Let's flip the Eurocoin

Recently, I have been very positive about the European Union and what it can teach us. While a huge portion of its policies and government attitudes are a great model for us in the United States, one topic has been strangely avoided. Like all ignored ideas and viewpoints, it strangely re-entered my mind on the toilet. The topic that plagues and is at the core of the European Union is its common currency and financial policy.

The Euro was conceived by founders of the European Union, back when it was called the Europe project, as a way to tie nations together in such a way that wars between any number of member states would harm all members financially. While this is an admirable goal, as with all plans to change the world the scope started too large and ended up with some arguably major flaws.

Economists George Irving and Alex Izuriata argue that the main problem with the Euro is that:

 "The [E]uro aimed at removing nominal exchange rate fluctuations in a wide freetrade area" and "in consequence, by way of its specific design, it removed three essential policy instruments at once from the domain of national policymaking - exchange rate management, monetary policy and fiscal policy - and it intrinsically weakened labour and welfare policy."

One major flaw with the system that greatly supports their argument is the fact that there is no European Treasury! Instead all policy is made by the European Council, with strict economic guidelines put in place to join the Eurozone. But, what happens when a member is admitted and at a later time begins to fail in its duties? There is not some huge reserve to assist the market, which would normally make bailouts and austerity measures more successful than they have been in Europe. Instead, large amounts of money need to be printed by the bank and immediately  put into circulation in the failing member states. All member states contribute to this process by agreeing to EU policies and joining the Union. However, many member states such as France and the United Kingdom are not always happy with decisions made by the EU but cannot threaten to leave because there are no methods within its Framework to leave. 

While on the topic of fiscal policy, there is a small note from one member state that I'd like to make here. In the UK, public opinion of austerity measures and bailouts suggested by the EU and US is on the decline. In fact, according to the Community Practitioner IMF studies show that for every 1 pound sterling spent on these measures there is a less than 1 pound sterling savings for the nation saved (a fiscal multiplier of less than 1). In contrast the figure jumps to about 3 pounds sterling saved for every 1 pound sterling spent on public healthcare and welfare. Other data reported by nations themselves indicate that their reduced spending on national healthcare increases infection rates for many diseases. 

From these negative aspects of European fiscal policy, there are still lessons that the US can use to improve its methods of governance. Looking into European nations with incredible public healthcare and welfare could provide valuable insight into how to improve fiscal policy within our nation. There are clearly negatives in both our systems, but I hope there is some type of compromise that can resolve these issues and improve the quality of life in our nation.