The euro – a curriculum vitae

The euro – a curriculum vitae

This story has no ending, of course, and it will remain that way: for the euro is immortal. Just like a limited company – in principle. This means there are limits to the analogy with a curriculum vitae, and I will take pains not to flog it to death.

As is so often the case in the life of a child: the story begins long before it takes its first breath, in fact even before its conception. The parents started out by toying with the idea for quite a long time. And: it seemed obvious to think about offspring. A single market in Europe, a market without internal borders, with common regulations, is only complete if trade is not hampered by the use of different currencies. This obstacle became increasingly evident with the convergence of the European markets. And it is not surprising that the smaller and more open societies in Europe realised this earlier than others. These countries – which included the Netherlands, Austria and Denmark – closely tracked the D-mark exchange rate anyway, and hence German monetary policy.

The first progenitor came from Luxembourg. His name was Pierre Werner. The consultants were extremely competent, friendly partners from different countries, such as Hans Tietmeyer, who at the time worked for Germany’s ministry of economics. But neither the “father” nor the “doctors” took into account that the idea was conceived in the thick of immense foreign-exchange turmoil. The shocks proved too severe for mother and embryo alike. The infant had not yet taken on a recognisable shape before it succumbed. Various circumstances were to blame. The parents were probably not yet really mature, and the environment was too hostile for the planned child at a time when the Bretton Woods system of fixed exchange rates worldwide was in the process of collapsing.

I, too, had been involved with the European currency – but only platonically – as early as 1972. And I was not ready to go all the way then either. Hermann Josef Abs, who listened to my critical deliberations on the European currency shortly before Christmas 1972, said to me, a 28-year-old at the time: “Interesting speech, young man, but I didn’t believe a word of it.”

But in the middle of the forex market turbulence the potential parents of the euro started making tender advances to each other. This led to the birth of the currency “snake” in 1973. The ongoing difficulties, though, promptly made it degenerate into a currency worm, as major European currencies – such as the French franc, the pound sterling and the Italian lira – soon had to exit the system. But two circumstances helped keep the idea alive: first, the fierce determination of the parents – Germany and France – and an unwitting, but very effective godfather, the USA, whose dollar policy would have softened a stone. After the mid-1970s, the Carter malus pushed the dollar into ever lower levels, so the European parents increasingly felt responsible for finally engendering a counterpart of their own. Giscard d’Estaing and Helmut Schmidt were responsible for the successful conception, assisted by an American (of German stock) who had returned to his roots, Horst Schulmann, and this set the stage for the birth of the European Monetary System (EMS) in 1979.

This fertile environment was the breeding ground for Europe’s subsequent Economic and Monetary Union (EMU). It was nourished by the reorientation of France’s monetary, fiscal and economic policy, which turned onto a clearly mapped path for economic stability. This helped Jacques Delors and Hans-Dietrich Genscher, two Europeans par excellence, to implant the idea of the European currency. The Delors Commission, under the gifted leadership of Karl Otto Pöhl, drafted the blueprint for its inception. The baby inherited much of its constitution from the German mark; it was even to first see the light of the world in Frankfurt. But French charm was missing, as was professional care from London – up to the present at any rate. The child was given a European name – euro – so all Europeans could identify with it.

All involved were surprised at how smoothly the birth went. The leaders of the 15 EU governments met on the first weekend of May 1998. Fourteen were prepared – as set out in the convergence criteria – for the big event. However, only 11 could say “yes” to the child. All important arrangements were made: conversion rates, guardians (the Executive Board) and the central bank governor (despite competition between two extremely qualified candidates). And the euro got off to a “Flying Dutchman” start: with an excessively high exchange rate and too much advance praise. The result was inevitable: the new-born was stricken with diarrhoea. The parents suffered. The many observers harbouring doubts or envy were vindicated. And they turned their back on the little challenger. They made jokes about the “preemie”. It suffered depreciation. But anything with a good constitution will survive. And that has been the case: the launch of banknotes and coins from Helsinki to Faro in the fourth year of its existence was a success. The new money shines beyond the borders of Europe, too. It is taken seriously as unit of account, currency anchor and payment instrument. And now it has won a prize which stands for tradition: the International Charlemagne Prize of Aachen.

So far, no other three-year-old has been awarded the Charlemagne Prize. But Emperor Charlemagne will look kindly upon the good European, the euro, given that during the time of his reign there was already a single European currency in circulation in the form of the Carolingian denier. And he will call out to Alan Greenspan: “Alan, it will still be around even when you are gone.”

Mr Norbert Walteris the chief economist of Deutsche Bank Group. For more information, see

Walter’s Web Wisdom.