Ten years of the euro

The EU has the right to be proud of the euro, which turns ten this week. But although it is strong and well-established, it is heading for the trickiest moments of its life, writes The Economist.

The Economist

The European Union is entitled to crow as it marks this week’s tenth birthday of the euro. Remember the sceptics (especially in Britain and America) who confidently predicted that the single currency would never happen; or that, if it did, it would soon fall apart? And the traders who, in the euro’s feeble early months, called it a “toilet currency”? Today the euro is well-established and strong — so much so that it is widely seen as a haven from the world’s storms.

Yet it would be wrong to infer from the birthday celebrations that the euro’s troubles are over. In truth the single currency is heading for the trickiest moments of its short life. Eurosceptics were right that the real test of the single currency would come when Europe’s economies fell into deep recession. As job losses mount and businesses go under, criticism of the euro and the European Central Bank can be expected to mount. And in the places that suffer the most — Italy and Greece, say — more voices may begin to question whether euro membership was such a wise idea. …

Strictly speaking, the Maastricht criteria for the euro never made much economic sense. But the message behind them — that irreversible entry into a single currency necessitates reform to make economies more flexible and competitive — is sound. So long as it is heeded, the euro’s next decade should be as successful as its first. If it is not, then expect the next ten years to be harder.