Is there a better symbol of peaceful European unity than the single currency, the euro, shared by 13 countries, 317 million fellow citizens and a single market across the whole continent?
Europe’s successes were achieved only thanks to the political vision, leadership and determination of the people that built from the ruins of the Second World War and the Holocaust. As Jean Monnet writes in his memoirs, commenting on the project to create the European Coal and Steel Community in 1950: “Through the sharing of primary resources and the setting up of a new High Authority (today’s European Commission)...this proposal will lay the first foundations for a European federation preserving peace on the continent.”
After Monnet’s initiative, the most important milestone was the Treaty of Rome, signed 50 years ago this Sunday. It was symbolic. For a long time, the “Eternal City” symbolized a united Europe held together by a Pax Romana established by force. In 1957, the first six European countries turned their backs on their tragic past and voluntarily pooled parts of their national sovereignty into a supranational European body, laying the ground for a Pax Europea established by the rule of law. The Treaty of Rome was an unlikely achievement. We should not forget the downbeat atmosphere of the negotiations coming just after plans for European political and military union were rejected in 1954. In such a climate, the transfer of core state powers to European bodies, which the creation of a common market entailed, was hugely controversial. Yet, three years later, the treaty was signed.
Nor should we forget the fear that the dismantling of trade barriers generated in business communities and national bureaucracies, as they realized that the wall of protection against foreign competitors would be torn down. Yet, by 1968, we had a customs union. In the next decade of oil shocks and economic difficulties, the economic policy responses of different European countries varied wildly. Europe seemed incapable of moving forward together.
Yet, in 1986, a new treaty—the Single European Act—jolted new life into the freedom of movement of people, goods, services and capital inside the bloc, and the so-called Internal Market was born. Today, the internal market helps almost half a billion people to prosper. When asked what the EU means to them personally, one citizen in two referred to the freedom to move, live and work anywhere in the Union. Europe has achieved even more than the founding fathers of the Treaty of Rome could have hoped for. The EU has grown to 27 members; more countries would like to join. Membership has also brought prosperity. Ireland is a shining example: Its GDP per capita rose from 61% of the EU average when it joined in 1973 to 125% by 2004. Democracy and prosperity are now spreading to Europe’s southern and eastern borders, replacing dictatorships and poverty. Already, one ex-communist country, Slovenia, has joined the single-currency area.
The Union has also moved into new areas such as foreign policy and police and judicial affairs. Closest to my heart is the single currency. I remember the scepticism of 15 years ago when we were negotiating the euro’s creation. Yet today our 317 million fellow citizens of the euro area walk around with a little piece of Europe in their pockets and enjoy a level of price stability which previously had been achieved in only a subset of the euro-area countries. This price stability is a direct social benefit to all, in particular the most vulnerable, who have no way to protect themselves against inflation. The single currency has also bolstered Europe’s resistance to external shocks. We will never know how a Europe without the euro would have weathered events such as 9/11, the bursting of the high-tech bubble or the oil shock.
The euro has also increased price transparency and competition, and boosted trade within the euro area. The European Central Bank’s credibility has allowed the solid anchoring of inflationary expectations which, in turn, has brought a tremendous decrease in the cost of borrowing. In the eight years since the euro’s introduction, more than 12 million jobs have been created in the euro area, compared to significantly less than three million in the preceding eight years. These achievements are real and momentous. However, this is no time for complacency. The extraordinary advances of science and technology, together with the rapid development of emerging countries, call on all continents to reform to take advantage of the new state of the world. Europe needs to take a big step up the knowledge ladder, and achieve the full integration of highly flexible goods, services and financial markets, while fostering job creation through open and dynamic labour markets.
Europe has the wisdom of a 2,000-year experience and the energy of a 50-year entity, which is extremely young in historical terms. I am confident Europe will continue to engage more and more resolutely with the indispensable reforms to speed up the creation of jobs and ensure growth and prosperity. And I am confident Europe will surmount its present political difficulty as it has done in the past.
Edited excerpts. Jean-Claude Trichet is president of the European Central Bank. Write to us at email@example.com