The past year has been a most tumultuous one for the nations of the eurozone, from the sunny shores of debt-ridden Greece to her disgruntled northern neighbors. The seventeen-member union has approached the brink of disaster and backed down seemingly several times a day for months, exhausting lenders and spectators, while inciting political unrest throughout the region. While bill after bill intended to increase liquidity in European markets and to assuage the concerns of international investors has been passed, the dim forecast on the continent looks to spell disaster for the common currency. The euro can be saved, however – what will be required, though, goes far beyond the superficial remedies that have been tried up until this point. The powerhouses of the Monetary Union, Germany and France, need to take more decisive action to save their common currency.
It is clear that the European Monetary Union (EMU) – the basis of the eurozone – is an idea half baked, so to speak. The European Central Bank (ECB) , which regulates the euro, controls the flow of cash and the exchange rate of the euro. This is a power reserved to national governments in other cases. The United Kingdom, for example, is a member of the European Community but not the Monetary Union, and thus maintains its right to mint its own currency. Control over monetary policy has long been used to political ends – in times of low economic competitiveness, governments often devalue their own currency to encourage more investment and foreign purchase in their country. Because the nations of the eurozone have ceded their authority to produce money, they no longer enjoy this power, and countries like Greece have seen the repercussions of not being able to adapt to novel economic circumstances.
Furthermore, while there are so-called fiscal “requirements” inherent to being a member of the Union, the ECB suffers from clearly defined and accepted methods for dealing with countries that are not in compliance, like Greece. Like resolutions of the United Nations, decisions and suggestions made by the members of the EMU can ultimately only be implemented by national governments. Besides sheer pressure of influence, the mechanisms available to constituent members for enforcement are few and ineffective.
From a structural point of view, it is clear that attempted remedies on the surface of the problem will do little to prevent another situation like this in the future, though they may temporarily allay concerns. For the assured continuation of the eurozone, however, the Union will have to adopt measures like the plan proposed by Angela Merkel and Nicolas Sarkozy in December of last year, which would make fundamental adjustments to the treaties that founded the European Union. Such adjustments would strengthen mechanisms for keeping countries in fiscal health, and would allow for increased powers on the part of the Central Bank to assure stability. Qualms exist on the part of less powerful countries about ceding even more sovereignty to the European center, but this will have to be a necessary step if they desire the security that the common currency provides.
While Merkel and Sarkozy have proposed a plan to this effect, the time is long ripe for more persuasive action. The Lisbon Treaty at the inception of the Union took years to ratify, but the Europe of today is not in an appropriate position, financial or political, to make lengthy deliberations. Merkel must adopt more aggressive tactics to ensure the quick implementation of a long-term strategy to stabilize the region – otherwise, the future of the euro itself may not be guaranteed.