Published Date: January 6th, 2022
Common currency an unprecedented collective endeavour and a testament to EU unity
By Paschal Donohoe, Irish Minister for Finance
Twenty years ago this week, around 300 million Europeans held a brand-new currency in their hands, the euro. From Lisbon to Helsinki to Athens, citizens were able to withdraw euro banknotes in their local ATMs, buy their groceries with euro coins and travel abroad without exchanging currency.
The changeover from 12 national currencies to the euro was a one-of-a-kind operation in history: the European Central Bank printed more than 15 billion euro banknotes and some 52 billion coins were minted ahead of January 1st, 2002.
Building on the expansion of the single market, the euro became one of the most tangible achievements of European integration, together with the free movement of people, the Erasmus student exchange programme or the lifting of roaming charges within the European Union.
On a deeper level, the euro is reflective of a common European identity, symbolic of integration as a guarantor for stability and prosperity in Europe.
As the finance ministers and members of the European Commission steering euro-area economic policy, we take a collective look back at the past 20 years and identify some priorities for the future of our common currency.
It is fair to say that the euro has had an eventful first two decades.
From the great enthusiasm of its beginnings, the euro has grown to become the world’s second most widely used currency. Our shared currency remains highly popular – about 80 per cent of citizens think the euro is good for the EU – and the euro area has continued to expand, from the 11 initial members, to 19 countries today, and more on the path to joining in the coming years. This progress was made in the face of severe challenges. Some were skeptical about the project already at its infancy.
When it reached its teens, there was a wider realisation among the member states and institutions that the architecture of the euro was not originally designed to respond to the seismic shock of the global financial and subsequent sovereign debt crises. This prompted the reform of the euro area’s governance framework, the establishment of a joint support mechanism for countries in financial distress and a common supervisory system for European banks: a recognition that the solution had to be found in greater co-ordination and deeper integration.
These early crises enabled the euro to mature and strengthen its international role. We have also learned valuable lessons that have stood us in good stead in the current pandemic: its borderless nature revealed both the depth of our interdependence and the strength of our unity.
When the scale of the Covid-19 crisis became evident, it was met with much swifter, more decisive and more co-ordinated policy action, in contrast to previous shocks. While existing tax and welfare systems worked to cushion the economic impact, the EU took unprecedented decisions to further protect lives and livelihoods, complementing the ECB’s supportive monetary policies. Our collective response included the Sure financial assistance scheme that has contributed to protecting about 31 million jobs, as well as the ground-breaking recovery plan for Europe – Next Generation EU.
Our co-ordinated policy response, coupled with the rollout of Covid-19 vaccines, helped the euro area to quickly rebound from the economic effects of the pandemic. Moreover, the financial and liquidity supports provided were designed to limit the risks of long-term damage so that our economies could rapidly recover lost ground.
We have achieved a lot in the first 20 years of the euro, but there is more to be done.
We need to keep pace with innovation and promote the international role of the euro. The euro itself must be fit for the digital age. That is why we support and contribute to the ongoing work of the ECB on a digital form of our currency.
At the same time, the euro area needs to be further reinforced. While we have set strong foundations to our European banking system, we have more work to do to strengthen our banking union and unlock new opportunities for economic recovery and growth. The same applies to our capital markets: we must take decisive action to improve the way private investments and savings flow across the single market to provide much-needed financing to companies, including our SMEs, and in turn create new job opportunities.
Investment levels have been too low for too long: we must invest heavily and sustainably in our people, infrastructure and institutions. Coupled with responsible budgetary policies and the contribution of the private sector, Next Generation EU will play a key role in delivering many necessary reforms and investments. This is the best route we have to boost our growth potential, improve our living standards and tackle the critical challenges facing humanity.
We must also ensure fiscal sustainability as our population is aging. In the context of the review of our common budgetary rules, we need to guarantee that euro-area fiscal and economic policies are fit for purpose in a changed environment and responsive to future challenges.
Our common currency is an unprecedented collective endeavour, and a testament to the unity that underpins our union.
As the world recovers from the pandemic, we must now combine our efforts and resources to reap the benefits of a rapidly digitalising world and to tackle the climate emergency. None of these issues can be addressed by countries acting alone. The euro is proof of what we can achieve when we work together – looking ahead to the next 20 years, let’s make it a symbol of our commitment to secure a prosperous, sustainable and inclusive future for coming generations.
This article has been reproduced here by kind permission of The Irish Times. It has been co-signed by Minister for Finance Paschal Donohoe, president of the eurogroup; European Commission executive vice-president Valdis Dombrovskis; Paolo Gentiloni, European Commissioner for Economy; Mairéad McGuinness, European Commissioner for Financial Services, Financial Stability and Capital Markets Union; and all finance ministers of the euro area.