The Sustainability Of The Euro: Past, Present, And Future




Ram, Adhvaith

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The eurozone is a monetary union comprised of 19 European Union member states that share a currency called the euro. To understand whether or not the eurozone is sustainable, we must first understand the previous major developments of the euro. Thefirst section will provide background on domestic motivations and sentiment towards the euro beginning in the time period before the introduction of the euro as a currency unitand highlight the resulting incomplete institutions and divergence from optimal currency area. Next, the second section will discusshow the unsustainable pre-crisis construction of the eurozone highlighted these shortcomings. To provide background, a brief narrative describing the events, causes, and effects of the crisis will be provided. Economic theories that justified the incomplete structure of the eurozone are critically analyzed and additional construction faults are uncovered to consider the feasibility of the eurozone in its crisis-era state. Additionally, the causes and effects of austerity, a devastating and ineffective strategy that attempted to remediate the issues of euro-area countries, are discussed and extrapolated to determine future issues the eurozone may face. The central role of the European Central Bank in the crisis is considered through the lens of its actions and inactions to understand the influences on the Bank and the conflicting visions for the eurozone’s future. Finally, in the last section, a judgement of implemented emergency measures and the eurozone’s current and future growth and debt prospects will be contrasted with required solutions needed to make the eurozone sustainable. Ultimately, the reason for the lack of collective willingness to implement needed measures is unearthed to determine that the eurozone is not sustainable as is. A deeper comparison of the unique problems that two large countries in opposite camps face will highlight additional struggles the eurozone bloc will have to overcome.



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