Quarterly Journal of Austrian Economics 20, no. 3 (Fall 2017)
The Euro: How a Common Currency Threatens the Future of Europe
Joseph E. Stiglitz
W.W. Norton, 2016
As Joseph Stiglitz sees matters, the euro suffers from a fatal flaw. The euro is the currency of 19 European countries; and common money blocks efforts of nations that, according to Stiglitz, need to devalue their currencies. More generally, attempts to restrict government control of the economy arouse the wrath of this implacable enemy of the market.
As he explains,
When two countries (or 19 of them) join together in a single-currency union, each cedes control over their interest rate. Because they are using the same currency, there is no exchange rate, no way that by adjusting their exchange rate they can make their goods cheaper and more attractive.
Since adjustment in interest rates and exchange rates are among the most important ways that economies adjust to maintain full employment, the formation of the euro took away two of the most important instruments for insuring that.
