The Finance Minister last week went public saying that Kenya is still behind the move to get East Africa a common currency, according to a report here. The debate on the ground was livid, has the Finance Minister not seen what is happening in Europe? Can he not understand why we can’t just follow in the footsteps of a failing plan? I mean, Spain is now at an unemployment rate of 24.6 according to Google’s data. With Kenya at around 40%as per the last poll, we could be much worse for wear after a recession; we have barely picked ourselves up and beaten off the dirt after 2007/2008 PEV.
I beg to differ.
Back in 1997 the countries in Europe were pretty much at the same stage with the Euro that we are with the, well, whatever it will be called. At this point they set some strict rules that were to control this currency that was to be introduced in 1999 and usher Europe into the new millennium as the giants to the world. Germany, the largest economy in Europe at the time was at +2.1% GDP annual growth and demanded that, among other rules, the countries stick to limiting their total borrowing to 3%, and they all said yes, we will do that.
In 2003 Germany had to fix the damage that was done to the Berlin wall and exceeded this 3% limit. France, which also had some pull in the eurozone back then had also exceeded the limit that year, probably on developing a new type of smelly cheese. Italian Prime minister Romano Prodi went to complain but the vote let him off the hook and a precedent was set, things were bad. Italy got angry and started breaking it regularly. Greece started manipulating figures, Spain joined the bandwagon and it was all downhill from there. Come 2012 everyone is in debt. Everyone that is, except Germany. By limiting the private sector debt Germany has managed to keep itself out of the mess and stand at +0.5%, which is not bad for a nation which has had to bail out a couple of others in the process.
Bringing It Home
The Euro itself was not a bad thing, it still stands as one of the strongest currencies in the world, it was the breaking of rules that brought Europe’s downfall. Even with that in mind Kenya, standing at +0.7% GDP growth is the largest economy in East Africa and the 11th Largest in Africa and could easily stand to gain from the common currency even if the rules are broken. The open borders and easy trading will grow the industrial sector without necessarily breaking the back of the economy (companies in Germany are doing well despite the crisis, in fact some are even thriving). So I say bring on the common currency, it’s the common government that worries me, but that’s a whole other can of worms.