Magazine article The Spectator

Had Mr Blair Been Braver, He Could Have Been in on This Week's Euro Euphoria

Magazine article The Spectator

Had Mr Blair Been Braver, He Could Have Been in on This Week's Euro Euphoria

Article excerpt

The combined political will of 11 nations - or at least of their political elites - assured an easy birth for the euro. But the euphoria should not deceive us. Most thoughtful politicians and commentators throughout Euroland will acknowledge that the present position of the euro is inherently unstable, and that this can only be corrected by the most radical economic and political reform. On the Continent, such an agenda is rapidly evolving; there, those who are most enthusiastic about the euro will acknowledge that the New Year launch was only the beginning of a process of fundamental change.

For all its potential strengths, the euro will probably behave like the dollar, the yen or sterling, not like the deutschmark or the Swiss franc. There are bound to be market challenges and periods of fluctuation, but the real challenge to the euro will be political, not economic - just as its real purpose is political, not economic.

Three related problems remain unsolved. How can one monetary policy possibly work for 11 different economies? How will the peoples of Europe react to the shocks of adjustment: rising inflation in some countries, rising unemployment in others? What will be the relationships between the peoples and governments of Euroland and the central bankers who will now exercise such enormous power over their lives?

'Vaste entreprise', as de Gaulle once commented, on seeing a poster with the slogan 'Mort aux c-s'. But there is a simple answer to all of those questions. The euro can only work if the 11 economies rapidly become one, and if its 11 peoples begin to think of themselves as citizens of one country. Because it is one nation, England can cope with inflation in Mayfair and unemployment in Middlesbrough. Europe will have to develop a similar sense of statehood, to deal with inflation in Munich and unemployment in Messina. It will also require the apparatus of statehood, especially a common fiscal policy. As for the bankers, it would be intolerable if monetary policy were at the mercy of democratic whims; we should no more elect our central bankers than our judges. But there is a democratic input into law-making; the same ought to be true of monetary policy. In Britain, the USA and Germany, the relationship between the central bank and the politicians is a product of history and political culture. Europe will now have to create its own history and culture, by a process of accelerated evolution.

The democratic deficit is the biggest problem facing the euro. Like all recent developments within the EU, and on even more basic matters, the euro involves a transfer of power within nations from legislatures to executives and, above all, a transfer of power from nations to the EU's central institutions. As currently constituted, the EU has only a minimal claim to be a democracy; it is far more of a bureaucracy, judgocracy and bankocracy. It has been observed that the EU itself is insufficiently democratic to meet the criteria for EU membership.

On the Continent, that analysis is widely accepted. The euro's greatest architect its Albert Speer - Helmut Kohl, knew that it could only work if politics caught up with economics. His strategy was Marxist: get the economic structure right and the political superstructure will follow.

Herr Kohl is gone, but the German position remains unaltered. On Monday, Chancellor Schroder said that the euro 'will make Europe move forward and it will force us into new stages of integration'. He was not just speaking for himself but for the whole of the euro-nomenklatura who dominate the politics of Euroland. …

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