The concept of the euro as an international currency has both many positive aspects and a sufficient number of controversial and negative ones. Given that this currency was created relatively recently, there are many questions regarding further possible development prospects. The existing ambiguity and uniqueness of the euro as a project make this topic so attractive to study. This essay aims to explore the future of the European currency.
To analyze the possible future uses of the currency, it is necessary to understand the current situation and the ideas and motives with which the euro was created. The euro is the official currency of the so-called “Eurozone” – the economic union of 19 European countries. This decision to unite several states through the use of the same currency has several reasons. One of the most important goals is to eliminate exchange rate risks (Strange 127). The establishment of a single currency makes it possible to significantly secure money transactions, giving commercial structures a chance to operate more freely. Thus, the investment field increases, attracting more players to the European market. Besides, according to the original concept, trade itself should become safer, more transparent, and flexible. Thus, the euro is presented as a public good, designed to make life easier for both traders and ordinary people (Strange 125). However, reality shows that not all of the initial factors are implemented in the course of implementation.
For example, eliminating exchange rate risk, making the investment field wider, makes the market more flexible. However, creating a level playing field allows buyers and investors to choose those markets where negotiation terms are much more liberal. Thus, there is a potential for an outflow of capital to more “profitable” countries, which could lead to a blow to some economically weaker countries’ national and traditional social programs. Therefore, it can be noted that although the euro opens up a particular scope for trading, this currency has several self-restrictions that do not allow it to develop fully.
Hence, the euro’s propensity for a crisis stems from some fundamental problems, including the micro-hegemony of the eurozone’s central states – France and Germany (Strange 125). Such flaws, which underlie the currency itself, undermine the euro as a concept designed to bring order and stability. Even the implementation of reforms, such as, for example, in 2010 and 2012, do not solve all the problems since they focus more on correcting and immediately stabilizing the existing situation rather than addressing fundamental issues (Strange 136). Consequently, the stable future of this currency lies, first of all, in correcting not current but conceptual shortcomings.
Moreover, these corrections should come from the states with the most significant weight in the eurozone – France and Germany. Since it is around these states that virtually the entire European zone is concentrated, and these two states are the center of many of the region’s financial operations, these players should use the existing influence to maximize the effect. At the moment, all the main proposals for introducing reforms to the euro concept come precisely from France and Germany, representing two opposite paths. While France is much more reform and change-oriented, Germany is promoting more conservative policies. For the euro to function well, according to German officials, euro area member states need to be more strict in adhering to existing rules and also maintain faith in the market discipline (Creel and Francesco 116). On the other hand, Emmanuel Macron, in his speeches, emphasizes the need to share risks and increase cooperation between EU members.
Thus, the future of the euro as a stable currency, designed to preserve the public good, lies in conceptual reforms that affect not only superficial issues but the very foundation of the euro. In the absence of any global changes, the currency will continue to be prone to crises, which in the long run will only further undermine the situation. There are two approaches in which the euro can develop further – through the more risky changes proposed by France or through, the more conservative process recommended by Germany.
Creel, Jérôme, and Francesco Saraceno. “The Future of the Euro Area: The Possible Reforms.” Report on the State of the European Union, edited by Jérôme Creel, et al., Palgrave Macmillan, Cham, 2018, pp. 115-130.
Strange, Gerard. “The Euro Crisis, Euro Reform, and the Problem of Hegemony.” Asia Europe Journal, vol. 16, no. 2, 2018, pp. 125-139.