Dumping the euro to save Europe seems harsh – and the outcome uncertain
Opinion: A French diplomat has proposed a radical amputation to save the life of the EU
Loadsamoney: the euro seemed fine before the crisis hit but some believe it is now doomed. Photograph: Pat Langan
We can’t make the euro work. We are unwilling and politically unable to complete monetary union, to mutualise debt, to create either a system of significant fiscal transfers or the political integration such a union would require. Faint signs of growth mean European Central Bank president Mario Draghi may have given the single currency a breathing space of three years or so, but it is still doomed. And the danger is that it will bring down the European Union with it.
The gloomy prognosis, I hasten to add, is not mine but that of Prof François Heisbourg, a former French diplomat and chairman of the International Institute for Strategic Studies and the Geneva Centre for Security, who was in Dublin this week to talk to the Institute for International and European Affairs.
“The dream has given way to nightmare,” he says in his latest book, Le Fin du Rêve Européen (The End of the European Dream). “We must face the reality that the EU itself is now threatened by the euro. The current efforts to save it are endangering the union yet further.”
Breaking up the euro
His solution – seen as heresy by fellow Europhiles and federalists – is radical surgery to save the EU, an operation, he acknowledges, with all the dangers of separating Siamese twins, to cut out the “euro cancer” by preparing a complete “orderly” break-up of the euro and a return to national currencies.
The parallel, he says, is war – Europe’s leaders face the choices that a general overwhelmed in battle does: to continue fighting until obliterated, to break out and at least save the bulk of the army – in this case the EU itself – or to give up the battle for lost. “You cannot create a federation to save a currency. Money has to be at the service of the political structure, not the other way around,” he argues.
Perhaps in 10 years, in a different political/economic climate, when the member states really appreciate and can embrace all the political consequences of a single currency, the EU could have another go. A case of, as the French would put it, “reculer pour mieux sauter” – stepping back to get a better run . . .
But, freed of the constraints of the euro zone, not least the deflationary Stability Pact and its German-inspired stifling one-size-fits-all austerity philosophy, he believes states such as Spain and Italy could restore their competitive advantage fast through limited devaluation of their restored currencies. Such a policy if adopted in Greece, he argues, could have allowed it to avoid the worst of the crippling cuts it is currently undergoing. But it’s a lottery – it could have made things even worse.