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A well-known cliché about European integration runs like
this: European countries are divided by language, preferences
and national rivalries. They are also united by a shared history
that demonstrates the destructiveness of these rivalries.
The European project seeks to overcome these and realise the
enormous gains from cooperation. But full integration is too
big a step. With governments committed to national interests
first, the European project remains a halting and piecemeal
affair. Big leaps occur only at moments of crises, when the
costs of failure to decide collectively and cooperatively are
overwhelming.
There is more than a grain of truth to this cliché. But as Ivo
Maes demonstrates in this splendid short history of the euro,
it is also incomplete, missing a critical element: the power of
economic ideas and their ability to rationalise what happens
to be feasible. Maes focuses on the ideas underpinning the
drive to economic and monetary union (EMU) and explains
why they either fell flat (the Werner Report) or became a
driver of integration (the Delors Report).
Consensus around economic policy evolves through a
process in which schools of economic thinking enter the
minds of policymakers, dominate for a while, and eventually
fail. The consensus then moves on. This process is largely
supranational, driven by shared common experience: the
Great Depression, postwar recovery, stagflation, currency
instability, the Great Moderation, the Global Financial Crisis,
lowflation, COVID-19, the invasion of Ukraine.
The essential insight of the essay is that the leap to the
euro was made possible when the economic consensus
converged on viewing independent monetary policy as
essential and monetary-fiscal coordination as irrelevant,
if not outright harmful. At that moment, economists had
justified a construct that European politicians were capable
of delivering: a common currency without a common fiscal
policy.The euro was born because the pillar of EMU that
was out of reach – common fiscal policy – was temporarily
viewed as unimportant.
The result was a great step into a woefully incomplete
architecture. Can we do better? Perhaps to the extent that
the evolving economic consensus highlights new areas of
collective gains that turn out to be feasible. Will this address
the structural handicap of the euro, the political and fiscal
fragmentation of its membership? I am not sure.
Ivo Maes has given us a gift that helps us celebrate – or at
least reflect on – the euro’s twenty-fifth birthday: thought-provoking,
wise and highly readable. Enjoy.
Jeromin Zettelmeyer
Director of Bruegel, February 2024