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The Euro Argument

Fidel Sendagorta

March 28, 2010

We are all in debt with Greece. Thanks to its unfortunate indebtedness, we finally have in Europe a fascinating and substantial debate on the euro and its sustainability. The exhausting and depressing experience of devoting our best energies for ten years to the cause of institutional reforms had left us a bitter aftertaste –and it was definitely not worth it. But now we can forget this bad experience and face a real challenge. The debate on the euro deals with one of the most visible and obvious aspects of the European integration in the daily lives of millions of citizens. And it is about one of the more risky aspects of integration: after all, there are not many current or past currencies not backed by a single State.

Suddenly, the experiment could not be irreversible, in spite of having finally learned to calculate in euros without the tiresome need to convert into old currencies. Some talk, with very bad manners, about showing Greece the door- and then others? Some more well mannered suggest allowing a country out of monetary union for some time, so it can return once it has placed its accounts in order, with the help of “de facto” devaluation. A more imaginative and malicious banker proposes to use the fiscal distinction North / South between stringent and relaxed European countries to be reflected in a division of the euro in two currencies: the “neuro” and the “sudo”(read “pseudo”) . A joke which has the merit of exposing a popular narrative of the dilemmas of the euro based on the timeless fable of the grasshopper and the ant.

Beyond the speculative exuberance of economists, political visions about the future viability of the euro could be classified into the following categories:

First, the apocalyptic puritans such as Krugman, who consider Europeans have to pay dearly now for the original sin of the arrogant over-ambition of the leaders who gave birth to the euro.

Second, the starry-eyed utopians such as Attali who believe that monetary union must necessarily be accompanied by a common budget, administered by a single government.

Thirdly, the pro-european skeptics, such as Münchau, who fail to see enough political will within the EU to implement the necessary mechanisms in order to avoid a self-destructive drift of the euro. He is thinking in measures such as a method for crisis resolution, another to deal with domestic imbalances and a common banking supervisor.

However, some of us can share the doubts of the latter without renouncing to think in solutions inspired by the original spirit of the promoters of European integration project. This implies meeting two conditions: first, that progress would be pragmatic, with proposals that do not require further reforms of the treaties. Second, that a new balance be found between national interests and the Union interest.

A two tier strategy would then be needed. In a fist stage of the debate it is not necessarily harmful to put on the table all national interests without any shyness. This might be somewhat disturbing in some cases, but as José Ignacio Torreblanca has reminded us in a recent article, the suspension of German national interests in favor of European integration was the way chosen by the boomers for achieving the rehabilitation of their country , but fifty years later, this appears as an anomaly that has lost its raison d’etre. To present their positions in such a manner would not be a bad idea for other countries that in quite a lazy way identify automatically national and European interests, at least with regards to the euro.

At a later stage and upon completion of this catharsis, the European institutions must fully exercise its role of arbiter and negotiating forum of national interests to find their fit with a EU common interest. This will certainly be a litmus test of the current functioning of these institutions and also, why not say so, of the capacity of a new generation of European leaders to rise to the occasion. The challenge, on this occasion, is not to take a giant leap forward in integration. It is to find realistic solutions to the euro, so it will continue to be an awesome experiment once it has been renovated thanks to its first crisis.

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