Steve Forbes uses his latest Forbes magazine column to puncture myths about the common European currency.
Since 2008, the EU has been beset by economic crises that have dulled any luster the new currency had.
Too bad. Had Europeans understood the proper principles of monetary policy, the euro would be a resounding success, doing for participating EU countries just what the dollar has done for the U.S.–a common currency that enormously facilitates prosperity-creating investment and commerce. But this extraordinary creation has been bedeviled by profound misunderstandings that could ultimately threaten its very existence. …
… The euro did make it easier for capital to flow across borders, thereby reducing costs of exchanging individual currencies and hedging against the risks of the currencies’ fluctuating against each other. However, the Continent’s chronic subpar economic performance didn’t improve as much as had been expected because the problems are structural: excessive taxation and regulation, particularly with regard to inflexible labor practices. When Germany made some labor and pension-rule reforms in the early 2000s, the country’s economy markedly improved. …
… [A] host of economists lament that countries such as Greece and Italy can’t devalue their currencies since they’re tied to the euro. Everyone should rejoice that this is the case. Otherwise, Greece would have become the EU’s version of Venezuela, and Italy’s lira would resemble Argentina’s chronically shrinking peso. (The state of Illinois is in severe financial straits, but no one talks about it leaving the “U.S. dollar zone” to cope with its woes.)