

It’s a big world out there and plenty of commentators and journalists are writing about it — but not always in English. And not surprisingly, ideas about big events of the day shift when you move away from the Anglosphere. Best of the Rest is a fortnightly NM feature by Berlin-based journalist Charles McPhedran. Charles reads the news in French, German, Spanish and Portuguese and reports on what the rest of the world is saying about the big stories. 

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