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Julianna Witt
Karen Tucker
ENC2135
6 November 2015

The Euro Crisis

Indeed, the creators of the euro envisioned it as an instrument to promote political union. -Gerhard
Schroder

The world changed in 1999 when the Euro was created and the European Central Bank was
officially running. 19 countries currently use the Euro as their currencies, these countries include
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain. When
the Cold War ended in 1991 there were many countries that were created and in order to unify
the continent, the European Union was created and adopted the Euro to create a stronger united
Europe (John van Oudenaren 18). These steps were taken to stay clear of another costly conflict
and have been somewhat successful. On the other hand, while its creation was for benefitting the
area, it is currently facing a crisis where multiple countries, like Greece, Ireland, Portugal, and
Spain are on the verge of collapsing due to the 2008-2012 worldwide economic crisis (Franco
Pavoncello 3). Because of this threat the Euro may be experiencing a shorter lifespan than
planned.

Depending on who you ask, the creation of the Euro as a currency has had both negative
and positive effects. Numerous scholars and economists are still arguing about its overall
effectiveness to this day. To fully understand this crisis I will take into mind the many
viewpoints and findings to come up with my own analytical conclusion. My research will focus

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on European nations and how their economies are functioning. The United Kingdom, Germany,
and Greece will be the prime focus on my research because the United Kingdom is one of the
most popular countries in Europe combined with Euro and non-Euro using countries. Germany
was picked by looking at the countries who use the Euro and looking at which of them most
individuals are familiar with. I have also included Greece as a Euro-using country because it has
come up in the news recently about the economic crisis. One may ask him/herself What
importance does this have to myself and those around me? Even though most individuals live in
the United States, thousands of miles away from European soil, it can greatly affect Americas
economy. If things in Europe go sour, America will have a possibility of falling into another
economic crisis as a result of trading with Europe. There could possibly be a population boom if
things get bad enough that Europeans are moving over here for better opportunities.

The UK is a special case in this debate since it is one of the leading forces in Europe but
has stayed with its own currency the pound. The UK is a member of about all multi-country
pacts in Europe to propose peace and sustainability in Europe, but it has not accepted the Euro as
its national currency. According to Professors Chris Mulhearn and Howard Vane at the
University of Liverpool one of the main reasons the UK hasnt switched over to the Euro is
because it will result in issues facing the loss of financial independence (Mulhearn and Vane
248). The UK has been using the pound ever since the year 760 and has been in total control of
that monetary unit as a world power. That means if economists needed to change the exchange
rate or anything else pertaining to financials there would only be a few hoops to go through since
the UK doesnt really need to consult with any other organization besides its own parliament.
(http://www.parliament.uk/business/bills-and-legislation/) Now if the UK switches over to the
Euro and they proposed a change in something pertaining to it they would have to get the

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approval of 19 other nations who share the currency. With the UK as such a huge power and in
the past has been the leader in charge of many countries a change in authority might not work
well.

On the other hand, the exchange rate between nations will likely decrease if the UK adopts
the Euro (Mulhearn and Vane 244). This would greatly help the UK in terms of saving money
and making a larger profit. When countries buy or sell items to each other they need to exchange
currencies since for example if the United States buys 100 pounds of fish from Japan and Japan
sells them at $1 per fish the US isnt going to give them $100 because one Japanese Yen doesnt
exactly equal one US dollar, it actually comes to 0.0084 US dollar to 1 Yen. In order to have a
fair purchase the US would need to swap its American dollars into Japanese Yens which will
either cause the US or Japan to lose money over the exchange rate. Getting back to the issue at
hand, if the UK began using the Euro they would not have to pay the difference to trade with
other EU countries thus benefiting in trade.

To conclude on if the UK is better off without the Euro, I am leaning towards yes
because the UK has been such a powerhouse and even though they have faced their own
hardships they have always been able to get back up and come back stronger than before. If that
position is threatened (i.e. adopt the Euro) it could help the UK on the other hand and possibly
other countries like the US who do a lot of trading with them.
Now onto a country who uses the Euro, how has Germanys economy been since
adopting the Euro? Germany is an interesting case, after its loss in World War II the allied forces
split Germany up into 4 sections; then the USSR became very distant with the allies and started
to build the Berlin wall that separated East and West Germany. This wall was torn down in 1990

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one year before the USSR dissolved and like at its beginning, the future did not look too bright
for Germany. Now the German people had to reconnect with each other which was difficult since
the decades of separation saw different governmental and economic policies on each side.
However Germany was able to turn a poor economy into a working economy in the next 18
years up until the 2008 economic crisis. Like most nations the crisis decreased GDP (Gross
Domestic Production, i.e. exports) and was a severe threat to the nation. The Dutch economist
Servaas Storm stated Germany bounced back quickly- with revitalized export industries, low
borrowing costs, an inflow of investors cash, a huge external surplus and a balanced budget
(Storm 1). Many countries within the EU who are facing issues of their own should take into
mind the actions Germany used to get out of their own issues. The balanced budget and low
borrowing costs have greatly improved todays Germany and should be used since many nations
are having a lot of problems with money, especially borrowing money and not being able to pay
it back. With regards to Germanys renewal 4-5 years after the economic collapse, Germany was
one of the first European countries to regain control after the crisis and really set the example on
how to get things back to normal. (Ahilan Kadirgamar and Cenan Pirani). The nation is very
dependent on exporting goods/services internationally which has increased their GDP (Storm 2).
Along with this observation, the Euro has worked well for Germany and other countries.
Along with the Euros successes in some EU countries there has also been EU countries
who are still drowning in debt and are facing major threats. These countries include Greece,
Ireland, Spain, and Portugal; with Greece currently facing the most issues. These countries face
issues regarding debt, unemployment, and the housing market. Wolfgang Munchau is an
associate editor for the Financial Times and has argued that of the Euros most negative faults is
the no bailout, no default, and no exit (Munchau 1). This means by joining the Eurozone

