For the first time, an official French report has criticised the Euro. The latest report of the Council for Economic Analysis (CAE) given to the French government on 23 March, “Economic policy and Growth in Europe,” written by Philippe Aghion, Élie Cohen and Jean Pisani-Ferry, draws up a really tough assessment on the single currency and the actions of the Euro zone. This evolution of official speech – at least of speech officially published – regarding to Euro is important.

The introduction sets the tone: “Economic Europe disappoints, the Commission and the European Council never failed to promise that integration and reforms would solve the economic languor of the continent. [...] Because they said that monetary stability was going to create the conditions of growth that in the 1990s, Europeans agreed to the up front sacrifices to settle Euro.”

Thereafter, this Report raises questions on the disappointments generated by the single currency:
“Why has the single market and the Euro failed, or apparently failed to bring about the expected benefits?” (p. 24)
“We were waiting to see European integration stimulated by the Single market and creation of the Euro. At this stage, we have to note the weakness of these effects.” (p. 47)

Moreover, the Report underlines the reduction in internal European trade between the Eurozone economies since 2002, and the absence of any convergence in prices, despite of promises made at the time of the introduction of the single currency.
“Nothing confirms the hypothesis of an intensification of the integration created by the introduction of the single currency.” (p. 48)
“Neither the single market nor euro have provided a decisive impulse.” (p. 50)

On page 128, the conclusion is clear in the title: “The Euro has not been a factor of revival.” “Europeans and in particular the French have waited for results related to efforts they have made on its [the Euro's] behalf. [...] The Euro did not produce the expected effects” specifies this paragraph.

This report I believe is the first concrete evidence of a slow dawning of official criticism of the Euro in France: “It’s not obvious that the [single market] implies the single currency. It is enough to remember that Krugman (1993) suggested the possibility of a vicious circle between real integration and monetary integration.” (p. 36)

Interesting times, particularly when compared with the large piece in yesterday's Daily Telegraph where Ambrose Evans-Pritchard picks up on an answer from the responsible Joaquin Almunia, the EU’s monetary affairs commissioner, who “told a group of City bankers and fund managers that the markets were ‘not properly pricing the risk’ of Italian sovereign debt. He also raised concerns about Greek debt. […] The spread between German and Italian 10-year bonds has already jumped from 20 to 31 basis points in recent days as rising global interest rates make investors more sensitive to risk. […] Mr Almunia said the spreads may widen further to reflect the default risk in Italy, which has the world’s third biggest stock of public debt after Japan and the United States.”

This comment was in response to a question from UKIP MEP Dr John Whittaker who replied, “This is surely a signal for the markets to sell, [...] I find it extraordinary that the EU’s chief official of monetary affairs, somebody who knows the inner working of the system, should say such things. It’s like a central banker saying his own currency is overvalued.”

Quite, or ooops.