If, as a consequence, the objects of desire, for which all sense has been extinguished, are displaced by the abstract representative of all such objects, Money, ... then the Will ... has barricaded itself into its last bastion where only Death can besiege it.


To say that the European continent has gone mad over money would be quite correct and yet miss the special character of its mental state. In Germany, France, Italy, Spain, Portugal and Belgium, but above all in Germany, the mighty realms of politics, diplomacy, commerce and public administration have been condensed into tiny and arbitrary numerical quantities: to be precise, tenths of a percentage point.

According to a protocol annexed to Article 104c of the European Union Treaty of 7 February 1992, known as the Maastricht Treaty, as glossed by a so-called Stability and Growth Pact adopted at Amsterdam on 16 June this year, the Governments of the Union must not spend more than they receive in taxes and other income each year than the equivalent of 3 per cent of their state’s national product. If they overspend that limit this year, or plan to do so next, they will not be permitted to take part in the common currency zone to be inaugurated at the beginning of 1999.

On 1 January of that year, rates of exchange between the member currencies are to be fixed irrevocably and for all time; and the present moneys will become merely forms or aspects of a new money, to be known as the euro, a hideous name that is hard to say in all European languages. Over the next three years, and not later than 1 January 2002, euro coins and banknotes will be introduced, and all contracts in the old moneys converted into euros. A little later, the old moneys will cease to be legal tender.

Because the present moneys of Europe express the commercial varieties of the Continent, and reflect in their movements one with another the changing fortunes of the European states, a rigid and immobile currency must diminish those varieties or itself risk cracking under the strain. For that reason, the candidates for monetary union have submitted to binding rules to make them more alike in the way they manage their public affairs. The purpose of the 3 per cent limit is to ensure that a notoriously spend-thrift state, an Italy or a United Kingdom, will not go on a borrowing jag and force up rates of interest for all borrowers in euros. The question now tormenting Continental Europe is whether 3.1 or even 3.8 per cent might still be considered, for the purposes of diplomacy, to be 3.0 percent.

At last month’s summit meeting of European heads of state and government in Amsterdam, in the restaurants of the Reguliers-dwarstraat, the feeding delegations passed scraps of spiteful arithmetic to the reporters’ tables nearby: the French are at 3.6, the Germans at 3.5, let’s keep ’em both out, ha-ha! A continent has been bound into the straitjacket of a set of percentages that have gained ever greater precision and authority as next year’s deadline for selection approaches; and have, like money itself in Marx’s Paris notebooks of 1844, assumed an alien and terrifying power over their creators.

The straitjacket has, naturally enough, disabled the Continental Governments: a government at peace that can’t borrow money can’t really govern. Without the state to spend money, Italy has fallen into slump: at a time of booming world trade, Italian business is contracting. Yet the cradle of branch banking, public credit and scientific book-keeping has set its heart on monetary union as a child sets its heart on a pretty toy: the Prime Minister, Romano Prodi, has taken to telephoning any journalist who dares to suggest that Italy might not make the cut.

The coalition government in Germany is disintegrating: ‘They just can’t bloody get any business through,’ said a European ambassador in Bonn last week. Helmut Kohl, great champion of the euro, has of late become so bad-tempered that the gentlemen and ladies of the German Foreign Office feel they must apologise for his manners.

In his speech to the French National Assembly on 19 June, Lionel Jospin, the Prime Minister, put forward two mutually contradictory propositions – socialist solidarity and the Maastricht percentages – which only penal taxation can reconcile. At the Amsterdam summit, which the Dutch Government had hoped would promulgate a new treaty to take the Union into Eastern Europe and the new century, meetings dissolved in bad humour and in business so sloppily drafted and debated that officials are still running over the stenographic records to try and identify what, if anything, was agreed. The reconstruction of Eastern Europe has slowed down: the Czech Republic, which depends on now stagnant markets in Germany, has suffered a chaotic devaluation.

This subjection of the Continent to a set of arbitrary figures is not merely a matter of the public administration. The electorates of the Continent, in whose name the whole thing is being done, have been disenfranchised. They have become what the Germans of Bismarck’s era called Manövriermassen, obedient formations to be moved around the field under the monocled glares of the general officers on the Feldherrnhügel. At the Amsterdam meeting, politicians, officials and reporters were isolated from the city population by a high steel fence, three thousand Dutch police officers, an impenetrable diplomatic language and an Ancien Régime luxury. Slipping through the fence for a long-standing appointment downtown, I felt reckless, light-hearted and plebeian. Reality, incarnate in a city tram, all but did for me.

