One Europe, One Currency: Can This Dream Be Saved?
Europe is just waking up from a thrilling dream. A dream of a dozen or more countries bound together in a confederation with a single currency. United. Free. Peaceful. Prosperous.
Six countries - France, Germany, Austria, Belgium, Luxembourg, and the Netherlands - are among those struggling to fulfill the "criteria" that will enable them to join up in 1999. Inflation at 3 percent or below. Government debt below 60 percent of gross domestic product. Budget deficits 3 percent or below of GDP. Currencies in line with the Exchange Rate Mechanism.
If they succeed it will be at great social cost. In Belgium, for instance, government debt is currently at 130 percent of GDP. In Italy it is 125 percent. Even in France the budget deficit has been above 5 percent for some time. Only little Luxembourg already fulfills all the criteria.
Now if these countries, waking to reality, look out their windows, so to speak, what will they see? They will see millions of unemployed people marching in the streets. Unemployment in Germany is above 10 percent. In France it is 12.5 percent. That's true of Italy, too. In Belgium unemployment is at 14.5 percent. In Spain it is above 22 percent. And the present effort to meet the convergence criteria for the single currency is adding daily to this jobless problem.
Meanwhile Britain enjoys low inflation, low debt, and low unemployment. The jobless total is reckoned to be just above 6 million and falling, lower than it has been for about 10 years. There are two main reasons for this. First, Britain left the Exchange Rate Mechanism (which was causing recession), and second, it opted out of the European minimum wage. Costs and prices in industry have fallen relative to those in Germany, France, and the rest of the European "inner core." Investment has been pouring into Britain as a result.
Understandably, German and French finance ministers have warned that if Britain does not join the intended single currency, fines will be levied on it to even things out. If Britain were to join, the exchange rate of the pound sterling would once again be fixed (and fixed in Frankfurt), and pressure would still be exerted for Britain to join the minimum wage.
The scene appears set for serious divisions in the European Union (EU). The dream of a united Europe is a splendid one. Breakup in broad daylight would be catastrophic. So what is to be done? The first thing, I suggest, is for the governments in the EU to put the financial criteria for joining a single currency in the freezer for the present. New criteria, such as economic growth and fuller employment, should be set in place. Then the governments should act to get all the peoples on their side.
There should be pro-Union campaigns in every country to counter the antifederal campaigns now being organized in Britain, France, Austria, and even Germany. And then there should be referendums in every country of the Union.
A United States of Europe will work only if the people really want it. If they don't and yet the governments of the major countries persevere with their present financial and economic policies, even the present Union could break apart.
*John Allan May covered the progress of the European Economic Community for the Monitor for 20 years.