Don’t rule out Britain joining the euro in a few years
Britain entering the currency union with German encouragement would have huge benefits for Ireland
“The ‘euro’ though has become almost a toxic issue of debate in certain quarters in Britain.”
‘In der Ruhe liegt die Kraft’ is reputed to be one of the favourite mottos of the recently re-elected German chancellor. Pilloried by many in the British and Irish media for her calm, pragmatic approach to the euro crisis, Frau Merkel is now lauded even by titles such as the Economist for her belief that “strength lies in calmness”.
She was hailed recently by that paper as “the world’s most politically gifted democrat”. As the reputation of others like Cameron and Obama have “soared and dipped” she has remained steadfast and trusted. And as Philip Stephens also pointed out in the Financial Times recently, one should not underestimate her achievement in holding Europe together.
What many forget is that what is economically desirable is not always possible politically, at least not in the short term. Besides, new waters were and are being charted in dealing with the euro zone crisis and it has, in effect, been a process of learning by doing. Merkel has said repeatedly she wants to build a stronger financial union, push more liberal policies and complete the single market. She wants also, and of particular interest to Ireland, to keep Britain in the “club”, though not at any price. All of this will require calmness and a keen political sense.
Summer travels vividly reminded me once again of the origins of the European project. Visits to Germany made me realise how recent in fact is the second World War, when a European conflict led to the loss of 20 million European lives.
A visit to Slovenia brought back how very recent were the Balkan Wars and how fragile the situation still is in that region.
Events during the euro crisis reminded us also that dangerous stereotyping relating back to these conflicts is not far from the surface today in many European countries.
Just because peace has been achieved in most of Europe for almost 70 years does not mean that the maintenance of peace, through extensive co-operation and mutual understanding, does not remain the over-riding policy objective by far of the EU.
This is the essential political background to the European project and in turn the euro.
Recall that the single currency came into being largely because of a desire by others to tie irrevocably a united Germany to a unified Europe. Its demise could have unimaginably damaging political and social consequences. There were also good economic as well as political reasons for a single currency. A currency union, properly constituted, has potentially many advantages: such as exchange rate stability, certainty, greatly reduced transactions costs, increased competition and greater opportunities for economies of scale in production. This applies in particular in the case of a very small economy like that of Ireland. But it also applies to larger countries like Britain. The “euro” though has become almost a toxic issue of debate in certain quarters in Britain, and to a lesser extent in Ireland. It is one thing to decide to remain out of a currency union, quite another to wish its demise, especially in its most severe moments of crisis.