The euro as failure or savior?
The global financial crisis is testing the eurozone.
Tony Barber of the Financial Times writes about the ever-widening spread between the yields on German and Italian 10-year government bonds, implying that investors lack full confidence in Greek and Italian fiscal policies. While these problems are created by the policies of the Greek and Italian governments themselves, it also shows an uncertainty among investors that all nations in the eurozone are economically strong and fiscally disciplined enough to share the same currency over the long term.
In the Scandinavian countries there has now started a debate on joining the eurozone, in Sweden, in Denmark and in Iceland where demonstrations have been held for an Icelandic entry into the European Union and the eurozone. A rapid change of opinion since a couple of years ago.
Is the euro a failure, who's stability will be tested severely by the current crisi? Is it a saviour for small economies, that are too small to stand up for their own in a crisis? Denmark is spending a lot of resources of keeping its krona in line with the ERM II agreement, and some think it might as well enter now, while Sweden's and Iceland's currencies are falling. Seeing the eurozone as a "quick fix" to current economic problems in Scandinavia is any case not viable solution, but the next weeks will probably see changes in Scandinavia.
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