EURO, currency of the euro zone. | See Europe.

LIMITATIONS | ‘Within the euro zone troubled economies cannot devalue to regain competitiveness or loosen monetary policy to suit their needs. Instead they must adjust by painfully reducing wages and prices relative to those of others. Such “internal devaluation” can be done gradually, by holding down wages, as Germany did before the crisis; these days, though, it is accompanied by wage cuts and deep recessions. By contrast surplus countries, including Germany, the Netherlands and Austria, enjoy an artificially low exchange rate. Were Germany still using the Deutschmark, its currency would surely appreciate,’ (‘Charlemagne: Fawlty Europe’, The Economist 2nd November 2013, p29).

‘The main argument of [Joseph Stiglitz’s] book [The Euro: How a Common Currency Threatens the Future of Europe] is that, on its current course, the euro is certain to fail—and indeed, that it was fatally flawed from birth. It entails a fixed exchange rate and a single interest rate for its members, which means countries must forgo the option to devalue in times of economic weakness. To make up for that loss, the euro’s architects should have created institutions, such as jointly issued bonds, mutual backing of bank deposits and a common fund for unemployment insurance, so the costs of righting each economy are shared. Instead the burden falls on individual countries through austerity policies, such as tax rises and wage cuts,’ (‘On course to fail’, The Economist Aug 20th 2016 p65-66).