At the height of the Greek financial crisis Mario Draghi, President of the European Central Bank said that the common European currency is a true wonder of nature, like the bumble bee. By every natural law, the bumble bee shouldn’t be able to fly. By the same token, the euro shouldn’t work, yet it does.
The mighty dollar has been as strong as 0.85 against the euro in 2002 and as low as 1.62 at the onset of the global financial crisis that first hit the United States. It is abundantly clear that the euro has been and remains a major component of global power play. At the core of this global power play is that in past centuries, all five major trading and banking nations of Europe – Portugal, Spain, France, the Netherlands and Great Britain – have at some point been “the global power”. When it was Germany’s turn, the five prevented this with two world wars.
But in the second half of the 20th century there was apparently a tacit agreement that Germany can after all fashion its own “global empire”. While it was not allowed to create a de facto empire, it was allowed to establish the euro as the “Mark of the fourth German empire”.
The euro is, without question, in the hands of the “fourth German empire” which is also its main beneficiary. But signs are increasingly supporting the view that Germany has both won too much for its own good and as a result is becoming a rival of the weakening American empire.
As a means of power economics, the euro has remained sufficiently weak to afford Germany the biggest trade surplus in the world, but at the same time it has also become dangerously strong for its main European partners.
Twenty years after its introduction, the euro is now beneficial to the countries that are effectively part of the German “imperial region”: Germany, Austria, Belgium, Finland and the Central European countries that adopted the currency.
A second group of unstable nations – Greece, Ireland and Portugal – are in the middle, enjoying some benefits but also experiencing drawbacks.
But the real strategic challenge comes from the third group – Malta, Cyprus, France, Italy and Spain. Great Britain is no longer relevant due to Brexit.
Beginning with the 1980s, in France, Italy and Spain the welfare state has become increasingly unsustainable. The introduction of the euro may have halted the erosion of real wages in these countries – and even led to an increase in real wages – but at the cost of a huge debt to Germany.
This has created tremendous social conflicts and so far Germany has been unable to devise a strategy to counter the threats. This means that the euro – and the European Union itself – is facing its biggest challenge ever. Whatever the first twenty years have brought, the next twenty years will be even more adventurous.