simplwrds

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May be Euro isn’t the best currency!!

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1)   At the launch of the Euro, Romano Prodi – the then president of the European Commission – said that, “The common currency is not an economic decision, it is a political decision“. Unfortunately, he was right, economically speaking, it’s a significant chance that the currency might fail.

2)   Even the architects of the Euro have begun questioning its future now. Otmar Issing, one of those architects and a former chief economist at the European Central bank, recently said that, “policy makers not only have weakened the functioning of monetary union but have also called into question its very survival“.

3) The consistent argument of the Europhiles that it was not the system, but it was Greece, who was entirely responsible for the crisis, has been proven wrong by the recent entry of Ireland, Portugal, Spain, Italy and soon Belgium in the turmoil zone. It shows that there is a ghost in the machine.

4) It’s hard that a monitory union without a fiscal collaboration and political cohesion will survive and sustain in today competitive global market. And, making a fiscal union is a dream considering the social and economic differences among the EU countries. You can already hear a loud opposition to the “competitiveness pact”.

5)  Some of the politicians and experts will surely argue: “the Eurozone was designed to be irreversible, so we don’t know the exit strategy. It is going to be extremely risky and hugely expensive to dissolve the Euro, and we can’t afford it!”

Of course, it is going to be difficult to return to previous currencies, but that doesn’t mean that we just keep on waiting for another country to crash financially, and letting the debt burden soar.  We must either dissolve the Eurozone or we should make a strong and permanent mechanism for its stability.

6) Having a currency that doesn’t reflect the competitiveness of a country, and is not govern by the country itself (the European Central Bank in this case), could be counterproductive for growing economies like Greece and Ireland. Growing economies need a currency with real and flexible exchange rate to make the market more competitive. Therefore, the long-term solution for the crisis could be that PIIGS leave the Eurozone, its good for them, and good for the Euro.

7) Austerity measures are inhuman. The innocent and poor people, who already paid for the bailouts are again punished in the name of austerity measures. The turnout in the latest EU parliament elections showed that people are not so interested in the EU and the austerity measures will just add to their frustration.

8) The Euro has actually created a north-south divide in Europe. The north fraction lead by France and Germany, who just want to be part of the ‘benefits’ of a common currency without dealing with the side effects, and other group consist of so called PIIGS (Portugal, Ireland, Italy, Greece and Spain), who wants to use strong economies of the Eurozone to pay for their ‘sins’.

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Written by simplwrds

February 20, 2011 at 10:06 am

Posted in Uncategorized

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