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WHAT A TIME to write a book about the euro. The single currency is alive but not kicking. Greece has stepped back from the abyss – for now. But few think this is the end of the story. In a year’s time the euro might be radically different. It might even be dead. David Marsh’s publication would then be read more as an obituary than a history.
But it would still be worth reading.
An updated version of a book first published in 2009, The Euro: The Battle for the New Global Currency, remains an unparalleled telling of the story of the euro’s creation and the tensions that accompanied it. Its central story is the tangled relationship between Germany and France: two nations locked in a loveless embrace. Marsh debunks the crude myth that the single currency was François Mitterrand’s price for accepting German unification; that was a done deal and three other key players – the US, the Soviet Union and the UK – had no dog in the euro fight.
In reality the euro was about two competing versions of the economic organization of a continent struggling to come to terms with a challenging future. Those issues could have been addressed with microeconomic reforms but macro played better. The Cartesian nature of Rhineland policymaking – where words are substituted for action and structures are confused with on-the-ground facts – is the original sin of the euro project. Build a currency and they will come.
What Marsh illuminates so well – and it is a story that echoes down the decade of the single currency’s existence – is the way in which French and German policymakers used the same words and phrases to mean different things. In Berlin, "economic governance" means fiscal oversight. In Paris it means an activist industrial policy. Despite the late-July agreement on the Greek rescue package, those two versions have not become one.
It is arguably that dialogue of the deaf that has so weakened the single-currency project. When Germany and France worked effectively together – fostering the ludicrously named Growth and Stability Pact and neutering proposals for boosting the powers of Eurostat, they were, ironically, at their best.
The contrast between German pragmatism and French theory is, of course, played out in the body of European Central Bank president Jean Claude Trichet, in his own words: "A German in France, and a Frenchman in Germany."
People in London and New York are often lazy in their assumptions about the continent of Europe. Witness the widespread use of the phrase ‘Eurosceptic’. A sceptic is one who doubts and challenges received opinion rather than substituting one set of prejudices for another.
Marsh does not do that; that is why he commands the kind of respect in continental Europe that more shrill Anglo-Saxon commentators do not. This is reflected in his unparalleled access to the agents in this story. He gets interviews that lesser authors would not.
This writer remembers interrogating Marsh on stage at a Euromoney conference in Berlin in early 2010. ECB board member Jürgen Stark and German state secretary of finance Jörg Asmussen – two of the heaviest hitters in the politics of European finance – sat riveted in the front row throughout the session. When Marsh described Stark – in an earlier life – as the "Rottweiler of the Bundesbank", this writer thinks, but cannot swear, that he saw Stark’s trademark moustache twitch.
This new edition brings Marsh’s 2009 book up to date. It is inevitably handicapped by just how fast events are unravelling. Arguably there is not that much new: Marsh did such a good job of detailing the run-up to the project and what the compromises involved meant for its viability that it is hard to add to.
But for anyone who wants to understand why the euro project is where it is now, this book is indispensable. And that includes the armies of ‘Eurosceptics’.