By Simon McMahon
The Euro is going through its greatest challenge, a fight for survival. The financial crisis and subsequent economic downturn have put the single currency under pressure as Greece, Ireland, Portugal and possibly Spain or Italy struggle to keep markets happy, confidence up and debt off their backs. However, despite the ease with which political and media elites squarely place the blame on these countries’ shoulders, the bad news goes beyond their situation. Large deficits and high levels of public debt, at an average of 6.3% and 78.7% in the Eurozone, respectively, have made the Stability and Growth Pact seem irrelevant and ineffective. Growth out of the recession has been slow and uneven across the Eurozone, whilst unemployment has remained stubbornly high. According to the economist Nouriel Roubini structural reform is needed or the aforementioned countries may have to leave the Euro.
Economic and Monetary Union, designed to maintain monetary stability, encourage investment and economic growth as well as lowering unemployment, appears to be failing, whilst the Euro2020 Strategy goals seem ever-further away. Yet there appears to be political will across Euroland to fight for the single currency. At the annual knees-up of the economic elite in Davos, French President Sarkozy has vociferously pledged to defend the Euro. Suggestions of countries leaving the single currency have been rejected. Why is this so?
First, the costs of leaving the Euro are perceived to be higher than those of staying in. As noted by Scott James on Europe on the Strand in December, there are no institutional mechanisms for member states to leave, and the impact of a change in currency on trade balances with countries that retain the Euro is uncertain.
Second, again noted by Scott James, in line with sociological institutionalist reasoning monthly ministerial councils, weekly working group meetings and daily communications between European policy makers have fostered a powerful sense of collective belonging among European elites. These actors consequently retain a certain level of support for the single currency.
Third, EMU and the launching of the Euro were seen by many as a step towards deeper integration and the development of a united Europe, viewing a national currency as a central reference for collective identity. For example, whenever a British resident goes through a cash transaction they are in contact with the head of the monarch, along with an array of other symbols and historical figures that define the nation. In this way the Euro can be interpreted as a symbol of the unification of the EU.
The position of President Sarkozy is firmly situated on this third point. In his own words, the Euro’s future is “not simply an economic issue, it has to do with our identity as Europeans”. At a time when there is talk of the failures of Union and the possibilities of disintegration, it may seem counter-intuitive to speak of a common identity. Yet the crisis could hypothetically provide a masked opportunity to further the integration of European society.
Advocating a European Constitution, Jurgen Habermas has argued that political integration is improbable without the legitimation of shared values. Commenting on this task, he noted that “economic expectations alone can hardly mobilize political support for the much riskier and more far-reaching project of a political union”. Along with the development of a public sphere and recognition of a shared political culture, Habermas suggests that the very process of deliberating on a Constitution can have a catalytic effect, uniting European citizens around a specific collective issue. Alas, the constitutional project fell a long way short of reaching this goal. But could the Euro as a symbol of shared identity, rather than an economic tool, provide the catalyst for future political developments?
Europe needs a new direction. Recognition of the shortcomings of EMU and neoliberal capitalism, and establishment of a more inclusive and egalitarian political economy are necessary. But this comes at a time of legitimacy crisis as levels of trust in European (and national) institutions decline. Whilst supranational political reform and change is suspiciously viewed by the public, can the symbolic character of the Euro suggest a sense of unity and common purpose strong enough to give political legitimacy to Europe’s leaders? In short, will Europe rally around the Euro? Time will tell if elites and publics are to follow President Sarkozy down this path.