How The Fall Of The Berlin Wall 25 Years Ago Caused The Euro Crisis
But what many people don't know is that as the Soviet Union lost control over East Germany, a series of political events dramatically accelerated the construction of the euro.
Records held by the Margaret Thatcher Foundation show just how rattled other European leaders were. Below is a memorandum of a conversation between Thatcher and French President Francois Mitterrand, produced by British government staff:
These attitudes seem astonishing in hindsight. We now think of the collapse of communism as a joyful occasion, but the French president genuinely thought it could spark off another war with Germany.
In the end, Mitterrand realised that reunification was not really optional, but that the quick integration of Germany into a shared monetary system would blunt any lingering nationalism that a large, strong Germany might have.
West German chancellor Helmut Kohl had been dragging his feet on negotiations for what was then the European Monetary Union, the precursor to the eurozone.
David Marsh, a former FT correspondent, believes they were close to collapse in his book, "The Euro: The Battle for the new Global Currency". He writes: "strains over German and European unity between Kohl and Mitterrand nearly reached breaking point in autumn 1989."
France's acceptance of reunification happened in exchange for the speedier adoption of a single currency. Here's what Hubert Vedrine, one of Mitterrand's policy advisers, said about the negotiations 10 years later:
Peter Caldwell and Robert Shandley's book on German reunification says that, at the very least, the fall of the wall hugely accelerated the euro's development:
And that's basically what happened. The Bundesbank, more than any other monetary authority in Europe, built the culture of the new European Central Bank. That's part of the reason that the ECB is now behind the curve seemingly all the time. In 1998, future German chancellor Gerhard Schroeder said bringing in the euro too quickly would cause it to resemble a "sickly, premature baby". And when the crisis came, it did.
Without the fall of the Berlin wall, West Germany may not have ever consented to the EMU (or the eurozone). The project would have got underway much later, and taken a much longer period of time, or never happened at all.