There are many monetary communities in the world. There are two which bring together a highly significant number of sovereign states and their inhabitants: on the one hand, the CFA franc, which is older, and on the other hand, the newer European monetary community, the Euro.
It is well known that the CFA currency went through a difficult period at the start of the 90s, which it had to overcome in order to ensure its survival.
We cannot help but draw a parallel with the difficult situation in which the Euro currently finds itself, especially given the context of the Greek crisis.
The states of the CFA zone were extremely attached to their monetary community, and dealt with their crisis and prepared for the necessary devaluation of the CFA franc of January 1994 by urgently setting up a series of drastic measures intended to transform their monetary community into a veritable community of law and rules.
That is precisely what Europe should be doing today.
In a similar way to the European situation today, the African common currency was sitting at the time on a mosaic of economies and of economic, social and fiscal rules which were not convergent.
In response to this untenable situation, the states of the CFA area decided to build their monetary community on a judicial area which was unified in all domains of economic law which govern the underlying economies.
An exceptional level of engagement from the governments involved made it possible to implement reforms to the UEMOA, CEMAC and sub-regional banking commissions, the CIMA reform in the insurance sector, the CIPRES reform to welfare, and finally – under the impetus of Judge Kéba Mbaye, whose assistance was expressly sought by the heads of state to this end – the introduction of OHADA’s unified business law. This was fundamental and historic legal reform, Pan-African in purpose and not inherently limited to the countries which belonged to the CFA monetary community.
All these reforms, which were implemented in record time, are unanimously considered to have protected the CFA community by enabling it to get through an extremely difficult and turbulent period.
In the current context of the Euro crisis, it seems legitimate to ask to what extent the European states would benefit from learning lessons from the CFA monetary community in order to preserve their own common currency.
The European monetary project is indeed a magnificent ambition, but even some of its founding fathers admit that the project remains unfinished, and its shortcomings are now a source of risk for the European ideal, if no urgent measures are taken to correct them.
The simple fact of establishing the Euro was not enough, as its founding fathers had hoped, to create the necessary convergence of its underlying economies.
In the present context, the Euro could become – against its will and if the necessary measures are not implemented – a vector for economic and social divergence and hence let political division take it in the opposite direction of its intended goals.
In reality, as the African monetary community of the CFA has proved, a common currency must rely on a community of economies and of rules. It must result from them. This is a mathematical truth. It cannot be otherwise, and establishing a common currency is insufficient to create convergence.
This is attested by the present situation of the Eurozone’s economies. The economies of Germany and France, the two pillars of the European monetary community, do not converge. On the contrary, they tend to diverge and France, because it has failed to take the necessary measures since entering the Eurozone, has lost a substantial part of its competiveness compared with its biggest neighbour and main commercial partner.
In some ways – relatively speaking, of course, since their economic realities are very different – we can fear that France, if it does not act quickly, may take the same direction as Greece.
When it comes to many economies in the south of Europe, including France, we hardly ever discuss foreign trade deficits or the balance of payments any more. But the constraints that haunted governments before the European common currency came into effect and which made the headlines of economic newspapers did not, unfortunately, disappear as if by magic just because of the Euro.
Hence it is now reasonably possible to consider that the Euro – which for ten years made it impossible for Greece to benefit from the restoring forces which counterbalance foreign trade and foreign reserves at the same time as allowing the country to fall into debt in hard currency until it collapsed – contributed in spite of itself to the tragedy that Greece is going through, as well as the absence of structural reforms for which so many successive Greek governments have been criticised.
These observations confirm that when the underlying economies diverge due to a lack of real instruments of convergence, a common currency cannot be durably viable, whether it be in social or economic terms, or in political terms.
Today, it is in the interest of the global economy that urgent measures be taken to give the common European currency greater economic meaning and transform it into a true vector for convergence. If truth be told, it is a question of saving the European ideal, the universal idea of peace, generosity and shared prosperity, whose fate is linked to the survival of the European common currency.
For this reason, European governments and the European Commission should attend without delay to strengthening the European common currency using real and concrete legal instruments of convergence, as the African states did at the start of the 90s with determination, energy and success in order to save their own monetary community.
Though European leaders have now clearly realised that they need to work towards the convergence of the economies which share the Euro, we do not know exactly what they mean by setting up an economic government for the Euro – a noble idea indeed, which has resurfaced in the wake of the Greek crisis.
Will it be a government that takes the place of national governments in terms of setting up – after the Stability Pact, which was not respected – a common budget and federal debt? Do the European states agree and are they ready to take the federal leap which would make formidable historic progress? There still seems to be a long way to go, even if in the long term this goal is probably unavoidable.
Or will it instead form another layer of bureaucracy which will only have a limited hold on decisions taken at state-level, especially in the key economic areas of social and fiscal law – in short, a new Stability Pact?
To consolidate the Euro and give it greater economic meaning in a consensual manner which includes all members of the Eurozone, be they in the North or the South of the monetary community, European leaders and the European commission must act urgently in a concrete and consensual manner, with vision and creativity and without being confined to classic technocratic paths which have already shown their limitations.
In this respect, Europe should take inspiration from the measures taken 25 years ago to save the African CFA monetary community.
In Ouagadougou in 1991, when the CFA monetary area was in great difficulty and Europe was en route towards her own common currency, the minsters of finance of the CFA franc area bravely decided to transform their monetary community into a true community of rules and law with the aforementioned reforms.
This decision led to the rapid implementation of multiple unifying reforms in all areas of economic and social life, and the driving force behind the process was OHADA’s unified business law, which is now recognised around the world.
We observe with dismay that it is now the turn of the European monetary community to go through a major existential crisis and that if it does not immediately find solutions to its original shortcomings and weaknesses, the European monetary dynamic harbours the seeds of serious divisions between its member states and thus poses a threat to the European project itself as well as the social and political stability of many states.
Today, like yesterday for the CFA monetary community, there is every reason to think that creating a true community of legal rules within the Eurozone – mainly in the key areas of labour law and taxation but also in company law, the right to recover funds and enforcement procedures, security law, bankruptcy law and contract law – would represent tremendous progress and be life-saving for the Euro and the European project.
We hope that the Greek tragedy will provide the necessary impetus that the whole world is waiting for, and especially that it will lead European leaders, like their African counterparts 25 years ago, to identify the optimal critical path to save the Euro and which could take the form of rapidly turning the European monetary community into a community of legal, fiscal and social rules.
Admittedly, it would be a revolution for the legal system, as the OHADA was in Africa, and a federal shock. But the Euro was also an intrinsically federal revolution, which now needs to be completed urgently, concretely, rapidly and intelligently by another federal revolution, one which implies neither sharing the burden of debt nor having a common budget, since the combined group of states has not reached a consensus on either of these.
We should bear in mind the words of Judge Kéba MBAYE: “law, the common rule, more so than currency alone, constitutes the true cement of nations, economies and peoples”.