Money is an instrument of governance as well as commerce. In almost all countries on earth, the change in people’s pockets and the bank notes in their wallets are an assertion of national sovereignty.
Today, there is an exception: the euro, the common currency of 18 of the member states of the European Union. The euro zone puts these countries in the vanguard of the greatest experiment in regional cooperation the world has ever known.
Yet that venture has had a rough five years. In the wake of the Great Recession, the euro has become economically disruptive and politically divisive, pitting the states of northern and southern Europe against one another. The crisis is not over, but Chancellor Angela Merkel of Germany, President François Hollande of France and their fellow leaders are determined to keep the euro zone intact. They are reinforcing accords on national budgets, spending and financial regulation, pushing ahead with a banking union, and tackling unemployment.
These measures are necessary to salvage economic integration and serve its original purpose: to bind up the wounds of the most bloodstained continent in modern history and turn it into a zone of peace, prosperity and democracy, governed by common policies and administrative structures.
That is the European Project. Its master architect, Jean Monnet — even though he died nearly 35 years ago — would have understood the mistakes, dilemmas and dangers that threaten that project now. It is likely he would also have supported the remedies that European leaders are attempting, since they fit with his conviction that political institution-building and economic integration had to be carefully synchronized.
Monnet has been hailed as a statesman. In fact, he was something far rarer and more consequential — a key figure in the transformation of the concept of statehood itself. He never held elective office or a ministerial post, but he was an effective advocate. Modernization, this Frenchman believed, was more than the exploitation of new technologies to improve industry, transportation and communication; it also meant adjusting to the ways in which individual nations were conjoined by an ever thickening skein of economic transactions.
Monnet quit school when he was 16 to enter the family brandy business. The experience taught him to respect consistency of method and the importance of proper sequence in a complex process: hanging the vines on meticulously laid-out trellises, fermenting the juices of the grapes for weeks, distilling them twice, then storing the final product in neatly arrayed oak casks in dark cellars for anywhere from two years to five decades or more. As a salesman of this patiently produced and precious commodity, he absorbed the basics of finance and commerce.
The House of Monnet was competing against Cognac’s superpowers, Hennessy and Martell. But brandy merchants also depended on cooperation to broaden the global market for the benefit of all. An environment conducive to vigorous trade was a common good. That was an ethos that suited Monnet’s temperament.
At the end of his long life, Monnet described his birthplace as a brandy town where “one did one thing, slowly and with concentration.” That could have served as a motto for his life: the cultivation and marketing of a grand plan to bring lasting peace to Europe.
Like the liberal economist John Maynard Keynes, Monnet came to view the “war guilt” clause in the Versailles Treaty, which concluded the First World War, as a mistake. It enforced a Carthaginian peace on Germany, demanding reparations in the form of payments and transfers of property, and sowed the seeds of the next conflict.
Even in the dark days of the late 1930s and early ’40s, however, when the Axis dominated most of the Continent, Monnet was thinking ahead about how to break the cycle of total war followed by a false peace. At a meeting of the French government-in-exile in Algiers in 1943, he declared, “There will be no peace in Europe if the states are reconstituted on the basis of national sovereignty ... The countries of Europe are too small to guarantee their peoples the necessary prosperity and social development. The European states must constitute themselves into a federation.”
Two years later, after Germany and its allies surrendered, Monnet had his chance to begin realizing his vision. As commissioner-general of the French National Planning Board, Monnet advised Gen. Charles de Gaulle, the president of the provisional government at the end of the war, on the reconstruction of the French economy.
One obvious means was to tap into Germany’s industrial potential, much of which was still intact. The Monnet Plan, as it became known, proposed the expropriation of coal from German mines in the Ruhr and Saar regions to fire the furnaces of French steel factories. In addition to hastening the recovery of France, this inhibited Germany’s ability to rearm.
Therein lies an irony: the Monnet Plan had an unmistakable aspect of Versailles redux. If its punitive measures had remained in place, it would have crippled Germany’s recovery, and very likely — as Versailles had done — sown dragons’ teeth in the soil of Europe.
Over the next four years, Monnet worked on a successor arrangement that was negotiated with Germany, not imposed on it. The agreement lowered duties and restrictions on coal and steel trade between France and Germany, bringing two vital sectors together under the aegis of a joint state-sponsored authority.
This bilateral accord was an exemplar of Monnet’s strategy for diluting national sovereignties by creating new economic facts on the ground, which, in time, would lead political leaders to see the virtue in acting on the Pan-European level. The 1951 Treaty of Paris was a step in that direction: It added Italy, Belgium, Luxembourg and the Netherlands to what became the European Coal and Steel Community. The E.C.S.C. was the progenitor of the European Union, based on Monnet’s guiding principle: “Nothing is possible without men, but nothing lasts without institutions.”
In 1955, Monnet resigned from the presidency of the E.C.S.C.’s High Authority to found an independent group advocating an all-inclusive European federation. Widely referred to as the Monnet Committee, its formal name was the Action Committee for the United States of Europe. De Gaulle and others sometimes mocked Monnet as “the great American.” He did not much mind, since he admired what he had seen of the United States’ federal democracy.
