The Euro as a common European currency is a political project, you often hear it said in the current crisis. Did the currency indeed arise out of political expediency? In any case, a lot has to do with the controversial reunification of Germany after the fall of the Berlin Wall.
On February 7, 1992, the heads of government of twelve European countries signed the Maastricht Treaty. The European Union was thus a fact. The EU was the successor to the European Communities, which in turn consisted of all kinds of loose economic partnerships (ECSC for coal and steel, Euratom for nuclear energy, EEC for the common internal market).
From now on, all those collaborations continued as an umbrella partnership. But the most important thing that the heads of government agreed in Maastricht was the establishment of an Economic and Monetary Union. From now on, the EU countries would no longer all pursue an economic policy separately, but jointly.
The final piece was a joint currency, the Euro. On New Year's Eve of 2001, the time had come and the then Minister of Finance Gerrit Zalm with a broad smile removed the first euro notes from an ATM.
In Maastricht it was formally decided to introduce the Euro, but the idea of a European currency has a long history.
“A continental currency, resting on all of Europe as capital and propelled by the activity of 200 million souls:such a currency should replace the bizarre variety of money types that exist today, with all those different rulers, all symbols of misery. ”
That is what the famous French writer Victor Hugo wrote in 1855. It only became clear after two world wars had been fought on the European continent that all those different European currencies that constantly fluctuated in relation to each other. The European economies were closely linked, but each country pursued its own money policy. That caused destabilization and inequality, and that should finally end.
Snake in the tunnel
Various things have been tried since 1945 to counteract this destabilization. One of those attempts was called "the snake in the tunnel." A limited bandwidth of 2.25% was set for the European currencies, within which they were allowed to fluctuate freely against the world currency, the US dollar. If one currency appreciated 2.25% against the dollar and another currency fell 2.25%, the difference between those currencies was never more than 4.5%. That was seen as acceptable.
Unfortunately, the snake was short-lived. Due to the oil crisis of 1973, among other things, more and more countries left the system because they wanted to be able to devalue their currencies freely (decrease in value to stimulate their own economy. Domestic products then become cheaper and foreign products more expensive). Other experiments to allow the European currencies to fluctuate less relative to each other also failed to achieve the desired stability. In practice, it turned out that the Deutsche Mark kept getting stronger, while the French Franc had to devalue constantly to keep the French economy somewhat competitive.
Ever since the 1950s, when the 'Wirtschaftswunder' in West Germany showed an amazingly rapid economic recovery after the Second World War, Germany has been by far the strongest economy in Europe. The D-Mark was a stable currency, loved by investors and sought after in the international financial markets. What the Bundesbank, the German central bank did was leading in Europe. Many countries, including the Netherlands, have committed themselves closely to the Bundesbank in order to benefit from the strong German economy. Former finance minister Onno Ruding said:
“If the Bundesbank decided to change its interest rate at 4pm, they called us at 5:45am to let us know. De Nederlandsche Bank then announced the same change at five past four. Our independence went that far. ”
Because the Netherlands and Germany effectively formed one economic bloc in this way, the Dutch guilder quickly became an almost as stable currency as the D-mark. The Netherlands hardly had an independent monetary policy anymore, but thought it was fine that way. However, it was an abomination for France, which wanted to play first fiddle in Europe but was constantly confronted with its inferior economic position compared to Germany.
The German 'nuclear weapon'
Germany had limitations in its political power after World War II, but was all the stronger economically. French President François Mitterand said in 1988:
“Germany is compensating for its weak diplomatic position with its economic power. The D-Mark is in a sense the German nuclear weapon "
However, both countries always recognized that they were mutually dependent on each other. Germany needed France to avoid becoming politically isolated. But such German isolation would also be unfavorable for France and the other Western countries, because West Germany was still the bridge between East and West in the Cold War. Fast, closer cooperation between the two countries seemed the only solution.
François Mitterand (1916-1996)
President of France between 1981 and 1995. An extremely sharp and pragmatic politician of the French Socialist Party. Lost two elections before becoming president in 1981. He saw the power of the Eastern bloc falter during the 1980s and was one of the few Western politicians to envision a reunified Germany. When the time came, he wanted to 'manage' the reunion, but never block it.
Helmut Kohl (1930)
Chancellor of Germany from 1982 to 1998. Political leader of the German Christian Democrats (CDU) from 1978 to 1998. Unlike Mitterrand, Kohl thought until shortly before the fall of the Berlin Wall that it would be "generations" before Germany would become one again. When he was taken by surprise by the rapid events of 1989, Kohl had no long-term plan. Nevertheless, thanks to good contacts, he managed to make the reunification go quickly and orderly.
At the end of the eighties, especially at the initiative of Mitterand, considerable steps were taken towards cooperation in both economic and military fields, but Germany in particular had great difficulty giving up its independence from its Bundesbank. That independent central bank had provided so much economic prosperity. At the beginning of 1989, Mitterrand was already toying with the idea of a European currency and a European Central Bank, to solve the 'German problem'.
Lodge
A common currency seemed to be coming anyway, but with the shock waves that swept through Europe in the fall of the Berlin Wall in the autumn of 1989, everything took an unexpected turn. Once the Wall was gone and thousands of East Germans could travel freely across the border to meet their families, it became clear that reunification of East and West Germany would be only a matter of time. Opinions in diplomatic Europe were divided on this. British Prime Minister Margaret Thatcher, who liked to delve into war history, feared a reunified Germany.
Mitterrand said he has no problem with it, provided there is a common currency. “When Germany has overcome the difficulties of reunification and becomes stronger again, it will be a European Union, and only a European Union, which can curtail German power. Without a common currency, we are at the mercy of the German will," he said.
Thatcher didn't believe him. She flew to Moscow to secretly persuade Soviet leader Mikhail Gorbachev to block German reunification with France and Britain. But the Soviet Union was on the brink of death, and Gorbachev was unwilling or unable to play political games.
But even after the fall of the Wall, German Chancellor Kohl continued to hesitate about relinquishing economic power and starting negotiations on a monetary union. Relinquishing the D-Mark as a post-war success symbol was simply not popular among the Germans. When Mitterrand heard that Kohl had presented a ten-point plan for reunification in the German parliament without informing him, the Frenchman became suspicious.
'Back to 1913'
The war had ended almost fifty years ago, but the mistrust of Germany was still great. Was Kohl secretly trying to go his own way and create a mighty, reunited Germany? A Germany that would destroy post-war peace and stability in one go?
Mitterand, who felt control of the rapid political developments slipping from his fingers, immediately demanded that Germany seriously negotiate an Economic and Monetary Union. If not, Kohl would face an alliance of France, England and Russia. “In that case, we will return to the world of 1913,” Mitterrand added menacingly.
Mitterrand knew very well how sensitive these kinds of references to the First and Second World Wars were in Germany. Under this pressure, Kohl agreed to negotiate a single European monetary system. Germany had to give up its cherished, hard D-Mark in favor of a European currency. Those negotiations eventually led to the Treaty of Maastricht, and the birth of the Euro, and almost ten years later to a smiling Gerrit Zalm at the ATM.