(by Massimiliano D'Elia) Donato Masciandaro on Il Sole24Ore makes real pindaric flights between the CFA (African Franc) and the Euro, trying to make it clear that the need to create a currency in the former French colonies and anchor it to a stable currency, the euro, with a guarantee from the French Treasury, was a requirement of stability in countries, those of the former transalpine colonies, with a very high risk of flammability. Today, therefore, given that it is necessary to anchor a weak currency to a stronger and more stable one, why not put the ECB and no longer the French Treasury as a guarantee for the CFA? This was the request made several times by Chancellor Angela Merkel herself to President Macron who has always avoided delving into the subject with evident "nonchalance".
As Masciandro argues, the African franc and the euro have done their primary function of ensuring stability well, keeping national governments away from monetary policy. Monetary policy is an extraordinarily effective economic policy tool in hiding the real analysis of the costs and benefits of any public intervention. Being a debt that can be produced immediately at no cost, with costs that will instead emerge later and affect citizens unequally, money is a perfect tool for those who can have an electoral or ideological objective.
In the same way, the euro worked, which in 19 European countries removed the protection of monetary stability from the uncertainty and instability of management by national governments, assigning the related mandate to an independent central bank, the ECB.
In parallel, the experience of the CFA is that of 15 African countries that share a monetary regime with three main common properties:
- they linked the exchange of their own currency to the euro;
- the credibility of this link is guaranteed by the French Ministry of the Treasury;
- tax policies may have to meet criteria that are compatible with maintaining the credibility of the exchange rate.
This economic action defended the weakest strata of the population from the risks of inflationary or financial bubbles, increased trade, and therefore economic growth. The perceived costs have also been specular: the inefficient or opportunistic political classes that fail to draw the appropriate economic policies to face the economic cycle end up lamenting the so-called loss of monetary sovereignty.
Finally, the two monetary regimes are intertwined, Masciandaro argues. The CFA is an example of hybrid "eurization": the currency is credible because it is pegged to a stable currency. Today the guarantor is the French Ministry of Economy and in economic terms, there is an expected cost, corresponding to the risk of having to guarantee all the potentially convertible monetary liabilities.
The desired transalpine benefit should be to increase trade with France. The estimates available so far tell us that both expected costs and benefits are not relevant, compared to the size of the French economy.
Why not think of a complete "eurization" of the CFA? The guarantor of the convertibility should become, therefore, the ECB: it would be a wonderful step forward that would give the lost impulse to the Europeanist feeling of the EU countries that, day after day, is dispersing in inappropriate electoral "quarrels".
If France really wanted to prove its "good faith", it would have to pass the ball to the ECB. Time is running out and this move would give an incredible blow to the accusations, often out of line, of some members of the M5S.
What is certain is that another small international problem would arise: why not put the CFA under the Dollar, Ruble, or Yuan?