The Euro as an Episode in the History of Money

Recent research has shown that the euro crisis had four fundamental and underlying causes: a forgetting that all artificially created and ‘disembedded’ currency unions in the past have failed; the lack of proper financial institutions – such as a banking union, prudential supervision, deposit insurance – rather than just a central bank; the lack of complementary fiscal institutions or economic government; and the lack of democratic legitimacy to make it work politically. Given that the empirical claim that Europe has almost always moved forward through crises is false, that the euro crisis is qualitatively different from previous EU challenges, and that Germany is unlikely to play the ‘hegemonic stabilizer’ role to keep the euro together during future crises, is there any reason to believe the euro can survive in the longer term? This paper tackles this question by analyzing historically why some monetary arrangements have survived while others have not, and examines the implications of the euro’s uncertain future for the (in)stability of the international monetary system. Since the current and dollar-centric world financial system also suffers from persistent weaknesses, are we invariably moving towards a multipolar system or is the current arrangement much more stable than we think?