Is the Euro a European Public Good?
Amalia Fugaru
This chapter examines whether the euro can be regarded as a European public good, drawing from discussions on the European Single Market, which represents the success of the European economic integration project. While the euro was conceived as a natural complement to the Single Market, its 25-year history has been marked by governance challenges that have, at times, threatened the EU’s political stability, such as during the sovereign debt crisis. Additionally, the delayed adoption of the euro by some EU member states, which are legally required to implement it, has tempered the enthusiasm not only for the currency itself but also for the broader principles and objectives it symbolises.
Rather than providing a definitive answer to the title question, the study aims to explore a variety of perspectives on attitudes towards the euro within the Economic and Monetary Union (EMU). The analysis highlights that discussions about the euro are often restricted to economic and fiscal governance issues, thereby neglecting its political and societal dimensions. By framing the euro as a „public good,” the research draws on Elinor Ostrom’s framework on common pool resources to examine whether this conceptualisation can offer new insights.
The chapter is structured into three sections. The first addresses conceptual questions about the euro as a public good and investigates the relevance of Ostrom’s analytical framework to this context. The second and third sections evaluate whether these theoretical perspectives align with the realities experienced by eurozone members and countries bound by treaty obligations to adopt the euro. Finally, the research proposes a broader set of questions for policymakers, researchers, and the public beyond the commonly debated costs and benefits of adopting the euro.
The first part thoroughly explores European public goods, highlighting their definition, historical evolution, and contemporary significance. Public goods at the EU level are characterised by their capacity to deliver greater benefits when managed collectively across member states rather than individually. The analysis roots this concept in the intellectual lineage of global public goods, incorporating criteria such as pan-European benefits, citizen preference homogeneity, and economies of scale. These features justify the need for European-level initiatives to address transnational challenges such as climate change, digital sovereignty, and defence. However, significant barriers impede the effective provision of European public goods. Thus, the EU’s resource allocation practices often prioritise regional or local concerns over broader European benefits. Moreover, institutional constraints, including the heterogeneous preferences among member states, further limit the scope of coordinated action. These obstacles underline the necessity for structural reforms that enhance the EU’s ability to provide public goods while maintaining political and economic legitimacy.
The analysis proceeds with conceptualising fiduciary money as a public good, evaluating its compliance with Samuelson’s criteria of non-rivalry and non-excludability. Fiduciary money facilitates transactions, serves as a store of value, and provides a unit of account, appearing to meet the fundamental characteristics of public goods. Nevertheless, certain conditions—such as inflation or restricted access due to financial regulations—undermine these qualities. The evolution of money from commodity-based to digital forms introduces complexities that challenge its straightforward classification. The discussion further examines externalities and societal trust as essential components of fiduciary money’s functionality. Network effects amplify its value as more individuals and institutions adopt a currency, creating benefits that transcend individual transactions. However, the monopolistic issuance of fiduciary money and potential mismanagement by central authorities pose significant risks to economic stability. These concerns underscore the dual nature of fiduciary money as both a societal necessity and a source of systemic vulnerabilities.
The defining features of common goods – non-excludability and rivalrous consumption – are considered in the context of their management challenges. Examples like fisheries and forests illustrate the tendency of common goods to be overexploited without effective governance. The „tragedy of the commons,” as conceptualised by Hardin, suggests that unregulated access often leads to resource depletion, harming collective welfare. The critique of Hardin’s deterministic view introduces Ostrom’s alternative framework, demonstrating how communities can successfully govern common goods through localised, participatory institutions. Her principles—such as clear boundaries, collective decision-making, and adaptive governance—highlight the potential for sustainable resource management. This nuanced perspective challenges the dichotomy between privatisation and state control, advocating for decentralised solutions that balance individual and collective interests.
Fiduciary money is examined within the framework of common goods, drawing a parallel between inflation and the overexploitation of shared resources. Monetary stability is presented as a collective asset that necessitates diligent governance to mitigate systemic risks comparable to the tragedy of the commons. Ostrom’s principles are applied to propose institutional structures prioritising transparency, accountability, and collective decision-making in monetary policy. The resilience of fiduciary money is critical in its classification as a common good. Resilience is defined in terms of the system’s ability to absorb shocks, adapt to changing circumstances, and maintain its core functions. This adaptability is essential for addressing economic disruptions, technological innovations, and evolving public expectations, ensuring the long-term stability of monetary systems.
Trust emerges as a foundational element in the governance of fiduciary money, anchoring its legitimacy and societal acceptance. Drawing on philosophical constructs like Locke’s social contract, it is argued that fiduciary money functions effectively when citizens trust the issuing authority to maintain its value. Historical examples of monetary crises demonstrate the fragility of this trust and its implications for economic stability. Public choice theories provide additional insights into the governance of fiduciary money, highlighting how competing incentives among political actors and institutions shape monetary policies. Short-term political goals often conflict with the long-term requirements of stability and trust, exacerbating vulnerabilities within monetary systems. Therefore, the analysis underscores the need for robust institutional frameworks that align individual and collective incentives.
