"The euro is more than just an economic instrument. It heralds a new departure for Europe". These words of the Commission president, Mr Jacques Santer, capture well what is at stake now that the single currency has been launched. Mr Santer, like the other major players in this drama, has his own agenda, including substantially more political and economic integration, which may or may not come to pass. The Minister for Finance, Mr McCreevy, is among those who resist the idea that this will necessarily be so. But all concerned know that the launch of the euro puts the European Union onto a new plane within its own territory and in its dealings with the rest of the world. It is indeed a momentous step.
It is artificial to separate the politics from the economics of the EMU project. In both dimensions it is a response to the end of the Cold War and the resultant prospect of unifying the continent after decades of division. Economically it is also necessary to complete and underwrite the single market. It will greatly enhance European competitiveness in international markets and lead to a decisive equalisation in economic and financial relations between the European Union and the United States. Much remains uncertain about the precise timing and ramifications of these changes and how they will be managed, simply because events rather than advance agreement will determine the outcomes. This very open-endedness ensures that the institutional and political design of the euro is a dynamic process, subject to political as well as economic influences.
Political discussion about the euro has concentrated in recent months on whether employment should be recognised as an explicit objective in managing EMU and the extent to which the European Central Bank should take account of the need to lower interest rates in order to achieve it. Much of the initiative came from the new German government, which quickly found allies among fellow social democrats. A certain consternation over whether such pressure would upset the bank's independence has given way to a recognition that within the basic parameters already agreed there must be room for political dialogue and communication.
The argument about whether the existing design needs to be complemented by provisions for economic governance is unresolved but will surely continue and be subject to events as they unfold. Mr McCreevy and the Government have said firmly that tax convergence is not on the existing agenda, a position endorsed by the European Council at Vienna last month. But EU and international developments are likely to see such questions recur. Mr Santer and those who think like him believe the euro heralds a political departure in EU affairs, including communitarisation of more sectors and a maturing foreign and defence policy to give the EU a more clearcut political voice in international affairs.
Public opinion in Ireland and the other memberstates should be prepared for this debate by political leaders. But they will need to be alive to the need for more representative structures of democratic accountability if such capacities are to be built on the back of a successful euro. The EU is an ambitious experiment in domesticating inter-state relations, transforming diplomacy into politics. The euro brings that process a decisive stage further. But it must be borne in mind that it is also an unprecedented experiment, which cannot be judged by the standards of previous developments in building states and nations.