The Euro: The Politics of the New Global Currency by David Marsh

By Philip Collins - published on 12/02/09 in The Times 

Every book on economics that has been in preparation for more than a year will require a rapidly written coda, even if the body of the text remains intact. This history of the euro will be no exception.

The research for the book was conducted in a world before the worst of the credit crunch. The book is now released in the midst of a financial crisis and appears against a backdrop of claims that the euro is hampering the economies of its members and that, most fancifully, the euro itself might be a casualty of the crunch.

Whether the euro is the solution or the problem is the tale that David Marsh has to tell. The story of the euro became the story, by proxy, of national identity. Germany gave up the Deutschmark and the Bundesbank with reluctance and only at a price - the Maastricht criteria, the stability-pact limits on budget deficits and the details of the ECB's independence all met the terms demanded by the Germans. In Britain, more than anywhere else, the debate over Europe carried the weight of the debate about national sovereignty. There are not many economists in Marsh's generation who have been present at so many of the vital moments or who can call on such an impressive roster of interviewees as background research. He is especially good on the way that the two great European projects of our time - economic and political union - have counteracted each other.

Marsh concludes that the euro has not mattered as much as either party to the argument thought. The achievement is that it has been established: the euro is now the currency for 15 nations and the world's second-largest reserve currency. But it is neither the cause of, nor the antidote for, the sluggish performance of many of the eurozone economies during its ten years of life. As Marsh says, that has a lot more to do with their reluctance to reform their labour markets than the properties of the new currency.

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