In a year that will see the United Kingdom voluntarily leave the European Union only months before the bloc goes to the poll to elect officials that will shape the Continent’s trajectory for the next several years, 2019 also marks the 20th anniversary of quite possibly the most monumental decisions that Europe has made since the end of World War II – the adoption of a single currency.
For a generation of Europeans, it’s hard to fathom a time when the euro was not in circulation and that every coffee that was had or taxi paid was done in anything but a single currency. But it was only on January 1, 1999, that 11 countries in the European Union chose to rid themselves of their often unstable national currencies in favour of what came to be known as the “euro”.
The origins of the euro date back to the early 1990s when a newly unified Continent was taking the embryonic steps to emerge as a major player on the world both politically and economically after 50 years of division and post-War reconstruction. In 1992, with the signing of the Maastricht Treaty which effectively switched the loosely assembled European Economic Community over to a track that would put them on the road to the future European Union.
One of the core tenets of the agreement was the introduction of a single, Europe-wide currency. On January 1,1999, France, Germany, Italy, Spain, Greece, the Netherlands, Belgium, Luxembourg, Austria, Portugal, Ireland, and Finland began using the newly minted euro as a virtual trading currency, but it would be another three years before it would hit the streets and become a foundational part of a new pan-European identity that is still being forged to this day.
The original group of countries were later joined by Slovenia (2007), Cyprus (2008), Malta (2008), Slovakia (2009), Estonia (2011), Latvia (2014) and Lithuania (2015) as the European Union began expanding in the former Communist Bloc of Eastern Europe. While most of the core nations of the EU opted to be a part of the single currency project, the UK, Denmark, and Sweden kept their distance, saying they had no intention of being part of trans-national currency experiment.
To this day, despite a major global financial crisis and a decade-long economic meltdown in Greece, the euro remains strong and a respected reserve currency on the international market.
To mark this anniversary, Jean-Claude Juncker, the President of the European Commission, and one of the few signatories of the Maastricht Treaty still politically active today said the euro had been put to the test since it was first officially made available in the late 1990s, adding “More than anything, I recall a deep conviction that we were opening a new chapter in our joint history. A chapter that would shape Europe’s role in the world and the future of all its people. 20 years on, I am convinced that this was the most important signature I ever made.” A staunch pan-Europeanist and a steadfast supporter of the European family, Juncker is one of the most forceful defenders of the single currency as he equates the euro with “a symbol of unity, sovereignty, and stability. It has delivered prosperity and protection to our citizens and we must ensure that it continues to do so.”
“Our common currency has since matured into a powerful expression of the European Union as a political and economic force in the world. Despite crises, the euro has shown itself resilient, and the eight members which joined the original 11 have enjoyed its benefits,” the President of the European Council, Donald Tusk said at the end of December.
While the euro remains a pillar of financial institutions two decades after it came into being, few would argue that in the early years of this century, most Europeans found themselves financially better off than they had in decades. In some cases, in a better financial position in terms of disposable income than they ever had. The creation of the euro led to a temporary wave of euphoria, with vast amounts of money flowing into southern nations like Italy, Spain, and Greece.
But when a major financial earthquake hit in August 2008, many Eurozone nations were forced into a never-ending depression and high unemployment as they struggled to bring their costs down without the benefit of being able to devalue their currencies to remain competitive in the same way that the EU nations who opted out of using the euro were able to do.
This inevitably led to an often bitter argument over the root cause, as well as a solution, to the problem. Though the evidence pointed to both fiscal recklessness and misguided spending policies, the end result was a much needed lost decade of harsh, at times draconian, austerity measures on countries like and Portugal, where the overall population saw their purchasing power evaporate almost overnight and the bureaucracy addled economies become even more bogged down by their inefficiency.
Both Spain and Portugal have slowly managed to reach a level of competitiveness again after a decade in the wilderness, but Italy – the third largest economy in the European Union – will suffer through an undetermined number of years before it can be back on its feet again and competing with its much smaller market rivals within the Eurozone.
As the euro enters its third decade, to quote European Central Bank President Mario Draghi, the common currency is “a logical and necessary consequence of the single market as it makes it easier to travel and trade.” But the crisis of the last decade has proven that the shared prosperity and enhanced solidarity that the euro was supposed to advance with the goal of greater European integration, has yet to be fully realised.
Far too many weaker countries in the south of Eurozone still lag far behind their northern neighbours when having to deal with the systemic question of how to correct the sort of exchange-rate discrepancies that still afflict nations like Italy and Greece and leave them vulnerable to the justifiable dictates of the bloc’s fiscal powerhouse – Germany.