The current crisis has left Europe looking weak. Whenever that happens, a bout of anxiety about the euro can’t be far off
following the bankruptcy of Lehman Brothers in 2008, there was naturally concern about the security of deposits. Many judged cash was safer kept in hand than parked with a wobbly bank. Demand for banknotes surged. Discerning German hoarders were said to be stuffing their mattresses with euros with serial numbers prefixed by an “This made little sense. A euro banknote is a euro banknote, wherever it is printed. But in troubled times people look to strong states for security.
History says that political union is the essential glue of any currency union. This invariably entails a centralised system of taxation and public spending. It offers a way to deal with economic disruptions that have an uneven effect across the currency zone. A shared fiscal policy automatically directs support to where the economic hurt is greatest. The coronavirus is one such “asymmetric shock”. It hit Italy and Spain first, and hardest, within Europe.
None of this makes the euro zone a powerhouse. Its bourses are laden with the stocks of seemingly doomed industries, such as carmaking and banking. But the euro itself is not obviously doomed. Indeed it is not too fanciful to imagine a future in which it survives even if theThe commitments of a shared currency are not easily shaken off. The complexity of the financial super-structure built upon the euro makes break-up a terrifying prospect.
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