You might think the “euro-crisis” is solved. After all, the economy of the 19-country eurozone expanded at an annual rate of 1.8pc during the first quarter, outpacing Britain and the US. Surveys show French and German growth at a six-year high.
All that fuss about Greece, Portugal and Cyprus going bankrupt, and spreading “financial contagion” across the world, seems over. And Yanis Varoufakis, that dashing Greek academic-turned-finance-minister, who grappled with the German paymasters, has just published his memoirs.
“En Marche!” That’s the message of Emmanuel Macron – the telegenic “independent” inaugurated today as the youngest ever President of France. Can Macron get the moribund French economy “on the move” as his slogan suggests? Can this 39-year old, with only two years of political experience, no Parliamentary party and having never held elected office, succeed where so many have failed, injecting some dynamism into France? And can he re-invigorate the crisis-ridden European Union.
Much is at stake. The world’s sixth-biggest economy, France is also the second-largest member of the eurozone – a key player, economically and diplomatically, if the single currency is ever going to work. Having seen off Marine Le Pen, can Macron now drive jobs, growth and broader French prosperity, so keeping bad-tempered euro-populism in check?
What can we expect in 2015? A stronger dollar, as the US economy continues to expand – albeit on ever more borrowed money and an over-hyped stock market? Weaker sterling, perhaps, as the UK recovery remains patchy and our trade deficit keeps pulling down the pound?
How about a partial oil price recovery, as growth across energy-hungry emerging markets once again outstrips the West? Or maybe an interest rate cycle reversal – with America’s Federal Reserve raising borrowing costs at least once over the next 12 months, followed by the Bank of England?
“I wouldn’t hold French shares,” said Nigel Farage with a wink, belying his previous life as a stockbroker. “The country is in real trouble,” the Ukip leader told me at an investment conference in London last week. “As someone who loves France, it gives me no pleasure to say that”.
While Farage casually dishes out advice to sell French stocks, he knows only too well that, for all his admiration of Gallic gastronomy and tabacs, the singular weakness of the French economy, and related political fall-out, is playing into his hands.
I distinctly remember the day I decided the UK should never join the European single currency. I couldn’t tell you the precise date, and am not absolutely sure what year it was – probably 1990. But I vividly remember sitting in my student digs – jostick burning, posters on the wall – surrounded by books and articles. It was one of those moments when, after intensive reading, the penny almost audibly dropped.
As an economics undergraduate, I had to study a lot of complex mathematical modeling. Rebelling against the arid pointlessness of pretending economics is a science, I immersed myself in economic history too. It was while learning about the failed monetary unions of the past – particularly those of the mid- and late-nineteenth century, in Latin America, Scandinavia and the nascent United States – that I instinctively realized the euro, still then not a reality but almost certainly coming, was in for a bumpy ride.
The European Central Bank took no decisive action last Thursday either to lower Eurozone interest rates or launch its own programme of “quantitative easing”. It was made clear, though, that the ECB may soon follow the US Federal Reserve and Bank of England by firing up Frankfurt’s virtual printing press and creating, ex nihilo, hundreds of billions of euros.
The council was “unanimous”, said ECB boss Mario Draghi, a hint of steel entering his voice, in its commitment to “unconventional instruments”. In case that wasn’t crystal, he spelt it out. “All instruments within our mandate are part of this statement,” he told the world. “There was, in fact, during the discussion we had today, a discussion of QE”.
The Eurozone has recently been off our news radar. We Brits have become smug of late given our new-found growth, now that we’re the most rapidly expanding economy in the Western world (almost).
We certainly have a sense (oh joy!) that the “continental” economies aren’t doing as well as ours. Apart from those pesky Germans, of course, who are annoyingly good at making stuff the rest of the world wants to buy.
Yet, the euro as a tinder-box, which at any minute could spark financial meltdown – that fear seems to have gone. The euro as a ticking-time bomb, about to explode, causing another Lehman-style Minsky moment on global markets – surely, all that has been dealt with, sorted, solved?
“The euro is no longer under existential threat,” said Herman Van Rompuy three weeks ago. “Financial stability has been restored”. Van Rompuy, if you can’t place the name, is President of the European Union. That makes him the most senior policy-maker in Brussels, wielding considerable power over the governments of 28 countries with a combined population exceeding 500m people.
Despite this reality, Van Rompuy has a near-zero public profile. He’s probably best known, not only in the UK but across much of Western Europe, for being the man that UKIP leader Nigel Farage once described as having “the charisma of a damp rag and the appearance of a low-grade bank clerk”.