Photo: Goldman Sachs
Goldman Sachs Chief European Economist Huw Pill exposes a terrible irony about the eurozone in a video filmed this month: at the signing of the Maastricht Treaty, both those who loved and hated the prospect of a European Monetary Union actually thought that the euro would see a crisis that would test its structural basis eventually.The key difference between their viewpoints consisted of their approval or rejection of the progress that would need to happen to make the euro area sustainable, and whether the populace would actually consent to go through with such reforms.
“They both shared the assessment that [the European Monetary Union] was incomplete in some important respects, and in particular that it lacked the depth of fiscal and political integration that was really required to make the monetary union workable and efficient and effective on lots of dimensions.”
Both groups recognised that these flaws were deep, and ultimately could provoke a crisis:
“The euro-sceptics’ argument at that point was precisely because you were lacking things like deeper political integration, deeper fiscal integration, and so forth…You thought they were undesirable, and not only undesirable, unattainable…In the end, these design flaws would lead to a crisis in the euro…
But the irony is that the europhiles would have agreed with that assessment. But they thought deeper fiscal integration, deeper political integration were both desirable and were attainable, but would only be attained once there was the pressure of having monetary union there to act as a forcing mechanism to make these things happen.
Pill argues that these predictions have ultimately come true, “vindicat[ing]” euro-sceptics while at the same time setting the stage for the fiscal and political integration that the europhiles had desired.