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June 9th 2005

The woes of the Euro

The saga of the battered Euro is far from over. In the wake of French and Dutch rejection of the Constitution, politicians are examining whether the Euro should continue to exist. Many experts are renewing their objections to the Euro, on the grounds that it is not appropriate for a region as large and diverse as the EU to share a common currency. The universal monetary and fiscal policies applied equally to different economies has a resulted in dangerous imbalances. Perennially low interest rates have stimulated the economies of some EU nations to the point of overheating. Meanwhile, Europe’s largest economies are stagnating, as the strength of the Euro has hurt exports. The Euro has also failed to integrate Europe’s vast labor and capital and labor markets, which originally served as the pretext for monetary union. It seems the economies of Europe are fundamentally too different to merit a common currency. The Economist reports:

Unfortunately for euro-boosters, recent policy moves have all been in the wrong direction. Not only has the stability and growth pact, which was supposed to help force fiscal policies into rough alignment, been weakened.

Read More: Can this union be saved?

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Posted by Adam Kritzer | in Euro | No Comments »

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