The debate on the abandonment of the euro resurfaces regularly in France. While new presidential elections will take place in 2027, the victory of the national rally could lead to this withdrawal. The French may well come out ruined
In short
- The euro exit could lead to an explosion in interest rates and a capital flight as in the 80s.
- Europe would risk being weakened in the balance of power in the face of China and the United States.
- European states could fight a merciless battle through competitive devaluations, which would ignite inflation.
The failures of the franc in the 80s
Frexit supporters often forget the difficulties encountered by France before the Euro. During the 1980s, the country practiced successive competitive devaluations Faced with the German Mark, like Javier Milei's Argentina practice it today. In 1981, the franc was devalued by 3 %, then 5.75 % in 1982, 8 % in 1983 and another 3 % in 1986.
This strategy turned out to be catastrophic. Unlike objectives, these devaluations have fueled a galloping inflation and dug the trade deficit with Germany. Consequently, investors fled massively, preferring to place their capital in more stable currencies like the Mark.
France has thus lost all credibility on the financial markets. The Banque de France was considered a second -class institution, unable to guarantee price stability. These repeated failures finally pushed the French authorities to abandon this approach and to align themselves with the German model of strong money.
Liberal construction behind the euro
The euro is based on rigorous academic work carried out by several Nobel Prizes in economics. There public choices theory by James Buchanan and Gordon Tullock shows that politicians act above all to be re -elected. They are therefore tempted to adopt short -term populist policies, especially in monetary matters.
This vision justifies The independence of the central bank as a bulwark against opportunistic drifts. A respected central bank must follow stable and predictable rules, not manipulable by political power.
Milton Friedman completed this approach by demonstrating that inflation is always a monetary phenomenon. Thus, only a rigorous monetary creation control can lastingly fight against inflation. These liberal economists have directly inspired the European Central Bank model with its clair mandate for price stability.
The concrete, but unknown advantages of the Euro
The euro brought a Unpublished monetary stability in Europe. The exchange crises that regularly shakes European currencies disappeared. No more speculative attacks like that of George Soros against the Sterling book in 1992, which cost more than a billion dollars in the United Kingdom.
This stability resulted in Historically low interest rate. The countries of southern Europe have benefited from exceptional financing conditions thanks to the credibility of the ECB. In addition, the euro facilitated European commercial integration: 65 % of French foreign trade is done today with countries in the euro zone.
In addition, the euro has become the second world reserve currency after the dollar. This position offers Europe a tool for collective sovereignty in the face of major powers. The euro is also a monetary shield for fragile countries which, without this protection, would have seen their currencies collapse during crises.
Euro faults
Economist Robert Mundell theorized the incompatibility triangle which explains the main faults of the euro. We cannot simultaneously have a fixed exchange rate, an autonomous monetary policy and a free movement of capital.
The euro zone has chosen the common currency and the free movement of capital, thus sacrificing national monetary policy. This situation is problematic during asymmetrical shocks : A real estate crisis in Spain or a budgetary crisis in Greece can no longer be dealt with by national monetary adjustments.
L'lack of budgetary union constitutes the main structural weakness. Unlike the United States, there is no automatic solidarity mechanism between Member States. Countries in difficulty can only count on their national fiscal policy, creating tensions between north and southern Europe.
Towards a monetary apocalypse?
Getting out of the euro would not solve the fundamental problems of the French economy. On the contrary, this decision would probably cause a Interest rate explosionas was the case in the 1980s. Investors would lose confidence in the new French currency, causing a massive capital flight.
The real French challenges are structural: lack of competitiveness, rigidities of the labor market, demographic aging. These problems existed before the euro and would persist after its disappearance. The euro is not the cause of these difficulties, but rather a safeguard which prevents politicians from masking these weaknesses by irresponsible monetary policies.
THE essential structural reforms Go through an improvement in productivity, flexible labor market and massive investment in innovation. These transformations require political courage and a long -term vision, qualities often absent from the French public debate.
The euro is certainly not perfect and suffers from significant structural defects. However, its destruction would be more expensive than its reform. Rather than playing with fire by leaving the euro, France should focus on its internal reforms while working for a more integrated and ambitious Europe. Another promising strategy would be to start constituting a Bitcoin reserve by drawing inspiration from certain American states.
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