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(adopting the Euro) countries are not allowed to leave since it is similar as NATO (North
Atlantic Treaty Organization) where countries who join are signing an agreement for peace and
if a country leaves it is a sign that this country will rebel against the others that could escalate
into another worldwide conflict. Since technology is at its all-time high and some countries are
allied with nations with access to nuclear bombs one small threat could spark another world war.

Unfortunately when this agreement was declared the founding members did not think that
an economic crisis could cause a bailout since the Euro would not work for that specific country
who is facing a crisis. Greece has tried to bailout three times in the past five years
(http://www.dpa-international.com/). Greece has been experiencing all sorts of issues from
borrowing money from many other nations to fix their problems but in the end it has only
increased their debt and therefore have made their problems even bigger. Which shows how
Greece is trying to fix its problems but is still coming up short. Professor Alfrons J.
Weichenrieder of economics and public finance at the University of Frankfurt supports this
argument with statistics on Greeces unemployment. He has noted that in the past 4 years
Greeces unemployment rate has increased by 18.8% to a total of 26.6% recorded last year
(Weichenrieder 4). To put this into perspective, the highest rate of unemployment in the United
States happened during the Great Depression in the 30s at 23.6% (http://www.bls.gov/). With
Greeces unemployment beyond that figure it demonstrates what dire circumstances Greece is
facing.

One thing to keep in mind is that there are underlying factors that affect every European
country differently. For example, some countries like Germany, France, the United Kingdom,
Italy, etc. are countries who export a lot of their resources/goods and therefore may weigh in

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differently than smaller countries like Slovakia, Estonia, Latvia, etc. who do not trade as much
internationally as other nations. Another factor to take into consideration is technological
advances throughout Euro-using countries. Countries like Latvia, Estonia, and Lithuania were
granted independence from the Soviet Union in 1991 and therefore in the past 24 years those
countries are trying to catch up technology wise with other countries who have been around for
centuries could alter GDP.

To conclude, the Euro has been successful for many countries but damaged some. The
United Kingdom as an outsider to the Euro is doing well without it and evidence suggests that
the Euro would not be a good fit for the UK. What does mean for the Euro overall? It shows that
the Euro has been a good choice for some and others can do well without it. My findings have
been inconclusive in the fact that the overall results are ambiguous, some countries have
benefited with the Euro (Germany), while others have not (Greece) and the UK has benefited
from not using that currency. The major factor on why my findings are ambiguous is because all
the countries I researched are all very different. Some practice different forms of government and
all have contrasting histories that make each individual countrys economy unique. Europe
should keep the Euro because overall it is benefiting majority of the countries who use it. Even
though at times the Euro could be a sacrifice to those who do not benefit, it helps the majority.

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Works Cited

"Greek parliament passes latest austerity budget." Deutsche Press- Agentur 17 Oct. 2015,
jjjjFinancial/Business. NewsBank. Web. 17 Oct. 2015.
J. Gordon, Robert. The Unemployment Rate, 1960-2013. Boston:

Addison-Wesley,

jjj2012. Table. Web. 21 Oct 2015.

J. Weichenrieder, Alfrons. Greece: Threatening Recovery. EconStar.

(2015). Goethe

jjjjjjjjUniversity, SAFE Sustainable Architecture for Finance in Europe (2015). Online. Web.
jjjjjjjjj11 Oct 2015.
Kadirgamar, Ahilan and Pirani, Cenan. Piketty and the Economic Crisis in the Euro
jjjZone: Cenan Pirani. Kafila. 30 April 2015. Web. 29 Oct 2015.

Mulhearn, Chris, and Howard R. Vane. "The UK And The Euro: Debating The British
jjjDecision." World Economy 28.2 (2005): 243-258. Business Source Complete. Web. 8
ffOct. 2015.

Mnchau, Wolfgang. "The Euro At A Crossroads." CATO Journal 33.3 (2013): 535-540.
ffAcademic Search Complete. Web. 7 Oct. 2015.

Pavoncello, Franco. "One For All, All For One: The Euro In Crisis." Current 535 (2011):
e3-6. Academic Search Complete. Web. 5 Oct. 2015

Storm, Servaas. "Crisis and Recovery in the German Economy: The Real Lessons."
eStructural change and economic dynamics 32 (03): 11; 11,24; 24. Print.

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United Kingdom. UK Parliament. Bills and Legislation.

eehttp://www.parliament.uk/business/bills-and-legislation/ Web. 29 Oct 2015

van Oudenaren, John. Uniting Europe. Lanham, Boulder, New York, and Oxford: Rowan
ee& Littlefield Publisher, INC. 2000. Print