20 years of the euro
January 2022 marks the twentieth anniversary of the appearance of the euro in the household wallet. Admittedly, twenty years is not a long time for a currency, but we can still try to draw up an initial balance sheet, albeit a provisional one. In other words, to identify its successes and failures
20 YEARS OF THE EURO AGAINST THE DOLLAR
When the euro first appeared, insofar as it was becoming the currency of an economic entity more or less the size of the United States, it was expected that it would one day rank on a par with the dollar. Is this the case twenty years later? No, the dollar represents 60% of the world’s currencies, the euro almost half as much. 80% of international trade is denominated in dollars, far ahead of the euro. What explains this?
Because the United States is a single country, albeit a federal one, with a single federal government and a single foreign policy, served by an incomparable army. Therefore, this country can impose the terms of its international trade, particularly with regard to oil, which plays the role that gold once did and to which the dollar can be linked. The European Union does not have this capacity to adopt a single foreign policy, which also explains its military weakness.
THE ENRICHMENT OF THE FRENCH IN THE FACE OF 20 YEARS OF THE EURO
Has the euro made the French richer? If one relies on calculations that group together all the products that can be purchased, yes. But in this addition of products, we should distinguish vital purchases, such as food, from non-vital purchases, such as high-tech products. Yes, the price of computers has collapsed, the price of cell phones has collapsed, etc., but the price of salad has soared. In concrete terms, this leads to the following conclusion: the euro has benefited the richest 20% and harmed the poorest 20%, those who have to buy potatoes first before thinking about household appliances or cars.
As regards foreign trade, France had a surplus overall until the arrival of the euro. But with a very strong currency, exports are more difficult to achieve, except when, as in Germany, we have retained a high-performance industrial base from which foreign buyers cannot escape. Thus, the euro encourages consumption in our country – with the reservations we have just expressed concerning the richest and poorest – but penalizes our production. To compete with Germany, we would have to be able to devalue our currency. In the current situation, the euro is even undervalued in Germany and overvalued in France. One can imagine what it might be like for Greece, for example, which has to sell olive oil in euros, the equivalent of which is produced in its Turkish neighbor. Of course, intra-European agreements can compensate for this lack of competitiveness, but the question remains.
THE MAINTENANCE OF THE EURO
So how is it that the euro is holding on despite everything? Because it is the result of a political will. What holds the euro together is the European Union. It is not the euro that makes Europe, it is Europe, as a political entity, that makes the euro. And it is true that this European Union with its own currency has been useful in managing certain crises, especially when it has been necessary to print masses of new money, following the example of the Fed: the quantities necessary to keep nations afloat, especially during the world crisis caused by the Chinese flu, could only be issued by a giant bank, the ECB.
What threatens this policy is inflation in the price of raw materials and energy, which would render ineffective the rotating movement of the money printing press, designated under the linguistic umbrella of quantitative easing. Now, this inflation, if it is higher in the United States than in Europe, still reaches on this side of the Atlantic at least 5%… We will see what will happen.
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