The Euro at 20: Successes, Problems, Progress and Threats

Abstract

The euro has had a difficult second decade but the project has still had some important successes. The common currency is popular among the Euro Area’s citizens, intra-European exchange rate instability has been removed and the ECB has successfully achieved its primary goal of price stability. The single currency’s popularity has made the euro more resilient than many sceptics thought possible twenty years ago. A number of improvements to the architecture of EMU have been implemented in the past decade but serious tensions remain, relating to fiscal capacity, sovereign default and financial stability. To keep the euro together, Europe’s politicians need to make the Euro Area less crisis-prone and to make it easier for member states to recover from the inevitable cyclical downturns that will happen in the future. The past few years have seen many proposals put forward for future improvements to the economic policy structure underlying the euro. Keeping the euro together may depend on Europe’s politicians agreeing to implement them.