Jean Monnet died, at 90, in March 1979. It was a seminal year in the evolution of Europe. That month, the European Economic Community created the European Currency Unit, the precursor to the euro.
The ECU (an acronym pronounced “écu”) was legal tender, but not in the form of paper currency and coins that could be used to buy a croissant. Rather, it was a single-denomination bookkeeping artifice, backed by a portfolio of currencies whose exchange rates were stabilized by an imposed limit on how much they could fluctuate. Together, these devices made it easier to conduct international financial transactions. They constituted the kind of careful, deliberate, steady-as-you-go approach Monnet favored.
Three months later, citizens of the nine member states of the E.E.C. went to the polls for history’s first truly international parliamentary election. The European Parliament, based in Strasbourg, France, was initially a consultative body that offered nonbinding opinions on proposals from the European Commission, the executive branch of what was then called the European Community.
Europe was laying the foundation for a common monetary system and a representative legislature — two prerequisites for the federalized Europe that Monnet hoped would eventually evolve. But in each case, progress toward that ultimate goal was counterbalanced — and, to a degree, inhibited — by the still powerful instinct to protect the sovereignty of the nation state. And in the realm of fiscal policy, there was no proto-European finance ministry — an institution of the sort that Monnet believed was crucial to successful integration.
The Maastricht Treaty of 1992 gave the European Community, which by then had 12 members, a new name, the European Union. It also added to the common market and parliament two new “pillars”: a coordinated foreign policy (a proto-ministry of foreign affairs) and judicial cooperation (a proto-ministry of justice).
On New Year’s Day 1999, the process of introducing the single currency began. The European Union’s leaders felt that moving forward with the euro would act as an incentive to grant the European Central Bank, established in 1998, more authority over monetary policy. It was often said that the monetary union would be a locomotive that would pull Europe toward an ever more perfect political union.
Exactly three years later, euro bank notes and coins began to replace Deutsche marks, francs, lire, pesetas, drachmas and other currencies of the 11 member states that accepted the new currency. (Britain and Denmark negotiated formal opt-outs, and Sweden, through a series of parliamentary maneuvers, has so far avoided joining.)
The euro zone thrived as long as its southern tier — despite gargantuan public deficits in countries like Greece and real-estate bubbles in Spain and elsewhere — was buoyed by a rising tide of global growth and a huge influx of German capital.
The leaders recognized that a common currency without fiscal coordination could backfire if the European economy went into a tailspin and bubbles started to burst. They enacted a Stability and Growth Pact in the late 1990s to ensure that all members of the euro zone were committed to limiting budget deficits. But the pact was never fully enforced. Nor was there any sense of urgency about bolstering the E.C.B. Good times continued to roll, reinforcing the illusion that there was no need to prepare for a major downturn.
There is no doubt about how Monnet would have reacted to the financial upheaval on Wall Street in 2008. Unapologetic Americophile that he was, he was also a believer in sound, transparent business practices. He would have had a tart thing or two to say about the complex, opaque financial schemes that — abetted by the shortcomings of government regulation — toppled major financial institutions, impoverished clients, wreaked havoc on the economy at large and sent a tsunami across the Atlantic.
Because Maastricht had failed to give the E.C.B. regulatory powers to address sudden and crippling pressure on the banking system, there were few mechanisms to stanch the spreading damage. In the depths of the crisis, in 2011 and 2012, serious figures on both sides of the Atlantic urged a wholesale, or at least partial, disbanding of the euro zone.
The prevailing view, however, was that the euro zone would have to hang together. Expulsions and defections were out of the question. It would do no good to lament the introduction of the euro. Hasty as that decision was, the name of the game now must be stabilizing and strengthening monetary union; to give up on it would be to give up on union itself.
Europe still lacks the type of transnational finance ministry Monnet would have advocated, but it is developing some of the functions of one through existing institutions. In particular, the European Commission and the European Central Bank, along with the International Monetary Fund, are empowered to require, monitor and enforce the fiscal responsibility of national governments.
In 2011, the E.C.B. reduced its buying of Italian bonds. This led to the fracture of Silvio Berlusconi’s coalition, forcing the transcendently irresponsible prime minister out of office. The ability of the central bank to, in effect, fire a sitting head of government rebuts the gripe that the European Union is hobbled by a lack of clout.
The euro zone may, over time, find ways to replicate the American government’s reliance on the Federal Reserve and the Treasury to back the dollar, while the larger European Union maintains and deepens the common market, even as it develops shared defense and security policies.
The progression toward a United States of Europe was the real Monnet Plan. Now that Europe has learned the hard way that it needs to follow the Monnet Method of bolstering integration with institutions, the plan may be back on track.
Strobe Talbott was deputy secretary of state from 1994 to 2001, under President Bill Clinton. This article is adapted from The Brookings Essay, a series published by the Brookings Institution, of which Mr. Talbott is the president.