A Sea of Hope

Dad, you were right

The structural foundations of the eurozone project were indeed flawed and the current crisis is forcing leaders to correct them

By Gillian Tett

Sixteen years ago, my father  took me out for dinner at the Bar Jacques restaurant in Val d’Isère, a French ski resort. Back then, in 1996, I was working as a (relatively new) economics correspondent for the Financial Times, covering the preparations for the euro. And as I analysed the technicalities of that euro-tale, I was becoming consumed with a sense of historical drama – and excitement about the project.

My father, however, took a radically different view: as he listened to me describe how the euro would transform Europe, he repeatedly and grumpily shook his head. “It won’t work,” he muttered, pointing out the problem of running monetary policy without fiscal union. “It just doesn’t make sense.”

I vehemently disagreed. So much so, that as the red wine flowed and the fondue bubbled, we had an explosive, blazing row which lasted even as we later tramped out into the snow, and has gone into family lore. But now, with the benefit of hindsight – and a little more maturity – it is time for me to utter the words I never thought I’d say: “Dad, you were right, and I was wrong!” Never mind all those dreamers who assumed the challenges in the eurozone project would somehow evaporate; or those naive young journalists (like me) who were dazzled by the hype. What is crystal clear today is that the structural foundations of the eurozone project, back when we argued that night in Bar Jacques, were indeed flawed.

This does not in itself automatically mean that the euro is doomed. On the contrary, if you want to be optimistic, it is possible to argue that the current crisis is finally – belatedly – forcing the eurozone leaders to recognise these structural flaws and correct them. At least that has been the argument advanced to me by leaders on both sides of the Atlantic in recent weeks. “Europe is addicted to crisis – that is how the political economy works,” one senior eurozone official says. “But the direction of reform is clear. The euro will survive.”

But even if you believe this argument – and it is a big “if” – what is also clear is that my father was entirely correct to be cynical in the face of my optimism. So the question I keep asking myself today is, why did so many people (like me) get swept along by the hype – while others (like my Dad) did not? Why was his cynicism a minority view, in a sea of hope?

One easy explanation, perhaps, might be our relative ages. By the time we had our argument in Val d’Isère, my father was 58 and had lived through numerous economic cycles. I had only worked as an economic journalist for a few years. I had never stared a recession deep enough in the face to become truly wary, rather like those young mortgage traders who stoked up the subprime boom a decade ago. 

Then there was the nature of my father’s career. Although he was a brilliant student of economics in the US and UK, he did not go to work in the City or on Wall Street; instead, he headed for the distinctly unglamorous world of British manufacturing, working mostly in midsized companies. So instead of worrying about complex financial products or public policy rhetoric, my father has spent his life thinking about making widgets, such as fire detection equipment. 

In that earthy world, there is little place for punditry or wishful thinking: either your sums (and widgets) add up, or they do not. Stock rooms cannot be conjured up by rhetoric alone. Little wonder, then, that my father considered it madness to run a single monetary policy without free labour flows or fiscal union. If the eurozone was a business plan, in his eyes it simply did not add up.

There was also a more subtle factor. Precisely because my father worked in the (then relatively unfashionable) manufacturing world, he was less subsumed by fashionable policy group-think. By 1996, as the financier George Soros says (quoting the psychoanalyst David Tuckett), the euro had become a “fantastic object”: it was unreal but immensely attractive. Or to put it another way, political idealism had subsumed economic gravity. My father, outside the intellectual echo chamber of the eurozone elite, was never infected by the hype. 

So what are the lessons? One is that it shows the value of retaining older people – or at least, a diversity of life experience – in the workforce. If nothing else, a range of ages helps guard against group-think. Another moral is that it shows the value of having some people from “real” businesses sitting in the corridors of power: handling widgets or running small companies is a good reality check. But perhaps the biggest lesson of all, which journalists, financiers and politicians should all have posted up on their desks, is how wrong we can sometimes be, especially when we are excited by a “cause”. Someday I hope to take my father back to Bar Jacques to tell him that. And who knows? By then I may even need to pay the bill in French francs.