Single Currency In The European Union

Single currency in the European Union.

Although the adoption of the euro was an encouraging step towards integration, there came several issues with introducing a single currency. Firstly, a single currency among multiple states makes it inflexible to an economic crisis. This is because if one country experiences an economic problem, it cannot deal with it in the traditional manners, such as devaluation, borrowing, adjusting interest rates without the agreement of other states that share the same currency (McCormick 1999). Secondly, European skeptics believe that the problems that the EU faced in 1997-1998 would reoccur to the detriment of the EU. Also, Euro skeptics put little faith into the EU as it was not following its standards and was accepting states that had not met its economic criteria. This again would in turn lead to troubles with the euro later on as the EU and the euro would have to cope with those weaker ineligible states (McCormick 1999). A third possible cost of the euro, that McCormick (1990) has suggested, might be that it still would not encourage free movement due to physical, fiscal, technical and social barriers. However, this third possible cost has not occurred as now internal migration within the EU has become an issue of debate due to the increase of migrants rather than the non-existence of them.

Although the third cost has not occurred, the other two possible difficulties with the euro have indeed occurred. Countries indeed have been unable to flexibly deal with the economic recession in 2008, when the housing market had crashed in the United States and affected the European businesses. Greece is the largest example of a country that is unable to cope with the economic crisis. The reason for this is that the other euro using states could not and would not devalue the euro simple for the sake of one country’s failures. Also, the European Bank, Germany in particular, had restricted Greece’s response to the economic crisis. For example, Germany had given the criteria for Greece to receive austerity packages from the EU. The Greek government and public disapproved of these criteria as seen with the protests that followed the announcement of Germany’s plan for austerity (Wearden and Smith 2015).

Another thing to mention about the negative aspects of the euro is that in countries that have recently adopted it, such as Lithuania, it has struggled to succeed. Although it has only been slightly over a year since they have adopted the euro in January 2015, the majority of the public feel it was a mistake.