Euro – liantul stabilității (Euro – the Bond for Stability): A synopsis
Editura Academiei Române, 2024
Foreward
Eugen Dijmărescu
In 2024 the Euro has marked its 25 years. An opportunity and an invitation to remember the harsh days of creating the European single currency, but also the present reasons that made some of the member states to be still outsiders of the Eurozone, despite provisions of their Accession Treaties to the EU. In a quarter of a century, Euro has been confronted with harsh threats to its stability – a financial and debt crisis, an energy crisis, a pandemic, a war, Brexit, a broken supply chain, all rooted outside Europe -, and it has overcome them all. The opinions expressed belong to researchers from non-Euro area countries, which joined the EU between 2004 and 2007, to give the reader a local insight from different jurisdictions concerned. At a time of revival of sovereignism and nationalism the book wishes to offer the reader a better understanding of societal fears and doubts, or political choices that keep those countries at bay from membership. It opens the door to ponder those still making their mind, both from an economic perspective and a domestic policy option, supported or presumed likewise, by the population.
The case of Euro has been long debated, opposed or supported. The narrative reveals that Euro is not only an economic instrument, but also has a powerful political significance. Beyond the presumed belief that Euro has emerged as a compromise between France and Germany with the aim of achieving balance in Europe, the research has revealed that Euro has developed primarily into a tool of unity and solidarity in Europe, offering trust to members and partners worldwide. Despite national peculiarities, cultural differences or past animosities, Euro has raised above them and, proving stability, it has proved un-equivocally that no financial crisis, no disruption of global distribution channels, no pandemics or nearby war can defeat it.
The Euro stands as a complex and unique tool within the European framework, itself neither an optimal monetary zone nor a federal entity. While respecting the visionaries behind the currency, concerns about unrealised political objectives and limited engagement from certain countries are the consequence of institutional indifference and lack of proactive involvement in the European debates. The absence of comprehensive pro-European education and neutral public consultation about the EU’s common future highlights the need for a stronger, collective European identity. Whatever analysis explores the complexities of the European Monetary Union, its challenges, and its role within the broader European framework, examining structural weaknesses and how external shocks and geopolitical tensions influence European integration, it reveals the Euro’s dual role as a unifying force and a source of contention.
The European Economic and Monetary Union (EMU) faces theoretical and practical challenges compared to optimal currency areas. While the EMU struggles to achieve optimal currency area characteristics without labour mobility or fiscal transfers to mitigate asymmetric shocks, the absence of centralised fiscal authority and cohesive decision-making processes hinders response to crisis. Divergent national fiscal policies divide the Eurozone between core states favouring fiscal discipline and peripheral states advocating shared debt mechanisms. The reliance on external capital creates vulnerabilities, mainly when sovereign debt is held by non-residents, increasing the risk of market speculation.
Built as a pillar of unity, beside the economic asset, the Euro has dealt with the challenges of a changing global order. Its stabilising role has been particularly obvious during the COVID-19 pandemic. Together, the Single Market and the Euro mutually reinforce European competitiveness and solidarity. However, beyond pure political or security stimuli, questions remain about the feasibility of future enlargement of the Euro area and the readiness of candidates to meet political, economic, and legal commitments. The sacrifices undertaken by member states to integrate all the above reflect the complex balance between national interests and collective progress within the European Union.
The Euro’s origins were shaped by differing economic traditions, from the German preference for stability through rules to France’s emphasis on public intervention. Key persons like Jean Monnet, Helmut Kohl, and Jacques Delors laid the foundations of a far-sighted European integration, involving the single market, the rule of law, the financial market, services supply of public goods, energy, environment and the Euro as landmark of stability, ambitions which current leaders in Europe are short of. Today’s politicians lack of commitment has fuelled further the erosion of trust in EU institutions, already alive due to public resistance to elite-driven integration and failed initiatives, like the European Constitution. While the currency has proved resilience during financial crises, particularly between 2008 and 2012, structural imbalances between national sovereignty and unified governance persist, as evidenced by the Euro area’s struggle with the missing fiscal unity and delayed financial solidarity, especially during crises. It is worth noting that even when ECB discretionary measures were met with public scepticism, the confidence in the single currency did not diminish. That is a strong asset of the Euro, not welcomed by other powers in the World.
The Euro faces complex threats, including geopolitical crises such as the war in Ukraine and in the Middle East, which combine economic and social risks and increase Europe’s vulnerability to external pressures. Those include efforts by BRICS to challenge Western economic norms, including cross border transfers. While the Euro provides stability to global markets, the EU’s fragmented governance, characterised by absence of federal mechanisms, makes it susceptible to political challenges. Rising populist and Eurosceptic narratives that point at the European institutions as sources of national problems, combined with limited democratic oversight and excessive technocratic governance, deepen public alienation and enhances nationalist sentiment. Those issues counteract to internal debates over reforms, such as transition from unanimity vote to qualified majority in the European Council.
