Why the Euro failed

https://qz.com/1377098/why-the-euro-failed/

by jajag • 8 years ago

11 18 8 years ago

The article assumes that the Euro has failed and goes on from there. I would like to see what realistic scenario could have produced the implied Utopian vision the author implies is the only criteria for success.

twblalock2• 8 years ago

The Euro didn't fail. It has flaws (as did many European currencies that existed before the Euro), but no EU member state has abandoned it, because the upsides outweigh the downsides and the costs of leaving would be enormous. Even Greece didn't do that, although they did come close.

jajag• 8 years ago

The Euro has failed to generate the promised economic growth. Average GDP growth for the Eurozone since the Euro's adoption is a bit above 20%. The UK has managed double that since it opted to stay out, and other non-Eurozone EU members have done even better. As addressed in the article, the Euro has also failed to promote closer political unity - see what happened during the Greek crises, or what is happening currently in Italy.

NicoJuicy3• 8 years ago

I'm holding you on your UK quote, they had a lot of more advantages playing with their own rulebook. I'm wondering what that will bring without the EU

zeristor• 8 years ago

Wasn't this mostly down to pound plummeting in value.

The UK can devalue its currency every time it needs a GDP growth spurt.

Just like Italy used to do.

ackidacki4• 8 years ago

Europe's most successful countries are the ones with their own currencies. It's easy to compare the differences in growth and debt with those in and out of the EZ. Ireland is the only true exception & it's for reasons relating to its tax policies.

twblalock2• 8 years ago

What's your standard of success? Germany has the largest GDP in Europe by about a trillion dollars and uses the Euro.

NicoJuicy3• 8 years ago

? They were some stronger countries that wanted to play by their own rules. It's always like that unfortunately

But don't over exaggerate, we are just about to see the story when one tries to play on their own without the EU. I think it's going to be the first true example of "what happens"

Theodores• 8 years ago

There is some baby and bathwater going on here. An assumption that everything to do with the Euro is bad and an assumption that everything bad is to do with the Euro.

For some people in Europe the Euro was a bit like when decimalisation happened in the UK - suddenly everything in every shop was marked up to be that bit more expensive. But people got over that, much like how people got over decimalisation in the UK, nobody wishes for 'pounds, shillings and pence' any more.

Trade is so much easier in Europe without the funny little currencies that there used to be. You don't get fleeced by people exchanging money from Lira to Francs to Deutschmarks to Irish Pounds and so forth. This helps the little guy as well as normal sized businesses.

In the pre-Euro days it was a regular thing to read stories about how places like Italy had shaved a few zeroes off their Lira due to hyperinflation. We don't have those stories now. I think the Euro has something to do with that. At least everyone in Europe has a currency that is worth something, before then half the European currencies were as useful as Monopoly money or crypto-ponzi-tokens.

There was also a lot of speculation on currencies in the pre-Euro days. Effectively 'pump and dump' schemes, some capitalist fat cats would get bored and pick on a currency to destroy. The only way to control this is to have restrictions on how much money people could travel with, so in pre-Euro days you might find yourself off on holiday to Greece or somewhere and not be able to take much more than pocket money with you.

History is generally written by people with an agenda who don't specifically lie to make their point (sell more books), instead they lie by omission. The Euro was not some dastardly neo-liberal scheme to economically colonise places like Greece and make things difficult for the German taxpayer. Saying so in fake academic b.s.-speak does not make it so. Europe has difficulties with things like Brexit, there is no need for reject 'scholars' from the IMF who aren't even European to stir people up into nationalistic fervour.

What next? An 'academic' who knows nothing about America could sell books on how the dollar has been a failed experiment and how the U.S. needs to have separate currencies per state. Sounds great, don't see why those nice folks in California should be bailing out those dossers in Detroit, right?

How well would business work inside the U.S. if you needed to change your New Mexico Pesos into Arizonan Pobble Beads each time you ventured out from Albuquerque for a day trip to the Grand Canyon? What if you only had Wyoming Whuffies and the stall at the inter-state border took 10% commission and claimed they only exchanged at a fraction of what you bought them for the day before?

That would make no sense at all, neither would it make any sense to have the Eurozone broken up into lots of currencies that can be played by the stock markets of London and New York for speculative gain.

nopriorarrests• 8 years ago

In the pre-Euro days it was a regular thing to read stories about how places like Italy had shaved a few zeroes off their Lira due to hyperinflation.
We don't have those stories now. I think the Euro has something to do with that.

Yes, but it's not like Italian budget magically turned to proficit because of euro adoption. It still contains deficit, the one which EU is not happy about, and they are currently fighting with Italy. Maybe if lira was still italian currency, Italy devalued it a bit and that would be the end of the story.

Instead, there is a eurozone-wide problem of how to deal with populist italian government, and the cost of this problem is... €2.1 trillion (that's the amount of italian debt).

So, the problem was not resolved. It just was shifted into the future, with unclear implications.

chronid• 8 years ago

Well, I see forcing member states to be fiscally responsible (Italy's current expenditures - after removing debt/interest repayments - are curiously forever increasing even under the worst "austerity") something a union should do. The problem is the Euro is not enough to do so.

Devaluation won't fix Italy's problems in the long term, it just shifts them into the future. The devaluations of the lira in the last ~30 years of the last century and the flattening economic growth in the '90s are there to prove it. You cannot keep drugging your economy forever, you'll pay for it in the end.

doe88• 8 years ago

The death/failure of € is greatly exaggerated.

kyriakos• 8 years ago

aside from the economic issues which I believe are exaggerated, being able to travel around EU and not caring about exchange rates etc is really nice. moreover I order from online shops around europe and the only time I need to mentally convert prices is for amazon.co.uk.

Why the Euro failed

Related Stories