The history of the euro currency seems also to be a history of broken rules. Efforts to rescue the currency have broken even more rules, but can the currency union survive if rules go on being broken?
Back in 2009, Japanese economist Kenichi Ohmae wrote that the euro derived its value from strict fiscal discipline. He was referring to the Growth and Stability Pact which had been negotiated before the introduction of the euro with a view to keeping fresh borrowing at bay and ensuring solid budgetary policies.
What he overlooked was that the members of the currency union never really took the pact seriously. "Countries such as Belgium, Greece and Italy were admitted into the union even though their public debt levels were well over the 60 percent of GDP which had been set as the maximum," Deutsche Bank analyst Nicolaus Heinen writes in his latest book "Mission Vertrauen" ("Mission: Trust").
The year 2003 sounded the death knell for the pact when Germany and France managed to escape sanctions for excessive budgetary deficits. All in all, the stability pact has been violated over 100 times, with no sanctions ever being imposed on anyone.
So do European lack the discipline needed for the task? Whenever it came to getting governments to consolidate their budgets, any attempt to force them to stick to the rules invariably came to nothing. Heinen claims that's because of the different cultures of Europe's different countries: target-oriented rules set up by northern Europeans have only been followed by northern Europeans, while southern Europeans considered those rules as mere recommendations - as Heinen puts it, "just as they do with a red traffic light."
A matter of taste?
In other words, while Germans prefer to stick to principles, the French would rather decide on a case-by-case basis. When the Greek debt crisis threatened to spill over on to the rest of the euro area, the French perception became the dominant one. In May 2010, eurozone nations threw overboard their previously agreed no-bailout clause and have since been doing nothing else but assisting anyone who's in trouble financially.
But sticking to the rules is critical if the currency union is to continue to exist, maintains Wim Kösters from Germany's RWI economics think tank: "Without sticking to the rules the currency union is doomed to failure."
In his view, member states will be able to regain lost trust if, in the course of the current rescue efforts, they were to return to the rules. But that's not what happens. The red lines that allegedly must not be overstepped stay in place just for a few months, weeks and sometimes only days. Kösters cites the self-imposed regulations on interest rates that nations would have to pay for their debt, the austerity measures which were demanded of them, and the rule that should be no debt "haircuts" At first haircuts were said to be impossible, and then they were allowed - but only for Greece.
Heinen argues governments' response to the euro crisis has been anything but creative: "They tried to improve rules which didn't work, such as the Growth and Stability Pact, by introducing new rules" he says, "but those rules have been imposed from the top, and they tell countries what to do and what not to do."
Shared debt a silly notion?
The Fiscal Pact which came into force in early 2013 is a good example, he says: it's nothing but a paper tiger. Even more absurd to him is the concept behind the so-called Eurobonds under which debt would be shared among eurozone states, and crisis-stricken nations would lose any motivation to carry out reforms.
Out of all the agreements which have been made, it's the non-binding Euro Plus Pact that Heinen sees in a positive light - a deal which was agreed among 23 EU countries in the spring of 2011. He says the pact provides some useful instructions for debt reduction and structural reform that governments can abide by. "The rules which have been disregarded so far are first and foremost based on rigid targets without defining the process of how to meet those targets," Heinen said.
But he believes it's such procedural rules that Europe needs to channel nations into genuine competition. And fair competition would entail rewarding the achievers, for instance with lower interest rates on their debt. For that, he argues, financial markets should retain their power to serve as indicators for good or bad policies. He views the new role of the European Central Bank (ECB) with a good deal of unease: "I'm indeed afraid that eurozone nations will relax their reform efforts and their attempts to make savings if they know the ECB will bail them out if need be."