Commentary by Louis VIS
Whilst the idea of a single currency for the whole of the European Union (EU) gained momentum from 1969 onwards, it had to wait until the signing of the Maastricht Treaty in 1992 and the strong leadership of Jacques Delors, then President of the European Commission, to become a concrete European objective. This objective became reality on the 1st January 1999, when the new single currency, the Euro (€), was launched as an electronic currency before entering into circulation on the 1st January 2002. However, the Economic and Monetary Union of the European Union (EMU) is often considered to be incomplete and seen as a monetary union established for political objectives by politicians themselves and not economist. Thus many economists and scholars alike believe that its institutional design is inherently weak, flawed and full of economic ambiguity. Indeed, it is true that the EU is not an ‘optimum currency area’.
Regardless, the EMU is often considered as ‘the flagship project of European integration’ and the EU’s most ambitious project. Therefore and unsurprisingly, when the financial crisis hit the EU in 2008, it quickly became the EU and EMU’s biggest challenge. Many believed, and still do believe, that ‘if the euro fails, Europe fails’. When looking at the impact of the financial crisis within the EU it is clear that it has exposed its institutional weaknesses. However, it would wrong to assume that these weaknesses alone are responsible for the failures of the EU to deal with the crisis effectively. Exogenous factors such as failing governments (ie: Greece), and low public opinion have also had a role to play in exacerbating the impacts of the financial crisis within the EU.
The lack of a fiscal union along with a monetary union demonstrates that the EMU was launched as an incomplete project. However, since the crisis, the EU has actually tried to respond. Unfortunately, the lack of public support and the lack of co-operation and solidarity between Member States within the Eurozone as well as in the EU generally, only served to hinder such actions and thus served to exacerbate the impact of the crisis. This has therefore led scholars to talk of solidarity as the ‘Achilles’ heel of EU integration’. Ultimately greater solidarity and integration among Member States might have helped to build a stronger initial project and thus minimise the EMU’s institutional flaws. However, whilst reforms for EMU are seriously needed for its further success, it appears unlikely that public opinion in the EU would be ready for this. Whilst the Greek crisis has led to some improvements in the Eurozone, the risk remains that public dissatisfaction, the rise of populism, and major electoral setbacks may instead cause the undoing of the EMU. Therefore although institutional flaws may indeed have a part to play in the impact of the crisis on the continent, they alone cannot be seen as fully responsible for the depth and impact of the financial crisis.