The Euro: Political Experiment or Thousand-Year Currency?

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On May 3rd, CFA Society New York hosted its The Euro: Political Experiment or Thousand-Year Currency? program. Featuring both the history and importance of the current geopolitical climate in Europe leading up to a potentially groundbreaking French election, this event functions as a critical opportunity for those looking to optimize their investments and macroeconomic overview of both the Euro and Europe overall as political and fiscal realities begin to take shape.

This event brought together upwards of 60 attendees and featured notable panelists and speakers from various executive positions associated with global economics and foreign strategy, just a few among several in related fields, all with a strong knowledge and experience with the importance of how much a geopolitical event such as this French election can affect the very fiscal union the EU has prided itself on for so many years. Based upon the future of the Euro, the discussion focused on questions such as survival when pitted against the strong headwinds of the political climate within Europe, and the key questions that must be answered if the Euro hopes to not only survive, but thrive in the upcoming years.  

Beginning with an introduction from Harumi Urata-Thompson, COO of CFA Society New York, Urata-Thompson spoke briefly about her personal time spent in Europe just as the Euro conversion had originated and how quickly it has already become a currency of wary, with political strife seen in recent news such as the Brexit and the upcoming controversial election within France. This was followed by a panel, moderated by David Allen, CFA and Institutional Director of Schroders and featured Poul Kristensen, CFA, CQF, and Managing Director, Chief Economist, and Portfolio Manager at New York Life Investment Management, Ebrahim Rahbari, Managing Director of the Global Economics Team for Citi Research, Luca Passoni, Independent Consultant for Casa Lambert LLC, and Robert Lynch, Global Head of Foreign Exchange Strategy at JPMorgan Private Bank.

Allen and the panelists immediately began to examine the Euro through their own global lens, based upon their own experiences and opinions. Beginning with Passoni, he states that it is actually the political disassociation and differences between the public and private sector that Europe faces that defines the very reason the Euro will remain in place, stating “once you start examining the government from an economic and legal standpoint, you begin to ask yourself why you would intervene.”

Agreeing with the points made, Rahbari transitioned into the fact that even going into the EU and Euro implementation, monetary policy was known to be incomplete, there was just no thought to it, but as Americans, it’s important for us to realize that perhaps the structural advantages Europe holds are the reason the Euro has thrived this long. Rahbari also states his perspective originating from Germany stating “the distinction between legacy and future issues is crucial, because we can’t really renegotiate the past as we didn’t buy into many of these debts… and this is so important because Europe’s biggest problems are in the past, and there’s not much we can do about that.”

He concluded with a resounding statement that these large changes to the very institution of the Eurozone are perhaps much further away then we think, and that at the end of the day, this originated as a political tactic, and if the political systems of Europe aren’t going anywhere, anytime soon, the euro shouldn’t be dismissed from the public eye just yet. To further expand upon the idea of legacy issues, Kristensen focused on specific factors that have come to the forefront of Europe’s political and social agenda. Kristensen cites education as a primary example of this, providing the fact that with a rapidly rising aging population, funding focus has shifted from the necessary education to components such as healthcare and pensions. However, he quickly notes that it is the quick response to such stimuli by the European markets such as removing the burden on local taxpayers to assume the role of bailing out failing banks to creating such a system that accounts for and assumes liability for such a risk of banks defaulting.

Lynch then provided an antithesis of sorts to the idea of these uncontrollable factors being the primary fear for the Euro, stating that “there has been a tendency of politicians not to have to move on what are clearly the difficult issues facing the Euro unless markets or some other factor forces them to make the tough political decision.” He concludes with the simple idea that if the Euro is going to evolve in the upcoming years, these are the circumstances we need from politicians to provide the features necessary to that evolution.

All the panelists then began to dissect the minutia of the impending election of France, all with a consensus that Macron, the current leading representative and projected winner, is an investment not only for France’s future, but for the Eurozone as a whole. However, several of the panelists state the importance past the election and rather the French initiative that is bound to be the agent for change in Europe. Whether it’s reconfiguring an axis with Germany or implementing a change in labor markets, Rahbari addresses the contention towards the election as “cautiously optimistic.”

In summary, the panelists’ consensus was that no matter the issue, whether the issue of a controversial election in France, an unstable economy in Italy, or a currency that faces problems of an unfinished monetary policy from the past, it is imperative to assume and prepare for any and all risks, especially in Europe’s geopolitical climate today. As the stipulations and minute details surrounding the euro are refined further, it must be the job of those in the field of politics, and even those in the surrounding countries to assure a stable future for the Eurozone.

Ultimately, whether the Euro ever becomes the number one focus of Europe following all of the legacy issues, investors have almost guaranteed that this currency is too big to fail with the support of Europe behind it. The night then concluded with closing remarks from David Allen, in which he states that while the conundrum of the Euro may not be able to be salvaged within one day, the questions and points raised over the event give a lot of thought for the future of the currency, and the Eurozone as a whole.

The Euro plays a pivotal role in global, economic, and political factions of macroeconomics every day. This event was intended to allow for a deeper insight into the common currency and its ability to survive against the separate wills of nations facing the geopolitical landscape of Europe today. CFA Society New York would like to thank its sponsor at Schroders.

2017-06-14T16:55:53+00:00