It’s hard to believe the infamous euro was born only 13 years ago. Considering how dependent an entire continent is on one currency, it’s hard to see it fail. And by fail, I mean suffer. And by suffer, I mean a lot.
The current stagnant economic state of Europe is a difficult thing to swallow. Especially since most of the world’s economic future relies on the survival of the European economy. Now, while the euro continues to make headlines, many people are cognizant of CFA.
CFA, or the African Financial Community, is the common currency used in 14 countries: 12 formerly French-ruled countries, Guinea-Bissau and Equatorial Guinea. This common currency was created in 1945 in direct response to the declining value of the French franc after WWII. The CFA was then adopted in the African countries in hope that it would spare the countries’ devaluation. France hoped this currency would encourage and facilitate trade in French-African ports.
Why am I suddenly talking about some sub-Saharan currency that no one has heard anything about? Simple — it’s a possible solution to the current economic problem. However, actually adopting a currency like the CFA is a dream, but it’s a nice daydream, considering how successful of a reality it’s been in central Africa. But maybe Europe and the world could take a few pointers from the obscure CFA.
This single currency system, which keeps inflation low and preserves investor confidence, has experienced some real economic growth in recent years. Even in the face of some serious economic hardballs, the CFA has remained relatively intact. Factor in that some of the countries using the CFA are among the poorest in the nation, it seems like this little unknown currency might just be the little engine that could. Not to mention the political instability in Central Africa — I mean, can we give this currency a round of applause?
Through recent economic problems and turbulent political affairs, the CFA has remained prosperous. The projected economic growth for 2012 for the [Central is 4.6 percent in the African bloc and for 6.4 percent the Western African bloc)](http://www.bbc.co.uk/news/world-africa-19743551).
Europe could live and learn from CFA. But, seriously — the CFA functions in the face of political uncertainty because of the shield it creates around the management of the currency from power of national politics and affairs. The ability to separate money from the government could have come in handy. Right, Greece?
Yet to closely compare and interchange the CFA and the euro is unfair. Africa and Europe are two very different places and the fact of the matter is that Europe simply does not have the ability or the luxury to adopt a currency system similar to the CFA. Africa’s strict and relatively closed-lipped politics differ greatly from the open parliamentary governments in Europe. Remember, Africa’s power in the different governments still runs top to bottom, while Europe faces much more economic scrutiny and pressure from the media and the public. The divide is too great. Trying to jump this chasm would just end poorly.
But let me let you in on a little secret. The CFA franc is hooked to the euro at a fixed rate. That being said, the euro could and has suffered some serious economic trouble, but the CFA doesn’t feel it because of this fixed rate. While different markets are punishing EU governments, the CFA hasn’t experienced any economic plunge. Sounds nice, right?
Another reason the CFA works in Africa and probably wouldn’t in Europe is because of the close link between the administrative elite. These members of the upper class all have the same general background, education and viewpoints. Try mixing something like that into the culturally diverse Europe, and you’ll only be left with water and oil.
It’s wishful thinking that Europe could adopt a similar system as the CFA; the reason the CFA works is geography. It works in sub-Sahara Africa because of its early history with French colonial rule and the fixed rate. It works because most of Africa’s wealth is controlled by a small number of hands, and it works because African governments are not scrutinized as much as they are in Europe.
So do I believe that Europe can revolutionize the euro to emulate the CFA? No. But do I believe that because of the devaluation of the euro that Europe should be looking for advice? Absolutely. Just thinking, “I think I can,” isn’t going to get the EU out of this economic problem. It’s time to put aside pride and look for some advice elsewhere. Until then, Europe, keep chugging along.