The Euro has been on the brink of collapse in recent years, according to many economists. Although the European Union managed to steer clear of economic meltdown at the hands of the unfolding Eurozone debt crisis, its future still remains uncertain.
Three professors led a forum for discussion about the history and future of the Euro, as well as contemporary issues faced by the global market due to the Euro’s shortcomings 6 p.m. Tuesday in Withers Hall.
The speakers included Mark Nance, assistant professor at the School of Public and International Affairs, and Doug Pearce, former department head of Economics.
The Euro, established in 1992, is the currency of the European Union. It is the second most traded currency in world markets behind the United States dollar. Although the Euro has many advantages, typically maintaining a higher value than the United States dollar, in recent times it has encountered a number of problems, which contributed to the debt crisis, according to the three professors.
One problem the Euro poses to individual European states is monetary policies such as interest rates. The regulation of interest rates allows countries to adequately deal with problems such as inflation and unemployment.
As stipulated by the European Union, the European Central Bank keeps currency rates at approximately two percent, a relatively low rate compared to other countries.
According to Nance, the stable interest rates established by the European Central Bank led many countries to borrow and spend at a rate not typically afforded by their Gross Domestic Product. This occurs despite the fact that the European Union implemented legislation to assure the impossibility of this problem.
The problem with this legislation, according to Nance, is that it allowed the countries, which were presumed guilty of spending more than they produced, to vote on whether or not they violated the aforementioned agreements. It is not difficult to imagine that countries did not have an adequate incentive to condemn themselves to paying fines to compensate for their actions, Nance said.
Pearce said one of the defining characteristics among states with a common courtesy is a good degree of capital mobility. The European Union has a number of barriers in this regard such as language and cultural differences.
Students contributed to the discussion, and offered a variety of opinions about the best measures that states in the European Union should take to ensure a fiscally stable Europe.
“I enjoyed the overall presentation,” Gavin Harrison, a sophomore studying biology, said. “Especially the history of the Euro and how it’s influenced monetary politics today.”
The same cannot be said about the European Union, at least to the degree in which it can be said about the United States.
Problems in economic policy and aligned collective interests caused Pearce to be “less than optimistic about the future of the Euro,” he said.