Is the euro a failure?

Abstract

Many political analysts and even some prominent economists put the blame for the current economic crisis in Europe on the euro. In their view, the crisis showed that the European Monetary Union has no future. Right from the beginning of the current crisis, these pundits proclaimed that the demise of the euro was imminent. As if hit by a kind of amnesia, these authors seem to forget that it was the American real estate market from where the crisis spread and that not only members of the European Monetary Union suffer from economic malaise but also many other countries, which do not belong to the euro. Those who proclaim a euro crisis seem to ignore that there are countries in the euro zone that are doing relatively well and that the severe crisis is limited to some countries in the Southern periphery of the euro area, most prominently to Greece. Other than by proclaiming massive contagion, there has never been a solid reason how an economy the size of Greece, which represents a small part of the total gross domestic product of the Eurozone, could bring down the European Monetary Union.