A decade of the Euro

Financial pundits want one Euro voice internationally

With the launch of Euro a decade ago, much was written in the pro-dollar media and the EMU, as the Eurozone is called, was compared with “EMU,” the bird that cannot fly. But then compared to the launch and subsequent drop as the nascent currency took baby steps, the Euro has come of age today gaining nearly 50 percent against the American dollar, the so-called Universal currency.

Financial pundits participating in the annual Brussels Economic Forum conference unanimously voiced the opinion that the Euro, the single European currency, is proving to be a blessing for the Eurozone during the rough turbulent times in the international financial scenario. Pointing out the benefits, European Economic and Monetary Affairs Commissioner Joaquin Almunia told the audience last week, “EMU has created a zone of macroeconomic stability in Europe.

From day one, the Euro put an end to traumatising exchange rate realignments. Were we without the single currency today, the present dollar weakness would be placing enormous strains on the Euro area economies- for some more than others- and would be having a serious impact on trade and investment. We ought to recall this simple fact, for those who forget our past monetary turbulences.”

Going down memory lane, the Commissioner highlighted how the unifying force of the Euro was helping the Eurozone weather the financial storms, “Indeed, we are much more resilient to external shocks thanks to EMU. This has enabled us to withstand the economic consequences of, among other events, the 9/11 terrorist attacks and the bursting of the dotcom bubble. And let there be no doubt that without the shielding effect of the single currency, we would be feeling much more strongly the impact of the current financial turmoil and soaring energy and food prices.”

“And EMU’s successes extend beyond the Euro area. We can be proud to share a currency that is now the second most important in the world. This international status, plus the economic weight of the Euro area, with its credible macroeconomic framework, has allowed EMU to become a pole of stability in the global economy, particularly during the recent period of turbulences.”

In addition to tightening the internal system by reforms, the Commissioner called for “a strong case for the Euro area to increase” its presence in the global arena.

“Our currency is the second most important in the world. Our policy decisions have a global impact and increasingly the Euro area is helping to support the stability of the global economy and financial system. This role brings undoubted advantages, ranging from seniorage revenues and a capacity to place securities among foreign investors at lower interest rates, to certain competitive advantages for Euro area exporters and financial institutions.”

Warning about “risks and responsibilities,” that come with “the exposure of the Euro area – including its financial system – to shocks originating in other parts of the world and to disruptive portfolio shifts between key international currencies,” the Commissioner said, “the Euro area must build an international strategy so that it can play a full part in pursuing global stability and project and defend its interests in the world.”

Urging the Eurozone nations to join hands to put a unified front on the international financial scenario, Almunia said, “This means first developing common positions on international issues so that we can speak with a strong single voice. Once accomplished, the logical next step will be to consolidate our representation and obtain a single seat in international fora.”

At the conference, Almunia was joined by the head of the International Monetary Fund, Dominique Strauss-Kahn, in these calls for unifying Eurozone voices in the international arena. “While the ECB has established itself in a number of international fora, Euro area member states have not yet made as much progress in developing and articulating a common view on broader macroeconomic issues. As a result, too little attention is paid at the global level to the Euro area’s economic challenges.”

Strauss-Kahn told the select gathering of financial experts. “At 10 years old, the Euro area is still a club that people want to join. This is perhaps the strongest indication of its continued success and good prospects,” Strauss-Kahn added, appealing to the EU member states to overcome their political and economic differences and added that the Eurozone lacks the political clout that it should have had by now.

Jean-Claude Juncker, the Prime Minister of Luxembourg and the voice of the 15-member Eurogroup voiced optimism at the Forum saying, “In the long term, the Eurozone will be represented in the IMF by one single seat.”

Lamenting the fact that incoming Eurozone finance ministers talk of a single representation at the IMF but forget all about it once in office, Eurozone Chairman Juncker challenged the French President to keep his word, “Mr (Nicolas) Sarkozy, also talked about a single representation in the IMF before he became president (of France). He still has four years (in office). I would encourage him to come back to this soon.”

Today, each of the 15 Eurousing European countries has individual representations at the IMF, an international organisation overseeing the global financial system with a key role in the global economic arena.

On the sidelines of the Forum, political pundits told New Europe, “Let us not forget that Euro has replaced 15 European currencies and some of them like the German mark, French franc and Italian lira were backed by strong economic and industrial giants of the world.

“With the Euro surging not only in value but also as a dependable currency, the world commodity markets, especially relating to oil, will start contemplating a switch to Euro to protect themselves against instable or falling dollar,” they said, and that a strong political will is needed to give the required unified voice to the Eurozone, argued some of the best visionaries in the field.

Almunia aptly concluded with the call for a broad debate to chart out a more unifying fiscal policy to guard interests of ordinary European citizens saying, “EU citizens face a future of rapid changes and greater uncertainty. Economic and Monetary Union must provide stability, prosperity and a platform to represent their interests in the wider world. In the next years we must update our vision of EMU and re-focus the policy framework to achieve this goal.”