The Global Roots of Euro-Jitters

FLORENCE – It is too simplistic to explain the current wave of concern about the euro in terms of Greece’s problems. Greece has massive fiscal and competitiveness problems, but Greece (2.25% of the population of the European Union) is smaller than California (12% of the population of the United States). And California, too, is suffering massive fiscal difficulties and declining competitiveness in some of the industries in which Californians were once pioneers.

The euro’s current problems are, instead, a reflection of unresolved Europe-wide and global problems. The common currency is the canary in the mine of the global exchange-rate system.

The euro precisely measures international tensions in that it is a bold experiment: a currency that is not linked to a state, but rather follows from international rules and treaties. It is a creature of the intellect rather than a product of power. It is a post-modern or post-sovereign currency. But in the aftermath of a crisis, countries put national interests above their willingness to go along with international rules.

The creation of money is often thought to be the domain of the state: this was the prevalent doctrine of the nineteenth century, reaching its apogee in the German economist Georg Friedrich Knapp’s The State Theory of Money . In the New Testament, Christ famously answers a question about obedience to civil authorities by examining a coin and telling the Pharisees, “Render unto Caesar what is Caesar’s.” Unlike most banknotes and coins, there is no picture of the state or its symbols – no Caesar – on the money managed by the European Central Bank.