The Euro And The European Debt Crisis

Abstract

This paper studies the history of the Euro leading up to its inception, what happened after the Euro was introduced into circulation and implications for its future.  The Euro was set up to accommodate a unified currency while preserving sovereignty among nations who, less than a century ago, were mortal enemies.  Preserving sovereignty weakened the ability to respond to crisis by design, and it wasn’t long before the limits of the European Monetary Union were tested after a series of financial crisis threatened the very existence of the Euro.  The Euro held together, yet the inability of the European Central Bank to assist member nations control subsequent debt following the financial crisis may wound the ability of the Euro to replace the dollar as the dominant world currency or even prove fatal.  Greece is on the verge of collapse, and is so entangled with other Euro nations; a systemic “domino effect” will occur should any of the troubled member Eurozone nations collapse uncontrollably.  Three options remain for the European Monetary Union, banding together and preserving the currency, grossly indebted countries exiting to preserve the health of countries which are more fiscally responsible, or the Euro may land inconsequentially between success and failure, never challenging the power of the dollar as the dominant world currency.