The debate on Europe’s Single Currency is based around a number of myths. Here’s four of them busted
The euro was supposed to be a catalyst for growth, principally on the basis of the theory that by abolishing national currencies there would be lower transaction costs across this vast market. But that’s not happened, indeed the Euro has hindered growth, setting Europe back in terms of its position in the global economy. Within OECD countries, over the period 1998-2011, Eurozone growth rates lagged Australia by 28 percentage points, Sweden by 20 points, Canada by 18 points, and the US by 10 points. The gap with the BRICs – Brazil, Russia, India and China – is even more dramatic. The fact is since the Euro’s establishment, Europe has become the ‘sick man’ of the global economy, and this will accelerate with the austerity measures taken to try to preserve it at all costs.
The euro was supposed to have deepened European economic integration, but it failed to achieve this, particularly after 2007. Where there has been integration it has been much less because of monetary union than an industrial logic, such as the German automobile sector’s expansion into eastern Europe, or the Airbus project. The Euro has been more a story of economic disintegration, as the struggling weaker Eurozone members have sought to export to countries outside the zone to pay for the unsustainable cost of imports from the zone’s powerhouses, France, and above all Germany.
The euro was going to be a haven against speculation. But instead speculation has just shifted its focus. Gambling by financial markets over currencies shifted to speculation on sovereign debt, as the yawning sovereign bond spreads – very low interest rates in Germany and sky high rates in Greece and Spain – show. A single currency has nothing to do with curbing speculation. This requires other measures such as control over capital markets and the nature of the operations within them.
The emergence of the euro was supposed to cut the dollar down to size. But it has not weakened. The euro has in fact led to an increase in the weight of the greenback and the formation of an euro-dollar currency duopoly which favours the United States. The dissolution of the euro area might actually have a positive stabilising effect on the global economy by promoting a more rapid emergence of new reserve currencies. It is even likely that the existence of the single European currency is an obstacle to the implementation of a reform of the international monetary system, a reform now openly called for by the BRICS, and in general, a number of countries whose economies are experiencing strong growth.
This is an edited version of an article (in French) by Jacques Sapir, director of studies at Ecole des Hautes Etudes en Sciences Sociales in Paris, and head of the Centre d’Etude des Modes d’Industrialisation, published in Memoire Des Luttes