The birth of the single currency in 1999 was a triumph for European integrationists whose vision had prevailed over nationalist naysayers. A monetary union that seemed fanciful a few years earlier as foreign-exchange markets cracked open its predecessor, the European exchange-rate mechanism, had become reality. On 1 January, the founder states, which included the four big economies of Germany, France, Italy and Spain, locked their exchange rates irrevocably against one another. Even though it would take three years until euro notes and coins replaced national money in circulation, at the start of 2002, the ECB based in Frankfurt now set interest rates for the whole of the euro area, affecting over 290 million people living in the eleven countries sharing a common currency.

But the euro was a premature birth (as Gerhard Schröder presciently observed before he became German chancellor in 1998) because it was engendered by old national fears rather than new European hopes. Politics trumped economics in the rush to curb the power of a unified Germany by creating a European currency. The compromises involved in the project meant that the design was inherently flawed. Instead of a monetary union crowning the creation of a single European state whose citizens identified themselves as European first and foremost rather than clinging to their national identities, the euro would leave the nation states in place and be run by a supranational institution, the ECB. Even though the members of the currency union were to lose national monetary sovereignty, they were to preserve their power over broader economic policies while retaining their fiscal autonomy.

As well as failing to comply with the traditional alignment between money and power, the euro did not meet the minimum economic conditions needed for a common currency to work properly. In the decades before its birth, economists had devoted much thought to specifying these requirements. Judged by the criteria they had set, the design of the euro was flawed, in particular through the retention of full national fiscal sovereignty while sharing a single money. Even so, the original template might have been workable if confined to a select band of highly developed and closely integrated northern economies.