Thank you, Professor Homburg. You’re not only hundred percent right in your answer, but also let me feel that this question of mine is finally taken as seriously and genuinely. Everybody admits that Germany is the example to be followed in its monetary unifying experience. So is its banking. The current ECB has been shaped on the Bundesbank structure. It is similar to that, in my opinion, that this time not Germany, but Belgium can be taken as a model of federalism in Europe – there are enough lessons that Belgium can teach to Russia or Yugoslavia on a civilized manner of federalism.

And I beg your pardon, Professor, let me have a plastic comparison of our here approach to something I live everyday here, in Bucharest. Now, winter feasts are approaching and inside the underground there are many people who gather for making specific music to all passers by. Unfortunately, they are mostly amateurs, they don’t play as properly and so provoke, on the contrary, depression around. But, sometimes just a little miracle occurs: some musician students, professionals of music touch down there and the popular feasts music so changes right away. Then, the unskilled amateur musicians disappear and all sounds much better around. That is what happened here and that is why I thank you once more and wish you happy Christmas and winter feasts!

Back to the same question and answers, and especially to the Professor Homburg’s answer, we can judge about the ‘converse’ way of the EU built in the monetary respect. Each State’s history starts with its identity, metric system declared – meaning measures for weight, distance, volume, electric power … and price, meaning market value unit. Some antique States, even important in their times, missed national currency (see the antique Egypt). Others had this option later on. Money looks to be born in Lydia (Turkey) in the 7th or 6th century BCE, meaning that it was flat coins, as today – in a context in which other forms of money (See Greece) had preceded flat coins. Once the currency issued, monetary policy was equally started by the issuer. States saw themselves forced to associate their monetary policy with their budget and taxation policies, as a whole policies complex issue that came up a so long time ago.

Now, let us jump directly to the post-World War II era: Government (economic and other policies) and Central Bank (monetary policy, as conveyed by Government) all over and they are committed to work together – this is not always a smooth job.

And how does compare the EU’s story with all these above ? Well, the EU already has its own (common) currency whereas its political identity is still theory. As specifically, EU has a central bank (ECB) vis-à-vis a so called government (European Commission) that is not as strong as its monetary correspondent. As in facts, the ECB deals with member States to manage the EU’s currency, plus the EU’s budget stays much less significant than for ensuring the 3% of total GDP as convenient for a stable money value.

You’re right, Professor Homburg. EU was born as currency previously than State or currency missing its own State issuer at least for the moment. It is like an upside-down fetus to be born, if you like.

Or, how long could this last ? Or, if this is to solve by building that ‘State’, how much are we all able and ready to accept it ?

This is the crucial current problem or dilemma of the EU, in my view. And on the optimistic side, let us also remember that the previous issues, problems and dilemmas of the same Union or Community weren’t less difficult in the past.

Dear Hak Choi ,

I would prefer you do not address to me, at least in given context, but if you do, I’ll give you my full opinion, as follows:

(1) I pay taxes to Angelica as much as you do, meaning not at all. Actually, the issue of EU taxation is still just theory, or that is the real problem: the common taxation looks necessary once the monetary union (common currency) already exists. But, unfortunately, I feel you aren’t quite prepared to really and seriously discuss about this (isn’t it ?).

(2) The way you formulate issues reminds me the years and decades of my life when I was living under communism myself. That was the time when: (a) Americans were ‘imperialism’ and (b) the European Community at the time (the today European Union) was something weaker, meaning ‘contemporary capitalism’.

Or, getting off communism, both Romania and the rest of the old Soviet camp did prefer the opposite market (namely ‘capitalist’) economy right away, then joining the EU was just the next step to be made. Look at the eastern half of Europe, read more about it and you’ll deeply and fully understand what I mean.

Lastly, let me explain the difference between the former communism we used to live in and the yesterday and today capitalism of the EU.

I. The EU is not even so ‘capitalist’, but just partly – it is capitalist when it needs a common-unique market, competition, unique currency, private initiative, even free market area and customs union; it stops being capitalist when policy making, structural policies and funds for emergent and poorer economies, common budget to fund all these and when talking about social and inter-country cohesion; even when shaping a central bureaucratic system.

II. The real difference between the two systems lays elsewhere. At the communism time, in the past, the ‘capitalists’ had plural voice: there were many who saw the Community falling and getting bankrupted, as Marx, Lenin and even Mao had predicted a long time ago. Vis-à-vis, communism was looking vigorous, strong and he seemed to have no rupture within. In 60ies and 70ies, we could see something as an ill man (the European Community) face to a healthy and strong man (USSR, communist system and its economic association among States at that time).

III. Several decades passed since that time and the result is: (a) the old ‘healthy man’ (communism), where is he now ?! and (b) the old ill man is still here, despite that he looks as ill as 30-40 years ago.

This is my story, my friend of China. I do not expect you to catch it so quickly, but I’m sure you will in some future.

