However, not all EU members participated, for different reasons. Some
countries, such as the UK, wanted to stay in control of their own currencies. By
manipulating the exchange rate of its currency, a country can influence import and
export.
For instance, a higher currency value makes one’s products more expensive and leads to
less export – but it makes importing cheaper and leads therefore to more import.
So having its own currency makes it possible for a country to influence its trade
balance with foreign countries, and that can have a large impact on the national
economy. Giving this up means giving up a large part of the power over one’s
national economy. Not all countries were willing to make this sacrifice in favor of a
more smoothly functioning internal market.
Other countries were not allowed to participate in the common currency because
their national financial households were deemed not to be solid enough. If a country
has large and increasing national debts, it needs depreciation of its currency. If other
countries have the same currency but do not want depreciation, this leads to
problems. Therefore, participation in the euro was, at least in theory, bound to
strict conditions on the national finance.
Greece, for instance, was for some time not allowed to participate in the euro because it had
to first do something about its national debt, tax income, etc.
As these examples about the UK and Greece illustrate, participation in the euro
goes together with giving up some of a country’s influence over its own finances.
This is characteristic for much of the development of the EU. Monetary integration
and the complications that go with it provide a good illustration of the development
of the EU, the hurdles that must be taken, the seemingly unavoidable increasing
transfer of sovereignty from national states to European institutions, and the
resistance to which this leads. In this section, we will have a brief look at these
developments because they offer us an overview of the EU from a somewhat bigger
distance than the precise rules that govern the internal market and the functioning of
the European institutions.
10.6.2 The Crisis
The period from 2008 until 2013 has been one of rapidly succeeding financial crises
in the world, particularly in the EU. It started with the subprime crisis in the US,
where banks had lent out large amounts of money to debtors who were insuffi-
ciently secure financially and could not repay their debts. As the claims that the
banks had on their debtors were packaged in complex financial products and sold all
over the world, the ensuing problems did not remain contained to the banks with the
bad loans but were spread over the financial world. Banks threatened to collapse,
and some actually did so. Governments felt compelled to support major banks with
billions of euros because they were “too big to fail.”
228 J. Hage