#12
Moscow Times
December 25, 2001
Euro Sure to Sow Discord
By Boris Kagarlitsky
In this country, no one trusts banks or the ruble, and as a result, people usually conceal envelopes stuffed with hundred-dollar bills on shelves between books or in wardrobes between sheets.
From January, however, a new mysterious currency -- the euro -- will enter circulation. Maybe we should all convert all our savings into euros posthaste. Any discussion in Moscow about globalization or the world economy of late ends with someone in the room posing a question along these lines.
On such occasions, I answer that I cannot vouch for the dollar, even less for the ruble and that the euro inspires still less confidence. Western Europe is embarking upon a grandiose experiment, and not just an economic one. Paris's Le Monde Diplomatique writes that the euro is a currency "without soul or culture." That's a very French thing to say.
But, in fact, money is not only a means of payment (as political economists would have us believe), but also a cultural symbol of sorts. It should have a history. The euro, however, is the handiwork of bureaucrats and technocrats. Even the appearance of the notes attests to the lack of culture and impoverished imagination of its creators.
Each denomination is adorned with nondescript walls and doors. And there is not a single human face. European Union bureaucrats explained that any historical figure who is popular in one country may arouse negative emotions in neighboring countries. However, if these gentlemen are speaking of pan-European traditions and of shared history, then there should be some historical figures that embody this.
I, for one, do not understand who in Europe could be irritated by portraits of Aristotle, Leonardo da Vinci, Columbus, Moliere, Mozart, Goethe or Einstein. But therein lies the tragedy -- the eurocrats themselves probably can't remember a single one of these names. Literature, philosophy and art have little, if any, meaning for them. Out of the whole of European history, they have only learned about Napoleon and Bismarck, and even then only superficially.
Moreover, the euro has another failing that is even more serious. The intention of the project's initiators was that a single currency would assist and facilitate European integration. In practice, it will likely have the opposite effect.
The stability of a currency depends, at the end of the day, on the state of a country's economy. And the economies and levels of development of different EU member states differ considerably. While northern European member states, by and large, have few problems in achieving low inflation, Mediterranean countries have difficulty.
In preparation for the introduction of the euro, all participating member states had to lower inflation to levels set by Brussels. While it is possible to achieve these levels in the short term, it is much harder to support them stably over the long term.
Sailors know full well that the speed of a squadron is defined by the speed of the slowest vessel. Otherwise the ship gets left behind. Exactly the same holds for the euro. If the European Central Bank chooses to support a high exchange rate, the result will be that "backward" countries will find that they are no longer competitive (as the unfortunate example of Argentina shows).
If, on the other hand, the decision is made to meet the "backward" countries halfway, then Italy, Portugal, Spain and Greece will export inflation to Germany and Finland.
On the one hand, national governments are deprived of the usual monetary instruments to influence the economy and social development. And on the other hand, at the European level there will inevitably be serious conflicts over monetary policy.
These conflicts will not be easy to resolve as the interests of the member states are diametrically opposed. Everything will end in some kind of bureaucratic, fudged solution that will make things worse for everyone. Inflation will be too high for the north and too low for the south.
Even worse is the fact that introduction of the new currency coincides with a world economic crisis. It would be hard to come up with a more inappropriate moment to launch such an ambitious project.
Bad luck is not really the issue here. Technocrats simply live in their own little world and rarely think about how their projects will function in real life.
The currency was supposed to unite but will no doubt lead to greater discord. In fact, that's usually the way with money.
Boris Kagarlitsky is a Moscow-based sociologist.
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