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91 Foreign Aff. 105 (2012)
The Failure of the Euro: The Little Currency That Couldn't

handle is hein.journals/fora91 and id is 111 raw text is: The Failure of the Euro
The Little Currency That Couldn't
Martin Feldstein
THE EURO should now be recognized as an experiment that failed.
This failure, which has come after just over a dozen years since the
euro was introduced, in 1999, was not an accident or the result of
bureaucratic mismanagement but rather the inevitable consequence
of imposing a single currency on a very heterogeneous group of coun-
tries. The adverse economic consequences of the euro include the
sovereign debt crises in several European countries, the fragile condition
of major European banks, high levels of unemployment across the
eurozone, and the large trade deficits that now plague most euro-
zone countries.
The political goal of creating a harmonious Europe has also failed.
France and Germany have dictated painful austerity measures in
Greece and Italy as a condition of their financial help, and Paris and
Berlin have clashed over the role of the European Central Bank (ECB)
and over how the burden of financial assistance will be shared.
The initial impetus that led to the European Monetary Union and
the euro was political, not economic. European politicians reasoned
that the use of a common currency would instill in their publics a
greater sense of belonging to a European community and that the shift
MARTIN FELDSTEIN is George E Baker Professor of Economics at
Harvard University and President Emeritus of the National Bureau of
Economic Research. He was Chair of the Council of Economic Advis-
ers from 1982 to 1984. This article is adapted from an NBER working paper,
The Euro and European Economic Performance.

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