The decision to create a single currency without the institutions which would make it work was “fatal” for the eurozone, said Nobel-Prize winning economist Joseph Stiglitz, adding that the “eurozone must ditch it now to survive.”
In his book ‘The Euro: How a Common Currency Threatens the Future of Europe,’ which is published next week, the economist writes the eurozone was flawed at birth and is destined to collapse unless huge changes are made to its common currency.
“The euro is often described as a bad marriage. A bad marriage involves two people who never should have been joined together making vows that are supposedly indissoluble. The euro is more complicated: it is a union of 19 markedly different countries tying themselves together,” said an extract from the book published by the Guardian.
A professor of economics at Columbia University, and former senior vice president and chief economist of the World Bank, Stiglitz said the euro had failed to achieve either of its two principal goals of prosperity and political integration. As a result of that failure European countries now view each other with distrust and anger.
According to the economist, a single currency designed to hold together a region with enormous economic and political diversity is almost incapable of working.
He criticized the eurozone leaders claiming they had no proper understanding of what a monetary union meant. The structure of the eurozone – its rules and regulations – was not designed to promote growth, employment and stability.
Stiglitz writes; “The mark of a well-functioning economy is rapid growth, the benefits of which are shared widely, with low unemployment. What has occurred in Europe is the opposite. .. A small country in Europe could, for instance, be in a recession when the rest of Europe is doing well.”
According to Stiglitz large parts of the bloc face a ‘lost decade,’ and even Europe’s so-called successes were actually colossal failures. He gives the example of Spain where unemployment has fallen from 26 percent in 2013, to 20 percent at the beginning of 2016 – but nearly one out of every two people are unemployed.
The economist suggested the best way forward for the euro area is a ‘flexible euro,’ where each member country adopts its own version of the currency.
A flexible euro could help southern European countries export more and import less, helping to achieve a trade balance and full employment, writes Stiglitz.