Euro Error

This critical study of the euro, written by a respected French economist, should make sense to every trade union member. Throughout the eurozone, growth is weak, unemployment high and rising, and investment stagnant. Yet society needs full employment: without it, we cannot end all its by-products, poverty, crime, corruption, bad health, illiteracy, lack of skills. When workers are in work, they can prevent all these evils. Rosa shows that unemployment is high because macro-economic policy, not Brown�s micro, supply-side, fiddling, decides employment levels, and the European Union has the wrong macro policy. Euro-fundamentalists, including the Labour Government, cling to a fixed overvalued currency - pound or euro - cutting real wages, revenues and growth, and raising unemployment. The resulting excessive interest rates deflate the real economy of production and inflate the casino economy of speculation. In the 1930s, France clung to the Gold Standard and suffered hugely; Britain floated the pound, and did better. In the 1990s, countries like Britain that left the ERM grew faster and had lower inflation than France, which stayed in. Capitalists argue that welfare spending and �labour market inflexibility� cause permanent �structural� unemployment, so you can only increase growth by raising unemployment enough to cut wages. Rosa demolishes this �Eurosclerosis� argument. He shows that in 1989, the last year before the Maastricht Treaty�s monetarism was imposed, the French economy grew by 4%, although welfare payments and the labour market stayed the same. We need a policy for growth, of floating exchange rates and cutting short-term interest rates down to zero. The OECD estimates that in France, for instance, cutting exchange rates would add 2% growth, and cutting 2% interest rates by 2% would add 0.5% growth, creating 320,000 jobs a year. Rosa notes that the euro is Europe�s worst mistake since deflationary policy turned the 1929 crisis into a decade of depression. He stresses that the euro�s economic failings don�t bother the EU�s leaders, because they expressly conceived it as an �economic� way to lock us into the single European state, since they know they could never do it through winning our democratic consent.