Tags: Atlantic | Euro | Dying

The Atlantic: The Euro is Dying

Thursday, 02 Jun 2011 09:04 AM

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The euro has little chance of shining due to a lack of economic synergies among the countries that use it as a currency, The Atlantic reports.

While U.S. states go through their own business cycles, the right levels of regulation, monetary policies and a mobile labor force keep the dollar healthy enough for all states to enjoy.

The opposite holds true in Europe.

“The euro countries are not an optimal currency zone: their economies do not move in sync, and they are not fully integrated,” says Megan McArdle, business and economics editor for The Atlantic.

“That means that at any given time, monetary policy will be too loose for some countries, too tight for the others — Italy was in recession even as Ireland was overheating.”

merkelgetyty200.jpg
Angela Merkel
(Getty Images photo)
European countries wield much more control over their respective economies than do U.S. states, and they are unwilling to give up that control to the European Central Bank.

Nevertheless, German Chancellor Angela Merkel has said she is committed to the euro as the continent works its way out of economic crisis.

That has market participants happy, for now.

“There is a perception in the market that European leaders will slowly, but surely, find a way out of the debt problem and save the euro,” says Neil Jones, head of European hedge fund sales at Mizuho Corporate Banking, according to Bloomberg.

“Greece may have to roll over its debt and that could work even though pushing the burden to the next generation is not ideal. The economic outlook for the region overall remains positive and interest rates are likely to rise further.”

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