The Euro and European Identity

The euro launched in 1999 for transactions and 2002 as cash, replacing national currencies like the franc and the mark for most European Union members. Not everyone joined: Britain kept the pound before leaving the Union entirely, and Denmark, Sweden, and several newer Eastern European members also stayed outside the eurozone, keeping their own currencies and their own room to maneuver.

That room to maneuver is exactly what eurozone members gave up. A country with its own currency can let it fall in value during a recession, making its exports cheaper abroad and its economy more competitive again. A eurozone country cannot do this alone, since the European Central Bank sets one monetary policy for all nineteen-plus members together. When Greece's government debt crisis hit in 2010, Greece could not devalue its way out. Investors grew nervous about every heavily indebted eurozone country at once, so Spanish and Italian borrowing costs spiked too, even though their economies differed from Greece's. A problem that devaluation would have contained to one country spread across the currency union instead.

This economic entanglement raises a deeper question about identity. Surveys across the European Union consistently find that most people rank their nation first and layer some European feeling on top, rather than choosing one loyalty over the other. A shared currency, a shared parliament, and open borders built European institutions faster than they built a European sense of self, leaving the continent economically stitched together while politically still a patchwork of nations.