Denmark will not join the first wave of monetary union because, as an official of the Danish Foreign Office explained to me that evening, there must, alas, be a plebiscite and the Danish people might vote against it. Jacques Chirac promised a referendum on the new money in 1994 but he sure ain’t doing so now. In Germany, the opinion polls show majorities that are opposed to the replacement of the D-mark while, simultaneously, being resigned to its disappearance. Senior MPs of both Kohl’s Christian Democratic Union and the opposition Social Democrats have told each other not to discuss the Maastricht deficit criteria because they might unsettle a) the financial markets and b) the federal citizen. Even the Greens have been brought into the euro-cartel. The old nightmare of the German Left of the Sixties, a society without opposition or even debate, seems to have carried into waking life.

There is no greater pleasure, says the Chinese proverb, than to see your neighbour fall off his roof. In Britain, which has devoted much of the last eight centuries to undermining and demolishing Continental schemes, the agonies of monetary union across the Channel should be a source of unalloyed delight. In fact, as British officials explain, the whole thing has gone far beyond a joke. ‘That might have been true of the previous government,’ said one such official. ‘Blair and Cook have made clear that they have no interest whatever in things going wrong. The last thing the UK Union Presidency wants nextyear is to have the Italians really upset that they’ve been excluded. Nor do we want some kind of chaotic postponement. The nightmare is that they will go ahead, on some unsound basis, which will then do real damage to the whole European enterprise.’

Any hope that Britain might somehow sit monetary union out, at least until it has been tested, has proved an illusion. Sterling has become a magnet for investors disappointed by the low returns on the Continent, and has risen by a quarter since last summer, pricing British manufactures out of some foreign markets. Industrial production in the UK contracted in May. At some point, it is believed, businesses will fail, throwing their workers onto the state, and the British public finances will disintegrate: a long period of prosperity will come to an end. Like all defensive alliances, the euro is also an act of aggression.

Kohl can bully the German press and public, the opposition, his own party and, to a much lesser extent, his Bavarian allies in the Christian Social Union. But glimmering through the mist of Continental idealism, maths and money is the last castle he must capture in his quest for Economic and Monetary Union: the Federal German Bank, which is, in the terms of its constitution that every German Chancellor has at some point wished to Hell, ‘independent of instructions from the Federal Government’. In its obsession with sound money, the Deutsche Bundesbank is the incarnation of monetary policy in Europe.

The Bundesbank sits in its own little park in the Frankfurt suburbs. Inside it, there prevails that quiet economy of effort which is the essence of the German bureaucratic genius: short hours under cloudy skies, formal manners, frequent and nourishing meals, apple-pie files, suppressed gallantry, a certain distaste for the telephone. In as much as I understand that institution, after long hours of study and the patient explanations of its servants, the Bundesbank will only submit to its own destruction in a monetary union if it is a good monetary union. By ‘good’, it does not mean that everybody must be at three-point-nought. By ‘good’ it means as good as the D-mark over which it has presided with such success since 1948, first as the Bank deutscher Läder and, since 1957, the Deutsche Bundesbank.

Because there has been little inflation of money in the Federal Republic, the Germans (unlike the British) hold their savings and retirement provisions in money or the fixed-interest securities known as Renten. Most Germans own no real property or shares or works of art, for what need have they of inflation-hedges? They put their faith not in governments but in the Bundesbank.

The bank’s officials feel the German public at their necks, and the German Constitutional Court; and also the only jurisdiction that really matters in Hegel’s homeland, the Court of World History. There is a possibility that next spring the Bundesbank will not give its approval to the euro scheme; and since the bank has greater prestige than any other European institution, let alone government, that will cause all Kohl’s majorities to dissipate. This prospect, which the Continentals are now unwilling to contemplate, is in the Bundesbank’s view preferable to a detonation of the system once it is in place in 1999.

