The euro turns 20 in the pocket of the citizens this January 1, 2022 As the maximum symbol from political integration of the European Union (EU), although it began its journey as an electronic currency three years before banknotes began to circulate. During these two decades, it has established itself as the second world currency after the US dollar and has weathered the two worst recessions since Great Depression of 1929.
Governments, the European Commission and the European Central Bank (ECB) have learned from the serious mistakes made in the 2008 financial crisis and the European debt crisis of 2009-2015. The immediate action of the ECB since the beginning of the pandemic has prevented speculative attacks against the public debt of the 19 countries of the eurozone and has maintained the cheap credit. The suspension of the public deficit rules has enabled higher spending to cushion the coronavirus recession without the exorbitant cost of the austerity policy.
It was the announcement on July 26, 2012 of the then President of the ECB, Mario Draghi, that he would do “everything necessary to preserve the euro & rdquor; and the ECB intervention in the markets what ended the debt crisis. The forceful iCurrent intervention of the ECB in the markets, the creation of the recovery fund and the suspension of the stability pact as a result of the pandemic have shown how counterproductives were the initial passivity of the ECB in 2009, the rise in interest rates in 2011 in the midst of the crisis by Jean-Claude Trichet and the austerity policy imposed by Germany and the European Commission.
Under the protection of the euro
The euro protects. Without it, the crises would have had a much worse impact and this is reflected in the growth of citizen support: 69% of the eurozone now consider that having the euro is positive for their country, while in 2007 that percentage was limited to 45%, according to the Eurobarometer.
The euro facilitates travels, makes business transactions cheaper and has reduced financial costs for citizens, businesses and states. The interest rate on the 10-year Spanish government bond was higher than 12% in 1995 and the interest rate on mortgages exceeded 11% that year. Nowadays, the cost paid by the Spanish State for a 10-year bond is 0.39%, while the average interest rate on mortgages stands at 1.47%, according to him Bank of Spain.
Despite the two decades that have passed, the reforms and the creation of the European Stability Mechanism, the euro still carries the deficiencies of the structure designed in the 1992 Maastricht Treaty: a limited ECB, the absence of a common Treasury, technocratic coordination, too rigid rules on public spending and a banking union to be completed.
Price stability
The ECB’s mandate prioritizes price stability, while growth and employment play a secondary role, unlike the US Federal Reserve and the Bank of Japan. The ECB’s ability to intervene in debt markets it is highly restricted compared to the central banks of the US, Japan and the UK, and recent crises have shown how essential it is to be able to intervene massively to keep interest rates low and avoid attacks on public debt.
Eurozone economic regulations lead to technocratic politics without democratic control. Recommendations to countries are decided by the European Comission and are automatically approved in the Council of Ministers of the EU If there is not a qualified majority of countries against it, it is almost impossible to achieve. In practice, a technocratic organ, which escapes democratic control and is not responsible for its mistakes, dictates the economic policy to governments elected by citizens.
The rules of the stability pact, with its limits of deficit Y debt, they are too rigid. The pandemic crisis has forced them to be temporarily suspended. But, if they are not reformed, they will limit the investments needed to curb the climate change, reinforce health, solve the problem of living place, reduce inequality and prevent the EU from lagging behind technologically. France, Italy and Spain lead the call for reform, which is opposed by Germany, the Netherlands and Austria. The covid crisis It has facilitated the first issuance of common EU debt, but for Germany, the Netherlands and Austria it is an unrepeatable exception.
More inequality
The creation of euro has not provided the promised reduction in inequality. On the contrary, economic and labor policy applied have accentuated it. Yes in the 19 countries of the eurozone in 2005 there were 7.3% of employed persons with incomes below the poverty threshold, in 2019 there were 8.9%, according to Eurostat. In Germany the figure rose from 4.8% to 8%, in Spain from 10.6% to 12.7%, in France from 6.1% to 7.4% and in Italy from 8.7% to 11.8% .
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The euro has substantially improved the Eastern member economyBut it has worsened the divergences in Western Europe. Germany and the Netherlands are the main beneficiaries of the creation of the euro, while France, Italy, Spain, Portugal and Belgium have suffered a high economic cost, according to the report of the European Policy Center (CEP) German ’20 Years of the Euro: Winners and Losers’.
Germany it imposed its rules and strengthened its competitive advantage over other European countries. The creation of the euro enriched Germany by 1.88 trillion between 1999 and 2017 (23,165 euros per capita) and the Netherlands at 346,000 million (21,000 euros per capita), the CEP study specifies. France and Italy were impoverished by 3.59 billion and 4.32 billion (55,996 and 73,605 euros per capita). In Spain, the wealth contributed by the creation of the euro was destroyed as of 2010 with the austerity policy and suffered an impoverishment of 224,000 million (5,031 euros per capita). Portugal and Belgium also suffered a cumulative loss of prosperity of 424,000 million and 69,000 million (40,604 and 6,320 euros per capita).
Reference-www.elperiodico.com