Talking Politics Guide to ... The Euro
TALKING POLITICS
Catherine Carr
4.7 • 2.5K Ratings
🗓️ 11 August 2019
⏱️ 29 minutes
🧾️ Download transcript
Summary
We talk to political economist Helen Thompson about the birth of the Euro and its tortuous recent history. Whose idea was it in the first place and how much of its current troubles were baked into its origins? A story of ambition, intrigue and unintended consequences.
Talking Points:
The euro was the brainchild of the French government, sometime around late 1987.
- The French had become extremely dissatisfied with the exchange rate mechanism. They thought the set-up benefitted Germany to the expense of everyone else.
- France saw monetary union as a way to Europeanize monetary policy.
The French persuaded the rest of the European community to set up a committee to look into monetary union, which was chaired by the former French finance minister.
- He understood that union would have to be on German terms: there would be an independent central bank committed to price stability.
- Helmut Kohl also wanted shifts on the institutional questions within the European Community.
The Maastricht Treaty was agreed in December 1991—ratification went on for two years.
- The treaty is about much more than monetary union.
- During contentious elections, Kohl started talking about monetary union as a symbol of European peace rather than a purely macroeconomic issue.
The general improvement in economic conditions in the mid-1990s allowed the monetary union to proceed.
- This doesn’t mean that there weren’t significant issues, but there wasn’t an existential crisis like the one that would emerge in 2009 with Greece.
Before the euro itself got going, there was the convergence of interest rates. Even for states like Italy and Greece, that has been a clear advantage.
- You also see some alignment on inflation.
- But you don’t get fiscal convergence. Some states run much higher deficits than others.
If the euro were to end now, it would be because of an implosion not states voluntarily seceding.
- There is more skepticism over the euro in Eastern Europe.
There is a recession coming; this will put more pressure on this system.
- The flashpoint may be Germany.
- There is going to be considerable pressure to go back to quantitative easing. Whether Draghi’s successor can secure tacit German approval is a different question.
Further Learning:
Transcript
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| 0:00.0 | Hello, my name is David Ronson and this is Talking Politics. Today's Talking Politics |
| 0:10.6 | Guide is with Helen Thompson and she's going to be talking about the Euro, where the idea |
| 0:15.9 | came from, how they thought it would work and whether it really does. |
| 0:26.0 | Talking Politics is brought to you in partnership with the London Review of Books. As politics |
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| 0:43.3 | at a special rate at lrb.co.uk forward slash talking. |
| 0:51.7 | Let's begin at the beginning. Whose idea was the Euro, where does the idea come from? |
| 0:57.7 | It was really the French government, sometime probably in late 1987 though, I mean it's possible |
| 1:04.7 | I guess that they've been thinking about it before. |
| 1:06.7 | You'd hope they've been thinking about it a bit. |
| 1:08.7 | Before that, at that time in France, the president was a Francois Mietouin from the socialist |
| 1:13.3 | party. It was what's called a period of co-habitation so that the Prime Minister was the |
| 1:19.2 | centre-right, Gourlest, Jacques Chirac. The finance minister was Edward Balladur and between |
| 1:26.2 | them though I would suspect that Mietouin was less involved in any of the detail of it. |
| 1:31.1 | They put forward the idea to have council of finance ministers of the European community |
| 1:36.0 | as it then was in early 1987 that what was needed, the European community needed was a |
| 1:43.1 | single currency. The reason why they wanted it was because the French had become extremely |
| 1:48.5 | dissatisfied with the way in which the exchange rate mechanism was working. The exchange rate |
| 1:53.4 | mechanism had produced the big crisis of the Mietouin presidency in March 1983 where effectively |
| 2:00.1 | Mietouin had to decide whether France was going to continue with its membership with the |
| 2:03.5 | exchange rate mechanism and ultimately of the European community itself. What Mietouin |
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