Reaction to Euro
Reaction Paper The article “The Failure of the Euro: The Little Currency That Couldn 't”, by Martin Feldstein, is a case about why the Eurozone has failed, is failing, or at best will fail. To prove his point, the author uses explicit examples such as the economic disaster occurring in Greece, while at the same time aiding the economic growth in Germany. Feldstein also demonstrates how the Eurozone also has allowed much room for error and has forced the hand of many European countries in one way or another. This lead many member countries to consider exiting the Eurozone, no matter how horrific the economic consequences might be. The author is correct in assuming that the Eurozone is one of several contributing factors causing the economic crash in many European countries. However, economists have feared that the problems with the Eurozone began many years before the 2008 economic crisis. Even in the Euro 's early years many economists argued Europe’s single currency zone was being built for more of a political gain, rather than economic unification. In particular that it would subsidize some countries such as France and Germany more so than other smaller Southern countries like Greece, Spain, and Italy. The Eurozone has a fixed monetary rate across the board, thus it cannot consider the economy of individual nations, but takes the overall of all economies of each nation. This makes the Eurozone more inclined to favor certain countries over others because of their economies capabilities. “... The ECB 's monetary policy must give greater weight to conditions in Germany in its decisions than it gives to conditions in other countries.” (Feldstein, pg 2) The Eurozone assist in keeping growing economies growing, but at the expense of weaker economies. A clear example of this would be how Germany keeps prospering while Greece keeps plunging. “During the past year, Germany had a trade surplus of nearly $200 billion, whereas the other members of the Eurozone
Bibliography: 1. Feldstein, Martin. "The Failure of the Euro." Foreign Affairs. Global, Dec. 2010. Web. 18 Nov. 2013. 2. El-Erian, Mohamed. "Who Is to Blame for Greece 's Crisis?" The Guardian. Theguardian.com, 18 May 2012. Web. 17 Nov. 2013.