The Euro on turning 10: Many happy returns?
January 13, 2009 5:10 PM
An official ceremony in the European Parliament this week marks the 10th anniversary of the Euro. South East MEP, Sharon Bowles, looks at the Euro and how it has weathered the recent financial storm.
"It was predicted that the establishment of a single European currency would never happen. On the eve of the Euro launch back in 1998 such sceptics were proven wrong. Critics then turned to predict the currency's disintegration; ten years later these critics have been proven wrong again. Not only is the Euro now well-established, it has widely been viewed as a sanctuary to weather the global financial crisis.
"Yes, the Euro has its critics and more so here in the UK than in other Member States. But to overlook what the Euro has achieved is unjust. The Euro has been a strength during the financial turmoil and offered smaller countries, which might otherwise have been in grave difficulties, real stability.
"This was evident in the back-end of last year when capital was pulled out of potentially risky currencies. As the financial markets in Iceland and eastern European states folded, countries in the Euro-zone with broadly similar set-ups looked on in relief, relatively protected from the credit crisis.
"Most of the criticism thrown at the Euro is because it does not behave exactly the same as a national currency. Some would say that is the point, it is more stable, and as a package it is certainly not inferior. The ECB has shown that it is no slouch during the turmoil, in the early stages responding faster and better than the Bank of England, broadening the scope of the securities that it accepted and injecting cash into the markets. The UK and UK banks benefited from that while the Bank of England was hung up on moral hazard. We know that the UK position is to wait on the sidelines and observe until the time is right, but we never expected to see such a testing ground!
"Some now speculate that because the spreads on government bonds issued between Germany and other countries such as Greece and Italy are increasing that it shows the Euro has not achieved harmonisation of the economies. That is true. But there are spreads because for all the talk of one interest rate not fitting all - countries do not have the same 'interest rate' at least in so far as government borrowing is concerned.
"There is no doubt that the Euro is being tested. There is no doubt that many smaller countries have survived potential disasters because of the Euro. I reckon the Euro will continue to show it is a strength and be an asset for both the Eurozone and the wider EU, and I still regret we did not, and still do not, have the courage to join."
ENDS
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