A reader recently sent me this question:
Is the Euro something good for Europe that all countries should be willing to adopt? Or is it a bad idea that takes away from the individual power of each country?
I realize that this is a subject that is constantly on the news. We hear about the economic problems of Europe every day now. However, many people aren’t sure what to think about any of it. Here’s my take – a brief summary and overview of the problems with the Euro. This is by no means close to comprehensive, but it should be a good starting point for you to research further.
When the Euro was first formed, it was a revolutionary idea because it would bring unity, price stability, and more trade and tourism. The problem is, printing a uniform currency doesn’t really unify people based on their lifestyles, thoughts, histories, prejudices, etc.
For example, someone could argue that the states in the US are more united because we have a uniform federal currency. Although this is true, if we took away the powerful federal government but still printed the US dollar, we would lose much of our unity. States would make vastly different laws and operate under different procedures, and cultural differences would be significantly magnified. So although a united currency can “contribute” to unity, a united government contributes a lot more.
“For noble reasons, perhaps, the euro’s founding fathers created a federal currency before creating a federal state to back it. Like Victor Frankenstein, they defied nature and created a monster.”
This quote from an article in the Economist sums it up pretty well. Union economically must be backed by a strong union politically. The “easy” solution would therefore seem to be, “Unite the Eurozone more! Make a central government!” The fact is, however, that Europeans don’t want this for obvious reasons. Italians are VERY different from Spanish, French are VERY different from Germans, etc. They don’t want one big conglomerate super-country. They want to keep their heritage. Elections and banking decisions are still made nationally. This means that regardless of whether we think a politically united Eurozone is good or bad, it won’t change anytime soon.
Additionally, each country has its own inflation rates and monetary problems. Greece started off joining the Euro late, because it wasn’t good enough to meet the financial requirements. So when Greece now goes horribly into debt, its GDP plummets, and the unemployment rate shoots to 25% (as compared to around 11% for the Eurozone as a whole), other countries are much less sympathetic to give their money. Especially when Greek political parties promise to not cut spending and instead ask for bailouts. Citizens of other European countries aren’t happy to support helping those in other countries when their own economies are struggling too.
I think it’s less that “the elite are losing wealth under the Euro system” and more that everyone is losing wealth under the Euro system. Over 50% of young people are unemployed, a quarter of all people are unemployed. Government employees’ pensions and salaries are being drastically cut. That includes school teachers. Social services are in a state of disaster. Their debt is enormous. Their economy has been decreasing by around 6 percent. The suicide rate has almost doubled. Greece has been close to being cut off from gas and electricity, simply because they can’t pay bills. They’ve had riots and a general sense of despair. What makes it worse is that Greece is limited in its powers to affect its currency. It instead has to beg for bailouts from the European Central Bank, which just increases the feelings of helplessness.
Here’s an interesting graph from The Economist you may want to see. Hope this is a good starting point for you to continue your research!