And many people are asking the simple question: will it make to 30?
Yes, the Euro is at a crossroads as it turns 20, and even some believe it might not make it to 30, I strongly disagree. As the single currency doesn't seem to benefit all, its role was a main topic at the European Economic Forum, reports Jo Harper, a German-international journalist.
At the European Economic Forum, held this week in the southern Polish town of Katowice, the future of the euro zone and the Single European Currency, the Euro, featured centrally. A view increasingly shared was that of Brigitte Granville, Professor of International Economics at the University of London, who stressed that the Euro urgently needed further political integration among the currency union's 19 member states.
"Monetary union requires political union and that is what the common budget means," she told an audience of European economists and policy advisers.
Do you still remember French President Emmanuel Macron in 2018 proposing driving ahead with European integration by establishing a single budget, the next step after the creation of the European Central Bank (ECB) in 1998 allowing the establishment of a single monetary policy framework. At the heart of Macron’s plan is strengthening the currency area's bailout fund, the European Stability Mechanism (ESM).
Professor Granville said in an interview with the German National TV, that she didn't believe Macron's idea would be going very far. "But if it did happen, it would be very dangerous, further integration is a grave concern," she said, adding: "Without political glue, you don't have real union. But at the same time the euro zone is slowing Europe."
Sad to say but we have to face it: The Euro zone economic growth is expected to slow in 2019 and some even believe the currency area could even face recession in 2020. What does that mean for the global economy, i.e. while dealing with the US-China trade war and other world's conflict zones?
Monetary union, Granville went on, is "just a fixed exchange rate" which would always end in financial crisis. "It cannot be dismantled, only by crisis and explosion. What will catalyze this I don't know, but I don't see it lasting for the next 10 years," she says, pointing to post-tax incomes in Italy down 5% and in France down 2%, while Germany is up 19%.
In my opinion, Granville voiced some very important details to think about, "The big mistake of the Euro is that it forces Germany to cooperate with countries that need spending, but Germany doesn’t need to. Lax monetary policy destroys pensions, saving and the banking system. So, there is no monetary stimulus. This is the Euro, welcome to the Euro".
Well, here is the question: drive on or turn back?
Paris also wants banking union, common rules and institutions governing the bloc's largest banks, in addition to a common deposit insurance scheme and a backstop to be used to support the winding down of failing banks.
EU governments have agreed to set up the European Stability Mechanism (ESM) — a €500 billion ($575 billion) fund that is, intended to absorb bond market turbulence. But a deposit guarantee scheme was opposed in Berlin. However, debate is still ongoing regarding a euro zone budget and a common system for security savings.
Germany and other northern euro zone countries have been reluctant to go as far as Macron would like to on this front.
Former German Federal Finance Minister Wolfgang Schäuble has also called for the EU to have more clout to set finance policy and ending the unanimity requirement in bloc-wide decision-making.
But some northern European countries are opposed to the idea, citing the difference between their tight fiscal frameworks and the traditionally loose budget policies in southern Europe. Finland, Denmark, Ireland, Latvia, Lithuania and the Netherlands have adopted a common position on the budget, arguing that participation in it should be voluntary as long as the funding is derived through intergovernmental agreements, as I learned from German journalist Jo Harper.
Strangling Europe? Hans-Olaf Henkel, a staunch Euro critic and MEP with the European Conservatives and Reformers in the European Parliament, even believes the currency is destroying the European Union.
"Until May 2010 I supported the euro, but then the European Central Bank and Brussels broke the promises they gave to the German people when they agreed to give up the deutschmark, namely that no country should have a debt ratio of over 3% of GDP. If breached, the EC [European Council] said it would punish the culprits. It was breached 160 time and the EC did nothing." the former head of the Association of German Industrialists (BDI) adds.
Henkel also said the Euro had done much economic and political damage in Europe, even to Germany which had benefited the most from the introduction of the currency.
Nine EU countries are not in the Euro, of them only Romania wants to adopt it. Why is that Henkel asks rhetorically, and notes that those countries "have done much better" most euro zone countries?
"The Euro is much too strong for the Italians and France. Huge unemployment. Countries can’t devalue. Some countries find it very difficult to reform, including France. But they can’t devalue to stay competitive. The Euro is designed to push countries to change, rather than vice versa."
The Euro @ 20 now. The Euro @ 30? We'll see ... .
