Euro in crisis: Founders reflect on its origins
Institutional figures across the eurozone have been scrambling to offer their latest solutions to the financial crisis.
It is a crisis which, in theory, should never have happened, say the figures who helped create it - if the stability and growth pact insisted upon by the then German finance minister, Theo Waigel, had been adhered to at the time of the creation of the euro in 1999.
Business Daily asked some of the architects of the single currency what went wrong, and whether the euro can survive.
Graham Bishop was a member of the European Commission's Maas Committee - preparing the changeover to the single currency - and then the Financial Services Strategy Group.
The Maastricht Treaty criteria
- Inflation: No more than 1.5 percentage points higher than the average of the three best performing (lowest inflation) EU member states
- Annual government deficit: No more than 3% of GDP
- Government debt: No more than 60% of GDP
- Exchange rate: Must be a member of the European Exchange Mechanism for at least two consecutive years, with no devaluations during that time
- Long-term interest rates: No more than two percentage points higher than in the three lowest inflation member states
He insists that had the requirements for sound public finances, embodied in the Maastricht Treaty, been met and fulfilled, the current crisis would not have happened.
"If countries with budget deficits had kept them low, there would not have been a need for the sort of measures we see now," he says.
"But the other problem that we didn't foresee, was that the US would export its subprime mortgages on such a scale and that the government would need to step in."
He says that it is easy to explain monetary union, but that political union is a very different matter.
"There is already a lot of political union through the European Commission, the European Court of Justice, the European Parliament," he notes.
"But to go further and say countries were going to give up their fiscal sovereignty and agree common tax policies wasn't on then, and it isn't now," he adds.
There is a now a greater push, with the Fiscal Compact Treaty which was agreed in March 2012, to make sure that member states conduct their economies in a way that does not spill over on to their neighbours.
"I'm sure the eurozone will survive. There are measures being taken to boost competitiveness in a way that Mrs Thatcher's government in Britain did 30 years ago," he concludes.
Joachim Bitterlich was a foreign and security adviser to Helmut Kohl, Germany's then chancellor.
"There were two or three open questions about the criteria of the Maastricht Treaty and no one expected Greece to be in the first team," he says.Continue reading the main story
"The first debate we had with the French was about the independence of the European Central Bank. The French were initially against the idea but we were sticking to it and said to the others, we could only realise a common currency and a common system if you accept the German cornerstones.
"What I regret today is that politicians in Europe did not look enough at the change of the environment around us," he says, referring to how the banking system has developed, accompanied by deregulation.
"It is strange that Europeans have only been examining these questions now under pressure of a crisis. They should have done so 10 years ago."
However, he is optimistic for the future.
"Europeans only have a future if they are bound together and if they defend not only a common currency, but a common economic policy," he says.
Yves Thibault de Silguy
Yves Thibault de Silguy was Europe's monetary affairs commissioner in 1998.
"The process of the launching of the euro between 1995 and 1999 was exactly within the strict application of the Maastricht Treaty," he says.
He is adamant that the process was positive for Europe because there was a good development of trade that brought international investment and more jobs to Europe.
"I think it was a success because, without the euro at that time, the common market would have been finished," he says.
"Without the euro tomorrow the common market will disappear rapidly," he adds.
Niels Thygesen was a Danish economist of the Delors Committee on Economic and Monetary Union.
History of the euro
- 1969 European summit makes a single currency an official objective
- 1988 The then president of the European Council, Jacques Delors, chairs a committee to put forward plans leading to European monetary union
- 1991 Plans for a single currency by the year 2000 are agreed at Maastricht
- 1995 The name "euro" is chosen for the new currency at the European Council in Madrid.
- 1998 The European Council agrees that 11 member states - Belgium, Germany, Spain, France, Italy, Ireland, Luxembourg, the Netherlands, Austria, Portugal and Finland - are ready to adopt the euro on 1 January 1999
- 2000 A referendum in Denmark results in 53% of Danish voters rejecting entry to the euro
- 2001 Greece joins the euro
- 2002 Euro coins and notes become legal tender and national currencies become obsolete
"A serious thing that was hard to predict was that a single currency created a lot more financial interdependence and spillover effects than you had before its introduction," he says.
It was assumed that the combination of a single market and a single currency would put pressure on countries to keep costs and prices more or less on parallel trends.
"That has been a disappointment. It is true that we assumed there would be some convergence but there has been less convergence than expected, and even divergence," he says.
"Clearly the mechanisms of monitoring the performance of countries was inefficient. It didn't address the emerging fiscal imbalances, nor the costs that arose after the euro was created."
He looks back with disappointment to Denmark's two referendums on that issue in 1992 and 2000.
"I thought we should have joined. But I must admit that we have not fared as badly outside the euro as I would have expected," he concedes.
"In joining the euro, we would have had some influence in the present decisive fate of European integration or disintegration."