Criticisms of the Euro

The Euro was introduced in 1999.

Criticisms of the Euro Project Include

  1. A fixed exchange rate can cause an imbalanced economy. Some countries in the Euro have become uncompetitive because of higher inflation. But, there is no devaluation to restore competitiveness. This has led to high current account deficits, low growth and high unemployment.
  2. No Independent Monetary Policy. Countries in the Euro have a common monetary policy set by the ECB. Therefore, interest rates and monetary policy may not be suitable for their economic situation. For example, Germany may be growing strongly, so the ECB increase interest rates, but this causes a recession in south Europe.
  3. Bond Yields have risen because no lender of last resort. Countries in the Euro have tended to see interest rates on government debt rise quickly over liquidity fears. Ireland, Italy and Spain, all had rapid increase in bond yields, despite having a lower budget deficit than UK, where bond yields remained low.
  4. ECB too concentrated on low inflation and not on promoting economic growth.

See also:

 

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