THE BEGINNING OF A MODERN EUROPEAN ECONOMIC EMPIRE
Europeans have long dreamed of creating a community, which would unite all European powers.
As early as 1848, Victor Hugo said:
“A day will come when all nations on our continent will form a European brotherhood…A day will come when we shall see…the United States of America and the United States of Europe, face to face, reaching out for each other across the seas.”
After World War II, the only real economic Empire left on the continent was the Soviet Union. Although it was badly beaten, the country’s industries were still largely intact, it had the most population in Europe, and was still the largest country in Europe, and in the world, with numerous natural resources.
The United States emerged as an economic leader of nations on the other side of the Atlantic, but since we are only concerned with economic history of EUROPE, we will not describe the economy of the United States in great detail. However, the country was rich in comparison to former European powers due a number of factors, the most important one, perhaps, being that no war damage has been done anywhere in the United States.
The year 1946 was the first step to united Europe. On September 19th, Winston Churchill appealed to a “kind of United States of Europe”. Since there was a constant threat from the Communist Soviet Union, the first alliance was to be a military one. The Brussels pact was signed by 5 European countries, which then led to the Western Union. It provided a committee, which was to coordinate combined European defense resources. 1949 brought upon the creation of North Atlantic Treaty Organization, which was responsible for military cooperation within an Atlantic framework.
THE FIRST STEPS TO AN ECONOMIC UNION
In 1949 the European Council was born. The countries sent representatives to Strasbourg, where they could decide on economic affairs and other areas such as labor relations, administration and legal affairs.
The first resolution of European Council was to “liberalize trade in order to foster a common market.”
“A common market is a free-trade area which
provides for:
-
free circulation of
goods
-
free circulation of
labor
-
free circulation of
capital
-
free establishment of
service.”
The Common Market mechanism developed as part of the European Economic Council, and focused on free circulation of goods.
“You
have to realize why it is such a tremendous advantage to have free circulation
of goods throughout all countries in Europe. The trade tariffs, levied on the
border, are eliminated, thus the goods cost much cheaper to the consumer!”
EUROPEAN MONETARY SNAKE
The second attempt to unite European countries together was in 1972, when a “European monetary snake” was established.
“Though
I am not an expert on the matter, I can tell you this much. The currencies’
exchange rates had to fluctuate within a certain “spread”, thus forming a snake-like
pattern. If the currency becomes too strong or too weak, it falls out of the
snake range and is no longer part of the system. Ah, it’s too hard to
understand…or is it?”
The system failed due to the oil crisis that hit the international community in 1973.
YET ANOTHER TRY – the EMS
In 1979, another attempt to reconcile the countries was made – the European Monetary System. It was to create a common account unit, the ECU.
“ECU is a currency basket… it consists of
currencies of EMS countries, balanced on their perspective economic weights.”
The EMS was a success: it insured the stability of European currencies. This system paved the way for changeover to the single currency.
THE EUROPEAN UNION
Figure 1. The fall of the Berlin Wall in 1989 and the
German reunification urged the French and the Germans to speed up progress
toward a single Europe.
The European Union was instituted by the Maastricht Treaty, effective on 1 November 1993. The European Union was finally a legal, political and economic entity.
The Economic and Monetary Union is what the countries aimed for. An ample period of time was given to the European countries to coordinate their monetary and economic policies. A EMI was created in order to improve coordination of monetary policy and to lay the technical groundwork for changeover to the single currency.
FYI: EMI stands for
European Monetary Institute.
The final stage of the project was 1 January,1999. At this date, countries which meet the “convergence criteria” will adopt a single currency, christened the Euro.
Figure 2. The Euro… a single monetary unit for participating
European countries.
Introduction of a single currency was accomplished by the creation of a European Central Bank.
EURO… THE BEGINNING OF A NEW ECONOMIC EMPIRE???
There was a great controversy among the makers of this site whether or not to include this chapter on this site. We were not yet sure if the countries of the European Community could be considered an “economic empire.” All other empire we described on this web site represented a single country, which had enormous financial wealth. As far as the European Community is concerned, we are not sure that a group of countries combined loosely together by a single currency can really be an economic empire. Recently, Euro has been losing much of its value against the US dollar.
Figure 3. Euro exchange rate has been slipping against the US Dollar
The currency is still not very stable, and the economies of the countries, which have Euro, did not necessarily become rich and powerful in economic terms.
But… who knows? May be, one day, the United States of Europe and the United States of America would be able to rival, and help each other, just as Victor Hugo predicted more than one-and-a-half centuries ago.
Back Up Home On
to
The Economic Quiz