The Euro: The Engine That Couldn’t

European Monetary Union—The Movie” would have to begin with the following scene. The place is the library of the Elysée Palace, the time is about March 1990. Only three people are present: François Mitterrand, the French president; Helmut Kohl, the chancellor of soon-to-be reunited Germany; finally, since neither speaks the language of the other, a faceless interpreter sworn to silence.

Mitterrand is in a melancholy mood. During the last few months, ever since the collapse of the Berlin Wall in November 1989, he has tried every conceivable diplomatic strategem to stop, or at least brake, the quickening pace of German reunification. But to no avail. Glumly, he stares into the fireplace, as his friend Helmut talks. “Look, François, this time it won’t be like Versailles in 1871, when Paris was encircled by German armies, when the new Reich was proclaimed on the ruins of French pride. We have Franco-German friendship, we have the European Union, our forces are completely integrated in NATO; indeed, we don’t even have our own general staff any more.”

The mention of NATO, America’s foot in Europe’s door, hardly cheers Mitterrand. So Kohl goes on. “My dear friend, this is 1990—not 1914 and not 1939. These days, my countrymen are polishing their BMWs, not their jackboots. Come on, François, what do you say?”

Mitterrand continues to stare into the fire for a minute that seems to stretch on forever. Finally, he bursts out, “Bon, Helmut, c’est ce qu’on va faire. You get all of Deutschland, if I get half of the Deutschemark.”

The point of this imaginary scene is that the euro, Europe’s soon-to-be common money, is a political currency. It was born out of the abrupt transformation of world politics: Moscow’s capitulation in the cold war, which suddenly revealed the true power relationships on the Continent. In a few months, Germany would be “whole and free” again, as George Bush had put it. Once united, the country would also shed the ancient dependencies that had tied two thirds of it, the Federal Republic, to France.

But Helmut Kohl is not Wilhelm II. Like Bismarck, he understood the precarious position of Germany about to become the most powerful country in Europe again—at least if power is measured by the size of Germany’s population and GDP, and by its central strategic position. Like Konrad Adenauer and Willy Brandt, Kohl knew that Germany was too weak to act alone, but too strong for the rest of Europe to leave it alone. The lesson of the past hundred years for him was clear. When Germany, its power untrammeled, struck out on its own, the result was ever greater disaster. When it was safely locked into European institutions—when its power was tamed by cooperative arrangements with other countries—Germany flourished beyond anyone’s expectations.

Now the division of the country imposed by the cold war was about to end, and Kohl wanted to reassure France and all …

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