One year later: the Euro
gamble has paid off
-Yves-Thibault de Silguy,
member of the Board of the Suez-Lyonnaise Eaux group, Paris
Despite the prophesies of calamity that
presided over its arrival, the balance sheet for the Euro is encouraging: economic growth
for the year 2000 should reach, if not exceed, 3% of gross domestic product-GDP. European
monetary stability has reinforced the credibility of the single currency. Finally, the
euro has, to date, won the approval of about 70% of people questioned. At the same time,
euro candidate States are for the most part seeing a positive change in their public
opinion.
The euro gamble has now paid off. One element
in the adaptation of the Old Continent to the changes in the international environment,
the euro is an attempt at a European response to globalization. Thus, the advantages of
the euro are essentially economic: increased growth and greater competitiveness for
business.
A growth factor: The euro is
a factor of European growth. Indeed, ensuring the health of public finances was essential
to its launch and to the establishment of a healthy and stable economic environment. The
more the State monopolizes savings in order to finance its deficits, the higher the
interest rate. When the cost of money is too high, investment is dissuaded, it acts as a
brake on growth and increases unemployment. On the other hand, the existence of excessive
deficits makes it impossible to conduct an active employment policy and prevents the State
from preparing for the future. Demographic changes, higher health expenditure and
environmental protection measures herald considerable costs, to be borne by the community
in twenty or thirty years time.
The great merit of the euro is that it forced
the European States to put their public finances in order from 1993 on. Besides this, the
euro is the essential complement to the single market. Its creation corrects a major
deficiency in the European community area. A single market without a single currency is
like an engine without oil: it seizes. By eradicating exchange variations, and by
permitting easy comparison of prices, the euro helps to break down barriers within the
domestic market. A large market, without exchange rate risks, puts business in a better
position.
Consumers are, lastly, the principal
beneficiaries of the single currency. A survey by the Commission, in October 1996,
revealed large price differences in Europe: a car could cost 40% more in Portugal than in
the UK. With the euro, price transparency is assured.
The launch of the euro is not an end in
itself. Put into circulation, its success will be complete and the anticipated benefits
collected, on the day when Europe draws from it all the consequences for the process of
economic integration. To this end, monetary Union calls for a move forward in four main
directions.
The euro should, in the first place, speak
with one voice on the international stage. This brings us back to the problem, not yet
suitably resolved, of how it is represented externally. More than a symbol of power, the
purpose of euro is to become an operational tool to prevent and manage crisis, and to
permit the Union to play a part in the reform of the international monetary and financial
system.
In the second place, completion of the
monetary Union demands preparation for the due date of January 1 2000 just as meticulous
as it was for the changeover of January 1, 1999. There is still much to be done; the
introduction of coins and notes in euros raises considerable psychological and practical
problems for the citizens. It is also necessary to increase the integration of the
European financial markets, which, in some cases, implies a transfer of responsibility to
the community level.
EMU is, furthermore, an open-ended process.
The provisional frontiers of the Euro 11 are supposed in the long term to coincide with
those of the European Union. The sooner the better for the free flow and effectiveness of
the single market; its logic demands it.
There remains one key aspect: the realization
of economic Union. Certainly, the convergence of the economies of the States in the euro
zone has reached a level sufficient to share the same currency. But the single currency is
living under one particular constraint: the conduct of economic policy remains within the
province of national competence under the treaty. Yet a lack of overall coherence of the
sum of the different national economic policies is making the work of the European Central
Bank, ECB, guarantor of price stability and fit to lead monetary policy at the European
level, more difficult.
A real political will: The
euro was launched at a time when the States had become certain that public finances would
be rigorously managed by all. To this end, the Amsterdam European Council in June 1997,
adopted a two part "pact for stability and growth": a preventive section, to
ensure the return to balance of public finances, by the end of 2002 at the latest; and a
dissuasive section, applying only to States in the euro zone, specifies and etimises the
public finance sanction and correction procedures, in the event of slippage.
Economic union is on track, the political
will seems real. The machine now must step up the power. If it does not, the EU will not
be in a position to take up the paradox of the treaty-a single monetary policy, national
economic policies-nor to carry out the structural reforms required.
The euro can’t be the elixir of youth
for a Europe in the process of changing from an industrial economy. But it has undenyingly
helped to increase awareness of the extent of the structural reforms to be undertaken. An
internal market, a monetary Europe, an economic Union: the European economy is steadily
providing itself with the resources for its integration into world globalization. For the
greater good of the Europeans too, since growth and employment should result from it and
lavish a higher level of wealth and prosperity on them. That covers the long-term trend.
Such a sequence of developments does,
however, have its limits: those of how acceptable it is to European public opinion.
Flexibility, the State’s disengagement from economic matters, deregulation, reforms
of social security schemes… all factors driving the European economy, all the social
costs of which the population is not spontaneously disposed to shoulder.
The Europe of economic and monetary
efficiency can not work for the properity of our children by sacrificing, on the altar of
sacred and healthy macro-economic management, the welfare guarantees of present
generations acquired in the course of the 20 century. There is already a plethora of
demonstrations of a need for a more social Europe. The Amsterdam Treaty made a qualitative
leap forward in this matter, but the populaion has yet to be convinced of this and it
remains to convert good and generous intentions in to concrete actions. Such is the
problem of the next economic development areas in the construction of Europe. They have
major implications for the future of Europeans.
Text courtesy: Label France, July issue,
2000-Chief editor. |
