The End of European Sovereignty

George Soros wrote a rather interesting article in the FT this morning to outline some potential problems which the European Union is facing in its potential attempts to prop up the Greek government in the face of its debt crisis. He began his article discussing how the Euro was not a political union, but solely a monetary one and finds it difficult to reconcile such a financial system. A number of flaws are pointed out, specifically putting the proverbial cart before the horse in unifying only the monetary systems instead of the political system.

While I see the reasoning in his argument, I have difficulty fully accepting his arguments. He seems to describe the worst possible conclusion to the Greek (and potential Irish, Spanish, Portuguese) debt crisis as a collapse of the joint monetary system.

My first major issue with his thesis is that the Euro is a politically unifying force in Europe. By tying their monetary systems together, the European governments have intertwined their political structures as well. Stronger countries, like Germany and France are forced to act to protect the strength of their own financial systems from problems which could be caused by a collapse in their currency. When other governments, such as the Greeks, can damage the strength of the Euro, stronger nations must step in to protect not only their neighbors but themselves. Likewise, the European community is nearing steps to force the Greeks to institute austerity programs and increase taxes against their national will. The Greeks would potentially, in essence, cede their sovereignty to its neighboring countries.

Another major problem I see is the thought that the 'Euro' system could fall apart. It would be incredibly unlikely for the nations of Europe to abandon their common currency. Such a move would likely be incredibly unpopular with people who would see their savings and purchasing power collapse along with a defunct currency. Also, a move away from the Euro would likely take quite a long time to implement. Countries would have to re-institute national currencies from scratch - printing, valuing, etc. Such a move would be incredibly costly, not just in terms of the printing and distributing, but also politically and psychologically.

In my opinion, the Euro is here and it is not going anywhere anytime soon. While the value of a Euro may drop, it will not fall to zero or any other point to justify taking it out of circulation. Additionally, counties who have adopted the common currency have given up their independence. When neighbors can damage a country's economy through its currency, that country will act to protect itself however it can. If it must impede on its neighbors sovereignty and force it to take undesirable actions it will. And thus, the sovereignty of the Euro countries is no more.