Euro Crisis Kills a Counter-American Idea

By Fabio Rafael Fiallo

Whoever followed the launching of the euro in January 2002 is not about to forget the high expectations placed by U.S.-bashers of the Old Continent on the creation of the common currency. The euro, it was trumpeted then, would provide the European Union with a monetary lever to strengthen its presence and weight in the world economy and, no less important, challenge what France's foreign affairs minister of the time labeled the "hyperpower," i.e. the U.S.

To be sure, the governments and citizens of Europe were in their vast majority impervious to the anti-American rhetoric. The debate focused then - and indeed still does - on whether the euro is an effective means of enhancing the continent's well-being. But for anti-globalizers, left-wingers and some leading politicians, conspicuous among them former French President Jacques Chirac, the euro would enable the European Union to become a "counterweight" to the "hyperpower." With the help of the euro, the days of American supremacy were numbered. Or so they said.

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Outstanding economists called into question the economic rationale of the euro. Among the contrarians, one should mention Nobel laureates Milton Friedman and Edward Prescott, as well as Martin Feldstein, president emeritus of the U.S. National Bureau of Economic Research. But such dissenting views were brushed aside with scorn by U.S.-bashers and Eurocrats alike on the grounds that they were held by advocates of "Anglo-Saxon ultra-liberalism," who, we were told, had an ideological bias in favor of "unbridled capitalism" and against government-led monetary engineering.

One decade after the creation of the euro, the Old Continent's common currency is striving, not to shine in the geopolitical landscape, but merely to stay afloat in a sea of troubles. Europe's policy-makers have been obliged to take their calculators and evaluate whether it is costlier (in hundreds of billions of dollars, whoops, of euros) to keep Greece on a financial drip, or to edge her out and cope with the contagion effect that a Greek exit would have on other highly-indebted members (Italy, Portugal, Spain). Between leprosy and cholera, the choice is harrowing.

Europe is in fact paying for having devised a common currency among countries with too profound disparities in terms of productivity, working culture, addiction to welfare benefits, fiscal discipline and political accountability. All those differences, however, were obliterated at the time of the creation of the common currency. For in the corridors of power in Brussels, political grandiosity has a much heavier weight than economic soundness. Hence today's debacle.

And while the euro fights for its survival, the U.S. economy takes the road of recovery from the Great Recession initiated in 2007. The recovery is undoubtedly tepid and fraught with uncertainties; but it is nonetheless a recovery. As a token, U.S. manufacturing output has been growing for 32 consecutive months, home construction is near a three-year high and unemployment aid applications aren't far from their four-year lows.

The euro crisis is not the first case in which the hopes of U.S.-bashers come a cropper. Remember the former Soviet Union, how strong it looked at the time the U.S. got mired in Vietnam ... before shrinking into a Russia whose oligarchy and ossified rent economy do not offer enticing opportunities to an expanding and disgruntled middle class. Remember, too, Japan, the rising star of the 70s and 80s, which many announced would take over the first place in the world economy ... before falling into a protracted economic lethargy that has lasted over 20 years.

Immune to all these delusions, U.S.-bashers continue their quest of a white knight that would deal American supremacy the longed-for death-blow. The bets are now placed on China and its 8-10 percent rate of growth.

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Fabio Rafael Fiallo is a Dominican-born economist, writer and retired official of the United Nations Conference on Trade and Development (Unctad).

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