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Let me start with touching upon the Euro. We are all aware, of what the foundations of the
Euro are: It is to be a stable, strong and joint currency of the European countries, which
participate in the Euro, it is a part of our European identity, which can be felt in our hands and
pockets, daily, and, most of all, it symbolises the will and desire of all participating countries,
after centuries of war, to live and work peacefully together for the joint common political and
economic advantage and benefit. This mission and vision is also the ground layer of the
European Union, constituted by 29 European Member countries.
But no instrument demonstrates this daily so intensely to everybody, as does the joint
currency the Euro.
Why then, has the Euro become, as of today, a phenomenon of so much dispute between the
Euroland member countries. What went wrong? The brief answer is this:
The creation of the common currency, the Euro, implies, that the participating countries have
given away part of their sovereignty, meaning they stopped having their own currency and
own central bank , and own monetary currency policy,
While, at the same time, maintaining sovereignty in other economic spheres, such as first of
all the own fiscal policy of a sovereign state.
As all economic policies are interlinked, it was clear from the beginning, that the joint
currency can only be successful, if there is also harmonisation of all other economic policies,
at least to some degree.
And so the famous Maastricht Treaty was created, which not only defines the basics of the
Euro, but which also defines criteria for economic stability, which itself then is the
prerequisite of economic growth of the participating countries. The basics of this are in a
nutshell:
-the yearly deficit of the government budget of a member state should not exceed 3 % of GDP
-the government indebtedness should not exceed 60 % of the GDP
-no member state should be held liable for the government debt of the other participating
states, and thus there should not be any forced flow of money from one government to the
other one in order to balance off government deficits. In short, Euroland should not be a
Transfer Union.
-and last but not least, the European Central bank is not allowed, to finance the governments
of states.
In summary, and to put it differently:
-the Euro is meant to be as stable and strong as the former DeutschMark.
-the European Central Bank is meant to be as independent from politics, as is the German
Bundesbank/ German Central Bank independent from politics.
The history is known. By the nature of the Euro construction, the Euro can only function
successfully, if the participating states have the discipline and the political will, to abide to the
Maastricht Treaty criteria.
IAFEI Quarterly | Issue 29 | 12