As Angela Merkel and Nicholas Sarkozy cobble together a deal that no-one believes to save a currency union that no-one respects, I figured I’d see what one of modern Europe’s great statesmen thought about the European monetary experiment at its inception.
Writing in 1989 about the prospect which now beckons of a “two-tier” Europe (PIIGS to the south, producers to the north) she asked,
“What’s wrong with that if the other tier is going in the wrong direction?”
As they have been.
And on Britain being left out of the monetary union?
“So be it. Germany and France would have to pay for all the regional subventions.”
As they will keep doing, as long as the currency union remains.
And on the dangers of the currency union, the idea of which was then only in its infancy:
“The Germans .. [sh]ould be worried about the weakening of anti-inflationary policies, and the poorer countries … must be told they would not be bailed out of the consequences of a single currency, which would therefore devastate their inefficient economies.”
Writing much later, in her memoirs, she reflects
“there is one lesson to be learnt from the economic development of the period of 1987 to 1990 [when the European currency union was being constructed], it is that that contained in the phrase I used in the House of Commons … : “there is no way in which you can buck the market.” I might add that if you try to do so, the market will buck you. The belief that the laws of economics and the judgement of markets can be suspended by clever people … is a perpetual temptation to folly.”
The lesson is being learnt again.