Mary Dejevsky: Let us join the Slovenians and celebrate the astonishing success of the euro

The value of euro notes in circulation has now passed the value of dollar notes in circulation
Click to follow
The Independent Online

Satellite communications and time zones have made New Year into a contest for best fireworks, best crowd and greatest improvement over a 12-month period. This year's winners had to be Bucharest and Sofia. As midnight struck, the capitals of Romania and Bulgaria erupted in a joyous show of pyrotechnics and flag-waving: two countries that had long felt consigned to Europe's margins exulted in their acceptance as full members of the European Union.

There are many reasons why the EU accession of Romania and Bulgaria might be seen as the most significant development of the New Year, not least the implications for Europe's economy and labour market. The hopes and fears that attended this latest EU enlargement, however, obscured a separate event that is at least as significant for Europe's future. As Romanians and Bulgarians danced in the streets and raised EU flags, Slovenians were withdrawing their first home-minted euros from cash machines across their country.

Slovenia has completed the transition from EU accession to membership of the single currency in little more than two-and-a-half years. There was next to no internal hostility and little nostalgia for the discarded national currency. For Slovenes, the euro was an ambition that followed from EU membership. The currency, as much as the flag, was what being real Europeans was all about.

In joining the euro so promptly and with such enthusiasm, however, Slovenians have bucked a trend. In the five years that euro coins and notes have been in circulation, an increasing number of those using them have been having second thoughts. Much has been made of recent polls that showed 52 per cent of French people believing that the impact of the euro had been negative for France, while 58 per cent of Germans wanted to bring back the Deutschmark. In Italy the level of popular disenchantment with the euro has encouraged some politicians to call for the country's withdrawal from the single currency.

Nor is it only in existing euro-zone countries where disappointment seems to have set in. Among the nine countries that joined the EU with Slovenia, only two - Malta and Cyprus - are on course to meet their own timetables for adopting the single currency. The former Soviet-bloc countries, it seems, are experiencing particular difficulty.

There is no one explanation. In France, Germany and Italy, popular disillusionment with the euro seems to derive from the perception that it brought higher inflation in its wake (although the figures do not bear this out). Prices at coffee bars went up, as owners rounded up rather than rounded down, but prices of consumer durables generally went down.

In France and Germany, the introduction of the euro coincided with a period of low growth and high unemployment (both of which are now starting to ease), while in Germany the abandonment of the Deutschmark came as Germans were just rediscovering national pride.

In the "new" European countries, politicians worry that meeting the criteria for euro-membership will jeopardise the high growth rates that have kept them in office and endeared their countries to foreign investors.

Puncturing inflated expectations, as the Hungarian government discovered last year, may precipitate civil unrest. The westward emigration of professional and skilled labour that followed EU-membership is a further complication: raising wages at home would fuel inflation, even as more emigration threatens growth.

Slovenia decided early on that euro-membership would benefit the country's economy, despite possible hardships on the way. It was also fortunate. Tucked between Austria, Italy and Croatia, Slovenia avoided involvement in Yugoslavia's civil war by declaring independence early. It had the highest standard of living of any part of former Yugoslavia and made the transition to a free-market economy gradually, rather than in the "big bang" of the Soviet collapse.

It was fortunate, too, in its comparative prosperity. This meant that the new sense of national purpose which came with the drive for EU-membership could be harnessed at once to the campaign to join the euro, before the novelty started to wear off.

Slovenia's smooth passage to the euro does not mean that it will be plain sailing for Ljubljana from now on. The long-term drawback of the euro is that it may restrict a country's room for manoeuvre on economic policy, even as it requires fiscal responsibility from national leaders. For the time being, however, the addition of Slovenia to the euro-zone offers a ray of light amid what seems to be gathering gloom about the euro.

That countries still aspire to join the euro-zone, however, even if they are likely to take longer to meet the criteria than they hoped, should be seen as a plus and not a minus. Unlike membership of the EU -which can be granted for political reasons, while a blind eye is turned to failings - requirements for membership of the euro-zone have to be exacting. Compliance is not something that can be learnt on the job. Some, if not most, of the problems currently being experienced by many of the new EU countries - high unemployment, high inflation, unstable governments - may have arisen because these countries were actually welcomed into the EU too soon.

They should stick at it, though, because the achievements of the euro are staggering, by any standard. This is a currency that lived for more than 40 years only in the mind's eye of Europhiles. It has existed as an electronic currency for only seven years; it has circulated as notes and coins for only five. Yet more than 300 million people across Europe now use it every day.

Britain, regrettably, has chosen to keep its distance from this phenomenon. The Government has clung to the pound, attributing the relative strength of our economy to the flexibility afforded by our independent currency. If, however, the growth rate in the euro-zone overtakes ours before too long, it will be much harder to argue that joining the euro is necessarily against our national interests. Observation suggests, by the way, that the pound has been shadowing the strong euro for a while.

The euro is already a major reserve currency that rivals the US dollar. It is the foreign cash currency of choice for traders large and small across Europe and Eurasia.

Last month it was reported that the value of euro notes in circulation had now passed the value of US dollar notes. Despite an early decline against the dollar, it is now seen as a strong global currency.

This has its drawbacks - the rising price of manufacturing the Airbus superjumbo plane being one - but in terms of international recognition and national, or in this case, collective European, pride, there is still little to compete with a strong currency.

Comments