The "successes" of the euro
For the 10th anniversary of the euro in the fall 2008, unluckily timed at the peak of the financial crisis, the European Commission issued a 23-page glossy brochure: “Ten years of the euro – 10 success stories.” Not five years later this brochure has become a send-up among observers of the euro crisis, if only there was something to laugh about.
Its introductory paragraphs say, “…the benefits that the euro has brought are not only found in numbers and statistics. It has also introduced more choice, more certainty, more security and more opportunities in citizen’s everyday lives.” The list of 10 supposed successes range from “Price transparency” to “A symbol of Europe,” intertwined with brief accounts of common people in Europe and their experience with the common currency so far.
One must wonder whether the Portuguese nurse Maria Almeida, in case she hasn’t been fired from the shrinking public sector due to austerity, still appreciates the “benefits of stability” of her savings account after the crisis in Cyprus, or whether the Greek family Savvas still owns the home they bought on Rhodes made so affordable by low interest rates (Greek interest rates were indeed rather low back in 2008).
Two such successes resonate loudly over the years. “Sounder public finances” states that “Euro member states do not build up excessive debts that will burden future generations of taxpayers,” taking Ireland as an example, since it managed to reduce its public debt from an average of 95% of GDP in the 1980s –1990s “to less than 25% at present.” Ireland, I recall, was the second country after Greece that needed to be rescued. For 2013, its debt-to-GDP ratio will be 122%. “A better performing economy” relates that “the economic stability of the euro area makes it more resilient to economic shocks.” Further, “the economic reforms which countries have implemented in order to qualify for the European Monetary Union and keep their economies in shape have helped boost employment.”
Last week, the European Commission issued revised growth forecasts for 2013. This will be the second year in a row of GDP contraction within the Eurozone. The European peripheral countries are still struggling with deep recessions – speaking of depressions would not be inappropriate.
Greece’s GDP is roughly 23% below where it was when the brochure was produced in 2008. By comparison, during the Great Depression, US GDP reached a trough in 1933 26% below its peak, four years after 1929. Portugal and Italy have levels of GDP equivalent to those at the beginning of 2000, meaning that since the introduction of the euro, those countries have stagnated.
France has just entered a triple-dip recession and is likely to post GDP contraction for 2013. Even the Netherlands, as a part of the “core,” will see a year of recession. The only major country with growth will be Germany. But at a meager 0.7% expected rate, it is lower than the US (2.3% expected) or even Japan (1%).
The dismal European economic situation is also reflected in the unemployment situation, which keeps on deteriorating. Greece and Spain have current unemployment rates of over 27% – much higher than the US (20%) or the UK (19%) at the peak of the Great Depression in 1932, and within reach of the rate Germany posted in 1932 (30%). Unemployment among Spanish youth is at a mindboggling 65%. France has registered its highest absolute number of unemployed since World War II, the rate not yet its highest. The overall unemployment rate in the Eurozone in March was the highest ever recorded.
The brochure ends with a quote from former German Chancellor Helmut Kohl in 2002, “The single European currency has made European integration irreversible.” A decade later we could ask whether that is still really the case.