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Thursday, August 18, 2011

United Europe?

When I was a kid living in Switzerland, my family used to go to nearby French towns on week-ends and during summer vacations; we enjoyed the added value of our Swiss Francs which were always quite welcome among the French businesses. We could buy more because our currency was stronger, a situation that is very similar to the relation between the Mexican peso and the U.S. dollar even today.

Alas! The European Union was born and with it, the Euro, a currency that is used by 17 countries, including of course France, Italy and Spain, three favorite destinations of yesteryear which used to have much lower prices and cost of living. The Union of 27 countries took place in 1993, although various attempts were made much earlier. The Euro itself became a common currency in 2002.

 Euro Countries

As some countries are showing the tendency to go bankrupt, many voices are expressing the desire to return to their national currency; Greece, Ireland, Italy, Portugal among the larger members are having trouble making ends meet and the richer nations such as Germany and France are trying desperately to find a way out of the financial impasse. The main culprit is the euro, as the nations in trouble cannot simply devalue their currency and print more money. Denmark, Sweden and England among others refused to adopt the euro, and, as such, are not affected by the banking crisis in the rest of Europe. Switzerland, not a member although it has strong ties with the E.U., has seen its currency rise to the top as one of the strongest in the world. That causes a serious problem for exports as its goods are much more expensive.

The euro will not survive the pressure in my humble opinion, making way for national currencies once again; a country's sovereignty is partly based on the coins and paper money emitted by the respective national central
banks. They can control inflation, deflation, and financial needs without consulting with other countries. The European Central Bank (ECB) was established in Frankfurt, Germany to coordinate the needs of 17 countries. It has obviously not done its job efficiently and perhaps that is too much to ask. Individual governments still make their own decisions on budget matters, sometimes in a foolish manner by funding excessive benefits for their welfare programs. The ECB cannot solve their financial problems nor can it force them to embrace austerity plans. The result is what we see today, a cacophony of mutual accusations that are sinking the European stock markets and endangering the stability of their banks.

The initial shows of unity in the European Union have given way to the rise of nationalistic movements which demand a return to full sovereignty, including national currencies. The original concept was designed to eliminate once and for all the threat of war among European nations after two global conflicts.

It doesn't seem that the dream will perdure, unfortunately.

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