![]() ![]() Read Moreīusiness cycle downturns come in many forms. In this post, we review the progress toward completion of the European monetary union, and note key gaps that remain…. With it comes a harsh reminder that standing still is simply not an option. The COVID-19 crisis brings renewed tensions. Politically and financially, the euro area remains divided. Moreover, as of November 2019, popular support for the single currency among euro area residents was at a record 76%, with sizable majorities in each member state (see Eurobarometer 92, pages 32-33).Īnd yet, over the past two decades, there has been only grudging progress toward a truly resilient monetary union. Today, an entire generation of people has come of age knowing only the euro. Despite enormous challenges, no country has abandoned the euro and reintroduced a national currency. To a considerable extent, experience has borne out these hopes. Since the euro’s beginning, European leaders hoped and expected that as tensions arose, member states would come closer together-integrating their economies and financial systems, sharing burdens and risks. This means that a single policy interest rate might exacerbate, rather than mitigate, economic differences, creating severe strains among euro area countries. For years before the start of monetary union in 1999, economists had warned that the member states of the European Union do not constitute an “ optimum currency area” (see, for example, Milton Friedman). ![]() The founders of the euro had little doubt about the common currency’s role as a foundation for European peace and prosperity. ![]()
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