By Franz Schurmann

fschurmann@pacificnews.org

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The euro will not replace the national currencies of the European Union as is now scheduled for January 1, 2002

Short Introduction:

Ever since Charlemagne proclaimed himself Emperor of Rome in the year 800 Europeans have yearned for unification. They remembered that, for all its foibles and faults, the Roman Empire kept the peace from the Atlantic to Mesopotamia for some four centuries. For Europeans disunity has meant war and unity peace.

Twice in the 20th century the Europeans slaughtered each other like animals in an abattoir. After the war French, German and Italian leaders came together to start building European unity. Fifty years later Europe is at peace and prosperous as never before in its history.

As the euro goes down and down Europe's leaders are dismayed that the euro is being shunned rather than eagerly sought after. But among ordinary people the euro is some lofty abstraction compared with their own beloved national currencies.

The fact is that Europeans don't see the Brussels bureaucracy as a state nor the Strasbourg parliament as significant and view the Frankfurt central bank as more of a German than a European institution, given that the mark is the euro's main foundation.

The oil crisis has sparked anger all over Europe. People accept that they pay heavily for gasoline because in the end they gain through all kinds of state-supported benefits. They were happy about the situation in earlier years when oil prices were low and didn't care that the oil exporting countries were getting angry. Now the tables are turned.

A lot of tensions have been building up in Europe in recent times. Some are about the growing strength of the right. Many more come from the realization that the economic paradise they live in may now be coming apart. If they want to keep that paradise they will have to pay more for gas, more for taxes and less for themselves. That's bad for European unity.

When recently oil prices started soaring the euro started tumbling. And when oil prices suddenly turned downward the euro still continued to fall. Why and what's the connection?

The answers can be found in the angry protests and gasoline chaos that have now spread over much of Europe. The protests show that the supposed Europeans have lost whatever faith they still had in the European Union (EU). And the gasoline chaos shows that while Europe gets over 90 percent of its oil from the Middle East its power and influence in the region is not that far from zero.

From the time of Caesar's conquest of Gaul and Britain till now the Europeans never have been durably unified. They weren't unified under the Roman Empire because the Germans refused to join. The Holy Roman emperor Charlemagne unified them in 800 but 14 years later his Europe fell apart. In the 1500's Charles V unified Europe for 35 years, in the early 1800's Napoleon for 10 and in the early 1940's Hitler for 5.

The current protestors are sending a curt message to their political elite: you've botched it once again. If this is the beginning of the end of the latest attempt to unify Europe its duration will have been less than 50 years.

A common explanation among members of the European Central Bank (ECB) in Frankfurt, is that the euro's fall is due to the "super-performance" of the American economy. Years ago when the common currency was being planned the French and Germans had visions of the euro becoming the equal of the dollar. Now it has even sunk vis-a-vis the mighty Japanese yen.

But observers who look at the larger picture believe the real reason is that a "political Europe hardly exists." A strong currency requires a strong state, an un-wobbling pivot on which all other institutions can confidently move. But there is no overarching state in the EU. Instead there are three Europes.

One is the ECB, an institution that operates with almost complete autonomy, like the America's Federal Reserve Board. The second is the eleven countries of the "Euro-group" that is the countries now participating in the euro experiment. Britain stayed out but is in the "Fifteen" who form the EU and elect delegates to the European Parliament in Strasbourg.

Some years ago in the Luxembourg conference that set the stage for putting the euro into circulation both the British and the French were unwilling to surrender power to a European superstate. A strong state mints strong currencies but since Luxembourg it became clear the EU never would have a strong state.

In the end hard currencies are only hard because people trust them. The Deutschmark is the most trusted of European currencies. The hope was that the DM would be the rising tide that lifted all EU currencies. Instead the sick euro has dragged down the mark, and Europe as well.

European unity or not, Europe is fatefully tied to the Middle East. Most of the 250 million old stock West Europeans never had it so good. Income and benefits are high. Almost everyone has a car. Health care is comprehensive and education inexpensive. And most enjoy lengthy vacations that take a lot of traveling. All these, directly or indirectly, come from oil.

Europeans have long paid for a liter of gasoline what Americans pay for a gallon. In Britain some 76 percent of the pump price the motorist pays goes for taxes. Comparable ratios exist throughout the EU. When oil prices recently spiked upwards the national governments refused to cut taxes. How could they without inflicting dire pain on the same people protesting the soaring oil prices?

When oil prices were low during much of the 80's and 90's it was the oil exporters who got meager returns. But consumers in Europe reveled because pump prices were low. And governments reveled because more gasoline bought by consumers meant higher tax revenues. And more benefits meant votes for the governments in power that accomplished these miracles.

In this millennium year OPEC -- especially Saudi Arabia and Iran who now work closely together -- has regained much of its lost power. The big losers are the Europeans. At this point the "Europeans" have much more to worry about than Europe or the euro.

Now in their deepening crisis the citizens of the 15 countries that make up the EU are not looking to the bureaucratic mazes in Brussels or the lofty chambers in Strasbourg but their national capitals in Paris, London, Berlin, Rome and so on. The euro is "left dangling in the wind," as said the late John Ehrlichman thirty years ago about the growing Watergate crisis.