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Europe’s Monetary Sins

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Over at Public Discourse, a new article by Acton’s research director Samuel Gregg examines the deeper reasons behind the problems of the euro. In “Europe’s Monetary Sins,” Gregg points out that many of the euro’s present difficulties reflect a basic refusal of Europe’s political class to acknowledge some of the unpleasant economic realities associated with the EU’s social model, as well as a tendency to say one thing while really doing another. In short, Gregg argues that many of Europe’s economic predicaments flow from a crisis of truth, an unwillingness to recognize it, and the subsequent formulation of policy on the basis of untruths and half-truths. The most recent result of this process, Gregg says, is that the independence of the European Central Bank has been severely compromised:

Ever since its foundation in 1998, the ECB has been a whipping boy for European politicians from the left and right who argue that the ECB’s legally mandated priority of maintaining price stability has kept productivity and economic growth rates in the EU far below those of America. In reality, these problems have little to do with monetary policy and everything to do with low rates of entrepreneurship, unsustainable levels of welfare expenditure, an aversion to competition, high rates of public sector employment, and structural rigidities associated with some of the world’s most inflexible labor markets. Indeed, it is probable that the ECB’s avoidance of the low interest-rate policies adopted by the Federal Reserve in the 2000s may have made the 2008 recession in Europe more bearable than it might otherwise have been.

Against considerable political pressures, the ECB has hitherto doggedly defended its independence. All that, however, changed when the European Union decided to set up its 750-billion-euro bailout fund in early May 2010 to stabilize financial markets and rescue the holders of not only Greek government debt, but also, implicitly, the holders of any EU government debts that seemed shaky.

John Couretas John Couretas is Director of Communications, responsible for print and online communications at the Acton Institute. He has more than 20 years of experience in news and publishing fields. He has worked as a staff writer on newspapers and magazines, covering business and government. John holds a Bachelor of Arts degree in the Humanities from Michigan State University and a Master of Science Degree in Journalism from Northwestern University.


  • Roger McKinney

    Europe’s sins are nothing new. The US has done exactly the same thing in the past and we have never learned from experience. In fact, if you know economic history you know that crises such as Europe’s happened in Greece inf 500 BC. Ever since the state learned that it could steal from the people with impunity simply by manipulating the currency, politicians have done so, all in the name of stimulating the economy. Nothing has changed. Monetary dishonesty is almost as old as prostitution. The only new twist to it is that the people vote for such policies in democracies. The people want to believe that they can live on credit forever.

    Socialism has its own built in judgements for those who blindly follow it.

  • Roger McKinney

    The Acton Institute may have reviewed “The Last Superstition: A Refutation of the New Atheism” by Edward Feser, but I just started reading it and think it has real bearing on the issue of this article on the European mess. The essence of the book is that people can know by reason what basic rights and wrongs, or morality, are. Everyone knows it. It’s not a lack of knowledge or reason that prevents Europeans from doing the right thing about money. It’s willful rebellion against what they know to be the right thing to do. And they think they can get away with that rebellion, but God has designed human nature and the world in such a way that it’s impossible to escape the consequences of their rebellion, just as it is impossible to escape the consequences of spitting in the face of the law of gravity. We can overcome the law of gravity for a short time with the use of aircraft and missiles, but only for a very short time; when the fuel runs out we have to acknowledge the law of gravity. In a similar way, we can rebel against the economic principles that God has established for a short time, but the day of judgment always comes and always has.