The reasons for Economic and Monetary Union are these. In eliminating movements in the European currencies, a fog will be lifted from decisions in business and European goods should become cheaper and better. Because creditors will need no cushion to protect them from die risk of their loans translating into less of their home currency, rates of interest, at least on public loans, will drop towards the long-run reward for risk-less or rentier investment, which is about 3 per cent per annum. When interest falls, the commercial profits to pay it don’t need to be so big, so business people don’t need to be so cautious, and more people can be employed. Governments then receive more in taxes and pay out less in benefits.

In this conversion of the Union into a true common market, the power and wealth of individual states, now dispersed, will combine to make an entity greater than Japan or the US in population and trade. Jacques Delors has spoken of ‘une Europe à la fois puissante et généreuse’. Less grandly, the federalists of Kohl’s Christian Democratic Union believe that only when people are handling euro coins and notes will they understand that the Union is more than white nights of herring quotas and Danish apples.

Money, for Schopenhauer, was ‘an inexhaustible Proteus’ ever ready to be transformed into our newest and most pressing object of desire. In Spain and Portugal, the euro is somehow the guarantee that there will be no restoration of Fascism (though the evidence from France and Bavaria so far suggests the opposite). In Italy, where an ingenious people saves much of its earnings, the euro will prevent those earnings being squandered by Roman governments on corrupt and unrentable schemes: if the lira means the Mafia and Andreotti then, in Richard Nixon’s famous outburst of 1974, Fuck the lira! Accident alla lira! Meanwhile, a country excluded from monetary union – and this is the truly diabolical feature of the euro – will be forced by the capital markets to pay higher rates of interest, run tighter public finances, and so on.

Yet in the heartlands of the Union, in France and Germany, the euro has taken an even more terrible shape: it is the power of a united Germany. Until 1989, that power was held in check by a wall and a fence and various armies of occupation. Even some Germans thought this arrangement better than the alternative. To the world after 1989, it appears barbaric. The new check is to be Economic and Monetary Union.

That is what Kohl means when he says that the euro is a matter of war and peace: that it will make union irreversible and war inconceivable. Formally, that is nonsense: a common currency didn’t stop the war in Yugoslavia, the revolt of the American colonists in the 18th century, the US War between the States and so on. What Kohl means, through his layers of inhibition and grandiloquence, is that Germany must be embedded in a union of states in which the German state will eventually be extinguished. Germany is in the grip of an uncontrollable anxiety, whose springs lie in its history of belligerence – I guess – and whose symptoms are depression, irrational haste and an enervating babble over pettifogging detail, Kleinkram.

Es geht nicht um das, was hinter’m Komma steht, sondern um das, was dahinter steckt: Forget the decimal. It’s what’s behind it! Beneath the abstrusenesses of’this essay lies a big, big story. Behind the comma – was hinter’m Komma steht – is the perennial German question. Behind the comma is the rate of a continent.

If you arrive in a strange land, said Montesquieu, and see that money is in use, you know that the place is civilised. In the civilised countries of Europe, we use money reflexively and rarely mind the immense assumptions behind its use. Modern money has no use except as money or, rather, when used as money has no other use. When we use it we make two acts of faith: that our institutions are robust enough to enforce contracts priced and absolved in this single-purpose medium; and that those institutions will try to maintain some sort of relation between money and the purchasable objects of desire: that is, in the interval of our accepting money and paying it out again, or lending it and getting it back, the money will not change – and we will be able to buy the same sorts of thing that we wanted then and still want now. The notion that money must have some relation of quantity to things was beautifully expressed by Davanzati in his lecture to the Florentine Academy of I May 1588: ‘tant’ oro ci ha in terra, tante cose, tant’uomini, tanti bisogni’ – ‘there is on Earth just so much Gold, so many Things, so many Men, so many Desires.’

Thus the euro coins, unveiled, like bashful Indian brides, on the stage of the Carré Theatre in Amsterdam on 16 June, alloys of copper, nickel, aluminium, steel, zinc, Belgian bad taste and manufactured folklore, are merely the tip of a great mountain of social arrangements. The notion, promoted by Kohl and the Tories after the Maastricht Treaty, that monetary union and political union were somehow separate categories, is an illusion. Those euro coins will condense in their metal not only the authority that will regulate their quantity, the European Central Bank, but also the nations of the monetary union, their productive capacity, their laws and customs, their soil and water.

