Will the euro survive?

Date posted: June 6, 2012

Elections in France and Greece have again raised questions about the financial stability of the European Union and the future of the common currency called the euro. Might Europe reach a point where member countries each go back to their own currency? N.C. State University economist Mike Walden answers.

“Collectively I would say no. … I think the perceived benefits of the euro for countries like Germany and France are simply too large. So I think that there will be many countries who will stick with the euro.

“I think if the European community had it to do over and start the euro again, they would not have included countries like Greece, maybe even Italy. So I think ultimately Greece will probably go its own way and go back to its own currency. That would actually give it some more flexibility to deal with some of its particular economic issues.

“Now you might say, ‘Well, why doesn’t the European Union just go ahead and do that? Why don’t they just jettison Greece out of the Euro community?’ I think the problem there is that there is fear this would set up a domino effect that potentially Italy would go, Spain would go, maybe even France would go because they all have economic issues similar to Greece — although not as large as Greece — and that those who think the euro is good for many countries in the European community would feel that would be a bad move.

“So I think what we would be looking for short term is another patchwork of support for Greece, but I think ultimately where the European Community is going is to take countries like Greece and say, ‘We’re going to let you go your own way.’”

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