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Happy birthday, Euro

Gregory Sawisky - Omega contributor

On Dec. 31, 2008, as the world was gathered around television sets, city squares and nightclubs to count down the final moments of the year, another entirely different milestone was about to be reached.

The euro, the European Union’s common currency—and now used by 16 countries—marked its 10th anniversary on Jan. 1.

One common currency in a region as diverse as Europe, however, has presented challenges. While it was invented as a way of stabilizing the European market—a power in numbers maneuver—some countries have been hurt by the inability to regulate their own currency.

“When the euro was introduced, some economists warned that Europe was not a single monetary area,” said Antal Deutsch, a Professor of Economics at McGill University in Montreal. In June 2008, the president of the Czech Republic, Václav Klaus, wrote an article of the upcoming anniversary in The Financial Times.

When responding to the idea of whether or not Jan. 1 was to be marked as a celebration or not he wrote “The answer is uncertain, given [Europe’s] sluggish economic growth, great growth differences among countries and large differences in inflation, even though a single country should have one rate.”

Klaus went on to highlight what may be the biggest underlying concern with the common currency.

“Member countries already react differently to the appreciation of the euro against the dollar, the rising cost of energy, food and raw materials and Asian competition. We can expect politicians eager to divert the disappointment of their citizens from their own doorsteps to increase pressure on the [European Central Bank] to adjust its monetary policy to the needs of the largest, most influential countries of the zone.”

Peter Oborne of The Daily Mail echoed Klaus’ comments. In an article appearing on Jan. 2, the day after the 10-year anniversary, Oborne predicted the euro would not survive to see another 10 years.

“The new currency was mollycoddled during a decade of benign global economic conditions and only now is being tested for the first time,” he said. “And it is already showing signs of being unable to survive the strain.” Deutsch, however, believes a certain degree of dissatisfaction will remain a constant as member countries deal with the implications of working under a common central bank.

“From time to time I think it’s a fair prediction to hear noises,” he said.

While Oborne predicts the euro will not live to see its 20th anniversary, optimism is still strong in the European Central Bank.

In an interview published through the European Central Bank, the bank’s president, Jean-Claude Trichet, spoke highly of the euro.

“As a symbol of European unity, the euro is already extremely successful,” he said. “Since the outbreak of the financial crisis, the euro and the ECB have become, even more visibly, a central anchor for confidence. In this sense, I believe the emotional relationship of citizens to the euro has become stronger.”