Wednesday, December 8, 2010

The Euro and it's future.

With the ongoing economic crisis, we hear a lot about the collapse of the EURO, the EU's most ambitious project so far. Many skeptics are feeling justified, while most Euro-zone and EU ministers bow that the euro will not and cannot fail, as it would lead to the collapse of EU itself!

First of all, I really believe that the euro is here to stay, even if some countries are forced out for a while or a new form of it may be created. Imagine a single market without a common currency. Free movement of capita, goods and people while having constantly to change currency and being charged interest rates for every transaction, is simply absurd! Those who benefit from all these charges, certainly would love to see the Euro go.

We can not blame the Euro for the crisis. The single currency as an idea, political and financial experiment is a very ambitious one, but it was not designed properly by its creators. In other words it is our governments and Europe's leaders that must be blamed, for creating a currency without the appropriate bodies, policies and safeguards to deal with situations like the ones we are dealing now.

The crisis was not created by the Euro, however it has worsen because of the cracks in its structures. If Europe's elites had agreed to do what was necessary to create a successful currency from the beginning, we would not be in such difficulties now.

A single currency needs a single governance in its policies. It needs a more federal Europe, further integration on economic and political level, something that our leaders are not yet ready to proceed with. They certainly fear their voters' reaction or their countries' business and financial elites, that do not want to change the current status quo.

How can we have a common currency without a common economy? Why aren't all Euro-zone member states encouraged to harmonize and collectively diversify their economies, develop new industries instead of relying on subsidies or bubble economies? If we harmonized our economies, then we would not need to have national currencies in the first place.

National currencies are a better solution when you have a distinct economic model. Without so many different models, we could achieve a more stable Euro. But doing something that is difficult. Europe lacks of strong leadership and I do not think that we are ready for something like that. We have yet to start thinking "European."

We could set up a European fund to start investing in all states, trying to exploit their natural resources and help them develop new technologies, new fields or science while creating more jobs as well! Why have a fragmented European economy with different policies while we try to fit all those under one currency? Instead of that, our leaders chose the "solution" austerity. Well it hasn't done much good for countries like Greece and Portugal so far.

Isn't it crucial when you have one currency, to have one economy as well? Does the USA have two or multiple different kind of policies in its economy, while they are having one currency, the dollar? It is time to start dealing with problems in a European level and set up tools now, for any further crisis that will most certainly come. Then the European integration becomes more successful.

Imagine if there was a common European industry and all states contributed resources, knowledge and funds to research new fields of science. And potentially explore new ways of finding solutions to our problems. Instead of that our leaders believe that competition at any cost is good for our continent, when it only benefits the banks and multinational corporations, who gain from playing one state against another.

Personally I like the euro. To me money and currencies are something I just use to buy stuff, I do not consider them as "national heritage". We used to trade with sea sells and animals bones, having a national currency does not add to my national heritage. I travel a lot as well and not having to change currency while moving from country to country, suits me just fine.

And that is only one of the benefits of the euro. The EU market will get a  boost by the elimination of currency fluctuations, while the single currency creates stable inflation and product prices, price transparency, fewer bureaucratic barriers in transferring large amounts of money between borders. Thus giving Europe a greater influence in global economic policy, rather having to react to developments in USA and Japan.

The future of the Euro can be a great one, if we accept what needs to be done and proceed with the reforms. Like salary harmonization for example across the block. If we keep trying to promote our national interests over others', while keeping the Euro we will find ourselves going in circles again.

We will keep patching temporarily things up, until the next crisis appears. By then, the European voters will definitely have enough of having to pay for the mistakes of our governments, that public support for the Euro will crash. And if that happens we will have no choice but to revert to our national currencies.

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