The Public Value of Monetary Integration

Recently there have been rumblings again about whether the introduction of the Euro was a good thing (Paul Krugman mentioned it in his column last Monday in the New York Times).

Several years ago, when I was living in Germany, I attended a conference where I found myself talking to a professor and his wife about the recent fall of the Berlin Wall. The recently united Germany was in the middle of a crisis of second thoughts. The former West Germany, in particular, was greatly irritated at the "Ossies" wanting a free ride all the time ("Do you know what they do? They come up to the cashier in a supermarket and refuse to pay, saying 'I suffered all these years, now I deserve this!'"). But the professor and his wife were adamant: reunification was absolutely the right thing to do.

"It will do something priceless: it will keep them from ever going to war. That's worth the entire cost of reunification."

They have a saying in Italian, Conosco i miei polli - I know my chickens. That's the way many people feel about European history: again and again, European countries have gone to war with each other. They could do it again - I know my chickens. Monetary integration is one more step toward making that harder to do in the future.

Put another way: the Public Value of monetary union is huge. Sure, the financial cost may turn out to be enormous, maybe even a net loss. But the political value is enormous, and makes it all worth it.