Why the Euro failed(qz.com)
qz.com
Why the Euro failed
https://qz.com/1377098/why-the-euro-failed/
7 comments
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.
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.
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.
The UK can devalue its currency every time it needs a GDP growth spurt.
Just like Italy used to do.
I think that’s the point.
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
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.
What's your standard of success? Germany has the largest GDP in Europe by about a trillion dollars and uses the Euro.
GDP growth, consumption growth, manageability of debt, standard of life, employment rate. The central question being not "how big is it because of the euro" but "is it better because of the euro"
Germany and Benelux are high but problematic in areas of consumption. 41% of the German Economy is export orientated (meaning consumption is extremely low) and while employment rates are high, employment isn't completely 'full time', wages lag productivity significantly (pay is relatively bad) and debts in the private sector are heavily problematic. Not to mention Germany's population demographics don't have a bright future.
Contrast this to economies with their own currencies - the UK, Sweden, Norway, Poland, Denmark - which aren't dogged down by such problems. Sweden had a housing crash last year and is managing just fine despite it.
If the EZ had another crash it would be debatable whether it can still hold strong - a point reinforced by France's Finance Minister himself.
Germany and Benelux are high but problematic in areas of consumption. 41% of the German Economy is export orientated (meaning consumption is extremely low) and while employment rates are high, employment isn't completely 'full time', wages lag productivity significantly (pay is relatively bad) and debts in the private sector are heavily problematic. Not to mention Germany's population demographics don't have a bright future.
Contrast this to economies with their own currencies - the UK, Sweden, Norway, Poland, Denmark - which aren't dogged down by such problems. Sweden had a housing crash last year and is managing just fine despite it.
If the EZ had another crash it would be debatable whether it can still hold strong - a point reinforced by France's Finance Minister himself.
What do you mean, problematic on areas of consumption? ( From BE, fyi )
In simple terms most of Benelux & German GDP doesn't make its way into citizens pockets, as a result pay is relatively poor and has an impact on the standard of living. This is a result of official policy (Tarifeinheitsgesetz) meant to make labour more competitive.
If you look up GDP it is pretty big, but if you look up wages you will find its relatively bad.
If you look up GDP it is pretty big, but if you look up wages you will find its relatively bad.
? 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"
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"
It'll be interesting to see what happens with the UK. While this is bad for them i'm speaking of countries in the EU but not in the EZ that have far better metrics across the board inc Sweden, Norway, Denmark & Poland. If you take a 30 year period and compare them to Europe's best (Germany) you can see drastic improvements in them relatively.
It's very distracting to keep looking at the UK and Brexit and forget that others on the continent clearly do better without the Euro. There are still countries in the Eu with EZ opt outs.
I'd also like to point out Switzerland is not in the Euro and not in the EU and its metrics are far better on everything - although it is in Schengen.
It's very distracting to keep looking at the UK and Brexit and forget that others on the continent clearly do better without the Euro. There are still countries in the Eu with EZ opt outs.
I'd also like to point out Switzerland is not in the Euro and not in the EU and its metrics are far better on everything - although it is in Schengen.
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.
The death/failure of € is greatly exaggerated.
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.
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.
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.
>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.
>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.
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.
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.
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