That relation I mentioned, between the money quantities and the objects of desire, was maintained for a long time in Europe by the so-called precious metals. In a way that seems strange to us, the produce of mines of silver and then gold, first in Eastern Europe and Africa, then the Americas and Australia, kept in step with the general expansion of trade; and when they didn’t, the difference was supplied by non-precious tokens, unconvertible paper, forgeries and various forms of the imaginary money known as credit. That system based, however remotely, on the precious metals fell apart in 1914, when suddenly everybody needed lots of money to fight one another; was resuscitated after the Great War only to collapse again; was replaced by a mongrel standard of metal and US dollars that began to unravel in 1971; and the world entered a free-for-all. Money is now created when a bank makes a loan and destroyed when it calls it in. The modern system, exposed to the almost unbelievable fecklessness of bankers, is felt to be too unstable, except by extreme libertarians, and remains subject to the interference of national governments and the institutions known as central banks, which are sometimes independent of their governments, like the Bundesbank, sometimes not.

The Bundesbank cannot define money any better than I can, but it has an interim money – ‘M3’ – that it can sort of measure and that it tries to ensure is not growing too fast or too slowly in relation to the objects of desire which are themselves in a state of perpetual flux. It does so by imposing a permanent hunger on the banks so that they must forever be calling at Frankfurt for money for their loans and speculations. The price at which the Bundesbank gives them that money, the Discount Rate, sets the other rates of interest in Germany and throughout Europe, which in turn affects business activity. Or so it is believed.

A common currency, an Esperanto, was discussed in the preparations for the Treaty of Rome that founded the European Economic Community. In 1970, the so-called Werner Plan promised a monetary union in 1980, but was promptly derailed by the collapse of the dollar standard and the depression in trade that followed the rise in crude oil prices in the winter of 1973-4. A system whereby European countries controlled their currency fluctuations, known as the European Narrower Margins Arrangement, or, more pleasantly, the Snake, was installed in 1972 but proved too constricting to those free spirits, Italy and the UK. In 1979, Helmut Schmidt and Valéry Giscard d’Estaing, without so much as telling their mothers, let alone their parties and parliaments, agreed a system of semi-fixed exchange rates known as the European Monetary System. They launched their project with that history-book rhetoric that falls so tinnily on the Anglo-Saxon ear: Giscard spoke at Aachen of the ‘spirit of Charlemagne’, who was sleeping in the Dom across the way, having, in the late eighth century, given Latin Christendom a more or less common currency of silver pennies that lasted five hundred years.

At first, the EMS was not more stable than what preceded it. Launched with the participation of Italy, the Netherlands, Belgium, Denmark and the Republic of Ireland, it lasted six months before the first upward revaluation of the D-mark: eventually, the D-mark would be revalued eight times for a total compounded increase of a third against the central rate and two-thirds against the lira. So much for semi-fixed exchange rates. A measure of stability only entered the system in 1983 when Jacques Delors, then the French Finance Minister, inaugurated the so-called franc fort policy: that is, submitted to what the Bundesbank, which doesn’t bother with small modesties, calls ‘the rule of the Bundesbank’ – stable prices, budgetary stringency and, as turned out, rising unemployment. Delors went on to head the committee, formed at the Hanover summit of June 1988, to re-open the issue of monetary union and rapidly ran into conflict with the then president of the Bundesbank, Karl Otto Pöhl. Like all Bundesbank officials, Pöhl was sceptical of monetary union and of that contempt and ignorance of markets that is such a feature of the French élite. Unlike the federalists, the Bundesbank believes that European countries are not uniform; and that the normal stresses of trade – changes in commodity prices, global competition, the price of money – do not fall with the same pressure on each country. Unless some uniformity were introduced in government, the currency zone would simply disintegrate under the first external shock. Pöhl insisted on binding restrictions on how the members of the monetary union managed their public finances; and these became the Stability and Growth Pact agreed, against bitter French opposition, at Amsterdam. It prescribes reparations so draconian that it is hard to imagine them being executed in peacetime.

