Actually the Euro was introduced to keep Germany under control
This is the essential part that is overlooked by most commentators. The Euro is predominantly a political instrument that is going to be kept alive at almost any cost necessary. Therefore its interpretation should blend out most of economic "rationality" but consider instead underlying goals such as the equalization of the standard of living across the European states.
The Euro is a political instrument. It had original been introduced to keep us Germans under control after reunification. But there were other reasons:
* a single large market which is competitive on a world-wide scale needs its currency
* less dependence on the dollar
* use it as a tool for further integration
* stabilize countries. This may look funny given what you read all day, but when the Euro was introduced many countries were either recovering from fascism (especially in souther europe) or communism. Having a large currency makes it much more difficult to speculate against these countries. The Hedge fonds are speculating against the Euro and they have a really hard time to bring it down - like they did with other countries.
But the Germans would not have agreed if it hadn't also brought direct advantages. The one big advantage is this: trading in the Eurozone is much much easier and cheaper with a single currency.
I may have missed this but what countries were recovering from fascism in southern europe when the euro got introduced?
AFAIR the last fascist there (colonels' regime in greece) ended in the '70s, while the closes thing I can think of as the euro (ECU) just had dracma added to their average a decade later.
> But the Germans would not have agreed if it hadn't also brought direct advantages. The one big advantage is this: trading in the Eurozone is much much easier and cheaper with a single currency.
They agree to it in part because the became a garantee that it will be stable but I agree that the Euro has some quite good propertys.
It also gave Germany a cheap currency to help it's exports.
If the Euro had been German/Netherlands/Luxemburg it would have been very stable, very strong, and so expensive that even Goldman Sachs bosses couldn't have bought a Porsche
This is the essential part that is overlooked by most commentators. The Euro is predominantly a political instrument that is going to be kept alive at almost any cost necessary. Therefore its interpretation should blend out most of economic "rationality" but consider instead underlying goals such as the equalization of the standard of living across the European states.