THE TECTONIC plates of international finance began to shift four years ago this summer. The world has since been living with repeated tremors, the consequences of the earthquake of Lehman Brothers’ collapse in 2008 and near-constant fear of further, possibly even more damaging upheaval. Poorly designed structures built atop fault lines of finance have been affected most severely. None is bigger or more at risk than the euro.
Conceived as the crowning of a half-century of European integration, the continent’s currency union was hugely ambitious, not least in its bringing together of such a diverse group of economies. It was also a risky enterprise: monetary union without fiscal/political union is subject to the kind of strains currently being experienced between centre and periphery. Before the euro’s launch economists warned that history was littered with examples of failed currency unions in which economic fundamentals went unheeded. But the political push for European integration trumped the dismal constraints of economics. Europe took the plunge.
As Europe’s debt crisis deepens, with tremors running through the Italian and Iberian peninsulas, unscrambling the egg of currency union is not an option. The notes and coins in pockets, from Helsinki to Palermo, Bratislava to Tralee, can’t be replaced overnight with legacy currencies. In current circumstances, even the hint of introducing a new currency would invite capital flight on a scale that would bleed any economy dry. Massive default would ensue. The banking system at the core of the zone would pay the price. Such a scenario would benefit nobody and be to the detriment of all.
If going back is not an option, standing still and hoping the crisis will abate of its own accord is fast ceasing to be a realistic alternative. The collective European response has been, almost without exception, too little too late. Given the extent of the crisis, the response now can be nothing less than overwhelming. With Italy and Spain infected by the contagion that Ireland, Greece and Portugal were unable to recover from, completing the euro project by creating a fiscal union appears to be the only real alternative to preventing it joining failed monetary unions in the dustbin of history.
The issuing of eurobonds has consequence far beyond finance and economics. For euro zone states to fund themselves with eurobonds would be a step towards full political union. But this has always been the project’s ultimate end-point. And for good reason. Europe’s extraordinary and unprecedented experiment in political and economic co-operation has proved, mostly and overwhelmingly, to be a success. Europe must overcome its debt crisis or put all that at risk.
And, lest anyone forget at this moment of crisis, the net benefits for Ireland of European engagement have been great. Indeed, in many respects, no other state has had as much benefit with as little cost. Being fully involved in our continent’s structures of co-operation remains a vital strategic interest. As long as integration is Europe’s destiny, it is Ireland’s destiny too.