Chancellor of the Exchequer overlooks German concerns about single currency as he mocks 'headlong' rush to form euro
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The fall of the Berlin Wall in November 1989 sparked alarm in France and Britain and eventually led to the creation of the euro. Photograph: GERARD MALIE/AFP/Getty Images
In the early autumn of 1989 George Osborne was eighteen. This means that the mind of the future chancellor may have been on other matters when the Warsaw Pact started to crumble.
In September 1989 Hungary unilaterally opened its border with Austria for citizens of East Germans who then poured, in their tens of thousands, into West Germany. Within months the Berlin Wall fell and the rest of Europe was faced with a challenge: would a unified Germany be a threat or a blessing?
Margaret Thatcher was sufficiently troubled by these events that she convened a summit of historians at Chequers in March 1990 to assess the dangers. François Mitterrand, then president of France, went even further and floated the idea a Franco-Soviet military alliance to resist German unity.
France eventually calmed down when Germany agreed to anchor itself fully in Europe by embarking on a move that, to many, was unthinkable. It would scrap the Deutschmark and join a single currency. Germany was fully aware of the dangers and signed up to what became the euro with a heavy heart.
But this is not the picture Osborne painted today when he gave the impression that European leaders embarked on the euro in the way that naive young lovers elope. This is what the chancellor told the Tory conference:
Our European neighbours plunged headlong into the euro without thinking through the consequences. How could they believe that countries like Germany and Greece could share the same currency when they had vastly different economies and no mechanism to adjust?
Britain feels it can offer lectures to the 17 members of the eurozone because Sir John Major negotiated an opt out from the single currency during the Maastricht Treaty negotiations in 1991. A few years later Ed Balls helped Gordon Brown resist Tony Blair's efforts to join the euro.
But Britain was not the only country with reservations about the euro. Most of the German establishment was deeply sceptical after Helmut Kohl, the then German chancellor, agreed the outlines of the single currency with Mitterrand. Their concerns centred on the area identified by Osborne today: a single currency without the discipline of a fiscal union would be unsustainable. Their model was the introduction of what became the Deutschmark after the unification of Germany in 1871.
With these doubts in mind, the Bundesbank wanted to limit the single currency to the Deutschmark zone – Germany, the Benelux countries and France. This would not have included Italy, Spain or Greece.
But Kohl felt that Spain, which had joined the EU in 1986, should be allowed to join the single currency as a reward for the economic reforms it had been making. If Spain joined then Portugal had to be allowed in. Once Portugal was in then Italy had to join. It was then difficult to say no to Greece.
Unease was so widespread in Germany that Gerhard Schroeder, the future SPD chancellor, once campaigned against the single currency in a state election. But his record is far from perfect. For three years after 2002, in Schroeder's final years as chancellor, Germany breached the 3% limit in the growth and stability pact. This was meant to enforce Bundesbank-style discipline. France was also in breach. The French and German disregard of the rules served as a green light for far greater offences by the likes of Greece.
The euro was therefore born in an uncertain period when many in Europe wanted to rein in a reunited Germany. Many in Germany had their doubts about the euro and many across Europe had concerns about admitting the likes of Greece.
The euro was not created in a headlong rush inspired by love. It was a headlong rush prompted by fear.