Where would we be without Europe?
If the financial crisis looks bad, I for one am thinking it might have been even worse — in the euro zone at least — had European countries not decided to pool their economies together by launching the single European currency.
I covered Europe in the 1980s from Belgium and Luxembourg when the idea of a single currency was still the pipe dream of a few old men who back in the 1950s had been inspired by the idea of a united Europe emerging from the rubble of World War Two.
Then in the 1990s, I was based in Paris when France and Germany, the powerhouse duo of European integration, struggled to align their economies in preparation for European monetary union. In a smaller version of what is happening now, huge volumes of money washed around Europe’s financial system, as currency dealers bet that the governments of Europe would never be able to pull it off.
The spending restraints needed to knock economies into shape were hugely unpopular, yet governments — mindful of the competitive devaluations of previous decades — stuck to them in the hope of better days ahead. I remember then Bank of France governor Jean-Claude Trichet patiently explaining to journalists the need for monetary union, so that individual countries were no longer vulnerable to a run on their currencies that would force up interest rates to suffocating levels.
Looking at what is happening now, the early visionaries of European integration seem remarkably prescient. Or put more directly: If there were no European Central Bank, how many more Icelands would we have inside the euro zone?
Of course, this picture may be too rosy. Europe has struggled to form a coordinated response, as Paul Taylor says in this analysis. “Since the credit crunch swept into Europe from the United States last month,” he writes, “European countries have gone their separate ways in rescuing distressed banks, guaranteeing some or all deposits and suspending practices like short-selling shares.”
So am I being over-optimistic in thinking that the euro is one of the few bedrocks that we have right now, for which we have to thank those who conceived and gave birth to it in the 20th century? What would have happened had there been no single currency? And how well will that bedrock withstand the challenges today?