On euro anniversary, EU leaders warn of tough year ahead
European leaders predicted more economic gloom in 2012 amid muted celebrations for the 10th anniversary of the euro single currency, far from the fanfare which heralded its arrival a decade ago.
The leaders of euro powerhouses Germany and France led the warnings of a tough year ahead for the battered single European currency after the market maelstrom of 2011.
“The debt crisis is still keeping us in suspense,” German Chancellor Angela Merkel said in her New Year’s message which warned of a difficult year in the eurozone.
Europe, she insisted, was growing through this crisis, even if “the path to overcome it remains long and will not be without setbacks.
French President Nicolas Sarkozy said 2012 was a year “full of risks” but vowed that Paris’s economic policy would not be dictated by the markets or the ratings agencies.
“What is happening in the world announces that 2012 will be a year full of risks but also full of possibilities. Full of hope, if we know how to face the challenges. Full of dangers, if we stand still,” Sarkozy said.
“Emerging from the crisis, building a new model for growth, giving birth to a new Europe — these are some of the challenges that await us,” the French leader said.
“A very difficult year, marked by necessary but painful measures, is ending… a very difficult year is around the corner,” Greek Prime Minister Lucas Papademos said in his New Year’s message.
The European Central Bank, which sets the interest rate for the entire 17-member eurozone from its Frankfurt headquarters, is to issue a new 2-euro commemorative coin from Monday but its own celebrations were decidedly muted.
“Despite the challenges currently faced by Europe as well as the rest of the world, the people of the euro area can rest assured that the ECB will remain faithful to its mandate of maintaining price stability,” said ECB president Mario Draghi in a commemorative video message.
Belgian Prime Minister Elio Di Rupo said “2012 will be a determining year,” adding: “We must transform obstacles into new opportunities,” while Swiss President Eveline Widmer-Schlumpf called for national unity at a difficult time.
Economists agree that the longer-term benefits of the euro — the world’s biggest currency switch which saw 14.9 billion notes and 52 billion coins launched across 12 founding countries in a single day — have been real and tangible, even if some helped set the stage for the current crisis.
The end of currency exchange risks and costs helped integrate European markets, boosting trade between member states, a move that helped German small business in particular.
Another benefit was in cutting inflation, which has remained around 2% since the introduction of the single currency.
But the euro’s lower interest rates enabled successive Greek governments to go on a borrowing binge that resulted in the debt crisis that spread to Portugal, Ireland and now threatens all the countries in the region, despite a series of “last chance” EU summits.
The crisis over the past year has demonstrated that the eurozone leaders have still not developed a sufficiently robust firewall to boost the flagging economies of Spain and Italy. And support from the IMF remains uncertain.
The crisis has also highlighted a failure to coordinate the eurozone members’ disparate economic policies.
Partly as a result, the euro ended the year at a 10-year low against the yen and a 16-month low against the dollar, although still well above its original rate to the dollar in 2002.
For the first time, the euro’s very survival has been openly questioned in several countries.
But a poll published Sunday by France’s Journal de Dimanche showed that 64% of French voters were against abandoning the euro, although 81% blamed it for fuelling price increases.