Twelve years later, the common currency - and more importantly, the bonds which it has forged between economies - has become a way of life for many people in many nations. But twelve years is short time in world history. The question may still be posed: is the Euro here to stay? Or is this a brief interlude in normal economic patterns?
Jeff Madrick points out that economic conditions in some southern European countries - Italy, Spain, Portugal, and Greece - continue to act as a sort of ballast on other economies in the Eurozone. This inevitably creates a sort of tension, as stronger economies like Germany are asked to pay for a series of fiscally irresponsible decisions made by the southern governments.
The ripple effects of strained relations inside the Eurozone will affect the United States; the only question is whether such effects will be significant or small. The financially negligent choices made by some, not all, southern European governments - accumulating government debt, high tax rates, nationalized healthcare - place a burden not only on Europe's productive economies like France and Austria, but will eventually have some effect on the other side of the Atlantic. Madrick notes:
Angela Merkel has just been comfortably reelected chancellor of Germany, which seems to strengthen the hand of austerity advocates there. Throughout the euro zone, trade is becoming less imbalanced. Productivity is rising in some countries, and a decline in labor costs is helping exports. All of this has led to a calming of financial markets. But the other side of this coin is extreme deprivation across the south of Europe, where unemployment remains extremely high and GDP is well below pre-crisis levels. Meanwhile, here in the United States, Janet Yellen is set to replace Ben Bernanke as chair of the Federal Reserve, and many observers wonder how long she can resist inflation hawks, who are demanding the “tapering” of the Fed’s quantitative-easing policy. Events in Europe could well influence her decision, and her decision will in turn surely affect economic conditions in Europe.
French scholar Emanuel Todd offers a perspective from Paris. Most scholars, economists, and businessmen reckon that the Euro will be around for a long time. Todd isn't so sure. Even if it does endure, Todd argues that it will do so out of pure stubbornness, not for any economic motivation. The French government considers the Euro to be its trophy, inasmuch as it persuaded other European governments to sign on for it. To abandon the Euro would be to lose its hard-won prize, so the French government continues to support the Eurozone into the future. Todd remarks that
outside Germany, it’s pretty obvious that the euro is a complete failure. So the mystery I’m talking about is: Why does it go on? That is not an economic question; it’s an ideological question. I think France is much more responsible than Germany for this mess. The German dominance of Europe is possible only because of French acceptance. You must realize what the euro is from the point of view of French politicians, whether right wing or left wing. They had the idea, they imposed it on Germany, which accepted it and turned it into a very efficient, German economic instrument. For France, getting out of the euro would mean admitting that our entire political class was hapless. It would be the beginning of a social revolution.
Germany is one of the few countries in the world which is presently turning a profit on manufacturing. Germany is building products in its factories and exporting them in large numbers, as well as selling them domestically. To what extent did the Euro help or hinder Germany in achieving this enviable condition? How would the demise of the Euro affect Germany's production? How can the United States return to this same condition - becoming both a major and a profitable manufacturing power?
Whatever happens to the Euro, the center of Europe is inhabited by the one nation that really doesn't care too much. Switzerland never adopted the Euro, and the Swiss franc remains one of the world's most stable and envied currencies.
