Reflection Paper 2 – Pauline Ng Wan Ching

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MGMT 105 Pauline Ng Wan Ching Reflection Paper 2 On 17 February 2009, Mr Marc Calcoen, Ambassador of Belgium to Singapore and Brunei, shared his insights on “10 Years into the EURO: Achievements and Challenges” at the Wee Kim Wee Lunchtime Talk. Ambassador Calcoen mentioned that there are currently sixteen nations in the Eurozone and many other countries are interested in joining, especially during this difficult economic recession. This even includes non-European Union (EU) nations such as Iceland. The euro has been stable in the current economic crisis; its value has not suffered as much as the UK pound. However the effects of this crisis on different member nations and how the euro has affected them is debatable. Despite its popularity, the euro did not have an easy start. Ambassador Calcoen highlighted that the concept of a common currency was a move to promote a political and economic union and was driven by France and German. The EU was established in the early 1990s following the Treaty of Maastrich and had two economic objectives as established by the European Economic Community.1 One would be the formation of a single market and a customs union between its member states. A single market refers to the free circulation of goods, capital, people and services within the EU and a customs union refers to the application of a common external tariff on all goods entering the market. Achieving its objectives required the formation of a common currency to establish a monetary union amongst member nations. Having a common currency was viewed as inevitable due to the increasing interdependence of the EU nations and the forces of globalization. The formation of the euro has had a profound impact. Since inception, it has attracted the attention of critics and governments both for and against a common European currency. Ambassador Calcoen stated that the introduction of the euro was met with high resistance from many nations, except those with weaker currencies. Over the past ten years, support for the euro has risen steadily and currently more than 70% of the Europeans? are in support of the euro. This is derived from the increased ease of travelling amongst countries and the formation of a single market. Economically, inflation has been kept to only 2% for the past decade, thus keeping interest rates low (in single digits). The euro was also a catalyst for financial integration that allows ease of investments, reduced costs, improved liquidity of labor markets, etc. The general economic health of countries in the Eurozone has seen great progress since the adoption of the euro. However, the current financial crisis will prove to be a test whether or not the euro can minimize damage done to all its member countries. Establishment of a single market and integration of economic policies accordingly meant that European integration has succeeded in strengthening the EU’s economic power in the global economic playground. This is demonstrated by the fact that the euro is increasingly competitive, next to the US dollar and Japanese yen and used by many countries as reserves. However, Ambassador Calcoen briefly suggested that economic progress in social and territorial cohesion

1 http://en.wikipedia.org/wiki/EU

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has not been as successful as expected. For example, cross border labor mobility was hardly realized because the labor markets are largely national and highly immobile, according to Ambassador Calcoen. In my opinion, the root of the problem lies in establishment of a single market. This is because adoption of the euro did not generate equal responses in bridging social and regional disparities. On a macro level, this can be attributed to differences in the political will of member states. As highlighted by the speaker, regional and national reforms are pivotal to the success of European integration. In the example above, dominance of labor unions would need to be reduced to improve competitiveness amongst nations. Territorially, there has also been a profound cultural impact of the euro on European integration. Many member states are highly nationalistic and Ambassador Calcoen mentioned the hugely negative reaction to the adoption of euro. Many felt that replacement of their currency was a loss of a national symbol and national pride. Known as D-Mark patriotism, “When it came to the question of replacing the D-Mark with another currency, old fears reappeared. Many people felt as though their primary source of pride, their country’s economic (monetary) power, was being threatened” (Thomas Risse, 1999, p.159).2 However, like any major change, the euro has received gradual acceptance after a necessary adjustment period.

Despite general economic success thus far, there are many social, cultural and political aspects to the euro that need to be addressed in greater detail and with precision. Looking forward, Ambassador Calcoen highlighted that Eurozone states will have to undergo major reforms to weather the current financial turmoil. On the macro perspective, one of many issues that the Eurozone has to face will be its inevitable expansion. It is a huge challenge to create a political and monetary framework that aims to serve the interests of all parties included. Ambassador Calcoen also mentioned the Treaty of Lisbon3, signed in 2007, in hopes that it will bring improved efficiency and coherence to the actions of the union. Some studies4 have suggested that member states relook at the end-goal of European integration and focus their energies on coordinating economic policies so as to better address the issue of governance in the EU and the Eurozone. The euro had come a long way since its inception. Although Europe is half a world away from Singapore, globalization and technology has shrunk the world so much that there is no way we can shy away from unfamiliar territories. This talk has exposed me to subjects that are alien, but provided me with invaluable insights and lessons that are quintessential to shaping the future of our societies.

2 R. Hoekstra, C. Horstmann, J. Knabl, D. Kruse and S. Wiedemann

3 http://en.wikipedia.org/wiki/Treaty_of_lisbon 4 http://www.cer.org.uk/pdf/e335_economic_coordination.pdf

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References

http://en.wikipedia.org/wiki/Euro

http://en.wikipedia.org/wiki/Maastricht_Treaty

http://en.wikipedia.org/wiki/Eurozone

http://en.wikipedia.org/wiki/Treaty_of_Lisbon

http://scholar.google.com/scholar?q=eurosceptism&hl=en&lr=&start=40&sa=N

http://www.dnb.nl/binaries/ms2001-04_tcm46-147303.pdf

http://books.google.com/books?hl=en&lr=&id=nZVMX_T8D8YC&oi=fnd&pg=PA173&dq=euro,+eurozone,+culture&ots=PuU-66jLcq&sig=8uCYCNitpt6wLMoX3JOFe5ECI2E

http://books.google.com/books?hl=en&lr=&id=q7y5W8svwh0C&oi=fnd&pg=PA59&dq=eurosceptism&ots=txiO6oRWTL&sig=hhapAckMuJ3OkUHT3vjTCpdGsRE#PPA62,M1

http://books.google.com/books?hl=en&lr=&id=RFFDOhKHb9gC&oi=fnd&pg=PP11&dq=eurosceptism&ots=ySr56Jg_to&sig=VMLVNjUptBQvTQRWjptprpMCPqQ#PPA1,M1

http://digital.sabanciuniv.edu/tezler/etezfulltext/tezercagla.pdf

http://www.allacademic.com//meta/p_mla_apa_research_citation/2/5/2/9/7/pages252976/p252976-3.php

http://www.zei.de/download/zei_wp/B00-04.pdf

http://www2.dse.unibo.it/soegw/paper/GomGraHelKanoMurrayS.pdf

http://www.cer.org.uk/pdf/e335_economic_coordination.pdf

http://books.google.com/books?hl=en&lr=&id=nZVMX_T8D8YC&oi=fnd&pg=PA173&dq=euro+eurozone+culture&ots=PuU-57iGhr&sig=UNczAMqhhjns6JDvvQS1QseDjBI#PPA205,M1

http://books.google.com/books?hl=en&lr=&id=oq3Bc1XNkEUC&oi=fnd&pg=PA1&dq=euro+eurozone+culture&ots=YZ2lzPyC6W&sig=Hd75Jl2Vl5HX3j1WRocJwGAokRE#PPA5,M1

http://www.sussex.ac.uk/sei/documents/wp40.pdf