January 4, 1999—The euro, backed by 11 European countries, debuted, fueling the dream not merely of a common continental currency but even of a common continental economy that could compete against the United States.
There hadn’t been a common currency in Europe since the days of the Holy Roman Emperor Charlemagne, back at the start of the ninth century. We all know how that ended. Now, even with 17 nations using the currency, the euro has had its own struggles, as can be seen by turning to almost any newspaper with any kind of international coverage. (If you really want the major milestones for the euro crisis, this dandy timeline will do nicely.)
“Europe unified its monetary policy through the euro before it unified politically, therefore sustaining member countries' abilities to pursue the kind of independent fiscal policies that can strain a joint currency,” wrote Amity Shlaes in a Bloomberg News article from 2010.
What Ms. Schlaes is talking about can be seen even in the deliberations that brought about the pact. Germany, still fearful of the hyperinflation that doomed the Weimar Republic and helped bring on Nazism, wanted to call the treaty a “Stability Pact.” The leaders of France, balefully eyeing the prospects of putting that before their voters, pushed to have it called a “Growth Pact.” In one of those compromises that make political economy what it is (i.e., essentially meaningless), the agreement hammered out at a quarrelsome summit meeting in 1996 ended up calling it “the Stability and Growth Pact.”
(That meeting, by the way, took place in Dublin Castle. Ireland has had reason to question its relationship to the International Monetary Fund following the extreme austerity imposed as part of a bailout program designed to remedy their pell-mell struggle for—take a bow, France!—“growth.”)
It just goes to show that reality—or, at least, reality in the form of the traditional nation-state—is bound to rear its head against any economic theory.