Magazine / History / Euro / Essay | 19/02/2008

The Euro Shows: History Rewards the Brave

Since 2002, the euro has been the means of payment in twelve EU countries. Even though people were sceptical at first; now everybody has become used to carrying a piece of Europe in his/her purse. In his essay, Eckart Stratenschulte describes how the 1970 idea of a common currency was put into effect in 1998.

Now, it has also arrived in the Eastern Mediterranean: the euro. The single currency of the European Union is still not the official means of payment in all EU countries, but since Malta and Cyprus joined the EU on January 1, 2008 it has at least become the money used in the majority of the European Union member countries.

Photo: AP

It has been ten years since the crucial steps towards the establishment of the euro have been taken. In May 1998, the convergence criteria and the participants of Project Euro were defined, and on New Year's Eve the exchange rates of the different national currencies in relation to one another and therefore to the new euro currency were determined. Starting on January 1, 1999, the euro became valid in cashless transactions in eleven countries, and on New Year's Day 2002, the citizens in twelve EU countries were handed the new money. Greece just about succeeded in jumping onto the bandwagon on time – playing a few tricks as we are now aware. In the meantime, Slovenia (2007) and both Mediterranean islands mentioned above (2008) have joined in.

A currency is the backbone of a national economy. And the concerns regarding the euro, namely that it would be too weak to support our economy, were strong. The fact that the euro lost a lot of its value compared to the US dollar when it was first introduced, seemed to prove the critics right. But taking into consideration the latest slump for American money and the numerous turbulences on the international foreign exchange, during which the euro has acquitted itself very well, this criticism has given way to the concern that the euro actually could be too strong. Europe-wide, currency experts and economics experts are discussing these questions. However, it must not be overlooked that the euro essentially was and is a political measure.

Plans for a shared currency – and be it by establishing a fixed connection between the national currencies – have existed in the European Community and later European Union for a long time. The Werner-Plan, named after the former Luxembourgian Prime Minister Pierre Werner, an exact schedule for an economic and monetary union, had already been presented in 1970. However, at that time nothing actually happened. The initiator for the realisation of a shared currency was the fall of the Berlin wall on November 9, 1989.

The looming German unity shook the basis of the European Community to its core. One should remember that the European Community had not been established because of excessive love for one another, but had developed on the basis of deeply rooted mistrust resulting from two World Wars. The prerequisite for this supranational community was that no country should be in a position to dominate the others, least of all Germany. Due to country size proportions, this was no problem until 1990, as the Federal Republic of Germany was playing in the same league as France, Great Britain or Italy when it came to population figures. But everybody knew that after the German unification there would be an unambiguous number one, and of all countries it would be the originator and loser of the Second World War: Germany.

Therefore, it is not surprising that our European partners did not get excited about the idea of a unified Germany. The reactions, however, were diverse. While the British Prime Minister Margaret Thatcher wanted to prevent the German unification from happening, the French President François Mitterrand as well as the (also French) President of the European Commission, Jacques Delors, emphasized that it was time to explore the European integration and to include Germany to a larger extent. For Germany, the strongest means of influencing European matters was the German mark currency. Putting German's means of power, its currency, on the leash of shared control was the political motivation for the euro project. It was by no means a coincidence that it was agreed one month after the fall of the Berlin wall on a summit of the EC Heads of states and Heads of governments in Strasbourg.

It is a lasting achievement of the former Federal Chancellor Helmut Kohl and the majority of the political elite of the Federal Republic of Germany to have recognized and accepted this connection. The Federal Government guided Germany towards the euro, although a strong majority of Germans wanted to hold on to the German mark. Most people in Germany were not aware of the reasons behind the move, and political strategists considered it impossible to make them clear. Instead, the public was given rather silly examples of saved currency exchange rates when travelling through all twelve euro countries. The euro is a big advantage for European tourists, but this is not the reason why it was introduced.
Due to the recognizable willingness of Germany to integrate itself better into the European Union by means of the euro, it had already rendered its first positive services before one single note had been printed. In retrospect, one has to say that the fact that the EC/EU did not fail due to the German unification can to a large extent be attributed to the euro.

Since then, the euro has contributed immensely to the formation of a European identity. The citizens of the 15 countries, who currently own a shared currency, not only feel the economic advantages, but also the resulting togetherness. The identity formation function of the euro is also recognized in countries that are not part of the euro zone out of their own free will. That is exactly the reason why Great Britain, Denmark and Sweden are critical of the single currency – they are afraid of losing the sovereignty and uniqueness of their own country and people. However, in the meantime, at least in Denmark these arguments are being put to the test, probably not least because it has become obvious that the Irish remained Irish and the Portuguese remained Portuguese even though they all use the same currency.

The identity formation effect of the euro, however, does not only consist of everybody using the same money, but is based on the fact that by using it the euro countries have linked their destinies. Changes in the prime rate, which the collectively borne European Central Bank (ECB) carries out, directly influence the economic processes in all our countries. And the question of how much our private pension provisions will one day be worth depends on the yearly inflation rate, which is again controlled by the ECB. So, in the euro zone, we not only have something the same, but also something shared. It is this common ground which unites us.
Even in countries in which the euro has not (yet) been introduced, it has become the lead currency. Therefore, it is somewhat like the business card of the European Union – also far outside our continent.

The euro has been – we can now say as much, ten years after the definite decisions to introduce it – a success both politically and economically and has proved its critics wrong. By the way, there had also been similar reservations as against the euro some 40 years earlier, when the European Economic Community was founded. Even experts such as the former Minister of Economic Affairs, Ludwig Erhard, disapproved of the EEC and predicted its economic failure. But it turns out: History rewards the brave!

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