Op-Ed: Is the Euro a Failure?

A single European currency is no doubt a technical success in many respects. Its positive effects within the single market are authentic and easy to identify. It put an end for instance, to the debilitating effects of the change crisis between the EU member states. However, with the “Great Recession,” the euro is entering a realm of intense disturbance.

So far, the EU has wished to reconcile the existence of the euro and the maintenance of national fiscal sovereignty. To advance, the EU chose an independent European Central Bank braced for inflation and strict supervision of public finances. The result was the depoliticization of Europe. Official reforms have already been put in place to overcome this great recession and to prevent future crises from developing the same way. European leaders even intended to address the problems brought about by the crisis with the “six pack” or the “Budget Pact” and the launch of the European Stability Mechanism.

The severity of the effects on sovereign debt led to many considering scenarios ranging from the output of the euro to the pooling of debt. The idea of establishing a “tutelary federalism” based on respect of fiscal and monetary draconian rules also has made headway. Yet, this strategy is ambiguous and tries to preserve a methodology of intergovernmental coordination considerably different from how federalism would actually function. Currently perceived as punitive, it might permanently discredit the idea of a politically federal Europe. A long term solution is a sort of “federalist planning” that would be possible on two conditions: if the European Union leaves the neo-liberal system to which it has been committed since its inception, and two, if it accepts a further political unification.

“Federalist planning” requires the establishment of an elected government by the people. Europe would have a true federal budget and would decide major collective choices by election. Underlying difficulties would be similar to those faced when creating a new treaty. Moreover, if a State is not ready to take the “federal” step necessary to benefit from the euro, it should be able to renounce belonging to the single currency area. The major impediment to any federal progress is national politicians who dare not break the taboos of an open path toward federalism. They are all the more reluctant that they would lose ground on some of their own prerogatives.

Even if the way suggested here seems unrealistic, it will at least have the virtue of placing the prospective failure of the euro at its true level. The euro is not a mere economic construction, it is a political project.

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