Not Whats wrong with the Euro?; but Why was the Euro made wrong?

Article published on Oct. 28, 2002
community published
Article published on Oct. 28, 2002

This article has not been vetted by an editor at Paris HQ

The CaféBabel debate on Whats Wrong with the Euro managed to reflect and pre-empt an escalating debate in the real world of politics. With Romano Prodis recent admission that the Growth and Stability Pact, the rules covering Eurozone governments fiscal behaviour, is stupid, the CaféBabel debate has apparently uncovered a dilemma that lies at the heart of the Euro.

The CaféBabel debate on Whats Wrong with the Euro managed to reflect and pre-empt an escalating debate in the real world of politics. With Romano Prodis recent admission that the Growth and Stability Pact, the rules covering Eurozone governments fiscal behaviour, is stupid, the CaféBabel debate has apparently uncovered a dilemma that lies at the heart of the Euro. Conflicting sides of the dilemma are represented in the two articles on the CaféBabel website. On one hand, the article by Duprat-Briou, Alban Pillet and Pinturault argues that the economic gains to be made from membership of a single currency and the potential for political representation and intervention in an international economy are not being fully reaped due to the inability of Europes political elite to unify economic policymaking at the EU level. On the other hand, Nekvapil argues in his article that the effect of EMUs monetary integration without concomitant political integration risks, and explains, nationalist backlash by discontented citizens increasingly aware of the institutional weaknesses of their representative institutions, in particular due to passing of economic competencies to an unrepresentative European Union. Therefore, the dilemma appears to be as follows: gains from a single currency cannot be fully realised until political integration has advanced to the point where economic management can be performed at the European level; however, political integration is increasingly held back by the nationalist tendencies that arise from European integrations focus predominantly on economic issues. In other words, European integration takes an economic form because popular support for political integration is lacking due to the economistic nature of integration. The dilemma therefore shows its circular and irresolvable nature: popular support for the EU is lacking due to the inability of the EU to meet popular demands due to the need to respect national sovereignty, which is itself due to the lack of popular support for the EU.

However, although the problems of the Euro and the Growth and Stability Pact appear to relate to problems of national and European identity and the allocation of competencies at the national or European level, a closer look reveals that the dilemma outlined above itself results from attempts to resolve an equally irresolvable dilemma: how to democratically govern in a market economy unable to tolerate inappropriate intervention. We can call this the democratic-economic dilemma, by which we mean that political intervention in the economy of Western Europe must be of an appropriate nature in order to avoid recession and/or economic crisis; yet the concept of democracy and self-government rules out the idea of an objectively appropriate direction for policymaking as it rules out the possibility of subjective deliberation, decision making and self-government. From this perspective, the mismatch within European integration between under-developed political integration and over-developed economic integration can perhaps be viewed not so much as a political accident or the effect of a natural time-lag between economic and political integration, but rather the conscious attempt to depoliticise economic activity and therefore resolve this central dilemma facing democratic attempts to govern the market. The attempt to use the EUs quasi-constitutional treaties and protocols to set in stone the rules of the economic game sought to remove democratic pressures to spend beyond economic limits. However, slow growth and ongoing problems of unemployment across Western Europe demanded a governmental response and showed democratic pressures to be stronger than anticipated. With the result that Portugal, Germany and France have each overstepped, or are about to overstep, the line marked out by the Growth and Stability Pact. The criticisms currently facing the Pact therefore represent the rearing of democracys troublesome head and the re-emergence of the democratic-economic dilemma, yet this time it is complicated further by the sovereignty-efficiency dilemma, itself initially invoked to depoliticise the economy but now representing an obstacle to the resolution of the latest manifestation of the democratic-economic dilemma. Whatever form the latest resolution of the democratic-economic dilemma takes be it economic government by the Council, election of the ECB president, abandonment or relaxation of the Growth and Stability Pact, or whatever we can be certain that, unless it involves the end of either democracy or the market economy, the effects of this central dilemma will emerge in new forms, new crises and new debates. Whilst we may not be able to resolve the dilemma, awareness of it and its effects may at least help to sharpen our response, and avoid the misconception that the problem is about national versus European identity or national sovereignty versus European efficiency, but rather is about subjective democratic decision making within objective economic constraints.