The Austrian Defense of the Euro in Light of Luigi Einaudi’s Quest for Sound Money

Abstract

The European project which took hold in the aftermath of World War II set out to provide a framework that would guarantee peace among the European nations. At the core of this initiative was the establishment of a sound international monetary system. The latter, in fact, was considered crucial for peace, in so far as it guaranteed an effective free-trade area in which both households and firms could conduct their activities with the greatest possible certainty and trust in the general medium of exchange. A key figure in this regard was Luigi Einaudi. Considered to have been a grandfather of Europe, Einaudi was a close affiliate of the Austrian School, both on a personal and intellectual level, as one can see from analyzing his views on inflation, the gold standard and European economic and monetary integration. Aware that the chief cause of inflation throughout history was the monetization of public debt, Einaudi defended the single currency as a step away from monetary nationalism, thus anticipating the arguments presented by Huerta de Soto in An Austrian Defense of the Euro. Taking a step back to look at his framework allows us on the one hand to appreciate the historicity of the “Austrian” defense of the euro and on the other to evaluate the dangers of fiat monetary integration, especially considering its most recent evolutions.