GEAB 198

EDITORIAL

Beneath the sarcasm of a global mass media still revelling in France’s misfortunes lies a titanic battle to save the euro and, along with it, a certain model of European integration.

From a systemic perspective, the battle is over before it starts: the Europe Macron is fighting to preserve belongs to the past.

And yet…

In the 1980s, Mitterrand’s France pushed for the creation of a common currency in exchange for the German reunification sought by Kohl[1]. It certainly achieved this, but not entirely: as long as debts are not mutualised, the euro remains an unfinished currency, without the ability to issue money externally and without the status of a true international currency.  After all, our American friends do not want a real challenger to their dollar, so let’s keep our euro for our little businesses among Europeans. The heyday of our continent is behind us anyway…

Except that, incidentally, the member countries of the eurozone have nevertheless relinquished their fiscal and monetary sovereignty without this being offset by fiscal solidarity mechanisms.

It took only seven years for this half-measure to become a problem: the Greek crisis hit the euro hard, forcing the ECB to implement ultra-complex and restrictive stability mechanisms (ESM) to avoid mutualising debt at all costs. There was no question of rich countries risking the depreciation of their bonds because of the negligence of a few.  Even France, led by Nicolas Sarkozy at the time, did not call for mutualisation.

Emanuel Macron, on the other hand, following in the footsteps of François Hollande, has been on the subject since 2017, calling for the creation of a common eurozone budget and a finance minister to pool risks. In 2020, the Covid pandemic even enabled him to convince Angela Merkel to create a €500 billion European recovery fund financed by joint debt – leading to the NextGenerationEU mechanism – which is in fact the first instance of debt mutualisation at European Union level. But since then, the momentum has faded, and the approach has largely reverted to an ‘every country for itself’ stance.

Macron’s France, however, continues to dream of a Europe that counts on the global stage, not only for its consumer market, but also in terms of innovation, strategic autonomy and so on. That is why it contributed to build Europe! So that combined budgets would enable it to stand up to the Chinese, Indians and Americans.

But the race is picking up speed. As explained in the following article, Saudi Arabia, China, Nigeria, Japan, the United Kingdom, Switzerland and others, all of which control their own currencies, are in a position to jump on board this emerging multi-currency system. Meanwhile, the eurozone isn’t even at the starting line…

So, after all, the debt of the continent’s second largest economy, by pushing the unfinished euro that serves as our currency to its limits, becomes an argument for negotiation. In any case, the situation is deadlocked: a European Commission pushing for investment (and therefore debt), a eurozone that prohibits any mutualisation of debt, a French population that rejects any austerity plan, a National Assembly in the hands of lobbies that reject any taxation of the super-rich, markets that want stability, an America that is destroying the old systems of solidarity…

And this time, it is no longer Greece that is defaulting, but France. Is the rest of Europe ready to face the consequences? Because in any case, the old-style euro will disappear: either we mutualise debt or we renationalise currencies… France is too big a country to remain stuck in a monetary straitjacket that costs it dearly, clips its wings and prevents it from even staying in the global race. If Macron loses, France will fall into the hands of politicians who believe that there are other ways to count on the international stage in the 21st century than to make common cause with its neighbours…

These are the terms of the standoff that, we believe, is unfolding between France and the rest of the eurozone. As on the other side of the Atlantic, the central bank’s fiscal discipline will almost certainly yield to political pressure. Nothing is settled yet… and France remains alone in Europe in dreaming of continental grandeur.

Marie-Hélène Caillol
Managing Editor

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[1]     Source: LeMonde, 04/03/1998