In Business Euro on the Rocks

Listen to Euro on the Rocks (16/12/2010)

Eleven years ago, right at the end of 1999, we made a strange R4 programme (not part of the In Business series) called A Cyclists' Guide to the Euro.

It was supposed to be a view of the common currency (then just one year old) from the cycle saddle, and incorporated various ideas from people (like me) who spend a lot of time peddling between places in Britain and on the Continent.

I cannot remember many of the conclusions but I do remember one contribution from a veteran European diplomat who had played a big part in many behind the scenes negotiations that shaped the modern Europe. Gratifyingly, he confirmed the strange approach to the single currency that we had taken in the programme.

He told me that is was indeed valid to describe the single currency agreement as a bicyclist's concept. If the grand European project did not have something around which to advance, he said, it might, like the learner cyclist, glide to a halt ... and fall over.

That was one of the best explanations of what the Euro was about that we got on that journey through the north of Europe on our way to Brussels and Strasbourg, and for a time it was very plausible.

Proof

What better symbol of unity was there than a united currency? Sober economists assured me that even if the Euro did not make a great deal of economic sense, then it was worth it to ensure that Europe did not once again slide into war, as it had done twice in the 20th century.

Politicians thought that the existence of a single currency would force unity on diverse economies. It doesn't. Something else has to give.

Visiting central European countries lining up to join the EU after the end of Communism, it was notable how many people looked to joining the Euro as a proof of their new found Western-pointing freedom, and an endorsement of their embrace of free markets. Economics had little to do with it.

Greece was the first non–founder member, joining the Euro two years after it started, in 2001. Four others followed later. Other later enthusiasts in places such as Poland and the Czech Republic now appear to be having cold feet.

But despite the current Euro upheavals, the enlargement of Euroland continues. Estonia is due to join on January 1st, 2011.

But what will it be joining?

The Euro had a successful and unified first 10 years, but then the pressures started. It began to become obvious that one currency did not fit such various economies. Neither did a single Euro interest rate across so many countries.

It was not quite such a unifying currency as its protagonists had assumed.

Belief

The Euro is now undergoing a drawn-out crisis, as doubts about its survivability and the ability of member countries to repay their great big borrowings force divergence on what was supposed to be a unified financial mechanism.

Greek economists I heard from in the summer thought that the European Union is a kind of bloc that advances only crisis by crisis ... that new mechanisms for backing ailing countries would emerge from the current Euro upheavals.

To me that sounds very like the Euro bicycle theory, or Mr Micawber's perennial belief that Something Would Turn Up in Charles Dickens's David Copperfield.

Keep cycling or else is what the politicians who formulated the idea of the Euro had in mind as they pushed on with the united Europe project 12 years ago.

And ridding Europe of conflict is of course an admirable aim.

What they did not foresee was the economic consequences of what was a political act, the social upheavals that may be caused by the stringencies imposed on debtor countries to get their finances back in the sort of shape that the Euro demands of its member nations.

In a Europe of many moneys, it was the currencies that took the strain when economies under– or over–performed. That cannot happen now, so something else has to give.

If it doesn't, the Euro bicycle will fall over.

Listen to Euro on the Rocks (16/12/2010)

Previous Programmes

Watch Your Language - Peter Day joins a group of enthusiasts determined to improve the language of business.

Keep it Local - As pubs struggle to survive, Peter Day travels through villages in Yorkshire and Cumbria to talk to local activists.

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German Pencils - Peter Day asks Faber-Castell and Staedtler how they both stay sharp ...

Building BRICS - Peter Day finds out about the BRICS - Brazil, Russia, Indonesia and China

Over A Barrel - Peter Day contemplates the turmoil in the Middle East and fears it will affect the price of oil

Reconstructing Capitalism - Peter Day hears all about the challenges to the way capitalism works.

All at Sea - Peter Day hears all about sea transport.

China Dispossessed - Peter Day hears about some of the problems caused by China's rush for prosperity.

Back on the Road - Alan Mulally tells Peter Day how he changed the way Ford works and how it is now back in the business of selling cars.

Asia Bling! - Peter Day ponders how the rise of the Asian comsumer will change business.

Euro on the Rocks - Peter Day asks what is the future for the Euro?

Bitter Pills - Peter Day looks at changing face of drug development.

Operation Robot - would you allow a robot to operate on you? Peter Day looks at robot-assisted surgery.

Growing Pains - Peter Day asks, what is the main component of growth?

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Chips off the Old Block - Computing in the UK, past, present and future.

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Small Wonder - microfinance.

Unlimited Company - organizational models.

Credit Crunch - cash and credit.

Student Startups - student entrepreneurs.

Media Mayhem - changes in the newspaper industry.

Squeaky Clean - branding.

Battery Power - Bolivia.

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Hell For Leather - John Timpson and Timpson's Shoes.

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Let's Start a Bank - banking.

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Iceland feels the Heat - the credit crunch in Iceland.

The Cisco Kid - Mike Lynch and John Chambers.

Grand Design - business schools.

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Europe on the edge - What is this thing called "Europe"?

For more programmes visit the In Business programme archive.

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