ECONOMY

Many EU citizens disgruntled with euro, but currency is safe

BERLIN – Many Europeans blame the euro for their economic woes and see it as an unwelcome intrusion foisted on them by politicians in Brussels, but few seem to expect it to disappear. While politicians scramble to defend the single currency from attacks amid rumors of its potential demise, belief across the continent is widespread that there is no alternative to it. With the euro already hit by the recent rejection of the draft European constitution in France and the Netherlands, Italian Welfare Minister Roberto Maroni, a member of Italy’s euroskeptical Northern League, even suggested Italy should hold a referendum on abandoning it and bringing back the lira. In Germany, one of the original architects of the single currency, policymakers have repeatedly stressed their commitment to the euro, knocking down a report that the government and the Bundesbank had discussed the possibility of a breakup of monetary union. However, ordinary people’s enthusiasm for the euro is less marked, with many regarding it as a drain on their income. A recent study by pollster Forsa for Stern magazine showed 9 out of 10 Germans think the euro caused lasting price hikes, while almost half blamed it for the country’s sluggish economy. Sabine S., a 39-year-old physiotherapist from Hamburg, said her patients were always moaning about the cost of life now. «All they do is just swap stories the whole time comparing the price of foods at various supermarkets,» she said. Broken promises Across the border in the Netherlands, pollster Maurice de Hond said the Dutch saw the euro as a symbol of broken promises. «The euro in itself is not something people dislike,» he said. «What they hate is what they see as the lies around it, the weakness of the government around it,» he added, citing anger over France and Germany flouting the EU budget rules even as the Netherlands cut spending to keep its deficit in line. A November poll conducted for the European Union found that only 39 percent of the Dutch believe the euro was beneficial for their country, the lowest total in the eurozone. Although European finance officials have rubbished the notion of a break-up of EMU, markets have shown heightened sensitivity to perceived negative comments on the euro. Some fear these could generate their own momentum. Paul De Grauwe, an economist at Belgium’s Leuven University, said such fears were exaggerated but that Europe needed to adapt. «If it is forecast that in the next few years the eurozone will break up, then that’s not to be taken seriously,» he said. «What is to be taken seriously is that in the very long run, monetary union can only survive with political union.» Berlin electrician Detlef Schroeder said a lack of unity had undermined the euro, which he said was launched too early. «It should never have happened while politicians were still split over Europe’s future. That’s why these ‘no’ votes came.» He also said the euro had left his clients unable to pay their bills, but did not see any alternative to it now. «Nothing’s going to change. It’s not possible.» In Ireland, one of the big beneficiaries of the euro, Davy Stockbrokers economist Rossa White said joining the single currency had given the country a big lift. «We’ve had much lower interest rates than we would have had with our own central bank,» he said. «That has helped boost consumer spending and investment.» Even among those whose enthusiasm for the single currency is tepid at best, there seems little expectation of a return to separate national currencies. «I wish there could be a referendum on the euro in France, because everything has become too expensive since we gave up the franc,» Paris hotel worker Monique Ameda said. «It won’t happen, though,» she added. Trichet firm on euro European Central Bank President Jean-Claude Trichet said on Friday it was «absurd» to talk of any eurozone country ditching the single currency. Trichet also stressed the benefits of euro membership, such as low interest rates and assured price stability. «The single currency is a win-win project,» the central bank chief told LCI television. «I repeat it is absurd, it is totally absurd,» he added when asked for his opinion on Maroni’s comments. That echoed the line Trichet and others have taken since last Wednesday, when talk of an end to the euro was sparked by a media report that possible failure of the project was discussed at a meeting attended by German Finance Minister Hans Eichel, Bundesbank President Axel Weber and investment bank economists. Such talk has undermined the euro on the foreign exchanges. Asked about the euro’s swings, Trichet declined to comment on moves, which he said had been «modest.» Trichet dismissed calls for the ECB to cut interest rates and pointed out that short-term rates were effectively at zero in real terms, which are adjusted for inflation. The ECB has kept its key interest rate is at 2 percent since June 2003. He said some European households felt prices were rising too fast but directly assured them that the ECB would continue to fulfill its mandate of keeping prices stable, which it defines as keeping inflation close to but still below 2 percent. «You can have confidence; your purchasing power will be preserved,» he said. He said raising the ECB’s inflation objective would be counterproductive as this would only result in increases in market interest rates. Trichet hammered home the benefits of the euro by saying France and Germany had lost nothing by joining the bloc as their interest rates had not risen, while other members had benefited as their rates had fallen toward French and German levels. He said the ECB was one of the policymaking bodies which could help stimulate economic activity, and was doing all it could to provide an ideal climate for growth. «What is sure is that by being true to our mandate, by being credible in assuring price stability – which we are – we provide an exceptionally favorable monetary and financial environment for the European economy,» he said. «Good monetary policy is a necessary condition for growth and job creation, but unfortunately it is not a sufficient condition on its own.»