Essay on Euro: Crises or Not?

In the aftermath of World War II, economic devastation was evident throughout much of Europe. Vast amounts of resources, infrastructure, and financial ability had been destroyed in the nearly decade-long conflict. Due to the obvious disunity that European nations shared, an idea was created out of the ashes of the largely European conflict: The European Union. In 1958, after attempting to create several different organizations to unite Europe (The European Coal and Steel Community, the European Economic Community, etc...) the European Union was organized. The objective of the European Union is both economical and political. The six original founding members (Belgium, France, West Germany, Italy, Luxembourg, and The Netherlands) envisioned an organization of such economic unity, that the threat of another continental war would be nearly impossible to instigate in Europe again. As members of the European Union grew, an idea was formed to enhance the economic cohesiveness of the many member nations. In 1992 the Maastrict Treaty was established to create a universal currency for members of the European Union who wanted to participate (cited in Lynn, 2012, p. 25). Those nations that joined this Eurozone can be seen in Figure 1 as indicated by their blue color.
Figure 1

Members who abandoned their national currency in favor of the new "Euro" currency became known as members of the "Eurozone" (Ashton, 2012). By linking a single currency to multiple economic engines, the Euro quickly gained value and popularity. After roughly one decade of existence, the Euro surpassed the par value of the United States dollar in 2003 (Westover, 2011). As financial reserves increasingly switched from dollars to euros, the outlook for the European Union seemed almost guaranteed. Although not perfect, many hailed the creation of this economic machine as brilliant. Never before in the history of the world had so many nations conformed to a universal currency. A gamble had been taken and had seemingly paid off. As the financial crisis began in 2007-2008, flaws that had gone unnoticed began to appear in the organizational structure of the Eurozone. With so much economic turmoil on a world-wide scale, certain nations that are members of the Eurozone began to experience difficulty paying large debts that had been accumulated. For example, Greece, a member of the Eurozone, seemed on the verge of bankruptcy. The instability of this member of the Eurozone threw the value of the actual currency into question. If a nation pulled out of the euro, how much was the new value of the euro? What effect would this have on other member countries? How would the devaluation of the currency affect other members? These questions had to be looked at as Greece fell into a financial chasm. In essence, a significant portion of the Greek population wants to leave the euro. This is explained further in Mr. Ashton's article, it reads: THE conventional wisdom that emerged immediately after Europe's weekend elections—that voters may have forced Europe into a new crisis reckoning— seems to have been correct. Greece is struggling to put together a government and whatever government eventually emerges will probably press for a renegotiation of its bail-out deal. Euro-zone officials are saying that this is out of the question. Odds of a Greek departure from the euro zone appear to be rising sharply; Intrade now puts the chance of exit in 2012 at close to 40%, up from 22% a week ago. Markets are shuddering at the possibility; European equities are dropping like stones, yields around the periphery are jumping— Spain's 10-year yield is back above 6%—and German yields are sinking to record lows. Big trouble is brewing. The brilliance of the euro has been lost in the recent economic downturn and fear of disunity amongst Eurozone members. The question remains, was it (and is it ever?) a good idea to link together multiple-national economies into one universal

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