Implications of the Euro

I have a good life here in Mollans. I Like the place and most of the people in it; I garden, play boules, join in and promote village activities, eat frequently with friends, go shopping and do very many other satisfying but unremarkable things. And living here is well within my very reasonable financial means. I estimate the cost of living as similar to that in the UK, probably slightly less as a retired person, and there is not a lot to spend money on here. In short, I can live well here, quietly, and within my means. A significant factor though is the pound-euro exchange rate, since my income is in pounds which I have to convert to euros. In my time here I've seen the exchange rate swing by about 25% one way or the other but it has been easy to even out that effect on my income. What though if the euro or even the EU itself were to implode?

To my mind, the euro has been a big mistake. There was huge political backing for it at its inception, as a means to achieve financial integration in the EU. Financial integration and the euro are interdependent; you can't have one without the other. At the euro's inception financial homogeny didn't exist between EU countries and a nod to its necessity was made through financial requirements for joining the eurozone. These were widely and blatantly flouted though, particularly by Greece and Italy; only political wish-fulfilment saw them and a few other countries through. The result is a currency that is currently unsustainable. Of the major eurozone economies only Germany's is healthy. The second most important economy, that of France, now seems to be in serious trouble; if that continues to fail, questions about the economies of countries such as Ireland, Spain and Italy will become irrelevant. In fact, the financial crisis of the past few years has seen European economies diverge rather than converge, the opposite result to that desired. As in individual internal economies, the rich have got richer and the poor have got poorer. The euro will collapse, at least in some countries, unless Germany agrees to underwrite all eurozone debt.

The popular reaction to that possibility in Germany has been a swing to nationalism; why should Germany underwrite other countries' debts? That is the reaction not only in the most powerful country in the eurozone but also in the weakest: Greece. And similar rises in nationalism can be seen in Spain and France and even outside the eurozone, in the UK. When times are hard for most people, a rise in nationalism is normal and it generally subsides when a solution to the problems causing the hard times is found. In the current context the situation is serious because the only available solution could be disappearance or retrenchment of the euro and a fundamental rethink of the EU. We can probably dismiss the prospect of a Europe-wide war, a reaction to these circumstances in former times, but withdrawal of some countries from the eurozone and severe curbing of the power of Brussels are distinct possibilities. Certainly, global currency speculators will continue to attack the euro until its weaknesses are resolved; and they are currently being exacerbated rather than resolved. And, with the rise of nationalism, the idea of devolving more power to Brussels to achieve greater financial integration must be a forlorn prospect.

So what is to happen and how will it affect my quietly happy life? Accounting has always been a moveable feast, a game of smoke and mirrors, so I expect attempts to salvage the euro to continue, whatever fudges are involved, until or unless a total impasse is reached. That won't affect me greatly although, one way or another; I expect the cost of living here to rise sharply in the future, though hopefully still within my means. The rise in nationalism is unlikely to affect me nearly as much as it may other immigrant communities. But I think it may well produce radical changes in Brussels. If these include transference of power from the European Commission to the European Parliament, so much the better because that would apply a brake to the grand designers in favour of the pragmatists. And Brussels has always suffered from a lack of the latter. Such a change also could preserve the good work that the EU has done whilst eliminating its wildest flights of fantasy.

So I don't see any great threat to my quiet life but I do see some changes which, hopefully, won't be too disruptive.