Countries rethink strategies as euro switchover blues rise

N Madhavan

Proponents of the European Union (EU) are eagerly awaiting the launch of euro—the common currency. Not because it furthers the integration process by way of monetary union but more for generating that badly needed emotional bonding to catalyse European nationalism.

Despite many tangible benefits of the EU, such as peace, free movement of people, capital, goods and services, zero currency risk, better clout in world bodies such as the World Trade Organisation Organisation, the United Nations etc., its popularity has been registering a continuous decline over the years. In 1991, 72 per cent of the Europeans supported the EU, but today that figure has declined sharply to less than 50 per cent.

Only seven in a hundred people at present consider themselves Europeans. Nationalistic feeling still run very high in countries such as the United Kingdom, Sweden, Finland, Ireland and Denmark.
The growing disenchantment is still far away from assuming a proportion that will undo the EU itself but experts are worried that unless people start getting emotionally attached to Europe, further headway, be it in the form of enlargement or increased co-operation among the existing members, may not be possible.

In prospective member countries, like Estonia, popular support has fallen below the 50 per cent mark and many such countries are now rethinking their strategies.

Even in the existing member states, the people are against closer unification as they fear transfer of jobs to countries in the EU which have lower production costs, especially those that are to come on board pursuant to enlargement. Their other worries include increase in drug trafficking and organised crime as the borders disappear, loss of social benefits, lesser subsidies, loss of national identity and culture, reduced use of own language and loss of power for smaller states.

As if these issues are not enough, a whole lot of other reasons have contributed to what people think of the EU today. Among these are:
Generation gap: The genesis of the formation of the EU was the necessity to avoid another war. World War II had just ended and people had to endure severe hardship. Inflation was unmanageable and in Germany especially, Camel cigarettes had more value than the currency. Purchasing power was crashing by the hour due to hyper-inflation.

The present crop of youngsters did not experience this and consequently are unable to appreciate the advantages of the EU. What is in their minds is the various sacrifices they have made or need to make to make the EU a reality.

Blame it on EU policy: One of the major cause for the fall in the EU’s popularity has been the policy adopted by political parties across the spectrum in Europe to blame all hard but unpopulist decisions on the EU. This may have saved them some votes in their country but, in the long run, damaged the perception of EU.

For example, to become a part of the monetary union, the EU laid stringent criteria, such as low inflation, cap on fiscal deficit etc., which forced member states to cut back subsidies and social spending. Some resorted to labour reforms which impacted wages adversely for many. Instead of explaining this as the cost that one has to bear for the sake of the EU and its consequent benefits, most governments said they were forced to do this because of European integration, thus increasing the wedge between the people and the EU.

Lack of democracy: There is a strong feeling that the EU is not democratic. This is because most crucial decisions are taken by the European Commission (EC) which is not an elected body. Though the European Parliament, comprising members directly elected by the people, does have a say, the general impression is that the EC still calls the shots in crucial decisions. Only four out of 10 Europeans are satisfied with democracy as it exists in the EU.

Communication gap: The EU has 11 official languages and all documents, information are translated into these languages to enable people to understand and appreciate EU decisions. But there still appears to be a large communication gap about what the EU stands for and the positive role that it plays and the likely impact of a particular decision etc. This had largely contributed to the scepticism as far as the EU is concerned. Only around 50 per cent of the Europeans say that they know a lot about the euro, which is to be launched soon.

Conflicting interests: Each member has conflicting interests and consequently a particular policy favouring a country has exactly the opposite impact on another. For example a large section of people in Germany are becoming increasingly worried about the EU’s enlargement as it will distort the already fragile labour scene in the respective countries. But there are some countries which stand to benefit from some extra hands.

The euro’s launch may not solve any of the aforesaid problems, but come January 1, 2002, people across Europe (barring the UK, Denmark and Sweden) will have the same currency—euro. As the currency impacts the people on their day-to-day lives, it is expected to bring them closer. This is what EU supporters are hoping for.

But there is a catch here too. There are reports that retailers are already raising prices of their products on the pretext of rounding off the value upon conversion from their local currency to the euro. Nearly 61 per cent of Europeans fear that the switchover to euro will be used as an opportunity to raise prices.

Also, the switchover has to be seamless as it is a mammoth logistical operation. Nearly 70,000 tonnes of coins are needed for circulation and the notes required will also be of similar proportion.

Any price increase or problems in switchover will turn out to be a classical case of the medicine becoming the poison, and without doubt, the support for EU would sink further.