Evaluating the Euro

The euro turned ten on January 1, 2009, which called for a reflection on its first decade. The authors of the edited volume The Euro at 10: Europeanization, Power, and Convergence set out to assess the impact of the new currency on three groups of states within the European Union (EU): the Euro group, the 16 member states of the EU that gave up their national currencies for the euro; temporary outsiders, the eight central and eastern European states that have not yet met the convergence criteria to be able to adopt the euro; and semi-permanent outsiders, the three member states that chose not to adopt the euro for the foreseeable future. The main theme of the book, as the subtitle indicates, is the effect of the advent of the single currency on EU member states’ power and convergence. The authors of the various chapters conform to the theme with uneven success, as with many edited volumes. They identify, however, interesting patterns of the effect of the euro on EU member states, which the editor, Kenneth Dyson, groups in spatial and temporal hypotheses in a concluding chapter.

The Euro at 10 is organized in a logical and efficient manner. The introductory part focuses on some of the main challenges of the Economic and Monetary Union (EMU) such as the Stability and Growth Pact (SGP), which requires member states to keep their budget deficits below 3 percent of GDP, and the Lisbon Process, the questionably successful planning program aimed at making the EU “the most competitive and dynamic knowledge-based economy in the world.” This is followed by case studies of EU member states, leadin to discussion about the effect of the EMU on financial and banking regulation, collective bargaining, and welfare reform. The authors look back on the process of accession to EMU, the compliance with the rules of the SGP, the evolution of public opinion, and the way national leaders understood and utilized Europeanization for domestic purposes.

The case studies of EU member states are by far the most interesting and accessible chapters. David Howard, in his chapter on France, warns of adverse consequences when national leaders view EMU as a useful tool to implement needed economic restructuring while engaging in scapegoating of the euro. Such a politically convenient blame game based on European constraints risks creating a backlash against further Europeanization, as the rejection of the Constitutional Treaty by the French public illustrated in 2005. The chapter by Kenneth Dyson on Germany contrasts nicely with that of the French case. Dyson shows that despite the problems that Germany experienced after adoption of the euro, especially its inability to conform to the SGP in 2003, blaming of elected and public officials did not occur. Dyson attributes this lack of scapegoating to a common understanding of the EMU by German party leaders as a political project vital to Germany’s national interest.

The authors of The Euro at 10 not only recount the Stability and Growth Pact crisis of 2003, when both Germany and France violated its rules and subsequently called for reforms, but also many other critical “episodes” of the first decade of the euro saga. Kevin Featherstone, for example, reminds us of the controversy over the accuracy of the Greek statistical records of convergence that led to the member state’s accession in the euro area in 2001, while showing the impacts and limits of Europeanization on Greece. In Lucia Quaglia and Paul Furlong’s chapter on Italy, we relive the height of the Berlusconi government’s skepticism of EMU, which culminated in a call for reintroducing the lira by the Minister for Welfare Roberto Maroni. And in the chapter on The Netherlands, Amy Verdun makes us realize how the perceived inflationary effect of the euro was a contributing factor to turning the traditionally EU enthusiast Dutch into a skeptical public that rejected the Constitutional Treaty in 2005. This public opinion backlash in the Netherlands that followed the “non” of French voters stalled progress at further European integration and led the EU into an impasse.

The cases of the semi-permanent outsiders in the book, the UK and Sweden, contrastingly showcase two member states that chose national routes to achieving low inflation and sound fiscal policies with greater success than the euro area member states. Both the UK and Sweden implemented monetary policy strategies based on inflation targets and operational independence of their central banks. The two outsiders also adopted new fiscal rules for stricter budget discipline. The national economic policy architectures of the UK gained international recognition for achieving stable, non-inflationary growth. Chancellor of the Exchequer Gordon Brown provided advice on how the SGP could adopt some of the features of the successful British fiscal framework.