In Defense of the Euro

Theorists of the Austrian school have focused considerable effort on elucidating the ideal monetary system for a market economy. On a theoretical level, they have developed an entire theory of the business cycle which explains how credit expansion unbacked by real saving and orchestrated by central banks via a fractional-reserve banking system repetitively generates economic cycles. On a historical level, they have described the spontaneous evolution of money and how coercive state intervention encouraged by powerful interest groups has distanced from the market and corrupted the natural evolution of banking institutions. On an ethical level, they have revealed the general legal requirements and principles of property rights with respect to banking contracts, principles which arise from the market economy itself and which, in turn, are essential to its proper functioning. Economists of the Austrian School are supporters of the gold standard because it hinders and restricts arbitrary policies and rulers: it disciplines the behavior of all the agents involved in the democratic process and encourages people to act orderly and morally. The creation of the euro in 1999 and its final implementation in 2002 assumed the disappearance of monetary nationalism and flexible exchange rates in most of continental Europe. It is now seen how the different states of the European Monetary Union have given and completely lost their monetary autonomy, that is to say the ability to manipulate their local currency to serve political needs. In this sense, the euro has therefore acted, at least for the countries of the euro area, very similar to that which was, in its time, the gold standard manner. This is why the euro should be considered a real equivalent, albeit imperfect, of the gold standard. The euro must survive if all of Europe is to internalize and adopt as its own the traditional German monetary stability, which in practice is the only and the essential disciplinary framework from which, in the short and medium term, European Union competitiveness and growth can be further stimulated. On a worldwide scale, the survival and consolidation of the euro will permit, for the first time since World War II, the emergence of a currency capable of effectively competing with the monopoly of the dollar as the international reserve currency, and therefore capable of disciplining the American ability to provoke additional systemic financial crises which, like that of 2007, constantly endanger the world economic order.