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Jul 6, 2015

It’s the end of the euro as we know it (and I feel fine)

If the wise heads who developed the euro had lived through the GFC and its aftermath, they would not have so discounted the importance of unique monetary policy for each unique economy within Europe, writes economist and journalist Jason Murphy.

Greece voted no in its big referendum, and that looks like the beginning of the end for the euro. Common currencies seemed like a great idea in the 1980s, when currency conversion was a serious source of economic friction. Said the European Commission:

“Before the euro, the need to exchange currencies meant extra costs, risks and a lack of transparency in cross-border transactions. With the single currency, doing business in the euro area is more cost-effective and less risky.”

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4 comments

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4 thoughts on “It’s the end of the euro as we know it (and I feel fine)

  1. David Hand

    The problem is not just monetary policy, it’s fiscal policy which all European countries retain independently and which Greece has badly mismanaged.

    Euro countries agreed to manage fiscal policy in a conservative way and Greece ignored it and even hid what they were doing.

    By exiting the Euro and relaunching the Drachma, Greece regains control of its destiny which is a good thing for everyone. Of course, their profligate fiscal policy will mean a collapse of the Drachma to a very low level, thereby sheeting home the accountability to the people who have run up the debt – the Greek people. The way out of it is to then build an export led recovery supported by a low currency and cheap prices.

    Oh, and a more responsible fiscal policy.

  2. AR

    Having the euro was not a reason for a holiday in Greece to cost the same as one in Italy – that was just dumb gouging.
    When a shot of ouzo went overnight from 3-5 drachma (depending on how clean the glass)to one euro the course for Scylla & Charybdis.

  3. RachelP

    Great article but just one correction – the US policy of ZIRP and QE is a derivatives bubble waiting to burst. The Fed knows it can’t raise interest rates without bankrupting half the major banks and possibly the US too. We may have seen stocks at record highs but main street has been suffering since the GFC – hardly an ‘economic recovery’

  4. David Camroux

    The justification for the euro, i.e. namely having a strong enough currency – a reserve currency -not a the mercy of currency speculators remains. To we want to remain at the mercy of decisions taken in Washington on the dollar?
    Sure the euro has problems which, if your author, was attentive are being addressed in the European way, requiring time and compromise.
    As Winston Churchill said about democracy,the EU is the worst possible supra-national political system… except for all the others.
    As a French citizen like the overwhelming majority of those in the euro zone, I want the euro to continue. Enough of francs, liras and other ‘mickey mouse’ money.

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