The euro is more than politics and economics

TWELVE years have passed since Jan 1, 2002, when Europeans were queueing up at their cash machines to take out their first euros. Like millions of others, I remember looking at the banknotes with a sense of curiosity and a feeling that something historic was taking place.

Since then, the euro has become an everyday reality for over 330 million Europeans in 18 countries. But has it delivered on its promise?

The euro is a unique political, economic and cultural phenomenon. Sovereign democratic countries have willingly agreed to give up their (mostly) cherished national currencies and agreed to share the same coins and banknotes as their fellow euro zone members.

The project of monetary union was many years in the making. It was seen as an integral part of the vision for "an ever closer union". After the fall of the Berlin Wall and the new geopolitical realities of a reunited continent, that vision gained political traction in a wide majority of European countries.

Recent events have, however, called into question the original vision. As Europe is starting to emerge from one of the most serious economic crises of recent years, a number of commentators, including from these pages, keep predicting the demise of the euro and point to two "original sins" that make the common European currency inherently unsustainable. These are weak economic governance and top-down decision-making, leading to public disaffection.

The ultimate judge of the strength of the euro's economic governance is, as recent years have shown, financial markets. Markets eventually reacted positively to the raft of measures that European institutions have brought in since 2009. These included the fiscal compact and the banking union, not forgetting the key role played by the European Central Bank. It now seems that the new phase of consolidation of economic governance will help stabilise the common currency and will in turn trigger further reforms.

But what about public disaffection? With high unemployment and the prospect of a slow and jobless recovery, many anti-establishment or protest parties campaigning on an anti-euro platform seem to be making gains across Europe.

Many commentators remark that the euro was an elite-driven project, pushed by bureaucrats with little public buy-in.

Interestingly, however, Europeans in the euro zone remain overwhelmingly in favour of the single currency. Recent opinion polls taken by the European Commission (Eurobarometer November 2013) confirm that only 33 per cent of those living in the euro zone say the common currency is a bad thing. In Germany, in spite of a public debate dominated by the need to bail out weaker euro zone members, public support for the euro is at 65 per cent.

This public support calls for some explanation. I would suggest that for a majority of Europeans, the euro is more than an economic policy or a political compromise in at least three ways.

First, it provides a sense of belonging. A majority of Europeans over the past 60 years have seen the need to "belong to Europe" as a national priority.

This belonging is felt not simply in terms of economic gains or geopolitical strategies. It is perceived as a cultural common home for all Europeans. Since its origin, for Germany and France, the European Union had been part of national strategies to ensure peace on the continent. For Mediterranean members, it was a way of anchoring weaker political processes in a stronger framework.

And this sense of belonging extends to economic policy as well. Interestingly, even after the euro crisis, nearly three-quarters of Europeans think that there should be more coordination of economic policy (including budgetary policies) among euro zone governments. They also believe that economic reforms would be more effective if carried out at the European Union level.

Second, the euro is becoming increasingly important in establishing Europe's place in the world. Europeans, with their open economies, large number of tourists and shared free trade agendas, are keenly aware of the changing realities of the world economy and of the position of their countries in it.

Paradoxically, the sovereign debt crisis of the past few years has highlighted how continued membership in the euro provides more guarantees than alternative paths. Greek voters confirmed this through the ballot box in June 2012 by voting in a coalition that supported taking the necessary measures to ensure Greece's membership in the common currency.

Third, the euro is firmly embedded in both the minds and the pockets of Europeans. By now, two-thirds of Europeans living in euro zone countries report that they rely solely on the euro for calculating prices in everyday transactions. This proportion reaches over 90 per cent for younger Europeans in some countries.

The euro also feels less and less "new" or "foreign". Over 50 per cent of Europeans report travelling to and visiting other euro zone countries for work or tourism. A significant number also live in other European countries or work across borders. The euro brings real advantages to their daily lives, making prices comparable, reducing transaction costs and increasing transparency.

The fact that support for the euro is particularly strong among the young suggests that the future of the currency is assured. Four in five young Europeans report that they calculate prices only in euro and have no need to think back to old currencies. The strongest support for the common currency is found in the 15 to 24 age group, with over 65 per cent of young citizens in countries using the euro believing that it is good for their country.

Ultimately, this is the most encouraging sign that the euro has taken root: A new generation of Europeans used to travelling, studying and working across the continent, all with euros in their pockets.

The writer is the European Union visiting fellow and gives lectures on European regional integration at the Lee Kuan Yew School of Public Policy


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