Demographic reversal will erode France’s capacity to underwrite franc zone currencies

Evidence

In the context of the transition to the euro, the European Economic and Monetary Union (EMU) became the only competent authority in matters of monetary and exchange rate policy. From a legal point of view, its members would no longer be able to seal monetary cooperation agreements or exchange rate agreements with third countries. In the legal language of the European institutions, ‘monetary cooperation’ agreements allow third countries to use the euro as their official currency, such as the European Union’s agreements with the Principality of Monaco, the Vatican State and the Republic of San Marino, while ‘exchange rate cooperation’ agreements refer to the pegging of the currencies of third countries to the euro. Presumably, the agreements between France and the African countries of the franc zone fell into the latter category. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 223 (#complicates, via linked claim)

Firstly, there is the question of the effects of the changes in the external value of the euro. An appreciation of the euro – that is, an increase in its external value – entails, for the countries of the franc zone, a reduction in the price competitiveness of their manufactured goods and of the equivalent in CFA francs of their export proceeds in dollars. At the same time, it makes their imports cheaper and reduces the weight of their debt in dollars. As a result, it hinders exports and favours imports, which contributes to a deterioration of the trade balance. Since its creation, the euro has often appreciated against the dollar, simultaneously causing an appreciation of CFA francs against the dollar: between October 2000 and mid-July 2008, the euro has cumulatively appreciated by almost 94 per cent against the dollar, according to ECB data. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 299 (#complicates, via linked claim)

Categorization

• XREF: connects to: Demographic reversal will erode France’s capacity to back the CFA currencies — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 337; Threatening to leave the franc zone could extract French aid; Euro pegging diverts trade toward France and blocks local industrialization. (+3 more)

Related

• Euro appreciation deteriorates franc zone trade balances (similarity 0.89)
• Demographic reversal will erode France’s capacity to back the CFA currencies (similarity 0.87)
• Euro pegging diverts trade toward France and blocks local industrialization. (similarity 0.85)
• Franc zone growth is uneven and often strongly negative (similarity 0.83)
• EMU law forced France’s CFA agreements into the exchange-rate cooperation category (similarity 0.82)
• Four structural handicaps explain the franc zone’s poor socioeconomic performance (similarity 0.82)
• EMU’s creation transferred monetary authority making France legally unable to renegotiate the franc zone (similarity 0.82)
• Eurozone membership merged CFA extraction with neoliberal austerity, worsening African prospects. (similarity 0.82)
• Devaluation and revaluation simply shift the fixed CFA-euro parity (similarity 0.81)
• France’s strong-franc policy transmitted its appreciation shock to the CFA zone (similarity 0.81)
• Euro appreciation against the dollar penalizes franc zone cotton exporters twice (similarity 0.81)
• The 1994 devaluation capped decades of Paris refusing to adjust the overvalued CFA franc (similarity 0.81)
• The same strong euro that hurts France devastates African export competitiveness (similarity 0.81)
• Portugal replicated France’s currency cooperation model with Cabo Verde. (similarity 0.80)
• The devaluation doubled France’s financial capacity in CFA francs overnight. (similarity 0.80)

Broader Connections

• EMU’s creation transferred monetary authority making France legally unable to renegotiate the franc zone #complicates (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 223
• Euro appreciation deteriorates franc zone trade balances #complicates (0.50) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 299
• Franc zone growth is uneven and often strongly negative #complicates (0.40)