More than ten years have passed since the outbreak of the financial crisis in 2008. Even though the Eurozone situation has, according to experts, stabilized, the debates of the future of the euro are still discussed. Furthermore, the success or failure of the Eurozone will determinate the EU´s future as well. To understand the future development, we need to consider issues related to the missing pieces of the Eurozone system, reformation made by the Eurozone governance to deal with future crisis and criteria on which the future of the Eurozone will evolve.
The European Prague Summit in cooperation with the Institute for politics and society organized a panel discussion on the subject of The Future Path of the Euro on 28th of May 2019.
The main speakers and contributors to the debate were Gabriela Cretu, Chairwoman of the European Affairs Committee, Senate of Romania, Hanni Schölermann, Economist, IMF Europe Office in Brussels, Oldřich Dědek, Bank Board member, Czech National Bank and Jean-Pierre Landau, Affiliated Professor, SciencesPo.
The moderator was Jan Macháček, Chairman of the Board, Institute for Politics and Society.
From Jan Macháček´s point of view, the European monetary union is a successful project despite the problems the Euro has. However, its gain is questionable – on the one hand Germany profits from being a part of monetary union, which also supports its export. On the other hand, Italy hasn´t reached the economic level it had before 2008.
Mr. Macháček specified the problems of the Eurozone, which are not having a debenture bond that other monetary unions have, common insurance of deposits and neither common tax.
Jean-Pierre Landau also presented an opinion that Europe´s great monetary endeavor, the Euro, is in trouble. He argues that the core problem with the Euro lies in the philosophical differences between the founding countries of the Eurozone. The model that was proposed before the monetary integration doesn´t correspond to reality, which encourages euroscepticism thoughts. He sees another problem of the Eurozone as having weak crisis management. For certain, the crisis in 2008 wasn´t the last Europe had to deal with. To avoid from devastating consequences, Europe needs a stronger crisis fighting management. Mr. Landau completed his contribution with idea of keeping the visions of strong monetary union alive – only it can bring optimism to the skeptical thoughts dividing Europe.
Gabriela Cretu considers herself to be a “realist utopian” because of understanding of the real problems of the European Union and still dreaming about the federal union. Even though she thinks critically, her approach isn´t skeptical. In her opinion, Euro is a trust-base currency. Trust is a very variable indicator that requires automatic stabilizers and a genuine central bank with all the intervention tools to keep the economic balance in a functioning democratic society. She compared the crisis in 1928, economic stagnation in the 70s and recent crisis in 2008. As a result, she mentioned changes that have been made after every huge crisis, except that in 2008 – almost nothing has changed. Furthermore, she argues that we don´t have a single currency yet. We only have a common currency in an area with wide disparities, acting as a sponge that absorbs added value from the periphery and focuses it into the center. Several states are winning and many others are losing – this deepens the economic gap between EU members. There are some fundamental balances that need to be touched once again. In the Euro reform, the balance between the state and the markets, between the public and the private sector, between the monetary and the fiscal instruments needs to be rebalanced.
Oldřich Deděk reported that the biggest eurosceptics are countries that don´t use the Euro, which is a paradox. Unlike the skeptical politicians, euro-citizens do trust the monetary union and Euro has its popularity among ordinary people. Mr. Deděk emphasized the necessity of respecting the Maastricht criteria. He assumes there are still European Union´s member states that are breaking the rules of Maastricht. Moreover, he sees the problem in the Eurozone as a clash of long and short-term interests of countries. Speaking about visions of the Eurozone, another remark was related to crisis in 2008. He insists this wasn´t a normal crisis that occurs regularly – from his point of view, such a negative economic event only happens approximately every 100 years. What he considers to be needed is not only economic, but also policy convergence, together with strict following of Maastricht rules.
The last speaker, Hanni Schölermann, sees the monetary union including Euro as a success. The European Union allows all members to benefit from its membership and achieve benefits on the trade market, too. As another proof of success she sees the popularity of the Euro among European citizens. In her opinion, the Euro had more problems in the past than it has now. She realizes the increasing number of euro-sceptics. However, she thinks the reason may be the under-utilization of the benefits of membership by governments. To sum up, she believes the Eurozone can work and subserve even it´s not perfect.
There were some interesting questions in the auditorium after the contributions. The first question related the possibility of replacement of the US dollar by another currency (€) as the world leading currency. Mrs. Cretu answered that Euro is a trust base currency of EU and everything depends on trust of their members, as well as its citizens. Mr. Deděk answered the questions what would happen if great powers didn´t follow the rules. He insists that European Union is a creation of states that have transferred part of its sovereignty to it, and can´t imagine what would happen – most likely the Eurozone would fall apart.