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The euro has become a different currency from what we were promised, because it has placed more emphasis on the rapid introduction and expansion of the currency union than on enforcing fiscal rules. Moreover, the countries of the South were able to set the monetary course simply because they were in the majority. As a result, we have all become Italians monetarily and fiscally, according to columnist and publisher Syp Wynia in an interview with Holland Gold.
In this conversation with Paul Buitink and Joris Beemsterboer, Wynia outlines the background from which the euro originated. He notes that there were not only economic, but also political interests at play. In France, in particular, the euro was seen as a means of controlling Germany and getting rid of the dominant role of the Deutschmark in Europe.
Together with the Italians, the French played an important role in shaping monetary policy, because after the conservative central banker Wim Duisenberg, a Frenchman (Trichet), an Italian (Draghi) and again a French (Lagarde) became the head of the central bank. As a result, monetary policy became increasingly accommodative. "This is typical of how the euro works", according to Wynia.
Wynia explains that after the Second World War, the Americans played an important role in the unification of Europe. In that sense, according to the columnist, they also had an interest in a European currency union. But since the introduction of the euro, it has always been a balancing act between Germany and the southern countries. The euro could not become the hard currency due to the participation of countries such as Italy and Greece, to the dismay of monetary and fiscally conservative countries such as the Netherlands and Germany.
The columnist notes that since the credit crisis, the entire euro policy has been geared to keeping Italy within the currency union. Even Eurobonds are emerging from this, as this was seen as a way to avoid fragmentation of the capital market. By borrowing jointly, interest rates remain low and Italy can finance its debts more easily. The result will be that the whole of Europe will eventually pursue an 'Italian' fiscal policy.
According to Wynia, the transformation of the euro from a strong to a weak currency is also reflected in the attitude of politicians. Right-wing parties were strongly in favour of the currency union because of the economic benefits, but that changed due to the increasing influence of southern countries on policy. Indebtedness and breaking fiscal rules became the norm, and the euro is now more popular with parties on the left side of the political spectrum. This is despite the fact that left-wing parties were the most critical of the euro at the beginning.
Wynia does not endorse the idea that the Netherlands should leave the euro. "If other countries do not comply with the rules, then it would make more sense to expel those countries from the currency union." That is what the Stability and Growth Pact was designed for. According to him, it cannot be the case that countries that do not comply with the agreements can continue to leave their mark on the euro. In this sense, the ECB has mishandled the Greek debt crisis, as it has set a precedent for other countries.