Plus, that story about 'ones cheating others' is rather similar: there were the ones argiung that capitalism would be crashed by violent revolutions; and it was rather communism crashed by violent revolutions in Europe (I have enough stories to tell about, in Romania, as for instance). Similarly, there were some arguing that the others cheat people -- just search on them to see exactly who's really cheating people... or even shoot people in Tien-An-Men Square...

I don't believe EMS has failed. It is doing exactly what it was designed to do.

@stefan: there is nothing like EU in history, so comparing with the past has little meaning

@Hak Choi: The weak always pay to support the powerful, not the other way around. The trick is to get powerful below the radar.

The reasons for EU crisis are not related to EMS, they go far deeper in EU design. Keep in mind EMS was designed to be a part of a different EU organization, that has failed to happen, due to the failed ratification of the EU Constitution.

Hi, Bradut,

I ought to be happy for a really vivid dialogue I succeeded to entail. Should I be proud of ? Believe me (nobody hears me, except you…), it’s the first one (I did launch a few other questions and there was no answer to. I was on the verge to believe I miss all qualities of socializing this way or another).

Ok, for now, and let’s go to serious aspects of the question. My critical remark for you here is about using the EMS locution. This means ‘European Monetary System’, isn’t it ? Or, if it is so the EMS is something different, in our debate. The EMS was a phase previous to the common currency one that is here right now. The EMS was founded in 1979 as the specific monetary system of the European Community. Its structure was basing on the ECU (European Currency Unit), as the common account currency of the system, and on the Deutsche Mark (DM), as the de facto ‘nominal anchor’ of all the EC’s member States’ currencies. This system lasted up to the EU phase and new common currency’s application.

But it is equally significant that such a monetary system’s structure was once criticized – see Professor Ronald McKinnon, from Stanford University, a very authority in this field. He did argue that such a structure reminded the former Bretton Woods’ international monetary system’s (IMS/1944-1971) one, correspondingly basing on the SDR (Special Drawing Right) of the IMF, as the account currency, and the US Dollar, as the effective unique ‘nominal anchor’ as internationally functioning (and that was during the whole 1944-1971 interval).

McKinnon drawn attention that the old IMS had got bankrupted, together with its fixed exchange rates support, whereas it was keeping, even partly, the gold parity of dollar – and metal parity was by definition the fixed exchange rates support. On the contrary, the EMS was wishing to work with the same fixed exchange rates whilst there was no metal base any more. The question in the McKinnon’s writing was something of: ‘ how could the EMS last, whereas the Bretton Woods IMS couldn’t make it even by keeping the gold reference for the dollar ?’

My idea here is emphasizing that the monetary approach of the EMU is something longer than the Euro’s birth and life since 1999-2002. Plus, whether we now talk about the EU’s common currency’s crisis of 2008-2012, another crisis might have been avoided previously to Euro – once more remember that the Bretton Woods IMS had brutally fallen down in 1971 and that really could happen to the EMS if it hadn’t be replaced by Euro (that was after the McKinnon’s article published in 1992). A presumable crash of the EMS could have been much more than the current or (hopefully) just ended Euro’s crisis.

Once more, in my view, the EU had to chose in those moments of the last century end between keeping an EMS -- that was just its previous IMS with no option for future -- and replacing it with a brand new currency – that was already expected to face enough new and maybe unknown and unexpected problems. This is my response to arguments such as ‘the Euro option was a mistake’, ‘Euro has no future’ or ‘It will get bankrupted in two weeks or so…’

The Euro currency was the lonely option that the EU had, be it a weak weapon to face ‘the so heavy fight’ (let me avoid to say ‘war’, with dreadful reasonance in our old Europe) that is just coming…or just arrived.

@Liviu, long comments are difficult to respond to. I speak about the EMS as it is designed today, since EUR introduction, meaning the system managed by ECB. The Euro currency makes sense if Europe evolves towards a state form.

@ Hak Choi, the key is not independence but interdependence. Independence, meaning the ability to challenge the power, is a threat to the powerful, an invitation to aggression. Interdependence, meaning a mutual advantageous situation would encourage the powerful to protect you, as a useful asset. The more advantageous the interdependence, and co-integration, the better is the positioning on the negotiation table. Bigger EU countries do not cheat smaller countries, they may bully them into accepting a less advantageous position, but it's not like they full anyone.

@Hak Choi. Every game has windows of opportunities even for weaker players, even rigged games. Big players have the cards and make the rules, and change them as well.

About the ”cheating” issue, i sense you have a strong opinion you want to share, do so, and we will debate-it. Place the first card on the table.

Read them, was fun, but those are not scientific papers. As i suspected, you have a strong opinion, and you seem to be dedicated to-it. That's fine, but it's politics not science.

Euro-exit option is far more complex that it appears, actually it's such complex that the results are completely unpredictable. We know, that any shock of that magnitude within an economy has a short-medium term negative effect, so the only reason to do that and accept the price is a very clear long term benefit.

