The Euro’s Chains and Pains

It has been quite a ride of late for Greece and its baffled citizens. There was cash shortage, with pictures of pensioners sobbing beside  barren ATMs, followed by the plebiscite on the latest European Union lifeline, which was rejected. Then came the showdown and, to the amazement of Greeks who thought they rejected one possible deal, the acceptance of a package even more onerous than that originally offered.

All this has been most peculiar, but even more strange is the chorus that insists the present agitation against Greece is an enormous threat to the EU. Why? Could not Greece be offered the option of an ordered exit from the euro? Why can’t Greece join in an orderly manner those EU member states that do not belong to the euro? And why, in the first place, did the treaty that created the euro not contain an exit clause?

These questions generate further questions. Why has there been an ever-growing hostility between northern and southern countries that belong to the eurozone? Did not the euro project envisage, as announced at the time, the reinforcement of convergence and unity — the so-called “ever-closer union” — among its members? Why has the euro achieved the opposite of what had been announced?

I am afraid I have to recall that there were people who warned against the unintented consequences of a single currency in the absence of a single country. It was then observed that a proper single currency would involve automatic transfers between its members. That this would in its turn entail a single fiscal policy and, ultimately, a single government — not to mention what for some is just a boring detail, a single parliament.

But can we really have a single budget, a single government and a single parliament without a single country? There is certainly a school of thought that believes we can (its adherents do not know what they believe, they just believe that they know). They indeed believe that nation-states have been merely the result of political decisions. They also believe that most social institutions and social artifacts are basically the result of political decisions.

It just so happens that they are not. It may well be that political decisions are an important ingredient of social institutions. But they are not the only one, and often not the decisive one. Social institutions are not made by anyone in particular. They emerge from a long and complex process of decentralised interaction which cannot be centrally commanded — even if that command is issued in the name of “reason”, or even, to quote the current boilerplate, “rational liberation from the yoke of prejudices and traditions”.

This, I think, does not necessarily entail that the creation of the euro has necessarily been a mistake. But it was certainly an enormous error to create the euro without an exit clause. And it is an enormous mistake to identify the euro with the European Union. The single currency should be perceived only as a possible option for those countries that want to subscribe to it. For this same reason, these very same countries should be entitled to leave the euro whenever elected parliamentary majorities may prefer to do so. That option should have been on offer from the very beginning.

I am afraid that the dogmatic interpretation of the euro as an irreversible project of social engineering, as Karl Popper would have put it, has created a sort of straitjacket. Unfortunately, straitjackets have been only too common in the Continental political tradition. Alexis de Tocqueville described this as the “perpetual and sterile conflict between the Ancient Regime and Revolution”. Sociologist and philosopher Ralf Dahrendorf described the same phenomenon as Europe’s recurrent e tendency to generate “unfortunate dichotomies”.

Prudence tells us that we should keep ourselves as far as possible from this illusion of inevitable dicothomic choices. There is always a via media. And perhaps now is finally the time to reshape the EU as a much looser and flexible institution.