Unusually perceptive of the political and historical roots of monetary union, the author begins and ends his book by reminding readers of Altiero Spinelli’s call for “the definitive abolition of Europe’s division into national sovereign states” (p. 1). The common currency, even though not specifically mentioned in the Ventotene Manifesto, may be seen as the most radical answer to Spinelli’s call to end the nation state. At the same time, the success or failure of the euro could well turn out to be the ultimate test of Spinelli’s proposition.
The book has little sympathy for objections inspired by a narrow reading of “optimal currency area” theory (interestingly, its original proponent, Robert Mundell, came out in favour of the creation of the euro). In contrast to American economists such as Kenneth Rogoff (“a giant historical mistake”) and, more recently, Joseph Stiglitz (“fatally flawed from birth”), Sandbu argues that the architecture of the common currency has been wrongly blamed for the Eurozone crisis, and has been used as a decoy by policy makers for their own unforced errors.
In brief, his main thesis can be summed up in three main points. First, monetary integration is not the source of the Eurozone crisis. (“The current account asymmetries between the euro’s member economies before the crisis did not constitute a problem with the currency itself. […] The debt accumulations they amounted to would have happened anyway, as they did within and between other, non-euro, economies”, p. 266).
Next, the bailouts became inevitable not because there was not alternative, but only as a result of “ideological resistance to writing down debts—whether those of banks or those of sovereigns” (p. 266). (“The debt crisis that exploded in 2010 necessitated neither the international rescue loans nor the associated fiscal austerity at anywhere near the scale they were pursued. Public and private debt restructuring could and should have been carried out instead and before any rescue programmes”, p.266).
Last, the Eurozone can thrive even without a move to a fully-fledged federal Europe. (“Since the lack of fiscal and political union is not what caused the eurozone’s economic stagnation, it is wrong to think that this is a permanent flaw that will continue to weigh on the economy”, p. 267).
Can Europe have both monetary union and democracy?