I guess the theme of the question is about the historical roots of the euro. Money usually has a lot of history and, typically, it has evolved rather than being imposed. When there were major changes in global or regional monetary systems, like the adoption of Bretton Woods after WWII or its dissolution in 1971. it was about rates of exchange between different currency units. When Argentina moved to a currency board, the austral (subsequently peso) was 'backed' one-for-one by dollars but the currency remained. The euro, as we all know, was quite different. A managing currency float (with the German DM as the reference rate) was converted into a system of fixed exchange rates and that change was made irrevocable when the national currency units disappeared. This is fundamentally different than a fixed exchange rate system because there are no national currencies to go back to and there is complete mobility of financial capital within the system. During the eurozone crisis, we decided it was axiomatic that the euro could not be dissolved. Back in the days of Bretton Woods there were strict capital controls (policed by 5,000 central bankers at the Bank of England). Imagine I lived in Greece and I thought the euro could fall apart. Why would I not transfer my bank deposits to a German bank in Germany? Nothing stops me from doing so. Or I could hold physical cash (the fact that each euro note has a letter in the serial number marking the bank of issue is irrelevant--these are so distributed around that Greek issued euros are easily found in Germany and vice versa). When the Czech Republic and Slovakia split in 1993 they tried to maintain a common currency. When it proved unworkable, over a weekend they governments surprised the public by freezing bank accounts, stamping bank notes on either side of the border, imposed strict capital controls and it took around six months to issue new currency. Commerce froze. Now imagine doing this across the entire eurozone. Imagine trying to keep the secret with billions of gains or losses to be made by early action. The consequences of trying to pull a Czech-Slovak split would be immense including a very deep recession across the whole of Europe. My take, a breakup is never going to happen. As Oscar Wilde might have said "the only thing worse than the euro not breaking up, is the euro breaking up!" So for good or ill we are stuck with it and the key is to make reforms that make it function better. The reforms so far are far from perfect but the period of systemic crisis seems to have passed. The euro even got a new member on January 1--Latvia.

Hi, John, welcome back and I very appreciate your current contribution after a while. When reading your last text I just remember I was once appointed by the so-called European Institute of Romania, that is something doing diverse works especially for a country that was working hard to join the EU at that time, in 2001-2002. When my relationships with the managing director were becoming not so pleasant on both sides, the man (i.e. I can’t call him a gentleman) asked me to write a study about the Euro currency. Then I’ve got to work because, despite his appreciation, this always was what I liked to. So, I’ve got it in a number of weeks. Nevertheless, my time wasn’t his time, because he called me once (I remember it was just a Monday morning) and told me that we had to ‘stop our working together’, so I don’t have to translate any of that into any language. Then I just asked nothing, but: ‘…ánd the paper I’m working on and will be finished in a few days ?’ He promised me that it would be published in a “honorable way”. Of course, he then didn’t cooperate with me on that, except for that he let me take the paper with me when leaving the institute.

What I mean is that it was in early 2002. My study was turning into a book that I could find a publisher for that summer, but then this one hardly did publish it the next Summer, after about one year, in mid 2003. The publisher isn’t likely to provide electronic forms, plus it is in Romanian (I mean I can’t put it on RG). It is entitled just ‘Ëuro’ and there currently are two editions of it already(2003 and 2007). But, what is the real meaning of that episode ? I mean the text is just what I had written on at that time, in January-February 2002 and even earlier, in late 2001, for being published nearly one and a half years later. It was nothing more than that for 2003, plus the issue of 2007 had not too much to be added to.

Do you understand, John ? If not, let me explain. First, that man of the Institute have done to me much better than he could ever have thought – who could prefer to have a poor study under the cover of an Institute, as just a paper required by the boss some ten or eleven years ago, instead of having his/her own book published ? So, forget about this even vulgar aspect for getting to the real history of Europe. Think about that when I have started working and having the first notes about this subject Euro wasn’t even effective money. Then, a real schedule was in place with its paces and phases. That complex undertaking could have met dysfunctions all time and even could fail. So I was writing what was just scheduled and then, after one and a half years the same text was published, as already done. Events could have changed and my book published could encounter a much different reality than what had been scheduled some years ago. Could that be a drama ? Of course, but could it be a drama for me – for having lost a book published on my name – or, as compared to such an eventuality, could that be really catastrophic for a whole Europe that would fail its project for some hundreds of millions of its inhabitants ?!

Then, it wasn’t any catastrophe, but on the contrary, the Union did make it. It was a performance that the same countries have really demonstrated to the whole world. There was no scheduled point missed, facts were exactly alike, plus my little book was well reflecting the one year after reality, and of course not for any merit of mine – I am far from any prophetic capacity.

But, once more, what is the real meaning of all these ? The meaning was that I could have two editions of my same book at the four years interval due to that not too much has changed during the first decade of the common currency’s lifetime. Euro was strong, so was the EU’s economy, even when dynamics were here a little lower than worl-wide.

I recently thought about trying a “Éuro II” volume. It was just an idea, but this time the publisher refused to talk about it with me. It would be much different this time and a real challenge. Don’t you think…?!