The implications of these theoretical frameworks are applied to the euro, examining its role as both a public and a common good. It is argued that the euro embodies the principles of collective action and shared governance, serving as a symbol of European integration. However, its success depends on adaptive institutional arrangements capable of navigating economic and geopolitical challenges. The euro’s stability and legitimacy are considered contingent on reforms that enhance its resilience and public trust.
The second section examines the strategic application of game theory within the Eurozone’s governance frameworks, highlighting two critical aspects: the interplay of cooperative and non-cooperative fiscal policies among member states and the role of institutional mechanisms in sustaining the Euro as a common good. This analysis spans 2016–2019 and 2023–2024, providing nuanced insights into fiscal behaviours under varied macroeconomic and political contexts.
The analysis firstly employs game-theoretic models, particularly the prisoner’s dilemma and the tit-for-tat strategy, in analysing fiscal conformity and cooperative dynamics among member states. The analysis highlights that cooperative strategies were dominant during 2016–2019, influenced by institutional tolerance and mutual reinforcement of fiscal discipline. Despite varied fiscal challenges, including significant divergences in debt levels, most member states adhered to preventive measures under the Stability and Growth Pact (SGP), avoiding the Excessive Deficit Procedure (EDP). However, instances of non-conformity, particularly in countries like Italy and France, underscore the complexities of enforcing fiscal discipline while accommodating structural disparities. These non-conformities often necessitated iterative negotiations and recalibrations by European institutions to foster compliance without undermining economic recovery or political stability.
Secondly, it delves into the implications of Ostrom’s theory on common goods for the Eurozone’s fiscal governance. Ostrom’s principles emphasise institutional trust, transparent communication, and adaptive enforcement mechanisms as pivotal for the sustainable management of shared resources, such as the euro. The analysis identifies critical institutional responses, including the European Commission’s measured application of sanctions and its adaptive tolerance to deviations during crises, as integral to preserving cohesion and trust in the euro. The study also extends this theoretical lens to 2023–2024, where renewed challenges, including post-pandemic recovery and geopolitical tensions, test the robustness of these governance principles. The gradual restoration of stricter fiscal oversight reflects the Eurozone’s effort to balance the need for fiscal discipline with the imperative to respond effectively to new macroeconomic challenges, ensuring both economic stability and adaptability.
The third section examines the application of Elinor Ostrom’s principles to EU member states with a legal obligation to adopt the euro. It frames trust in the euro as a „common good” and analyses how these states navigate convergence criteria and governance frameworks to achieve integration. The principles of defined boundaries, congruence of rules with local conditions, active participation, and monitoring are critically examined to highlight the strengths and challenges in fostering macroeconomic stability and trust in the euro across diverse national contexts. While the Maastricht criteria, establishing economic readiness for joining the eurozone, represent clear boundaries, they focus solely on initial eligibility without addressing mechanisms for ongoing governance. The principle of congruence underscores the need for euro adoption strategies to align with each country’s specific economic and structural conditions. Additionally, the analysis highlights the importance of engaging national-level stakeholders, such as governments and public institutions, in the decision-making process to foster effective reforms aligned with eurozone goals.
Moreover, game theory is used to model the interactions between EU institutions, national governments, political leaders, and the public in the context of euro adoption. The analysis focuses on 2016, 2019, and 2024 to highlight key economic and political shifts influencing these interactions. It outlines cooperation and non-cooperation strategies, highlighting the rewards and risks associated with each. Cooperative strategies, such as adhering to fiscal rules and promoting public support for the euro, lead to long-term stability and smoother integration. Conversely, non-cooperative behaviours, including fiscal indiscipline or nationalist rhetoric, risk sanctions, reduced trust, and delayed euro adoption. The analysis emphasises the dynamic nature of these interactions, where strategies evolve based on feedback, public opinion, and political leadership.
Thus, trust in the euro, conceptualised as a common good, is shaped by a complex interplay of economic, social, and political factors, going beyond standard macroeconomic indicators. While adherence to convergence criteria remains critical, sustaining trust requires recognising national specificities and addressing socio-cultural dynamics influencing public perception. The trust in the euro may persist even amidst deteriorating fiscal conditions, reflecting the currency’s symbolic role as part of the broader European integration project. However, this trust is not inexhaustible, as persistent economic divergences and weak alignment with EU governance standards can erode confidence over time.
This chapter concludes that while the euro exhibits certain characteristics of a public good, its classification as such remains contested due to the complexities of its governance within the Eurozone. The chapter underscores the pivotal role of trust, institutional readiness, and fiscal discipline, particularly for the EU member states with a legal obligation to adopt the euro. The euro’s success as a public good depends on mutual trust, cooperative governance, and adherence to shared commitments, which are essential for advancing the broader European project.
