Huzzah! Europe is saved! Disaster averted. Eurozone finance ministers agreed over the weekend to ship another aid tranche off to Greece – this one worth 8.7 billion euros (with the International Monetary Fund (IMF) contributing an extra 3.3 billion on top of that). Financial markets breathed a sigh of relief as yet another deus ex machina floated down to snatch Greece from the jaws of default. But to what end? Why do we have such a horrible sense of déjà vu?
Greece has been bought a stay of execution, nothing more. The euro can’t continue to lurch from crisis to bailout indefinitely. Serious doubts are starting to emerge. Senior politicians are now calling for the single currency to be scrapped altogether. In the UK, former foreign secretary Jack Straw argues it’s a done deal:
Since the euro, in its current form, is going to collapse, is it not better that this happens quickly rather than a slow death? … It is the responsibility of the British government to be open with the British people now about the alternative prospects.
Meanwhile, protests in Greece have erupted into rioting (though some argue the spectacle is more controlled and ritualistic than it appears). People are angry at austerity measures they view as impositions from outside. Surely nothing could be worse than this? The euro failed to stimulate flagging economies, but allowed them easy access to credit at low interest-rates. It has failed to bring sustainable benefits to the people of Europe and should be abolished now, before it can cause more misery.
Some take it even further. On Twitter, @allard_postma suggests that ALL national currencies should be abolished – and replaced with a “free market for money” (made up, presumably, of private currencies).
All monopolies are disastrous. Abolish state currencies like the Euro and introduce a free market for money! #bbcqt
— Allard Postma (@allard_postma) June 23, 2011
Perhaps we should take it one step further still and abolish money altogether. No money – no problem. Slightly less drastic is mike1966 from the UK, who has suggested in our forum that only the euro should be abolished and that national currencies should be reintroduced. We took his suggestion to a number of policy makers – from both the left and the right of the political spectrum – to hear what they had to say.
1. Poul Nyrup Rasmussen – President of the Party of European Socialists
First up, Poul Nyrup Rasmussen, former Prime Minister of Denmark and current President of the Party of European Socialists. His main argument is that European economies cannot compete independently of one another in the new global order. By 2050, Rasmussen predicts that today’s emerging economies could account for up to 70% of total global production – and individual European countries will be rendered small-fry by comparison.
Secondly, Rasmussen blames Europe’s centre-right conservative majority for mishandling the crisis. He argues they hesitated for too long with Greece and were “non-European” in their response. Instead, Rasmussen believes we need “true European mechanisms” and a new European economic and financial facility to keep EU economies following the rulebook.
2. Joseph Daul – Chairman of the European People’s Party Group
Next, we posed the idea to Joseph Daul MEP, the Chairman of the centre-right European People’s Party (EPP) Group in the European Parliament. Daul placed himself firmly within the status quo in terms of solutions to the crisis, arguing for a continuation of the bail-out strategy:
What we are doing now is helping these countries overcome a liquidity problem during the phase that is necessary to become competitive again. Structural reforms are essential in a number of countries. This is why the loans given to these countries by the EU and the IMF are linked to strict reform programmes. At the same time we are re-designing the Stability and Growth Pact (SGP) in order to avoid future problems of the kind witnessed in several Member-States.
In other words, Daul is arguing that the bail-outs are there to buy enough time to implement austerity measures and become competitive again. Not everybody agrees that countries like Greece can become competitive again without defaulting on their debts, a sentiment reflected in Standard & Poor’s recent decision to downgrade Greek debt to CCC – the lowest credit rating in the world.
3. Judith Sargentini – Green MEP
Green MEP Judith Sargentini is optimistic about the euro:
The last 10 years should be our guide to the Euro, not the current crisis. I’m from the Netherlands – a trading country – and, although a lot of citizens say the Euro took away our space for spending, I still think the Netherlands has a lot to be thankful for because of the introduction of the Euro. Trading with the rest of Europe is a lot smoother now. The current crisis, however, is a warning that you cannot have a common economy without a common politics.
People have been arguing since the birth of the euro that a common monetary union cannot survive without a stronger fiscal and political union (i.e. common decision-making over tax and spending). However, even moderate moves towards fiscal union prove deeply unpopular with Europe’s electorate. Rose22joh has written about the balance between democracy and sovereignty in a world where international capital flows ignore borders.
What does sovereignty mean in a world so interconnected? A Greek default could destabilise other Eurozone countries and spark off a chain reaction that tips the international community into another crisis. The acting Managing Director of the IMF, John Lipsky, is so concerned he has publicly rebuked EU leaders for engaging in “unproductive debate” and told them to integrate “now”. The EU has, after all, one of the world’s most important currencies – with some 26.3% of global reserves now denominated in euros.
World Reserve Currencies by %
What happens in Europe over the coming months will affect everybody. By preserving Greek sovereignty, do we risk violating the sovereignty of those countries affected by a Greek default? German Christian Democrat MEP Andreas Schwab told us he thinks the EU will develop stronger economic and fiscal unity simply because it has no other choice:
The eurozone countries will behave more responsibly and will establish [stronger rules] for the common currency because it has become a necessity given the interdependence of their economies and because they see the benefits – for example the stability of the Euro and the facilitation of trade. To secure these advantages in the long term a common economic and fiscal policy will also have to be established.
There is still, then, a great deal of support in the European Parliament for the euro. We didn’t speak to any eurosceptics (although we do plan to) – but there was nonetheless broad support for the single currency from both the right and the left. Everybody we spoke to seemed to recognise a need for either stronger rules or closer political integration, but the exact details were left slightly vague.
This is a topic we plan to return to – but this is probably a good place to open it up to comments from you guys. Let us know your thoughts on Twitter, Facebook, in our forum or in the comments below. We’ll take your ideas and comments and show them to more policy-makers for reaction. So, what do you think? Should we abolish the euro? Or is it here to stay?