It is difficult to see how a single rate could possibly be suitable for all of the economies in all foreseeable situations. All Rights Group prayer is a poor way to manage a currency. It also seems inevitable that once the EU started controlling the UK economy it will want to control other aspects of government – what about taxes, the legal system, the armed forces….. In light of the current tensions in Greece, Portugal, Italy and Spain I see the logic presented by these ten points to be just as relevant today as they were ten years ago. The euro suffers from a similar asymmetry. It would also be difficult to image that Eurozone interest rates can be managed effectively by the European Central Bank if the tax policies (fiscal policies) are different throughout Europe. How Bad Could a Euro Crisis in Italy Get? In other words, northern Europe isn't doing enough to offset the demand destruction in southern Europe. A leave vote would cost jobs It is commonly claimed that if the UK were t Europe doesn't have to keep crucifying itself on a cross of euros, the gold standard of the 21st-century. But there was an asymmetry. Here are 10 of the arguments for remaining in the EU that do not stand up. The Euro Area payments system (TARGET2) allowed weak banks to borrow from the European Central Bank to replace their evaporating deposit base. The German economy is on the brink of recession while the Irish economy is booming. Perversely, the opposite. It, the euro, is simply a bad idea which will not work. Based on that, here's four reasons why I think the Euro project is failing, apart from the obvious issue of sovereign debt. The ECB apparently prefers pushing more and more countries into oblivion with too tight money than risk anything resembling more inflation. One size cannot fit all! Especially if your banks are bigger than your economy. The euro zone doesn't have the fiscal or banking unions it needs to make monetary union work, and it's not close to changing that. It is inevitable that the Eurozone countries will eventually move substantially towards tax harmonisation. President Blair says that, “it would not be for the good of Europe”. Excluding Germany, just over half of all euro trade is with each other. The European Union was officially founded on November 1, 1993. But with bad policy pushing southern Europe into depression and northern Europe towards recession, euro zone countries can't afford to buy as much stuff from each other. I hope the reasons stated below will persuade you that this project must be halted, and possibly reversed, as soon as possible! The euro EURUSD, +0.40% has rallied 1.6% versus the U.S. dollar so far in July, changing hands Wednesday at $1.1401 after hitting a four-month high. Continue Reading. Even worse, this slow-motion collapse is turning loans that would have otherwise been good into losses -- losses that force bailouts and faster collapses. EURUSD | A complete Euro currency overview by MarketWatch. The proposal is immediately rejected by the European Government. If a country feels that it is not in their interests to remain in the single currency there is no mechanism for it to leave. The types of industry varies from country to country. European treaties and alliances, however, have been in place since 1949 when NATO was formed. This means that if there was an increase in interest rates in both the UK and Germany, the slowdown effect would be greater for the UK as more people have floating rate mortgages. This type of comment shows a shallow understanding of what is important. Euros Nations like Italy and Greece suffered most, failing to meet the unrealistic economic directives and demands imposed by the centralized authorities, more often than not at the behest of wealthier, northern member states. The Euro is not just a currency, it’s an expression of a political ideal. TheAtlantic.com Copyright (c) 2021 by The Atlantic Monthly Group. That adds a degree of difficulty to recovery for southern European countries that need to export their way out of trouble. For the single currency to work, this single rate must be suitable for all member states. Continental Europe has a history of high taxation; so it’s also certain that ‘tax harmonisation’ is another way of saying that British taxes would go up. Now, it might not sound like it really matters which option they choose, but it very much does. I believe that the project of European Integration is the evil of our time. It's the difference between a bit more inflation or not -- in other words, between looser ECB policy or the status quo. Britain would be in an excellent position outside the Eurozone. 9 The Failure Of European Neoliberalism. More exports would mean more gold, and then lower interest rates. It is also frequently compared with the euro, because of the UK's close trading relationship with the European Union (EU), but can be matched to any currency around the world. Falling wages make it harder to pay back debts that don't fall, setting off a vicious circle into economic oblivion. And although Northern Europe was happy to reap the benefits of currency union during the good times, it has proven to be unwilling to make the fiscal transfers to the South during the bad times. This seems wrong. The compromise rate is not suitable for either Ireland or Germany. While this avoided a collapse of the euro, it subsidized weak banks, delayed their recapitalization, and reinforced the ongoing disintegration of the Euro Area financial market. That's the lesson Cyprus learned the very hard way  after its banks. Euro-based countries face challenges as the coronavirus pandemic has caused the growth rate to decline by approximately 12% in Q2 2020. Before the local elections in the State of Spain the people feel isolated and frustrated. That was perpetuating depressions. At the moment we can freely trade with the Eurozone and that is unlikely to change. A country that is dependent upon heavy industry would most likely be hit harder than one which is predominantly service based. The continuing Greek debt crisis and slow growth in other parts of Europe are leading many economists to reiterate the view that the euro is a bad idea. In the past interest rate changes could compensate for they discrepancies. 1. The people start to protest on the streets of Madrid and Barcelona. Most recently, Cyprus was forced to accept a, The euro zone isn't what economists call an "optimal currency area". In this conventional wisdom, the common currency prevents eurozone governments from using monetary policy to offset adverse economic shocks. The local Spanish population resents such a move and open hostility breaks out on the streets of Madrid……. The background here is optimal currency areas. The euro has also strengthened the EU’s single market. Either northern European wages rise faster than normal while southern wages stay flat, or northern European wages grow normally while southern European wages fall. Euro is Good for Both – the Strong and the Weak. 523 Why the Euro Failed member states took advantage of these flaws to finance unsustainable public policies. They win a landslide victory, capturing 63% of the vote. 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