Meanwhile, the Berlin Wall came down and, as the dust settled, Europe was confronted with a Germany of 80 million in population and two and a half trillion in national product: half as much again as the next European power, France. The prospect scared the wits out of both the Germans and the French. Monetary union broke into what even Delors called a ‘fuite en avant’, a headlong flight without strategy and with unforeseeable consequences. Meanwhile, in converting East German money into D-marks, while simultaneously writing off that state’s entire fixed and intellectual capital, Kohl created a mountain of money: men, gold and desires were multiplied without any extra things to absorb them. The Bundesbank was aghast at this Potosí in Pankow. On 24 April 1990, an official said to me: ‘If this leads to a disturbance in monetary policy, then naturally we can do what is necessary: tighten monetary policy.’ And that is what happened, though not before, in an act of frivolity that simply beggars belief, John Major, then Chancellor of the Exchequer, had taken sterling into the European exchange-rate system.

By the summer of 1992, the German Discount Rate was at a historic peak of 8.75 per cent and Britain was in a recession of astonishing savagery. Sensing there was something called British common sense, and that the British would not crucify themselves for Continental idealism and German unification, the banks and speculators sold every sterling security they could find (and a great many they couldn’t find) and on 16 September forced sterling out of the system. The lira followed that evening. In the course of the next year, the peseta, the punt and the escudo were devalued and there were persistent runs on the French franc.

Those events, attended by the direst warnings from the Continent, inaugurated a period of prosperity such as the UK had not known since the Sixties. As the Continent sank deeper into the mire, Britain enriched itself, risorpassò the Italians, and generally made itself insufferable. Tensions over the euro were worked out not in the world of failing businesses and job queues but in Parliament, where the Tory Party tore itself to pieces. Meanwhile, on the Continent, employment fell and public deficits rose. It was as it Fast Germany were taking its revenge. At Amsterdam last month, I kept thinking to see the gnome Honecker leering through the fence surrounding the Netherlands Central Bank. Others must have seen him, too. At a meeting with reporters at the Amstel Hotel in the early hours of 17 June, a high German official said: ‘Without German unity, there wouldn’t have been a problem’ – ‘Ohne die deutsche Einheit hätten wirüberhaupt kein Problem.’

To look now at Eastern Germany is to see the catastrophe the euro could bring to Europe. Without their own currency to devalue and price their labour and products into world markets, the East Germans have been delivered up to mass unemployment, and the West Germans to transfers to the East of around 150 billion marks a year. An EMU in its present form risks similar consequences.

A devaluation impoverishes an entire nation, not simply its working people: lager and champagne become more expensive. As an expression of social solidarity, devaluation has always been favoured by absolute rulers and socialists and bitterly opposed by the propertied classes. In the age of the euro, as of the International Gold Standard, working people threatened by world competition will have to take cuts in their actual wages or forego their jobs or both.

The euro-utopians say that workers become redundant in one part of the Union can always migrate to a more prosperous district: in this violent Ancien Régime fantasy, Manon and Des Grieux are reunited not on the Mississippi but in Schleswig-Holstein. In reality, of course, and for some time, redundant workers will have to be maintained at home by subsidies from Brussels, or rather from the only deep pockets in the Union, the West German taxpayer’s. Abandoned by Kohl and the politicians in Bonn, the German public has no protection from this mulct other than Hans Tietmeyer and the directors of the Bundesbank.

The Bundesbank is, in reality, and as required by its Act of 1957, supporting the policies of the Federal Government. It is now providing money for German banks and industry at rates of interest lower even than at the time of the French reparations-after Sedan. The purpose of this money inundation is, I imagine, to float Germany and the other Continental economies off the rocks of low investment, rising unemployment and deteriorating public finances. The policy, in force for the last 15 months, has had no effect whatever: the money created is simply going into booming stock-markets, in Frankfurt, Paris, London, Moscow, Amsterdam, Helsinki and Milan, and the Bundesbank does not see its historical role as being to finance stock-market speculation. On 9 July, Tietmeyer warned that this policy could not continue indefinitely. For it has caused a devalution of the D-mark, a process known in Frankfurt by the euphemism, ‘the appreciation of sterling and the dollar’: you don’t use the D-word (or rather A-Begriff) in Frankfurt.

