Guest pen The euro has achieved a lot, but the euro area still needs to be strengthened

The euro, introduced twenty years ago, is a testament to the unity on which the EU is founded.

The day after tomorrow New Year’s Day marks the twentieth anniversary of the introduction of a new currency, the euro, by some 300 million Europeans. In Lisbon, Helsinki and Athens, citizens were able to withdraw euro banknotes from ATMs, buy food with euro coins and travel abroad without exchanging currency.

The euro was driven by the expansion of the internal market. The euro became one of the most tangible achievements of European integration, together with the free movement of persons, Erasmus student exchanges and the abolition of roaming charges.

The euro is a reflection of a common European identity, symbolizing integration as a guarantor of European stability and prosperity.

From the euro has become the world’s second most widely used currency. It is still very popular: around 80% of citizens think the euro is a good thing for the EU. The euro area continues to expand.

After the first ten years of the euro, there was a wider realization in the Member States and the EU institutions that the structure of the euro was not originally designed to respond to the turmoil caused by the global financial crisis and the ensuing sovereign debt crisis. As a result, the governance of the euro area was reformed, a common support mechanism for countries in financial difficulties was set up and a common supervisory system was set up for European banks. It was understood that the solution would be to increase coordination and deepen integration.

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As a result of these early crises, the euro has matured and strengthened its international position. We have also gained valuable experience that we have been able to benefit from during the current pandemic. The limitless nature of the pandemic revealed how deeply interdependent we are and how strong our unity is.

Are have achieved a great deal in the first 20 years of the euro, but we need to keep up with innovation and promote the international role of the euro. The euro must adapt to the digital age. We support and promote the work of the European Central Bank to develop the digital euro.

The euro area needs to be further strengthened. Although we have laid a strong foundation for the European banking system, we can still strengthen the banking union and create new opportunities for economic recovery and growth.

The same goes for the capital markets. We need to boost the flow of private investment and deposits in the internal market so that we can provide finance to businesses, including SMEs, and create new jobs.

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Investment has been too low for too long: we need to invest heavily and sustainably in people, infrastructure and institutions. Together with responsible fiscal policy and the private sector, the Next Generation EU Recovery Facility has an important role to play in implementing reforms and investment. This is the best way to increase growth potential, improve living standards and meet the critical challenges facing humanity.

As the population ages, we need to ensure the sustainability of public finances. When looking at common budgetary rules, it must be ensured that fiscal and economic policies in the euro area are appropriate in a changed environment and able to meet future challenges.

Euro is an unprecedented collective effort and a demonstration of the unity on which the European Union is founded.

As the world recovers from the pandemic, we need to join forces and resources to reap the benefits of digitalisation and combat the climate crisis.

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The euro shows what we can achieve through cooperation. It can symbolize that we ensure a prosperous, sustainable and inclusive future for future generations.

Annika Saarikko and Paschal Donohoe

Saarikko is the Finnish Minister of Finance (Central). Donohoe is president of the Eurogroup. The views expressed in this paper are signed by all eurozone finance ministers as well as EU commissioners Valdis Dombrovskis, Paolo Gentiloni and Mairead McGuinness.

The guest pens are the speeches of experts selected by the HS editorial board for publication. The opinions expressed in guest pens are the authors’ own views, not HS’s statements. Writing instructions: www.hs.fi/vieraskyna/.

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