The European Single Currency And Its Consequences Essay

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The well-known economist, Joseph E. Stiglitz, stated in his recent book “the Euro” that the European single currency had been “flawed from its beginning” (Stiglitz, 2016). But what exactly are the problems the Eurozone is facing? In the following, the problems regarding the single currency and its consequences will be discussed. To begin with, the countries initially joining the euro were too heterogeneous, showing broad differences not only regarding their economic structure but also considering their budget practices and civil approaches (Feldstein, 2011). Moreover, differences regarding production structure, qualifications of the labour force as well as capital stock are considerable (Fürrutter, 2012). However, in order to make a single currency work, adequate similarities between the countries adopting the currency are required. The more similar countries are, the more will a common interest and exchange rate suit all. For this reason, the convergence criteria were created and had to be fulfilled upon entry to the Eurozone. Providing general criterion for price and exchange rate stability, continuous and flawless public finances, the Maastricht criteria aimed at safeguarding the country’s ability to adopt the single currency (European Commission, 2015). However, exceptions were made and even countries that did not meet the admission standards of a budget deficit below three percent of GDP and a national debt below 60 percent of GDP – in particular, Italy and Spain –
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