At the end of May, Kohl attempted to steamroller the Bundesbank as he had in 1990. Without warning and – a serious offence, this, in Germany – without schriftliche Vorbereitung, ‘written preparation’, the Federal Government announced that it would like to revalue the reserves of gold and foreign currencies held by the Bundesbank at cost or written-down, and charge off the resulting book gain against the Maastricht deficit ratio. The offence against Italian book-keeping concerns us less than the Bundesbank’s reaction. It saw an assault on its independence and the ‘arbitrary creation of new money’, as in 1990. I believe Tietmeyer considered, and rejected, resignation.

The difference between now and 1990, as the Bundesbank made clear to me, is this: after German monetary reform, the Bundesbank still enjoyed its sovereignty over money and could do ‘what was necessary’, which was to raise the discount rate to 8.75 per cent: this time there would be no second chance because there would be no Bundesbank, only the European Central Bank, which the rump Bundesbank might or might not dominate. The Bundesbank’s opposition to the gold-grab caused a revolt in Kohl’s coalition and the plan was watered down to nothing. Even so, party and coalition discipline was breaking down. A general election looms in October 1998, just after the Bavarian state elections, and the Christian Social Union is becoming ever more vocal for a hard euro. On I July, in Munich, Kohl finally accepted the Maastricht ratios in terms so confused they seemed to reveal exteme distress: ‘Three or 3.0 per cent – that is not my problem,’ he said.

Grand as these dramas are, they do not disrupt the immemorial rhythms of German bureaucratic life. Germany is now in Anacapri and will not return until September when the final phase of the battle will be joined.

Essays such as this one usually end with a set of predictions, labelled with mathematical probabilities. The purpose is to help the European banks, using the mathematics of the gaming table, to bet your savings on the outcome: to buy the public liabilities of the European states in the hope they’ll be admitted to monetary union, causing their credit to improve and price to rise, or vice versa. Such harmless speculations occupy some of the very best minds in Europe. Yet any probabilities I suggest will be wrong unless they happen to be right: rather as a stopped clock is right twice a day.

There appear to be four possible outcomes. The first is that EMU will proceed with all the members of the Union except Britain, Denmark, Sweden (who want to wait and see) and Greece, which enjoys no credit for co-inventing coined money but rather is considered too Levantine for the rigours of the euro. The second is that it will proceed, but only with France and Germany and the hard (or hardish) money countries: Luxembourg, the Netherlands, Belgium, Ireland, Austria and, if it wants, Finland. The third is that there will be an orderly postponement until the effects of German unification have been squeezed out of the system. Finally, there will be a chaotic postponement or disintegration. These different outcomes must be seen within the boundless possibilities of world trade, which has been expanding strongly for some years (except on the Continent) and may be due for a rest. In mathematical probability, Dr Thomas Mayer, the expert on monetary union at Goldman Sachs in Frankfurt, assigns 60 per cent to the first and second, 10 per cent to the third, and 30 per cent to the last.

If Kohl had managed to overrule the Bundesbank, then the euro might have developed into a typical rickety European institution, like the EMS or the Common Agricultural Policy, unloved, immensely wasteful of energy and money, more than a little mad; exposed to tremendous shocks in its early years; but yet surviving to carry the European project towards the sunlit uplands, whatever and wherever they are. Whether the prospect from those hills will be worth the weary years spent journeying there I leave World History to adjudicate.

Now that 3 per cent means 3 per cent not 4 per cent, that way becomes a little rougher. The time for an orderly postponement may, as Dr Mayer suggests, have passed. That leaves chaos as a strong probability, out of which the central problem I mentioned, what to do with the united Germany, will force itself on our attention.

Send Letters To:

The Editor
London Review of Books,
28 Little Russell Street
London, WC1A 2HN


Please include name, address, and a telephone number.


Vol. 19 No. 17 · 4 September 1997

There is one aspect of the euro which has gone unnoticed by James Buchan and many others (LRB, 31 July). EMU (Economic and Monetary Union) and the euro (one of the original names for a kind of kangaroo) together represent the two supporters of the Australian coat of arms.

L.G. Norman
Naremburn, New South Wales

send letters to

The Editor
London Review of Books
28 Little Russell Street
London, WC1A 2HN


Please include name, address and a telephone number

Read anywhere with the London Review of Books app, available now from the App Store for Apple devices, Google Play for Android devices and Amazon for your Kindle Fire.

Sign up to our newsletter

For highlights from the latest issue, our archive and the blog, as well as news, events and exclusive promotions.

Newsletter Preferences