The Euro: How a Common Currency Threatens the Future of Europe

 Professor Stiglitz writes what we all know now, that the Euro was flawed from the first day. His claim is that the single currency was designed to prevent inflation, but not to promote growth. He also portrays the Euro as being blind to economic diversity; the economies of France, Ireland, Italy, Germany and Greece are far different. They all have different  economies, and their taxation policies are all different from each other. But the big question is, why was the crisis not foreseen?

    Way back in 2005, a Greek-American colleague lamented the days when she could visit Greece. Thanks to Greece going on the Euro, the costs had all gone up. Couple that with a weak dollar, and US currency wouldn’t get you anywhere in Greece anymore. If US tourists were staying away, and money sent home by Greeks living abroad wasn’t worth as much, then Greece would’ve lost its revenue. What use was the Euro now?

    Stiglitz’ research has found some things with regard to the Euro that I find a little disturbing. Greece was forced to change its food quality laws with regard to milk so that Dutch milk could be sold in Greece and compete with the local. It didn’t lower the price of milk, because the Dutch wanted top dollar. What it did was force out the Greek dairymen, because it couldn’t be called “local” anymore. In Greece, only local was called “fresh,” but the new rules said that Dutch milk had to be allowed that label, even if it wasn’t fresh at all. Lowering the price of Greek milk wasn’t feasible. The Dutch got the benefits, and the Greeks got the bills.

    My problem is the conclusion to his book. His plan for the Eurozone works, but it seems to advocate for a central European bank and regulation system. I don’t see this as being much different from what started the crisis in the first place, seeing as the Euro was governing the whole of Europe, with no regard to each nation’s credit. If Europe has a central currency system, will each nation have to prove itself in order to get loans? What about Greece’ existing debts? Will the German voters agree?

    I think of the Euro in terms of an IPO; you don’t let a company go public unless you know what it has to sell, otherwise you’ll end up with another Facebook or Martha Stewart on your hands. Both of these corporations owned nothing, they were just services, and that’s why the stock price plunged. So why would Europe want a single currency if the Greeks couldn’t be trusted to pay their taxes? I guess it was Greece that turned out the be the biggest problem in the Euro.

    The US once had a similar problem to the Eurozone. Congress wanted the Federal government to assume all remaining debts from the Revolution, and the south refused because they’d already paid off their debts. The solution; in exchange for the south agreeing to nationalizing the debt, the nation’s capital would be in the south. Alexander Hamilton had to “throw them a bone,” because no country wants to assume debt.

   Not that the south got much of a bargain either. Washington DC was built on a swamp!