Excerpted with permission from the publisher, John Wiley & Sons, from BUST by Matthew Lynn. Copyright 2011 by Matthew Lynn.
Now We Are TenOn January 13, 2009, Jean-Claude Trichet, president of the European Central bank, traveled to the Strasbourg to give a lecture celebrating the tenth anniversary of the euro. It was a pleasant, downbeat occasion. Over much of its short existence, Europe's single currency had been a bitterly contested, viciously fought-over creation. Over prolonged European summits it had been argued over savagely by a whole generation of political leaders. Careers had been made and broken. Referenda had been played out across Europe, and, as the votes were counted, the fate of the project regularly hung in the balance. As preparations were made for its introduction, the global financial markets poured endless buckets of scorn on its prospects for success. As the notes and coins were introduced from Bavaria to Lombardy, from Catalonia to Provence, shopkeepers turned up their noses at this strange, foreign money, a garishly colored imposter creeping into their tills. And as it made its debut on the markets, it was treated much as the new fat boy might be at a rough school: an object to be kicked around and bullied, mainly for the amusement of the bigger and nastier children. And yet, even at the tender age of 10, it appeared to be approaching a kind of calm, middle-aged serenity. If it was possible for a currency to pull on a cozy pair of slippers, make a cup of hot chocolate, pull itself up by the fire, and start reading the gardening supplement in the newspaper, then that is what the euro would be doing. And that mood was very much reflected in the tone of Trichet's speech to the European Parliament that afternoon. "For decades, the single European currency was merely an idea shared by a few people. Many others said that it could not be done, or that it was bound to fail," said Trichet.
Today, the single currency is a reality for 329 million citizens. The creation of the euro will one day be seen as a decisive step on the long path toward an "ever closer union" among the people of Europe. Since the introduction of the euro, fellow Europeans have enjoyed a level of price stability which previously had been achieved in only a few of the euro area countries. This price stability is a direct benefit to all citizens. It protects incomes and savings, and it helps to bring down borrowing costs, thus promoting investment, job creation and prosperity over the medium and long term. The single currency has been a factor of dynamism for the European economy. It has enhanced price transparency, increased trade, and promoted economic and financial integration within the euro area and with the rest of the world.Indeed so. Trichet is in many ways the perfect Mr. Euro. A smooth, articulate French intellectual, he speaks with the calm authority of a fiercely intelligent technocrat. You could interrogate the man for weeks and not force him into a single error, slip, or gaffe. Over a career spent pushing for the closer integration of the European nations, he sometimes appears to have transformed himself into a living embodiment of the ideals he strives to articulate: a kind of Franco-German unity turned, with surprising success, into flesh and bone. Like all French political and intellectual leaders, his speeches and press conferences are often elaborately erudite, laden with cultural, historical, and literary references. In the manner that only French officials can achieve, he is never afraid to make the connections between poetry and central banking (Goethe and Dante turn out to be among the influences on the European Central Bank's decisions on interest rates, in case you were wondering). But he has also assumed a Teutonic rectitude and sternness. He is never shy about imposing a very German view of financial conservatism on Europe. He discusses thrift and balanced budgets as matters of morality as well as economics and bookkeeping, in a way that plays better in Bavaria or Saxony than it does anywhere else in Europe. He is well aware that money is as much a matter of national identity as a medium of exchange, and perhaps more so. The euro could have no better champion.