Essay on Macroeconomic flaws in the Euro

Essay on Macroeconomic flaws in the Euro

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Fundamental Macroeconomic Flaws in the Euro


Five years ago, the biggest thing in economic and international news was the introduction of the new European currency, the Euro, into circulation and into the pockets of the consumers of the participating countries within the European Monetary Union. In an attempt to unite Europe and to form a dominant currency to rival the US dollar, Europe locked their exchange rates and went full steam with this plan. Unfortunately, for many of the European countries, what seemed to be the end all for European economics, quickly unraveled the inherent reality of the fundamental macroeconomic flaws in the European monetary system that may cause its downfall and deficit policy that could lead to its utter collapse. Even with this in mind, some speculate that, with the right amount of revision and monitoring, the Euro might actually have a chance of becoming the worlds leading currency. In any cases, however, before looking this far into the future, we must first remember the past.

For decades, Europe and all of the countries within its continental borders have disagreed, argued, and on many occasions, fought wars over disputing issues, differing cultures, and the occasional expansionist fascist. From WWII, to the Russian uprising, Europe has been separated by years of wars and hatred. And despite attempts, it is this reason, among many, which has hindered the coming together and agreeing upon many common goals needed for Europe to grow and thrive as an economic contender.

Since these post war years, Europe has seen many steps taken to unify Europe. We have seen the formation of the European Union which has been a crucial step and huge driving force in the thought process behind the Euro itself and many more pieces of legislation and plans for future European monetary policy.

“One of the unique characteristics of Europe that make it different from any other region in the world is the extreme political fragmentation that has existed and the diversity of its population. People that travel Europe can be amazed by the fact that every few hours they can enter into a new country with a different language and culture”. (Soto)

Despite these differences, the European Union came together in the 1970’s to adopt two plans that would ultimately alter the monetary face of Europe as we know it—the Warner plan and the subsequent...


... middle of paper ...


...actually worsen the situation.(Globalist)

The type of deficit cure stated above is first of all a recipe for economic stagnation and then for political turmoil. Its actually a double whammy of sorts. Its bad enough that common currency takes away an individual counties ability to participate in monetary and fiscal policy. But its a lot worse for the budget defect policing device to actually hurt the system more than it helps it.

For the sake of Europe I hope they get these problems figured out other wise we could be looking at a major debt default and a banking crisis.(China)

Works Cited

1. JP Morgan, (1999). Euro. On line: http://www.jpmorgan.com/

2. China Business Weekly, (2004).Euro failing to fulfill its huge potential. On line: www.chinadaily.com

3 Soto, Mauricio. (1999)History and Implications of a New Currency. http:/europa.eu.int/euro/

4 Feldstein, Martin. (2004)Why Europe is not an optimum currency area. ,http://econlog.econlib.org/archives/000102.html

5 The Globalist,(2002). Why the Euro Will Fail. Online: www.theglobalist.com.

6 Urwin, D. (1991). The community of Europe: A history of European integration since 1945. London: Longman Group.

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