France Has Second Thoughts About the Euro

The French have growing reservations about the euro: 36% want to withdraw from the eurozone and go back to the franc, the old national currency; 4% have no opinion, which means that they don’t warmly support the single European currency; 44% say it is a handicap in the present context of a world economic crisis; 45% say it doesn’t serve the national interests of France; and a staggering 62% say it is damaging the average French family’s standards of living and purchasing power.

Some "realist" analysts dismiss these figures as mere panic. Just two months ago, only 26% of the French mentioned withdrawing from the eurozone. The most articulate "withdrawist" was Marine Le Pen, the leader of the far Right turned populist National Front. She advocated a planified restoration of the franc as the sovereign currency of France, complete with a 30% devaluation. But most people were then of the opinion that the core of the eurozone (Germany, France, the Netherlands) was safe, and that the relevant question was how to deal with the less significant and less efficient partners (essentially the southern tier of the European Union, from Greece to Portugal).

In the meantime, however, the core itself started to melt. There was talk, in particular, of stripping France’s triple A credit rating. Even Germany got nervous. Both the Paris and the Berlin cabinets envisioned drastic reforms of both the European Central Bank status and the European Union statutes. This, to say the least, was an admission that the present ones were not perfect.

No wonder opinions regarding the euro plummeted shortly after. But once some reasonable steps are taken and core countries' credit is restored, polls -- according to the "realists" -- will switch back in favor of the euro.

Or will they ? The measures that most European countries -- with the notable exception of the UK -- finally agreed upon last Friday in Brussels will be an acid test in this respect.

The problem of the euro is that it is a currency, but not money. Money is largely magic. It is the sum total of what allows production, trade, innovation, profit. It works as long as there is confidence in it. "Give me good politics, I’ll repay you in good finance," said Baron Louis, the finance minister of King Louis XVIII under the French restoration. In other words, see to it that everybody thinks he has a future under your government, whether he is a Royalist or not. As long as that will be the case, it will be comparatively easy to manage business, raise taxes, and balance budgets.

Baron Louis’ modus operandi was the secret of the American era of prosperity from 1945 to 2008. In a globalized world, the United States -- as a benevolent hegemonic power -- was providing good politics, i.e., confidence, and it allowed for good business everywhere. Whatever the theoretical state of the dollar and other currencies, the United States had iron: the will and the practical means to make war if needed. It cost the American taxpayer 4% to 5% of its GDP annually -- no other Western business-oriented nation (except Israel) invested as much. Europe as a whole never took off from a 1% to 1.5% level. France and the UK never raised above 2%. And the American iron transmuted into gold.