2017-2020, Euro crisis: The window of opportunities. Follow the world crisis in the GEAB

crise

Recent debates on the single currency have largely shown that reform is preferable to the status quo on the one hand, and the abandonment of the euro on the other. Is this enough to trigger the transformation of the euro according to the outlines described above? Certainly not. Nevertheless, a whole range of converging reasons makes us anticipate the beginning of a reform by 2020 as follows:

– public opinion, as understood by the national leaders, would be ready to accept a change on this side, as the recent political debate has given them the opportunity to denounce the single currency, and they are waiting for evolution after the 2017 elections in France and Germany;

– right now, the extreme rights have imposed this subject, they will only be more legitimate and more audible after the European elections of 2019 when they will represent one of the main political forces in the European Parliament;

– if the Schäuble “barrier” (probably the most rigid euro manager) breaks down after the German elections in September, discussion will be welcomed and facilitated;

– the crises of the euro are not over yet, as the discussions around Greece[1] and Italy[2], for example, are still on the table;

– the desire to “save” the euro is reinforced, paradoxically, by Brexit: in fact, Europe needs financing for many projects, including the renovation of its infrastructure, but also for its companies if the latter wish to be able to compete with GAFA (Google, Apple, Facebook and Amazon web giants) or other Wall Street-funded NATUs (Netflix, Airbnb, Tesla, Uber). The uncertain future of the City of London in the management of the euro has thus launched a vast operation to recover this market on the continent[3], with Frankfurt and Paris at the forefront;

– the protectionism which has the wind in its sails (the election of Trump is no stranger, of course) pleads for a return to national currencies on the one hand, but also, on the other hand, for a withdrawal and a strengthening of the euro area against the Chinese, Indian, Russian, and American mastodons; an equation which finds its solution in the reform which we have sketched above;

– the supposed Chinese “threat” is a particularly powerful lever to safeguard the euro in one way or another;

– and finally, it is interesting to note that Germany, which, as explained above, has benefited greatly from the euro after its efforts to restrain wages, does not push its advantage further: Schäuble criticises the policy of the ECB, which induces a weak euro, even though it boosts German exports. Countries such as Italy[4], which suffer from the euro, can therefore hope to find common ground, like in “if the euro is too weak for you, too strong for us, then how should we proceed? “.

fig1Per capita GDP evolution for the eurozone, France, Germany and Italy, 1998 – 2016. Source: Bloomberg.

Such an outcome to the European crisis would of course be a considerable failure for Europe over the last twenty years, since it would more or less correspond to a return to the ECU system (1979-2002) and would seal, for at least another twenty years, the project of political union and socio-economic convergence which contributed to the inauguration of the adoption of a single currency. But our team has an anticipatory approach and if the think tank LEAP, to which it belongs, will continue to carry out actions of democratisation of the European and Euroland entities and authorities, it must be clear that the strongest probabilities are on the side of solutions among member states, since they refuse to share the European project with the citizens it should serve…

This is an excerpt from the GEAB 114 / 2017. Read the entire report on your GEAB client platform.

Follow the Global Europe Anticipation Bulletin, your crisis-time companion.

———————————————————————-

[1]     Source: New York Times, 05/04/2017.
[2]     Source: Euronews, 21/03/2017.
[3]     Sources: Reuters (01/04/2016) ; L’Usine nouvelle (07/07/2016) ; Guardian (21/02/2017), etc.
[4]     Source: Bloomberg, 23/03/2017.