Was Euro a Bad Idea?

Was Euro a bad idea?

Introduction

The world economy has been dominated with the dollar currency for almost a century due the major reason that is it had no competition. US economy has the largest size and no other economy was close to its competition. The economies of scale, scope, externalities network was difficult for any other currency to acquire (Bergsten, 2005, p.1). Furthermore, public goods benefit essential to compete the dollar at the global level was unattainable for any other currency. There was a similar situation for United Kingdom (Hodson, 2011).

Euro is the currency that is officially used in Euro zone. This consists of 17 of the 27 member states of the European Union while also serving 332 million Europeans. The main aim of Euro was to unify the 27 members of European Union. There are many countries in euro zone such as Spain, Cyprus, PortugaSl, Greece, Belgium, Slovenia, France, Austria, Malta, Estonia, Netherland, Slovakia, Ireland, Finland, Luxembourg, Italy and Germany (dbpedia.org).

In 1999, euro was launched. This currency was introduced for the purpose of electronic payment, which includes debit and credit cards, accounting and for loan purposes. In the initial phase old currencies which were for cash purpose only. In 2002, the physical form of euro coins and banknotes appeared. Every country has its own unique form of euro coin (Goodhart, 2012).

However the Euro crisis in Greece and other countries of Euro zone countries, created many problems. The Europe struggled to pay the debts that were caused by the debt crisis. Mainly the five countries Spain, Ireland, Greece, Portugal and Italy were not able to achieve the economic growth which further made it impossible for the countries to pay off bondholders. The term to guarantee the payback was not met and this failure caused the crisis. These five countries were predicted to face the difficulties but the danger of default affected beyond the borders, to world. Moreover, the head of Bank of England stated that this crisis is considered the most serious one.

The purpose of the study is to see why is Euro considered bad? This study will give an insight on the Euro crisis and the possible reasons of euro being discouraged. However, there are some factors that support the euro and so a proposed solution is also discussed. It is essential to understand different aspects of the euro and this study will provide with various argument (Brewer, 2010).

Discussion

Euro crisis

The Euro crisis, during 2008-09 had a major impact on the global economy, and raised question on the fiscal policies of Europe and the world. Greece was unable to implement the fiscal reforms properly, and led to slow growth. The slow growth will lead to lower tax revenue thus creating budget deficit. The debt of Greece was so large that the amount was larger the size of country's economy and the problem was getting out of control.

The investors asked for higher yield on Greece bond. This increased the cost of the bond and the debt ...