After months of European leaders scrambling to control this threat, critics have been

wondering if the Euro is more trouble than it's worth. So, we wanted to know, was the

Eurozone a bad idea?

The Eurozone was established in 1999. Today it consists of 19 member states who have all

adopted a singular currency: The Euro. Monetary policy concerning the Euro is decided by the

European Central Bank located in Frankfurt, Germany. Their biggest role is preventing

inflation by attempting to keep prices stable amongst member countries.

Now, it would seem that it’s a good idea to combine powerful economies to feed off

and strengthen each other... However, what happens when a weak country enters the mix?

Or when a strong country becomes weak? There are strict guidelines for being considered

a strong enough economy to join. These are primarily based on a country’s long term

stability forecast. But Greece was able to enter the Eurozone without all the necessary

qualifications by severely understating their massive deficit. On top of that, the 2007

financial crisis sent a lot of formerly powerful economies into a downwards spiral, forcing

the ECB to bail them out, lest the Eurozone fails too.

The ability of failing economies to bring down strong economies is one of the biggest

criticisms of the Eurozone. Often, when a country has trouble paying its debts, it simply

prints more money. While this devalues the currency to some degree, it’s preferable

to outright defaulting. However, individual countries don’t own the Euro, so they can’t

devalue everyone else’s money to solve their own problems. Instead, the ECB provides emergency

loans, but in exchange for economic reforms to make sure the country can keep up with

everyone else. You may have heard of these reforms as “austerity measures”.

Austerity measures mostly include massive government spending cuts, curtailing social

programs, and raising taxes. Now, while this works in theory, it can also lead to severe

consequences. In Greece’s case, the EU’s austerity measures put a massive strain on

the economy, and removed the government’s ability to invest in the public sector. This

meant higher rates of unemployment, which led to fewer people paying taxes, leaving

less money for the government to pay back their ballooning loans. Today Greece’s total

inability to survive within the Eurozone has unprecedented consequences for both the country

and the European Union.

There are a number of subtle and complicated reasons for the Euro’s current instability.

However, the biggest problem simply comes from the inherent differences in attempting

to lump together economies with different growth, exports, relationships, and most importantly,

monetary politics. So, all things considered, was the Eurozone a bad idea? While the Eurozone

may be beneficial to many countries, its ability to weather an economic downturn may just be

its ultimate failure.

Sometimes it’s hard to imagine what life is really like for people living in these

sorts of crises. To get a glimpse of the struggles, check out this video on Seeker Daily. Thanks

for joining us on TestTube News, we’ll see you next time!