On Jan. 1, 1999, several countries in the European Union (EU) all joined forces and became a part of the “eurozone.” This declaration made certain countries adopt a common currency – the euro. Not only did this bring certain EU countries even closer, but it also had many intended goals. For one, it brought these countries together to pursue similar fiscal policy goals. At the time, it was only 11 countries; now, however, 19 of the 28 EU member countries are a part of the eurozone. Because of this, all of these countries have monetary and fiscal policies that are mostly controlled by the same entity – the European Central Bank (ECB), making all eurozone countries subject to a single organization. Although the organization pursues policy differently depending on the country to which the policy is directed, the ECB still has a few main goals for every single country. Specifically, it foremost wants to keep inflation (or deflation) under control (like most central banks). The creation of the eurozone and the ECB was intended to do good, to bring most of the EU countries together and to make them stronger financially. Recently, however the eurozone has been in grave danger. It is facing a crisis, and the many countries within it are in severe fiscal distress. This can be seen in the Greek debt crisis and the infighting between countries on how to finance debt within the eurozone. One needs to look at what has happened in the past to see how economists can tell that the eurozone is in a severe crisis, In doing so, one can figure out what such a unique agreement needs to succeed in today’s globalized economy. In looking at the crisis that the eurozone faces, one can see just how it has melted down in recent years. Various performance indicators show economists how efficient or healthy the economy is – from its large unemployment and debt to its slow growth and struggles with the inflation rate. These indicators show that the eurozone crisis is real, and that all countries within the eurozone are in trouble. In looking at this however, economists can see just how the eurozone may be able to survive as an institution. One can look at its current policies to determine just what conditions are necessary for it to survive and become viable once again. Additionally, one must look at certain factors that indicate just how all economies are performing. One of the most significant and alarm-raising statistics is the unemployment rate of eurozone countries. Currently, about 11 percent of the labor force in eurozone countries is unemployed. This is about 18 million people across 19 countries, with significant variations amongst eurozone countries. Countries such as Spain have unemployment over 20 percent, while countries such as Germany have unemployment as low as 4.7 percent. When compared to two relatively healthy economies such as the United States and United Kingdom (both having unemployment around 5 percent), eurozone countries are in serious trouble. Not only is unemployment inherently a problem because it is an obvious indicator of business and jobs not growing, it also breeds other issues. Unemployment, as we have seen in our country, makes people unhappy and resentful towards the establishment. When this happens, countries tend to react sharply to the will of their people – when people aren’t happy about being unemployed, they criticize the euro and the ECB. This puts pressure on both the ECB and the home country to do something about unemployment. In a collective, cooperative entity such as the eurozone, this is never good. Obviously, the eurozone was established to benefit the entire continent of Europe. Its recent results, however, have been incredibly troublesome — its stability is certainly something that will shape the world economy in the next few decades
The views expressed in this column are those of the author and not necessarily those of The Observer.