The historical road of European monetary integration, from the 1969 Plan Barre through Pierre Werner’s proposals and the European Monetary System, faced numerous challenges, including global economic disruptions and resistance from certain member states. Under Jacques Delors’ leadership, the groundwork for the single currency culminated in the Maastricht Treaty. Nevertheless, the persistent tension between political ambitions and the absence of robust federal institutions has shaped the Euro’s development, though crises have paradoxically driven to deeper integration. Historical moments, such as the 2010 Deauville agreement between the French President Nicolas Sarkozy and German Chancellor Angela Merkel, to scrap automatic sanctions for breaches of fiscal rules, made the sanctions system vulnerable to political negotiations, and stays as examples of how much domestic political agenda undermine collective European mechanisms.
The interaction between solidarity and national identity raises both opportunities and challenges for European integration. While solidarity through mechanisms like the European Stability Mechanism and NextGeneration EU demonstrates a commitment to collective action, national identity emphasises sovereignty and the particular. The expansion of the EU has amplified this tension, raising questions about the compatibility of those values with further integration. The emergence of new financial instruments, such as EU-wide taxes and Eurobonds, represents steps toward a more unified fiscal architecture. However, these initiatives continue to face resistance from member states concerned about their sovereignty. Achieving balance is walking on thin ice: national identity can support solidarity up to a certain point, but beyond that, it risks becoming a barrier to unity.
Eastern Europeans’ relationship with the Eurozone reflects deep economic, cultural, and historical influences. Their transition from planned to market economies and concerns over monetary autonomy and fiscal discipline have fostered cautious approaches to Euro adoption: smaller and less competitive jurisdictions face challenges in aligning with more advanced Euro area members’ economic framework. At the same time, public sentiment often shows fear of alienation and prioritisation of bureaucratic imperatives over national identity. Late state formation and alliances driven by necessity rather than solidarity have contributed to scepticism about deeper integration and supranational governance. Moreover, Eastern governments often emphasise the potential risks of losing levers of currency devaluation or interest rate adjustments, particularly in responding to economic downturns.
The Euro’s future trajectory faces various scenarios shaped by economic, political, and social factors. Digital currencies, environmental sustainability requirements, and demographic shifts may reshape monetary systems and economic policies. Geopolitical dynamics influences defence, security, and economic strategy decisions, including relationships with the U.S., China, and Russia. Despite innovative interventions, the Euro area’s rigid fiscal rules and institutional fragmentation, particularly within the European Central Bank, are limits to crisis response capabilities. Setting ambitious goals for 2030 to overcome fragmentation and stimulate economic growth is essential for ensuring the Euro area’s long-term sustainability. Furthermore, estimates for green and digital transitions suggest investment needs of over €1 trillion annually by 2030, an amount achievable only through integrated capital markets and efficient resource allocation.
The Euro’s role as a cornerstone of EU economic unity exemplifies both progress and persistent challenges. While serving as the second reserve currency of the World, structural issues, economic heterogeneity and divergent national interests undermine its potential as a strategic alternative to the dollar. The unfinished banking union and the absence of a European deposit insurance scheme leave the system vulnerable to financial fragmentation. The ongoing expansion of the EU (contemplating the inclusion of Ukraine, Moldova, or the Western Balkans), echoes long lasting debates on enlargement versus deepening integration, with institutional reforms often sidelined by domestic agendas in core European states. The broken bridge between economic and political integration, reveals that while economic solidarity is driven by market optimisation, political solidarity requires deliberate effort and a commonly shared purpose.
Adopting the Euro has both benefits and challenges, including price transparency and exchange rate stability, but also involves relinquishing national monetary policy and accepting Stability and Growth Pact constraints. The process remains inherently political, requiring consensus among EU member states and reflecting both economic convergence and political judgment. Eastern European states’ hesitation, driven by economic and political factors, illustrates how national priorities shape the Euro adoption despite Accession Treaties obligations. As Europe confronts external challenges, the Euro’s role in enabling seamless financial operations across border becomes increasingly significant. However, its success depends on addressing socio-economic disparities and new demands arising from the EU enlargement. The future success of the Euro hinges on deeper integration, including a restructured EU budget and the creation of permanent financial instruments.
The Euro’s upgrade from regional to universal currency meets significant challenges, including geopolitical tensions and uneven economic cohesion within the EU. Maintaining restrictive Stability and Growth Pact parameters reflects persistent neoliberal austerity approaches that hinder societal resilience, while investment needs for green and digital transitions require integrated capital markets and efficient resource allocation. At the same time, the Euro’s international role remains limited by incomplete economic and monetary union and fragmented policies.
Democratic and economic disparities across the EU highlight tensions between unity and diversity. While some member states resist Euro adoption, citing various considerations, proposals for treaty modernisation emphasise the need for an adjustable architecture balancing shared values and flexible paths of integration. The diverse explanations for not being a part of the Euro area illustrate a complex interwoven of historical, political, and economic factors, showing the region’s divergent path. Looking ahead, the EU must address those disparities by engaging citizens in shaping a more inclusive and resilient Europe, strengthening its role as a global power committed to prosperity and stability via treaties reform that transcend national self-interest.
